Scott v Dimov - [2012] FMCA 903

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SCOTT v DIMOV

[2012] FMCA 903

BANKRUPTCY – Interim Application under s.50 of the Bankruptcy Act 1966 (Cth) for the appointment of a controlling trustee pending substantive judgment – whether trustee should take control of respondent’s property – application allowed.

Bankruptcy Act 1966 (Cth) ss. 30, 50, 109, 187
Corporations Act 2001 (Cth) ss. 201F, 206B

Banov v Ciric [2008] FMCA 353
Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118
Efstathiou & Anor v Fenwick [2007] FMCA 1450
Lane & Anor v McConochie [2006] FMCA 376
Malcolm Slater Pty Ltd v Thompson & Anor [2010] FMCA 120
McEntee & Anor v Khoury [2006] FMCA 696
Smith v Varley [2006] FMCA 1572
Talacko v Talacko [2010] FCA 193

Applicant:

ANTONINA CATERINA SCOTT

Respondent:

JOHN DIMOV

File Number:

SYG 1393 of 2012

Judgment of:

Lloyd-Jones FM

Hearing date:

21 September 2012

Date of Last Submission:

21 September 2012

Delivered at:

Sydney

Delivered on:

26 September 2012

REPRESENTATION

Solicitors for the Applicant:

Ms S. Nash of Sally Nash & Co

The Respondent:

The Respondent appeared in person

ORDERS

Pursuant to section 50 of the Bankruptcy Act 1966 (Cth) and the Bankruptcy Regulations 1996 (Cth) Giles Geoffrey Woodgate be appointed Controlling Trustee to take control over the Respondent Debtor’s property.
The control of Giles Geoffrey Woodgate over the Respondent Debtor’s property end upon delivery of the reserved judgment by Barnes FM in these proceedings.
The Respondent Debtor pay the Applicant’s costs of the Interlocutory Application filed 18 September 2012.
Liberty to apply is granted on 2 days’ notice.
Notice be given to the Official Receiver in Sydney and Giles Geoffrey Woodgate, The Respondent Debtor and Joseph Grassi & Associates within 24 hours of this order being sealed and received.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 1393 of 2012

ANTONINA CATERINA SCOTT

Applicant

And

JOHN DIMOV

Respondent

REASONS FOR JUDGMENT

Introduction

On 26 June 2012 the applicant creditor, Ms Scott, filed a creditor’s petition in this Court against the respondent debtor, Mr Dimov. Her Honour, Barnes FM, heard the petition on 11 September 2012 and has reserved her judgment. On 18 September 2012 Ms Scott filed an application in a case (the “Application”), supported by affidavit, seeking the following orders:
1. Pursuant to Section 50 of the Bankruptcy Act, 1966 and Bankruptcy Regulations that Giles Geoffrey Woodgate be appointed Controlling Trustee to take control over the Respondent debtor’s property and to take control of the proceeds of sale of: -
a) Folio identifier 1/SP82152, and
b) Folio identifier 2/SP82152.
to the sum of $180,000.00 or such other sum as may be ordered.
2. Such further or other order as the Court may order.
3. Costs.
4. Notice be given to the Official Receiver and Giles Geoffrey Woodgate within 24 hours of this order being sealed and received.
This Application was referred to my chambers as the Duty Bankruptcy Federal Magistrate. I listed the matter for hearing before me on 21 September 2012. Ms S. Nash…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Scott v Dimov

Details

AGLC: SCOTT v DIMOV [2012] FMCA 903
Case: [2012] FMCA 903
Decision Date: 26 September 2012

CaseChat Overview and Summary

The case of Scott v Dimov involved Ms Scott, the applicant, seeking an order under section 50 of the Bankruptcy Act 1966 (Cth) for the appointment of a controlling trustee over the debtor’s property. Mr Dimov, the respondent, opposed the application. The Federal Magistrates Court was tasked with determining whether it was in the interests of the creditors for a controlling trustee to be appointed.

The central legal issue was whether the appointment of a controlling trustee under section 50 of the Bankruptcy Act was appropriate given the circumstances of the case. The court had to consider whether Mr Dimov had failed to comply with a bankruptcy notice and whether such an order would serve the interests of the creditors. Ms Scott argued that the appointment was necessary to protect the creditors pending the determination of a creditor’s petition. Mr Dimov contended that the application should be dismissed as it was not in the creditors' best interests.

The court found that Mr Dimov had not complied with the bankruptcy notice and that it was in the creditors' interests to appoint a controlling trustee. The court noted that the appointment would allow for the preservation of the debtor’s assets, specifically two unencumbered properties under contract for sale, to protect them from being dissipated. The court also acknowledged that Mr Dimov could continue to be a director of the company holding the properties, as this would not interfere with the trustee’s control over the shares. The court granted the application and appointed Giles Geoffrey Woodgate as the controlling trustee.

The court made several orders, including the appointment of Giles Geoffrey Woodgate as the controlling trustee to manage Mr Dimov's property, the termination of the trustee’s control upon the delivery of the reserved judgment in the creditor’s petition proceedings, and that Mr Dimov pay Ms Scott's costs for the interlocutory application. The court also granted liberty to apply for further orders and required notice to be given to relevant parties.

Orders

Orders of the court

Pursuant to section 50 of the Bankruptcy Act 1966 (Cth) and the Bankruptcy Regulations 1996 (Cth) Giles Geoffrey Woodgate be appointed Controlling Trustee to take control over the Respondent Debtor’s property.

The control of Giles Geoffrey Woodgate over the Respondent Debtor’s property end upon delivery of the reserved judgment by Barnes FM in these proceedings.

The Respondent Debtor pay the Applicant’s costs of the Interlocutory Application filed 18 September 2012.

Liberty to apply is granted on 2 days’ notice.

Notice be given to the Official Receiver in Sydney and Giles Geoffrey Woodgate, The Respondent Debtor and Joseph Grassi & Associates within 24 hours of this order being sealed and received.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

Section 50 of the Bankruptcy Act 1966 (Cth) (the “Bankruptcy Act”) relevantly states:50 Taking control of debtor’s property before sequestration(1) At any time after a bankruptcy notice is issued, or a creditor’s petition is presented, in relation to a debtor, but before the debtor becomes a bankrupt, the Court may:(a) direct the Official Trustee or a specified registered trustee to take control of the debtor’s property; and(b) make any other orders in relation to the property.(1A) The Court may give a direction or make an order only if:(a) a creditor has applied for the Court to make a direction; and(b) the Court is satisfied that it is in the interests of the creditors to do so; and(c) the debtor has not complied with the bankruptcy notice.(1B) If the Court directs a trustee to take control of the debtor’s property, the Court must specify when the control is to end.… Ms Nash, appearing for Ms Scott, sought to rely on the following evidence at the hearing:a)Affidavit of Christie Boyd sworn 10 September 2012;b)Affidavit of Christie Boyd sworn 17 September 2012;c)Affidavit of Debt of Antonina Caterina Scott sworn 10 September 2012;d)Affidavit of Search of Megan Zhang sworn 13 August 2012;e)Affidavit of John Dimov sworn 27 August 2012;f)Affidavit of Service of the Bankruptcy Notice of Sally Susan Nash sworn 13 April 2012; andg)Affidavit of Service of the Creditor’s Petition of Clark Frank Shaw sworn 23 July 2012.Ms Nash also filed written submissions and a Consent to Act as Controlling Trustee form of Giles Geoffrey Woodgate. Mr Dimov provided a bank statement to the Court and filed some written submissions that were handed up at the hearing. Ms Nash submits that the purpose of this application is to provide interim protection to the creditors pending the determination be her Honour Barnes FM of the Creditor’s Petition in the same proceeding. Ms Nash submits that Mr Dimov is the sole director and sole shareholder of a company, Sanctuary Homes Pty Ltd (“Sanctuary Homes”), a company that holds title over two unencumbered properties, both of which are under contracts for sale. Ms Nash refers the Court to Mr Dimov’s affidavit at Annexure “C” where the relevant contracts for sale and certificates of title are annexed, along with a discharge of mortgage of the two properties from Westpac Banking Corporation. Ms Nash submits that the creditor does not seek an order for payment from the proceeds of sale, rather, seeks a preservation order from the proceeds of each contract. There is no evidence of the current financial position of Sanctuary Homes before the Court and Ms Nash concedes that the company will have its own set of creditors. All creditors of Mr Dimov must be treated equally, as prescribed by s.109 of the Bankruptcy Act. Ms Nash submits that if a controlling trustee were to be appointed this would not affect Mr Dimov’s being a director of Sanctuary Homes. The Corporations Act 2001 (Cth) at s.206B does not preclude someone the subject of an order under s.50 of the Bankruptcy Act from being a director of a company. However, in this instance, the shares owned by Mr Dimov in the company would vest in the trustee. The trustee would gain control of them, and the shareholder is the primary controller of the company, whereas the director is simply the person to deal with the affairs of the company. If appointed, the controlling trustee could then make any application in relation to Sanctuary Homes. Ms Nash submits that where a company is involved, the Court can nevertheless make an order under s.50: Efsathiou & Anor v Fenwick [2007] FMCA 1450.