FEDERAL COURT OF AUSTRALIA
Osborne v Gangemi [2011] FCA 1252
Citation: Osborne v Gangemi [2011] FCA 1252 Parties: RICHARD OSBORNE and KOUROSH JAFARI v ANTONIO GANGEMI, STEPHEN ROBERT DIXON (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR) and JOHN ADAMS (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR)
RICHARD OSBORNE v ANTONIO GANGEMI
File number(s): VID 742 of 2009
VID 790 of 2009Judges: BROMBERG J Date of judgment: 4 November 2011 Catchwords: BANKRUPTCY AND INSOLVENCY – Section 222(1) of the Bankruptcy Act 1966 (Cth) – whether the Court should set aside Personal Insolvency Agreement on grounds of unreasonableness or because it is not calculated to benefit the interests of creditors generally – amount available for distribution trivial or negligible when compared to the debtor’s total debts – debtor’s affairs call for further investigation – closeness of the vote of creditors a relevant factor – Personal Insolvency Agreement set aside and sequestration order made. Legislation: Bankruptcy Act 1966 (Cth) ss 5, 64D, 64ZA, 89A, 116, 120-122, 156A(3), 188, 222, 231 Cases cited: Bloomingdale Holdings Pty Ltd v 63 Buckley Street Pty Ltd [2008] VSC 168
Gangemi v Osborne & Anor; Bloomingdale Holdings Pty Ltd & Anor v 63 Buckley Street Pty Ltd & Ors [2009] VSCA 297
Westpac Banking Corporation v Hingston (No 2) [2010] FCA 1116
Re Richards: Ex parte Beneficial Finance Corporation Limited [1986] FCA 74
Re Brennan: Ex parte Stokes (Australasia) Limited (unreported FCA 31 May 1988)
Re Codrington: Ex parte Don McKay Tourist and Charter Pty Ltd [1989] FCA 349
Palazzolo v Ex Parte Discusso [1991] FCA 317
NZI Capital Corporation Limited v Lancaster (1991) 30 FCR 441
Lancaster v NZI Capital Corporation Limited [1991] FCA 471
Re Lockett: Ex parte Northern Equity Limited and Others [1992] FCA 142
Re Emmett Ex parte: Beneficial Finance Corporation Limited v Emmett [1991] FCA 632Date of hearing: 9-10 February 2011 and 4 March 2011 Place: Melbourne Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 67 VID 742 of 2009 Counsel for the Second Applicant: Mr M Gronow Solicitor for the Second Applicant: Christopher Bunnett Solicitor Counsel for the Third Applicant: Mr M Strang Solicitor for the Third Applicant: Melbourne Legal Partners Counsel for the First Respondent: Mr S Minahan Solicitor for the First Respondent: Abrahams Meese Lawyers Counsel for the Second and Third Respondent: Mr P Agardy Solicitor for the Second and Third Respondent: Lewis Holdway Lawyers VID 790 of 2009 Counsel for the Applicant: Mr M Gronow Solicitor for the Applicant: Christopher Bunnett Solicitor Counsel for the Respondent: Mr S Minahan Solicitor for the Respondent: Abrahams Meese Lawyers
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 742 of 2009
BETWEEN: RICHARD OSBORNE
Second ApplicantKOUROSH JAFARI
Third ApplicantAND: ANTONIO GANGEMI
First RespondentSTEPHEN ROBERT DIXON (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR)
Second RespondentJOHN ADAMS (AS TRUSTEE OF THE PROPERTY OF ANTONIO GANGEMI, THE DEBTOR)
Third Respondent
JUDGE:
BROMBERG J
DATE OF ORDER:
4…
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- AGLC
- Osborne v Gangemi [2011] FCA 1252
- Case
- [2011] FCA 1252
- Decision Date
CaseChat Overview and Summary
In Osborne v Gangemi, Osborne, a creditor, petitioned for the sequestration of Antonio Gangemi's estate, following a second application originally filed in the Federal Magistrates Court and transferred to the Federal Court on 19 October 2009. The Court was tasked with deciding whether to set aside a Personal Insolvency Agreement (PIA) between Gangemi and his creditors, which was deemed unreasonable and not calculated to benefit creditors generally. The Court had to consider whether the amount available for distribution was trivial or negligible when compared to Gangemi's total debts, and whether further investigation of Gangemi's affairs was warranted. The closeness of the vote of creditors was also a relevant factor in the Court's decision.
The Court examined the legal grounds for setting aside the PIA, focusing on section 222(1) of the Bankruptcy Act 1966 (Cth). The Court considered whether the PIA was unreasonable or not in the best interests of creditors. The evidence presented indicated that Gangemi and Lanciana had jointly developed various properties, with Gangemi controlling Bloomingdale Holdings Pty Ltd. The Court scrutinised the properties, particularly Buckley Street in Footscray and Stevedore Street in Williamstown, to assess the value of assets available for distribution. The Court noted the breakdown of the relationship between Gangemi and Lanciana, and the subsequent legal proceedings, which were heard in the Supreme Court of Victoria.
After careful consideration, the Court determined that the PIA should be set aside as it was not in the best interests of the creditors. The Court found that the amount available for distribution was indeed trivial or negligible compared to Gangemi's total debts, and that further investigation of his affairs was necessary. The closeness of the vote of creditors supported the decision to set aside the PIA. Consequently, the Court made a sequestration order against Gangemi's estate. The costs of the second and third applicants were to be taxed and paid out of Gangemi's estate, while the costs of the second respondent were reserved.
The Court dismissed the creditor’s petition but ordered that the applicant's costs of the petition be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth). The Court also set aside the PIA made by Gangemi and ordered the sequestration of his estate. The costs of the second and third applicants were to be paid out of Gangemi's estate, and the costs of the second respondent were reserved.
The Court examined the legal grounds for setting aside the PIA, focusing on section 222(1) of the Bankruptcy Act 1966 (Cth). The Court considered whether the PIA was unreasonable or not in the best interests of creditors. The evidence presented indicated that Gangemi and Lanciana had jointly developed various properties, with Gangemi controlling Bloomingdale Holdings Pty Ltd. The Court scrutinised the properties, particularly Buckley Street in Footscray and Stevedore Street in Williamstown, to assess the value of assets available for distribution. The Court noted the breakdown of the relationship between Gangemi and Lanciana, and the subsequent legal proceedings, which were heard in the Supreme Court of Victoria.
After careful consideration, the Court determined that the PIA should be set aside as it was not in the best interests of the creditors. The Court found that the amount available for distribution was indeed trivial or negligible compared to Gangemi's total debts, and that further investigation of his affairs was necessary. The closeness of the vote of creditors supported the decision to set aside the PIA. Consequently, the Court made a sequestration order against Gangemi's estate. The costs of the second and third applicants were to be taxed and paid out of Gangemi's estate, while the costs of the second respondent were reserved.
The Court dismissed the creditor’s petition but ordered that the applicant's costs of the petition be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth). The Court also set aside the PIA made by Gangemi and ordered the sequestration of his estate. The costs of the second and third applicants were to be paid out of Gangemi's estate, and the costs of the second respondent were reserved.
Orders
Orders of the court
1. The title of the proceeding be amended to reflect the withdrawal of Pasquale Lanciana as the first applicant.
2. The Personal Insolvency Agreement made by Antonio Gangemi under Part X of the Bankruptcy Act 1966 (Cth) and dated 7 September 2009, is set aside.
3. The estate of the first respondent Antonio Gangemi is sequestrated.
4. The costs of the second and third applicants be taxed and paid out of the estate of Antonio Gangemi in accordance with the Bankruptcy Act 1966 (Cth) as if they were the costs of a petitioning creditor.
5. The costs of the second respondent be reserved.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
1. The creditor’s petition be dismissed.
2. The applicant’s costs of the petition be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
The second application before the Court is a creditor’s petition issued by Osborne. It was originally filed in the Federal Magistrates Court and was transferred to this Court on 19 October 2009. That application was heard together with the application to which I have already referred. Given that the Court will make a sequestration order against the estate of Gangemi in the first application, it is unnecessary for the relief sought by the creditor’s petition to be further dealt with other than for the question of costs. For those reasons, I will deal with costs and otherwise dismiss the creditor’s petition. BACKGROUND FACTS In 1997, Lanciana and Gangemi began to jointly develop various properties utilising a number of corporate entities which one or the other of them controlled. One of the corporations involved was Bloomingdale Holdings Pty Ltd (“Bloomingdale”). Gangemi was the director of Bloomingdale and at all relevant times was in control of that company and until 30 June 2011 its sole shareholder. A number of properties were purchased in which Gangemi and Lanciana had an involvement. Gangemi’s evidence was that eight properties were purchased in inner Melbourne suburbs. According to Gangemi, Bloomingdale and not Gangemi had a beneficial interest in each of these properties which was shared equally with Lanciana in relation to six of the properties and with additional interests in relation to the remainder. One of those properties was purchased in 2002 and was located in Buckley Street, Footscray (“Buckley Street”). Buckley Street was registered in the name of 63 Buckley Street Pty Ltd. In the first half of 2002, Osborne advanced $200,000 to Gangemi. Jafari advanced $350,000 to Gangemi and Lanciana with a view to acquiring an interest in Buckley Street. It was intended that Buckley Street be a joint development involving Gangemi, Osborne, Jafari, Lanciana and others. Gangemi claimed in his evidence before me, that he held no beneficial interest in this property but that through a constructive trust, Bloomingdale held about a third of the beneficial interest in that property. Another property that was purchased by Lanciana and Gangemi and which is of particular interest, was located at 87 Stevedore Street, Williamstown (“Stevedore Street”). Its registered owner was 87 Stevedore St Pty Ltd. Gangemi claims that through a trust, Bloomingdale and Lanciana each held half of the beneficial interest in that property. Since about 1996, Bloomingdale has also owned a property at Rae Street, North Fitzroy. According to Gangemi this property, in which he resided, was held on trust for his son Anthony. In 1996, when the property was purchased, Anthony was aged one and made no contribution to the purchase of this property. From 2003, Bloomingdale also owned a property in Little Collins Street, Melbourne. Before the Buckley Street properties could be developed, and by May 2003, the relationship between Gangemi and Lanciana broke down. They executed a document titled “Heads of Agreement” which dealt with the Buckley Street property. That and other circumstances led to proceedings being issued in the Supreme Court of Victoria which were heard by Hargrave J in January and February of 2008. Reasons for judgment in that matter are reported as [2008] VSC 168 and were delivered on 22 May 2008.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
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