Young v Capocchiano - [2015] FCCA 3346

FEDERAL CIRCUIT COURT OF AUSTRALIA

YOUNG v CAPOCCHIANO & ANOR

[2015] FCCA 3346

Catchwords:
BANKRUPTCY – Creditor’s Petitions – application for Sequestration Orders – Notice of Opposition to Creditor’s Petitions – whether the Court should exercise its discretion to go behind the judgment on which the debt is based in considering whether the respondents are creditors of a company of which the first respondent is a director and shareholder (“the Company”) – where decision of Supreme Court of New South Wales determined that neither the first nor second respondent is a creditor of the Company – whether the Bankruptcy Notices comply with the Bankruptcy Act 1966 (Cth) – whether the Creditor’s Petitions comply with the Bankruptcy Act 1966 (Cth) – Sequestration Orders made.

Legislation:
Bankruptcy Act 1966 (Cth) ss.41, 43, 44, 52
Bankruptcy Regulations 1996 (Cth) reg.4.02
Federal Circuit Court Rules 2001 (Cth)

Cases Cited:
Katter v Melhem (No 2) [2014] FCA 1176
Ramsay Health Care Australia Pty Ltd v Compton [2015] FCA 1207
Capocchiano v Young [2013] NSWSC 879
Capocchiano v Shellharbour City Council [2015] NSWLEC 28

Applicant:

DAVID GREGORY YOUNG IN HIS CAPACITY AS LIQUIDATOR OF GREAT WALL RESOURCES PTY LTD (IN LIQUIDATION) ACN 080 224 808

First Respondent:

FRANK CAPOCCHIANO

Second Respondent:

ITALIA CAPOCCHIANO

File Number:

SYG 1321 of 2015

Judgment of:

Judge Emmett

Hearing date:

8 December 2015

Date of Last Submission:

8 December 2015

Delivered at:

Sydney

Delivered on:

17 December 2015

REPRESENTATION

Counsel for the Applicant:

Mr Stephen Ipp

Solicitors for the Applicant:

Kemp Strang

The first respondent appeared in person with the assistance of an Italian interpreter. No appearance by or on behalf of the second respondent.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1321 of 2015

DAVID GREGORY YOUNG IN HIS CAPACITY AS LIQUIDATOR OF GREAT WALL RESOURCES PTY LTD (IN LIQUIDATION) ACN 080 224 808

Applicant

And

FRANK CAPOCCHIANO

First Respondent

ITALIA CAPOCCHIANO

Second Respondent

REASONS FOR JUDGMENT

This is an application for Sequestration Orders against the Estates of each of the first and second respondents.
The applicant is the liquidator of Great Wall Resources Pty Ltd (in liquidation) (“the Liquidator”) (“Great Wall”). The first respondent is a director and shareholder of Great Wall. The second respondent is the wife of the first respondent and is neither a director nor a shareholder of Great Wall.
On 3 August 2015, the respondents filed a Notice of Opposition to the applicant’s Creditor’s Petitions (“the Petitions”).

The Statement of Opposition was expressed to be on the following grounds:
“1. I, Frank Capocchiano respondent in this matter and as former sole director, shareholder and sole orchestrator of all of Great Wall Resources pty ltd financial matter including buying and selling and financing purchases of all properties for Great Wall Resoures and comserv no.1074 pty, ltd and declare that by my estimation the applicant has recovered a surplus of three million dollars from the sale of all assets and has a duty to pay the remaining creditors…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

Continue reading Young v Capocchiano

Details

AGLC: Young v Capocchiano [2015] FCCA 3346
Case: [2015] FCCA 3346
Decision Date: 17 December 2015

CaseChat Overview and Summary

In *Young v Capocchiano*, Emmett J of the Federal Circuit Court of Australia considered bankruptcy petitions based on non-compliance with bankruptcy notices. The notices were issued for a total debt of $203,179.02, which arose from an unpaid costs judgment granted by Kunc J in the Supreme Court of New South Wales. This costs judgment followed a proceeding where the respondents failed to prove they were creditors of Great Wall, and Kunc J ordered them to pay the Liquidator's costs.

The primary legal issue before Emmett J was whether the Court should exercise its discretion to "go behind" the existing costs judgment. The respondents sought to oppose the bankruptcy petitions on grounds that included the Liquidator's alleged duty to distribute a surplus from asset sales, the manner of asset sales, and a claim that the proof of debt proceedings had not determined their status as creditors or debtors. Essentially, the respondents argued that no debt was owed to the Liquidator.

Emmett J accepted that the respondents' grounds of opposition were intended to raise the argument that no debt was owed and that the Court should go behind the judgment. However, based on the evidence presented, his Honour was satisfied that the acts of bankruptcy occurred on 28 April 2015, that the bankruptcy petitions complied with the relevant legislative requirements, and that the petitions and supporting affidavits had been properly served on the respondents. The Court was satisfied that the statutory requirements for the bankruptcy petitions had been met.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The Bankruptcy Notices were for a total debt amount of $203,179.02. That amount was the subject of a Judgment/Order issued on 3 February 2015 (“the Judgment Debt”). The Judgment Debt arose from an unpaid costs Judgment following a six day hearing in June 2013 before Kunc J in the Supreme Court of New South Wales. The proceeding arose from a rejection of a Proof of Debt lodged by the Liquidator in the winding-up of Great Wall. Kunc J found that the respondents failed to demonstrate that the Liquidator erred in rejecting the respondents Proof of Debt. Kunc J found that the Liquidator was correct to reject the Proof of Debt and found that the respondents had not proved that they are creditors of Great Wall for any amount at all. Kunc J noted that, having been unsuccessful, no persuasive reasons were advanced by the respondents as to why costs should not follow the event and ordered that the respondents pay the costs of the Liquidator. Following a costs assessment, dated 12 November 2014, the costs were assessed to be in the amount of $203,179.02. The first respondent confirmed at the hearing that the Grounds of Opposition upon which he relied were accurately summarised in the Liquidator’s Outline of Submissions as follows:“It appears from the Grounds that the respondents oppose the petitions on the following grounds:(a) the Liquidator has recovered a $3 million surplus from the sale of assets of Great Wall and has a duty to pay that surplus to creditors;(b) the Liquidator has sold assets of Great Wall without first determining “who the true creditors were”;(c) the proof of debt proceedings have not determined whether the respondents are creditors or debtors of Great Wall, this should be determined “via mediation” before the sale of any assets;(d) the Liquidator “has always denied me access to all of the information surrounding this liquidation and we the applicants are true creditors to Great Wall Resources”.” I accept that the effect of those grounds is intended to be a submission by the respondents that there is no debt by them owing to the Liquidator and that the Court should exercise its discretion to go behind the Judgment Debt upon which the Petitions, served on the respondents on 8 June 2015, are based. The Petitions were filed on 14 May 2015 and relied on the failure of the respondents to comply with the Bankruptcy Notices served on each of the first and second respondents. Based on the evidence before me, I am satisfied that the Acts of Bankruptcy occurred on 28 April 2015 and that the Petitions comply with the relevant legislative scheme under the Act and the Regulations. I am also satisfied that the Petitions and affidavits were served on the respondents in accordance with the Federal Circuit Court Rules 2001 (Cth) on 8 June 2015. The Petitions were presented on 14 May 2015 in accordance with ss.43 and 44 of the Act. Further, as referred to above, an Affidavit of Final Search and Affidavit of Final Debt were filed and served in accordance with the statutory regime.

Ratio Decidendi

Legal Principle Established

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