Timbercorp Finance Pty Ltd (In Liq) v Gulabovski
[2022] FedCFamC2G 996
Federal Circuit and Family Court of Australia
(DIVISION 2)
Timbercorp Finance Pty Ltd (In Liq) v Gulabovski [2022] FedCFamC2G 996
File number(s): MLG 1158 of 2022 Judgment of: JUDGE MANSINI Date of judgment: 28 November 2022 Catchwords: BANKRUPTCY – Application for review of a sequestration order made by a registrar of this court – where applicant identified error in creditor’s petition as to date of the act of bankruptcy – where respondent did not contend solvency but claimed other sufficient cause – creditor’s petition amended pursuant to s 33(1)(b) – jurisdictional requirements met – no other sufficient cause established – application for sequestration order allowed. Legislation: Bankruptcy Act 1966 (Cth) ss 33(1), 40(1), 41, 43(1), 44, 52, 156A, 306.
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 256(1).
Bankruptcy Regulations 2021 (Cth), reg 10A.
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 rr 4.04, 4.06.
Federal Circuit Court (Bankruptcy) Rules 2016 r 4.04.
Cases cited: Allesch v Maunz [2000] HCA 40
Bechara v Bates [2021] FCAFC 34
CTI Logistics v Ogbonna [2022] FedCFamC2G 781
De Robillard v Carver [2007] FCAFC 73
MacDonald v Official Trustee in Bankruptcy [2001] FCA 140
Division: Division 2 General Federal Law Date of last submission/s: 15 November 2022 Date of hearing: 16 November 2022 Place: Melbourne Number of paragraphs: 64 Date of last submission/s: 15 November 2022 Date of hearing: 16 November 2022 Place: Melbourne Counsel for the Applicant: Mr J Grant Solicitor for the Applicant: Mills Oakley The Respondent: Appearing in person ORDERS
MLG 1158 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: TIMBERCORP FINANCE PTY LTD (IN LIQ)
Applicant
AND: ALEX GULABOVSKI
Respondent
order made by:
JUDGE MANSINI
DATE OF ORDER:
28 NOVEMBER 2022
Amended pursuant to r.17.05(2)(g) of the Federal Circuit and Family Court Rules (Division 2) (General Federal Law) 2021 on 9 December 2022.
THE COURT ORDERS THAT:
1.The registrar’s sequestration order made on 13 October 2022 be set aside.
2.Timbercorp Finance Pty Ltd (in liquidation) have leave to amend paragraph 4 of the creditor’s petition to substitute 29 March 2022 with 19 May 2022 as the date of the commission of the act of bankruptcy by extension in accordance with s.41(7) of the Bankruptcy Act 1966 (Cth) (Act).
3.The requirement for re-verification and re-service of the creditor’s petition is dispensed with.
4.The estate of Alex Gulabovski is sequestrated under the Act.
5.The Court will hear further as to costs.
AND THE COURT NOTES THAT:
A.A consent to act as trustee signed by Stephen John Michell has been filed under s.156A of the Bankruptcy Act 1966 (Cth).
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Judge Mansini
IN SUMMARY
This is an application for review of a sequestration order made by a registrar of this Court on 13 October 2022 against the estate of Alex Gulabovski, pursuant to s.256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCOA Act).
Mr Gulabovski filed an application for review on 28 October 2022. The application for review, by its nature, requires the prosecution (or re-prosecution) by the applicant creditors of their petition which was heard by the Court on 16 November 2022 after both parties had filed affidavit materials.
The applicant creditor contended that there was then and remains now a proper basis for a sequestration order to be made. In the context of the specific argument in this case, the applicants’ position is that Mr Gulabovski is not able to establish sufficient cause as claimed. Mr Gulabovski, in pressing his objections, did not contend that he is able to prove his solvency for the purpose of s.52(2)(a) of the Bankruptcy Act 1966 (Cth) (Act).
For the reasons that follow, I have determined that the conditions of the sequestration of Mr Gulabovski’s estate are fulfilled.
CONTEXT
There is substantial factual context to the matter, which has involved considerable litigation between the parties over a period of some 8 years.
The broader context of the relationship between the parties was characterised in submissions of the applicant’s counsel and accepted by Mr Gulabovski as an accurate summary, essentially as follows. At the time of its collapse in 2009, the Timbercorp Group had some 33 agricultural managed investment schemes across Australia. The schemes produced crops that were harvested and sold, and the proceeds were applied for the benefit of investors (known as growers). Timbercorp Finance Pty Ltd (now in liquidation, hereinafter referred to as Timbercorp Finance) provided finance to investors to invest in the managed investment schemes which were run by Timbercorp Securities Limited (Timbercorp Securities). The investments were subject of a loan agreement a term of which was that Timbercorp Finance took a charge over the investors’ rights to be paid proceeds from the harvests. The assets of the Timbercorp Securities schemes were ultimately sold pursuant to court processes and there was a dispute between investors and secured creditors who had security over those assets. Litigation arising from that dispute resulted in compromises and funds were paid by secured creditors, held on trust by Timbercorp Securities for the benefit of investors, but Timbercorp Finance maintained its security interest over those funds.
Specifically in relation to Mr Gulabovski, on 15 September 2014 by writ filed in the Supreme Court of Victoria, Timbercorp Finance commenced proceedings against Mr Gulabovski as the guarantor of a corporate entity which had invested in Timbercorp Securities schemes, among other named respondents, to those proceedings. Ultimately, summary judgement was entered in favour of Timbercorp Finance and as against Mr Gulabovski in the amount of $3,584,975.55 together with indemnity costs (the Supreme Court Judgment): per Riordan J, 11 October 2021 in S CI 2014 04920.
On 1 March 2022, the official receiver issued bankruptcy notice BN255538 against Mr Gulabovski in relation to debt owed pursuant to the Supreme Court Judgment (Bankruptcy Notice).
On 8 March 2022, the Bankruptcy Notice was personally served on Mr Gulabovski. On 23 March 2022 and before the time fixed for compliance, Mr Gulabovski applied to the Federal Court to have the Bankruptcy Notice set aside. On 19 May 2022, Mr Gulabovski’s application to the Federal Court was dismissed.
Mr Gulabovski did not pay the amount claimed in the Bankruptcy Notice (or make arrangement to do so to the applicant creditor’s satisfaction) by 19 May 2022.
The proceeds that are held by Timbercorp Securities comprise both proceeds of the sale of harvest(s) and proceeds from the compromise of the earlier litigation. Timbercorp Finance has now claimed security interest over those proceeds in the amount of $61,505.53 which is referenced in the creditor’s petition and a matter of dispute in these proceedings.
The proceeding in this Court was originally commenced on 24 May 2022 by the filing of a creditor’s petition with a notice of hearing at 9.30am on 30 June 2022.
On 15 August 2022, the creditor’s petition was re-issued with a notice of hearing at 9.30am on 13 October 2022. The creditor’s petition included particulars of security held by Timbercorp Finance specified in the amount of $61,505.53 and a statement of intention to rely on that security and proceed as an unsecured creditor in the amount of $3,660,975.93 (being the Supreme Court Judgment debt including costs less the security held).
On 16 August 2022, a registrar of this Court made an order dispensing with personal service of the creditor’s petition and made orders for substituted service meaning that service on Mr Gulabovski would be deemed to have been effected service on 9 September 2022 provided that certain steps were taken as ordered (Substituted Service Order). That is, provided that by 26 August 2022 steps were taken to deliver specified documents by the following methods: by post to a Smith Street, Fitzroy address (the Substituted Service Address); by personal delivery to the Substituted Service Address; by email to Mr Gulabovski at an aperio.com.au email address; and by SMS to a mobile number ending in -057. The specified documents for service were:
(a)a cover letter;
(b)a sealed copy of the creditor’s petition;
(c)a copy of the affidavit required by r.4.04(1)(a) of the Federal Circuit Court (Bankruptcy) Rules 2016;
(d)a copy of the affidavit, or affidavits, of service of the Bankruptcy Notice; and
(e)a copy of any consent to act as trustee; and
(f)a sealed copy of this order,
(together, the Documents).
Timbercorp Finance filed affidavit evidence that it had caused steps to be taken in accordance with the Substituted Service Order over the period 18 to 22 August 2022: by post and delivery to the Substituted Service Address, by email to the @aperio.com.au address and by SMS to the mobile phone number ending in -057.
On 13 October 2022, a registrar of this Court made orders for the sequestration of the estate of Alex Gulabovski in the absence of Mr Gulabovski.
By the review application filed on 28 October 2022, Mr Gulabovski sought orders the registrar’s sequestration order of 13 October 2022 be “immediately overturned” and the sequestrated estate be “immediately cancelled”. Further, he sought the removal of the appointed trustee, the removal of the freezing order and that the registry notification to credit agencies be removed.
Timbercorp Finance sought to rely on the following materials
(a)affidavit filed 24 May 2022 which verified and exhibited the creditor’s petition with the act of bankruptcy described as a failure to comply with the Bankruptcy Notice on or before 29 March 2022 and further affidavit filed 15 November 2022 which identified the date of the act of bankruptcy as 19 May 2022;
(b)affidavit filed 24 May 2022 which verified paragraph four of the creditor’s petition pursuant to r.4.04(1)(a) of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Bankruptcy Rules) and further affidavit filed 15 November 2022 which exhibited the orders dismissing the application to set aside the Bankruptcy Notice pursuant to r.4.04(3) of the Bankruptcy Rules;
(c)affidavit of service of the Bankruptcy Notice filed 24 May 2022;
(d)s.156A consent to act as trustee of the respondent’s estate filed 24 May 2022;
(e)four affidavits as to substituted service filed 10 October 2022;
(f)updated affidavit as to r.4.06(3) search filed 15 November 2022;
(g)updated affidavit as to r.4.06(4) debt filed 15 November 2022; and
(h)outline of written submissions filed 15 November 2022.
Mr Gulabovski sought to rely on the following materials:
(a)affidavit of Alexander Gulabovski filed 15 November 2022; and
(b)affidavit of Jimmy Gulabovski filed 15 November 2022.
STATUTORY FRAMEWORK
Part III, Division 2 of the Act of the Act confers broad jurisdiction on this Court in bankruptcy. A short summary of the relevant provisions follows.
Upon the making of a sequestration order, a person becomes “a bankrupt” with various consequences proscribed by the statute: see s.43(2).
Jurisdiction to make a sequestration order exists where a debtor has committed “an act of bankruptcy” and, at the time when the act of bankruptcy was committed, the debtor had a proscribed connection with Australia: s.43(1).
At Part IV, Division 1, the Act defines an “act of bankruptcy” to include a circumstance where a creditor has obtained a final judgement or order (the effect of which has not been stayed) against a debtor, has served the debtor a bankruptcy notice under the Act and the debtor does not, within the time fixed for such compliance (in the case of service in Australia):
·comply with the requirements of the bankruptcy notice; or
·satisfy the Court that they have a counter-claim, set-off or cross demand equal to or exceeding the judgment debt payable and that could not have been set up in the action or proceeding in which the judgment or order was obtained,
at s.40(1)(g) of the Act.
Where an application to set aside is made by a debtor on grounds of a counter-claim, set-off or cross demand as referred to in s.40(1)(g) and before the expiration of the time fixed for compliance with a bankruptcy notice, the Act provides that the time shall be deemed to have been extended, immediately before expiration, until and including the day on which the Court determines whether it is so satisfied: s.41(7) of the Act.
On application of a creditor who has obtained a final judgment or order against a debtor of the kind described in s.40(1)(g) and is for an amount of at least the statutory minimum ($10,000), the official receiver may issue a “bankruptcy notice”: s.41(1)(a)(i) and (ii) of the Act. A bankruptcy notice shall not issue in certain circumstances, including where at the time of the application for the issue of such notice the judgment is stayed: s.41(3).
A creditor’s petition may be presented against a debtor, in the case of: a single creditor and a single debt owing by the debtor to the petitioning creditor a debt in excess of the statutory minimum ($10,000); the debt owed is in a liquidated sum due at law or in equity (or part of each); is payable immediately or at a certain future time; and the act of bankruptcy was committed within six months before the presentation of the petition: s.44(1) of the Act, Regulation 10A of the Bankruptcy Regulations 2021 (Cth) (Bankruptcy Regulations). Where a petitioning creditor is a secured creditor, they are required to set out in the petition the particulars of their security: s.44(4) of the Act. These are among other conditions on which a creditor may petition and requirements of a creditor’s petition proscribed at ss.44 and 47 of the Act and at Part 4 of the Bankruptcy Rules.
A party to a proceeding in which a registrar has exercised a power of the Court may apply to the Court for review of that exercise of power within 21 days after the day on which the power was exercised: s.256(1) of the FCFCOA Act. The de novo character of the Court’s review jurisdiction requires, in a case involving a sequestration order, that the judge hearing the review be satisfied as to the matters referred to in s.52 of the Bankruptcy Act.
Subsections 52(1) and 52(2) of the Bankruptcy Act, which identify matters as to procedure and proof of a creditors petition, provide:
(1) At the hearing of a creditor’s petition, the Court shall require proof of:
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of that petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing:
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
…
(2)If the court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a) that he or she is able to pay his or her debts; or
(b) that for other sufficient cause a sequestration order ought not be made;
it may dismiss the petition.
A de novo hearing by way of review of a sequestration order in bankruptcy made by a registrar proceeds subject to the principles enunciated by a Full Court of the Federal Court in Bechara v Bates [2021] FCAFC 34 at [27] (Allsop CJ, Markovic and Colvin JJ):
(a) The application for review leads to a hearing de novo of the creditor’s petition.
(b)The hearing (or rehearing) of the creditor’s petition is not prosecuted by the debtor (applicant for review) but by the creditor in the proceeding in which the registrar’s order was made.
(c)The application for review is a demand that the claim for relief (the sequestration order) be heard by a judge.
(d)The onus is upon the creditor to prosecute its petition. The only onus of the debtor/bankrupt against whose estate a sequestration order has been made is to prove either solvency or any other sufficient cause under s.52(2) of the Bankruptcy Act 1966 (Cth).
(e)An appreciation of the above considerations makes it evident that summary or default judgment terminating an application for review is highly likely to be misconceived and founded upon a misconception that the applicant for review has an onus to prosecute an application or to show error in the approach of the registrar.
A formal defect or irregularity in a proceeding of this kind will not invalidate the proceedings unless the Court is of the opinion that substantial injustice has been caused by the defect or irregularity and that the injustice can not be remedied by an order of the Court: s.306 of the Act. However, where an alleged deficiency in a creditor’s petition is more significant than a formal defect or irregularity (and therefore incurable pursuant to s.306), the Court is conferred power to, at any time, allow the amendment of any written process, proceeding or notice under the Act: s.33(1)(b), MacDonald v Official Trustee in Bankruptcy [2001] FCA 140 at [21]-[34].
THE PRESENT APPLICATION
The respective contentions
In the review application presently before this Court, Timbercorp Finance sought to amend the creditor’s petition to correct the date of the act of bankruptcy pursuant to s.33(1)(b) and otherwise contended that it had made out its proof of the matters at s.52(1) of the Act, as further informed by rr.4.04. and 4.06 of the Bankruptcy Rules. It asked the Court to find that Mr Gulabovski had not proved either solvency or sufficient cause pursuant to s.52(2) of the Act and to affirm the registrar’s sequestration order and sought an order for its costs of an incidental to the application to be paid from the bankrupt estate.
Mr Gulabovski opposed the amendment to the creditor’s petition and otherwise was understood to raise the following issues in these proceedings, by which he urged the Court that it should overturn and cancel the sequestration order, remove the appointment of the trustee and the freezing order associated with his estate:
(a)Mr Gulabovski did not receive notice of the hearing of the petition and therefore was not able to attend before the registrar;
(b)Mr Gulabovski was not properly served with the creditor’s petition and other Documents covered by the Substituted Service Order;
(c)the petition is wrong because the quantum of the debt and validity of what is described as the security is incorrect; and
(d)the appointment of the trustee is a conflict of interest.
Each contention is addressed in the consideration below.
Service of the creditor’s petition and other documents
It was not contentious that Mr Gulabovski was personally served with the Bankruptcy Notice but he took issue with the alternate methods in the Substituted Service Order which he contended were not capable of bringing the Documents to his attention.
To the extent that Mr Gulabovski contended that the registrar’s sequestration order ought be set aside because he was not on notice of the hearing before the registrar, at the hearing before the Court as presently constituted he ultimately accepted that this proceeding is a hearing de novo or anew before a judge about which he was on notice since at least 31 October 2022: Bechara v Bates [2021] FCAFC 34; (2021) 286 FCR 166; (2021) 388 ALR 414; Allesch v Maunz [2000] HCA 40; (2002) 203 CLR 172 at [27].
The Court has received an affidavit of the steps taken as were required to be taken in order to effect service of the Documents in accordance with the Substituted Service Order. Although Mr Gulabovski did not agree with the methods in the Substituted Service Order, he did not challenge the registrar’s decision to make the Substituted Service Order and indeed filed affidavit evidence of his brother which indicated that the Substituted Service Address was an alternate method of service capable of bringing the matter to Mr Gulabovski’s attention in the sense that this did in fact occur. In any event, there was also evidence of further attempt at service of the Documents made by email of 31 October 2022 which Mr Gulabovski accepted he had received and he was therefore on notice of the creditor’s petition and other documents prior to the hearing on review.
I am of the view that the criterion of proof at s.52(1)(b) is made out, and there is no other reason why the application should fail on account of Mr Gulabovski’s objections as they relate to service or notice of the proceedings.
Statutory conditions on which a creditor may petition
First, and as Mr Gulabovski confirmed at the hearing, there is no question that the Supreme Court Judgment debt is a debt in excess of $10,000 (the statutory minimum) presently and immediately owed and payable by Mr Gulabovski to the applicant creditor: s.44(1)(a) and (b) of the Act, Regulation 10A of the Bankruptcy Regulations.
Second, the act of bankruptcy was committed within six months before the presentation of the petition: s.44(1)(c). In this respect, the act of bankruptcy on which the petition was founded is taken to have occurred on 19 May 2022 which was the date that Mr Gulabovski’s application for the setting aside of the Bankruptcy Notice was dismissed: s.41(7). The petition was presented and filed in this Court by way of the originating application on 24 May 2022. Accordingly, the act of bankruptcy was within six months before the presentation of the creditor’s petition.
Third, Timbercorp Finance proceeds as a creditor only to the extent by which the amount of the debt owed exceeds the value of the security: s.44(2). In the present case, Timbercorp Finance claimed to be a creditor in the amount of $3,660,975.93 being the amount of the Supreme Court Judgment debt including costs ($3,722,481.46) less the security held ($61,505.53). It should be noted at this point that Mr Gulabovski submitted that the quantum of the debt in the creditor’s petition is inaccurate - addressed further below.
Criteria for satisfaction to make a sequestration order
Turning then to the requirements of s.52 of the Act.
The creditor’s petition
The Court has received an affidavit verifying the creditor’s petition for the purpose of the proof required at s.52(1)(a) and an application to amend the date on the creditor’s petition pursuant to s.33(1)(b).
The creditor’s petition provided that the date of the failure to comply with the Bankruptcy Notice was 29 March 2022, not 19 May 2022 which was the extended date by operation of s.41(7) as I have earlier concluded. Before this Court, Timbercorp Finance sought that the creditor’s petition to be amended to include the correct date pursuant to s.33(1)(b).
Mr Gulabovski objected to the amendment – not because he sought to challenge the jurisdictional facts as to the act of bankruptcy, but because he objected to the approach Timbercorp Finance and urged they not be allowed to so amend the petition.
It is well-established that the petitioning creditor may amend a petition to correctly allege a matter required by the Act before or after the making of a sequestration order: De Robillard v Carver [2007] FCAFC 73 at [55]. Even if an alleged deficiency in a creditor’s petition was more significant that “a formal defect or irregularity” curable by s.306, an amendment may be made with leave of the Court under s.33(1)(b): MacDonald v Official Trustee in Bankruptcy [2001] FCA 140 at [21]-[34].
In the present case it may be accepted that the creditor’s petition contained a defect or error as to the date of the act of bankruptcy because it did not reference the extended date which is taken to be the date of the act of bankruptcy on account of Mr Gulabovski’s decision to challenge the Bankruptcy Notice pursuant to s.41(7).
Timbercorp Finance accepted that this is an error of some significance and could not be described as a “formal defect or irregularity” as to engage s.306. That same error also infected the registrar’s sequestration order which proceeded on the basis of the creditor’s petition with the incorrect date. An error of this kind may otherwise be grounds for a different outcome on review. However, on the evidence that is before the Court, the commission of the act of bankruptcy is not disputed, the correct date of the commission of the act of bankruptcy is not disputed and the jurisdictional requirement that the creditor’s petition be brought within six months of the date of the act of bankruptcy was in fact satisfied. Accordingly, I am satisfied that it is appropriate to allow the amendment of the creditor’s petition to correct the date to 19 May 2022 and do so pursuant to s.33(1)(b). The existence of these jurisdictional facts supports a finding that this criterion is met being just one of the criteria the Court must be satisfied of in order to make a sequestration order in this de novo review.
Verification of the judgment debt still owed
The Court has also received an affidavit verifying that the Supreme Court Judgment debt including costs and less the security on which Timbercorp Finance relies was still owing as at 19 May 2022 and no arrangement to the applicant’s satisfaction for payment of that debt had been made as at that date: s.52(1)(c).
Mr Gulabovski did not agree with the accuracy of the security claimed (addressed below) but did not contend that he is able to pay his debt or seek to satisfy the Court for the purpose of s.52(2)(1)(a).
It follows that the Court can be satisfied of this criterion of proof.
Other requirements
In the present case, which involves a creditor’s petition founded on a failure to comply with the Bankruptcy Notice, the petition is to be accompanied by an affidavit verifying: search of records of the Court and Federal Court with a copy of the search attached; that an application to set aside the Bankruptcy Notice was made to the Federal Court and has been finally decided with a copy of the order attached; and an affidavit of service of the Bankruptcy Notice with the Bankruptcy Notice attached: r.4.04.
In these proceedings, Timbercorp Finance submitted a further affidavit of verification in these proceedings which exhibited the Federal Court orders by which the set aside application was dismissed. Those orders had not been before the registrar. Nonetheless, I am satisfied that the materials filed by Timbercorp Finance in these proceedings meet these requirements.
The additional requirements at r.4.06 have also been met in that the Court has before it an affidavit of service effected pursuant to r.4.05 and an affidavit stating there are no details of a debt agreement and that each debt on which the applicant creditor relies is still owing: r.4.06. The Court in this case ordered those materials be filed two days prior to the hearing.
Other sufficient cause
Mr Gulabovski asked the Court to find other sufficient cause as to why a sequestration order ought not be made: s.52(2) of the Act.
It may be accepted that a mis-description of the debt in a creditor’s petition may be a defect of a kind that amounts to sufficient cause as to ground a finding that a sequestration order ought not be made: CTI Logistics v Ogbonna [2022] FedCFamC2G 781. To the extent that Mr Gulabovski complained about the description of the debt in the creditor’s petition, that complaint was limited to whether the value of the security held by Timbercorp Finance is $61,096 not $61,505 (put another way, that it has overstated its security) and that it is not entitled to hold that security at all. Specifically, he contended the value of security did not align with an email he was sent by the liquidator and that the security held on account of the harvest proceeds are not his asset (rather, an asset of Tascoast Pty Ltd ATF Gulabovski Family Trust) and can not be included in any action against him, or set off against monies by him or by any trustee to be funded for their actions.
By s.306, the legislature has made clear its intention that proceedings under this Act are not invalidated by a formal defect or irregularity unless the Court is of the opinion that substantial injustice has been caused by that defect or irregularity and can not be remedied by order of the Court.
There is no evidence of the discrepancy in the quantum of security claimed by Mr Gulabovski (which, it was submitted, is explicable by subsequently accrued interest and is de minimus but again there is no evidence of this). Even if Mr Gulabovski had discharged the evidentiary onus and established a defect or irregularity, the essence of his complaint is that Timbercorp Finance has sought an amount that is less than the total debt owed which, in the absence of any security held, would be owed in full. In those circumstances, there is no identifiable or substantial injustice.
In relation to Mr Gulabovski’s contention that the money held on security by Timbercorp Finance does not belong to him but rather is an asset of Tascoast Pty Ltd ATF Gulabovski Family Trust, during the course of the hearing it became apparent that this is a dispute about whether Timbercorp Finance can act upon or “take” its security interest in relation to the debt owed by Mr Gulabovski’s estate (being the guarantor) or whether other members of the Gulabovski Family Trust would be entitled to claim those monies. Counsel for Timbercorp Finance put, and Mr Gulabovski ultimately accepted, that is a separate matter arising outside of the present proceedings for a sequestration order. For present purposes, there are no other creditors involved in these proceedings, there is no evidence of the finance agreement and the issue raised bears out that there is no dispute that Mr Gulabovski owes the Supreme Court Judgment debt with costs and is not able to discharge it.
Regarding Mr Gulabovski’s objection to the appointment of the trustee in bankruptcy, it is not contentious that Mr Stephen Mitchell of PCI Partners was involved in the assessment of Mr Gulabovski’s financial circumstances for the purposes of a hardship process that was run by Timbercorp Finance. Mr Gulabovski claimed that Mr Mitchell is “conflicted” because he had an undertaking from the liquidator of Timbercorp Finance that no information provided to PCI Partners to complete the assessment of his financial circumstances would be used in the Court proceedings, yet such information had been used in the freezing of his bank accounts. Timbercorp Finance submitted that the appointment of a trustee pursuant to s.156A occurs automatically upon the signing of the consent and is not a proper basis for the Court to refuse to sequestrate the estate in the present case particularly where Mr Gulabovski does not come to the Court claiming solvency and where other remedies exist for the removal of trustees.
Section 156A of the Act provides that a registered trustee may, by an instrument signed by him or her and filed with the official receiver, consent to act as trustee of the estate of the debtor specified in the instrument in the event that the debtor becomes a bankrupt – such instrument to be in the approved form.
The Court has before it an instrument of consent signed by Mr Mitchell pursuant to s.156A and there is no evidence that consent has been revoked. On the materials before the Court, I am not satisfied that the allegations surrounding the trustee appointment constitute a sufficient cause for a sequestration order not to be made.
CONCLUSION
For the above reasons I am satisfied that the jurisdictional pre-requisites are met and there ought be an order sequestrating the estate of Mr Alex Gulabovski.
As there was an error in the date of the act of bankruptcy in the creditor’s petition on which the registrar’s sequestration order was made, the appropriate form of order is to set aside the sequestration order of the registrar of this Court made on 13 October 2022. The applicant having been granted leave to amend the date of the commission of the act of bankruptcy, and the other statutory requirements being met, the application for a sequestration order is allowed. Such order will be entered accordingly.
An order will be made as to costs upon the Court being further addressed in this respect.
I certify that the preceding sixty-four (64) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 28 November 2022
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