Re Ciardulo, I. Ex parte Deputy Commissioner of Taxation

[1993] FCA 883

IN THE FEDERAL COURT OF AUSTRALIA	1 1
VICTORIA DISTRICT REGISTRY	1 No. VP 574 OF 1993
1
GENERAL DIVISION	1
B E T W E E N :

Re: IVAN CIARDULO

Debtor

EX parte: DEPUTY COMMISSIONER OF TAXATION

Petitioning Creditor

Judge :	Heerey J
Date :	17 November 1993

Place: Melbourne

REASONS FOR JUDGMENT

The act of bankruptcy relied on in this case is non-compliance with a bankruptcy notice which was served on the debtor on 24 February 1993. That act of bankruptcy is made out and indeed was not contested. The debtor, however, sought to rely on s.52(2) of the Bankruptcy Act 1966 by showing that he was "able to pay his debts".

The principal evidence relied upon by the debtor to satisfy that onus was contained in an affidavit sworn on 3 September 1993. He there set out a list of assets said to total $332,000 and liabilities totalling $218,500. However some of the asset items appear to be, to say the least, not readily capable of conversion into cash to meet outstanding liabilities. I refer to items like goodwill, $80,000 and work in progress, $150,000.

Apart from the liabilities set out, the debtor also refers to

what he described as a "contingent liability" to Westpac Banking Corporation. In respect of this liability he says he will dispute the validity of the documentation and will also be counter-claiming for general damages for ruining his business by cashing forged trust account cheques. He believes that in the ultimate there will be a balance due to him.

It is true that the debtor has been subject to some disastrous personal events; his brother who was employed in his practice forged cheques and burnt the premises down in an attempt to conceal his fraud. There was apparently litigation with Westpac over the forged cheques. This was settled, but I am told from the bar table by counsel for Westpac that there is some $176,000 owing, approximately half of which is overdraft. The other half arose from advances made by Westpac to clients of the debtor for the purposes of litigation and guaranteed by the debtor. There is no evidence as to transactions with Westpac other than what appears in the affidavit of the debtor himself and I think for present purposes all I can say is that

concerned there is likely to be any nett benefit to him which	it is not shown by the debtor that as far as Westpac is
might help towards a finding that he is solvent.
Since the debtor's affidavit was sworn on 3 September it appears he has made some attempt to borrow monies in Italy for the purpose of paying his debts, but as far as the evidence goes this remains still unresolved. The only evidence produced was a fax from an Italian company dated 15 November 1993 addressed to the debtor which advised:

"We confirm loan application for $US30,000. This loan is approved conditionally. Documentation to be supplied by us is to be approved by you after your documentation has been verified."

The test of insolvency is that contained in the well known High Court authority Sandell v Porter (1966) 115 CLR 666 at 670 where Barwick CJ said:

"But the debtor's own moneys are not limited to his cash resources immediately available, they extend to moneys which he can procure by realisation by sale or by mortgage or pledge of his assets within a relatively short time relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor."

Here the debtor, who has been carrying on practice as a solicitor, was subject to a judgment on 24 September 1991 in favour of the Deputy Commissioner of Taxation for $28,796.67. After more than two years no amount has been paid in reduction of that judgment.

Another creditor is a Mr Markopoulos who was the landlord of	some premises occupied by the debtor as tenant. A number of
arbitration proceedings took place and on the first of these Mr F J Shelton, arbitrator, by an award dated 18 September 1992 ordered the debtor to pay to Mr Markopoulos the sum of $46,289.75. There were subsequent awards which result, on the
debtor's own account, in an amount of some $80,000 being owing to Mr Markopoulos. Of that amount, as I have said, some $46,000 has been owing for over a year.
I think the overwhelming conclusion from the failure of the debtor to pay for substantial periods of time these admitted debts is that he is insolvent. He has not been able to pay the debts because he has not had the money and has not been able to borrow money to pay them "within a relatively short time".
There will be a sequestration order against the estate of the debtor. I order that the petitioning creditors' costs of and incidental to the petition in this matter, including reserved costs, be taxed and paid in accordance with the Bankruptcy Act 1966. I order that the costs of the supporting creditors of and incidental to the petition, including reserved costs, be taxed and paid in accordance with the Bankruptcy Act 1966. The date of commission of the act of bankruptcy is 30 March

I certify that this and the preceding four pages (4) pages are a true copy of the reasons for judgment of his Honour Mr Justice Heerey.

Dated:  17 November

ADDearances

Counsel for the petitioning	Mr J Shears
creditor:
Solicitor for the petitioning	Australian Government
creditor:	Solicitor
Counsel for the debtor:	Mr M Goldblatt
Solicitor for the debtor:	Ciardullo, Moore & CO
Counsel for first supporting	Mr P Brown
creditor:
Solicitor for first supporting	Mankopoulos Brown
creditor:
Counsel for second supporting	Miss J Miller
creditor:
Counsel for third supporting	Mr A W Sandbach
creditor:

Date of hearing:  17 November 1993

JUDGES' CHAMBERS
FEDERAL COURT OF AUSRALIA

2 AUSTRALIA 'L	450 LITTLE BOURKE STREET
4~>>>)5*~<<<<4'	MELBOURNE, 3000

3 December 1993

MS Sonia Cornale
Federal Court of Australia
Principal Registry
Queens Square

Sydney NSW 2000

Dear Sonia,

re: BHP Petroleum lTimor Sea) Ptv Limited and Ors v Minister

for Resources
No. VG 341 of 1993 ~ ~- - - - - - - - - -

re:  Ivan Ciardulo Ex Darte: DeDutv Commissioner of Taxation
No. VP 574 of 1993

I enclose two judgments delivered by his Honour M r Justice

Heerey in the above matters.

These judgments are not for general distribution.

Y

David Brennan

Associate to Justice Heerey