Turco v Mortgage Ezy Australia Pty Ltd
[2018] FCCA 1519
•14 June 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TURCO v MORTGAGE EZY AUSTRALIA PTY LTD | [2018] FCCA 1519 |
| Catchwords: WORDS AND PHRASES – “abuse of process”. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.30, 41, 52 Bankruptcy Regulations 1996 (Cth), reg.16.01 |
| Cases cited: Atkinson v Oakleigh Holdings Pty Ltd [2000] FCA 1547; (2000) 105 FCR 15 Bank of Australasia v Hall (1997) 4 CLR 1514; (1997) 14 ALR 51 Brunninghausen v Glavanics [1998] FCA 230 Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 Rankine v Lord [2011] FCA 478; (2011) 9 ABC(NS) 142; (2011) 121 ALD 258 Re Athans; Ex parte Athans (1991) 29 FCR 302 Turco & Turco & Ors [2017] FCWA 150 Warner v Frost [1999] FCA 830 |
| Applicant: | MARIO TURCO |
| Respondent: | MORTGAGE EZY AUSTRALIA PTY LTD (ACN 050 494 454) |
| File Number: | PEG 5 of 2018 |
| Judgment of: | Judge Antoni Lucev |
| Hearing date: | 2 May 2018 |
| Date of Last Submission: | 2 May 2018 |
| Delivered at: | Perth |
| Delivered on: | 14 June 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr T Galic |
| Solicitors for the Applicant: | MGM O’Connor Lawyers |
| Counsel for the Respondent: | Mr NW Kalmund |
| Solicitors for the Respondent: | Hotchkin Hanley Lawyers |
ORDERS
Time for compliance with Bankruptcy Notice BN 218341 be extended to 10.00am on 14 June 2018.
The application filed 3 January 2018 to set aside Bankruptcy Notice BN 218341 issued 14 November 2017 be dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 5 of 2018
| MARIO TURCO |
Applicant
And
| MORTGAGE EZY AUSTRALIA PTY LTD ACN 050 494 454 |
Respondent
REASONS FOR JUDGMENT
Application
This is an application filed 3 January 2018 under the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) which seeks final orders to set aside a bankruptcy notice, being Bankruptcy Notice 218341, dated 14 November 2017 (“Bankruptcy Notice”), on the basis that it is an abuse of process.
Bankruptcy Notice
A copy of the Bankruptcy Notice is attached to the application. It claims that the applicant, Mario Turco (“Mr Turco”) owes the respondent creditor, Mortgage Ezy Australia Pty Ltd (“Mortgage Ezy”) the sum of $904,649.61 (being a judgment debt of $903,721.13 and interest accrued since judgment of $928.48). The Bankruptcy Notice was issued by the Official Receiver on 14 November 2017.
WA Family Court judgment and orders
The judgment debt arises from orders made by the Family Court of Western Australia (“WA Family Court”) in Turco & Turco & Ors [2017] FCWA 150 (“Turco-FCWA”).
By orders dated 8 November 2017 made in Turco-FCWA the WA Family Court gave judgment for the fourth respondent in proceedings in which Mr Turco was the first respondent, and his former wife, Suellen Williams (formerly Turco) (“Ms Williams”), was the applicant, and Mortgage Ezy was the fourth respondent. Relevantly, the orders provide as follows:
1. Judgment is entered for Mortgage Ezy Australia Pty Ltd (“MEA”) against the first respondent, Mario Turco (“the husband”) and the applicant, Suellen Williams (formerly Turco) (“the wife”) in the sum of $903,721.13 -which sum comprises:
a) the sum of $790,043.49 pursuant to the certificate tendered at trial (“the primary debt”); together with
b) interest of $113,677.64 (being interest on the primary debt for the period 21 April 2015 to 8 November 2017, calculated at the rates set out in the Loan Agreement between MEA, the husband and the wife).
Affidavit of Mario Turco sworn 3 January 2018 (“Mr Turco’s Affidavit”) at Annexure MT-2.
Mr Turco’s affidavit
In Mr Turco’s Affidavit in support of the application to set aside the Bankruptcy Notice it is asserted that:
a)the Bankruptcy Notice was never personally served on Mr Turco, and it was first brought to his attention by email on 14 December 2017: Mr Turco’s Affidavit at [2];
b)the orders on which the Bankruptcy Notice is based were the orders made in the WA Family Court in Turco-FCWA: Mr Turco’s Affidavit at [2];
c)Mr Turco is appealing Turco-FCWA, and has lodged a “Notice of Appeal application to extend time” together with an affidavit on 22 December 2017, and as at the time of the swearing of Mr Turco’s Affidavit Mr Turco had not received sealed copies of the documents lodged with the WA Family Court: Mr Turco’s Affidavit at [6] and Annexure MT-4; and
d)the Bankruptcy Notice is an abuse of process for the following reasons:
7.1 The Notice was served or attempted to be served on me just before Christmas.
7.2 Given the time of the year the Notice was served or attempted to be served on me with the time for compliance coinciding with the Christmas Holidays period when most lawyers are on holidays there has been no time to confer in relation to it's withdrawal and I have been forced to bring an urgent application. A letter was sent by my lawyer to the Respondent's lawyers dated 3 January 2018 a copy of which is annexed and marked “MT-5”.
7.3 The other Judgment Debtor my former wife Suellen Williams (Suellen) who is the Applicant in the Family Court proceedings informs me and I do verily believe that no Bankruptcy Notice was ever served on Suellen by the Respondent Mortgage Ezy Pty Ltd (Mortgage Ezy)
7.4 Mortgage Ezy has not attempted any other form of execution against me and has taken no steps against Suellen.
7.5 There is no suggestion that I am unable to pay my debts as and when they fall due.
7.6 In order to practice I am required to have professional indemnity insurance, which is renewed each year and again here I make a declaration about my solvency, the turnover of the business etc.
7.7 I have leased new premises and as most commercial people who are in business know when you are required to sign lease agreements guarantees are required to be given and the landlord completed credit checks on you as to your solvency.
7.8 My business, M2 Corporate has the following credit cards, all were acquired in the last 3 and ½ years:
a) Amex platinum - $200k plus limit
b) Amex - $15k limit
c) Anz business one - $21k limit.
7.9 I am a member of the following professional bodies:
a) Institute of Public Accountants - MIPA
b) The Taxation Institute of Australia - CTA ( Chartered Tax Advisor )
c) National Tax &Accountants Association -member
d) Tax Practitioners Board -Registered Tax Agent
7.10 With all these membership[s] I am bound by their bylaws -i.e. meeting the continued professional educational requirements, meeting my personal tax obligations and I must be a fit and proper person -i.e. not insolvent.
7.11 I have real estate assets in my name.
7.12 The Notice, I believe, is not an effort to prevent me from incurring further obligations that I will not be able to meet and is, I believe, being used for the private ends of Mortgage Ezy with the aim of putting pressure on me to pay the debt rather than being a genuine effort by Mortgage Ezy to invoke the court's jurisdiction in relation to insolvency. The Notice is, I believe, an attempt to embarrass me by invoking the Official Receiver.
Mr Turco’s Affidavit at [7].
The WA Family Court proposed appeal
The grounds of the proposed appeal are set out in a Notice of Appeal which is Annexure MT-4 to Mr Turco’s Affidavit. The Court has used the phrase “proposed appeal” because there is also an Application in a Case in the WA Family Court by Mr Turco seeking permission to appeal by way of an extension of time in which to appeal: see Annexure MT-5 to Mr Turco’s Affidavit. In short, there is presently no appeal on foot: see also [15(h)(ii) and (k)] and [21(a)] below, and will not be until an extension of time is granted, if an extension is granted. The grounds of the proposed appeal (Annexure MT-4 to Mr Turco’s Affidavit) are as follows:
1. There has been an inordinate and unacceptable delay in the delivery of the decision some 2 and a half years following trial. Not only has the Husband been denied natural justice by the delay but also by the following errors of fact and law made by the Family Court Judge ( FCJ) in his reasons.
2. The FCJ should have found
(a) that the discharge of mortgage by Mortgage Ezy Australia Pty Ltd (MEA) in response to express written directives and authorities given by both the Husband and Wife in duly signed Discharge Directive Forms (DIF) sent to MEA and/or its agents meant that MEA intended to discharge both the mortgage and by implication the loan agreement secured by the mortgage that had been discharged.
(b) MEA only held the Certificate of Title to the East Fremantle Property until the loan was repaid. Its only when the full amount of the loan is repaid that any mortgage can then be discharged and the lender (MEA) is removed from the title. Once the mortgage was discharged deliberately or otherwise the loan debt had also been extinguished - there was no longer any obligation on the part of the borrower to make any further payments. The borrower was no longer obligated to make further payments under the loan. This is the position even if MEA had never intended for this to happen. The banks mistake (which is denied) is irrelevant and not to the point if there was no mistake and certainly no finding of any mistake on the part of the borrowing parties. Absent the existence of any (mutual) mistake on the part of all parties concerned the FCJ failed to decide this case on established commercial law principles of what it means in a practical sense for a mortgage to be discharged.
3. The payments made to MEA by Turco & Co Pty Ltd should have been brought to account in reduction of any loan debt that may have existed or ordered to be repaid.
4. It was Bankwest that disbursed the funds to Turco & Co Pty Ltd at settlement. MEA could have and should have taken action against Bankwest for negligence and breach of duty of care but didn't and/or could have taken action against Turco & Co Pty Ltd for monies had and received but didn't. It instead took action against the borrowers (who never received the money from Bankwest at settlement) and after the loan agreement had come to an end following the discharge of the mortgage.
5. From a Limitations Act perspective the loan was already in default when MEA failed to receive its money at settlement. Subsequent monthly payments weren't made by the borrowers but by a third party Turco & Co Pty Ltd. That did not suspend or enliven the operation of the limitation period during the currency of those payments. The borrowers weren't obliged to make payments under the terms of a loan agreement that had come to an end upon discharge of the mortgage. Turco & Co similarly weren't obliged to make payments and any payments made should have been credited towards any principle debt (if any) or alternatively been treated as payments made mistakenly believing there was still a debt due and owing. MEA is being rewarded for its incompetence and negligence in the handling of this matter while others have been allowed to suffer changes to their position - the change of position defence the FCJ had clearly never heard of.
6. The Judges attitude and approach towards the Husband in denouncing the Husband's credentials as a witness was also an error that meant that this case went off the rails and was decided not on legal principles but by reference to the judge's own personal view of the matter.
Claim of abuse of process
On 3 January 2018 at 2.19pm lawyers acting for Mr Turco sent an email to the lawyers acting for Mortgage Ezy in which they indicated that they had been instructed to bring an urgent application to set aside the Bankruptcy Notice “purportedly served on him electronically by email on 14 December 2017”, and indicating that in their view that the Bankruptcy Notice was an abuse of process because:
1. No Bankruptcy Notice has been served on the other Judgment Debtor Ms Suellen Williams ,
2. Your client has not attempted any other form of execution
3. Our client is understood to have real estate assets in his name and there is no suggestion that Mr Turco can't pay his debts as and when they fall due
4. Mr Turco is appealing the Family Courts decision
5. The purpose of the Notice appears to be to put pressure on Mr Turco to pay the debt rather than being a genuine effort to invoke the court's jurisdiction in relation to insolvency and is an attempt to embarrass him by invoking the Official Receiver.
6. The Notice was served just before Christmas when the time for compliance coincides with the Christmas holiday period when most lawyers are on holiday. This is certain to attract the criticism of the court as in other cases where this has been done.
Mr Turco’s Affidavit at Annexure MT-5.
This application was filed less than two hours after the above email was sent.
Notice of grounds of opposition
On 29 January 2018 Mortgage Ezy filed a “Notice stating grounds of opposition to application, interim application or petition” (“Notice of Opposition”). The Notice of Opposition sets out the following grounds of opposition to both the final orders and interim orders sought by Mr Turco:
1. Bankruptcy Notice BN 218341 dated 14 November 2017 (“the Bankruptcy Notice”) is not an abuse of process.
2. The application to set aside the Bankruptcy Notice on the grounds that it is an abuse of process has no prospects of success.
3. Alternatively to 2, the application to set aside the Bankruptcy Notice being dismissed, the applicant ought not be granted an extension of time to comply with the Bankruptcy Notice.
4. The applicant debtor did not, before expiration of the time fixed for compliance with the Bankruptcy Notice (or at all), institute proceedings to set aside a judgment or order in respect of which the Bankruptcy Notice was issued.
Affidavits in support of the Notice of Opposition
On 29 January 2018 Mortgage Ezy filed two affidavits in support of the Notice of Opposition: the first being an affidavit of Cheryl Lorraine Harrison sworn 29 January 2018 (“Ms Harrison’s Affidavit”), the second being the affidavit of Nicholas William Kalmund also sworn 29 January 2018 (“Mr Kalmund’s Affidavit”). Ms Harrison is a professional process server. Mr Kalmund is a solicitor employed by the solicitors for Mortgage Ezy.
Ms Harrison’s Affidavit
Between 16 November 2017 and 7 December 2017 Ms Harrison’s Affidavit attests to 13 attempts to serve the Bankruptcy Notice on Mr Turco. Those attempts were made:
a)on seven occasions at Mr Turco’s work premises, on three occasions when Mr Turco was in attendance, but said by reception staff not to be available to see Ms Harrison, and on four occasions when Mr Turco was not, or was said not to be, in attendance; and
b)on six occasions at his residence, on none of which occasions was Mr Turco present.
Despite the 13 occasions on which Ms Harrison attempted to effect personal service on Mr Turco between 16 November 2017 and 7 December 2017, those endeavours were unsuccessful. The Court is prepared to infer from Ms Harrison’s evidence that Mr Turco was aware that Ms Harrison was attempting to effect service of some form of legal process on him, by reason of the information relayed by Ms Harrison to the reception staff at Mr Turco’s workplace, and by reason of Ms Harrison having left her business card at that workplace, and also by reason of the statements of the female identified as “Anna” spoken to by Ms Harrison at Mr Turco’s residential address, who indicated that she had passed on a message to Mr Turco to call Ms Harrison, Ms Harrison having given her business card to Anna. There was of course no obligation on Mr Turco to facilitate service of any legal process upon him.
On 14 December 2017 Ms Harrison collected from the lawyers for Mortgage Ezy:
a)a letter addressed to Mr Turco at his workplace address enclosing the Bankruptcy Notice; and
b)a letter addressed to Mr Turco at his residential address enclosing the Bankruptcy Notice: Ms Harrison’s Affidavit at [22].
On the same day (14 December 2017) Ms Harrison attended:
a)Mr Turco’s workplace, and left with the receptionist an envelope containing the letter addressed to Mr Turco at his workplace address and enclosing the Bankruptcy Notice: Ms Harrison’s Affidavit at [23]; and
b)Mr Turco’s residential address, and rang the doorbell, but there was no answer. She then placed under the front door an envelope addressed to Mr Turco at his residential address and enclosing the Bankruptcy Notice: Ms Harrison’s Affidavit at [24].
Mr Kalmund’s Affidavit
In Mr Kalmund’s Affidavit he attests to:
a)the WA Family Court proceedings giving rise to the judgment in Turco-FCWA commencing as proceedings in the Supreme Court of Western Australia and those proceedings being cross-vested to the WA Family Court in or about June 2014: Mr Kalmund’s Affidavit at [5]-[6];
b)the WA Family Court ordering that Mortgage Ezy’s claim against Ms Williams and Mr Turco be heard in the WA Family Court as a preliminary issue, with the trial being on 21 and 22 April 2015, and Turco-FCWA being delivered on 3 November 2017: Mr Kalmund’s Affidavit at [7]-[8] (the orders arising from Turco-FCWA were however dated 8 November 2017: see [4] above);
c)on 11 December 2017 Mortgage Ezy’s solicitors sent a letter to the solicitors acting for Ms Williams (“11 December 2017 Letter”), in which a demand was made for payment of the judgment sum of $903,721.13 by 5.00pm on 18 December 2017: Mr Kalmund’s Affidavit at [9] and Annexure NWK-1;
d)on 14 December 2017 Mr Kalmund sent by email (to [email protected]) a letter addressed to Mr Turco at his residential address enclosing the Bankruptcy Notice (and being the same letter left with the receptionist at Mr Turco’s workplace by Ms Harrison: see [14(a)] above: Mr Kalmund’s Affidavit at [10] and Annexure NWK-2), by way of service pursuant to reg.16.01(e) of the Bankruptcy Regulations 1996 (Cth) (“Bankruptcy Regulations”);
e)on 21 December 2017 Mortgage Ezy’s lawyers wrote to the lawyers for Ms Williams (“21 December 2017 Letter”) in relation to the 11 December 2017 Letter and Ms Williams’ application for a stay of execution of the judgment in Turco-FCWA: Mr Kalmund’s Affidavit at [11] and Annexure NWK-3. The 21 December 2017 Letter notes that the time by which Mortgage Ezy had demanded payment of the judgment sum and interest had passed, and that Ms Williams had not paid the amount demanded, or any amount at all, and further Ms Williams had not sought to have her application for a stay heard urgently, and there was as yet no notice of any date on which that stay application was to be heard. The 21 December 2017 Letter then went on as follows:
We have been instructed to propose the following:
1. Our client will agree to not take any step to enforce the judgment until your client's application for a stay is heard and determined provided that:
(a) the application is heard and determined by 31 January 2018; and
(b) by 5:00pm (WST) on 22 December 2017, your client provides our client with a written undertaking to the Court that she will not, between the date of the undertaking and 31 January 2018, deal with, diminish the value of, or further encumber in any way (including by drawing down on any present encumbrance), her property located at Unit 2, 181 Marmion Street, Fremantle; and
If your client agrees to the above proposal, please provide us with the written undertaking. If the undertaking is not provided, we are instructed to enforce the judgment against your client notwithstanding her pending application that it be stayed.
In relation to your client's application to, amongst other things, defer the balance of the hearing, and the determination of, our client's costs application until after the appeal, we are instructed that:
(a)our client opposes the application;
(b)our client does not agree to any deference or suspension of the time by which your client is to file and serve her submissions as to costs until after the application is heard and determined; and
(c) paragraph 4 of the orders of Justice Walters made 8 November 2017 remains operative and requires your client, should she oppose our client's costs application, to file and serve a minute of orders sought and any written submissions by 3 January 2018.
f)on 4 January 2018 Mortgage Ezy’s lawyers sent to the WA Family Court a letter concerning a stay application filed by Ms Williams and Mr Turco’s Application in a Case also seeking a stay of the orders made in Turco-FCWA: Mr Kalmund’s Affidavit at [12] and Annexure NWK-4;
g)on 5 January 2018 the WA Family Court advised that all stay applications in relation to Turco-FCWA would be heard on 8 January 2018: Mr Kalmund’s Affidavit at [13] and Annexure NWK-5;
h)on 5 January 2018 the lawyers for Mortgage Ezy received a copy of a letter from the Western Region Appeal Registrar of the Family Court of Australia (“Appeal Registrar”) to Mr Turco dated 2 January 2018: Mr Kalmund’s Affidavit at [14] and Annexure NWK-6, in which the Appeal Registrar:
i)referred to Mr Turco’s Proposed Notice of Appeal, Application in a Case and Affidavit in relation to Turco-FCWA;
ii)indicated that he had already emailed Mr Turco directly on 28 December 2017 in the following terms:
“Dear Mr Turco
I am the Appeal Registrar for the Family Court of Australia in Perth.
It is unusual for me to correspond by email with parties directly, however I do so on this occasion as I am concerned about delays in the post and possible appeal deadlines in your case. I have unsuccessfully endeavoured to telephone you at your office earlier today.
I will send to you a detailed letter in due course, but the contents of this can be summarised as follows.
Your various appeal related documents were received on 22 December 2017 and have been referred to me. I do not propose to accept them for filing because:-
1 You may not seek an extension of time to file an appeal using a Form 2 Application in a Case - the required form is a Form 21 Application in an Appeal supported by a separate dedicated affidavit.
2 You may seek an order to stay the orders appealed from using a Form 2 Application in a Case supported by affidavit, but these documents must be separate from any of the documents referred to in paragraph 1 above as they are referred to and dealt with by the Judge who made the orders or another Judge, not the appeal court.
More generally, however, you should consider Rules 22.07 and 22.08 of the Family Law Rules 2004 which I reproduce below, as a result of which it may be possible for you to file a Notice of Cross-Appeal (which is a Form 20 Notice of Appeal endorsed on the front page as a Cross-Appeal) without seeking an extension of time at all provided that it is filed within 14 days of service on you of the Notice of Appeal filed by Ms Williams. I do not know whether that Notice of Appeal has been served on you yet or, if so, on what date, so I therefore am unable to specify the last date on which any Notice of Cross-Appeal may be filed by you.
…
It would be highly desirable for you to seek some legal advice at this time.
I will be returning your documents to you, unfiled, in the post shortly.
I hope this has been of assistance.
T Kuurstra
Appeal Registrar”
iii)referred to certain additional information in relation to cross-appeals and extension of time in which to cross-appeal; and
iv)returned the documents referred to, namely the Proposed Notice of Appeal, Application in a Case and Affidavit, “unfiled”;
i)on 8 January 2018 Mr Kalmund appeared on the hearing of the stay applications by Ms Williams and Ms Turco (“Stay Application Hearing”): Mr Kalmund’s Affidavit at [15], and a copy of the transcript of the Stay Application Hearing is Annexure NWK-7 to Mr Kalmund’s Affidavit (“Stay Hearing Transcript”);
j)at the Stay Application Hearing the WA Family Court made the following orders:
1 Subject to para 2 below, execution against the wife of the judgment in paragraph 1 of the orders of the Honourable Justice Walters made 8 November 2017 (“the Judgment”) be stayed until close of Registry business on 8 May 2018.
2The wife have liberty to apply for a continuation of the operation of para 1 above.
3The husband's oral application for a stay of execution of the Judgment against him be dismissed.
4All other matters forming the subject of the wife's application in a case filed 15 December 2017 be adjourned to 5 February 2018 at 10.00 am before the Honourable Justice Moncrieff.
5The husband must forthwith pay the fourth respondent's costs of and incidental to his oral stay application - fixed in the sum of $1,000.
6The fourth respondent must forthwith pay the wife's costs of and incidental to her stay application - fixed in the sum of $1,000.
Mr Kalmund’s Affidavit, Annexure NWK-8 (“Stay Application Orders”);
k)on or about 25 January 2018 Mortgage Ezy’s lawyers received a copy of a letter addressed to Mr Turco from the Appeal Registrar dated 22 January 2018: Mr Kalmund’s Affidavit at [17] and Annexure NWK-9, in which the Appeal Registrar indicated as follows:
I refer to your various documents received 22 January 2018 including:-
1. Proposed Notice of Appeal from orders of Justice Walters made 8 November 2017 (which should have been endorsed as a Cross-Appeal);
2. Form 21 Application in an Appeal seeking an extension of time in which to appeal (which should have sought an extension of time to cross-appeal) and a stay of the orders made 8 November 2017 (which I previously advised you may not be sought in an Application in an Appeal);
3. Purported affidavit of yourself.
I am unable to accept your documents for filing because the document which purports to be an affidavit has no jurat and is unsworn.
I think it would be also advisable, given the comments in parentheses above, that you pay closer attention to the contents of my letter dated 2 January 2018.
I return your documents to you, unfiled.
Stay Application Hearing – 8 January 2018
As indicated above, the Stay Application Hearing took place on 8 January 2018, at which the WA Family Court made the Stay Application Orders: see [15(i) and (j)] above. The Stay Hearing Transcript is in evidence, and need not be referred to in detail at this point: relevant extracts or references are set out later in these Reasons for Judgment.
Court’s order of 2 February 2018
When the matter came before the Court for directions on 2 February 2018 the Court made orders:
a)that time for compliance with the Bankruptcy Notice be extended until further order of the Court;
b)for the filing of further affidavits and submissions by:
i)Mr Turco, by 23 February 2018 and 30 March 2018 respectively, and
ii)Mortgage Ezy, by 16 March 2018 and 4 April 2018 respectively;
c)that there be liberty to apply for urgent mediation or conciliation before a Registrar; and
d)that the matter be listed for hearing on 2 May 2018.
Mr Turco’s further affidavit
On 9 March 2018 Mr Turco filed a further affidavit sworn 9 March 2018 (“Mr Turco’s Further Affidavit”). At hearing on 2 May 2018 an order pursuant to r.3.05(1) of the Federal Circuit Court Rules 2001 (Cth) (“FCC Rules”) was made extending time for the filing of Mr Turco’s Further Affidavit.
In Mr Turco’s Further Affidavit he says as follows:
a)refers to the WA Family Court proceedings, and in addition to the information contained in Mr Turco’s Affidavit and Mr Kalmund’s Affidavit, and says that:
i)he and Ms Williams were divorced on 15 February 2007, at a time at which property proceedings had already been filed against him in the WA Family Court, which property proceedings have not yet been finalised, and in relation to which no orders have been made or agreed between he and Ms Williams in relation to the property; and
ii)he was present in the WA Family Court when the Stay Application Orders were made, and that he was self-represented in those proceedings: Mr Turco’s Further Affidavit at [8];
b)that the basis for Ms Williams seeking a stay was to prevent Mortgage Ezy from taking enforcement action against her personally, including any assets that she may have a contingent or underlying beneficial interest in, while her appeal against Turco-FCWA proceeds, including the matrimonial pool of assets that is yet to be divided between Ms Williams and Mr Turco: Mr Turco’s Further Affidavit at [9];
c)that if a sequestration order were to be made as a result of Mr Turco’s non-compliance with the Bankruptcy Notice, and he was bankrupted, it would effectively defeat the purpose of Ms Williams obtaining an interim stay in relation to the orders made in Turco-FCWA, if it allowed Mortgage Ezy to circumvent the operation of the stay in favour of Ms Williams by enforcing the orders in Turco-FCWA against Mr Turco where the assets concerned are still part of the matrimonial pool of assets over which Ms Williams has a claim: Mr Turco’s Further Affidavit at [10];
d)the assets which form part of the matrimonial pool of assets over which Ms Williams has a claim include:
i)Mr Turco’s one-third interest in properties that he owns with his two brothers, being two properties in Glyde Street, Fremantle, and three properties in Hubble Street, Fremantle;
ii)Mr Turco’s half interest in an accounting practice that his brother, Victor Turco, continues to operate without him, and in respect of which there has been no accounting for money or payment to Mr Turco for his half share in that business; and
iii)unspecified interests in various family trust entities,
and that Mr Turco approximates the value of those assets as at “around the $700,000 mark subject to any claims my brothers may make that will be contested”: Mr Turco’s Further Affidavit at [10];
e)that there are orders made in the WA Family Court on 24 March 2014, varied in 2015, injuncting Mr Turco from disposing of any of his assets referred to above, and that Mortgage Ezy is aware that Mr Turco cannot access any of the above assets to satisfy the judgment debt claimed in the Bankruptcy Notice: Mr Turco’s Further Affidavit at [11] and Annexure A;
f)that Ms Williams would be severely prejudiced if she were to be successful in her appeal and Mr Turco were to be bankrupted in the meantime before the property proceedings in the WA Family Court between Ms Williams and Mr Turco had been finalised: Mr Turco’s Further Affidavit at [12];
g)that any attempt by Mortgage Ezy to take any steps in relation to the Bankruptcy Notice in the meantime would be:
i)an abuse of process inconsistent with the interim stay granted in favour of Ms Williams by the WA Family Court; and
ii)an attempt to circumvent the operation of any order for a stay and to affect Ms Williams’ interests: Mr Turco’s Further Affidavit at [13]; and
h)that he never sought to evade personal service of the Bankruptcy Notice, and disputes certain details as to Ms Harrison’s endeavours to personally serve him, but does not dispute that he became aware of the Bankruptcy Notice left at his workplace: see [14(a)] above, on 15 December 2017 (being the day after the Bankruptcy Notice was left at the workplace), and became aware of the Bankruptcy Notice left at his residential address sometime after 14 December 2017 upon his return to his residence: see [14(b)] above.
Galic Affidavit
On the day of the hearing of the application on 2 May 2018, an affidavit of Mr Turco’s solicitor, Tihomir Galic was filed (“Mr Galic’s Affidavit”). There was no objection by Mortgage Ezy to Mr Galic’s Affidavit being read and put into evidence.
Mr Galic’s Affidavit says that he is now on the record in the proceedings in the WA Family Court, as a result of the filing of documents on 2 May 2018 in the WA Family Court Registry, being:
a)an Application in an Appeal for the following orders:
1. There be an extension of time in which to file the attached Appeal Notice from the decision of Walters J in (P)PTW5653/2006.
2. The commencement date of the appeal be fixed as being 22 December 2017.
3. There be a stay of the orders made by Walters J on 8th November 2017 until further order.
4. Such further or other orders as the Court sees fit.
The reference to the “decision” in proposed order 1 is to the judgment and orders in Turco-FCWA;
b)a Notice of Appeal, setting out proposed grounds of appeal as follows:
1. There was an inordinate and unacceptable delay in the handing down of the decision some 2 and a half years following trial. Natural justice has been denied by the delay. The following errors of fact and law were made by the Trial Judge.
2. The Trial Judge should have found:
(a) that the discharge of mortgage by Mortgage Ezy Australia Pty Ltd (Mortgage Ezy) in response to express written directives and authorities given by both the Husband and Wife in duly signed Discharge Directive Forms (DIF) sent to Mortgage Ezy and/or its agents meant that Mortgage Ezy intended to discharge both the mortgage and by implication the loan agreement secured by the mortgage that had been discharged.
(b) Mortgage Ezy only held the Certificate of Title to the East Fremantle Property until the loan was repaid. When the full amount of the mortgage debt is repaid any mortgage can then be discharged and the Mortgage Ezy [sic] is removed from the title. Once the mortgage was discharged deliberately or otherwise the loan debt had also been extinguished. There was no longer any obligation on the part of the borrower to make further payments under the loan. This is the position even if Mortgage Ezy had never intended for this to happen. Mort[g]age Ezy's mistake (which is denied) is irrelevant and not to the point if there was no mistake and certainly no finding of any mistake on the part of the borrowing parties.
3. The loan was already in default when Mortgage Ezy failed to receive its money at settlement. Subsequent monthly payments weren't made by the borrowers but by a third party Turco & Co Pty Ltd. That did not suspend or enliven the operation of the limitation period during the currency of those payments. The borrowers weren't obliged to make payments under the terms of a loan agreement that had come to an end upon discharge of the mortgage. Turco & Co Pty Ltd similarly weren't obliged to make payments and any payments made should have been credited towards any principal debt (if any) or alternatively been treated as payments made mistakenly believing there was still a debt due and owing. The Appellants have been allowed to suffer changes to their position.
The proposed grounds of appeal are, for practical purposes, the same as grounds 1, 2 and 5 of the grounds of the proposed appeal originally sought to be filed by Mr Turco on 22 December 2017: see [5(c)] and [6] above. The orders sought in the appeal are that the judgment in Turco-FCWA be set aside, and that Mortgage Ezy’s claims against Mr Turco be dismissed, with costs, or alternatively that the orders made in Turco-FCWA be set aside and the matter be sent back for retrial; and
c)an affidavit by Mr Turco in support of the application in an appeal sworn 1 May 2018 (“Mr Turco’s Appeal Affidavit”). Mr Turco’s Appeal Affidavit provides as follows:
1. I am the Appellant herein and seek an extension of time in which to appeal the decision of Walters J delivered in written reason form on 3 November 2017.
2. An appeal notice was first filed by me on 22nd December 2017. The unsealed papers were served all other parties.
3. I was not present in court when the decision was handed down. I was stationed out of the jurisdiction away from my office for several weeks and wasn't present when orders for judgment were made on 8 November 2017.
4. I was unrepresented at the time and I was not conscious of the time for appealing.
5. I thereafter spent an enormous amount of time pouring over the decision trying to understand it and could not come to terms with the reasons which I did not then understand. I didn't have access to affordable legal assistance to review the entire transcript and the evidence given at trial.
6. Following filing of the Appeal Notice, the Registrar of the court then sent me a letter dated 2 January 2018. I changed the grounds of appeal with my application for an extension of time being made as a form 21- Application in an Appeal. I understood and believed that I had addressed the courts concerns and / or a requisitions and resubmitted the papers. The papers were again rejected by the Court on technical grounds by letter dated 22 January 2018.
7. The trial judge, Walters J, subsequently dealt with my application for a stay at short notice on 8 February 2018 and dismissed it despite the application not yet having been accepted for filing.
8. It has taken me this long to appoint lawyers to represent me because the matter was complex, and it has been hard for me to find affordable legal assistance to review the entire transcript and the evidence given at trial without committing a substantial sum of money, which I simply do not have, on lawyers.
9. My grounds of appeal have since been redrawn. Annexed hereto and marked MT-1 is a copy of my Appeal Notice. I believe the grounds have merit. I am willing to expediate the steps required to have my appeal heard at the same time as the First Respondent's appeal. I believe I will be prejudiced if an extension is not granted and my appeal is not heard. I have already had to apply to set aside a bankruptcy notice served on me by the Third Respondent.
10. I seek the extension of time and seek that the commencement date of the appeal be set as being 22 December 201·1to coincide with the original date of filing of my Appeal Notice.
Submissions
Both parties filed written submissions, and made further oral submissions at hearing. The written submissions have been read by the Court and the relevant issues arising from both the written and oral submissions are dealt with in the Court’s considerations set out below.
Consideration
Jurisdiction
There is no doubt that this Court has jurisdiction to determine whether a bankruptcy notice ought to be set aside on the basis of an abuse of process: Bankruptcy Act, ss.30 and 41(6A); Re Sterling; Ex parte Esanda Ltd (1980) 44 FLR 125; (1980) 30 ALR 77, ALR at 82-83 per Lockhart J.
Service
The issue of service was not pressed at hearing, and it is sufficient to observe, firstly, that Mr Turco acknowledged receipt of a served copy of the Bankruptcy Notice on 15 December 2017, and, secondly, that the various means of service employed by Mortgage Ezy can be taken to have satisfied the requirements for service under, at least, the provisions of reg.16.01(1)(c) and (e)(ii) of the Bankruptcy Regulations: see [14(b)] above (left at last known address); and [15(d)] above (in a manner which should have been received, in this case by email). The time at which the service of the Bankruptcy Notice was effected, namely 14 or 15 December 2017, does not give rise to any abuse of process, and it did not prevent Mr Turco from making and pursuing an urgent application to set aside the Bankruptcy Notice.
Abuse of process
In considering whether the issuance of a bankruptcy notice is an abuse of process it must be borne in mind that an express object of a bankruptcy notice is to persuade the debtor to pay the debt the subject of the bankruptcy notice, and it is unarguable to say that issuing the bankruptcy notice as a means to secure payment, or with an intention or hope that the debt would be paid, is an abuse of process where sequestration proceedings are intended to be invoked upon noncompliance: Slack v Bottoms English Solicitors [2002] FCA 1445 (“Slack”) at [20]-[21] per Spender J. If the purpose of a bankruptcy notice is to put pressure on a debtor to pay a debt rather than to invoke a court's jurisdiction in relation to insolvency, then the filing of a bankruptcy notice is an abuse of process: Brunninghausen v Glavanics [1998] FCA 230 (“Brunninghausen”). In Young v Cooke [2017] FCA 26 (“Young”) at [104] per Gleeson J the Federal Court observed that “…. it is not an abuse of process if a creditor genuinely intends to pursue the matter if there is default in complying with the notice and there is no evidence of collateral purpose or undue pressure. See also Killoran v Duncan [1999] FCA 1574 (“Killoran”) at [12]-[13] per Gyles J. The relevant time to judge abuse of process is the time at which a bankruptcy notice is issued, and subsequent events generally have less relevance: Killoran at [13] and [15] per Gyles J.
The onus of proving the existence of a collateral purpose lies on the debtor: Cavoli v Etl [2007] FCA 1191; (2007) 5 ABC(NS) 363 at [17] per Heerey J, and more than mere assertion is required: Watts v Adelaide Bank Limited [2009] FCA 420.
In order to make out an abuse of process a party must establish more than:
a)the mere obtaining of a judgment;
b)the issuance of a bankruptcy notice; and
c)the existence of a proceeding challenging the judgment: Seller v Deputy Commissioner of Taxation [2011] FCA 865; (2011) 84 ATR 501; (2011) 282 ALR 80; (2011) 9 ABC(NS) 195 (“Seller”) at [25] per Flick J; Lavan Legal v Kenyon [2017] FCCA 2529; (2017) 326 FLR 20 at [125] per Judge Lucev.
In a recent judgment of the Federal Court, Kimber v The Owners Strata Plan No 48216(No 2) [2018] FCA 406 (“Kimber (No 2)”) an allegation of abuse of process was raised, and the Federal Court having cited Brunninghausen and Killoran went on to observe with respect to the categories of abuse of process, and the facts of the particular case, as follows at Kimber (No 2) at [128]-[131] per Markovic J:
128 In HWY Rent Pty Ltd v HWY Rentals (in liq) (No 2)[2014] FCA 449 Perry J set aside a bankruptcy notice finding that its issue was part of a systematic abuse of process. At [74] her Honour said:
“74 The categories of abuse of process are not closed. However, certain categories are well-established. As Justice McHugh observed in Rogers v R(1994) 181 CLR 251 at 286:
‘ … abuses of procedure usually fall into one of three categories: (1) the court's procedures are invoked for an illegitimate purpose; (2) the use of the court's procedures is unjustifiably oppressive to one of the parties; or (3) the use of the court's procedures would bring the administration of justice into disrepute. Many, perhaps the majority of, cases of abuse of procedure arise from the institution of proceedings. But any procedural step in the course of proceedings that have been properly instituted is capable of being an abuse of the court's process. In Walton v Gardiner, Mason CJ, Deane and Dawson JJ said that the jurisdiction to stay proceedings that are an abuse of process “extends to all those cases in which the processes and procedures of the court, which exist to administer justice with fairness and impartiality, may be converted into instruments of injustice or unfairness”.
129 Unlike the position in Brunninghausen, Ms Kimber has not sought to appeal the Local Court Judgment, and subject to the matters set out in [130] below, there is no evidence of her current financial status.
130 Insofar as Ms Kimber's financial status is concerned, there is a letter in evidence dated 26 October 2016 from the Mullumbimby branch manager of the National Australia Bank in which the branch manager states that she has known Ms Kimber for three and a half years during which time Ms Kimber has been “consistent with her home loan repayments” and has been paying an additional amount of $100 per fortnight towards her loan. The writer also expresses the opinion that “after viewing [Ms Kimber's] current state of affairs … it appears that [Ms Kimber] is more than capable of paying her debts as they fall due”. The evidence also establishes that, at least until 28 February 2016, Ms Kimber was paying her quarterly levies on Lot 110. But this evidence, on its own, is not sufficient to demonstrate Ms Kimber's solvency. It does not demonstrate Ms Kimber's current income and liabilities and her current capacity to pay her debts as and when they fall due. It is apparent that Ms Kimber is not willing to pay the Local Court Judgment. She objected to the fact that the strata manager and the solicitors had not owned their mistake about the correct amount owing and has consequently continued to defend her actions on principle.
131 It may well be that Ms Kimber is solvent but as I have observed in the preceding paragraph, there is on this application insufficient evidence before me to draw that conclusion. Further, while there are a number of unsettling aspects to this matter, including that it appears on the evidence that the only method of enforcement of the Local Court Judgment has been by way of service of the Bankruptcy Notice and that it appears that the Owners Corporation has continued to charge Ms Kimber's account with recovery expenses, there is insufficient evidence for me to draw a conclusion that there is any collateral purpose or undue pressure being applied by the Owners Corporation through the issue of the Bankruptcy Notice or that the Court's processes are being used for an illegitimate purpose.
In Mr Turco's submissions at [7] he asserts that the Bankruptcy Notice “is not an effort to prevent the Applicant from incurring further obligations that he will not be able to meet” and that the Bankruptcy Notice “is entirely being used for the private ends of the creditor”. There is, however, no evidence that, in serving the Bankruptcy Notice on Mr Turco, Mortgage Ezy seeks to do anything other than genuinely invoke the sequestration jurisdiction of this Court should Mr Turco fail to comply with the Bankruptcy Notice. There is no evidence of Mortgage Ezy:
a)having any collateral purpose; or
b)having applied any undue pressure to, or in relation to, the alleged debt owed by, Mr Turco.
Mr Turco's submissions at [4] refer to pending appeal proceedings, and the Court's discretion to extend time for compliance with a bankruptcy notice pending the hearing of an appeal. There is, however, no evidence that an appeal has been instituted, or at least properly instituted: see [6], [15(h)(ii) and (k)] and [21(a)] above, and, in any event, Mr Turco has to obtain an extension of time within which to appeal before there is an appeal on foot. Accordingly, the statutory precondition to the Court's jurisdiction to exercise its discretion to extend the time for compliance with a bankruptcy notice under s.41(6A)(a) of the Bankruptcy Act has not been satisfied: Guss v Johnstone [2000] HCA 26; (2000) 74 ALJR 884; (2000) 171 ALR 598 at [62] per Gleeson CJ, Gaudron, McHugh, Kirby and Callinan JJ. Even if an appeal had been instituted, the refusal of Mr Turco's application for a stay of the orders in Turco-FCWA: see [15(j)] above, weighs significantly against the Court exercising its discretion to extend the time for compliance with the Bankruptcy Notice based on a pending appeal: Byron v Southern Star Group Pty Ltd (1997) 73 FCR 264 at 270 per Lehane J; followed in Atkinson v Oakleigh Holdings Pty Ltd [2000] FCA 1547; (2000) 105 FCR 15 at [8]-[9] per Heerey J, and Sims v Suda Ltd [2015] FCCA 2934 at [11] per Judge Smith.
In dismissing Mr Turco's application for a stay, the WA Family Court found that there were grave doubts about Mr Turco’s bona fides: Stay Hearing Transcript at page 37. The basis for the finding concerning Mr Turco’s bona fides by the WA Family Court can be seen in its analysis of Mr Turco’s Affidavit which was annexed to affidavit material filed by Mortgage Ezy in the Stay Application. The WA Family Court examined the sworn statements made by Mr Turco in Mr Turco’s Affidavit and compared it to the position that he put before the WA Family Court in making an oral application for a stay. In particular it had regard to his statements that he had real estate assets and that there was no suggestion that he was unable to pay his debts as and when they fell due: Stay Hearing Transcript at page 36. Mr Turco had however told the WA Family Court that without selling the real estate assets to which he had adverted he could not pay the debt: Stay Hearing Transcript at page 29, but that he did not have access to them “at the moment”: Stay Hearing Transcript at page 28, which caused the WA Family Court’s presiding judicial officer to ask whether Mr Turco had “told the Federal Circuit Court that what you said in your affidavit was not entirely the full story”: Stay Hearing Transcript at page 28. In dismissing Mr Turco’s oral application for a stay the WA Family Court observed that “since others might claim over the assets that are in his name … he is not free to dispose of them to meet this liability”: Stay Hearing Transcript at page 37. In concluding its oral reasons for judgment on Mr Turco’s Stay Application the WA Family Court adverted to the fact that in Turco-FCWA it had found that Mr Turco was “a very poor witness and not a credible witness”, and went on to observe that “his comments to the court today simply reinforce the concerns the court would have regarding his credibility and his bona fides”: Stay Hearing Transcript at page 37.
Because the Stay Applications in relation to Turco-FCWA post-dated the issuance of the Bankruptcy Notice the Stay Application and developments in relation to it are largely irrelevant to whether the issuance of the Bankruptcy Notice is an abuse of process because abuse of process is to be determined at the time of issuance of the Bankruptcy Notice, which in this case, preceded by several weeks the Stay Application in relation to Turco-FCWA: Killoran at [13] and [15] per Gyles J. Mr Turco's assertion that the Bankruptcy Notice is an attempt to circumvent the operation of the stay granted to the other party found liable to Mortgage Ezy in Turco-FCWA, namely, Ms Williams, is also otherwise without merit. That stay was granted by the WA Family Court at the Stay Application Hearing. At the same Stay Application Hearing the WA Family Court dismissed Mr Turco's application for a stay: Stay Hearing Transcript at page 37. Ms Williams sought only a stay of enforcement against her, and did not contend that a stay of enforcement against Mr Turco was somehow required to protect her assets or interests. Notably, other than Mr Turco’s bare assertion, there was no evidence from, or in relation to, Ms Williams being prejudiced by the issuance of the Bankruptcy Notice, or the failure to set aside the Bankruptcy Notice, either in these proceedings, or in the Stay Application Hearing, which was heard less than a week after these proceedings were commenced, and in which Ms Williams was represented by a, with respect, very experienced and well-regarded barrister specialising in family law. Indeed, there was some suggestion in the Stay Hearing Transcript from Counsel for Mortgage Ezy (being the same Counsel who appeared in this case) and Mr Turco that there was a deed in existence which shifted the entire liability for any debt owed to Mortgage Ezy by Mr Turco and Ms Williams jointly to Mr Turco solely: Stay Hearing Transcript at pages 16, 25 and 26. The effect of the stay obtained by Ms Williams is that it prevents enforcement against her assets, and a sequestration order against Mr Turco will not circumvent that effect, contrary to Mr Turco’s assertion: Mr Turco’s Further Affidavit at [10]. In any event, if there is some substance in this assertion by Mr Turco it was not made out in the present proceedings, but there would be nothing to prevent appropriate evidence being led (by either Mr Turco or Ms Williams, or both of them) in an endeavour to make good such an assertion if a creditors petition were to issue and a sequestration order were sought against Mr Turco on the basis that it might then be arguable that there was other sufficient cause not to issue a sequestration order: Bankruptcy Act, s.52(2)(b). For reasons set out below: see [40] below, it is more appropriate that if that assertion is arguable upon proper evidence that it be put at the hearing of the creditors petition. A proposition to that effect was put to, and not quarrelled with by, Counsel for Mr Turco at hearing: Transcript at page 7. Finally, the Court observes that the suggestion that Mortgage Ezy had not sought to enforce the judgment against Ms Williams cannot be sustained on the facts: it is contrary to what is said in, and is the import of, the 11 December 2017 and 21 December 2017 Letters, and Mortgage Ezy’s opposition to Ms Williams’ application for a stay in the WA Family Court, described by the presiding judicial officer in the WA Family Court as having been “forcefully opposed”: Stay Hearing Transcript at page 37.
For the purposes of embarrassing the debtor
An argument was put on behalf of Mr Turco that Mortgage Ezy’s purpose was to embarrass him as the debtor. The argument was based on the judgment in Rankine v Lord [2011] FCA 478; (2011) 9 ABC(NS) 142; (2011) 121 ALD 258 (“Rankine”) at [20]-[28] per Marshall J where the Federal Court observed as follows:
20. The federal magistrate found at [26] that the request to issue the notice against the respondents “was not so much to secure payment from recalcitrant debtors but to embarrass them”.
21. At [27], his Honour referred to other methods to enforce a judgment and specifically to a “garnishee order”.
22. His Honour said (at [27]):
The applicants [current respondents] are partners in a firm of accountants. It would have been simple for a garnishee to be issued against that firm in respect of any drawings or profits payable to the debtors. There has been no suggestion that the ... [current respondents] are personally insolvent, it is acknowledged that notwithstanding their personal liability for the costs, they were acting in their capacity as special liquidators and court officers ....
23. The federal magistrate went on (also at [27]) to refer to unassessed costs orders which have been made in Supreme Court in favour of the current respondents with respect to their litigation with the first and second appellants. His Honour then said:
In circumstances like this where the relationship between the parties has become severely strained, as it clearly is, the Court should look very carefully at the way in which [the notice] ... is sought to be used. A misuse of the processes at the Court constituted an abuse of process.
24. His Honour referred to various authorities at [27] and [28] and then said (at [29]):
The proper purpose of seeking a sequestration order against the estate of a debtor is so that a debtor, who is unable to pay his debts as and when they fall due, should have his affairs controlled for the benefit of all his creditors and not just specific ones. Allied to this purpose is the prevention of the debtor incurring further obligations which he will not be able to meet. It is a public purpose. The bankruptcy process is not to be used for private ends.
25. The federal magistrate referred to the “course of dealings” between the parties and in particular to the events of 18 May 2010 referred to at [16] above. His Honour then said (at [29]):
... this course of dealings and the failure of the respondents to take any other steps to execute upon their judgment is indicative of an intention to utilise the bankruptcy process for reasons other than securing the orderly distribution of the debtor’s estates.
26. His Honour noted that the respondents are partners in an established insolvency practice and are officers of the Court with a right of indemnity over the assets of Nielsen.
27. Taking all of the foregoing considerations into account, the federal magistrate concluded that “the issuance of this notice constitutes an abuse of process and it should be set aside on that ground”.
28. The finding of the Court below that the issuing of the notice was an abuse of process is a finding of fact. I consider that it was a finding which was open to his Honour on the evidence before him and a correct and appropriate finding in all the circumstances.
The judgment in Rankine is distinguishable from the present case because:
a)in Rankine the debtors were liquidators who, in the course of acting in their capacity as officers of the Court, had been ordered to pay the creditors' costs in the sum of $24,995.25. The liquidators were engaged in ongoing litigation against the creditors, had informed the creditors of their obvious solvency, including by virtue of their right of indemnity from the assets of the company in liquidation, and had an unassessed costs order in their favour against the creditors;
b)the Federal Court in Rankine found that in the circumstances, those matters, considered as a whole, constituted sufficient evidence to find that there was no error in the finding by the Federal Magistrates Court that the bankruptcy notice was an abuse of the process: Rankine at [33]-[34] per Marshall J. The Federal Magistrates Court at first instance also found, on reading the history and the correspondence in evidence that the creditors were intent on resisting the actions of the liquidators as officers of the Court, and that the request for the issue of the bankruptcy notice was to embarrass the liquidators: Lord v Rankine [2010] FMCA 668 at [26] per Raphael FM;
c)in the present case:
i)save for these proceedings, Mr Turco and Mortgage Ezy are not currently engaged in litigation against each other. Mortgage Ezy has a judgment in Turco-FCWA against Mr Turco, against which Mr Turco has not yet instituted an appeal: Mr Kalmund’s Affidavit at [14] and [17]; Mr Galic’s Affidavit at [2] and Annexure A, and Mr Turco’s application to the WA Family Court for a stay of the orders arising from Turco-FCWA has been dismissed: Mr Kalmund’s Affidavit at [15] and [16];
ii)it is not apparent that there is a severe strain in the relationship between Mr Turco and Mortgage Ezy: rather, it appears that Mortgage Ezy are simply pursuing their rights under the mortgage to which they and Mr Turco are party, as any commercially prudent mortgagee might do; and
iii)Mr Turco is not an officer of the Court, and pursuant to Turco-FCWA presently owes Mortgage Ezy the substantial amount of $904,649.61.
Rankine is such a different case on the facts, and so distinguishable from the existing circumstances involving Mr Turco and Mortgage Ezy, that the Court finds it surprising that it would be relied upon by Mr Turco, or that any analogy between Mr Turco’s position and that of the liquidators in Rankine might be sought to be drawn. The fact that Mr Turco is an accountant, and that he might suffer personal embarrassment by reason of the issuance and existence of the Bankruptcy Notice does not mean that his position can be equated to that of accountants acting as liquidators and officers of the Court, with a right of indemnity from the assets of the company in liquidation, and otherwise patent solvency. As was observed in Seller at [20] per Flick J there is no general principle of fairness necessitating a bankruptcy notice to be set aside merely because it is in some way unfair to the debtor (citing Re Briggs; Ex parte Briggs v Deputy Commissioner of Taxation (WA) (1986) 12 FCR 310; (1986) 18 ATR 663; (1986) 86 ATC 4779; (1986) 75 ALR 554; FCR at 312 per Toohey J).
Mr Turco submitted that there is no evidence he is unable to pay his debts as and when they fall due: Mr Turco's submissions at [7], but the Court finds that that submission cannot be made out when regard is had to the following evidence:
a)on 8 January 2018 at the Stay Application Hearing Mr Turco made submissions to the WA Family Court that:
i)the only assets he has are the properties that he owns jointly with his brothers: Stay Hearing Transcript at page 23;
ii)there are assets that are tied up in companies and trusts: Stay Hearing Transcript at page 23;
iii)through mediation he has tried to gain access to what he believes are his assets within various company and trust structures, all of which his younger brother has “basically absconded [with], through various means”: Stay Hearing Transcript at pages 23-24;
iv)without access to those assets, he does not have the $900,000 claimed by Mortgage Ezy: Stay Hearing Transcript at page 26; and
v)without selling the assets, he cannot pay the debt owed to Mortgage Ezy: Stay Hearing Transcript at page 29;
b)Mr Turco’s Appeal Affidavit says that he “simply do[es] not have” a “substantial sum of money” for the purpose of appointing lawyers and finding “affordable legal assistance”: Mr Turco’s Appeal Affidavit at [8]; and
c)the value of the assets referred to in Mr Turco’s Further Affidavit being “around the $700,000 mark” does not cover the amount of the judgment debt and interest accrued since judgment which is in excess of $900,000, and it would appear from Mr Turco’s Further Affidavit that that sum of $700,000 may not be realisable in any event by reason of the claims that his brothers may make: Mr Turco’s Further Affidavit at [10], or the dissipation of assets allegedly belonging to Mr Turco by one or other of his brothers: Stay Hearing Transcript at pages 23-24.
Solvency of a debtor is not ordinarily a ground on which to set aside a bankruptcy notice properly obtained: Re Athans; Ex parte Athans (1991) 29 FCR 302 (“Athans”) at 310 per Hill J; La Pegna & Anor v Commissioner of Taxation [2006] FMCA 1643; (2006) 204 FLR 364 (“La Pegna”) at [26] per Lucev FM. There may be some cases where it is so obvious that a person is solvent that the issuance of a bankruptcy notice would be an abuse of process, but this is not such a case. The evidence of any assets that Mr Turco has, has not been put before the Court in such a way as to establish the fact that he is obviously solvent and able to pay his debts, and it would be inappropriate for the Court to act upon his assertions to that effect when those assertions are not presently supported by proper or cogent evidence demonstrating that he is obviously solvent: see Kimber (No 2) at [131] per Markovic J. If a debtor is solvent a court may refuse to grant a sequestration order, if that order is sought: Athans at 310 per Hill J; La Pegna at [26] per Lucev FM.
It is not to the point that Mr Turco might suffer some personal embarrassment by reason of his profession and professional associations because of the issuance and existence of a bankruptcy notice. Those effects are a normal consequence of the issuance of a bankruptcy notice, and having regard to the purpose of a bankruptcy notice: as to which see [40] below, it is not appropriate to set aside a bankruptcy notice as an abuse of process merely because of some degree of personal embarrassment.
Appeal against Turco-FCWA
In circumstances where, for reasons set out above: see [6], [15(h)(ii) and (k)] and [21] above, there is presently no appeal instituted against Turco-FCWA, and will not be unless and until an extension of time in which to file an appeal is granted, it is unnecessary to consider the merits of the proposed appeal. In any event, that matter was not addressed in any substantive way during the hearing. Indeed, Counsel for Mr Turco indicated that “… I don’t really want to go to much, if at all, into the merits of the Family Court proceedings”, and other than adverting to “complex commercial law considerations” relating to the effect of the discharge of the mortgage by mistake (a position contested by Ms Williams), that submission covering just seven lines of transcript, nothing was said by Counsel for Mr Turco concerning the merits of any proposed appeal against Turco-FCWA: Transcript at page 6.
Purpose of a bankruptcy notice and the issue of solvency
The issuance of a bankruptcy notice, followed by a failure to comply with that bankruptcy notice, brings about an act of bankruptcy upon which all creditors can found a creditors petition seeking a sequestration order: Athans at 311 per Hill J; La Pegna at [27] per Lucev FM. The legislative purpose is to “identify markers or criteria that point towards insolvency”: Australian Securities and Investments Commission v Forge [2003] FCAFC 274; (2003) 133 FCR 487; (2003) 1 ABC(NS) 429 (“Forge”) at [30] per Emmett J; La Pegna at [27] per Lucev FM. The legislative purpose exists for a public benefit to which the Court must have regard when exercising a discretion of this kind: Forge at [15] per Branson and Stone JJ and [29] per Emmett J; La Pegna at [27] per Lucev FM. Part of that public interest, as well as being a matter in the interests of creditors generally, is to ensure the appropriate determination of the relation-back date: Forge at [6] and [9] per Branson and Stone JJ; La Pegna at [27] per Lucev FM. There are potential adverse consequences if an act of bankruptcy is delayed, and it is in the interests of creditors generally, where a sequestration order ultimately follows, that the act of bankruptcy be earlier not later, and in the exercise of a specific discretion, such as that presently under consideration, that is a further factor which goes to whether or not to grant an application to set aside a bankruptcy notice, where the effect of doing so might be to delay the time at which the act of bankruptcy occurs: Warner v Frost [1999] FCA 830 at [8] per Hely J; Elliott v Water Wheel Holdings Ltd [2004] FMCA 37; (2004) 178 FLR 459 at [59] per McInnis FM; McPhee v Glentham Pty Ltd [2006] FMCA 1508 at [40] per Lucev FM. In Killoran at [14] per Gyles J the Federal Court observed that “[i]t may be most unfortunate if a bankruptcy notice were set aside in circumstances where the debtor is in fact insolvent”. In Clyne Deputy Commissioner of Taxation (NSW) (No 3) (1982) 13 ATR 466; (1982) 82 ATC 4484 (“Clyne (No 3)”), ATR at 476 per Lockhart J the Federal Court observed that “[t]he proper time to consider any adjournment of any relevant bankruptcy process or proceeding is upon the hearing of a bankruptcy petition, and not before”. An appeal against Clyne (No 3) was dismissed: Clyne v Deputy Commissioner of Taxation (NSW) (No 3) (1982) 13 ATR 686; (1982) 69 FLR 1; (1982) 45 ALR 323; (1982) 82 ATC 4690. In any event, in this case, the evidence does not demonstrate that Mr Turco has current capacity to pay his debts as and when they fall due, there being insufficient evidence as to his current income and liabilities, or the value of any current assets that he may hold, and which may be capable of realisation within an appropriate period of time: Sandell v Porter & Anor (1966) 115 CLR 666; (1966) 40 ALJR 71; CLR at 670 per Barwick CJ; Bank of Australasia v Hall (1997) 4 CLR 1514; (1997) 14 ALR 51; CLR at 1527-1528 per Griffith CJ. Counsel for Mr Turco conceded that whilst Mr Turco might have assets on paper their realisation was “another matter”: Transcript at page 7. In the above circumstances, there is simply insufficient evidence to warrant drawing any conclusions as to Mr Turco’s solvency, and in those circumstances, it is appropriate that if Mr Turco is able to pay his debts that be a matter that he prove upon the hearing of any creditors petition which ultimately issues: Bankruptcy Act, s.52(2)(a). The fact that the corporate entity through which Mr Turco appears to run his accounting business might be solvent or have access to credit facilities does not establish that Mr Turco is solvent, and is therefore irrelevant to the question of Mr Turco’s solvency in the absence of any evidence as to how funds might be distributed from that business to Mr Turco personally.
Usual categories of abuse of process
Having regard to the circumstances set out above the Court is of the view that the issuance of the Bankruptcy Notice does not fall into any of the usual categories of abuse of process: see [28] above. That is, firstly, there is no evidence that this Court’s procedures have been invoked by Mortgage Ezy for an illegitimate purpose; secondly, the Court’s procedures are not unjustifiably oppressive to Mr Turco, and in that regard the Court notes that before any sequestration order issues there will be an opportunity for Mr Turco to argue that it ought not issue by reason of the matters set out in s.52(2) of the Bankruptcy Act; and, thirdly, there is nothing in this application, or its disposition, which would bring the administration of justice into disrepute, and it suffices to observe that the matter has been considered, and will be disposed of in an orthodox way and upon orthodox principles in relation to applications to set aside bankruptcy notices.
For the reasons set out above, the Bankruptcy Notice is not an abuse of process, and there are no other apparent grounds on which the Bankruptcy Notice may be set aside.
Conclusion and orders
The Court has concluded that Mr Turco has failed to make out an abuse of process in the issuance of the Bankruptcy Notice. It follows that there will be an order that the application be dismissed.
There will also be an order extending time for compliance with the Bankruptcy Notice to 10.00am today, which order will precede the order for dismissal of the application.
The Court will hear the parties as to costs.
I certify that the preceding forty-five (45) paragraphs are a true copy of the reasons for judgment of Judge Antoni Lucev
Date: 14 June 2018
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