Zahos v Hatzistergos

[2012] FMCA 780

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ZAHOS v HATZISTERGOS [2012] FMCA 780

BANKRUPTCY – Application for leave to proceed against bankruptcy in NSW Supreme Court by creditor – where leave previously granted limited to a Statement of Claim – where Statement of Claim to be amended – further leave required.

Conveyancing Act 1919, s.39

Niland v Macchia (1997) 78 FCR 419
Kassem, in the matter of Koutavas v Struthers [2011] FCA 322

Applicant: TERRY ZAHOS

Respondent: HARRY HATZISTERGOS

File Number: SYG 978 of 2012

Judgment of: Raphael FM

Hearing date: 22 August 2012

Date of Last Submission: 22 August 2012

Delivered at: Sydney

Delivered on: 22 August 2012

REPRESENTATION

Counsel for the Applicant: Mr C Wood

Solicitors for the Applicant: Robertson & Associates

Solicitors for the Respondent: Beazley Singleton

ORDERS

1. That the condition imposed by paragraph 2a of orders made 2 July 2012 herein, the orders be amended, with effect from the date of this order, to include within the definition of “the Permitted Relief” in the document attached and marked A entitled “Proposed Amended Statement of Claim” (“the Additional Claims”).

2. Without giving any indication as to the merits of the Statement of Claim, leave be granted to Mr Zahos pursuant to section 58(3) of the Bankruptcy Act 1966 to commence and prosecute the additional claims by amendment to the Statement of Claim in proceedings 2012/88916 in the Supreme Court of New South Wales subject to the same conditions as set out in paragraphs 2 and 3 of the orders made 21 July 2012.

3. Applicant to pay the Trustee’s costs of and incidental to the application dated 7 August 2012.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 978 of 2012

TERRY ZAHOS

Applicant

And

HARRY HATZISTERGOS

Respondent

REASONS FOR JUDGMENT

1. On 2 July 2012 I made orders that the applicant have leave to proceed in certain proceedings in the Supreme Court of New South Wales, pursuant to which he sought declarations under s.37A of the Conveyancing Act 1919 that the respondent bankrupt had alienated property with the intention to defraud creditors.  The orders were made, eventually, with the consent of the bankruptcy trustee and were restricted to a statement of claim that had been annexed to the short minutes of order that were handed up to me.  In matters of this nature it is normal for the trustee to bring any proceedings of the type envisaged as any right of the bankrupt is now vested in him.  But I was satisfied that in this particular case, given the lack of funds of the trustee, it was more appropriate that the applicant bring those proceedings.

2. After the orders were made on 2 July some further investigations were made and it was revealed that the bankrupt may well have alienated approximately $185,000.00, in addition to, or possibly as an alternative to, the claims that were made in the original statement of claim. As a result the applicant brought the matter back for leave to amend the orders made on 2 July to include, within the definition of the permitted relief, the additional claims referenced in a document entitled “Proposed Amended Statement of Claim. 

3. The matter came before me on two occasions.  On the first I ordered that a full draft of the amended statement of claim be provided to the respondent and to the trustee.  I also ordered the respondent to advise the applicant of the nature of any objections to the proposed application by 17 August and if he maintained his opposition to the proposal he should file and serve a notice of objection and any affidavits in support upon which he intended to rely by 20 August.  It is fair to say that in the original application made by the applicant he sought an order that Mr Hatzistergos’ bankruptcy be extended and that caused Mr Hatzistergos to be represented at the first hearing.  The claim was later withdrawn, the applicant having taken account of the decision of the Western Australian Supreme Court in Niland v Macchia (1997) 78 FCR 419. The trustee has been represented throughout by Mr Beasley who has had negotiations with the applicant and now neither consents nor opposes the order being made.

4. This morning I received some helpful written submissions from Mr Wood, who appears on behalf of the applicant, in which he notes that the trustee wrote a letter of demand for the $185,000.00 to those persons to whom it had allegedly been transferred but that the trustee had no funds to follow up any action under ss.120 or 121 or the administrative sections of the Bankruptcy Act 1966 (Cth). The orders which the applicant seeks in the statement of claim have the effect of transferring any funds recovered by the action to the bankrupt estate of Mr Hatzistergos and so there is no special benefit being given to the applicant.

5. As Mr Wood pointed out in his submissions this case has many similarities to that of Kassem, in the matter of Koutavas v Struthers [2011] FCA 322[1] in which Yates J gave leave to proceed to a creditor.  I draw comfort from his Honour’s decision and accept that his analysis supports the grant of leave that is sought in this application.  I will therefore make orders in accordance with the short minutes that have been provided to me this morning and which I have initialled and placed with the papers. 

   [1] “Kassem”

6. The only matter to be resolved is the question of costs.  The applicant asks that Mr Hatzistergos pays the costs.  Mr Hatzistergos, through his counsel, has indicated that he believes that the applicant should pay at least some of the costs particularly those relating to the claim for an extension of his bankruptcy which was later withdrawn.  In Kassem the bankrupt’s wife appeared and objected to the order being made.  Yates J made orders that she should pay the applicant’s costs.  This is not quite what has happened here. 

7. The orders I made on 2 July included an order that the applicant pay the trustee’s costs.  As Mr Beasley reminds me today the amended statement of claim that I have now approved is not based upon new facts but on a reformulation of the basis of the claim.  The agreement that the parties have come to is as a result of negotiations between them.  It seems to me that, in those circumstances, the applicant should pay the trustee’s costs.  As for those of the respondent, who is not present today, Mr Wood suggests that I make those costs, the costs of the Supreme Court proceedings.  But I think there may be some difficulty with a Federal court making orders as to costs in State court proceedings.  What is clear is that Mr Hatzistergos objected to the orders being made, not just order 3 relating to the continuation of his bankruptcy, but to the general orders sought and that has added to the costs of the matter.  However, given that he was also required to take legal advice and have some representation to ward off the clearly misguided claim, I think that, in all the circumstances, the appropriate order is to make no order as between the applicant and Mr Hatzistergos.

8. I have amended the short minutes to take into account these orders so that it now reads:

   (1)That the condition imposed by paragraph 2a of orders made 2 July 2012 herein, the orders be amended, with effect from the date of this order, to include within the definition of “the Permitted Relief” in the document attached and marked A entitled “Proposed Amended Statement of Claim” (“the Additional Claims”).

   (2)Without giving any indication as to the merits of the Statement of Claim, leave be granted to Mr Zahos pursuant to section 58(3) of the Bankruptcy Act 1966 to commence and prosecute the additional claims by amendment to the Statement of Claim in proceedings 2012/88916 in the Supreme Court of New South Wales subject to the same conditions as set out in paragraphs 2 and 3 of the orders made 21 July 2012.

   (3)Applicant to pay the Trustee’s costs of and incidental to the application dated 7 August 2012.

I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Raphael FM

Date:  31 August 2012