Stojanovski v Stojanovski

AND THE COURT NOTES: The agreement between the parties that the costs of the present proceeding in this Court will be their costs in the Supreme Court. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT 1 The present proceeding was first instituted in this Court by the filing of an Originating Application on 4 December 2017. An Amended Originating Application was filed on 13 March 2018. 2 The relief which is sought is for the grant of leave pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) to permit the Applicant to continue to prosecute a part-heard proceeding presently pending before the Supreme Court of New South Wales. 3 The Applicant in the proceeding in this Court, Mr Steven Stojanovski, is the Plaintiff in the proceeding in the Supreme Court of New South Wales. The First Respondent in the proceeding in this Court (Mr Robert Stojanovski) is the Applicant's younger brother; the Second Respondent (Ms Jovanka Stojanovski) is the Applicant's ex-wife; the Third Respondent (Mr Jordan Stojanovski) is the Applicant's uncle; and the Fourth Respondent (Ms Angelina Stojanovski) is the First Respondent's estranged wife. The Fifth and Sixth Respondents are the trustees in bankruptcy. 4 It was the intervening bankruptcy of Mr Robert Stojanovski which occasioned the need for the Supreme Court to adjourn the proceeding before that Court. The sequestration order against the estate of Mr Robert Stojanovski was made by the Federal Circuit Court of Australia on 30 June 2017: Swaab v Stojanovski [2017] FCCA 1509. 5 Initial difficulty was encountered in the present proceeding with effecting service upon one or other of those persons related to the Applicant. But those difficulties had been overcome by 28 March 2018. The matter was then set down for hearing on 24 April 2018. 6 It is concluded that leave should be granted.

SECTION 58 7 Section 58(1) of the Bankruptcy Act provides for the vesting of the property of a bankrupt in the Official Trustee or the trustee of the estate of a bankrupt. 8 Section 58(3) provides (in relevant part) as follows: Except as provided by this Act, after a debtor has become a bankrupt, it is not competent for a creditor: … (b) except with the leave of the Court and on such terms as the Court thinks fit, to commence any legal proceeding in respect of a provable debt or take any fresh step in such a proceeding. Section 58(3)(b), it may be noted in passing, only applies to a legal proceeding "in respect of a provable debt": cf. Morris Finance Ltd v Brown [2017] FCAFC 97 at [41], (2017) 350 ALR 86 at 97 per Beach, Markovic and Moshinsky JJ. The policy behind the requirement of leave imposed by s 58(3) has been addressed in Re Rose; Ex parte Devaban Pty Ltd (unreported, Hill J, 7 October 1994). That policy need not be repeated. Of present concern is the manner in which the discretion to grant leave is to be exercised. 9 The exercise of that discretion was addressed in Allanson v Midland Credit Ltd (1977) 30 FLR 108. A creditor had there commenced a proceeding in the Supreme Court of New South Wales. In allowing an appeal from a decision of the former Bankruptcy Court, the Full Court of this Court concluded that it had jurisdiction to grant leave to continue the action in the Supreme Court and that leave should be granted. In so concluding, Bowen CJ, Riley and Deane JJ observed (at 114): Before proceeding further with the question of the effect of the stay and the operation of s. 58 (3), it is convenient to consider the second question which arises. That is, whether the court, if it has jurisdiction, should grant leave in the present case. Franki J., while indicating that as then advised he would not have answered this question in the affirmative, never reached the stage where it was necessary to decide it. The facts are complex. The claim of Midland Credit is not only against Mr. Allanson, but against other defendants who, in some respects, may be jointly and severally liable with him. There is also the question of the defences, some of which form the basis of the cross-claim. It would seem that all of these issues would be better and more comprehensively dealt with by a contested trial of the action in the Supreme Court than could possibly be the case if Midland Credit were required to lodge a proof of debt in respect of its claim against Mr. Allanson alone. Such a proof of debt would be in the form of an affidavit and determined by the official receiver at such time as the stay ceased to operate. If the official receiver disallowed the claim in whole or in part, an appeal on this isolated issue could be brought to the Bankruptcy Court. But in these circumstances, the issues would have been determined in a less satisfactory way and questions between Mr. Allanson and the other parties to the action would not be resolved. It is not suggested that if leave be granted, the bankrupt estate will suffer financially in any way. In the circumstances, we have formed the view that, if s. 58 (3) applies, the court has jurisdiction to grant leave to proceed and such leave should be granted. These observations have since been applied by other Judges of this Court: e.g., Sturdy Components Pty Ltd v Trustee of the Bankrupt Estate of Sturt [2000] FCA 884 at [5] per Burchett J; Macquarie Bank Ltd v Bardetta [2005] FCA 507 at [19], (2005) 216 ALR 670 at 677 to 678 per Conti J. Of relevance to the exercise of the discretion, accordingly, is "whether the facts are complex and whether it may be preferable for those facts to be resolved at a hearing rather than by way of a proof of debt": 7Steel Building Solutions Pty Ltd v Wright [2011] FCA 328 at [12] per Flick J.

THE SUPREME COURT PROCEEDING & THE GRANT OF LEAVE 10 Prior to the making of the sequestration order in June 2017, Mr Steven Stojanovski had commenced the proceeding in the Supreme Court of New South Wales. That is but one of a number of related proceedings which have been occupying the attention of that Court. 11 Of present concern is the proposed Fifth Further Amended Statement of Claim sought to be filed by Mr Steven Stojanovski in the Supreme Court. The First Defendant in that proceeding is Mr Robert Stojanovski; the Second Defendant is Ms Jovanka Stojanovski; the Third Defendant is Mr Jordan Stojanovski; and the Fourth Defendant is Ms Angelina Stojanovski. The Fifth and Sixth Defendants are the trustees in bankruptcy of Mr Robert Stojanovski. 12 Ms Nada Stojanovski was the mother of Messrs Steven and Robert Stojanovski. She died in January 2006. Her estate included four properties or an interest in properties at: 41 Breakwell Street, Mortdale; 17 Kemp Street, Mortdale; 18A George Street, Mortdale; and 47 Jersey Avenue, Mortdale. Central to the resolution of the Supreme Court proceeding is the manner in which one or other of those properties has been dealt with. 13 A finding of fraud has already been made by the Family Court of Australia in 2014 when it was relevantly concluded: [42] … it is abundantly clear that [Robert] and [Angelina] sought by subterfuge to obtain orders by consent as to property knowing full well that the subject properties were very much in dispute. They deceitfully failed to disclose the prospective and pending third party interest of [Steven] and [Jovanka] in the Application for Consent Orders and sought to undermine proceedings in the Supreme Court of New South Wales. Orders made by consent by that Court were there set aside. Orders sought in the Supreme Court include orders pursuant to the Family Provision Act 1982 (NSW) and orders setting aside the transfer of land pursuant to s 37A of the Conveyancing Act 1919 (NSW). Those transfers purported to give effect to the Family Court orders which had been fraudulently obtained. 14 The hearing of the proceeding in the Supreme Court in which such discretionary relief is sought commenced in December 2016 and was due to resume the cross-examination of Mr Robert Stojanovski and Ms Angelina Stojanovski in August/September 2017. But the bankruptcy of Mr Robert Stojanovski in June 2017 intervened. The August/September 2017 dates were vacated, together with dates set aside for the hearing of submissions in November 2017. 15 The Supreme Court proceeding was adjourned to allow the present application for leave to proceed in this Court. 16 It is concluded that leave pursuant to s 58(3)(b) of the Bankruptcy Act should be granted because: the Supreme Court proceeding is the most appropriate forum in which to agitate and resolve the myriad of legal and factual issues dividing the parties; it is only the Supreme Court that can grant relief pursuant to the Family Provision Act; it is arguably only the Supreme Court which can make orders setting aside the transfers of the land; and the proceeding in the Supreme Court has already commenced and progressed to a stage where it should continue to finalisation of the dispute. 17 Although leave should be granted, it is further concluded that a condition should be imposed in respect to property that would be divisible amongst creditors. The reason for caution arises because there are two categories of property which are vested in the trustees in bankruptcy pursuant to s 58(1) of the Bankruptcy Act, namely: property to be transferred back to Mr Robert Stojanovski by Ms Angelina Stojanovski, being property held as trustees for Mr Jordan Stojanovski as executor of Ms Nada Stojanovski's estate or as trustees for Mr Steven Stojanovski either under the testamentary agreement or as notional estate of Ms Nada Stojanovski which is gifted to Mr Steven Stojanovski in consequence of orders for his provision under the Family Provision Act; and property held for Mr Robert Stojanovski's benefit which is to be transferred back to him by Ms Angelina Stojanovski out of which Mr Steven Stojanovski seeks (inter alia) monetary relief in the form of equitable compensation and legal costs in the Supreme Court. The former category of property, referred to as the "non-divisible property" is held by the trustees, or will be so held when it is transferred to them by Ms Angelina Stojanovski, as bare trustees for Mr Jordan Stojanovski and ultimately Mr Steven Stojanovski. The latter category of property, however, would be divisible between the creditors of Mr Robert Stojanovski pursuant to s 116(1) of the Bankruptcy Act. A condition should thus be imposed to ensure that Mr Steven Stojanovski would not assume any preferential right over other creditors to that "divisible property" to satisfy any orders that may be obtained for equitable compensation and costs. The drafting of conditions was the subject of agreement between the Applicant and the trustees.

CONCLUSIONS 18 Leave should be granted pursuant to s 58(3)(b) of the Bankruptcy Act but a condition should be imposed to ensure that Mr Steven Stojanovski does not secure any preferential right in respect to property otherwise divisible between creditors in accordance with s 116 of the Bankruptcy Act. 19 Although the Fourth Respondent appeared represented by her solicitor and neither consented to nor opposed the grant of leave, no costs order should be made in her favour by this Court.

THE ORDERS OF THE COURT ARE:

1. The Applicant have leave to continue to prosecute to its conclusion proceeding No. 2012/0089349 in the Supreme Court of New South Wales (the "Supreme Court proceeding") on the conditions specified in order 2 below pursuant to s 58(3) of the Bankruptcy Act 1966 (Cth) (the "Bankruptcy Act").
2. The following conditions referred to in order 1 above shall apply to the grant of leave under s 58(3) of the Bankruptcy Act which is made in order 1 above: (a) Prayer 9 in the Applicant's Proposed Fifth Further Amended Statement of Claim in the Supreme Court proceeding (the "5FASOC") be amended so that the words appearing before the word "comprising" are replaced with the words: "Alternatively, an order that the Plaintiff be entitled to equitable compensation which is to constitute a provable debt in the First Defendant's bankrupt estate comprising of … [(a)] - [(c)]"; (b) Prayer 10 in the 5FASOC be amended to read: "Order that the First Defendant, Robert Stojanovski, and the Fourth Defendant, Angelina Stojanovski, jointly and severally pay the Plaintiff's costs and the costs of the Second Defendant, Jovanka Stojanovski, of and incidental to the proceedings, including all reserved costs, on the indemnity basis and, in the case of the First Defendant, that the Plaintiff be entitled to claim any such costs as a provable debt in the First Defendant's bankrupt estate"; and (c) The Applicant not enforce any judgment or orders obtained by him against the property of the First Respondent, Robert Stojanovski, being property which is divisible amongst the creditors of his bankrupt estate within the meaning of s 116(1) of the Bankruptcy Act, other than by way of lodgement of a proof of debt with the Fifth and Sixth Respondents, in their capacity as joint and several trustees in bankruptcy of the First Respondent, Robert Stojanovski, pursuant to Part VI of the Bankruptcy Act, without the leave of this Court pursuant to s 58(3) of the Bankruptcy Act or otherwise.
3. The proceeding is otherwise dismissed and there be no order as to costs.

AND THE COURT NOTES: The agreement between the parties that the costs of the present proceeding in this Court will be their costs in the Supreme Court. I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick.

SCHEDULE OF PARTIES NSD 2146 of 2017 Respondents Fourth Respondent: ANGELINA STOJANOVSKI Fifth Respondent: FABIAN KEN MICHELETTO Sixth Respondent: MICHAEL CARRAFA