Unali v Belmont Assets Pty Ltd
[2011] FMCA 320
•12 May 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| UNALI v BELMONT ASSETS PTY LTD | [2011] FMCA 320 |
| BANKRUPTCY – Application to review decision of Registrar to make a Sequestration Order – self-represented applicant – grounds of application difficult to understand – express disinclination to cross-examine director of the creditor – application dismissed. |
| Bankruptcy Act 1966, ss.33(1)(b), 52(1), 52(1)(a), 52(1)(b), 52(1)(c), 52(2), 306 |
| Totev v Sfar [2008] FCAFC 35 |
| Applicant: | ANDREW UNALI |
| Respondent: | BELMONT ASSETS PTY LTD |
| File Number: | MLG 410 of 2010 |
| Judgment of: | Burchardt FM |
| Hearing date: | 28 March 2011 |
| Date of Last Submission: | 28 March 2011 |
| Delivered at: | Melbourne |
| Delivered on: | 12 May 2011 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the Respondent: | Ms Burke |
| Solicitors for the Respondent: | Rothwell Lawyers Pty Ltd |
ORDERS
To the extent necessary, extend time for the Applicant to file his application until 14 January 2011.
The application for review be dismissed.
The orders made by Registrar Hetyey on 23 December 2010 are affirmed.
The Respondent’s interim application filed on 22 March 2011 is dismissed.
The Applicant pay the Respondent’s costs to be taxed pursuant to the Federal Court Rules if not agreed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 410 of 2010
| ANDREW UNALI |
Applicant
And
| BELMONT ASSETS PTY LTD |
Respondent
REASONS FOR JUDGMENT
This is an application for review of a decision of a Registrar made on 23 December 2010 that a Sequestration Order be made against the estate of Andrew Unali. Mr Unali seeks that the order be set aside and that he have leave to serve and file the application out of time.
There is also before the Court an interim application filed by the respondent creditor on 22 March 2011 in which security for costs is sought.
For the reasons that follow, I will extend time to enable Mr Unali to bring his application and I will dismiss both the application for review and the interim application for security for costs.
Some history
The Creditor’s Petition was filed on 22 March 2010. It asserts relevantly that Mr Unali owes the creditor $157,627.66 pursuant to judgment obtained in the County Court of Victoria on 17 July 2008.
In fact, that figure is incorrect. It is clear from the Bankruptcy Notice (annexed to the affidavit of service of Creditor’s Petition) that the total debt owing is not the judgment debt that I have referred to, but rather the amount of $96,233.28 as set out in the Bankruptcy Notice. I will return to this matter later.
The Petition does rightly, however, say that Mr Unali did commit an act of bankruptcy by failing to comply on or before 10 December 2009 with the requirements of the Bankruptcy Notice served on him on
19 November 2009.
As earlier indicated, Registrar Hetyey made a Sequestration Order on 23 December 2010.
In the affidavit filed in support of the application for review on
14 January 2011, Mr Unali sets out the reasons why he failed to attend Court on 23 December 2010 and narrowly missed the hearing before the Registrar. It also explains, to my mind entirely satisfactorily, why he was unable to lodge the application until 14 January 2011. According to his affidavit, he was “24 hours over 21 days permitted”. In fact, time did not run during the legal vacation and Mr Unali was not, in my opinion, out of time in any event. To the extent that it might be necessary, clearly he would be entitled to an extension of time.
In the matters set out (not in an appropriate formal way) in the affidavit in support, Mr Unali raised a number of grounds. They included an indication that he wished to seek legal aid. He also complained that the respondent failed to exercise due care in the realisation/auction process of the sale of the property known as 604/26 Shutter Street, Moonee Ponds (“the property”). It is fair to say that a number of the matters raised in Mr Unali’s affidavit are either very difficult to understand or are inadmissible. The gravamen of the matters he raises is complaint about the sale at an undervalue of the property to which he refers.
It should be noted that one of the annexures to Mr Unali’s affidavit is draft terms of settlement between himself and the applicant (and a company of which he was a director) in the County Court proceeding. It is clear from that document that Mr Unali has known about the County Court proceeding for an extensive period of time.
When the matter came before me on 21 February 2011, I understood Mr Unali to say that he was not solvent because he was not able to pay his bills as they became due. He subsequently retracted that admission, at least in part. Mr Unali also said he wished to cross-examine a
Mr Papadopoulos, a director of the creditor, and I accordingly made an order that Mr Papadopoulos attend for cross-examination at trial on
28 March 2011. I put in place further orders to facilitate the filing of affidavit material.
This was at least in part because Mr Papadopoulos, by leave, was permitted to file an affidavit at the hearing on 21 February 2011 in which he set out what at least he would say was the relevant history of the matter. It was Mr Unali’s challenge to that material that gave rise to the adjournment and the orders to which I have referred.
Subsequently, Mr Unali filed a further affidavit on 3 March 2011. Like all his affidavits, it is not set out in a proper fashion but in the ultimate, in my view nothing turns on this. He is self-represented and not legally qualified.
He refers to an arson attack on the property in August 2007 and further difficulties flowing from that incident. He sets out a number of bases upon which he would assert that he has a cross-claim against the creditor and, once again, appends a number of materials which are either inadmissible or difficult to understand. It is clear, however, that in the main, his complaints relate to the price achieved for the sale of the property and a variety of asserted misconduct relating to the way in which Mr Papadopoulos and the creditor dealt with the property prior to its sale.
In a further affidavit filed in Court, on 28 March 2011, Mr Unali returned to the question of his “counterclaim”. He said that further documents had been found which supported and allowed quantification of his claim with respect to “the three main areas of claim”. These areas are:
a)due care during the auction process;
b)delays in the sale and rectification works for an improper reason; and
c)insurance related matters.
The evidence and oral submissions made
Despite the fact that Mr Papadopoulos did indeed attend for cross-examination when the matter was called on Mr Unali, who appeared with the assistance of a Mr Pinney, as a McKenzie Friend, told me that he did not wish to cross-examine Mr Papadopoulos. He said that he was not legally qualified and simply could not do so, although I made it clear that he had the option of doing so should he wish.
Indeed, Mr Unali’s general presentation appeared somewhat confused. He did, however, confirm that he was not able precisely to quantify how much he said the creditor owed him. He confirmed that he had never sought to set aside the County Court judgment which had given rise to the Bankruptcy Notice. He offered no explanation in detail for not doing so although at one point during his submissions he said, and tellingly, that having been the victim of an arson attack, it had affected him. He said words to the effect that, “It was all a bit too much. I moved to the best of my ability and in the light of my resources at the time.”
He complained that he had only become aware of a hearing in the Court, posited for 5 October 2010, when a friend phoned him when he was in Adelaide. He had some complaint about this aspect of the matter but it should be noted that the October hearing was adjourned administratively.
Mr Unali resiled from the proposition that he was not solvent. He said he had some money and was paying a number of his debts but that he could not pay the amounts outstanding contained in the Bankruptcy Notice. He did not seek, however, to put any materials before the Court to establish his solvency to any greater level of detail than that which I have described.
The respondent, in the main, relied upon the written submissions filed by its counsel.
Review of the Registrar’s decision – s.52 of the Bankruptcy Act 1966
This hearing is a hearing de novo (see Totev v Sfar [2008] FCAFC 35). The Court requires proof of the matters set out in s.52(1) of the Bankruptcy Act 1966 (“the Act”).
The relevant affidavits have been filed to satisfy the requirements of s.52(1) and even if there was some deficiency, they were clearly properly satisfied when the matter was before Registrar Hetyey. This would be a case for an exercise of the Court’s power to waive the requirements of r.4.06 of the Bankruptcy Rules in any event. However, it is not necessary to do so. I am fully satisfied that the creditor has satisfied the Court as to the matters contained in s.52(1)(a) to (c), inclusive, of the Act.
Accordingly, the Court has discretion to make a Sequestration Order against the estate of the debtor.
The next question that arises pursuant to s.52(2) is whether the Court is satisfied by the debtor that he is able to pay his debts. In this instance, it is readily conceded by Mr Unali that he cannot pay the debt upon which the Bankruptcy Notice is founded and, as I have earlier said, he has provided no evidence to suggest that he is in fact solvent beyond a vague oral assertion that he and/or his company (the matter is not wholly clear) are paying their way as they go.
The real issue agitated by Mr Unali is whether the Court should be satisfied “that for other sufficient cause a Sequestration Order would not be made” (s.52(2)(b)).
Even where the Court is so satisfied, the Court retains discretion as to whether or not to dismiss the Petition.
This brings us back to the rather difficult question as to what it is that Mr Unali really says by way of complaint against the creditor and, in particular, Mr Papadopoulos. Mr Papadopoulos has made an extensive and comprehensible recitation of what he regards as the relevant history in his affidavit filed on 21 February 2011. Given the express disinclination of Mr Unali to cross-examine him, I am entitled to approach this affidavit with relative confidence. This is all the more bolstered to by the fact that despite his numerous various complaints, most of what Mr Unali says seems to fit quite comfortably with the recitation of the events set out by Mr Papadopoulos.
The debt upon which the Bankruptcy Notice was based arose out of a contract of sale between the respondent and Catalyst Capital Pty Ltd (“Catalyst”), of which Mr Unali was a director. Catalyst was unable to satisfy its contractual obligations and pay the whole of the purchase price, so a settlement was entered into pursuant to which the creditor was granted a second mortgage for the shortfall in the sale price. Catalyst was unable to repay the mortgage on the due date, being 6 October 2006, but, following some discussion between Mr Papadopoulos and Mr Unali, Mr Unali was given some grace in repaying the mortgage.
The unit in question (ie, the property) was damaged by fire in August 2007. Proceedings for possession were issued by the respondent creditor on 10 June 2008. In the interim, Catalyst was in default under the first mortgage and the first mortgagee sought possession.
As the creditor already had possession of the property and had started fixing the fire damage, the first mortgagee allowed the creditor to continue to exercise its power of sale provided, of course, that its first mortgage would be fully paid out.
The creditor was granted a default judgment against the applicant on
17 July 2008 and a warrant of possession was granted on 22 July 2008. A copy of that warrant of possession is annexed to Mr Papadopoulos’ affidavit.
Due care during the auction process
This is the first of the three main areas of claim raised by Mr Unali. He says that he should be paid $95,000 “being the difference between the sale price of unit 604 and the lower price given by Ray White”. It is not entirely easy to understand the evidentiary basis on which the simple proposition propounded by Mr Unali is put forward. What is easy to understand, however, is the account given in paragraphs 12 to 19 of Mr Papadopoulos’ affidavit. That confirms that due care was taken in the auction process and the assertion at paragraph 14 by
Mr Papadopoulos that, “The advertising was extensive because as second mortgagee I knew it was unlikely to recoup my entire debt from the sale and therefore I wanted to ensure the best possible price,” is entirely common sense. Mr Papadopoulos goes on to say that he accepted the sale price recommended by Hocking Stuart on the basis of their advice and, in my view, there is no reason (particularly given that there was no cross-examination of Mr Papadopoulos) to doubt the veracity of the matters he sets out.
I am not persuaded that the matters of which Mr Unali complains in this regard are made out.
I also note the very plausible explanation by Mr Papadopoulos, at paragraphs 20 to 26 of his affidavit, as to why the comparison that
Mr Unali seeks to make between the sale price of the property and another property at 603 Shutter Street is inappropriate. Indeed, I repeat as a second mortgagee, Mr Papadopoulos, had every possible reason to seek to get the best return on the sale of the property that he could.
Delays
Mr Unali asserts (paragraph 8 of his affidavit filed in Court on
28 March 2011) that Mr Papadopoulos sought to undertake the repair works himself in order to earn a profit. This was “following on from the repair works he undertook on this basis on his own unit 506. This sequencing of works was necessary to allow his tradesmen to do the work required on both units – directly causing the delay in unit 604 being finished. This is a clear conflict of interest against myself and other creditors.”
Mr Papadopoulos says, at paragraphs 33 to 37, the delay was because of problems with a builder, disagreements between the insurance companies and the applicant, and the threatening behaviour of the applicant towards him. Mr Papadopoulos’ assertion that he applied for and obtained an intervention order against the applicant was not only not the subject of cross-examination, but was referred to in passing by
Mr Unali himself. In my view, the grounds of delay are not made out.
Insurance
This claim appears to be based upon what Mr Unali describes as
“a draft agreement prepared by my insurance company” (appendix K to his last affidavit). The document does not appear to me to be admissible but even if it is, it is only a draft. Mr Unali refers to the last paragraph, which says:
“CGU will continue to review the loss of rent claimed upon completion of the External Works and will make further payments with respect to the loss of rent claim subject to the conduct of Catalyst and Unali and compliance with their obligations as set out in clause 5 and will” [sic]
I note that clause 5 presupposes that Catalyst and Mr Unali have the capacity to provide unrestricted access to unit 604. Yet it seems quite clear on the evidence that that property has been in Mr Papadopoulos’ control at all relevant times. The draft agreement is not dated and is not executed, although it does refer to the year 2008.
There is nothing to indicate that that document provides Mr Unali with any money at all, nor indeed is there any evidence that he has been paid or is likely to be paid any money pursuant to it.
Waiver of rights
Under this heading Mr Unali annexes to his affidavit items of correspondence indicating ongoing negotiations. In my opinion, all this shows is that there were negotiations. They do not appear to have ever reached any concluded agreement.
Other matters
The next matter raised by Unali’s affidavit is a generalised complaint that Mr Papadopoulos failed to advise the outcome of the auction and to provide a reconciliation of the financial outcome. The matters asserted are entirely speculative.
Finally, I note that at paragraph 15 of his affidavit, Mr Unali refers to appendix M, being a letter requesting compensation in relation to car parking in the sum of $4,200. The matter was not the subject of any oral submissions, and there is no appendix M to the affidavit filed with the Court.
Conclusion
In my view, it is quite clear that even if the Court were minded to go behind the County Court judgment, which being a default judgment the Court would be more likely to do than otherwise, there is simply nothing raised by Mr Unali’s materials that suggest that he has any sort of effective counterclaim whatever against the creditor. Mr Unali has not at any point since the judgment was entered into against him in the County Court sought to set it aside. He has provided no explanation for his failure to do so other than a generalised, albeit very understandable, indication that he has found it difficult to attend to his affairs owing to ill health.
While it is impossible to avoid being sympathetic to Mr Unali, who has clearly found the passage of events since 2007 very difficult, the fact is that his assertions do not persuade me at all that he can establish “other sufficient cause” why a Sequestration Order should not be made.
The application for security for costs
The affidavit in support of the application for security for costs characterises the proceeding as “the applicant’s appeal”. That is incorrect because this is an application for review involving a hearing de novo not an appeal.
Nonetheless, the creditor points correctly in the application to Part 21 of the Court’s rules.
Nonetheless, this is not a case where it would have been appropriate to make an order for security for costs. The interim application came on for hearing at the same time as the substantive application for review. It was patently inappropriate to adjourn that to enable the applicant to be forced to put up the relevant funds.
While it seems highly likely that Mr Unali will not be able to pay any of the costs that may be ordered against him, the fact is that he is self-represented, he clearly has a genuine grievance against the creditor, and the reality is that an order for security for costs would have prevented his application being heard at all.
In all these circumstances, it was in my view quite clear that an order for security for costs should not be made.
The amount in the Creditor’s Petition
It is quite clear that the amount quoted in the Creditor’s Petition as being owing was inaccurate inasmuch as it referred to the County Court order, which has since been reduced by the proceeds of the sale of the property to the sum of approximately $96,000 referred to in the Bankruptcy Notice.
There is in fact no admissible evidence as to precisely how the original judgment debt was reduced. At paragraph 18 of the creditor’s written submissions, it is asserted that:
“In mid 2009 Belmont Assets engaged Hocking Stuart real estate agents in Kensington to market the property for sale. The property was sold at auction on 25 July 2009 for $636,000. Belmont Assets realised $79,963.60 from the sale of the property.”
The sale price of $636,000 is confirmed by Mr Unali’s first affidavit, but the amount realised by the creditor is nowhere in evidence, save that that is the amount set out in the Bankruptcy Notice as a credit since the date of the original County Court orders.
In my opinion, in this instance the error in the Petition, which sets out the full County Court debt rather than the apparent net debt following the sale of the property, is of no moment. Mr Unali has never said he was misled in any way and it is clear that he accepts that the debt is owing.
Furthermore, the Creditor’s Petition expressly referred to the act of bankruptcy being the failure to comply with the Bankruptcy Notice. Looking at the Bankruptcy Notice it would have shown Mr Unali and the true state of his indebtedness.
Thus while it is clear that the Creditor’s Petition is inaccurate and, therefore, the affidavit verifying it by Mr Papadopoulos is also, this in my view would be a formal defect capable of remedy pursuant to s.306 of the Act or by an amendment so that the figure in the Petition was amended to be the correct one pursuant to s.33(1)(b).
I note that this issue was not the subject of any debate apparently before Registrar Hetyey and that the Registrar made the Sequestration Order in any event.
Conclusion
For all the above reasons it is in my opinion appropriate that the Court exercise its discretion to make a Sequestration Order against the estate of Mr Unali, and appropriate orders, bearing in mind that this is a hearing of an application for review of the Registrar’s decision, will issue.
I certify that the preceding fifty-six (56) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Associate:
Date: 12 May 2011
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