Sutera v Nelson

REASONS FOR JUDGMENT 1 The applicant has applied pursuant to Rule 36.05 of the Federal Court Rules 2011 (Cth) ("the Rules") for an extension of time in which to file a notice of appeal from orders of the Federal Magistrates Court made on 21 October 2011. These orders were: 1. The Personal Insolvency Agreement of the Respondents in Administration Number VIC 502 of 2010 dated 9 March 2010 be terminated pursuant to s 222C of the Bankruptcy Act 1966 (Cth) ("the Act"). 2. The Respondents have committed an act of Bankruptcy by having a personal insolvency agreement executed under Part X of the Act terminated by this Honourable Court. 3. A sequestration order be made against the estates of Guiseppe Sutera and Emanuella Sutera. 4. The Applicant be appointed as trustee of the bankrupt estates of Guiseppe Sutera and Emanuella Sutera. 5. The Applicant's costs of this application be taxed and paid as a priority out of the assets of the Respondent Debtors' bankrupt estates. 2 The sole ground of appeal disclosed in the draft notice of appeal accompanying the application for an extension of time is that: The Federal Magistrates Court erred in law in exercising its discretion under section 222C of the Bankruptcy Act 1966 (Cth) to terminate the personal solvency agreement executed by the Plaintiffs. 3 The first applicant, Guiseppe Sutera, filed two affidavits - sworn on 7 December 2011 and 14 December 2011 - in support of his application for an extension of time. There were three affidavits filed by the respondent - the affidavit of his solicitor, David Alan Baker, sworn on 14 December 2011, which annexed the transcript of the hearing before the Federal Magistrate; the affidavit of Manuel Hanna (an accountant employed by Northern Insolvency Solutions) sworn on 14 December 2011, in which Mr Hanna deposed to his efforts to contact Mr Sutera before the creditors' meeting (referred to below); and the affidavit of Simon Patrick Nelson sworn on 14 December 2011. 4 Affidavits filed on the parties' behalf show that: (a) From 1995 until he became bankrupt, Mr Sutera ran a small security business, which employed about 10 staff on a casual basis. (b) On 29 January 2010, Mr Sutera and his wife executed a proposal under Part X of the Bankruptcy Act 1966 (Cth) ("the Act"), which stated that they proposed to make a payment of $50,000 to their unsecured creditors in full and final settlement of their debts over 36 months. (c) On 26 February 2010, the controlling trustee, Des Ryan, prepared a report pursuant to s 189A of the Act. (d) On 9 March 2010, Mr Sutera and his wife executed a Personal Insolvency Agreement ("PIA"), in accordance with the proposal. Clause 4 of the PIA provided: The debtor agrees to pay to the trustee a sum of money as set out in the SCHEDULE 1 hereof upon trust to deal with the same in accordance with this deed … The Schedule stated: Item 1: A sum of $50,000.00 over a three year period after acceptance of this offer by creditors. (e) On 20 August 2010, Simon Patrick Nelson was appointed trustee of the PIA ("trustee"). (f) On about 26 October 2010, the trustee sent a letter to the Australian Prudential Regulatory Authority ("APRA") regarding the early release of superannuation funds, stating: Pursuant to the terms of the PIA, the debtors are required to pay $50,000 over a three year period. At this time the debtors have been unable to make any payments to the PIA. Should this situation continue, I am duty bound to terminate the PIA. Should the termination of the PIA occur, creditor's rights against the bankrupt will be revived, ultimately leading to the bankruptcy of the debtors. A Trustee in Bankruptcy would be likely to take immediate action to sell the debtor's house property. (g) On about 6 April 2011, the trustee sent a further letter to APRA, regarding the proposed early release of superannuation benefits to be used as contributions under the PIA. (h) On 6 April 2011, the trustee and Mr Hanna met with Mr and Mrs Sutera to discuss the performance of the PIA. (i) On about 7 April 2011, the trustee sent a letter to creditors, advising that there had been no contribution under the PIA; the debtors had made application to APRA for the early release of their superannuation benefits, $20,000 of which they proposed to contribute to the PIA; that the debtors held significant equity in a property at Greenvale; and that, if the application to APRA failed and funds were not available within 28 days, the trustee would make application to Court to terminate the PIA and to sequester their estates. (j) On about 10 May 2011, the trustee allegedly sent Mr Sutera a letter (which Mr Sutera maintains he did not receive) advising that a meeting of creditors had been scheduled for 17 May 2011, to resolve whether an application would be made to the Court to terminate the PIA and for a sequestration order. (k) On 17 May 2011, the trustee held a creditors' meeting, at which the creditors resolved to terminate the PIA. (l) On 21 July 2011, the trustee filed an application in the Federal Magistrates Court for orders terminating the PIA and seeking that a sequestration order be made against the applicants' estates. (m) On 21 October 2011, Federal Magistrate O'Dwyer made an order terminating the PIA pursuant to s 222C of the Act and a sequestration order against the applicants' estates. (n) On 8 November 2011, Mr and Mrs Sutera executed statements of affairs. (o) On about 11 November 2011, Mr Sutera received a letter from Victoria Police regarding the suspension of his security business licence. (p) On about 30 November 2011, Mr Sutera received a notice to vacate the Greenvale property. (q) On about 5 December 2011, the trustee sent a report to creditors. (r) On 7 December 2011, the applicants filed this extension of time application. 5 Amongst other things, Mr Nelson also deposed to discrepancies in information regarding vehicles allegedly owned by Mr and Mrs Sutera, including as to the ownership of a 1978 Porsche (referred to at the hearing before the Federal Magistrate). In his second affidavit, Mr Sutera responded to various matters raised by Mr Nelson in his affidavit, including the matter of the ownership of the 1978 Porsche and other motor vehicles mentioned in Mr and Mrs Sutera's statements of affairs. In this second affidavit, Mr Sutera also deposed that he now has access to funds that would satisfy the PIA in full.