Federal Circuit and Family Court of Australia
(DIVISION 2)
Westview Frames and Trusses (NSW) Pty Ltd v Murabito [2022] FedCFamC2G 897
File number(s): SYG 1905 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 2 November 2022 Catchwords: BANKRUPTCY – application for review of sequestration order made by Registrar on the basis of the debtor not having complied with the requirements of a bankruptcy notice – whether creditor has established preconditions to the making of a sequestration order – whether the debtor and creditor made an arrangement to the creditor’s satisfaction for settlement of the judgment debt on the basis of which the bankruptcy notice was issued – whether debtor able to pay his debts – application for review dismissed. Legislation: Bankruptcy Act 1966 (Cth) ss 5(2), 43, 47, 52(1), 52(2)(a)
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss 256(1), 256(2)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) rr 2.02(3), 4.04(1)(a), 4.04(1)(b), 4.06(3), 4.06(4)
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr 1.07, 2.02(3)
Civil Procedure Act 2005 (NSW) s 101
Cases cited: Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728
Bechara v Bates [2021] FCAFC 34
Conlan v Mladenis [2007] FCA 1129
Deputy Commissioner Of Taxation v Caporale [2013] FMCA 5
Re Eric Trojan v Corporation of the Town of Hindmarsh (1987) 16 FCR 37; [1987] FCA 276
Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596
Division: General Number of paragraphs: 126 Date of hearing: 14 and 28 June and 31 October 2022 Place: Sydney Counsel for the Applicant: Mr R Parsons on 14 and 28 June 2022 Solicitor for the Applicant: Mr C Brown of O’Neill Partners Commercial Lawyers on 31 October 2022, by telephone Solicitor for the Respondent: Mr E Patakas of Evangelos Patakas & Associates on 14 and 28 June and 31 October 2022, by video and telephone Counsel for the trustee in bankruptcy: Mr D Eardley on 14 and 28 June 2022, by video and telephone ORDERS
SYG 1905 of 2021 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF STEVEN MURABITO
BETWEEN: WESTVIEW FRAMES AND TRUSSES (NSW) PTY LTD ACN 150 774 628
Applicant
AND: STEVEN MURABITO
Respondent
order made by:
JUDGE MANOUSARIDIS
DATE OF ORDER:
2 November 2022
THE COURT ORDERS THAT:
1.The application by Mr Steven Murabito (applicant) for orders to the effect set out in the email sent at 1:59 pm on 31 October 2022 by the applicant’s solicitor to the associate to Judge Manousaridis is dismissed.
2.Pursuant to r 1.07 of the Federal Circuit and…
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Details
- Case
- [2022] FedCFamC2G 897
- Decision Date
CaseChat Overview and Summary
Westview Frames and Trusses (NSW) Pty Ltd sought a sequestration order against Mr Murabito, who filed an application for review of the Registrar's decision. The court was required to determine whether Mr Murabito could satisfy the requirements of the Bankruptcy Notice and if there were sufficient grounds to deny the sequestration order. The primary issue was whether Mr Murabito could demonstrate his ability to pay his debts, thus proving solvency, or if he had any other sufficient cause to deny the sequestration order.
The court examined Mr Murabito's evidence, including his affidavits and financial statements, to assess his financial position. The court found that Mr Murabito's evidence did not meet the standard required to prove solvency. The affidavits contained unaudited accounts and unverified claims of ownership or valuation, which were insufficient to establish solvency. Additionally, Mr Murabito's claims of disputes with other creditors did not provide a basis to deny the sequestration order. The court concluded that Mr Murabito had not provided sufficient evidence to discharge the onus of proving solvency or any other sufficient cause to deny the sequestration order.
As a result, the court dismissed Mr Murabito's application for review and upheld the Registrar's decision to grant the sequestration order. The court found that Mr Murabito had failed to demonstrate his ability to pay his debts or provide any other sufficient cause to deny the sequestration order. The court ordered that Mr Murabito be declared bankrupt.
The court examined Mr Murabito's evidence, including his affidavits and financial statements, to assess his financial position. The court found that Mr Murabito's evidence did not meet the standard required to prove solvency. The affidavits contained unaudited accounts and unverified claims of ownership or valuation, which were insufficient to establish solvency. Additionally, Mr Murabito's claims of disputes with other creditors did not provide a basis to deny the sequestration order. The court concluded that Mr Murabito had not provided sufficient evidence to discharge the onus of proving solvency or any other sufficient cause to deny the sequestration order.
As a result, the court dismissed Mr Murabito's application for review and upheld the Registrar's decision to grant the sequestration order. The court found that Mr Murabito had failed to demonstrate his ability to pay his debts or provide any other sufficient cause to deny the sequestration order. The court ordered that Mr Murabito be declared bankrupt.
Orders
Orders of the court
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Background
Background to the litigation
There would be no utility in granting an adjournment for this purpose. As I have already noted, I have approached Mr Murabito’s application for review on the assumption that Mr Murabito has no liability under the amended assessments the ATO has issued. I therefore propose to order that Mr Murabito’s application be dismissed.Background On 10 August 2018 Westview filed a statement of claim against Mr Murabito in the Local Court. Westview recovered a default judgment for $58,735.36 against Mr Murabito on 9 December 2018. On 28 August 2019 Westview obtained a bankruptcy notice directed to Mr Murabito demanding payment of $58,735.36; and, on 30 October 2019, Westview filed a creditor’s petition with this Court on the basis of Mr Murabito’s failure to comply with the requirements of the bankruptcy notice. The creditor’s petition was dismissed by consent on 16 April 2020 after, on 14 April 2020, the default judgment was set aside; and Mr Murabito was ordered to pay Westview’s costs in the amount of $5,600. After a contested hearing, on 2 February 2021 Westview recovered a judgment against Mr Murabito in the sum of $92,054.21 (this being the “Judgment Debt” I identified at the beginning of these reasons). On 10 March 2021 Westview obtained the issue of the Bankruptcy Notice and arranged for it to be served on Mr Murabito on 20 April 2021. On 4 June 2021 Mr Murabito filed an application in this Court for an order extending the time for compliance with the requirements of the Bankruptcy Notice (Extension Proceeding).[9] The application was listed for hearing on 10 August 2021, and the time for compliance with the Bankruptcy Notice was extended up to that day.[9] Affidavit of D Carbone 28.04.2022, [5], annexure “A”, page 9 Also on 4 June 2021 Mr Murabito filed with the Local Court three applications to pay the Judgment Debt by instalments, but the Local Court refused all three applications on that day.[10] On 19 July 2021 Mr Murabito filed a further notice of motion to pay the Judgment Debt by instalments; and, on that day, the Local Court ordered that Mr Murabito pay the Judgment Debt by monthly instalments of $5,000 commencing on 11 August 2021 (Instalment Order).[11] Also on 19 July 2021, however, Westview filed a notice of motion objecting to the Instalment Order (Instalment Order Proceeding). The notice of motion was listed for hearing on 5 August 2021. On that day the Local Court ordered that the objection be listed for hearing on 19 August 2021. The Local Court also ordered that within 7 days Mr Murabito provide to Westview’s lawyers an up-to-date financial statement, and that Mr Murabito pay the first instalment of $5,000 by 11 August 2021 “as per existing Intsallment [sic] Order”.[12][10] Affidavit of D Carbone 28.04.2022, annexure “G”, page 35[11] Affidavit of D Carbone 28.04.2022, annexure “D”, page 16[12] Affidavit of M Zhou 09.06.2022, annexure “A”, page 11 At 10:47 am on 9 August 2021 Mr Carbone, the lawyer for Mr Murabito, sent an email to Ms Zhou, the lawyer for Westview, in which he suggested that the Extension Proceeding that was due to be heard on 10 August 2021 be adjourned to 20 August 2021, given that the Instalment Order Proceeding was due to be heard on 19 August 2021.[13] After he sent the email Mr Carbone and Ms Zhou had a conversation to the following effect:[14]Mr Carbone: Would you please give me your client's nominated bank account details into which my client can pay the first $5,000 instalment due on 11 August 2021?Ms Zhou:I will need to get my client's instructions and will let you know.Mr Carbone: Have you considered the proposed short minutes to adjourn Mr Murabito’s Application in the Federal Circuit Court which I sent you today? Ms Zhou:Yes, my client agrees but we will need to also provide for a further extension for compliance with the Bankruptcy Notice.[13] Affidavit of M Zhou 09.06.2022, annexure “A”, page 5[14] Affidavit of D Carbone 28.04.2022, [12]; affidavit of M Zhou 09.06.2022, [8.4]
Evidence
Evidence Before The Court
Finally, I refer to what is required to prove solvency. Speaking in the context of corporate insolvency, Weinberg J in Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd said that to discharge the onus of proving solvency “the Court should ordinarily be presented with the “fullest and best” evidence of the financial position of the respondent”; and that “[u]naudited accounts and unverified claims of ownership or valuation are not ordinarily probative of solvency. Nor are bald assertions of solvency arising from a general review of the accounts, even if made by qualified accountants who have detailed knowledge of how those accounts were prepared”.[61] [61] Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728, at [44]Mr Murabito’s evidence Mr Murabito relies on a number of affidavits. First Murabito 28 April affidavit The first is an affidavit made on 28 April 2022 that was filed on 2 May 2022 (First Murabito 28 April affidavit). At paragraph 36 of that affidavit Mr Murabito annexes what he describes as his “current statement of Assets and Liabilities”, which is as follows: I admitted this schedule as a summary of what Mr Murabito claims are his assets and liabilities on the basis I would give no weight to it other than to the extent there is other evidence to support it.[62] Mr Murabito annexed documents that show he and Ms Stojcevski are registered proprietors as joint tenants of a parcel of land, which I assume is the property at 29 Wymston Parade Five Dock (Five Dock Property), a real estate agent’s appraisal of the Five Dock Property as having a market value of between $5.5 million and $5.8 million; and a valuation of the Five Dock Property of $5.5 million. Mr Murabito also annexes a document issued by Australia and New Zealand Banking Group Limited (ANZ Bank), which is headed: “Your home loan at a glance”.[63] The document records that the original loan was $2.09 million (Home Loan); the current balance of the loan is $2,440,954.23; the minimum monthly payment is $9,795.74 per month; and the “current bank managed payment” is $10,690.81 per month. In his affidavit Mr Murabito deposes that “[o]ur current debt to the ANZ Bank is $2,090,000 as recorded in” the document ANZ Bank issued which Mr Murabito annexes to his affidavit.[64] That statement does not correctly describe the information contained in the ANZ Bank document. [62] 14.06.2022 T30.5[63] First Murabito 28 April affidavit, [40]; annexure “AC”[64] First Murabito 28 April affidavit, [40]; annexure “AC”Second Murabito 28 April affidavit The second affidavit on which Mr Murabito relies is another affidavit he made on 28 April 2022 (Second Murabito 28 April affidavit). In that affidavit Mr Murabito addresses the following matters:(a)Claims by Australian Mortgage Finance Services Pty Ltd (AMFS), which has a registered second mortgage over the Five Dock Property. Mr Murabito says the mortgage secures a debt it acquired from AET Corporate Pty Ltd (AET) who had lent money to Samuel M Holdings Pty Ltd (SMH) which Mr Murabito and Ms Stojcevski guaranteed. Mr Murabito and Ms Stojcevski are in dispute with AMFS and AET “regarding that loan and AET’s premature and wrongful termination in March 2019 of that loan in breach of a roll over agreement extending it to June 2019”.[65] Mr Murabito then refers to AET having appointed a receiver and manager over SMH in June 2019 and on 23 September 2020 SMH selling land of which SMH was the registered proprietor; AET transferring the outstanding debt to AMFS which then commenced proceedings in the Supreme Court for orders to recover a debt of $74,345.99 and an order for possession of the Five Dock Property; “[d]ue to circumstances beyond” Mr Murabito’s and Ms Stojcevski’s control they were unable to file a defence and on 17 September 2021 the Supreme Court ordered that default judgment be entered against Mr Murabito and Ms Stojcevski; on 6 October 2021 Mr Murabito and Ms Stojcevski filed a notice of motion seeking a stay of the default judgment and an order to set it aside; the default judgment as against Mr Murabito was set aside; and on 7 April 2022 the Supreme Court directed Mr Murabito to file an amended defence by 15 April 2022.[66] Mr Murabito concludes this part of his affidavit as follows:[67]Based on the above I not only dispute that I am liable to AMFS for the judgement [sic] sum of $74,345.99 plus costs but I claim that AMFS and AET are liable to me, Lilly and Samuel M Holdings for sums in excess of $700,000.(b)Caveats lodged over the Five Dock Property by Parkview Estate Pty Ltd and Dynamic Bradview Roofing Pty Ltd. The caveats relate to Ms Stojcevski’s share of the Five Dock Property, and they are disputed.[68](c)Mortgage registered by Capital Securities Australia Pty Ltd. This was registered to secure loans that have been discharged.[69](d)Caveat lodged by Agora Capital Corporation Pty Ltd. That has remained by oversight, and does not relate to any debt.[70] (e)Caveat by Ageist Pty Ltd (Ageist). The caveat purports to relate to an agreement between Ageist and Mr Murabito and Ms Stojcevski, but both Mr Murabito and Ms Stojcevski deny having entered into any agreement with Ageist. Ageist claims the debt is one that H&H Mezz Pty Ltd (HHM) assigned to Ageist which arose from a loan of $400,000 HHM made to SMH, and in relation to which Mr Murabito and Ms Stojcevski granted a security over the Five Dock Property. Mr Murabito and Ms Stojcevski dispute the debt on the same ground that they dispute the debt to Ageist; and in any event claim that Ageist and HHM are liable to SMH, Mr Murabito, and Ms Stojcevski for $700,000.[71][65] Second Murabito 28 April affidavit, [6][66] Second Murabito 28 April affidavit, [5]-[14][67] Second Murabito 28 April affidavit, [15][68] Second Murabito 28 April affidavit, [16]-[17][69] Second Murabito 28 April affidavit, [18]-[21][70] Second Murabito 28 April affidavit, [22]-[25][71] Second Murabito 28 April affidavit, [26]-[31]Third Murabito 28 April affidavit
Decision
Reasons for decision
The Bankruptcy Notice demands that Mr Murabito pay to Westview $98,192.66. That is the sum of the following three amounts. (a)$92,054.21, being the amount of a judgment (Judgment Debt) entered in the Local Court of New South Wales (Local Court) on 8 February 2021 pursuant to an order made on 2 February 2021;(b)$538.45, being interest pursuant to s 101 of the Civil Procedure Act 2005 (NSW) on the Judgment Debt from 3 February 2021 to 9 March 2021; and(c)$5,600, being the costs Mr Murabito was ordered to pay Westview on 16 April 2020 in a previous bankruptcy proceeding Westview commenced against Mr Murabito in this Court ($5,600 FCC costs order). Mr Murabito does not dispute that Westview has satisfied the preconditions for the making of a sequestration order under the Bankruptcy Act 1966 (Cth) (Act) and the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules). Mr Murabito submits, however, that a sequestration order ought not be made, first, because in a telephone conversation between Mr Murabito’s and Westview’s lawyers on 18 August 2021, Mr Murabito claims an arrangement was made to Westview’s satisfaction for the settlement of the debt the Bankruptcy Notice demands; and, second, because Mr Murabito is able to pay his debts.nature of review Mr Murabito has applied for a review of the Registrar’s decision under s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFC Act) which, together with s 256(2), provides: (1)A party to proceedings in which a delegate has exercised any of the powers of the Federal Circuit and Family Court of Australia (Division 2) under section 254 may:(a) within the time prescribed by the Rules of Court; or(b) within any further time allowed in accordance with the Rules of Court;apply to the Court for review of that exercise of power.(2)The Federal Circuit and Family Court of Australia (Division 2) may, on application under subsection (1) or on its own initiative, review an exercise of power by a delegate under section 254, and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised. The time for applying for review has been prescribed by r 2.02(3) of the Bankruptcy Rules, and it is within 21 days after the day on which the power was exercised. A review under s 256(2) of the FCFC Act is a “hearing de novo”. That means that an: [1]applicant for review under [s 256(2)] is under no obligation to demonstrate error on the part of the Registrar, and does not need to establish that the Registrar’s exercise of discretion miscarried in the sense described in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505: Pattison v Hadjimouratis [2006] FCAFC 153 at [153]- [154].[1] Conlan v Mladenis [2007] FCA 1129, at [5] (Sundberg J) Further:[2](b)The hearing (or rehearing) of the creditor’s petition is not prosecuted by the debtor (applicant for review) but by the creditor in the proceeding in which the registrar’s order was made.(c)The application for review is a demand that the claim for relief (the sequestration order) be heard by a judge.(d)The onus is upon the creditor to prosecute its petition. The only onus of the debtor/bankrupt against whose estate a sequestration order has been made is to prove either solvency or any other sufficient cause under s 52(2) of the Bankruptcy Act 1966 (Cth).[2] Bechara v Bates [2021] FCAFC 34, at [27]course of hearing
Ratio Decidendi
Legal Principle Established
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