Pulitano v Van Eps (No.2)

[2019] FCCA 3908

FEDERAL CIRCUIT COURT OF AUSTRALIA

PULITANO v VAN EPS (No.2) [2019] FCCA 3908

Catchwords:
BANKRUPTCY – Creditor’s Petition – non-compliance with bankruptcy notice – whether debtor able to pay debt – sequestration order made.

Legislation:

Bankruptcy Act 1958 (Cth) ss.52, 52(2)

APPLICANT: GUISEPPE PULITANO AS TRUSTEE FOR THE 4-8 WELWYN CRESCENT TRUST

RESPONDENT: JULIE ANNE-MARIE VAN EPS IN HER PERSONAL CAPACITY AND AS TRUSTEE FOR THE VAN EPS FAMILY TRUST

File Number: BRG 657 of 2019

Judgment of: Judge Jarrett

Hearing date: 26 November 2019

Date of Last Submission: 26 November 2019

Delivered at: Brisbane

Delivered on: 26 November 2019

REPRESENTATION

Counsel for the Applicant: Mr De Waard

Solicitors for the Applicant: Piper Alderman

The Respondent appeared in person

ORDERS

1. A sequestration order be made against the estate of JULIE VAN EPS and JULIE ANNE-MARIE VAN EPS, IN HER PERSONAL CAPACITY AND AS TRUSTEE FOR THE VAN EPS FAMILY TRUST.

2. The applicant creditor’s costs fixed in the sum of $2,718.00 be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.

The Court notes that the date of the act of bankruptcy is 16 July, 2019

The Court also notes that a consent to act as trustee signed by Mr Mark William Pearce and Mr Andrew John Heers has been filed under section 156A of the Bankruptcy Act 1966.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT BRISBANE

BRG 657 of 2019

GUISEPPE PULITANO, AS TRUSTEE FOR THE 4-8 WELWYN CRESCENT TRUST

Applicant

And

JULIE ANNE-MARIE VAN EPS, IN HER PERSONAL CAPACITY AND AS TRUSTEE FOR THE VAN EPS FAMILY TRUST

Respondent

REASONS FOR JUDGMENT

1. This is the hearing of a creditor’s petition. The petition was filed on 23 July, 2019. It is verified in the way required by s.52 of the Bankruptcy Act 1958.  It has been served on the respondent; there is no dispute about that.  The petition relies upon the respondent’s non-compliance with a bankruptcy notice.  There is no dispute that a bankruptcy notice was served on her on 25 February, 2019.  She admits as much. 

2. The bankruptcy notice is based on a judgment of the Supreme Court of Queensland given by Bowskill J for a sum of $618,197.87, together with interest in the sum of $50,415.61.  Added together, those two amounts are $668,613.48.  That is the amount that appears in the box which is numbered 1 in the bankruptcy notice.  No claim is made for legal costs.  Interest accrued since the date of the judgment is added; that is $12,227.38, and the subtotal is $680,840.66.  It was suggested in the course of her submissions by the debtor that there was some anomaly because a solicitor from the applicant’s legal firm at some point swore that the debt was $668,000 and a different solicitor more recently sworn that it is $680,000.  They are both right, because the way in which those figures arise is set out very clearly in the bankruptcy notice.  

3. There has been in the past an application to set aside the bankruptcy notice.  I heard and determined that application and dismissed it. 

4. The petitioning creditor establishes the preconditions for the making of a sequestration order pursuant to s.52 of the Bankruptcy Act and, in those circumstances, ordinarily a petitioning creditor has a prima facie entitlement to the making of a sequestration order. However, s.52(2) of the Bankruptcy Act provides that:

   If the Court is not satisfied with the proof of any of the matters set out in s.52(1) or is satisfied by the debtor that he or she is able to pay his or her debts or that for other sufficient causes sequestration ought not be made, it may dismiss the petition.

5. Here, the respondent debtor says that she is able to pay her debts and that there is other sufficient cause for a sequestration order not to be made.  She says that she can pay her debts because she has an entitlement to some money.  That will come to her upon the sale of the business of a company.  The company, BioNaturals Proprietary Limited, she says, has an agreement with a supermarket chain for the supply of certain products developed by the applicant or one of her associated corporate entities and which she is in the process of selling.  She says that that business is worth $2.2 million and when the business is sold, or perhaps the company is sold – it is not clear which – she will be paid the sum of $1.5 million at the very least, and thereby, she says, she will have funds which will discharge or give her the capacity to discharge the debt. 

6. It is trite that a debtor who is in a position to pay their debts within a reasonable time ought not be subject to a sequestration order. That does not necessarily require a debtor to have at hand sufficient cash resources to make payment of the debtor’s debts immediately.  It is sufficient to show that the debtor has sufficient assets that might be realised in a reasonable time that would permit the payment of all of his or her debts.  Here, it seems to be the respondent’s argument that within a reasonable time, or a short period, as she says, she will be in a position to do that.  However, her evidence does not bear that out. 

7. I am satisfied by her affidavit material, and in particular the affidavit that was sworn by her on 29 October, that a company with which she is associated has an agreement with Coles to provide certain products.  I say it is a company that she is associated with because there is no evidence before me that she is a director or shareholder of the company that is named in the agreement which is JV1 to her affidavit.  Her husband has signed that document, or somebody whom I assumed was her husband, Peter Van Eps. 

8. Notwithstanding that, BioNaturals Pty Ltd or perhaps its business has been listed for sale with an organisation called Link Business Melbourne Proprietary Limited.  The respondent debtor is described as the vendor under the document – see the second box that appears on the first page of that listing arrangement.  She is also described as the “guarantor”.  That document was signed on 16 September, 2019.

9. The vendor’s asking price is $2.2 million.  It was said by the respondent debtor that that is a good guide and is reliable evidence of the value of either the company or the business.  She is wrong on both counts.  It is nothing more than evidence of the vendor’s asking price and there is no explanation as to how that amount is derived.  It is significant, I think, that in the second-last box on that page there is provision made for the insertion of figures that might be relevant to the calculation of the worth of the business, things like weekly turnover figures, average weekly turnover and the like.  None of that is completed.  And so it is difficult, if not impossible, to figure out how it is that the asking the price of $2.2 million has been derived.   It was said in submissions that the business broker would not have listed it if it was not valued at that, but there is no evidence before me that any business broker has valued the business at all.   The only evidence is that it has been listed with a particular “vendor asking price”.  It might be realistic, it might not. 

10. One of the other difficulties is that it is not clear what is being sold, whether it is the business of the company or the company itself.  And it might be that whilst the business has a particular value, the company’s value and the value of the company to its shareholders – for that is the worth of the company to shareholders, its value reflected in the shares held by the shareholders of the company – might necessarily be different to the value of the business conducted by the company because of other debts that the company has.  There is no evidence at all before me about the financial position of BioNaturals Pty Ltd or, indeed, any other company with which the respondent debtor claims to be associated.  She says that to put that evidence before me would be to compromise her position in certain criminal proceedings that are pending against her, but it is difficult to see how that could be.  It certainly was not explained in either submissions or in any of the material that I have read.

11. It was said by the respondent debtor that a statutory declaration sworn by her solicitor demonstrates the value of the business.  The solicitor –  a Mr O’Shea – swears that:

    BioNaturals has entered into an exclusive business authority with Link Business Melbourne Proprietary Limited for the sale of the business.  Ms Van Eps instructs that she will accept the minimum price of $2.2 million plus stock.

12. That, of course, says nothing more than the document to which I have earlier referred.  Interestingly, the solicitor then says this:

    (5) I am instructed that two prospective buyers for the business have signed non-disclosure agreements with BioNaturals for the purpose of conducting due diligence on the business, and that the settlement period will be 30 days.

13. The solicitor does not say who has provided him with those instructions.  It was submitted from the bar table that the solicitor told Ms Van Eps, the debtor, about the prospective buyers but the statutory declaration reads differently.  He does not say who he has been instructed by about the two prospective buyers.  Moreover, his evidence is that the two prospective buyers for the business have signed non-disclosure agreements, but they are not in evidence, and the purpose of those non-disclosure agreements is to conduct due diligence on the business and that the settlement period will be 30 days.  The statutory declaration was signed on 8 October;  30 days has well and truly passed.  The statutory declaration affords no evidence of value.

14. The respondent debtor also took me to what she described as “the KPMG document”.  It is headed BioTech Funding “Market Scan Summary April 2018”.  It was said that that document supports her submission of value.  The first page of the document says this:

    This document is provided to Astranobile Pty Ltd, Shastra Healthcare Pty Ltd and Veneka BioTech Pty Ltd in relation to the market scan of recent BioTech transactions as sourced from merger market by KPMG.  The information contained in this document is of a general nature only, is provided for the purposes of scoping of potential services, and does not constitute the provision of advice or provide any type of certification or accreditation status.  Before acting or relying on any information, recipients of this documents should seek appropriate professional advice in relation to their circumstances. 

    Although KPMH endeavours to provide accurate and timely information, there can be no guarantee that such information is accurate or complete as of the date it is received or that it will continue to be accurate or complete in the future.  This document is provided to Astranoble Pty Ltd, Shastra Healthcare Pty Ltd and Veneka BioTech Pty Ltd by KPMG and should not be relied upon by any other party.  KPMG nor any member or employee of KPMG undertakes responsibility arising in any way from reliance placed by a third party on this document.  Any reliance placed is that party’s sole responsibility.

15. The document then purports to provide a range of data.  It does not purport to be a valuation of anything.  Rather, it is simply a number of matrices that set out, as I say, various data.  In any event, even if it purported to provide a valuation, it is so heavily qualified that it is, for the purpose of these proceedings, in my view, unreliable. 

16. Finally, it was said that evidence of value might be found in a solicitor’s letter from HopgoodGanim and a document attached to that solicitor’s letter described as a shareholder’s agreement.  The letter from HopgoodGanim is not a valuation.  It simply records various positions of the respondent and/or one or other of her companies.  The shareholder’s agreement, too, is not evidence of value.  What it is evidence of, is that certain figures have been inserted in a document, but for what purpose it is not entirely clear.  The nature and extent of the document is unclear, given that the whole of it does not seem to be in evidence in any event.  To the extent that it represents a shareholder’s agreement, it is difficult to understand the terms and conditions of the agreement having regard to that part of it which is in evidence.  It is expressed to be of nine pages in length but only one page is before me.  The letter from HopgoodGanim is plainly more than one page in length but only the first page is before me. 

17. Those matters, even if I accept that there is an attribution of value in them of the relevant BioNaturals Pty Ltd business or company, does not prove in any reliable way the value of that business.  So that it is clear though, what is described as the shareholder’s agreement does not even relate to BioNaturals Pty Ltd but rather to a different company.  

18. In her affidavit sworn on 25 November, 2019 the respondent debtor says that she has developed intellectual property across a “number of indications” for various ailments and she says that the IP is held in four research and development companies of which she is the sole director.  She then sets out on page 2 of the affidavit what she says is a statement of her financial position.  She includes the judgment debt, another debt by way of personal guarantee, a personal loan and says that her total liabilities are in excess of $675,000.  She then sets out her assets which include household and personal effects, but then sets out what I assume to be her interests in the various companies that I have, at least in part, already identified.  As I have indicated, the value to the shareholders in these companies is the value of the shares, and there is no evidence before me that the valuations that have been ascribed by the respondent debtor in her affidavit to these interests are accurate.  They are but bald assertions unsupported in their entirety by any evidence.

19. Allied with the proposition that she has assets from which she might discharge the relevant debt is the proposition that she might also have a cause of action against the Australian Taxation Office, and maybe others, which would return to her a sum which would be sufficient to pay this debt.  But where a debtor says that they have a claim against the creditor or another which will realise an amount equal to or greater than the debts claimed by the creditor, the debtor needs to satisfy the Court that there is a sufficient validity in the claim to justify the Court’s refusal in making a sequestration order.  Here, there is no evidence before me at all that would justify any claim against the Australian Taxation Office by the respondent debtor.  Her case insofar as the ATO is concerned is that the ATO failed to pay to one of the companies of which she is a director and shareholder a sum to which she asserts, without more, the company is entitled. 

20. More than that, she says that the ATO has raised against that company a taxation assessment and imposed penalties.  These are not claims that she could make; these are claims that the company could make if there was any basis to them.  There is a difference, a significant difference.  The debtor in this case is liable pursuant to the judgment of the Supreme Court, not the company.  So even if it was the case that there was evidence before me that the claim against the ATO was sufficiently valid, it would not avail the respondent debtor in this case because it is not her cause of action; it is a cause of action that belongs to the company, if anybody.

21. For the same reasons, to the extent that the debtor says that there is other good reason not to make a sequestration order because she will be deprived of the opportunity to pursue those claims, the evidence demonstrates that the claims are not hers to pursue and that, if she is bankrupt, then it may be the case that the company, through a replacement director, can pursue the claims if they are worth pursuing in any event.

22. For all of those reasons, I am not satisfied and I find that the debtor establishes that she is able to pay her debts. For the purposes of section 52(2)(a) of the Bankruptcy Act 1966, I find that the debtor has not demonstrated that there is other sufficient cause that a sequestration order ought not be made.  In those circumstances, it is appropriate to make an order that the estate of the respondent debtor be sequestrated and a sequestration order will issue in the usual terms. 

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Judge Jarrett delivered on 26 November, 2019.

Associate: 

Date: 13 May 2020