Vonidis v BMW Australia Finance Limited
[2010] FMCA 972
•20 December 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| VONIDIS v BMW AUSTRALIA FINANCE LIMITED | [2010] FMCA 972 |
| BANKRUPTCY – Applicant subject to orders for substituted service – applicant not in fact served – applicant applying to set aside or annul bankruptcy – consideration of solvency of bankrupt– bankrupt not solvent – application dismissed. |
| Federal Magistrates Court Rules 2001, r.16.05 Bankruptcy Act 1966, s.153B |
| Kostokanellis v Allen [1974] VR 596 Anbar (in bankruptcy) v Linfox Australia Pty Ltd [2010] FMCA 717 Daskalovski v The Austral Brick Company Limited (unreported, judgment of Emmett J issued 23 June 1998) Chamberlain v Vitera Ltd [2010] FMCA 747 Alfio Peter Bulic v Commonwealth Bank of Australia Limited [2007] FCA 307 Sandell v Porter (1966) 115 CLR 666 |
| Applicant: | ALEXANDER VONIDIS |
| Respondent: | BMW AUSTRALIA FINANCE LIMITED (A.C.N. 007 101 715) |
| File Number: | MLG 1138 of 2010 |
| Judgment of: | Burchardt FM |
| Hearing date: | 18 November 2010 |
| Date of Last Submission: | 18 November 2010 |
| Delivered at: | Melbourne |
| Delivered on: | 20 December 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr K. Boden |
| Solicitors for the Applicant: | Starnet Legal Pty Ltd |
| Counsel for the Respondent: | Mr G. Moffatt |
| Solicitors for the Respondent: | Mills Oakley |
| Counsel for the Trustee: | Mr Evans |
| Solicitors for the Respondent: | Piper Alderman |
ORDERS
The application be dismissed.
The costs of the Trustee and Petitioning Creditor be paid out of the estate of the bankrupt in accordance with the Bankruptcy Act 1966.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 1138 of 2010
| ALEXANDER VONIDIS |
Applicant
And
| BMW AUSTRALIA FINANCE LIMITED (A.C.N. 007 101 715) |
Respondent
REASONS FOR JUDGMENT
Introductory
In this matter, the applicant seeks that the sequestration order made against him on 27 July 2010 be set aside pursuant to r.16.05 of the Federal Magistrates Court Rules 2001 or, alternatively, that his bankruptcy be annulled pursuant to s.153B of the Bankruptcy Act 1966. In summary, Mr Vonidis says that he was never served with the bankruptcy notice or the creditor’s petition, and that he had no notice of the proceedings that gave rise to the sequestration order and further, that he is solvent in any event.
For the reasons that follow, I have concluded that it is not proved that Mr Vonidis was served with the various Court documents, but that he is not solvent.
Further, I have concluded that the Court should not set aside the sequestration order, nor annul the bankruptcy. In order to deal with the issues of law that the case has produced, it is appropriate to deal first with the factual issues of service and solvency.
Service
A number of orders for substituted service have been made by Registrars of the Court from time to time in this matter. It is sufficient to say that in my opinion they were all properly made on proper application, supported by proper material.
When the case came on for trial, the process server employed by the respondent creditor was called to give evidence. Mr Preac is a process server of over 20 years’ experience and his evidence was given in a forthright and confident way. His evidence was consistent with commonsense and I accept it.
Mr Preac sought to effect service at 132 Belgrave-Ferny Creek Road, Tecoma, on numerous occasions. He deposed that (exhibit MDW3 to the affidavit of Mark David Wenn sworn 20 October 2010):
“On the 29/11/08 I spoke with a female and asked, “Can I speak to Alexander Vonidis” She said “I will get him.” A male came out and I asked, “Alexander Vonidis?” and he replied, “No.” He denied he was the Debtor and produced a driver’s licence with the name Alexander Von Risefer with the date of birth as 1981
He put the licence away quickly and claimed he had moved in six weeks ago although he refused to provide the real estate or owner’s details.”
When cross-examined, Mr Preac asserted that the person he had spoken to on that occasion closely resembled the individual in Court who it emerged was Mr Vonidis. Mr Vonidis denied that he had ever seen
Mr Preac before.
The female identified in the above extract from Mr Preac’s affidavit emerged to have been Maria, Mr Vonidis’ sister. She was not called to give evidence.
There is a very murky feel to this whole process whereby service was sought to be effected. On any view, the circumstances surrounding those who live at the Tecoma property are somewhat strange.
Mr Vonidis has been known from time to time by at least three names on his own account, and it appears that his mother has changed her name from time to time as well. Mr Vonidis is not on the electoral roll and appears, from the evidence he gave and the way that he gave it, to be somewhat disconnected to an extent in everyday affairs.
It is also clear, because it is expressly admitted, that contrary to earlier denials to Mr Preac, Ms Von Risefer, Mr Vonidis’ mother, did know where he lived although she denied this to Mr Preac.
If there had been nothing more to it, I would have been compelled to find that Mr Preac’s evidence was both truthful and, moreover, accurate. I would have been compelled to find Mr Vonidis to be lying when he denied ever having met Mr Preac before.
Nonetheless, it did emerge in evidence during the proceeding that
Mr Vonidis has a younger brother, known as Aristotle Von Risefer, or Aristotle Vonidis, who is a year younger than he is. It seems that he was living at the Tecoma property on the occasions, or at least some of them, when Mr Preac attended.
Aristotle is only one year younger than Mr Vonidis, and he has the same parents. It is highly possible that he bears a close physical resemblance to his elder brother, the applicant.
As I have said, this whole question of service is very murky, but by a fine margin I am satisfied that although Mr Preac was clearly a witness of truth, and was clearly given the run-around by those to whom he spoke at the Tecoma property, I cannot be satisfied that it is more probable than otherwise that Mr Vonidis was the person to whom Mr Preac spoke.
It should be noted that in any event, Mr Preac never actually served any male person at the property. He did, however, serve Mr Vonidis’ mother, and it is conceded that she simply failed to pass the documentation on to Mr Vonidis.
Accordingly, I am obliged to find that Mr Vonidis knew nothing about the proceedings leading up to, and including, the sequestration order made against him, until informed of them by his current solicitor on
10 August 2010.
It should be noted that his application to annul the bankruptcy was filed thereafter on 16 August 2010.
Solvency
In his first affidavit filed on 16 August 2010, Mr Vonidis deposed that:
“I have assets to the agreed value of about $190,000 consisting of items of furniture and spas presently in the possession of defendants in Supreme Court proceedings and referred to in an affidavit which I have annexed hereto and marked “AM2”. These assets are sufficient to cover any liability which I may have towards the respondent.”
The affidavit on the Court file does not have an attachment AM2, and the affidavit to which Mr Vonidis referred is likewise not otherwise apparently before the Court.
In his affidavit filed in Court on 18 November 2010, Mr Vonidis returned to the question of his solvency, and having asserted that he was capable of paying his debts as and when they fall due, he repeated that he owned stock in trade valued at approximately $70,000. The items alleged to make up this sum are set out in paragraph 3 of his affidavit.
He then referred again to proceedings in the Supreme Court of Victoria in these terms:
“I have instituted proceedings in the Supreme Court of Victoria in which I seek the return of stock and equipment, which I say belongs to me and which the defendant claims belongs to a company, which has gone into liquidation. The total value of this stock and equipment is $184,050 according to a valuation undertaken by Michael J. Bent Auctioneers Pty Ltd.”
A report from Michael J. Bent Auctioneers is annexed to the affidavit, and it should be noted that the value of $184,050 is based on “going concern.” The auction realisation figure is $100,400. The report, likewise, says:
“No allowance has been made in our valuation for items being subject to any incumbencies whatsoever.”
Additionally, Mr Vonidis has filed an affidavit from his mother, Elizabeth Von Risefer, who has deposed that she is prepared financially to assist her son with any debts he has up to an amount of $20,000.
In support of her capacity to provide that assistance, she said:
“I have a proprietary interest in a property at 132 Belgrave-Ferny Creek Road, Tecoma, Victoria. This property is valued at $1,200,000 according to Yarra Valley Ranges Valuers by report dated 16 August 2010.
The mortgage presently outstanding is approximately $594,000 leaving available equity of more than $500,000.
I am able to provide the sum of $20,000 to the applicant if and when needed.”
It should be noted that the debt to BMW, which Mr Vonidis put in issue in his first affidavit, has been confirmed by an affidavit of Natasha Marchese as being $23,231.04.
I accept the submissions of counsel for the creditor that Mr Vonidis’ affidavit material does not go anywhere near proving that he is solvent and able to pay his debts as and when they fall due. The assets listed in his affidavit as being said to be wholly within his control (leaving aside the first assertion of assets worth $190,000 in his first affidavit) are completely unsupported by any degree of independent valuation. Indeed, there is no proof beyond Mr Vonidis’ bare assertion that they exist. Assuming that they do, there is nothing that would enable the Court to have any satisfaction as to their value, and indeed Mr Vonidis has totally failed to put before the Court any information that would enable the Court to evaluate whether or not these items, assuming they do exist, are his. According to his affidavits, he is a marketing manager. Why these items, which would appear to be retail items such as coffee tables and spas and billiard tables and the like, would be his is not in any way clear. Putting the matter shortly, Mr Vonidis’ materials completely fail to convince me that he has assets in his possession to the value of $70,000. Even if he does, the capacity to realise these as ready cash would also be open to considerable question.
So far as the chattels in the possession of the company in liquidation are concerned, these are the subject of curial controversy, and it is clear that they will not be available, even if Mr Vonidis were ultimately to be successful, for a very long time.
Assuming in Mr Vonidis’ favour that the assistance of his mother is reasonably readily available, I note that in terms it is limited to a sum less than the debt clearly owing to the petitioning creditor, leaving aside the other debts that the trustee’s investigations say are extant.
I am satisfied, based upon the information provided by the trustee, that in fact Mr Vonidis’ debts are something more of the order of over $80,000, (see affidavit of Ms Wright filed on 28 October 2010 –
Ms Wright was not requested for cross-examination). To this should be added, of course, the cost of the administration of the estate and, depending upon the outcome of this proceeding, the costs thereof.
I am not satisfied that Mr Vonidis is solvent and able to pay his debts as and when they fall due.
The application to set aside pursuant to Rule 16.05
It should be noted that the applicant has not made any application, despite filing an amended application and being legally represented, to extend the time to review the exercise of the power by the Registrar when the sequestration order was made. The application is made, first, to set aside the bankruptcy pursuant to the Court’s rules. This, of course, would have a significant effect upon the costs outcome, if it were successful, as opposed to an application under s.153B.
For the reasons earlier expressed, it is clear that the order was made in the absence of Mr Vonidis. Indeed, it was made in his absence and in circumstances where he knew nothing about it for the reasons I have described.
The Court’s power to set aside orders in these circumstances is discretionary. Traditionally, at least in Victoria, it was thought that a party seeking to set aside a judgment made in their absence would have to explain why they were not there, and show that they have some prospects of success in their case (see Kostokanellis v Allen [1974] VR 596).
I think that similar considerations would apply pursuant to this Court’s rules.
Riethmuller FM in Anbar (in bankruptcy) v Linfox Australia Pty Ltd [2010] FMCA 717 said at [18]:
“The failure to effect service is a prima facie basis for annulling the bankruptcy and setting aside the order under r 16.05(2)(a) of the Federal Magistrates Court Rules 2001.”
His Honour went on to say at [20] and [21]):
“It appears to me that, for the reasons set out in Vaucluse Hospital Pty Ltd v Phillips [2006] FMCA 44; (2006) 5 ABC (NS) 330, I have a discretion as to whether or not to make an order annulling the bankruptcy or setting it aside under r 16.05.
21. In this case there is only one creditor, who is responsible for the service agent who failed to effect service. The estate has not been administered, in that the estate effectively consists only of frozen bank accounts. The applicant notified the Trustee earlier of his lack of knowledge of the proceedings and at an earlier stage offered to pay the debt.”
Those circumstances are not those here. In an analogous case in the Federal Court Daskalovski v The Austral Brick Company Limited (unreported, judgment of Emmett J issued 23 June 1998) his Honour said:
“I should add that I would have been satisfied that the Court has jurisdiction and power pursuant to Order 35 Rule 7 to make an order setting aside the sequestration order made in the absence of the debtor in circumstances where the debtor was served with a petition. However, it seems to me inappropriate to make an order under that rule where the estate has already been administered in bankruptcy, as is the case here.”
His Honour went on to say:
“That is not to say that, in an appropriate case, the power contained in Order 35 Rule 7 ought not to be exercised. However, such a power would normally be exercised in circumstances where the matter comes before the Court very soon after the order has been made and before there has been any administration in bankruptcy pursuant to a sequestration order.”
In this case the sequestration order was made on 27 July 2010 and the trustees were appointed on that date. It is clear there has been substantial administration of the estate and consequentially substantial fees engendered. This is not a case where the trustee proceeded incautiously. The sequestration order was made following orders of this Court for substituted service which were complied with.
Furthermore, even accepting that Mr Vonidis knew nothing of the proceedings until 10 August 2010, he has failed to provide to his trustee a completed Statement of Affairs.
Barnes FM summarised some of the issues raised by Riethmuller FM in Chamberlain v Vitera Ltd [2010] FMCA 747 at [58] as follows:
“His Honour pointed out that in determining what orders ought to be made, the court has a broad discretion and suggested that the factors which may be taken into account by the court as to the preferable course include whether the application for review was made within time, whether there has been substantial administration of the estate, the existence of other interested creditors and the conduct of the bankrupt.”
Bearing in mind all these factors, and bearing in the mind the observations of Emmett J which I consider are binding on me, it is clear that I ought not set aside the sequestration order.
The application for annulment
Section 153B(1) states:
“If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor’s petition, the petition ought not to have been presented or not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.”
Tracey J in Alfio Peter Bulic v Commonwealth Bank of Australia Limited [2007] FCA 307 reviewed the authorities and stated at [12]:
Section 153B(1) of the Act relevantly provides that:
“If the Court is satisfied that a sequestration order ought not to have been made …the Court may make an order annulling the bankruptcy.”
Section 153B(1) and its predecessors have been considered in many decisions of this and other Courts. These authorities establish a number of relevant propositions. They are:
(1) An order can be made under s 153B(1) of the Act notwithstanding that the applicant has been discharged from bankruptcy; Re Oates; ex parte Deputy Commissioner of Taxation (1987) 17 FCR 402.
(2) An applicant who seeks an annulment of his or her bankruptcy “carries a heavy burden”. It is incumbent on an applicant “to place before the Court all relevant material with respect of his or her financial affairs so that the Court may be properly informed and may make a judgment that is based on the actual circumstances of the applicant”: Re Papps; Ex parte Tapp (1997) 78 FCR 524 at 531.
(3) In determining whether or not a sequestration order “ought not to have been made” the Court is not confined to a consideration of whether the order should have been made on the facts known to the Court at the time at which it was made. The Court must take account of facts, known at the time at which the sequestration order was made and at which it determines an annulment application, even if those facts were not before the Court at the time at which the sequestration order was made: Boles v Official Trustee in Bankruptcy (2001) 183 ALR 239 at 243; Re Raymond; ex parte Raymond (1992) 36 FCR 424 at 426.
(4) A sequestration order “ought not to have been made” if, on the facts known at the time of the annulment application, the Court would have been bound not to make the sequestration order: Re Frank; ex parte Piliszky (1987) 16 FCR 396.
(5) The Court will be so satisfied if it is established that the debtor was not, at the time the sequestration order was made, indebted to the petitioning creditor. Re Deriu (1970) 16 FLR 420 at 422.
(6) If the Court is so satisfied, it is not precluded from annulling the bankruptcy because the bankruptcy had not sought to have the default judgment set aside or failed to oppose the creditor’s petition or failed to seek a review of the sequestration order; Re Raymond; ex parte Raymond (1992) 36 FCR 424 at 426.
(7) The power conferred on the Court by s 153B(1) is discretionary in nature. Even if persuaded that the sequestration order ought not to have been made, the Court can, in appropriate circumstances, decline to annul the bankruptcy: Boles v Official Trustee in Bankruptcy (2001) 183 ALR 239 at 243.
(8) Considerations which may have a bearing on the exercise of discretion include unexplained delay in the making of the application, whether or not the applicant is solvent, whether or not the applicant has made full disclosure of his or her financial affairs and a failure by the bankrupt to oppose the creditor’s petition and attend the hearing at which the sequestration order was made: Re Williams (1968) 13 FLR 10 at 24-5; Boles at 247; Re Papps; ex parte Tapp (1997) 78 FCR 524 at 531; Rigg v Baker [2006] FCAFC 179 at [79]; Cottrell v Wilcox [2002] FCA 1115 at [7]. Additional considerations are collected in D.A. Hassall, “Annulment of Bankruptcy and Review of Sequestration Orders” (1993) 67 ALJ 761 at 766.”
I think that the creditor’s counsel is correct to submit that the two bases upon which Mr Vonidis seeks to annul his bankruptcy are procedural fairness and solvency.
It is not necessary to repeat my earlier remarks about service. I would only say further that I accept the submissions set out at paragraphs 25 to 26 of counsel’s written submissions as to the weight to be given to the orders made for substituted service.
For the reasons earlier expressed, in relation to the application to set aside, I do not think that the deficiencies in service are sufficient of themselves to cause me to exercise my discretion to annul the bankruptcy.
This conclusion is only reinforced by consideration of the solvency question. Applying the test set out by Chief Justice Barwick in Sandell v Porter (1966) 115 CLR 666 at p.670 (a passage well known in the bankruptcy jurisdiction), it is clear from the reasons I have earlier expressed that Mr Vonidis is not solvent.
Even the position of his mother, who has volunteered $20,000 worth of assistance, is not wholly clear. The trustee’s report infers that there may be a claim made in respect to prior dispositions of interest in the property by Mr Vonidis and others.
Conclusion
For all the above reasons, I have concluded that it is clearly inappropriate for the Court to annul the bankruptcy of Mr Vonidis. Whatever deficiencies there may have been as to service, it is clear that he is not solvent. The application will be dismissed with costs. I will hear from the parties as to appropriate orders.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Burchardt FM
Date: 20 December 2010
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