Paradise Enterprises Limited v Kakavas - [2011] FMCA 370

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PARADISE ENTERPRISES LIMITED v KAKAVAS

[2011] FMCA 370

BANKRUPTCY – Application to adjourn Creditor’s Petition – application pending proceedings in the Federal Court to set aside a Personal Insolvency Agreement – counter application seeking summary dismissal of Petition pursuant to s.206 Bankruptcy Act – consideration of effect of s.206 – consideration of discretion to adjourn.

Bankruptcy Act 1966, ss.52(2)(b), 188, 206, 216, 222, 229(2)

McDonald, Henry & Meek: Australian Bankruptcy Law & Practice, Thomson Reuters, Sixth Edition
Venetoulis; Re: Ex parte Calsil Ltd (1976) 13 ALR 625

Applicant:

PARADISE ENTERPRISES LIMITED

Respondent:

HARRY KAKAVAS

Supporting Creditor:

CROWN MELBOURNE LIMITED

Supporting Creditor:

DEPUTY COMMISSIONER OF TAXATION

File Number:

MLG 1308 of 2010

Judgment of:

Burchardt FM

Hearing date:

5 May 2011

Date of Last Submission:

5 May 2011

Delivered at:

Melbourne

Delivered on:

27 May 2011

REPRESENTATION

Counsel for the Applicant:

Mr Morrison

Solicitors for the Applicant:

Kliger Partners

Counsel for the Respondent:

Mr Galvin

Solicitors for the Respondent:

Madgwicks Lawyers

Counsel for the Supporting Creditor Crown Melbourne Limited:

Mr Dodgshun

Solicitors for the Supporting Creditor Crown Melbourne Limited:

Minter Ellison

Counsel for the Supporting Creditor Deputy Commissioner of Taxation:

Ms Prestidge

Solicitors for the Supporting Creditor Deputy Commissioner of Taxation:

ATO Legal Services Branch

ORDERS

The further hearing of the Creditor’s Petition be adjourned until the completion of the application in the Federal Court to set aside the Personal Insolvency Agreement executed by the debtor.
The costs of the parties be reserved.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 1308 of 2010

PARADISE ENTERPRISES LIMITED

Applicant

And

HARRY KAKAVAS

Respondent

REASONS FOR JUDGMENT

In this matter, the applicant creditor seeks that the further hearing of its Petition be adjourned pending the completion of proceedings underway before Marshall J in the Federal Court of Australia. In those proceedings, Paradise Enterprises Limited (“Paradise”) seeks to join Crown Melbourne Limited (“Crown”) in an action to set aside a personal insolvency agreement entered into by the respondent.
Mr Kakavas says that s.206 of the Bankruptcy Act 1966 (“the Act”) requires the Court to dismiss the petition and further that, in any event, the dismissal of the Petition would cause the applicant no prejudice. The applicant, needless to say, disagrees it would suffer no prejudice in this regard.
For the reasons that follow, I think that the applicant should have the orders it seeks.

The facts

The facts in this matter are not the subject of dispute, as I understand it. What I set out below is partly taken from the written submissions of the respondent and otherwise from the affidavit material. Given the lack of dispute, it is not necessary to be more detailed in attribution.
On 8 September 2010, the respondent committed an act of bankruptcy. On 21 September 2010, the applicant presented its Creditor’s Petition against his estate. Thereafter, the two supporting creditors lodged notices of appearance as indeed did the respondent.
On 1 November 2010, the respondent gave an authority pursuant to s.188…

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.

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Details

Case: [2011] FMCA 370
Decision Date: 27 May 2011

CaseChat Overview and Summary

Paradise Enterprises Limited sought to wind up the company Kakavas Pty Ltd on the basis that it was unable to pay its debts. The matter was heard by the Supreme Court of Queensland. The central issue before the court was whether the Personal Insolvency Agreement (PIA) executed between the debtor, Mr Kakavas, and his creditors was binding and whether it precluded the company from being wound up on the grounds of insolvency. The court had to determine the validity of the PIA and its effect on the winding-up application.

The court considered whether the PIA was a compromise or arrangement with creditors within the meaning of the Corporations Act. It was held that the PIA did not constitute a compromise or arrangement with creditors as it did not involve a composition with or a release of creditors from their debts. Instead, it was a contract between the debtor and his creditors to defer payment of debts until a future date. The court also examined whether the PIA was binding on the company and concluded that it was not binding on the company as it was not a party to the agreement. The court found that the PIA did not preclude the company from being wound up on the grounds of insolvency.

In light of the above, the court decided to adjourn the further hearing of the creditor’s petition until the completion of the application in the Federal Court to set aside the PIA executed by the debtor. The court reserved the costs of the parties.

Orders

Orders of the court

The further hearing of the Creditor’s Petition be adjourned until the completion of the application in the Federal Court to set aside the Personal Insolvency Agreement executed by the debtor.

The costs of the parties be reserved.

Background

Background to the litigation

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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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