Re Thyssen, Natalie Ex Parte Maniotis, Basil & Ors [1996] FCA 65

IN THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA No VP 666 of 1995 Re: NATALIE THYSSEN Debtor Ex Parte:BASIL MANIOTIS, PETER MANIOTIS and SIXTY EIGHTH STOWAWAY PTY LTD Petitioning Creditors Coram: Olney J Place: Melbourne Judgment:15 February 1996 Reasons 21 February 1996 published: REASONS FOR JUDGMENT On 15 February 1996 I made a sequestration order against the estate of the debtor on the petition of the petitioning creditor. At the time of making the order I indicated briefly the view I had formed but said that I would in due course provide full written reasons. I now publish my reasons. THE ACT OF BANKRUPTCY The evidence establishes that on 12 December 1994 the petitioning creditor obtained a final judgment in the Supreme Court of Victoria against the debtor for the sum of $8,289.60 (the judgment debt). On 3 March 1995 the petitioning creditor caused a bankruptcy notice to be issued in respect of the judgment debt which notice required the debtor to respond within 14 days of its service. Service was effected on 18 May 1995. The debtor did not respond to the notice in accordance with its terms nor did she make any application to set aside the bankruptcy notice or seek an extension of time within which to comply. The debtor committed an act of bankruptcy on 1 June 1995. THE PETITION The creditor's petition was presented on 11 July 1995. It was duly verified as required by the Bankruptcy Act. It was served personally on the debtor on 29 July 1995. The petition relies upon the act of bankruptcy committed on 1 June 1995 when the debtor failed to respond to the bankruptcy notice. The petition was returnable on 22 August 1995. THE DEBTOR'S GROUNDS OF OPPOSITION On 18 August 1995 the debtor filed notice of intention to appear and to oppose the petition on the ground - That pursuant to s 52(2) Bankruptcy Act 1966 (Cth), the Court should exercise its discretion not to make a sequestration order against the debtor as the debtor has a counter-claim, set-off or cross-demand which exceeds the amount of the judgment debt which founds the Bankruptcy Notice and is claimed in the petition. The notice of intention to appear was signed by Law Partners as solicitors for the debtor and was supported by two affidavits filed on the same day. The first affidavit was sworn by Gene Volovich, a solicitor employed by Law Partners, on 18 August 1995. Volovich says that in January 1995 the debtor contacted his firm in relation to issuing Supreme Court proceedings to recover a debt owed to her by Basil and Peter Maniotis and the firm agreed to carry out all legal work for her on a "no win-no fee" basis. Instructions were received from the debtor during January, February and March 1995 and counsel was instructed to prepare a statement of claim which was later received by Law Partners on 30 June 1995. On 21 July 1995 Supreme Court proceeding 6664 of 1995 was commenced. The debtor is one of three plaintiffs named in the proceeding and Basil and Peter Maniotis are two of the defendants. The second affidavit filed on 18 August 1995 was sworn by the debtor on that day. The facts deposed to are as follows. The debtor says that the judgment relied upon in the bankruptcy notice is an order for costs made against her following the discontinuance by her of Supreme Court proceeding 5354 of 1994 issued on 7 April 1994 in which action she and Valimi Pty Ltd (Valimi) were the plaintiffs and the petitioning creditors were three of the seven defendants. The proceeding had to do with a partnership entered into between Valimi and B & P Maniotis in 1985. (A copy of the writ exhibited to the affidavit shows the proceeding number was 5357 of 1994 and the debtor was the sole plaintiff. Valimi was not a party to the proceeding). The debtor then says that on 18 May 1994 Master Wheeler ordered that the statement of claim be amended to remove Valimi as a plaintiff and granted leave to her to amend the statement of claim to exclude Valimi. (A copy of the order of Master Wheeler made on 18 May 1994 which is exhibited to the affidavit shows that the Master noted that the plaintiff (the debtor) had no standing to sue in respect of the dissolution of partnership, the proper plaintiff being Valimi). The orders made on that day were that the statement of claim against the first, second and third defendants (the petitioning creditors) be struck out with costs. The debtor was however given leave to file and serve an amended statement of claim limited to the subject matter of certain claims made by the debtor in her personal capacity. The debtor did not exercise the leave granted to file an amended statement of claim and discontinued the proceeding on 11 August 1994. A further order for costs in favour of the petitioning creditor was made by Master Wheeler on 12 August 1994 and costs were taxed by Master Bruce on 12 December 1994 in the sum of $8,289.60. Law Partners were engaged as solicitors for the debtor in January 1995 on a contingency fee basis. The bankruptcy notice was served on 17 May 1995 and on 21 July 1995 Supreme Court proceeding 6664 of 1995 was commenced in the name of Valimi, Con George Thyssen (the debtor's husband) and the debtor as plaintiffs and B & P Maniotis and the firm Arthur Anderson as defendants. This proceeding also relates to the former partnership between Valimi and B & P Maniotis. The only relief claimed on behalf of the debtor is against Arthur Anderson. The debtor claimed no relief against B & P Maniotis. At paragraph 7 of her affidavit the debtor says that the legal basis of her claim in the second Supreme Court proceeding, insofar as it is relevant to the present proceeding, is for recovery of a debt owed to the plaintiffs by B & P Maniotis pursuant to obligations under a partnership agreement. In paragraph 8 she says that the factual basis of her claim against B & P Maniotis is - a) Pursuant to a partnership agreement between Valimi and B & P Maniotis, she was employed as an agriculturist and horticulturist by the partnership; b) It was agreed between the partners that if payment for work done by her was not received, the amount accrued would be considered a debt of the partnership; c) From 22 July 1985 until 19 January 1990 the partnership accrued a total debt to her of $413,225; d) The debt has not been paid. The relevance of the facts as asserted to the present proceeding is not immediately obvious. If it be the case that the debtor has a claim for wages then it is a claim against Valimi and not against B & P Maniotis. Upon the first return of the petition on 22 August 1995 the matter was adjourned for hearing on 6 September 1995. Orders were made for the debtor to file and serve any further affidavit upon which she would seek to rely by 31 August 1995 and for the judgment creditors to file and serve any affidavit in reply by 4 September 1995. The debtor did not file any further affidavit pursuant to the order made on 22 August 1995. At the adjourned hearing on 6 September 1995 the hearing was further adjourned to 20 September 1995 and an order was made that the debtor file and serve by 13 September 1995 an affidavit in support of her notice of opposition setting out her current financial situation with particular reference to her interest in Valimi. On 18 September 1995 the debtor filed a further affidavit sworn by her on that day. The debtor refers to her earlier affidavit and says that the writ in the second Supreme Court action discloses that Valimi is claiming damages and other relief against B & P Maniotis and that the advice of counsel is that the quantum of damages will approximate $2,000,000. She says further that she and her husband are the sole shareholders in Valimi, each holding one of two $1 shares issued by the company, and that following completion of the Supreme Court action the value of her shareholding in Valimi will be approximately $1,000,000. The affidavit then proceeds to refer to a claim that Valimi is said to have against Sixty Eighth Stowaway Pty Ltd but that company is not a party to the Supreme Court proceeding. The debtor further asserts that the bankruptcy proceeding is an abuse of process undertaken to obstruct and prevent her pursuing her claim in the Supreme Court proceeding. She says that the judgment creditors are her only creditors and that she has a claim against them in excess of the amount of the judgment. It is worthwhile at this stage to reflect that what the debtor is saying as at 18 September 1995 is that a company in which she is a shareholder has a claim against the judgment creditors which if successful would mean that her asset, i.e. the share in the company, would be worth more than the judgment debt. Presumably the debtor is saying that she is thereby to be regarded as being solvent. If that is her case, and it appears to be the only basis upon which it is put, several things can be said. First, she clearly cannot satisfy the usual test of solvency; second, there can be no substance in the assertion of abuse of process as the bankruptcy of the debtor would not affect the capacity of Valimi to pursue any claim that it may wish to press against the judgment creditors; and third, the debtor appears to have abandoned her earlier claim in respect of wages claimed to be due to her. She may well have such a claim against Valimi but she clearly has no such claim against the petitioning creditors. The further adjourned hearing of the petition did not proceed on 20 September 1995. On that day counsel appearing for the judgment creditors sought an adjournment based on several grounds one being that on 21 August 1995 the defendants in the Supreme Court proceeding had made application to strike out the writ. Master Evans had reserved his decision and it was expected that a decision would be handed down in the week following. The hearing of the petition was adjourned to 18 October 1995 and later by consent to 15 November 1995. On 12 October 1995 Master Evans made orders, inter alia, striking out the claims made by Valimi against B & P Maniotis. On 9 November 1995 the debtor filed a further affidavit which was sworn on 7 November 1995. This affidavit is almost entirely vexatious and deserves no consideration apart from establishing that the debtor had previously (in about 1991) been a bankrupt. More will be said of that fact later. The second named judgment creditor, Peter Maniotis, swore an affidavit on 13 November 1995 in reply to the debtor's last mentioned affidavit but it is not necessary to canvass its contents other than to note that it is said the debtor had previously been made bankrupt on 30 May 1991. The hearing of the petition was again adjourned on 15 November 1995. The debtor sought the adjournment and her application was strongly opposed by counsel for the petitioning creditors. The transcript of the hearing indicates (at p 4) that the debtor (who appeared in person) said - I had a phone call from counsel last night, who is acting in the Supreme Court. He asked me to ask your Honour for an adjournment please, because he is amending the statement of claim before the Supreme Court in the name of Valimi, who was a 50% partner in the partnership known as B and V Nurseries, with the other 50% being Peter and Basil Maniotis jointly ... After hearing extensive argument Ryan J adjourned the hearing of the petition to 13 December 1995. In short reasons delivered at the time Ryan J said, after referring to the Supreme Court proceeding - The ruling made by Master Evans on 12 October 1995 contemplates that the matter should return to him for consideration of an application by Valimi Pty Ltd for leave to amend its statement of claim. I have been told by the debtor from the bar table that counsel has now formulated that application and is in a position to proceed with it. In the circumstances, which include the fact that the debtor apparently has no creditors other than the petitioning creditors, I propose to accede to the application to adjourn the petition. However, I shall do so only for a relatively short time.