Yeo, in the matter of Burhala
[2023] FedCFamC2G 303
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Yeo, in the matter of Burhala [2023] FedCFamC2G 303
File number: MLG 427 of 2023 Judgment of: JUDGE MANSINI Date of judgment: 24 April 2023 Catchwords: BANKRUPTCY – application for declarations in relation to Australian bankruptcy proceedings – where Australian bankruptcy subject of proceedings in foreign jurisdiction – where Court satisfied applicant is acting in faithful performance of their duties to the Australian creditors and declarations made. Legislation: Bankruptcy Act 1966 (Cth) ss.30, s.90-15 of Sch 2
Federal Circuit and Family Court of Australia (General Federal Law) Rules 2021 (Cth) rr.1.06(2), 6.01(3)
Federal Court Rules 2011 (Cth) rr.9.08, 10.41, 10.42, 10.49, 10.52
Cases cited: Bartlett v Goodwin [2021] FCCA 1871 Division: Division 2 General Federal Law Number of paragraphs: 32 Date of hearing: 28 March 2023 Place: Melbourne Counsel for the Applicants: Mr A Silver Solicitor for the Applicants: McInnes Wilson Lawyers Respondents: No appearance by or on behalf of the Respondents ORDERS
MLG 427 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF FLORIN BURHALA AND TANIA LOUISE BURHALA, BANKRUPT
BETWEEN: ANDREW REGINALD YEO
First Applicant
GESS MICHAEL RAMBALDI
Second Applicant
AND: FLORIN BURHALA
First Respondent
TANIA LOUISE BURHALA
Second Respondent
order made by:
JUDGE MANSINI
DATE OF ORDER:
28 March 2023
THE COURT ORDERS THAT:
1.Pursuant to rule 9.08 of the Federal Court Rules 2011 (Federal Court Rules), the Respondents are removed as parties to the proceeding.
AND THE COURT NOTES THAT:
A.Rule 9.08 of the Federal Court Rules has application pursuant to r.1.06(2) of the Federal Circuit and Family Court of Australia (General Federal Law) Rules 2021.
In relation to the bankrupt estate of Florin Burhala and the bankrupt estate of Tania Burhala and pursuant to section 90-15 of Schedule 2 of the Bankruptcy Act 1966 (Cth), THE COURT DECLARES THAT:
1.The Applicants as trustees of the bankrupt estate of Florin Burhala are acting reasonably and therefore justified in seeking to recover sufficient assets in order to pay not less than $8,921,081.22 in the bankrupt estate, in Romania.
2.The Applicants as trustees of the bankrupt estate of Tania Burhala are acting reasonably and therefore justified in seeking to recognise the bankruptcy, in Romania.
AND THE COURT NOTES THAT:
A.The Court has received evidence that the bankrupt Florin Burhala and the bankrupt Tania Louise Burhala (the Bankrupts) are husband and wife and the Applicants have been appointed trustees of their respective bankrupt estates.
B.The Court is satisfied that these orders are sought by the Applicants in their faithful performance of their duties to the Australian creditors of the Bankrupts’ respective estates.
C.Nothing in these orders alters the rights or interests of the Bankrupts in their respective bankruptcy under the Bankruptcy Act 1966 (Cth) or other Australian law within the Court’s jurisdiction.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
Revised from transcriptJUDGE MANSINI
The following reasons are prepared as revised from transcript of the proceedings before the Court as presently constituted on 28 March 2023.
In summary, on 28 March 2023, the Court was satisfied that it was appropriate to order as follows:
·First, that Florin Burhala and Tania Burhala (Bankrupts) be removed as named respondents to the proceedings; and
·Second, that there be declarations made for the assistance of Andrew Reginald Yeo and Gess Michael Rambaldi as joint and several trustees of the bankrupt estates of Florin Burhala and Tania Louise Burhala (Applicants/Trustees), in their faithful performance of their duties to Australian creditors of the Bankrupts’ respective estates.
CONTEXT
Materials before the Court
The following materials were filed by the Applicants and were before the Court as at 28 March 2023:
·Application, filed 9 March 2023;
·Affidavit of Andrew Reginald Yeo, sworn 9 March 2023;
·Affidavit of Giuseppe Domenico Giacco, sworn 21 March 2023;
·Further affidavit of Giuseppe Domenico Giacco, sworn 24 March 2023;
·Outline of written submissions, filed 26 March 2023;
·List of authorities, filed 26 March 2023; and
·Further affidavit of Andrew Reginald Yeo, sworn 27 March 2023, who also gave oral evidence at the hearing on 28 March 2023.
Factual
There is a prolonged history of litigation as between the Applicants and the Bankrupts relating to their bankruptcy. The following factual and procedural context is a summary of the pertinent facts on the evidence and materials before the Court as at 28 March 2023.
The Bankrupts are husband and wife.
On 10 August 2016, under a sequestration order made by this Court, Florin Burhala became bankrupt on a creditor’s petition issued on behalf of the Deputy Commissioner of Taxation. That same day, the Applicants were appointed as the joint and several trustees of the bankrupt estate of Florin Burhala.
On 1 November 2018, upon the acceptance of her debtor’s petition by the Official Receiver under s.54C of the Bankruptcy Act 1966 (Cth) (the Act), Tania Louise Burhala became bankrupt as recorded under bankruptcy administration no. VIC 2456 of 2018/8.
On 6 March 2019, the Applicants were appointed trustees of the bankrupt estate of Tania Burhala.
On 2 November 2021, Tania Louise Burhala was automatically discharged under s.149 of the Act, as a period of three years had elapsed since she filed her statement of affairs.
At the time of the hearing of the present application on 28 March 2023, there were proceedings on foot in Romania which related to recognition of Florin Burhala’s bankruptcy in Romania. More specifically, in three extant proceedings in the foreign jurisdiction, the Applicants challenge the transfer of assets to the Bankrupts’ children and seek enforcement against Florin Burhala. Further, the Applicants were instructed to commence a recognition proceeding in Romania with respect to Tania Burhala.
Procedural
On 14 March 2023, the originating application was made in this Court which sought declarations for assistance of the Applicants in administering the estate of both Respondents in Romania. The originating application named Florin Burhala as First Respondent and Tania Burhala as Second Respondent. An urgent and expedited hearing was sought on account of impending proceedings in Romania. An affidavit of the First Applicant, Mr Andrew Reginald Yeo was filed in support of the application and deposed to: the protracted history of litigation between the Applicants and the Bankrupts; the extant proceedings in the foreign jurisdiction; the costs and debts in the bankrupt estate of Florin Burhala; and the basis on which the Applicants now sought orders of the Court.
On 21 March 2023, the Court ordered that the then Respondents may be served at their last known addresses for service by 10.00am on 22 March 2023, that the then Respondents file a notice of address for service by 12.00pm on 24 March 2023, that the Trustees file and serve an outline of submissions and any further evidence by 5.00pm on 24 March 2023 and the then Respondents file and serve an outline of submissions and any evidence in response by 5.00pm on 27 March 2023. Liberty to apply was included in those orders. The orders also contained a notation as follows:
In the event of non-compliance with these orders or failure to attend the hearing, pursuant to r.13.05 of the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) the Court may dismiss the Application or determine the Application as if it were undefended without hearing further from the party.
Also on 21 March 2023, the Applicants’ solicitor, Mr Giuseppe Domenico Giacco, filed an affidavit of service in which the he deposed to having served by email dated 20 March 2023 a copy of the application lodged on 9 March 2023 and accepted for filing on 14 March 2023 and the affidavit of Mr Andrew Reginald Yeo sworn on 9 March 2023 on Florin Burhala and his Romanian legal representative, Mr Laurentiu Veteleanu. The solicitor also deposed to having served by email dated 20 March 2023, a copy of those documents on Tania Burhala and her Romanian legal representative, Ms Delia Bosman.
On 24 March 2023, an affidavit was filed by the Applicants’ solicitor, Mr Giacco, on behalf of the Trustees which addressed the usual method of service in Romania, the efforts at service of the Court documents in these proceedings and the various communications with and efforts to notify the then named Respondents and their Romanian lawyers in the extant Romanian proceedings about the originating application in and proceedings before this Court.
Also on 24 March 2023, the Court’s Registry received an email from a Mr Laurentiu Veteleanu, who purported to be (and the Applicants gave evidence that he is) the Romanian lawyer for Florin Burhala in the extant Romanian proceedings. The email attached a letter addressed to the Court and a copy of an email sent by the Applicants’ solicitors to Mr Veteleanu on 20 March 2023 along with a copy of the application dated 9 March 2023 and the affidavit of Mr Yeo sworn 9 March 2023. The letter stated:
I refer to the matter MLG427/2023 - Andrew Reginald Yeo and Gess Michael Rambaldi v Florin Burhala and Tania Burhala, matter in which I have been receiving email messages and had Mr Yeo and Mr Rambaldi’s Romanian lawyer, Mr Roman Ioan turn up at my office to serve me with documents for Mr Burhala Florin for this file in Australia, despite the fact that I have, in no uncertain terms, indicated the previous day that I have no instructions to accept service for matters in Australia and I do not have a mandate to be subpoenaed with documents and legal information regarding the procedure in Australia. I have also indicated to Mr Giacco that at this time my client is not contactable until 3 April 2023.
More so, I have clearly drawn Mr Giacco’s attention to the fact that both Romania and Australia are signatories of the Hague Convention on Service Abroad of Judicial and Extrajudicial Documents in Civil or Commercial Matters of 15 November 1965 ("the Convention"), hence such documents must be served in accordance with this Convention and I would advise my client against accepting service of any such documents unless and until such matters are dealt with in the proper way as provided for by the Convention.
At the same time, Mr. Burhala Florin has a legal domicile in Romania, respectively at his official address provided in the identity document, so I do not understand and cannot accept this abuse from Mr. Giacco
Regarding the abuse by which Mr. Giacco is trying to communicate to me some legal documents for Mr. Burhala Florin, in a procedure in which I am not a party, nor a lawyer, and I have no mandate from the client to receive and get involved in this file, I request you to order the necessary legal measures to stop this abuse, all the more so as the undersigned represents the interests of Mr. Burhala exclusively in file 9877 / 3 / 2017** - the IV civil section of the Bucharest Court - and file 23974/299/2020 pending at the District 1 Bucharest Court, it being obvious that my mandate as lawyer representing Mr. Burhala is limited only to these files
I attach, for your information, email exchanges between me and Mr Giacco.
(sic.)
On 26 March 2023, the Applicants filed a list of authorities and an outline of written submissions as to their application for the removal of the Bankrupts as Respondents to this proceeding pursuant to r.9.08 of the Federal Court Rules 2011 (Cth) (Federal Court Rules), there being no equivalent rule in the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (FCFCOA Rules) and pursuant to r.1.06(2) FCFCOA Rules. The Applicants contended that traditionally such applications do not require the joining of respondent parties, save for where substantive rights of third parties are to be determined. Further, that they did not seek the determination of any rights as against either Respondent – merely orders that the Applicants are acting reasonably in the pursuit of claims in the Romanian proceedings.
In the alternative, the Applicants sought that the Court make orders that service be deemed to have occurred given service under Romanian law would require the Court to serve documents via email and in circumstances where the application has been brought to the Bankrupts’ and/or their Romanian lawyer’s attention through email and WhatsApp messaging: pursuant to rr.10.41 and 10.52 of the Federal Court Rules (which apply to this Court pursuant to r.6.01(3) of Schedule 1 to the FCFCOA Rules). In this respect, the Applicants made submissions as to the reasonableness of their conduct in pursuit of these proceedings and in any event that service of a document outside of Australia need not be personal so long as it is served on the person in accordance with the law of the country in which service is effected. Further, that the Federal Court Rules enable a party to apply for an order that a document is taken to have been served on a person in certain circumstances of impracticability which threshold here was met: Bartlett v Goodwin [2021] FCCA 1871 [29]-[31], [56], [72]-[74].
The Applicants also expressed concern that the conduct of the Bankrupts and their Romanian lawyer ought give the Court reason to conclude that the Bankrupts would, if formal service were sought, seek to frustrate that process and further said of the preceding interactions between the Applicants and the Bankrupts’ lawyer:
… despite the use by the applicants of the said methods of correspondence for legal matters, which has been actively used by the respondents even as late as 17 March 2023; and despite the acknowledgment of receipt of documents by solicitors currently acting for the respondents… the respondents have not responded to the communications; and the Romanian solicitors have demonstrated a desire to take an overly technical position regarding the scope of their retainers; Florin Burhala’s solicitor has gone further and written that he would advise his client not to accept service of the documents (which by implication they acknowledge receipt of) unless it is done pursuant to the Hague Convention- this, it is contended, is clear example of an intention to stultify the case by insisting on an unduly cumbersome requirement governing service; the Family Court of Australia has already found Florin and Tania Burhala to have engaged in conduct with the intention of defrauding creditors.
In the further alternative, the Applicants sought that an order for substituted service be made pursuant to r.10.49 of the Federal Court Rules and relied on their submissions for deemed service outlined above.
On 27 March 2023, Mr Yeo filed a further affidavit in which he annexed further WhatsApp messages sent by the Mr Yeo to Florin Burhala on 24 March 2023 and 26 March 2023. In those messages, the Mr Yeo referred to the emails sent by Mr Giacco on each date to Florin Burhala attaching: the Form 26A - Notice to persons served outside Australia; the Applicants’ list of authorities, the Applicants’ written submissions, and the Applicants’ proposed orders.
Nothing was filed by the Bankrupts pursuant to the Court’s orders of 21 March 2023 and no correspondence was received from them or on their behalf requesting an alteration to the program for filing of materials or an adjournment of the hearing date.
At the hearing on 28 March 2023, the Applicants were represented by Counsel and there was no appearance entered for or on behalf of the Bankrupts. Given the materials before the Court including the evidence of the Bankrupts having engaged a Romanian lawyer and that lawyer’s correspondence addressed to the Court, the hearing proceeded pursuant to r.13.06 of the FCFCOA Rules.
Counsel for the Applicant handed up an outline of submissions in relation to the merit of the substantive application.
Also at the hearing on 28 March 2023, the Court was addressed about the Applicants’ application to remove the Bankrupts to the proceeding in this Court. Having regard to the materials that were before the Court, and importantly that there was no application before the Court that would affect their interests or that sought to do anything other than to affirm the effect of the Australian bankruptcy law as it related to them, it was considered appropriate that the Bankrupts be removed as respondents to the proceedings, pursuant to r.9.08 of the Federal Court Rules which have application pursuant to r.1.06(2) of the FCFCOA Rules. Orders to that effect were made accordingly, on 28 March 2023.
SUBSTANTIVE APPLICATION FOR DECLARATIONS
It followed from their removal as named parties that there was no requirement to satisfy the Court in relation to service on the Bankrupts and, not being party to the proceedings, there was no issue with proceeding to hear and determine the substantive application in their absence.
The substantive application was for orders in the following declaratory terms:
1.The Applicants as trustees of the First Respondent’s bankrupt estate are acting reasonably and therefore justified in seeking to recover through the Romanian litigation sufficient assets in order to pay not less than $8,968,806.67 in the bankrupt estate.
2.The Applicants as trustees of the Second Respondent’s bankrupt estate are acting reasonably and therefore justified proceeding on the basis that:
a. on 1 November 2018, upon the acceptance of her debtor’s petition by the Official Receiver under s 55 of the Act, the Second Respondent, Tania Louise Burhala became bankrupt which is recorded under bankruptcy administration no. VIC 2456 of 2018/8.
b. on 6 March 2019, the Applicants, Andrew Reginald Yeo and Gess Michael Rambaldi were appointed the trustees of the bankrupt estate of Tania Louise pursuant to s 181A of the Act;
c. the Second Respondent was automatically discharged on 2 November 2021 under section 149 of the Act, as a period of three years has elapsed since she filed her Statement of Affairs.
d. Notwithstanding her discharge from bankruptcy, any property of the Second Respondent’s bankrupt estate remains vested in the Trustees of her bankrupt estate to be realised for the benefit of her creditors.
At the hearing on 28 March 2023, Mr Yeo gave oral evidence including about: the “cash figure” currently held in respect of the bankrupt estate of the Florin Burhala and that it was appropriate to reduce the figure to be included in the declarations sought by the Applicants (from $8,968,806.67 to $8,921,081.22); the instructions the Applicants have to commence a recognition proceeding in Romania with respect to the Tania Burhala; the proceedings on foot in Romania with respect to the Florin Burhala; and the utility and appropriate form of the Applicants orders sought in this Court and their implication on those Romanian proceedings.
On the materials and evidence before the Court in relation to the substantive application of the Trustees, pursuant to s.30 and specifically s.90-15 of Schedule 2 of the Act, and having regard to the matters at s.90-15(4) therein, this is an appropriate case in which to make declaratory orders in terms that: First, the Applicants as trustees of the bankrupt estate of Florin Burhala are acting reasonably and, therefore, justified in seeking to recover sufficient assets in order to pay not less than $8,921,081.22 in the bankrupt estate in Romania. Second, that the Applicants, as trustees in the bankrupt estate of Tania Burhala are acting reasonably and, therefore, justified in seeking to recognise the bankruptcy in Romania.
Such conclusion being appropriate having regard to the evidence before the Court which established the bankrupt status of Florin Burhala, that the Applicants were appointed as trustees in his bankrupt estate, that the debt incurred in the bankrupt estate of Florin Burhala is to the value of at least $8,921,081.22 and as to the status of the extant Court proceedings in the Romanian jurisdiction. And, having so found and on all of the evidence before the Court, such order as it relates to the bankrupt estate of Florin Burhala is necessarily sought by the Trustees in their faithful performance of their duties to the Australian creditors.
Further, the evidence before the Court established the bankrupt status of Tania Burhala, that the Applicants were appointed as trustees of that bankrupt estate, and of the automatic discharge of the bankrupt estate on 2 November 2021 by lapse of time pursuant to the Australian bankruptcy legislation. There was evidence that the Applicants anticipated that the bankrupt Tania Burhala may assert to be a creditor to the bankrupt estate of Florin Burhala in the Romanian Court proceedings. Notwithstanding the automatic discharge of the estate of Tania Burhala on 2 November 2021, on the evidence before it the Court may be satisfied that by application of Australian law any property that vested in the Applicants as trustees remained vested in the Applicants to be realised for the benefit of any creditor to that estate. It followed that, that the order in this respect is necessarily sought by the Trustees in their faithful performance of the duties to any Australian creditors.
For completeness, the Court was not so minded to include notes to the orders that were proposed by the Applicants other than to make notations in the following terms: First, that the Court had received evidence that the Bankrupts are husband and wife and the Applicants have been appointed trustees of their respective bankrupt estates. Second, that the Court is satisfied that these orders were sought by the Applicants in their faithful performance of their duties to the Australian creditors of the Bankrupts’ respective estates. Third, that nothing in these orders would alter the rights or interests of the Bankrupts in their respective bankruptcy under the Act, being a Commonwealth act, or other Australian law within this Court’s jurisdiction.
For the above reasons, Orders were made accordingly on 28 March 2023.
I certify that the preceding thirty-two (32) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 24 April 2023
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