National Australia Bank v Troiani - [2003] FMCA 396

FEDERAL MAGISTRATES COURT OF AUSTRALIA

NATIONAL AUSTRALIA BANK v TROIANI & ANOR

[2003] FMCA 396

BANKRUPTCY – Opposition to creditors petition – consideration of discretion under s.52(2) – no basis for exercise of discretion.

Applicant:

NATIONAL AUSTRALIA BANK LIMITED

Respondents:

SANTE TROIANI and RITA TROIANI

File No:

BZ 474 of 2002

Delivered on:

16 May 2003

Delivered at:

Brisbane

Hearing date:

16 May 2003

Judgment of:

Baumann FM

REPRESENTATION

Counsel for the Applicant:

Mr C Muir

Solicitors for the Applicant:

Mallesons Stephen Jacques

Solicitors for the Respondents:

Mr Heyworth Smith

ORDERS

That the estates of the respondents should be sequestered and the usual order as to costs being costs in the estate shall apply.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BZ 474 of 2002

NATIONAL AUSTRALIA BANK LIMITED

Applicant

And

SANTE TROIANI and RITA TROIANI

Respondents

REASONS FOR JUDGMENT

I deliver these reasons orally. The application before me for consideration is a creditor's petition filed by the applicant, National Australia Bank Limited (“the Bank”). The petition is opposed by the debtors, Sante Troiani and Rita Troiani, who I will call (“the respondents”). This application represents the latest event in a long litigation journey undertaken by the parties. For the purpose of these reasons and in circumstances where the parties have a more than intimate knowledge of the history I can summarise the relevant history as follows.
a)That the respondents were defendants in an action brought by the bank to enforce a guarantee of the indebtedness of a company called Wide Bay Brickworks Pty Ltd, (“the company”). Mr Troiani was the managing director and major shareholder of the company;
b)When an action was commenced by the bank against the respondents and others under the guarantee, the matter came before the Chief Justice of Queensland upon application for summary judgment. The respondents were represented by senior counsel on the application and the Chief Justice delivered reasons on 22 March 2001 in which he concluded, pursuant to Rule 292 of the Uniform Civil Procedure Rules Queensland, that the bank was entitled summary judgment:
“There being no defence and that there is no need for a trial”.
c)He ordered the respondents to pay $5,333,452.24 and costs on an indemnity basis.
d)The respondents appealed the decision to the Court of Appeal which delivered reasons on 6 June 2002. The majority (McPherson J and Fryberg J, Helman J dissenting) allowed the appeal in part, essentially reducing the quantum of the judgment to $3,451,599.24.
e)The bank, relying on the judgment, issued bankruptcy notices. The respondents sought to set aside the notices, however, for the reasons delivered by me on 13 September 2002 the application to set aside was dismissed. The respondents failed to comply with the requirements of the notices and an act of bankruptcy was therefore committed.
f)The creditor's petition filed 27 September 2002 has been properly served and the petition is opposed by the respondents. The reasons for judgment of de Jersey CJ and the Court of Appeal were before me and have been considered and read by me. The respondents were represented before the Registrar of this Court by senior counsel, Mr Hicks QC and had retained legal representation.
The firm acting for the respondents, Messrs Morris Blackburn Cashman gave notice to the Court on 13 May 2003 that their services were terminated on 12 May 2003. They also say that they had never acted for Rita Troiani. When the matter was called on for hearing Mr Heyworth-Smith of counsel appeared for both respondents. He was, at best, directly briefed but characterised his appearance as "almost a McKenzie friend". His assistance was appreciated.
Although there was, at the end of all submissions, a suggestion that the respondents may like an adjournment so that some of the outstanding investigations could be completed by, or on behalf of the respondents, the request was opposed by the bank. There was no basis raised for the request to adjourn and for the reasons identified in the written submissions, particularly the prejudice to the bank and the history of litigation, the request was denied.
The grounds of opposition to the creditor's petition raised in the Notice of Intention to Oppose filed 7 February 2003, were stated initially to be the nullity of the bankruptcy notice because of –
"it having been served without a copy of the order upon which the debt, the subject of the notice to raise, being attacked", and was then amended on 18 February 2003 to be because "it having been served with a copy of the judgment of the Court of Appeal dated

6 June 2002 and a copy of the judgment in the Supreme Court dated 22 March 2001, attached".
These grounds at the hearing were abandoned and Mr Heyworth-Smith, after conceding that the requirements of section 52(1) of the Bankruptcy Act 1966 (“the Act”), had been satisfied by evidence relied upon by the bank, indicated that the respondents' only submission is that the petition be dismissed because on the evidence of the debtor/respondents the Court could be satisfied that "for other sufficient cause a sequestration order ought not be made" (see section 52(2)(b) of the Act).
The onus rests upon the respondents and they relied upon the affidavit of Mr Troiani filed 10 April 2003, the affidavit of the respondents' then solicitor, Mr John Kazecki, filed 10 April 2003 and sought to read and file by leave an affidavit of Thomas N. Quinn. Mr Quinn's affidavit was sworn on 13 May 2003 and only made available to the bank and to the Court at the hearing. The bank, through its counsel Ms Muir, objected to the admission of the affidavit because:
a)it had not been filed within the time limits directed, and
b)it was genuinely hearsay, supposition, lay opinion and irrelevant.
For the reasons delivered extempore at the hearing I allowed the respondents to rely upon the affidavit, indicating that it was a matter of weight for me ultimately. The affidavit prepared and sworn by Mr Quinn, who is an Accountant and holds a Bachelor of Laws and the Medal of the Order of Australia, can best be described as a sympathetic and self-serving summary of the unfortunate plight which has engulfed the respondents. Ms Muir's description of the contents from a legal perspective was accurate.
Mr Quinn, in his "report", gave an executive summary and overview of the issues which he says will convince me that the discretion under section 52(2) should be exercised, namely –
a)alleged unconscionable behaviour on the part of the bank;
b)apparent release of other guarantors and status of Rita Troiani as a guarantor, essentially relying upon an Amardio type issue;
c)failure of the bank to permit the company to sue Moira Spa (the kiln) because of the unsatisfactory operation of the kiln;
d)sale of assets by the receiver of the company at a price below book value;
e)sale of assets of the company by the receiver to people associated with the company at the time;
f)the status and condition of stored records of the company; and
g)a fraud squad investigation which I am told is still being undertaken.
The reasons for judgment of the Chief Justice and the Court of Appeal make it clear that nearly all these issues, save for two which I will mention shortly, were raised in the civil proceedings and rejected on the evidence offered to the Court during those proceedings. I was not provided with details of, or copies of, affidavits filed in those proceedings. I am satisfied on the evidence presented to me in these proceedings, however, that the respondent has no real claim to litigate against the bank. He has genuinely already done so and lost. He has not pursued other actions against others if such actions exist at all.
Whilst I accept that the Court exercising its bankruptcy jurisdiction is not the appropriate forum to decide the claims as asserted by the respondents (see Kazecki ex parte Mildon Alphman Smearling Cryser Pty Ltd (1996) 67 FCR 101), the respondent must, in accordance with long-standing authority, establish that not only do they have a probable claim against a petitioning creditor which is likely to succeed but it will exceed the debt. (See Schmidt ex parte Anglewood Pty Ltd (1968)

13 FLR 111 and Ling v the Commonwealth (1996) 139 ALR 159.
The respondent has failed to meet that onus. The two apparent "new issues" arising from the allegation of the related party transaction involving a solicitor of the purchaser and the alleged fraud squad investigation appear to be more consistent with the general "conspiracy" occupying the thoughts of the respondents than any reliable assertion based on evidence or the law. It is, on one hand, easy to feel some sympathy for the respondents, who appear from the history of the matter to have created over some years of hard work a fairly large regional business only to see their entire financial resources extinguished.
Their counsel says they had no assets at all and pursuing them to bankruptcy is a fruitless exercise. However, the bank has, it seems to me, an undisputed judgment for over $3 million and a desire to use the mechanisms offered to creditors under the Act to cause further investigations by a trustee to be made. The debtors/respondents are clearly insolvent and a prolonging of the inevitable cannot be justified in my view. I will order, as all requirements for section 52(1) have been satisfied, that the estates of the respondent should be sequestrated and the usual order as to costs being costs in the estate shall apply.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Baumann FM

Associate:

Date: