WK Marble & Granite Pty Ltd v Atanasovski (No.2)
[2010] FMCA 337
•7 May 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| WK MARBLE & GRANITE PTY LTD v ATANASOVSKI (No.2) | [2010] FMCA 337 |
| BANKRUPTCY – Creditor’s petition – debtor claiming substantial equity in family home and support of family members – failed to establish ability to pay debts within a relatively short time – sequestration order made – costs refused to supporting creditors. |
| Bankruptcy Act 1966 (Cth), ss.37(1), 49, 52(2)(a), 153A Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), r.4.06(4) Federal Magistrates Court Rules 2001 (Cth), r.16.05(2)(e) |
| Re Harris (1930) 2 ABC 77 Sandell v Porter (1966) 115 CLR 666 Stankiewicz v Plata [2000] FCA 1185 WK Marble & Granite Pty Ltd v Atanasovski [2010] FMCA 226 |
| Applicant: | WK MARBLE & GRANITE PTY LTD ACN 074 331 981 |
| Respondent: | TONY ATANASOVSKI T/AS SYDNEY HOME LOAN CENTRE |
| File Number: | SYG 1869 of 2009 |
| Judgment of: | Smith FM |
| Hearing date: | 7 May 2010 |
| Delivered at: | Sydney |
| Delivered on: | 7 May 2010 |
REPRESENTATION
| Counsel for the Applicant: | Mr C Trieu |
| Solicitors for the Applicant: | CCSG Legal Pty Ltd |
| Counsel for the Respondent: | Mr W Ward |
| Counsel for Elite Cruise Company Pty Ltd ACN 101 176 158, First Supporting Creditor: | Mr Rolfe (city agent) |
| Solicitors for the First Supporting Creditor: | Coleman & Greig |
| Counsel for Gasparre Tiling Pty Ltd, Second Supporting Creditor: | Mr J Merewether Merewether & Co, Solicitors (city agent) |
| Solicitors for the Second Supporting Creditor: | Whitfields Solicitors |
CORRECTED ORDERS
A sequestration order be made against the estate of Tony Atanasovski.
The applicant creditor’s costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note that the date of the act of bankruptcy is 13 July 2009.
Note that a consent to act as trustee has been signed by Andrew Hugh Jenner Wily and has been lodged with the Official Receiver in Sydney.
The applicant must within 2 days give a copy of this order to the Official Receiver in Sydney.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1869 of 2009
| WK MARBLE & GRANITE PTY LTD ACN 074 331 981 |
Applicant
And
| TONY ATANASOVSKI T/AS SYDNEY HOME LOAN CENTRE |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This is a creditor’s petition against Mr Atanasovski, in which I published a judgment explaining the adjournment of the petition on 23 March 2010 (see WK Marble & Granite Pty Ltd v Atanasovski [2010] FMCA 226).
The petition was then adjourned until 30 April 2010. On that occasion, the Court received the evidence in support of the petition and the notice of opposition, but the solicitor for the petitioner discovered that he was not in a position to take the Court to an affidavit of current indebtedness required under r.4.06(4) of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth). For his part, Mr Atanasovski had not complied with my direction in relation to the filing of additional affidavits, but filed three new affidavits at the hearing which had not previously been served. For both those reasons, therefore, the petition was adjourned for one week until today.
The three additional affidavits relied upon by Mr Atanasovski are those of himself, his wife and son. In his own affidavit sworn on 30 April 2010, he indicates that, notwithstanding his hopes on the last occasion, the private buyer with whom he was in negotiations has not reached agreement for the purchase of his family home. His affidavit raises no further expectations in relation to those negotiations. He indicates that on 12 April 2010 he and his wife signed an agency agreement with a real estate agent at Kogarah to place the home on the market. The terms of the contract which is being offered is not in evidence. The agency contract indicates that the “recommended method of sale” is “to be advised”, and the agent gives an opinion of a “current estimated selling price (or price range)” of $4 million. No sales plan is indicated. It is not possible on the evidence before me to identify the likelihood of a sale occurring with the assistance of this agent, nor the time within which funds from a sale could be anticipated to become available to creditors.
Mr Atanasovksi maintains his opinion that he has equity of about $1 million shared with his wife in the home, but there is no properly qualified valuation evidence to support this opinion. He expresses a concern that he could not continue with his business “Sydney Home Loans” if he remained bankrupt. Whether this is so, remains obscure, partly because I am left unclear as to the extent that this business is conducted by Mr Atanasovski in his personal capacity or through his company.
His new affidavit refers to evidence attached to his earlier affidavit, which is a letter from “Caveat Lenders” dated 19 March 2010 addressed to Mr Atanasovski in person, confirming that business “owes you $568,000”. The letter suggests that this money is not immediately due to be paid. The first identified component is said to be “due to settle within 3 months. The net proceeds from settlement are due to be deposited in the Supreme Court and our solicitor is attending to this matter”. This does not fill me with optimism that this money will flow through to creditors swiftly. The other two amounts are said to be due on settlements occurring “within 5 months”, and “within 8 months”. I do not consider that this letter allows me to conclude that the funds referred to would become available to pay Mr Atanasovski’s personal creditors within a reasonably short time.
In relation to his general financial position, Mr Atanasovski’s most recent affidavit confirms that his accountants “continue to struggle with incomplete records having recovered same from my previous accountant. At the time of preparing this affidavit, my tax returns have not yet been completed”. The picture, therefore, of Mr Atanasovski’s financial situation remains as obscure as it was when I gave my earlier judgment. There remains lacking a picture of Mr Atanasovski’s trading activities, and the solvency of his trading remains uncertain on the evidence before me. Mr Atanasovski concedes that his income “is presently extremely modest and I do not rely on any income stream to support my contention that I do have an ability to pay the judgment creditors”. These factors do not support any further adjournment of the petition.
The test of ability to pay debts within the concept of s.52(2)(a) of the Bankruptcy Act 1966 (Cth) encompasses the possibility of realising assets, but the prospect of such realisation has usually been required to be “within a relatively short time” after the debts become due (see, for example, Stankiewicz v Plata [2000] FCA 1185 at [27]‑[30], citing the well known statement of Barwick CJ in Sandell v Porter (1966) 115 CLR 666).
In the present case, the indebtedness relied upon by the petitioning creditor is a judgment debt entered by default in June last year, which no doubt accrued earlier than that. The two supporting creditors who have lodged appearances have informed the Court that the indebtedness in relation to the Elite Cruise Company Pty Ltd is in the region of $15,000, the timing of its accrual being obscure on what I have been told. The other supporting creditor, Gasparre Tiling Pty Ltd, has indicated that it is a creditor for $105,463.18 on a judgment entered in 2007. The indebtedness shown to the Court is therefore long overdue for payment.
As I noted in my earlier judgment, no contest is made as to the present petitioning creditor’s entitlement to a sequestration order. All the formal matters required to be established have now been established. No dispute is made as to the indebtedness, nor the act of bankruptcy, alleged by the petitioner.
In my opinion, Mr Atanasovski has been given very ample opportunity during the pendency of the petition to present to the Court better evidence of an ability to pay the debt relied upon in the petition, his other debts of which the Court has been informed, and the current and future claims of all other creditors.
The evidence now before me, although pointing to the possibility of a substantial equity in the family home, does not satisfy me that that is sufficient to pay all of Mr Atanasovski’s indebtedness to all his creditors. My inability to be so satisfied arises from uncertainty about his actual financial position generally. There may well be personal or trading creditors other than the three known to the Court. Even if his equity might be sufficient to pay the particular indebtedness evidenced before the Court, I am not satisfied that there is today a prospect of payment in a relatively short time. I am also not persuaded to adjourn the petition to allow Mr Atanasovski’s efforts to realise his equity to be pursued further.
Weighing up the discretionary considerations, both in relation to adjourning the petition for that purpose, and the Court’s discretion to decline to make a sequestration order under s.52(2) of the Bankruptcy Act, the circumstances, in my opinion, point to the making of a sequestration order today. The creditors have a prima facie right to that, and I am not satisfied that public interest concerns in relation to possible insolvent trading have been allayed.
When arriving at this conclusion, I have taken into account the two other new affidavits, being the affidavits of Mr Atanasovski’s wife and son. The former confirms that she is presently “estranged from my husband”, but is willing to consent to the sale of the marital property on appropriate arrangements as to the proceeds. I accept that at present she is minded to co‑operate with the sale of the house, and to allow payments to be made from his share to his creditors. However, it does not appear, at this stage, that she has obtained independent legal or financial advice about the situation. While I appreciate her willingness to support the efforts of her estranged husband to avoid bankruptcy, her affidavit does not cause me to reconsider the conclusions I have expressed above.
The affidavit from their son confirms evidence given by Mr Atanasovski orally on the last occasion, that his son has an investment property of a relatively modest nature, and that he has had it valued for the purpose of obtaining further borrowings up to the limits of its potential security value. The son says, and I have no reason to doubt, that he has made a loan application for a further $100,000 increase on his mortgage, and that “should that loan be granted I intend making those monies available to my father to satisfy certain judgment creditors in certain bankruptcy proceedings”. However, there is no evidence suggesting that the son has obtained independent legal or financial advice about how he can best support his father in relation to his indebtedness to creditors, whether before or after the making of a sequestration order. There is no suggestion by Mr Atanasovski that he is contemplating a coherent scheme of arrangement with creditors, assisted by his son, under any of the relevant provisions of the Bankruptcy Act. In this respect, the support of his son may also be available after the making of a sequestration order, should this be a wise thing to do.
In any event, the amount that the son indicates a willingness to make available to his father, would not satisfy even the indebtedness currently shown to me on the evidence, and the prospects of these further advances reaching the son are not such that I am ready to make assumptions that they would occur in the reasonably recent foreseeable future.
Overall, while I accept that in some respects Mr Atanasovski’s evidence has advanced since the last occasion, the picture which I generally arrived in that judgment has not altered. In my opinion, the balance of considerations points to the making of a sequestration order today, in the interests of all the creditors of Mr Atanasovski generally.
The making of a sequestration order will not impede, I hope, the efforts of Mr Atanasovski and his family to resolve his current financial difficulties, and he will have the assistance of a trustee in bankruptcy to advise how that can best happen. If indeed creditors can be paid from the proceeds of selling the family home, then it would be open to him to apply to his trustee for an annulment of bankruptcy pursuant to s.153A of the Bankruptcy Act. However, it appears to me inevitable that some expenses of administration will now need to be incurred.
For the above reasons, I shall make a sequestration order in the usual terms. [When revising this judgment, I discovered that a mistaken date of the act of bankruptcy was inadvertently included in the sequestration order. An order corrected under s.37(1) of the Bankruptcy Act, and r.16.05(2)(e) of the Federal Magistrates Court Rules 2001 (Cth) will therefore be issued.]
In relation to costs, applications for costs were made by the two creditors who have filed supporting creditor appearances, including their costs of professional attendances at Court from time to time in the course of the petition.
However, I am not persuaded that costs orders should be made in their favour from Mr Atanasovski’s estate in bankruptcy. It is not contended that at any point it has appeared that the petitioning creditor was not pursuing the petition with due diligence on behalf of all creditors. Gasparre Tiling Pty Ltd has never moved on its interim application for substitution under s.49, and I am unpersuaded that it had reasonable grounds for filing that application. It appears to me that the various adjournments of the petition that have occurred, most of them by consent, have occurred with the consents of supporting creditors. I do not consider that the partial involvement of their legal representatives during the hearing of the petition was necessary in the interests of all creditors.
I was referred to Re Harris (1930) 2 ABC 77, where in a brief judgment Long Innes J declined to award an intervener costs out of the estate in the statutory order given to a petitioner, on the ground that the actions of the intervener had been “taken to protect his own rights only, and in the result has been of no benefit to other creditors”. His Honour appears to have thought that he had jurisdiction to allow the intervening creditor to “add his costs to his debt”, presumably as part of the indebtedness provable in bankruptcy. It is obscure to me whether such a power exists under the 1966 Act, and I was not referred to any authority under the current legislation where this was considered. If such costs are provable debts in the bankruptcy, then this can be addressed by the trustee and, if necessary, on review by the Court.
In the present case, although I can understand the interests of the two creditors leading them to instruct legal representatives to attend Court from time to time, I am not persuaded that their attendances were in the interests of all creditors, nor that their presence has advanced the matters decided by me to such an extent that they should be awarded costs as a consequence of my making a sequestration order on the petition of WK Marble & Granite Pty Ltd. I therefore decline to exercise any power I might have to make a costs order in their favour.
I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Smith FM
Associate: Lilian Khaw
Date: 20 May 2010
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