FEDERAL COURT OF AUSTRALIA
Turco v Mortgage Ezy Australia Pty Ltd [2020] FCA 1181
Appeal from: Mortgage Ezy Australia Pty Ltd v Turco [2019] FCCA 1693 File number: WAD 377 of 2019 Judgment of: JACKSON J Date of judgment: 17 August 2020 Catchwords: BANKRUPTCY - appeal from decision of the Federal Circuit Court of Australia - where appellant had previously been made bankrupt on another occasion - first bankruptcy annulled by creditors' composition - claim that debt owed to respondent (current petitioning creditor) not disclosed to trustee of first bankruptcy - claim that respondent unaware of first bankruptcy until after annulment - respondent relies on judgment debt in Family Court of Western Australia proceedings - primary judge made sequestration orders against appellant on basis of judgment debt - whether primary judge erred in failing to go behind judgment debt - whether primary judge erred in holding appellant bound to his conduct in separate proceedings - whether primary judge failed to provide procedural fairness to the appellant - whether primary judge erred in finding appellant had obtained forbearance by fraud - no operative error established - appeal dismissed Legislation: Bankruptcy Act 1966 (Cth) ss 52, 54, 73, 74, 75, 82, 153
Evidence Act 1995 (Cth) ss 91, 140
Cases cited: BNMB Transport Pty Ltd v Mercedes-Benz Australia/Pacific Pty Ltd [2018] FCA 223
Browne v Dunn (1893) 6 R 67
Burke v Corruption and Crime Commission [2012] WASCA 49; (2012) 289 ALR 150
Jadwan Pty Ltd v Rae & Partners (A Firm) (No 2) [2020] FCAFC 95
Kioa v West (1985) 159 CLR 550
Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28; (2017) 261 CLR 132
Re Bosun Pty Ltd (in liq); Makris v Sheahan [2000] SASC 180; (2000) 34 ACSR 597
Re Minister for Immigration and Multicultural Affairs; Ex parte Lam [2003] HCA 6; (2003) 214 CLR 1
Shaw v Yarranova Pty Ltd [2014] VSCA 48
SZRUR v Minister for Immigration and Border Protection [2013] FCAFC 146; (2013) 216 FCR 445
Townsville City Council v McIntyre [2013] QCA 173; (2013) 231 A Crim R 116
Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 82 Date of hearing: 30 January 2020 Counsel for the Appellant: Mr P Fary Solicitor for the Appellant: TGC Lawyers Counsel for the Respondent: Mr JC Giles SC with Mr NW Kalmund Solicitor for the Respondent: Hotchkin Hanly Lawyers ORDERS
WAD 377 of 2019 BETWEEN: MARIO TURCO
Appellant
AND: MORTGAGE EZY AUSTRALIA LTD
Respondent
ORDER MADE BY:
JACKSON J
DATE OF ORDER:
17 AUGUST 2020
THE COURT ORDERS THAT:
1.The time for commencing the appeal is extended to 11 July 2019 inclusive.
2.The appeal is dismissed.
3.The appellant must pay the respondent's costs of the appeal, to be assessed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of…
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Details
- Case
- [2020] FCA 1181
- Decision Date
CaseChat Overview and Summary
In the matter of Turco v Mortgage Ezy Australia Pty Ltd, the appeal was brought against a decision of the Federal Circuit Court of Australia, which had granted a sequestration order against Mr Turco at the petition of Mortgage Ezy. The primary dispute centred on whether the debt claimed by Mortgage Ezy was valid and enforceable, particularly in light of a previous bankruptcy of Mr Turco that had been annulled by a creditors' composition. Mr Turco argued that the debt was not disclosed to the trustee in the first bankruptcy and that Mortgage Ezy was unaware of the first bankruptcy until after its annulment. The court had to determine whether the primary judge erred in various respects, including in failing to consider the effect of the previous bankruptcy and composition, in holding Mr Turco bound by his conduct in separate Family Court proceedings, and in finding that Mr Turco had obtained forbearance by fraud.
The court found that no operative error was established in the primary judge's decision. The primary judge had considered the submissions made on behalf of Mr Turco regarding the previous bankruptcy and composition and had found that they did not justify going behind the judgment debt or warrant an adjournment of the proceedings. The court held that the proposed grounds for appeal lacked merit due to the significant delay in challenging the judgment debt and the absence of any special circumstances. The court further found that the primary judge did not err in holding Mr Turco bound by his conduct in the Family Court proceedings, as there was no procedural unfairness and the findings were supported by the evidence.
The appeal was dismissed, and the time for commencing the appeal was extended to 11 July 2019. Additionally, Mr Turco was ordered to pay Mortgage Ezy's costs of the appeal, to be assessed if not agreed.
The court found that no operative error was established in the primary judge's decision. The primary judge had considered the submissions made on behalf of Mr Turco regarding the previous bankruptcy and composition and had found that they did not justify going behind the judgment debt or warrant an adjournment of the proceedings. The court held that the proposed grounds for appeal lacked merit due to the significant delay in challenging the judgment debt and the absence of any special circumstances. The court further found that the primary judge did not err in holding Mr Turco bound by his conduct in the Family Court proceedings, as there was no procedural unfairness and the findings were supported by the evidence.
The appeal was dismissed, and the time for commencing the appeal was extended to 11 July 2019. Additionally, Mr Turco was ordered to pay Mortgage Ezy's costs of the appeal, to be assessed if not agreed.
Orders
Orders of the court
1. The time for commencing the appeal is extended to 11 July 2019 inclusive.
2. The appeal is dismissed.
3. The appellant must pay the respondent's costs of the appeal, to be assessed if not agreed.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Mr Turco accepts that the appeal was commenced one day after the expiry of the time period required under the Federal Court Rules 2011 (Cth). He applies for an extension of time. Mortgage Ezy did not oppose the grant of such a short extension, and it will be granted.Background to the appeal The reasons for decision of the Family Court were admitted into evidence, but in this court Mr Turco submitted that s 91 of the Evidence Act 1995 (Cth) means that those reasons cannot be relied on to prove the truth of the findings the Family Court made. But the Federal Circuit Court's decision did not rely on those findings, and it is not necessary for this court to rely on them. So there is no need to determine the correctness of that submission, including whether it is open to Mr Turco to seek to confine the use that can be made of the material on appeal, when at first instance it was admitted into evidence without qualification and no appeal from that determination has been brought. The following background was uncontentious. Mr Turco is an accountant by profession. In November 2003, he and his then wife, Suellen Turco, now Suellen Williams, borrowed $644,000 from Mortgage Ezy. The loan was secured by a mortgage over a property in East Fremantle. In February 2005, Turco & Co Pty Ltd, an entity associated with Mr Turco and his brother, Vitorio Turco, obtained a $1.65 million facility from Bank of Western Australia Ltd. One of the purposes of the facility was to refinance the loan from Mortgage Ezy. The loan from Bankwest was to be secured by a mortgage over the East Fremantle property. Due to a mistake made by Mortgage Ezy's representative at settlement, Mortgage Ezy discharged the mortgage without obtaining payment of the debt. The funds from Bankwest for the discharge of the debt owed to Mortgage Ezy were not paid to Mortgage Ezy. They were paid to Turco & Co. The result was that the debt to Mortgage Ezy, much of which remained outstanding, was still owing but became unsecured, and Turco & Co had access to substantial funds provided by Bankwest which had been intended to repay Mortgage Ezy. Turco & Co disbursed those funds. It then continued the payments that were due under the loan agreement with Mortgage Ezy. Mr Turco was involved in the ongoing repayments. But Mortgage Ezy did not become aware of the mistake until September 2013, over eight years after it occurred. In the meantime, on 19 March 2010, a sequestration order was made against Mr Turco's estate on the petition of a different creditor. On 20 June 2012, the creditors of the estate passed a special resolution accepting a proposal pursuant to s 73(1) of the Bankruptcy Act for a composition in satisfaction of Mr Turco's debts. So by force of s 74(1) of the Act, the bankruptcy was annulled. Mortgage Ezy claims that it was not aware of the bankruptcy or the composition until at least 2014, when those things were referred to in documents served in Family Court proceedings between Mr Turco and Ms Williams. In the same year, Mortgage Ezy commenced proceedings in the Supreme Court of Western Australia against Mr Turco and Ms Williams for recovery of the debt. Orders were made cross-vesting that claim to the Family Court of Western Australia. It was tried in April 2015 and on 3 November 2017 the Family Court gave judgment in Mortgage Ezy's favour.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
Mortgage Ezy commenced the bankruptcy proceedings against Mr Turco in the Federal Circuit Court on 9 August 2018 and the primary judge made the sequestration order on 19 June 2019.The primary judge's decision The primary judge delivered brief, ex tempore reasons. The greater part of the written reasons are under the heading of an application for an adjournment which Mr Turco's counsel made. It appears that the application was based on the fact that Mr Turco had applied, some 18 months out of time, for an extension of time to appeal from the Family Court judgment. Mr Turco's counsel submitted that the bankruptcy proceeding should be adjourned pending the proposed appeal. The primary judge considered that the application for an extension of time to appeal and the proposed appeal had no real prospect of success, and so refused to grant an adjournment pending the outcome of the appellate proceeding. A ground of appeal from this aspect of his Honour's decision has been abandoned. In the course of determining the adjournment application, the primary judge also made comments and findings in relation to a submission made on behalf of Mr Turco which his Honour recorded as being that 'no real judgment debt existed and the Court should go behind the judgment debt'. His Honour also recorded a submission that Mortgage Ezy's debt had been extinguished by reason of s 74, s 82 and s 153 of the Bankruptcy Act. That appears to be a reference to the previous bankruptcy. In the primary judge's view, those submissions did 'not identify circumstances which the Court regards as special circumstances justifying going behind the judgment or justifying an adjournment of these proceedings …': at [5]. The primary judge went on to say:[6]The purported grounds advanced in the respondent's notice of appeal arise in circumstances where there was a contested proceeding before a learned Judge in the Family Court of Western Australia. Whilst the respondent may have ultimately been unrepresented in those proceedings, that does not give rise to circumstances which the Court regards as warranting the Court going behind the judgment debt in the present case. The Court does not regard any of the purported grounds identified in the notice of appeal as having any realistic prospect of success or being the subject of a grant of leave given the inordinate delay by the respondent in seeking to challenge the judgment debt and the lack of merit in the purported grounds.[7]The Court is not satisfied that the proceedings the subject of the notice of appeal have any real prospect of success. The Court does not regard those proceedings as identifying a proper basis to go behind the judgment debt obtained in the Family Court of Western Australia. The proposed notice of appeal was in the evidence provided to this court. It claimed that the Family Court erred in failing to consider the effect of the previous bankruptcy and composition. It raised, among other things, the absence of any finding by the Family Court that the debt was one of which forbearance had been obtained by fraud. While the primary judge does not say at this point why that ground lacked merit, as will be seen the reasons appear with sufficient clarity from the rest of the judgment.
Ratio Decidendi
Legal Principle Established
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