Pavese v Sutherland and Howell as Trustees of the Bankrupt Estate of Pavese

[2017] FCCA 713

FEDERAL CIRCUIT COURT OF AUSTRALIA

PAVESE v SUTHERLAND AND HOWELL AS TRUSTEES OF THE BANKRUPT ESTATE OF PAVESE [2017] FCCA 713

Catchwords:
BANKRUPTCY – Ruling on application to annul bankruptcy.

Legislation:

Bankruptcy Act1966 (Cth), s 153B.

Applicant: ALAN PETER PAVESE

Respondent: RODERICK MACKAY SUTHERLAND AND MALCOLM KIMBAL HOWELL (AS TRUSTEES OF THE BANKRUPT ESTATE OF ALAN PETER PAVESE)

File Number: MLG 2495 of 2016

Judgment of: Judge Burchardt

Hearing date: 5 April 2017

Date of Last Submission: 5 April 2017

Delivered at: Melbourne

Delivered on: 5 April 2017

REPRESENTATION

Counsel for the Applicant: Ms Brazenor

Solicitors for the Applicant: Dorsia Legal

Counsel for the Respondents: Ms Carruthers

Solicitors for the Respondents: Lewis Holdway Lawyers

ORDERS

1. Pursuant to s.153B of the Bankruptcy Act 1966 (Cth), the Applicant’s bankruptcy be annulled.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT MELBOURNE

MLG 2495 of 2016

ALAN PETER PAVESE

Applicant

And

RODERICK MACKAY SUTHERLAND AND MALCOLM KIMBAL HOWELL (AS TRUSTEES OF THE BANKRUPT ESTATE OF ALAN PETER PAVESE)

Respondents

REASONS FOR JUDGMENT

1. In this matter the applicant Mr Pavese seeks that his bankruptcy be annulled pursuant to section 153B of the Bankruptcy Act 1966.  That application is neither consented to nor opposed by the Trustee.  I note that the trustee, judging by correspondence sent between the parties solicitors, has taken a very restrained and sensible attitude to the administration of the estate in the circumstances.  The amount that will be required to pay out the bankruptcy will not be grossly excessive.

2. The history of this unfortunate matter can be paraphrased in the following terms.  Mr Pavese lives in or near Griffith, and he looks after a sibling who is faced with very significant difficulties.  He lives in the family home.  He owns another property which is positively geared although not by all that much.  It produces a small income which the trustee has been applying to various matters since the bankruptcy took place in 2015.  Mr Pavese has a niece, Ms Laviano, who was one of the partners in a business which was not incorporated and details of the owners of which were required to be lodged with ASIC from time to time.  The business was a blinds business if I can so describe it in Griffith and it ran for quite some years, although it’s profitability seems generally to have been somewhat marginal.  The business got into trouble.  Ms Laviano asked her uncle for money and received the staggering sum in the circumstances of in excess of $200,000 in bits and pieces of loans over approximately 18 months.  In or around some of that period, Ms Laviano, as is now apparent, lodged Mr Pavese’s name with ASIC as one of the owners.  He says he knew nothing about it.  Ms Laviano says he knew nothing about it.  She also however says it wasn’t her who put his name on when it obviously was.  One has to approach her credit with that in mind.

3. Things went from bad to worse.  The business owed money to a supplier.  The supplier sued for the money.  They sued Mr Pavese because of course his name was on the business records.  It is easy to see why the Local Court in New South Wales made the order.  That then gave rise to service of a creditor’s petition in due course.  There must have been a bankruptcy notice as well.  Like many people who come before the Court in these matters, Mr Pavese did not read the documents carefully enough.  He is not the first and he is not the last person to have that misfortune.  I note from his employment and general lifestyle he is probably not a person of great business sophistication in any event.  Lo and behold he goes to get another loan and finds he is bankrupt.

4. In correspondence passing between the parties’ solicitor’s – by which I mean the trustee’s and Mr Pavese’s solicitors, the creditors despite notice made no attempt to be involved.  It is asserted by the solicitors for the trustees with Mr Pavese delayed over much in bringing his application, and that his application before the Court faces very significant difficulties as a result of that and various other matters.

5. So far as delay is concerned, I find Mr Pavese and his solicitors explanations very persuasive.  Whichever way it was, he had a lot of difficulty in his endeavours to set the original judgement aside. The bottom line is that the explanations for the delay ring true, and I am not satisfied that he has unduly delayed or misconducted himself in that regard.  I note that there is no desire to cross-examine Mr Pavese or any of his witnesses.  That being so, and while I note that Ms Laviano’s evidence must be approached with caution, there is an overwhelming body of evidence from virtually everybody concerned in the operation of the business which had the original debt to the effect that he had no involvement, that’s to say Mr Pavese had no involvement in it at all.  I accept that that is the case.  I can understand the reasoning of the trustee’s solicitors in their correspondence to the applicant’s solicitors, but the fact is the proposition that Mr Pavese was a silent partner by virtue of the loans that he advanced to his niece is tenable, but is denied on oath by up to three or four people with actual knowledge of the facts, and I am prepared to and do accept the force of their sworn evidence.

6. The question thus becomes should the Court exercise its power under section 153B. The very helpful and comprehensive written submissions filed by the applicant point in my view rightly to the fact that there are two things that the Court needs to be persuaded on. First is that the bankruptcy order should not have been made. It seems clear beyond doubt that Mr Pavese has at all times been solvent, so that would have stood as a significant inhibitor in any event. And furthermore, the judgment upon which the bankruptcy notice and creditors petition were based was not one in truth that Mr Pavese actually owed. So while it is easy to see why the order was made, it should not have been made. So the first aspect of the test is met. The second aspect is the Court’s residual discretion as to whether or not to make a bankruptcy annulment. All the factors relevantly in this case point to that conclusion. Mr Pavese did not owe the original debt. Mr Pavese was at all times solvent. He has acted with at least with sufficient dispatch. There is no prejudice identified to anybody in the event that the bankruptcy is annulled. The trustee’s position is of course protected under the Act. The amounts involved in protecting the trustee are not burdensome or overly burdensome to Mr Pavese. They are, in truth, at one level of analysis the penalty he pays for not reading the creditors petition and/or the bankruptcy notice in the first place. That is what happens if you pay no attention to these documents.

7. In the circumstances, I am fully satisfied it is appropriate to annul the bankruptcy, and the Court will make that order.

I certify that the preceding seven (7) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Date:5 April 2017