Silvestro v Marshalls Sydney Pty Ltd T/As MERCEDES-BENZ PARRAMATTA

[2016] FCCA 3277

FEDERAL CIRCUIT COURT OF AUSTRALIA

SILVESTRO v MARSHALLS SYDNEY PTY LTD T/AS MERCEDES-BENZ PARRAMATTA [2016] FCCA 3277

Catchwords:
BANKRUPTCY – Bankruptcy – annulment – where debt to petitioning creditor paid – no opposition to application.

Legislation:

Bankruptcy Act 1966, ss.153B, 154

Cases cited:

Bulic v Commonwealth Bank of Australia Ltd [2007] FCA 307

Francis v Eggleston [2014] FCAFC 18

Applicant: PAUL SILVESTRO

Respondent: MARSHALLS SYDNEY PTY LTD T/AS MERCEDES-BENZ PARRAMATTA

File Number: SYG 2450 of 2016

Judgment of: Judge Barnes

Hearing date: 21 November 2016

Delivered at: Sydney

Delivered on: 21 November 2016

REPRESENTATION

Solicitor for the Applicant: Mr Glissan

ORDERS

1. The bankruptcy of the Applicant Paul Silvestro is annulled pursuant to section 153B of the Bankruptcy Act 1966 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2450 of 2016

PAUL SILVESTRO

Applicant

And

MARSHALLS SYDNEY PTY LTD T/AS MERCEDES-BENZ PARRAMATTA

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

1. This is an application for an annulment of the bankruptcy of Mr Silvestro.  A sequestration order was made in Mr Silvestro’s absence on 23 August 2016.  The petitioning creditor was Marshalls Sydney Pty Limited.  The debt relied on was $14,222.70.

2. Mr Silvestro filed an annulment application on 9 September 2016 supported by an affidavit sworn on 7 September 2016 in which he attested to the fact, which I accept, that the debt was paid to the petitioning creditor on 31 August 2016.  A receipt was issued. 

3. Mr Silvestro contended that he was solvent and that he had no other creditors.  He provided an explanation for his failure to appear on the date on which the sequestration order was made. 

4. When the matter came before me there was no appearance for the petitioning creditor.  This was consistent with a letter of 29 September 2016 from its solicitors to the Applicant’s solicitors indicating that the petitioning creditor consented to an annulment and would not attend the hearing.  However in these circumstances I required Mr Silvestro’s trustee in bankruptcy (the Official Trustee in Bankruptcy) to prepare a report pursuant to the provisions of the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth). 

5. A report was provided by way of affidavit sworn on 11 October 2016 by Vanessa Mallard, for and on behalf of the Official Trustee in Bankruptcy.  The matter was listed for hearing today.

6. It emerged that the Australian Taxation Office had lodged a proof of debt in Mr Silvestro’s bankrupt estate.  However by letter of 16 November 2016 the office of the Official Trustee in Bankruptcy advised that this proof of debt (which had been previously advised as being in the sum of $5,438.66) had been withdrawn by the ATO following payment of the tax liability and lodgement of outstanding income tax returns by Mr Silvestro.

7. The Official Trustee noted that the proceedings were scheduled to be heard today and indicated that it would be appreciated if the relevant parties informed him of the outcome of the hearing. 

8. Section 153B of the Bankruptcy Act relevantly provides that:

   If the Court is satisfied that a sequestration order ought not to have been made ... the Court may make an order annulling the bankruptcy.

9. The principles in relation to an annulment application were summarised by Tracy J in Bulic v Commonwealth Bank of Australia Ltd [2007] FCA 307, which has been referred to with approval in a number of subsequent cases (see, in particular, Francis v Eggleston [2014] FCAFC 18). I have had regard to those principles.

10. Mr Silvestro contended that the sequestration order ought not to have been made because he was solvent, in the sense that he was able to pay his debts as they fell due at the time of the sequestration order.  In relation to this issue, I have considered the position at the time of the sequestration order having regard to information that has to come to light since that time (not events that have occurred thereafter), consistent with Bulic.

11. There is now evidence before the Court (in Mr Silvestro’s affidavit and statement of affairs) that his debts at that time consisted of the debt to the petitioning creditor and the debt to the ATO.  These totalled approximately $20,000.  Mr Silvestro’s assets included two vehicles worth $45,000 (which in itself was considerably more than his indebtedness) and an interest in a joint bank account containing over $270,000 at the time of the sequestration order, albeit that it is not entirely clear that all the funds in that joint bank account would have been available to pay the debts.  He had assets that would be available for ready realisation that substantially exceed the debts in issue (which, I note have since been paid).

12. On the material before the Court having regard to the limited debts owed by the applicant and his readily available assets as explained in his affidavit, I am satisfied that he was able to pay his debts at the time of the sequestration order. 

13. There is therefore a question as to whether the Court should exercise its discretion to annul the bankruptcy.  Mr Silvestro has provided an explanation for his failure to appear at the hearing at which the sequestration order was made.  While perhaps not entirely satisfactory in circumstances where he had previously been bankrupt and presumably understood the consequences, nonetheless I accept that he was at that time dealing with difficult family circumstances, in particular ill health of his father, mother and wife, as set out in his affidavit. 

14. Mr Silvestro has co-operated with his trustee in bankruptcy.  According to the trustee, he provided requested information, including lodging a statement of affairs.  He has made a prompt annulment application.  While his initial non-disclosure of a debt to the ATO has to be taken into account, I note that it was a small debt and that when it came to light it was attended to (as was lodgement of outstanding tax returns).  In the circumstances, this is not such as to dissuade me from the view that it would be appropriate to annul Mr Silvestro’s bankruptcy.  

15. The trustee has not sought to intervene. Section 154 of the Act preserves his right to recover the costs and expenses of administration of the estate. In these circumstances there is no need to make any order in relation to the costs of the trustee’s report. I am satisfied that Mr Silvestro’s bankruptcy should be annulled.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Judge Barnes

Date: 19 December 2016