Nuplex Industries (Aust) Pty Ltd v Menso - [2011] FMCA 326

FEDERAL MAGISTRATES COURT OF AUSTRALIA

NUPLEX INDUSTRIES (AUST) PTY LTD v MENSO

[2011] FMCA 326

BANKRUPTCY – Creditor’s petition – entitlement established – grounds of opposition not established – sequestration order made.

Bankruptcy Act 1966 (Cth), ss.52(2)(a), 52(2)(b), 52(3)

American Express Australia Limited v Kerr (No.2) [2008] FMCA 1569
Cain v Whyte (1933) 48 CLR 639
Deputy Commissioner of Taxation v Catanese [1999] FCA 564
Eykamp v Deputy Commissioner of Taxation [2010] FCA 797
Rozenbes v Kronhill (1956) 95 CLR 407

Applicant:

NUPLEX INDUSTRIES (AUST) PTY LTD ACN 000 045 572

Respondent:

MARIO JOHN MENSO TRADING AS PARADISE POOLS REFURBISHMENT

File Number:

SYG 2156 of 2010

Judgment of:

Smith FM

Hearing date:

3 May 2011

Delivered at:

Sydney

Delivered on:

3 May 2011

REPRESENTATION

Counsel for the Applicant:

Mr D Mitchell

Access Law Group (city agent)

Solicitors for the Applicant:

Peter Winters & Co

Counsel for the Respondent:

Respondent in person (by telephone)

ORDERS

A sequestration order be made against the estate of Mario John Menso.
All proceedings under the sequestration order are stayed under s.52(3) of the Bankruptcy Act 1966 (Cth) for 21 days.
The applicant creditor’s costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note that the date of the act of bankruptcy is 20 September 2010.
The applicant must give a copy of this order to the Official Receiver within 2 working days.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 2156 of 2010

NUPLEX INDUSTRIES (AUST) PTY LTD

ACN 000 045 572

Applicant

And

MARIO JOHN MENSO

TRADING AS PARADISE POOLS REFURBISHMENT

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

This is a creditor’s petition filed on 6 October 2010. It relies on an indebtedness of $5,020.37, being the balance due on a Local Court judgment entered by default against Mr Menso on 15 June 2009 in the amount of $10,930.
The creditor’s petition initially described the source of the indebtedness as unpaid amounts on a supply of tyres, but a Registrar has ordered – correctly, in my opinion, that the petition should be amended to identify the debt as arising from the supply of fibreglass resins. In my opinion, nothing turns on that error.
The affidavit of debt filed under the rules today deposes to the debt relied upon in the petition remaining outstanding. As I understand Mr Menso’s evidence which is before me, although it is not clear, he concedes that that amount remains unpaid, or at least most of it (see his affidavit sworn on 28 April 2011 at paragraph 15). I accept the affidavits of debt.
There is evidence that a further indebtedness to the petitioning creditor in relation to other supplies arose and was pursued by the creditor at the end of last year. As I understand it, the evidence from both parties which is before me today shows that that amount has been paid by Mr Menso, but not the indebtedness relied upon in the petition.

I therefore do not consider that these circumstances provide Mr Menso with a ground of opposition to the petition.
The creditor’s petition relies upon an act of bankruptcy resulting from the service of a bankruptcy notice, which was based upon the same indebtedness which is identified in the creditor’s petition and the recent affidavit of debt. Mr Menso does not contest that the bankruptcy notice was served on 30 August 2010, and required him within 21 days after service to either:
(a)pay to the creditor the amount of the debt claimed; or
(b)make arrangements to the creditor’s satisfaction for settlement of the debt.
As I understand it, Mr Menso concedes or, if he does not concede, I find that he did not comply with subparagraph (a) within the 21 days after service of the bankruptcy notice. However, Mr Menso argued that after he was served with the bankruptcy notice he took actions which satisfy subparagraph (b).
However, even if I accept as true his assertions of fact in the course of his submissions, his evidence as I understand it shows only that he attempted to make further contacts with the relevant debt recovery personnel within the petitioning creditor’s office, to gain further time and make further arrangements for him to pay the outstanding balance. He said that he explained the misfortunes which had arisen, disrupting the continuance of the previous instalment plan which had been agreed, and that he thought that these misfortunes would be accommodated by the creditor. He gave no evidence that any of his new proposals were accepted by or on behalf of the creditor.
In my opinion, there is nothing in what Mr Menso has said to me, and no evidence now before me, showing that his efforts to reach further arrangements with the petitioning creditor after service of the bankruptcy notice gave rise to anything which could amount to an agreement or ‘arrangement’ which would show compliance with subparagraph (b) of paragraph (1) of the bankruptcy notice (see Deputy Commissioner of Taxation v Catanese [1999] FCA 564, and American Express Australia Limited v Kerr (No.2) [2008] FMCA 1569 at [22]).
I am therefore satisfied that the act of bankruptcy relied upon in the petition and the amended petition has been proved. Service of the petition occurred and is proved by affidavit, but it is also proved by repeated appearances by Mr Menso and a solicitor instructed by him on several occasions in front of this Court in response to the petition.
The petition has been repeatedly listed before Registrars, and on the last occasion it was also listed before Barnes FM on 12 April 2011. It is clear to me that Mr Menso has been given abundant opportunities to present evidence to the Court to establish a good ground of opposition to the petition, and also to make further efforts to reach agreement with the creditor, or otherwise satisfy the debt. However, the petitioning creditor today has moved on the petition, and it appears to me that the time has come for finality to be brought to this petition.
Barnes FM’s directions on the last occasion required Mr Menso to file and serve his further affidavit evidence in support of the notice of opposition on or before 28 April 2011. As I have noted, the last substantial affidavit from Mr Menso on the Court file which was referred to me today by the Registrar conducting the bankruptcy list, is an affidavit with bulky attachments sworn on 29 April 2011. There is also an additional affidavit stamped as filed on 2 May 2011, but which appears to have been received by facsimile on 29 April 2011. I have read that material on the basis that it should be considered to show sufficient compliance with Barnes FM’s directions.
Mr Menso today, as on previous occasions, has obtained the indulgence of the Court to attend the hearing by telephone rather than in person. By seeking that indulgence he has accepted the inevitable corollary that he is unable to tender further documents to me in the course of today’s hearing. He has in his submissions today referred to further documents, with suggestions that some of them may have been forwarded to the Federal Court registry at Queens Square. There is no confirmation of this in the file. In all the circumstances, I have declined to further adjourn to allow Mr Menso further opportunities to place before me any further documents he wishes to rely upon.
I should say, however, that nothing he has said to me today in the course of his submissions concerning the contents of further documents to which he has referred, points to the presence of any evidence which would provide him with material support for his arguments against the making of a sequestration order today.
As I understand it, the essence of his opposition to the making of a sequestration order remains the contentions in his notice of opposition filed by his solicitor on 24 November 2010. This makes three contentions:
1.I have never entered into an agreement to purchase tyres from Nuplex Industries and in that respect the Creditors Petition is defective and ought to be struck out with costs awarded to myself.
2.I am solvent and evidence to be provided by my accountant and filed in the Court will confirm this.
3.I am able to pay the amount of the debt claimed in the Creditors Petition if the Petition is not dismissed or struck out by the Court under ground 1.
The first contention takes issue with the statement in the creditor’s petition as to the nature of the supply of goods giving rise to the debt. As I have noted, the Registrar properly, in my opinion, has allowed an amendment to the creditor’s petition in that respect, and that ground therefore fails. Mr Menso does not, it appears, dispute that the amended petition correctly identifies the source of his indebtedness.
In relation to the second ground, the assertion by Mr Menso that he is ‘solvent’ has not been supported by any evidence provided by an accountant nor any other evidence which satisfies me that he can meet the tests of ‘solvency’, insofar as this invokes the terms of s.52(2)(a) of the Bankruptcy Act. This allows a debtor to resist a bankruptcy petition if “he or she is able to pay his or her debts”. As established by authority, this requires the debtor to show, if not funds immediately available to pay debts which are currently owing, at least the possession of assets which are available for realisation in a realistic timeframe (see Eykamp v Deputy Commissioner of Taxation [2010] FCA 797 at [7]).
Mr Menso has not shown me any evidence of such assets or ability to raise funds to meet this amount. Some of his evidence appears to suggest that he has trade debtors from whom he could meet his own debts, but he has not presented evidence which satisfies me that any amounts owing by trade debtors are, in fact, realisable in a reasonably short time.
A substantial part of Mr Menso’s business misfortunes result from the activities of a Queensland licensing authority referred to by Mr Menso as QBSA. He has attached in his evidence lengthy submissions which show the nature of his dispute with that authority, in which he maintains that he is a victim of circumstances outside his control and for which he has no culpability. This may indeed be the case, and it may be the case that Mr Menso’s business has been unfairly brought to an end. However, there is nothing in the material before me which would suggest that the petitioning creditor is responsible for these misfortunes, nor that any cross-claims against the petitioning creditor might arise from the circumstances of Mr Menso’s business failure.
In those circumstances, it appears to me that this background material in relation to his disputes with the building services authority and other persons does not provide “other sufficient cause” for dismissing the petition within s.52(2)(b) of the Bankruptcy Act.
Thus, the evidence before me today from Mr Menso not only fails to persuade me that he is ‘solvent’, it also fails to persuade me that there is any other reason for not acceding to the prima facie right of a petitioning creditor with an outstanding debt to move on a creditor’s petition and obtain a sequestration order (see Cain v Whyte (1933) 48 CLR 639 at 645‑646 and 648, and Rozenbes v Kronhill (1956) 95 CLR 407 at 414).
The third ground in the notice of opposition contains the assertion that Mr Menso is able to pay the amount of the debt claimed. However, he has not proved this to my satisfaction, for the reasons I have given above.
Mr Menso points to other various misfortunes, including ill health at the end of last year, distraction by natural disasters affecting parts of Queensland, and other misfortunes. These events give rise to sympathy on my part, but cannot in my opinion give rise to a reason for dismissing the petition or declining to make a sequestration order today.
I am however prepared, in view of an unverified assertion by Mr Menso that he can raise money to pay this debt, to suspend the operation of the sequestration order under s.52(3) for the maximum 21 days. That will not remove or suspend the status of bankruptcy, but will possibly delay the incurring by his trustee of some costs of administration during that period, and will allow a window of opportunity for Mr Menso to satisfy his trustee and his creditors that an insolvency administration should not proceed and should be annulled.
I am otherwise satisfied that the requirements of the Bankruptcy Act and Regulations in relation to the making of the sequestration order have been satisfied, and that it is appropriate for me to make that order today.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate:

Date: 10 May 2011