Petresca and Petresca (No. 2)

[2008] FamCA 1238

FAMILY COURT OF AUSTRALIA

PETRESCA & PETRESCA (NO. 2) [2008] FamCA 1238

FAMILY LAW – BANKRUPTCY – Administration of property – sale of asset by the Trustee in Bankruptcy in order to prevent the increase in the debts of the bankruptcy – bankrupt party in continued default of filing documents pursuant to court orders – failure by bankrupt to take up opportunity to pay out the trustee and procure an annulment of the bankruptcy

Family Law Act 1975 (Cth)

APPLICANT: Ms Petresca

RESPONDENT: Mr Petresca

INTERVENOR: Trustee for the bankrupt estate of the husband

FILE NUMBER: MLC 872 of 2008

DATE DELIVERED: 7 August 2008

PLACE DELIVERED: Melbourne

PLACE HEARD: Melbourne

JUDGMENT OF: Mushin J

HEARING DATE: 7 August 2008

REPRESENTATION

COUNSEL FOR THE APPLICANT: In person

SOLICITOR FOR THE APPLICANT: N/A

COUNSEL FOR THE RESPONDENT: Mr C.C. Ham

SOLICITOR FOR THE RESPONDENT:	T.I.A. Forbes & Henry
COUNSEL FOR THE INTERVENOR:	Ms Campbell

SOLICITOR FOR THE INTERVENOR: Forte Family Lawyers

Orders

1. The property situated at and known as O Business at O in the State of Victoria more particularly described in Certificate of Title Volume … Folio … (“the Business”) be forthwith sold by the Official Trustee in Bankruptcy of the estate of the husband wholly out of Court.

2. The said trustee be and is hereby solely authorised to sell the said Business on such terms and conditions including whether by private treaty or public auction, reserved price, terms and conditions of sale and choice of real estate agent and solicitor as he may decide in his sole discretion.

3. The proceeds of the said sale be dispersed as follows:

   a.first in discharge of any encumbrance on the said title thereto to enable the vendor to give clear title to the purchaser;

   b.in payment of all costs, disbursements and other outgoings in respect of the said sale including agent’s and solicitor’s costs;

   c.in discharge of all costs and expenses necessary to procure an annulment of the bankruptcy of the husband which is the subject of the said trust; and

   d.as to any balance to the solicitors for the wife to be held in an appropriate interest bearing account on behalf of the husband and the wife and not be distributed save by the written consent of both parties first had and obtained or order of the Court.  

4. Until further order the husband and the wife both be and are hereby restrained by themselves, their servants and agents from further encumbering the Business or the matrimonial home known as and situated at M in the State of Victoria.

5. The husband be and is hereby restrained by himself, his servants and agents as follows:

   a.from contacting any selling agent engaged to sell the Business;

   b.from attending at or within 100 metres of the Business;

   c.from attending at or interfering with any auction or sale of the Business; and

   d.from contacting or attempting to contact any prospective purchaser of the Business.

6. The further hearing of all applications be otherwise adjourned for hearing before Justice Mushin at 10:00am on Wednesday 24^th September 2008.

7. Liberty be reserved to either party to apply for the distribution of all or part of any money held in trust pursuant to sub-paragraph 3 (d) hereof on the said adjourned date or otherwise urgently in the event that such an application is justified by the circumstances.

8. All questions of costs be reserved.

9. Liberty be reserved to all parties to apply on short notice.

IT IS CERTIFIED

1. Pursuant to Rule 19.50 of the Family Law Rules 2004 this matter reasonably required the attendance of counsel

IT IS NOTED that publication of this judgment under the pseudonym Petresca & Petresca is approved pursuant to s 121(9)(g) of the Family Law Act 1975 (Cth)

FAMILY COURT OF AUSTRALIA AT MELBOURNE

FILE NUMBER: MLC 872 of 2008

MS PETRESCA

Applicant

And

MR PETRESCA

Respondent

And

TRUSTEE FOR THE BANKRUPT ESTATE OF THE HUSBAND

Intervenor

REASONS FOR JUDGMENT

1. The substantive proceedings concern alteration of property interest applications between the husband and the wife.  However, the husband is in bankruptcy and his trustee in bankruptcy is a party to the proceedings before the Court. 

2. This matter came before me in the Judicial Duty List on 23 July 2008.  On that date, Counsel represented the wife and the trustee, and the husband appeared in person.  The husband had not filed any material, despite the fact that he had been previously ordered to do so.

3. On 16 June 2008, a Registrar ordered the husband to file a response to both the wife's application for final orders and interim orders by 4 July 2008 and also file a Financial Statement.  The husband did not comply with that order.

4. Before me on 23 July 2008, it was ordered that the proceedings be adjourned part-heard before me today, that the husband file and serve any response to any application presently before the Court, together with a Financial Statement and any affidavit in support thereof no later than 5 August 2008.  I required the husband to attend Court today, either with or without legal representation.  I further ordered that:

   In the event that the husband fails to comply with any part of paragraphs 2 or 3 of this order, any application by the wife or the trustee to proceed on an undefended basis subject to the discretion of the trial judge with regard to the right of the husband to make any submission to the Court and cross‑examine any witness, if any.

5. The husband has failed again to comply with the order for the filing of documents in accordance with paragraph 2 of my order. 

6. Apart from the usual provisions with regard to a party in default, subsections (12) and (13) of section 79 are relevant to this matter.  Subsection (12) prevents me from allowing a bankrupt party to the marriage to make a submission to the Court in connection with any vested bankruptcy property in relation to that bankrupt party without my leave.

7. Subsection (13) requires me not to grant leave under subsection (12) unless I am satisfied "that there are exceptional circumstances".  On several occasions today, having pointed out the provisions of those subsections to the husband, I sought his submission as to whether there was any such exceptional circumstance.  He was ordered to telling me about the substance of the matter and tried at one stage to tell me what would appear to have been privileged communication outside the court in an attempt to settle the matter.  I would not listen to the last part of that, and as far as the first part is concerned, I find that they do not constitute an exceptional circumstance.

8. Accordingly, I have resolved that I cannot grant leave to the husband to make any submission in accordance with section 79(12).  I am happy to revisit that finding if the husband at some later time is able to persuade me there is such an exceptional circumstance. 

9. There are two major pieces of property which are presently relevant.  The first of those is a hospitality business in O and the second is the former matrimonial home at M.  The initial application on behalf of the trustee was that both of those properties be sold to pay out the trustee's entitlements under the bankruptcy trust.  The wife, through Counsel, opposes the sale of the M property and the husband, despite the fact that he has not been given leave, was permitted to indicate that he opposed the sale of both properties.

10. I am persuaded that given that I propose listing this matter for further Mention before me on 24 September 2008, there is no urgency about selling the former matrimonial home and that issue will await the further hearing.  However, I am persuaded by Counsel for the trustee in bankruptcy that given the ever‑increasing debt occasioned by the bankruptcy that it is appropriate that an order for sale of the Business be made forthwith.

11. The husband has indicated rather passionately from the bar table that he would like the opportunity to pay out the trustee and procure an annulment of the bankruptcy.  Despite his protestations, I find that he has had ample opportunity to do that and there is no reason why that opportunity should not continue at least for the immediate future.  The trustee in bankruptcy, through Counsel, informs me that it is expected that the Business will be difficult to sell; the more difficult it is to sell, the more opportunity that the husband will have to seek to annul the bankruptcy, although he would be well advised to try and obtain that annulment by payment of all moneys owing as soon as practicable.

12. The affidavit of the trustee persuades me that with costs and all other expenses, an amount which would appear to approach $100,000 would be necessary to pay out the trustee.  I do not make that as a finding but rather an indication of the ambit of the present dispute.  The husband has asserted that the Business has a value vastly in excess of $160,000 and seems to be suggesting that in the event the trustee were to enter into a contract for sale of the Business for that figure, being the figure of the valuation, that the property would be very significantly undersold.

13. From my point of view, that is a matter for the trustee.  The trustee has legal obligations to enforce the trust in accordance with the law and any breach of that may well be the subject of other proceedings.  I would be confident that the trustee is well aware of the obligations under the trust and I do not take that matter any further.

14. Accordingly, I have found that in order to prevent the increase in the debts of the bankruptcy, it is appropriate that the Business be sold, and hopefully when that occurs, the trustee in bankruptcy will be able to be discharged from these proceedings.  I will order accordingly.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of the Honourable Justice Mushin 

Associate: 

Date:  17 April 2009