Troiani v Peldan - [2004] FMCA 574

FEDERAL MAGISTRATES COURT OF AUSTRALIA

TROIANI & ANOR v PELDAN & ANOR

[2004] FMCA 574

BANKRUPTCY – Application for annulment of bankruptcy – bankrupts disputing debt due to the petitioning creditor – issues raised by the bankrupts previously raised by them in proceedings in the Supreme Court of Queensland and the Federal Magistrates Court – application summarily dismissed.

Bankruptcy Act 1966 (Cth), ss.146, 153B
Federal Magistrates Court Act 1999 (Cth), s.45
Federal Magistrates Court Rules 2001 (Cth)

Horvath v Commonwealth Bank [2001] FMCA 35
Michael Peldan & Morgan Lane as Trustees in Bankruptcy of Sante Troiani & Rita Troiani [2004] FMCA 469
National Australia Bank v Troiani [2003] FMCA 396

First Applicant:

Second Applicant:

SANTE TROIANI

RITA TROIANI

First Respondent:

Second Respondent

MICHAEL PELDAN

MORGAN LANE

File No:

BRG389 of 2004

Delivered on:

31 August 2004

Delivered at:

Brisbane

Hearing date:

31 August 2004

Judgment of:

Driver FM

REPRESENTATION

The applicants appeared in person

Solicitors for the Respondents:

Ms Costello

Mallesons Stephen Jaques

Counsel for the Petitioning Creditor:

Solicitors for the Petitioning Creditor

Mr Perkins

Mallesons Stephen Jaques

ORDERS

The Court directs that no further application by the applicants in relation to their bankruptcy is to be accepted for filing, except by leave of the Court.
The application for annulment is dismissed summarily pursuant to rules 13.10(a) and 13.10(b) of the Federal Magistrates Court Rules 2001 (Cth).
The applicants are to pay the costs and disbursements of the respondent trustees and the costs and disbursements of the petitioning creditor of and incidental to the application for annulment.
The application for discovery filed on 27 August 2004 is dismissed with costs.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG389 of 2004

SANTE TROIANI

First Applicant

RITA TROIANI

Second Applicant

And

MICHAEL PELDAN

First Respondent

MORGAN LANE

Second Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me an application for annulment of a bankruptcy pursuant to section 153B of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act), as well as an application for orders for discovery in aid of the application for annulment. The applicants are two bankrupts. Their applications are both opposed by the petitioning creditor, the National Australia Bank.
The history of the matter is somewhat complex. On 22 March 2001 the National Australia Bank obtained judgment against the applicant bankrupts in the Supreme Court of Queensland in the sum of $5,333,452.24. Subsequently, on 6 June 2002, the Court of Appeal of the Supreme Court of Queensland gave judgment in the reduced amount of $3,451,599.24. A sequestration order was made on 16 May 2003 against the estates of the two bankrupts. The petitioning creditor, the National Australia Bank, relied upon the applicant's failure to comply with a bankruptcy notice based upon the judgment of the Court of Appeal of the Supreme Court of Queensland. The sequestration order was made by Federal Magistrate Baumann, and reasons were given for his decision, reported at National Australia Bank v Troiani [2003] FMCA 396.
On 20 May 2003 the bankrupts were notified in writing of the appointment of the trustee. Between 29 May 2003 and 10 July 2003 the trustees wrote to the applicant bankrupts on six occasions requesting, amongst other things, that the applicants lodge a statement of affairs. They have not to date lodged a statement of affairs, although Mrs Troiani tells me that a statement of affairs has been prepared. She tells me that she has not filed it because she disputes the debt to the National Australia Bank.
On 28 July 2003 the trustees issued to the Insolvency and Trustee Service of Australia an offence referral document reporting the applicants for their failure to lodge their statement of affairs. On 6 July 2004 the trustees obtained an order pursuant to s.146 of the Bankruptcy Act entitling the trustees to distribute a first and final dividend in the applicant's estate. That decision was also made by Federal Magistrate Baumann and reasons were given, reported at Michael Peldan & Morgan Lane as Trustees in Bankruptcy of Sante Troiani & Rita Troiani [2004] FMCA 469. I understand that that decision is subject to appeal in the Federal Court.
The annulment application was filed on 22 July 2004. The applicants rely principally upon a lengthy affidavit and annexures filed on 22 August 2004. They also rely upon an affidavit by Sante Troiani filed on 27 August 2004.
As I have already noted, the application is opposed by the National Australia Bank. The trustees properly take no partisan position in relation to the annulment application and the discovery application. The trustees have prepared a report in relation to the administration of the estate in accordance with the Federal Magistrates Court Rules 2001 (“the Federal Magistrates Court Rules”). Although it is not entirely clear, based upon what the applicants have told me from the bar table, and based upon postal receipts that they have showed me, I am satisfied that the applicant bankrupts have met the requirements of rule 35.03 of the Federal Magistrates Court Rules in relation to annulment applications.
There is an outstanding subpoena issued on behalf of the applicants. That subpoena is opposed on the basis of inadequate notice, inadequate service, and failure to provide conduct money. The applicants orally seek an adjournment of the annulment proceedings to provide time for the subpoena to be complied with, and for the purposes of the discovery order sought being dealt with.
The substance of the annulment application is that Mr and Mrs Troiani do not believe that they are indebted to the National Australia Bank. They passionately believe that they have been wronged by the bank and make serious allegations against the bank, amounting to fraud if the allegations were true. The allegations made by the applicants have been advanced a number of times. They were advanced in the proceedings in the Queensland Supreme Court, but nevertheless judgment was entered against the bankrupts. The allegations were further pursued in bankruptcy proceedings in this Court and were dealt with by Federal Magistrate Baumann in the two decisions made by him.
It does not appear to me that anything new has been raised by the applicants in these present annulment proceedings. They seek an order for discovery against the National Australia Bank in the belief that if discovery is ordered material might come to light to support their allegations. However, s.45 of the Federal Magistrates Act 1999 (Cth) provides that there shall be no discovery in proceedings before this Court unless a Federal Magistrate determines that it is appropriate, in the interests of the administration of justice, to make a discovery order. In order to be satisfied that it was appropriate, in the interests of the administration of justice to make such an order, I would need to be satisfied that there is a cause of action worthy of a trial.
Rule 13.10 of the Federal Magistrates Court Rules deals with summary dismissal of applications. The rule provides that:
The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if it appears to the Court that:
(a)no reasonable cause of action is disclosed in relation to the proceeding or claim for relief; or
(b)the proceeding or claim for relief is frivolous or vexatious; or
(c)the proceeding or claim for relief is an abuse of the process of the Court.
In my view, based on the material before me, and what I have been told from the bar table by the applicants, the application for annulment is doomed to fail. It cannot possibly succeed. The applicants would have to persuade me first that the sequestration order should not have been made. That would require me to go behind the judgment of the Queensland Court of Appeal. Federal Magistrate Baumann was not prepared to do so and neither am I. There is nothing before me that would give me any cause to believe that there is anything in the judgment debt that warrants a further examination. Even if I were wrong in that, I would still have a discretion, which I would have to exercise, to determine whether or not the bankruptcy should be annulled. Relevant considerations in that regard would be the conduct of the bankrupts, whether they are solvent, and whether an arrangement has been made for payment of the trustees’ expenses.
It is apparent from the report of the trustees that the bankrupts have been uncooperative in the administration of the bankruptcy. That is why the orders were made by Federal Magistrate Baumann pursuant to s.146 of the Bankruptcy Act. No statement of affairs has been filed. I do not regard the continuing belief on the part of the bankrupts that they are not indebted to the National Australia Bank as sufficient cause for not having filed a statement of affairs. It also appears from the report of the trustees, that the bankrupts are hopelessly insolvent, even leaving aside the judgment debt in favour of the National Australia Bank. The public interest would not be served by an annulment of the bankruptcy. Finally, the applicants have put forward no proposal for the payment of the trustees’ fees and expenses. All of these considerations lead me to the firm view that the annulment application will necessarily fail. I am therefore satisfied that the high test has been met for the summary disposal of the annulment application pursuant to Rule 13.10(a) of the Federal Magistrates Court Rules.
Further, based on what I have seen and heard, I have formed the view that the annulment application is vexatious. The trustee and the petitioning creditor have been put to substantial expense in the repeated litigation of an issue of the existence of a debt on which the bankrupts have repeatedly failed. The issue has been litigated twice in the State Courts of Queensland. It has been litigated so far three times in this Court. As was the case in Horvath v Commonwealth Bank [2001] FMCA 35[1] at [39], it is clear that the applicants intend to continue to litigate the issue in whatever forum they find available. The issue should be put finally to rest.
[1] Dealt with under the then applicable Federal Court Rules
I find that the present annulment application is vexatious. I will, therefore, order that the application for annulment be dismissed, pursuant to rules 13.10(a) and (b) of the Federal Magistrates Court Rules. I will further order that the applicants pay the costs of the respondent bank and the trustee in relation to the application. It necessarily follows that the application for discovery will also be dismissed with costs.
It is, in my view, desirable in the interests of justice, that the trustees and the creditors should not be further troubled in this Court with continuing litigation based upon the issue raised by the applicants. I will, therefore, direct that no further application by these applicants in relation to their bankruptcy be accepted for filing by the registry, except by leave of the Court.

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

Associate:

Date: 10 September 2004