Nobarani v Mariconte

Case [2021] FCAFC 96

FEDERAL COURT OF AUSTRALIA

Nobarani v Mariconte [2021] FCAFC 96  

Appeal from: Mariconte v Nobarani [2020] FCA 1485
File number: NSD 1227 of 2020
Judgment of: ALLSOP CJ, FARRELL AND DERRINGTON JJ
Date of judgment: 7 June 2021
Catchwords: BANKRUPTCY – appeal against order setting aside bankruptcy notice – whether bankruptcy notice was issued for an improper purpose – whether bankruptcy notice was an abuse of process – appeal allowed
Legislation: Bankruptcy Act 1966 (Cth)
Cases cited:

Alhalek v Quintiliani trading as Kells Lawyers [2020] FCA 1272

Cavoli v Etl [2007] FCA 1191

Killoran v Duncan, in the matter of Killoran [1999] FCA 1574

King v Collins [2007] NSWCA 122

Maxwell-Smith v S & E Hall Pty Ltd [2006] FCA 825

Nobarani v Mariconte [2018] HCA 36; 265 CLR 236

Nobarani v Mariconte (No 2) [2018] HCA 49; 360 ALR 390

Prentice v Fewin Pty Ltd, in the matter of Prentice [2017] FCA 490

Re Estate of McLaren; Mariconte v Nobarani [2015] NSWSC 667

Re Iris McLaren (No 2) [2019] NSWSC 1894

Reaper v Baycorp Collections PDL (Australia) Pty Ltd [2014] FCA 13

Royal v Nazloomian, in the matter of Royal [2019] FCA 555

Sandell v Porter [1966] HCA 28; 115 CLR 666

Schellenberg v Tunnel Holdings Pty Ltd [2000] HCA 18; 200 CLR 121

Slack v Bottoms English Solicitors [2002] FCA 1445

Switz Pty Ltd v Glowbind Pty Ltd [2000] NSWSC 222

Williams v Spautz [1992] HCA 34; 174 CLR 509

Young v Cooke [2017] FCA 26
Division: General Division
Registry: New South Wales
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 56
Date of hearing: 20 May 2021
Counsel for the Appellant: Ms M Hall
Solicitor for the Appellant: McDonnell Schroder
Counsel for the Respondent: Mr A Martin (Pro Bono)
Solicitor for the Respondent: Law Society of New South Wales (Pro Bono)

ORDERS

NSD 1227 of 2020
BETWEEN:

HOMAYOUN NOBARANI

Appellant
AND:

TERESA ANNE MARICONTE

Respondent

ORDER MADE BY:

ALLSOP CJ, FARRELL AND DERRINGTON JJ

DATE OF ORDER:

7 JUNE 2021

THE COURT ORDERS THAT:

1.The appeal be allowed.

2.The orders made by the Court on 15 October 2020 be set aside and in lieu thereof it be ordered that:

(a)       the application to set aside bankruptcy notice BN 248686 be dismissed; and

(b)the applicant, Ms Teresa Anne Mariconte, pay the costs of the respondent, Mr Homayoun Nobarani.

3.The respondent to the appeal, Ms Teresa Anne Mariconte, pay the appellant’s costs of the appeal.

4.The time for compliance with bankruptcy notice BN 248686 be extended for 28 days from the date hereof to 5 July 2021.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

THE COURT:

Introduction

  1. The appellant, Mr Homayoun Nobarani, seeks to overturn a determination made on 15 October 2020, pursuant to which a bankruptcy notice issued on 5 February 2020 (the Bankruptcy Notice) and served on the respondent, Ms Teresa Mariconte, was…

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AGLC
Nobarani v Mariconte [2021] FCAFC 96
Case
[2021] FCAFC 96
Decision Date

CaseChat Overview and Summary

In the case of Nobarani v Mariconte, the appellant, Mr Homayoun Nobarani, appealed against the orders of the Federal Circuit Court of Australia, which had set aside a bankruptcy notice issued to the respondent, Ms Teresa Anne Mariconte. The bankruptcy notice was issued in relation to an unpaid debt of approximately $121,000, which arose from costs orders made in probate proceedings concerning the estate of the late Ms Iris McLaren. The primary judge had concluded that the bankruptcy notice was issued for an improper purpose and set it aside, which led Mr Nobarani to appeal to the Federal Court of Australia.

The key legal issues before the court were whether the bankruptcy notice was issued for an improper purpose and whether it constituted an abuse of process. The primary judge had found that the bankruptcy notice was issued for an improper purpose, based on several factors, including the fact that Mr Nobarani did not take any other enforcement steps before issuing the notice, he had an alternative method available to satisfy the debt, and the timing of the notice issuance was questionable. The court had to determine if these findings were legally sound and if the bankruptcy notice issuance indeed constituted an abuse of process.

The Federal Court of Australia, in allowing the appeal, held that the primary judge's judgment could not stand as the alleged improper purpose was not put to Mr Nobarani nor raised prior to the hearing. The court emphasised that for a bankruptcy notice to be deemed an abuse of process, there must be a clear and proven overriding improper purpose. Here, it could not be said that Mr Nobarani did not intend to invoke the bankruptcy processes if his debt was not paid, nor that it was objectively apparent that Ms Mariconte was solvent. The court concluded that it would be rare for the issuance of a bankruptcy notice in such circumstances to amount to an abuse of process. The existence of an improper purpose must be squarely put to the creditor and established by sufficient proof to deprive them of recourse to the bankruptcy process.

The final orders of the court were that the appeal be allowed, the orders made by the Court on 15 October 2020 be set aside, the application to set aside the bankruptcy notice be dismissed, and Ms Mariconte pay Mr Nobarani's costs of the appeal. Additionally, the time for compliance with the bankruptcy notice was extended for 28 days from the date of the judgment to 5 July 2021.

Orders

Orders of the court

1. The appeal be allowed.

2. The orders made by the Court on 15 October 2020 be set aside and in lieu thereof it be ordered that:

(a) the application to set aside bankruptcy notice BN 248686 be dismissed; and

(b) the applicant, Ms Teresa Anne Mariconte, pay the costs of the respondent, Mr Homayoun Nobarani.

3. The respondent to the appeal, Ms Teresa Anne Mariconte, pay the appellant’s costs of the appeal.

4. The time for compliance with bankruptcy notice BN 248686 be extended for 28 days from the date hereof to 5 July 2021.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

In circumstances where the alleged improper purpose had not been put to Mr Nobarani nor raised prior to the hearing, the judgment based upon the finding that the Bankruptcy Notice was issued for such a purpose cannot stand and the appeal must be allowed. Moreover, here, it could not be said of the judgment creditor that he did not intend to invoke the bankruptcy processes if his debt was not paid following the issue of the notice, nor that it was objectively apparent to him that the debtor was solvent. It would be a relatively rare case where the issuing of a bankruptcy notice in such circumstances would amount to an abuse of process. At the very least, the existence of some overriding improper purpose for the issuing of the notice needs to be squarely put to the creditor and, in any case, established by sufficient proof in order to deprive them of recourse to the bankruptcy process which, in all other respects, they have regularly invoked.Background There is no need to set out in detail the background to this matter for the purposes of the appeal. The primary judge carefully analysed the evidence before the Court and a brief summary of it will suffice. The long history of acrimonious litigation between Ms Mariconte and Mr Nobarani arises in the context of probate proceedings relating to the estate of the late Ms Iris McLaren. In those proceedings, Ms Mariconte propounded a Will of Ms McLaren dated December 2013 (the December 2013 Will), being the month in which Ms McLaren died. Mr Nobarani challenged that Will, relying on earlier Wills. The December 2013 Will named Ms Mariconte as the executrix and sole beneficiary of Ms McLaren’s estate. The Wills propounded by Mr Nobarani distributed the estate in a different manner including some, although not a great amount, to Mr Nobarani himself. The probate proceedings took place in the Supreme Court of New South Wales before Slattery J who, on 22 May 2015, granted probate of the December 2013 Will to Ms Mariconte and ordered Mr Nobarani to pay her costs of the proceedings: Re Estate of McLaren; Mariconte v Nobarani [2015] NSWSC 667. Those costs, in the sum of approximately $121,000, were subsequently recovered by Ms Mariconte. The matter then passed through the New South Wales Court of Appeal to the High Court which, on 15 August 2018, allowed an appeal by Mr Nobarani and set aside the orders of Slattery J and of the Court of Appeal: Nobarani v Mariconte [2018] HCA 36; 265 CLR 236. The proceedings were remitted to the Supreme Court of New South Wales for a new trial and Ms Mariconte was ordered to pay Mr Nobarani’s costs of the original trial, the appeal to the New South Wales Court of Appeal, and the appeal to the High Court. By a separate order on 17 August 2018, the High Court directed that those costs be paid out of the estate of Ms Mariconte on a trustee basis: Nobarani v Mariconte (No 2) [2018] HCA 49; 360 ALR 390. Subsequent to the grant of probate by Slattery J in May 2015, Ms Mariconte distributed the assets of Ms McLaren’s estate to herself in accordance with the December 2013 Will. As at the date of distribution, Ms McLaren’s estate comprised assets of approximately $1.8 million in value. It is apparent that Ms Mariconte gave away most of the property she received under the Will. The evidence reveals that the only asset now owned by Ms Mariconte is a unit referred to as the Caringbah property, which was purchased with the proceeds of Ms McLaren’s estate and is estimated to be worth between $620,000 and $650,000.

Evidence

Evidence Before The Court

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Decision

Reasons for decision

It should be observed that before the primary judge the submissions made on Ms Mariconte’s behalf were advanced at a high level of generality and abstraction and were somewhat underdeveloped. On the other hand, it is recognised that her solicitor and counsel were acting pro bono (for which courts are always grateful) and that may provide some explanation. Decision of the primary judge The primary judge set out at length the unfortunate history of disputation and litigation between Mr Nobarani and Ms Mariconte in relation to the estate of Ms McLaren. In particular, reference was made to the proceedings before Parker J and Mr Nobarani’s omission to avail himself of the opportunity to seek an order that the Caringbah land be sold and to the manner in which Ms Mariconte was served with the Bankruptcy Notice. After setting out the principles relating to abuse of process, the primary judge concluded that the Bankruptcy Notice had been issued for an improper purpose rather than to invoke the Court’s jurisdiction in relation to bankruptcy, and ought to be set aside. The essence of her Honour’s conclusion arose from the circumstances in which Mr Nobarani had obtained the Restitution Judgment but had eschewed seeking to enforce it by the issue of a writ for the levy of property in relation to the Caringbah property. The matters relied upon by the primary judge as supporting the conclusion that the issuing of the notice was an abuse of process were that:(a)prior to the issuing of the Bankruptcy Notice, Mr Nobarani did not take any other steps by way of enforcement action or make any demands for payment;(b)as Parker J had observed to Mr Nobarani’s counsel on 18 December 2019, the only way in which Mr Nobarani was going to be paid was if funds were raised on the Caringbah property or that property was sold;(c)Mr Nobarani provided no explanation as to why he did not take up the opportunity to seek the relief identified by Parker J; and(d)the issuing of a Bankruptcy Notice was Mr Nobarani’s preferred method of “enforcement” for his debt claim. From these matters, her Honour concluded (at [71]) that the issuing of the Bankruptcy Notice was designed to pressure Ms Mariconte in the context of the ongoing probate proceedings, including the mediation. The precise nature of that pressure and the result it was to achieve were not stated. Her Honour concluded that Ms Mariconte’s failure to pay or challenge the Restitution Judgment for six weeks was not sufficient justification to issue the Bankruptcy Notice when Mr Nobarani had open to him an alternative method of satisfying her indebtedness. Her Honour also observed that a period of only six weeks had elapsed between the date of the judgment and the issue of the notice, a period during which the Christmas holiday vacation intervened, and that there was also a mediation in relation to the probate proceedings scheduled. In those circumstances, it was not surprising that Ms Mariconte had not taken any steps to realise the Caringbah property.

Ratio Decidendi

Legal Principle Established

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