Nelson v Sutera

[2013] FCCA 721

FEDERAL CIRCUIT COURT OF AUSTRALIA

NELSON v SUTERA & ANOR [2013] FCCA 721

Catchwords:
BANKRUPTCY – Application to terminate Personal Insolvency Agreement – respondents failing to perform obligations under Personal Insolvency Agreement – whether further sequestration orders should be made – respondents have now sold and proceeds held by solicitors for trustee – respondents having no other assets – no utility in making further sequestration orders. 

Legislation:  

Bankruptcy Act 1966 (Cth), ss.43, 222C, 222C(3)

Corporations Act 2001 (Cth)

Applicant: SIMON PATRICK NELSON (IN HIS CAPACITY AS TRUSTEE OF THE PERSONAL INSOLVENCY AGREEMENT OF GUISEPPE AND EMANUELLA SUTERA)

Respondents: GUISEPPE SUTERA AND EMANUELLA SUTERA

File Number: MLG 1634 of 2012

Judgment of: Judge Burchardt

Hearing date: 22 April 2013

Date of Last Submission: 22 April 2013

Delivered at: Melbourne

Delivered on: 10 July 2013

REPRESENTATION

Counsel for the Applicant: Ms Mapp

Solicitors for the Applicant: Baker Jones Lawyers

The Respondents: In person

ORDERS

1. The Personal Insolvency Agreement of the Respondents in Administration Number VIC 502 of 2010 be terminated pursuant to s.222C of the Bankruptcy Act 1966 (Cth) (“the Act”).

2. The funds held on trust by Messrs Baker Jones Lawyers in the sum of $30,114.74 together with interest thereon, be paid to the Applicant and applied in priority to the Applicant’s costs. 

3. The application otherwise be dismissed. 

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT MELBOURNE

MLG 1634 of 2012

SIMON PATRICK NELSON (IN HIS CAPACITY AS TRUSTEE OF THE PERSONAL INSOLVENCY AGREEMENT OF GUISEPPE AND EMANUELLA SUTERA)

Applicant

And

GUISEPPE SUTERA AND EMANUELLA SUTERA

Respondents

REASONS FOR JUDGMENT

1. The application before the Court, filed 19 December 2012, is brought by the Trustee of the respondents’ Personal Insolvency Agreement (“PIA”). The application seeks the termination of that agreement, pursuant to s.222C of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”), that sequestration orders be made against the estate of each of the respondents pursuant to s.43 of the Act, and ancillary orders.

2. For the reasons that follow, I propose to deal with this matter in a relatively broad brush way.  The conclusion I have reached is that I should terminate the PIA but that I should not make any sequestration orders.  Rather, I will cause the relevant amount of remaining funds to be paid to the Trustee to satisfy so much of the Trustee’s costs as can be done. 

3. It is readily apparent that this will not gain any advantage for the Suteras’ Creditors but, as I hope I will explain, their position is hopeless in any event. 

4. The Suteras entered into a PIA on 9 March 2010.  They were to pay $50,000 over a three year period, assuming that the offer was accepted by the Creditors.  The offer was in fact accepted by Creditors. 

5. Litigation commenced on a number of fronts but in the ultimate, in January 2012, the Suteras entered into an agreement with Mr Simon Patrick Nelson, as their Trustee, to pay $75,000 of which $50,000 was paid by Mrs Emanuella Sutera, with the assistance of a loan from her parents, on 7 February 2012. 

6. The Suteras did not pay the additional $25,000 as envisaged by the Terms of Settlement entered into on 18 January 2012 and a further set of Terms of Settlement was entered into on 16 August 2012 whereby the Suteras were to pay the $25,000 in tranches of $1,500 per month. 

7. The Trustee gave notice of the proposed variation to the Creditors on

   
   

   9 October 2012 and as at the date of the affidavit sworn by the Trustee, Mr Nelson, on 19 December 2012, no objection had been received from the Creditors.  I infer that no such objection has been lodged since. 

8. The affidavit of Mr Nelson, filed 19 December 2012, shows that the Suteras paid the $1,500 in October 2012 and a further $1,000 on

   
   

   16 October 2012. 

9. In an affidavit filed by Mrs Sutera on 12 March 2013, she deposes relevantly that at some point (date not revealed) she was served with a County Court Writ by the Commonwealth Bank of Australia seeking repossession of the former family home in Greenvale, Victoria.  She deposed that she contacted the bank to arrange for a private sale and that she telephoned Ms Dorothy Gawlik, solicitor for the Trustee, straightaway. 

10. Mrs Sutera had to take out family law proceedings against Mr Sutera, from whom she had separated in October 2012, and this led to orders on 5 November 2012 whereby the family home could be sold.  It was Mrs Sutera’s position that she had told Ms Gawlik that the $25,000 owing under the amended Terms of Settlement in October 2012 would be paid upon settlement. 

11. From an affidavit of Mr Guiseppe Sutera filed on 19 March 2013, it is apparent that the contract of sale of matrimonial home was settled on about 12 February 2013 and various secured Creditors were paid out, including Service Finance Corporation.  It is apparent from the affidavit material subsequently filed that Service Finance Corporation was, contrary to the position adopted by Mr and Mrs Sutera, a secured Creditor. 

12. Relevantly, the sum of $30,114.74 was paid to the Trustee, this being the balance of the proceeds of sale.

13. Ms Gawlik filed an affidavit on 22 March 2013, in which she puts in issue Mr and Mrs Sutera’s suggestion that Ms Gawlik had been fully informed that the relevant moneys would be paid out upon sale of the property. 

14. Mr Nelson, the Trustee, has filed a second affidavit on

    
    

    22 March 2013.  As indicated, he confirms that Service Finance Corporation Ltd was a secured Creditor.  Relevantly, however, he also deposes that the Trustee has unpaid costs still outstanding in the sum of $25,687.90 (excluding GST). 

15. The vast majority of these costs were incurred before December 2012, and would be augmented by the costs of this proceeding in any event. 

16. When the matter came before the Court, counsel on behalf of the Trustee indicated that complaint was made to the effect that Mr Sutera had managed a corporation while bankrupt in contravention of the Corporations Act 2001, and that there were issues as to the cars apparently owned by Mr and Mrs Sutera. 

17. Counsel for the applicant sought that the PIA be terminated and that each of the respondents be the subject of a sequestration order.  Counsel pointed to the considerable difficulties arising out of the fact that the PIA was a joint one, whereas some of the debts were not.

18. Mrs Sutera dealt with the issue of her car.  She said that this was a car paid for by her daughter with assistance from her parents.  It had been placed in her name because her daughter, as a younger person, would have attracted a very high level of insurance.  In other words, she candidly conceded that a fraud had been effected upon the insurer because she was not in truth the owner of this car.  Although not articulated in terms, it is clear that what Mrs Sutera was saying was that she was, if anything, the trustee for her daughter in respect of the car. 

19. Mrs Sutera asserted that she would have continued to pay the $1,500 per month payments required under the amended Terms of Settlement if she had been told that it was not permissible simply to pay out the entire sum owing upon the sale of the matrimonial home. 

20. Mr Sutera took issue with the fact that his licence as a security operative had not been reinstated, contrary to agreement, but rather sabotaged by the Trustee, thus making it impossible for him to work.  He asserted that he had properly disclosed he was a director of the relevant company. 

21. In response to further questions from the Court about a Porsche motor vehicle, allegedly owned by him, which the Trustee had asserted he was going to sell to satisfy his Creditors, he asserted that his brother had been the registered owner of same for the last 13 years but that he drove it occasionally. 

22. Notwithstanding the obvious conflict of evidence between the affidavits of both Mr and Mrs Sutera which asserted, in effect, an agreement on the part of Ms Gawlik to suspend the monthly $1,500 payments until settlement of the family home, and Ms Gawlik’s denial of it, neither side sought to cross-examine.  This presents an obvious difficulty. 

23. I should say that the statements made by Mr and Mrs Sutera about their car had all the appearance of sincerity and they both impressed me as being entirely genuine and totally borne down by their experience. 

24. They pointed out that when one takes into consideration the $2,500 paid, together with the $3,000 plus garnisheed from Mrs Sutera and the $31,000 presently in trust, the sums that would be payable to the Trustee as a total amounted to substantially in excess of the $75,000 originally accepted by all Creditors as discharging their obligations in full in the amended Terms of Settlement. 

25. Thus, as things presently stand, the following seems to me to be the case:

    a)The Trustee has been paid the $50,000 contemplated by the amended Terms of Settlement and, indeed, had been paid that sum well prior to its execution.

    b)There is available to the Trustee sums substantially in excess of the $25,000 originally agreed to be paid. 

    c)The Trustee has engendered considerable costs which, inclusive of the costs of this trial (such costs not having been fixed) but clearly being more than the $6,000-odd in excess of the $25,000 figures revealed by the Trustee’s affidavit.  There is in truth nothing left for the Creditors in any event. 

    d)Mr and Mrs Sutera have no available remaining resources with which to meet their debts in any event. 

26. Accordingly, in my view, there are various things that ought to occur. First, pursuant to s.222C of the Bankruptcy Act, there is no question but that I should terminate the PIA.  The respondent debtors clearly failed to pay the monthly tranches of payments they were required to pay and I cannot be satisfied that any agreement was made to the contrary.  Ms Gawlik’s file notes strongly suggest that there is an excessive degree of optimism in the version for which Mr and Mrs Sutera contend.  It should be noted that this finding is the best the Court can do, given that both parties declined to cross-examine.  Ms Gawlik’s handwritten notes, being contemporaneous file notes made by a professional person, must be given weight. 

27. There is simply no point in making further sequestration orders pursuant to the Court’s powers to do so under s.43 of the Bankruptcy Act. Both estates would require administration which would engender further costs. The materials, as a whole, suggest in the strongest possible way that neither Mr Sutera nor Mrs Sutera has any other assets. Indeed, it is reasonable to suppose that the Creditors would not have approved the PIA had they not been satisfied that Mr and Mrs Sutera were not worth pursuing in bankruptcy in any event.

28. Furthermore, in circumstances where the Suteras have paid out well in excess of $75,000, it is appropriate to consider giving them relief and enabling them to get on with their lives. 

29. I note that the materials suggest there may be other debts, particularly owed by Mr Sutera, which would not be covered by the PIA and those are matters for those Creditors, if there are any, to pursue themselves. 

30. For the reasons I have set out, I do not think that Mr or Mrs Sutera has a car worth anything at all and there is simply no asset available for distribution to Creditors in the event that a sequestration order is made. 

31. Equally, however, I see nothing in the materials to suggest that the Trustee’s charges are unreasonable.  The fact is that Mr and Mrs Sutera failed to stand by the first two bargains they made and the process of inquiry and administration of the estates that was occasioned thereby must necessarily have taken considerable amounts of time and expenditure. 

32. In the circumstances, I will simply make ancillary orders pursuant to s.222C(3) of the Bankruptcy Act, that the Trustee retain the entirety of the funds presently held in trust.

33. I will otherwise dismiss the application. 

I certify that the preceding thirty-three (33) paragraphs are a true copy of the reasons for judgment of Judge Burchardt.

Associate: 

Date:  10 July 2013