Burt v Yiannakis
[2018] NZHC 3102
•28 November 2018
IN THE HIGH COURT OF NEW ZEALAND HAMILTON REGISTRY
I TE KŌTI MATUA O AOTEAROA KIRIKIRIROA ROHE
CIV-2017-419-0184
[2018] NZHC 3102
IN THE MATTER
AND
of the Insolvency Act 2006 IN THE MATTER
of the bankruptcy of YIANNOS YIANNAKIS
BETWEEN
DEANNE MARGARET BURT
Judgment Creditor
AND
YIANNOS YIANNAKIS
Judgment Debtor
Hearing: 3 October and 23 November 2018 Appearances:
C Bunce for the Judgment Creditor
Judgment Debtor in person (via Audio Link)
Judgment:
28 November 2018
JUDGMENT OF ASSOCIATE JUDGE SMITH
This judgment was delivered by me on 28 November 2018 at 2.00pm, pursuant to r 11.5 of the High Court Rules
Registrar/Deputy Registrar
Solicitors / Counsel:
Harkness Henry, Hamilton
BURT v YIANNAKIS [2018] NZHC 3102 [28 November 2018]
[1] The judgment Creditor (Ms Burt) applies for an order adjudicating the judgment debtor (Mr Yiannakis) bankrupt.
[2] Ms Burt relies on consent orders (the Consent Orders) made in this Court on 17 October 2016 under the Property (Relationships) Act 1976 (the PRA). Among other orders, there were orders requiring Mr Yiannakis to pay to Ms Burt the sum of
$450,000, in two tranches. The first tranche ($250,000) has been paid. Mr Yiannakis was ordered to pay the second tranche of $200,000 within 15 weeks from the date of the Consent Orders.
[3] That $200,000 has not been paid, and on 22 June 2017 Ms Burt issued a bankruptcy notice claiming that sum together with interest thereon at five per cent per annum and costs. On 1 September 2017 an order was made granting her leave to serve the bankruptcy notice in Bangkok, Thailand, where Mr Yiannakis now resides. Mr Yiannakis was allowed 20 working days after service to pay the amount demanded in the bankruptcy notice, or to file an application in this Court setting it aside.
[4] There is an issue as to whether the bankruptcy notice was properly served. An affidavit has been provided by Mr Macdonald, Ms Burt's former solicitor, stating that on 28 October 2017 he served Mr Yiannakis with the bankruptcy notice and the order granting leave to serve out of New Zealand. Mr Macdonald either happened to be passing through Bangkok, or travelled to Bangkok to effect the service. In any event, he deposes that on 28 October 2017 he went into the foyer of the apartment block in Bangkok in which Mr Yiannakis then resided. Mr Macdonald said in his affidavit that when Mr Yiannakis came out of the lift Mr Macdonald called his name and told him that he had bankruptcy documents issued by the Court to serve on Mr Yiannakis. Mr Macdonald's evidence is that Mr Yiannakis then walked out of the door of the building and began to walk away. Mr Macdonald stated that he went after him, calling out his name and telling him that he had papers to serve on him. When Mr Macdonald got closer, Mr Yiannakis began to run away. Mr Macdonald said that he caught up to him, and again told Mr Yiannakis that he had papers to serve on him. Mr Yiannakis did not stop, and Mr Macdonald reached out and touched his back or shoulder with the papers and told him that he was served. Mr Macdonald then let the papers fall to the ground, telling Mr Yiannakis that he had effected service. Mr Yiannakis kept on
running, and Mr Macdonald left the Court papers where they had fallen. Mr Macdonald said he was certain that it was Mr Yiannakis, because Mr Yiannakis was known personally to him.
[5] In an affidavit sworn on 15 March 2018 Mr Yiannakis denied that he had been served by Mr Macdonald with Court papers in Thailand. He said he had only ever met Mr Macdonald in New Zealand at the High Court.
[6] Ms Burt issued her bankruptcy adjudication proceeding on 8 February 2018. In her application, she contended that Mr Yiannakis had committed an act of bankruptcy, in that he had failed to comply with the bankruptcy notice served on him on 28 October 2017. She calculated the debt owing, including interest to 2 February 2018, at $210,082.19.
[7] Mr Yiannakis filed a notice of opposition dated 9 April 2018. In it, he contended that Ms Burt had been offered full payment of the outstanding debt of
$200,000 on at least five occasions, most recently on 25 May 2017. But Ms Burt had imposed conditions on her acceptance of the money that were not permissible under the Consent Orders. Mr Yiannakis filed an affidavit in support, and he relies on the further evidence contained in that affidavit.
[8] When the case was called on 3 October 2018, it appeared that the parties might be able to resolve the issues by agreement. The application was adjourned for the parties to endeavour to settle the matter, but in the event no settlement was reached. I heard further brief argument from counsel and Mr Yiannakis when the case was called again on 23 November 2018.
The Consent Orders
[9]The Consent Orders included the following:
Property Transfers
1.Within 14 days from the date of making these orders Ms Burt will do all acts and things and sign all documents necessary to transfer to Mr Yiannakis her shares with Winchmore Estates Limited (which owns [a property at St Stephens Avenue], Parnell, Auckland
("St Stephens property")). This will include the assignment of the current account in Winchmore Estates Limited to Mr Yiannakis.
2.Within 15 weeks from the date of making these orders Ms Burt will do all acts and things and sign all documents necessary to transfer to Mr Yiannakis the whole of her right, title and interest in [a] property [in] Tower Terrace, London N22 6SX ("Tower Terrace property") subject to the existing loan with HSBC Bank. This order is subject to Mr Yiannakis' compliance with order 11(b) (payment of $200,000 to Ms Burt).
3.Within 15 weeks from the date of making these orders Ms Burt will do all acts and things and sign all documents necessary to transfer to Mr Yiannakis the whole of her right, title and interest in [a] property [in] Alexandra Road London N8 0PP ("Alexandra Road Property") subject to the existing loan with Barclays Bank. This order is subject to Mr Yiannakis' compliance with order 11(b) (payment of $200,000 to Ms Burt).
Claims to the property in the UK
4.The parties consent to the High Court having jurisdiction with respect to:
a.…
b.…
c.…
d.[the Tower Terrace property];
e.[the Alexandra Road property]; and
…
5.Ms Burt agrees to forego any claim (at law, in equity) in any jurisdiction with respect to the UK Properties.
6.Ms Burt shall pay Mr Yiannakis' costs on an indemnity basis in the event any application is made by her in respect of the UK Properties.
7.Ms Burt (if called upon) by Mr Yiannakis shall sign all documents necessary to give legal effect to order 6 in any jurisdiction.
Implementation
8.For the purposes of orders 2 to 4.
a.Mr Yiannakis shall pay the costs with respect to the transfer of the Tower Terrace Property and Alexandra Road Property;
…
Indemnity
9.Mr Yiannakis shall:
a.Arrange to release Ms Burt from any liability with respect to any loan in relation to the St Stephens property, Tower Terrace property and Alexandra Road property; and
b.Indemnify and keep indemnified Ms Burt with respect to any loss, claim or default arising from any outgoings on the St Stephens property and/or the UK properties but not limited to loan repayments, rates and insurance.
Settlement Amount
10.In consideration of paragraphs 1 to 10 Mr Yiannakis shall pay Ms Burt the total settlement amount of $450,000.00 ("settlement amount") being:
a.$250,000.00 payable within 14 days from the date of these orders subject to Ms Burt immediately consenting to Westpac releasing these funds from the existing line of credit;
b.$200,000.00 being the balance payable within 15 weeks from the date of the orders.
11.In the event that the settlement amount or part thereof is not paid within the time frames under order 11, interest will accrue at the rate of 5% per annum from the date of default to the date of payment.
12.All other assets to lie where they fall including real estate, bank accounts, shares, motor vehicles and any other property of whatsoever nature and kind.
13.For the avoidance of doubt and subject to the payment of the settlement amount, Mr Yiannakis shall retain as his separate property:
a.UK properties; and
b.Shares in Winchmore Estates Limited.
14.In the event that Ms Burt has to take enforcement action then Mr Yiannakis will pay costs on an indemnity basis.
15.No order as to costs.
Proposed application by judgment creditor for declaration as to the interpretation of the Consent Orders
[10] Following the adjournment of the hearing on 3 October 2018, Mr Bunce filed memoranda on 31 October and 22 November 2018 advising that in order to resolve any issue over the interpretation of the Consent Orders, Ms Burt would make an
application to the Court in the proceeding in which the Consent Orders had been made. Initially, the intention appears to have been to seek sequestration, or contempt orders, on the basis that Mr Yiannakis had failed to comply with the Consent Orders. Mr Bunce indicated that a further adjournment would be sought in this proceeding to March 2019, to allow the proposed contempt proceeding to be heard and determined.
[11]Mr Yiannakis filed a memorandum opposing any further adjournment.
[12] In the 22 November 2018 memorandum, Mr Bunce maintained that the Consent Orders were clear and they obliged Mr Yiannakis to pay the $200,000 which Ms Burt claims. The proposed application (whether for sequestration or contempt orders, or for declaratory relief) relating to the interpretation of the Consent Orders was filed only on the basis that the Court in this proceeding might take a different view of what Mr Bunce submitted was a clear obligation on Mr Yiannakis to pay the
$200,000 plus interest. Mr Bunce attached a copy of a memorandum (also dated 22 November) in which an urgent telephone conference was sought in the proceeding in which the Consent Orders had been made, for the purpose of seeking directions on the correct interpretation of the Consent Orders.
[13] When the case was called on 23 November 2018, Mr Bunce advised that no formal application had been filed in the Consent Orders proceeding, and no response to the request for an urgent telephone conference had been received from the Court. There appeared to be no certainty that a determination on the interpretation of the Consent Orders would be obtained by the March 2019 date to which Mr Bunce proposed that this proceeding be adjourned. In those circumstances I declined Ms Burt's application to further adjourn the matter.
Bankruptcy adjudication applications – legal principles
[14]Section 13 of the Insolvency Act 2006 (the Act) provides:
13 When creditor may apply for debtor’s adjudication
A creditor may apply for a debtor to be adjudicated bankrupt if—
(a)the debtor owes the creditor $1,000 or more or, if 2 or more creditors join in the application, the debtor owes a total of
$1,000 or more to those creditors between them; and
(b)the debtor has committed an act of bankruptcy within the period of 3 months before the filing of the application; and
(c)the debt is a certain amount; and
(d)the debt is payable either immediately or at a date in the future that is certain.
[15]Section 37 of the Act provides:
37 Court may refuse adjudication
The court may, at its discretion, refuse to adjudicate the debtor bankrupt if—
(a)the applicant creditor has not established the requirements set out in section 13; or
(b)the debtor is able to pay his or her debts; or
(c)it is just and equitable that the court does not make an order of adjudication; or
(d)for any other reason an order of adjudication should not be made.
[16] A leading authority on the exercise of the Court's discretion under s 37 of the Act is Baker v Westpac Banking Corp. In that case Richardson J said:1
It is proper for the Court to consider not only the interests of those directly concerned – the petitioner, other creditors, the debtor – but also the wider public interest. A creditor who establishes the jurisdictional facts … is not automatically entitled to an order. On the other hand, it is for an opposing debtor to show why an order should not be made. The Court will give proper weight to the commercial judgment of the petitioner but the oppressive use of the bankruptcy process may be a ground for refusing an order. Another ground may be the undoubted absence of assets but that will not necessarily preclude an order given the range of interests involved including the public interest in the continuing oversight of a bankrupt's affairs and the disqualifications that go with bankruptcy. In the end the Court must balance the various considerations relevant to the case and determine whether the debtor has succeeded in showing that an order ought not to be made.
[17] The Court's starting point in considering a creditor's application for adjudication, then, is that the judgment creditor, having satisfied the s 13 requirements,
1 Baker v Westpac Banking Corp CA 212/92, 13 July 1993 at 4.
is prima facie entitled to an order for adjudication. The order is not to be refused on the grounds of expedience or convenience, but each case is to be considered on its own terms.2
[18] The learned authors of Insolvency Law and Practice state in respect of the exercise of the Court's discretion:3
When exercising its discretion, the court is required to consider whether the debtor is "able to pay his or her debts". This may require considerations of solvency at the date of the hearing or the probability of full payment over a period. It does not require consideration of the willingness of the debtor to meet the debt but it does require an ability to meet debts over time: Re Stirling, ex parte Webb Ross & Co [1990] 1 NZLR 569; Re Alexander, ex parte BNZ HC Wellington B244/96, 4 December 1996; Re Plimmerton Courtyard Ltd, ex parte Franklin HC Wellington CIV-2008-485-2613, 2 July 2009. It also requires consideration of the interests of creditors in being put out of their money for what, in some cases, are considerable periods: Re Fidow [1989] 2 NZLR 431. It is the essence of bankruptcy proceedings that they are brought to finality within a reasonable period: Re Guest, ex parte BNZ Finance Ltd [1991] 2 NZLR 477, 479; Re Guest, ex parte BNZ Finance Ltd [1991] 1 NZLR
250; (1990) 4 PRNZ 351 (HC) (at 255 and 356).
[19] In the very recent Court of Appeal decision in Body Corporate 68792 v Memelink,4 the Court of Appeal confirmed that the scheme of the insolvency legislation is to provide an appropriate means of dealing with insolvency, and not debt collection. The Court noted that it is well established that proof of ability to pay debts does not include proof of willingness to pay debts.5 The Court accepted on the facts of the case that Mr Memelink was someone who was unwilling, rather than unable, to meet his debts.6
2 Baker v Westpac Banking Corp, above n 1, at 4, and Strachan v Moodie [2014] NZHC 3167 at [35].
3 Brookers Insolvency Law and Practice (loose leaf ed at IN37.04).
4 Body Corporate 68792 v Memelink [2018] NZCA 509.
5 At [18].
6 At [20].
Mr Yiannakis' evidence and submissions
Mr Yiannakis' evidence
[20] Mr Yiannakis' first affidavit was sworn on 15 March 2018. In it, he confirmed that settlement of $200,000 had been offered to Ms Burt through her lawyer on several occasions, most recently on 25 May 2017.
[21] With reference to the implementation of the Consent Orders, Mr Yiannakis said that extensive work had been done in the United Kingdom through the two lending banks, HSBC and Barclays Bank (together, "the London banks"), to allow transfer of title of the (jointly owned) Tower Terrace and Alexandra Road properties (collectively "the London properties"). He said that finance was also raised in the United Kingdom, in February 2017, to meet the $200,000 payment.
[22] Mr Yiannakis went on to say that, throughout this process, Ms Burt has had the security of being on the titles to the London properties, and that security "far exceeds her owed settlement". Mr Yiannakis asserted that transfer of the $200,000 is dependent on Ms Burt transferring to him her interest in the London properties, but she has so far refused to transfer her interest.
[23] Mr Yiannakis attached a number of documents to his affidavit, including a detailed chronology covering events from October 2016 to 10 May 2017. It is evident from this chronology that Mr Yiannakis had extensive communications in the early stages with Ms Burt's former solicitor, Mr Macdonald. For example, Mr Yiannakis told Mr Macdonald in January 2017 that he was attempting to get the lenders' consent to remove Ms Burt's name from the mortgages over the London properties. He said that was "not so straightforward as both our financial circumstances have changed since we took out the joint mortgages". And Mr Yiannakis said that on 16 February 2017 he told Mr Macdonald that "it has been a complicated process as we have yet to get permission from [the London banks] to remove [Ms Burt's] name from the title".
[24] Mr Yiannakis' chronology stated that on 27 February 2017 he sent further correspondence to Mr Macdonald advising that the London banks required Ms Burt to stay on the mortgages as she is jointly liable for the debts. The chronology went on to
say "However I agreed to still pay the $200,000 owing as long as the title is transferred." Mr Yiannakis said that he sent Mr Macdonald proof of his ability to fund the $200,000 payable to Ms Burt, on 28 February 2017.
[25] Mr Yiannakis said that he received an email from Mr Macdonald on 13 March 2017, demanding that payment of the $200,000 be made before the transfer of title.
[26] Among the documents produced by Mr Yiannakis was a letter from HSBC dated 11 April 2017. In it, HSBC indicated that it had no objection to the transfer of ownership of Ms Burt's interest in the Tower Terrace property. In a letter from Barclays Bank dated 6 April 2017, that bank also agreed to the proposed transfer of the Alexandra Road property into the sole name of Mr Yiannakis (subject to the bank's mortgage). However, Barclays was not willing to release Ms Burt from her mortgage covenant – both borrowers would remain jointly and severally responsible for the mortgage commitment. It appears that HSBC took the same stance – neither bank was prepared to release Ms Burt from her mortgage covenant.
[27] Mr Yiannakis said that the 11 April 2017 correspondence from Barclays Bank was forwarded to Mr Macdonald. It appears that Ms Burt, through her solicitor, continued to insist that she be released as a borrower.
[28] Mr Macdonald set out Ms Burt's position in an email dated 14 March 2017, in the following terms:
… By the Court order you were obliged to pay 2 amounts to [Ms Burt] – one dependent on her transferring her interest in St Stephens to you and the other based on her transferring her interest in [the London properties] to you – Her obligation is to sign what she has to and to cooperate in the transfer process.
St Stephens is now yours and [Ms Burt] is ready willing and able to sign any documents to enable the UK transfers to take place. Transfer of the UK titles should have been initiated when the order was agreed – but even now we have not been asked to sign anything. You say the bank will not release [Ms Burt] from the mortgage – we have asked for a copy of the bank's requirements and you have not copied these to us – but your obligation was to secure her release.
You have many properties in the UK and at least one debt free – we need to understand from your lawyers where there is a problem here and they have not explained this. We want this resolved without further delay …
Please can you send us a copy of the bank requirements and get your solicitors to explain the delay.
[29] Mr Yiannakis' chronology recorded that the difficulties with removing Ms Burt's name from the mortgages on the London properties were not resolved by 9 May 2017. On that date, Mr Yiannakis suggested that the parties proceed with a transfer of the Alexandra Road property into Mr Yiannakis' name, with Mr Yiannakis paying half of the agreed amount ($100,000) to Ms Burt pending approval being obtained from the local branch at HSBC for the transfer of the other London property to Mr Yiannakis. Mr Yiannakis said that Mr Macdonald sent him an email on 10 May 2017, asserting that the bank's requirements were not relevant.
[30] The last entry in Mr Yiannakis' chronology recorded an email to Mr Macdonald and Ms Burt stating that tax returns for the London properties (both of which were let to tenants) had been done entirely in Ms Burt's name, and the position was that the London banks would not release her from their respective mortgages. Mr Yiannakis said that he had offered a reasonable solution, by providing an indemnity against the debt both in New Zealand and the United Kingdom.
Mr Yiannakis' submissions
[31] Mr Yiannakis submitted that he has done his best to fulfil his obligations under the Consent Orders. He transferred $250,000 to Ms Burt in December 2016, and he has offered to pay the outstanding $200,000 on a number of occasions. He submitted that Ms Burt has refused to accept the final payment.
[32] Mr Yiannakis confirmed that, although the London banks will permit the removal of Ms Burt's name from the titles to the London properties, they will not allow the removal of her name from their respective mortgages. He submitted that that should not have been a barrier to completing settlement under the Consent Orders. He submitted that the loan to value ratios on the London properties is low, and that Ms Burt's risk would be minimal if she transferred the London properties to him in exchange for payment of the $200,000. He noted that he has offered to indemnify Ms Burt from any liability arising from any default under the two mortgages, saying that his indemnity offer went beyond what was required of him by the Consent Orders.
[33] More generally, Mr Yiannakis rejected the contention that he has reneged on his agreement with Ms Burt. He said that he has travelled to London, raised finance, and engaged UK-based lawyers to handle the title transfer, and he has contacted the London banks to request that Ms Burt be released from the loans. He said that he has been willing and able to pay the outstanding balance since February 2017, and that there is nothing for him to gain by keeping Ms Burt on the loan documents.
[34] Mr Yiannakis submitted that it is standard practice in Thailand for any notice to be served by a local firm, with the police involved to verify that the notice has been served, and digital images taken as proof.
[35] Mr Yiannakis produced a copy of a cheque in the sum of £233,625 (NZ$461,465) which he said he raised on 17 February 2017. In addition, he attached screen shots showing that he had savings (as at 21 September 2018) of £129,629.05 (NZ$255,843.87). He submitted that is more than enough to satisfy the debt, and it could be transferred to New Zealand within 10 working days if a settlement were reached.
[36] Mr Yiannakis submitted that the fact that the London banks were unwilling to release Ms Burt from her mortgage debt is a matter beyond his control. He has attempted to overcome that difficulty by offering Ms Burt a side agreement indemnifying her against the bank debts, and paying the $200,000 to her, but that has been unacceptable to Ms Burt.
[37] Mr Yiannakis submitted that there is no risk of Ms Burt ever having to pay anything under the two mortgages. He said that the Alexandra Road property has been valued at £425,000 (with a debt of £176,000, leaving an equity of £249,000 (NZ$498,000)). The loan on Alexandra Road has 15 years left to run. He said that the Tower Terrace property has been valued at £365,000, and is subject to a debt of
£84,000. The equity in it is therefore £281,000 (NZ$562,000). The mortgage on the Tower Terrace property has 13 years left to run.
[38] Against that background, Mr Yiannakis submitted that it would take an extraordinary sequence of events for Ms Burt to ever have to pay anything on her personal covenants under the two mortgages. He submitted that there is no risk to her.
[39] Mr Yiannakis then submitted that a bankruptcy adjudication order in New Zealand would not assist Ms Burt: it would make no difference to the stance taken by the London banks.
[40] Mr Yiannakis submitted that he is not insolvent, and has funds ready to settle the case. He says that he wants to pay the debt and move on with his life.
[41] In a brief memorandum dated 2 November 2018, Mr Yiannakis advised that he has renewed his offer of $200,000 to complete the title transfer and legal indemnity he has proposed. He submitted that the indemnity he was offering was binding under UK law, and that there was no good reason for Ms Burt not to accept his offer.
Evidence and submissions for Ms Burt
[42] In her affidavit sworn on 30 April 2018, Ms Burt contended that Mr Yiannakis has failed to comply with the Consent Orders. He has made offers to settle on different terms from those set out in the Consent Orders, and those terms have not been accepted by her. She said that Mr Yiannakis should not only pay her the $200,000 plus interest, but also release her from any liability with respect to any loans over the St Stephens property or the London properties. If he does that, she will sign all necessary documents to transfer ownership of the London properties to him.
[43] Ms Burt's position on resolving the matter was set out in a letter from her solicitors to Mr Yiannakis dated 4 April 2018. The solicitors said that Ms Burt was not prepared to remain liable to the London banks upon transfer of the properties, and that Mr Yiannakis would need to make arrangements to refinance. Mr Yiannakis' current banks' refinancing requirements were not Ms Burt's responsibility or concern. If Mr Yiannakis was unable to refinance and keep the existing properties, he would have to sell one of them in order to meet his obligations under the Consent Orders, or refinance with a different bank. Ms Burt proposed that the bankruptcy application would be withdrawn if the following occurred:
(a)Mr Yiannakis arranged refinancing, removing Ms Burt from the mortgages;
(b)Ms Burt then transferred her interest in the London properties to Mr Yiannakis;
(c)Mr Yiannakis paid $200,000 plus interest and solicitors' costs to Ms Burt.
[44]Ms Burt said that her solicitors received no response to that letter.
[45] Ms Burt pointed out that all of Mr Yiannakis' offers have been conditional. The offer made by him on 9 May 2017 that he would pay half the settlement amount and transfer the Alexandra Road property into her name, would still have left her liable on the mortgage registered over Alexandra Road. Similarly, the offer of $200,000 made by Mr Yiannakis on 25 May 2017 would have removed her from the titles to the London properties, but she would have remained liable on the mortgages. She asserted that there was no requirement under the Consent Orders that she would remain on the mortgages before or after the settlement payments were made.
[46] Ms Burt contended that Mr Yiannakis has been doing everything he could to avoid selling. In her view, the settlement payments required by the Consent Orders were not contingent on Mr Yiannakis' banks' refinancing requirements.
[47] Ms Burt said that the indemnity offered by Mr Yiannakis does not provide her with any assurance. If he is unable to meet his obligations under the mortgages, and Ms Burt is called upon to pay under her personal covenants, his indemnity would be worthless. In any event, the Consent Orders expressly stated (at paragraph 9(a)) that Mr Yiannakis was to release her from any liability in respect of the London properties.
[48] In his submissions, Mr Bunce first noted a typographical error in the Consent Orders. The reference in cl 2 of the Consent Orders to "order 11(b)" should have been a reference to cl 10(b) of the Consent Orders.
[49] Mr Bunce submitted the $200,000 payable by Mr Yiannakis under the Consent Orders constitutes a certain amount for the purposes of s 13(c) of the Act, and the debt is payable immediately. Further, Mr Yiannakis has committed an act of bankruptcy by failing to comply with the bankruptcy notice served on him on 28 October 2017. He noted that Ms Burt's solicitor had also emailed a copy of the bankruptcy notice to Mr Yiannakis and his English solicitor on 27 June 2017, so there can be no argument that Mr Yiannakis was unaware of the notice.
[50] Mr Bunce noted Mr Yiannakis' argument that he has not paid the amount payable under the Consent Orders because Ms Burt has allegedly not fulfilled her obligations under the Consent Orders. Mr Bunce submitted that that is incorrect, and the reality is that Mr Yiannakis is simply not in the position to realise his assets. He cannot pay the debt due, and is therefore technically insolvent.
[51] Mr Bunce noted that all proposals from Mr Yiannakis to date have been made on the condition that Ms Burt would remain liable to the London banks on the debts owing on the London properties. Mr Yiannakis has never offered payment in accordance with the Consent Orders. Ms Burt has advised on several occasions, and as recently as 4 April 2018, that she will sign all documents necessary to transfer the ownership of the London properties provided Mr Yiannakis complies with the Consent Orders.
[52] Mr Yiannakis' submission that Ms Burt has full security for the $200,000 owed to her, having regard to the values of the London properties and the amounts presently secured over them, provides no assurance to Ms Burt. The proposals were made on the basis that Ms Burt would be removed from the title to the London properties before the payment was made. She would then be at risk if Mr Yiannakis defaulted, because she would no longer have the security of the titles.
[53] Mr Bunce acknowledged that the Court has a discretion in deciding whether to make an order for adjudication, but submitted that the discretion should be exercised in favour of making an order. He acknowledged that Mr Yiannakis owns properties, but Mr Yiannakis has not provided any evidence to show that there is any equity in the properties, or that he can pay the debt due to Ms Burt within a reasonable period.
[54] Mr Bunce submitted that Mr Yiannakis is now seeking to renege on the agreement embodied in the Consent Orders. Ms Burt would not have made that agreement if she had known that her ex-partner would not meet his side of the agreement.
Discussions and conclusions
[55] I think the first substantial issue between the parties is whether Ms Burt was entitled to insist on Mr Yiannakis discharging his obligation under paragraph 9(a) of the Consent Orders (arranging the release of Ms Burt from any liability with respect to the London properties) before the transfer of the London properties was completed in accordance with paragraphs 2 and 3 of the Consent Orders. It appears from the copies of his bank accounts as at 31 July 2018 that Mr Yiannakis has had sufficient funds to pay the $200,000 to Ms Burt, and has been prepared to do so in exchange for her transferring to him her interest in the London properties. The sticking point has been that he has not been able to procure a release for Ms Burt from her personal covenants under the two mortgages registered on the London properties, and has not been willing to sell either or both of the London properties to achieve the release.
[56] On my reading of the Consent Orders, I think it is reasonably arguable for Mr Yiannakis that procuring the release for Ms Burt under paragraph 9(a) was something that could be attended to after the $200,000 had been paid to Ms Burt and her interest in the London properties had been transferred to Mr Yiannakis. Under cls 2 and 3 of the Consent Orders Ms Burt's obligation to do all acts and things and sign all documents necessary to transfer to Mr Yiannakis her interests in the London properties was said to be "subject to the existing loans" with HSBC and Barclays Bank, and that wording appears to have contemplated that settlement would be effected (ie the payment of the $200,000 and the transfer of Ms Burt's interest in the London properties to Mr Yiannakis) before Mr Yiannakis was required to provide the release of Ms Burt's liabilities to the London banks under cl 9(a). The only qualification on Ms Burt's obligations under cls 2 and 3 of the Consent Orders was Mr Yiannakis' compliance with paragraph 10(b) of the orders, which required him to pay the
$200,000 to Ms Burt — there was no equivalent qualification requiring him to meet his obligations under cl 9(a) before Ms Burt was required to transfer her interest to
Mr Yiannakis. Nor is there anything in cl 9 of the Consent Orders to suggest that Mr Yiannakis was obliged to procure the cl 9(a) releases within the 15 week period for payment of the $200,000 under cls 2 and 3 of the Consent Orders.
[57] It appears on the evidence that the matter could have been resolved relatively early if Ms Burt had been prepared to transfer her interest in the London properties to Mr Yiannakis (against payment of the $200,000 and any interest thereon), without insisting that Mr Yiannakis also provide her with a contemporaneous release of her liabilities to the London banks. But it seems she was not prepared to do that.
[58] For this part, Mr Yiannakis appears to have believed that he could meet his obligations under cl 9 of the Consent Orders by simply providing Ms Burt with an indemnity in respect of her liabilities on her personal covenants to the London banks. On the face of it, that interpretation does not appear to be consistent with cl 9 of the Consent Orders, which called not only for the indemnity (cl 9(b)) but also for Mr Yiannakis to procure for Ms Burt releases of liability on the loans to the London banks. Nor in my view is it relevant to the interpretation of cl 9 that the values of the London properties, and the amounts secured over them, might make the risk of ultimate liability for Ms Burt low. On the face of it, she appears to be entitled to have Mr Yiannakis procure releases from the London banks, and that has not occurred.
[59] But I do not consider that Mr Yiannakis' apparently erroneous understanding of the requirements of cl 9(a) of the Consent Orders means that the bankruptcy adjudication application must succeed. As I have noted, Mr Yiannakis appears to have been willing and able to pay the $200,000 (in exchange for a transfer of Ms Burt's interest in the London properties), and I think it was reasonably arguable for him that his obligation under paragraph 9(a) was not a precondition to Ms Burt's obligation to transfer her interest in the London properties to him against payment of the $200,000. If Mr Yiannakis had paid the $200,000 (plus interest if any), Ms Burt might still have had a good claim for specific performance or damages (in respect of what appears on its face to have been non-compliance by Mr Yiannakis with his obligations under cl 9(a) of the Consent Orders), but in that situation there would have been no sum certain which could have provided a foundation for the bankruptcy notice and subsequent adjudication application.
[60] I take into account also the fact that Ms Burt remains the owner of a one half share of each of the London properties, which she is obliged by the Consent Orders to transfer to Mr Yiannakis. To that extent she has "security" for the amount she claims, although I accept that that "security" might not be strictly the kind of security contemplated by s 14 of the Act,7 in that her "security" might not qualify as a "charge" over Mr Yiannakis' assets). But if Ms Burt's half share in the London properties were treated as equivalent, or analogous, to security over Mr Yiannakis' assets, the equity figures provided by Mr Yiannakis suggest that the value of her interest in the London properties would significantly exceed the amount she is claiming from Mr Yiannakis.
[61] The latter point reflects the reality that, unlike most bankruptcy applications, this is not a simple debt situation — the creditor in this case also has undischarged obligations to the debtor. In my view those undischarged obligations must be taken into account in the exercise of my discretion under s 37(c) and/or (d) of the Act.
[62] Summing the position up, it appears that (i) both parties may have misconstrued their rights and obligations under the Consent Orders, and (ii) Mr Yiannakis has the money to pay the $200,000 plus interest. On the evidence, he is an "unwilling" debtor, of the kind referred to in Body Corporate 68792 v Memelink, and not one who is unable to pay. As that case illustrates, the insolvency jurisdiction is not designed to deal with such people. For all of those reasons, I do not think it would be fair to exercise my discretion in favour of making an order for adjudication, and I decline to do so. In those circumstances there is no need for me to make a finding on whether Mr Yiannakis was properly served with the bankruptcy notice.
Result
[63]The application for an adjudication order is dismissed.
7 Section 14 of the Insolvency Act 2006 provides:
14 Application by secured creditor
The court must not make an order of adjudication on the application of a secured creditor unless the creditor has established that the amount of the debt exceeds the value of the charge by at least $1,000.
[64] As a litigant in person Mr Yiannakis is not entitled to costs, and I am not prepared to make an order for disbursements in his favour. While he may consider the result of this case some sort of "victory", the dispute with Ms Burt is clearly not over, and it appears to me that there are respectable arguments to be made for her that cls 9(a) and (b) of the Consent Orders created cumulative obligations on Mr Yiannakis, that could not be discharged by simply offering an indemnity to Ms Burt. All this case has really decided is that the bankruptcy court is not the correct forum to resolve such arguments.
Associate Judge Smith
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