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Papalia v Romeo (No.2)

Papalia v Romeo (No.2)

Case [2013] FCCA 1609 14 October 2013

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FEDERAL CIRCUIT COURT OF AUSTRALIA

PAPALIA & ANOR v ROMEO (NO.2)

[2013] FCCA 1609

Catchwords:

BANKRUPTCY – Priority of creditors – where priority of unregistered mortgages determined on first in time basis – where priority may be affected if third party relies on failure to caveat and subsequently enters into mortgage agreement – where mortgage caveated in part only – where third party lent money to respondent debtor after applicant creditor and caveated its interest – whether applicant creditor’s caveat sufficient to give notice of full amount of its mortgage – where no evidence of third party’s actions entering mortgage – whether applicant creditor’s failure to caveat full amount of mortgage resulted in postponement of applicant creditor’s interest in favour of third party’s interest – whether third party’s caveat affected its priority – whether applicant creditor’s mortgage secured.

PRACTICE AND PROCEDURE – Affidavits – admissibility of expert reports – where expert valuer produced valuation of property – where amount of valuation reached without reference to amount of valuation of comparable properties – where reasoning of valuer not apparent – whether opinion of expert wholly or substantially based on specialised knowledge – whether expert report admissible.

BANKRUPTCY – Property – divisible property – determination of value of respondent debtor’s property.

PRACTICE AND PROCEDURE – Adjournment – where debtor is pursuing litigation against primary, registered mortgagee to remove mortgage – where mortgage is valid on its face – whether petition would require extension or may be extended – whether alternate proceedings sufficiently advanced – where there exists further supporting creditors – whether fruits of proceedings would overcome alleged insolvency – whether debtor’s prospects of success are good or reasonable – whether sufficient cause exists for adjournment – whether to adjourn.

BANKRUPTCY – Creditors petition – whether to make sequestration order.

Legislation:

Bankruptcy Act 1966 (Cth), s.44
Contracts Review Act 1980 (NSW)

Latec Investments Ltd v Hotel Terrigal Pty Ltd (In Liquidation) (1965) 113 CLR 265
Perpetual Trustee Company Limited v Smith [2010] FCAFC 91
Person-To-Person Financial Services Pty Ltd v Sharari (1984) 1 NSWLR 745
Double Bay Newspapers Pty Ltd and Others v A W Holdings Pty Ltd and Others (1996) 42 NSWLR 409
Taleb v National Australia Bank Ltd and Another [2011] NSWSC 1562

Heid v Reliance Finance Corporation Limited (1983) 154 CLR 326

First Applicant:

FRANK PAPALIA

Second Applicant:

JULIE RANCE

Respondent:

GIUSEPPE ROMEO

File Number:

SYG 993 of 2013

Judgment of:

Judge Raphael

Hearing date:

27 August 2013

Date of Last Submission:

27 August 2013

Delivered at:

Sydney

Delivered on:

14 October 2013

REPRESENTATION

Counsel for the Applicants:

Mr M Hadley

Solicitors for the Applicants:

Shaw Reynolds

Counsel for the Respondent:

Mr R Perla

Solicitors for the Respondent:

Dettman Longworth

ORDERS

A sequestration order be made against the estate of Giuseppe Romeo.
The applicant’s costs including any reserved costs be taxed and paid from the estate of the Respondent in accordance with the Act.
Under the Bankruptcy Regulations a copy of this sequestration order be given to the Official…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Papalia v Romeo (No.2)

Details

AGLC: PAPALIA & ANOR v ROMEO (NO.2) [2013] FCCA 1609
Case: [2013] FCCA 1609
Decision Date: 14 October 2013

CaseChat Overview and Summary

In *Papalia v Romeo (No.2)*, the Supreme Court of Western Australia considered a dispute concerning the priority of unregistered mortgages over a property and the admissibility of an expert report in bankruptcy proceedings. The applicant creditor sought to establish the priority of its unregistered mortgage over a subsequent unregistered mortgage held by a third party, arguing that its partial caveat should have provided sufficient notice. The court also had to determine whether an expert valuation report, prepared for the purpose of assessing the debtor's property value, was admissible given concerns about the valuer's methodology and reasoning.

The central legal issues before the court were: (1) the priority of unregistered mortgages, specifically whether a partial caveat by an earlier mortgagee was sufficient to give notice of the full extent of its interest and thus affect the priority of a later unregistered mortgagee; (2) the admissibility of an expert valuer's report where the reasoning behind the valuation was not apparent and it was unclear if the opinion was substantially based on specialised knowledge; and (3) whether to grant an adjournment of bankruptcy proceedings, considering the debtor's ongoing litigation against a primary mortgagee and the potential for the outcome of that litigation to resolve the alleged insolvency.

Justice Raphael applied the principle that the priority of unregistered mortgages is generally determined on a "first in time" basis, but this can be displaced if a third party relies on the failure to caveat and subsequently enters into a mortgage. The court found that the applicant creditor's partial caveat was insufficient to give notice of the full amount of its mortgage. Regarding the expert report, the court held that it was inadmissible because the valuer's reasoning was not apparent and it was not clear that the opinion was wholly or substantially based on specialised knowledge. The court ultimately decided not to grant an adjournment, finding that the debtor's prospects of success in the other litigation were not good or reasonable, and there was no sufficient cause to adjourn the bankruptcy proceedings.

Orders