Re Komljenovic, I. Ex parte Komljenovic, I. v Official Trustee in Bankruptcy

[1994] FCA 1015

JUDGMENT No. .... , /of5 1 qy- ........ .,, , , ,,,,.

..

IN-THE FEDERAL COURT OF AUSTRALIA	) \
VICTORIA DISTRICT REGISTRY	i NO. VB 1523 of 1994
\
GENERAL DIVISION	j
B E T W E E N :

RE: IVO KOMLJENOVIC

Bankrupt

EX PARTE: IVO KOML,JENOVIC

Applicant

- and -

OFFICIAL TRUSTEE IN BANKRUPTCY and

DEPUTY COMMISSIONER OF TAXATION OF THE

COMMONWElALTFI OF AUSTRALIA

Respondents

Heerey J

DATE : 23 November 1994

W: Melbourne

EX TEMPORE REASONS FOR JUDGKENT

The debtor applies under s.153B of the Bankruptcy Act 1966 (Cth) (the Act) for an order annulling the sequestration order which was made on 27 June 1994. The debtor did not attend the hearing before the Deputy Registrar on that occasion. An order was also made against the debtor's mother, Mrs Lucy Komljenovic, on the

same day. In an affidavit sworn today the debtor deposes:

" Neither myself nor my mother could attend the hearlng on 27 June

1994. My mother was ln Croatla at t h ~ s tune attending to the

sudden and potentrally fatal illness of her extremely weak 81- year old parents. On this day I was attendrng to the non- scheduled and urgent negotrations with the mortgagees where t h e n inexplrcable and sudden refusal to accept my normal Interest payments have had the effect of forcing me rnto a Dotentlallv catastrophic and rnvoluntary mortgage deiaulr situat~on unfortunarely precluded my attendance at thrs hi

Honourable Court, notwrthstanding my unfortunate and unforeseen pred~cament I would have been vigorously opposed to the making of a sequestration order agarnst both myself and my mother."

The act of bankruptcy in question was under ~.40(l)(d)(i) of the Act. The petitioning credltor had issued an assessment against

. .

the debtor based on a betterment statement. That assessment is being challenged by the debtor in the Admlnlstrative Appeals Tribunal. An appeal was filed in March of this year. The main debate in the application before me has centred around the two grounds mostly relied on by the creditor in opposing the application. First, it is said that the debtor is not solvent, or at least there are grave doubts as to ,his solvency, and, secondly, that there is a need to examine the circumstances in which the debtor acquired a property consisting of a unit at 43/7 Stewart Street, Glebe, New South Wales. It is said that the debtor holds that property on trust for his brother Drago Komljenovic.

The statement of affairs filed by the debtor subject to some modifications to overcome a double counting may be summarised as follows :

Equity in two house properties	$290,000
Cash at bank	$ 300
Superannuation policy	$ 29,000
Shares in two companies	$ 101
Motor vehicles	$ 500
TOTAL	$319,901

Liabilities:

Unsecured creditors $130,450

Apart from a debt to one other creditor of $2450 there is only one creditor, the Australian Taxation Office.

It was said that this statement of affairs takes debtor's asset and liability position at face value. The two properties in

question are, first, the Glebe property already mentioned and, secondly, a house property at 49 Mooney Street, Ascot Vale, Victoria. The debtor put a value of $240,000 on that property. The official trustee obtained a "kerbside valuation" on 18 August 1994 indicating a value "to be between $200,000 to $220,000 depending on the condition inside". There was evldence of a valuation by the Australian Valuation Office as at 20 October 1993 of $185,000. However, even if the lowest of those figures was taken, the net asset position would be reduced by $55,000 to $134,45lwhich is in excess of the total amount of the unsecured debts.

As to the Glebe property, the debtor's brother who is said to be the beneficial owner was convicted of serious drug charges on 9 October 1992. Subsequently, the Director of Public Prosecutions (Victoria) brought proceedings in the County Court under the Crimes (Confiscation o f P r o f i t s ) Act 1986 (Vic) . These were heard before his Honour Judge Dyett who on 25 October 1994 handed down reasons for judgment upholding the DPP's claim in respect of a number of properties.

The Glebe property was ment~oned in an af f idavit sworn in support of that application, but did not feature among the properties in respect of which his Honour made an order. I was told by counsel that that claim had been withdrawn. Before me there was in evidence a copy of the affidavit of a Detective Bingley, sworn in the County Court proceedings on 5 November 1992, in which he deposed relevantly that the Glebe property was purchased by the debtor on 28 February 1994 for $66,000 with the assistance of a mortgage loan of $30,000 from the Commonwealth Savings Bank, that

mortgage being repaid in full over the next 12 months.

There were some subsequent mortgages on the property wh~ch do not seem to be relevant for present purposes. Detective Blngley then deposed:

" That without the assrstance of the funds generated by the herorn sellrng of his brotner, Ivo Koml~enovrc could not have afforded

to purchase thls property. In 1983/4 Ivo Koml~enovic's net

lncome was $13,705 from hrs occupatron as an engmeer. In 1984/5

his net income was $15,644. During thrs year he paid off $23,000 from his mortgage on the Glebe property and provided $20,000 to MarLe Komljenovic for the purchase of a property at 49 Royal Avenue, Essendon. In 1985/6 his net income was $15,644."

It does not seem to me that if an annulment of this bankruptcy were otherwise appropriate it should nevertheless be refused because of a wish to use the remedies and procedures of a bankruptcy administration to pursue the question of ownership of the Glebe property. The matter, as I say, does not seem to have been pursued before Judge Dyett. The only evidence of a possible entitlement of Drago Komljenovic is the passage in Detective Bingley's affidavit to which I have referred.

That case seems to be somewhat speculative at the moment in that it assumes the only source of funds available to the debtor, other than his salary, was the heroin dealing of his brother Drago. In any event, if inquiries revealed no more than the fact that Drago made gifts to his brother with which his brother used to buy the property, it would not necessarily follow that Drago became the beneficial owner of the property.

In any case it is open to the trustee of Drago's estate to investigate the matter further by, for example, examining Ivo under s.81 of the Act and, in the meantime, protecting the

alleged interest of Drago's estate in the property by caveat or

injunction. It seems inconsistent wlth the usual function of a

trustee of a bankrupt estate for Ivo's trustee to pursue the possible diminution of the estate by the removal of an asset prima facie within it. There is also the factor that were the bankruptcy to continue, the debtor would not have the standing to pursue his appeal before the Administrative Appeals Tribunal. The reasons that the debtor gave for not attending at the hearing of the petltion before the Deputy Registrar were not challenged by cross-examination and I accept them.

I think in all the circumstances it would be appropriate to annul the sequestration order. In summary, my reasons for doing so are primarily that the evidence as far as it goes does appear to indicate that the debtor is solvent and I am not satisfied that it would be proper to continue the bankruptcy simply for the purpose of investigating the ownership of the Glebe property, particularly when there are other avenues open for this, so I will make an order for annulment.

I will order that the petitioning creditor pay any loss of wages or other expenses which the debtor incurred in attending court today upon procf of such loss.

I certify that this and the preceding five (5) pages are a true copy of the reasons for judgment of his Honour

M r Justice Heerey.

Appearances

Counsel for the applicant:	In Person
Solicitor for the applicant:	In Person

Counsel for the first respondent: Mr E Maron

Solicitor for the first

Australian Government

respondent:

Solicitor

Counsel for the second

respondent:

Solicitor for the second

Australian Government

respondent:

Solicitor

Date of hearing:

23 November 1994