Tadrosse v Barnden - [2013] FCCA 207

FEDERAL CIRCUIT COURT OF AUSTRALIA

TADROSSE v BARNDEN

[2013] FCCA 207

Catchwords:
BANKRUPTCY – Urgent application by bankrupt to restrain sale by trustee of property – no standing – delay prejudices creditors – no evidence of solvency.

Legislation:
Federal Magistrates Court (Bankruptcy) Rules (2006) r.7.06

Applicant:

GEORGE TADROSSE

Respondent:

ANDREW BARNDEN

File Number:

SYG 562 of 2013

Judgment of:

Judge Altobelli

Hearing date:

22 March 2013

Date of Last Submission:

22 March 2013

Delivered at:

Sydney

Delivered on:

22 March 2013

REPRESENTATION

Counsel for the Applicant:

Mr Walsh

Solicitors for the Applicant:

Mitry Lawyers

Counsel for the Respondent:

Mr Eardley

ORDERS

The matter be adjourned to 7 May 2013 at 9:00am for hearing of the indemnity costs issue.
By consent, orders be made in accordance with the document titled, “Orders” and attached hereto.
Leave be granted to the Respondent to file in Court a Notice of Appearance, Notice of Grounds of Opposition to Application, Affidavit of Andrew Barnden and an Application of today’s date.
Leave be granted to the Applicant to file in Court an Amended Application of Mr Tadrosse.
The Amended Application referred to in Order 4 of these Orders be dismissed.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT LAUNCESTON

SYG 562 of 2013

GEORGE TADROSSE

Applicant

And

ANDREW BARNDEN

Respondent

REASONS FOR JUDGMENT

Ex Tempore

On 20 March 2013, that is, two days ago, the applicant filed an application in this court the hearing of which was, in effect, short-listed by a Registrar. In the final orders of that application he seeks a declaration that his bankruptcy be annulled and a number of consequential orders. Importantly he sought interim orders the effect of which are that the trustee be restrained from taking any further steps to sell the property of the applicant.
Interim orders were sought the effect of which would be to restrain the trustee from proceeding to auction the applicant’s property at Kellyville. The said application is supported by two affidavits, sworn by the applicant on 20 March. This morning, when Mr Walsh of counsel appeared on behalf of the applicant, I granted leave for him to file in court, on behalf of his client, an amended application. The amended application seeks a number of final and interim orders and in order to abbreviate these ex tempore reasons, I will simply incorporate the final and the interim orders sought into these, my ex tempore reasons. I make the observation that the amended orders seek to deal with some significant jurisdictional issues. I will come to that in due course. Nonetheless, the interim orders remained the same and that is that Mr Tadrosse asks the court to restrain the sale tomorrow.
Mr Eardley of counsel appears on behalf of the respondent trustee. I granted leave this morning for him to file in court, on behalf of his client, a notice of appearance, the notice stating the grounds of opposition to application, an affidavit of Andrew James Barnden, sworn 22 March and indeed, a fresh application that is yet to be dealt with today. In addition, Mr Eardley provided an outline of his submissions, together with a list of relevant authorities.
Mr Tadrosse, in the evidence that he gives, explains the rather unfortunate and somewhat long history of this matter. When the creditors petition was heard, he was overseas. He contends that he had instructed a solicitor to attend on his behalf, to seek an adjournment and to make certain representations, the effect of which, I surmise, would have gone to his solvency. Mr Tadrosse instructed solicitors to appear; they did not.
I note, in passing, that there may be certain implications that flow as a result of that. It may be that Mr Tadrosse has suffered some form of loss as a result of that, the consequences of which need to be explored in another place and at another time. In any event, a sequestration order was made against him on 8 May 2012. Between 8 May 2012 and today, the evidence of both Mr Tadrosse and Mr Barnden indicates that there were discussions between them the intent of which seemed to have been to reach agreement about an annulment of the bankruptcy on payment of certain funds and on certain conditions. It is not necessary, in the circumstances, for me to go into this in significant detail. In short, there was no agreement between the parties that was fully implemented and it would seem that there were difficulties in agreeing not just about the conditions but about the amount that would be required to pay to the trustee in order for the trustee to agree to an annulment.
In Mr Tadrosse’s evidence, he explains that the property sought to be auctioned tomorrow is his home, that he has paid certain funds to the trustee, indeed Mr Tadrosse may be concerned about the status of the funds paid in the circumstances of the case. I have no doubt that Mr Tadrosse is deeply concerned about the potential loss of his family home, in the circumstances of the case.
However, there are certain facts that appear plainly from Mr Tadrosse’s evidence and many things that are not apparent but which would have been highly relevant in the context of today’s application. The fact is, a sequestration order was made on 8 May 2012. It is, today, 22 March 2013. This bankrupt estate has been administered for many months and has reached the point where the trustee has arranged an auction sale for tomorrow.
I take notice of the fact that these things do not happen overnight. Mr Tadrosse’s application is filed two days ago, on Wednesday the 20^th, which is three days before the scheduled auction. No explanation or certainly no explanation reasonably acceptable to the court, is given for why he has delayed bringing any proceedings to deal with the issues that he now brings before the court.
In any event, the first of the orders that he seeks is one for the filing of an application to review the Registrar’s decision to make the sequestration order to be extended to 22 March.
He then seeks that the decision of the Registrar be reviewed and set aside. There are a number of fatal problems with the evidence and the application, as pointed out by Mr Eardley and as highlighted in his notice stating grounds of opposition. The fact is that Mr Tadrosse is bankrupt and in the circumstances, unless his bankruptcy could be set aside or annulled, he lacks standing to do that, that is to say, to bring even the present application. Mr Eardley, on behalf of the trustee, submits that in any event, the time for any review of the Registrar’s decision is well and truly out of time; that is clearly the case. He also submits that the fact is, on the evidence before the court, that Mr Tadrosse is, in any event, insolvent, the strongest evidence for this being his own statement of affairs.
The other important matter raised by Mr Eardley is that there would be prejudice to the creditors of the bankrupt estate if, at this late stage, the auction were cancelled. I am prepared to infer that there would also be additional costs in the administration of the bankrupt estate that would result from the postponement of the auction at this late stage.
Another important point made is that the applicant has not complied with the strict requirements of Rule 7.06 of the Federal Magistrates Court Bankruptcy Rules, in that no notice has been given to creditors. That point actually becomes quite a significant one in circumstances where Mr Tadrosse puts into contention one of the debts, though he does so through his counsel in circumstances that are quite inconsistent with the statement of affairs that he filed.
The statement of affairs that he filed but which he would now seek to resile from clearly shows that he is insolvent. The trustee has proceeded on the basis that he is insolvent. There is no evidence adduced on behalf of the bankrupt or the trustee that would satisfy me, even if I were prepared to extend the time for reviewing the Registrar’s decision as to Mr Tadrosse’s solvency. In those circumstances, the application would, in any event, be futile. From a technical perspective, I think the most significant problem that the applicant faces is lack of standing.
There is no evidence that he adduces that would justify the granting of the leave or the review of the Registrar’s decision. In any event, the prejudice to other creditors, in circumstances where they have not been given notice is so great that I would not, in any event, exercise my discretion in the applicant’s favour, either in terms of extending the time to file the application or alternatively, even to review the Registrar’s decision to make the sequestration order. In dismissing the application filed by Mr Tadrosse, I am most conscious of the fact that if his property sells at auction tomorrow, he will lose his family home.
It is hard to understand, from the court’s perspective, why it has taken so long for him to respond to the making of the sequestration order in the first place. It may well be, as I have mentioned in passing, that in the fullness of time, in another place, the concerns that he has articulated through his counsel and hinted at in his evidence can be explored and dealt with. In the circumstances of the case, based on the evidence and having regard to what I have said, I dismiss the amended application of George Tadrosse, filed by leave this morning.

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

Date: 6 May 2013