Liprini v Liprini & Anor [2011] FMCA 359 (17 May 2011)

Last Updated: 20 May 2011

FEDERAL MAGISTRATES COURT OF AUSTRALIA

LIPRINI v LIPRINI & ANOR

[2011] FMCA 359

BANKRUPTCY – Application for annulment – whether sequestration order should have been made considered.

Bankruptcy Act 1966, s.153B

Liprini v Liprini [2010] FMCA 687 Liprini v Liprini [2010] FCA 1117 Liprini v Liprini (No 2) [2010] FCA 1495

Applicant:

DR ALLAN STEPHEN LIPRINI

First Respondent:

KEVIN LIPRINI

Second Respondent:

SCOTT DARREN PASCOE

File Number:

SYG 617 of 2011

Judgment of:

Driver FM

Hearing date:

17 May 2011

Delivered at:

Sydney

Delivered on:

17 May 2011

REPRESENTATION

The Applicant appeared in person

The first Respondent entered a submitting appearance

Counsel for the second Respondent:

Mr S A Wells

Solicitors for the second Respondent:

Farrar Lawyers

ORDERS

(1) The application filed on 1 April 2011 be dismissed.
(2) The trustee’s costs of the application be costs in the administration of the bankrupt estate.
(3) The second respondent be released forthwith from the undertaking given on 3 May 2011 relating to the realisation of assets and distribution of proceeds from the estate.

FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY

SYG 617 of 2011

DR ALLAN STEPHEN LIPRINI

Applicant

And

KEVIN LIPRINI

First Respondent

SCOTT DARREN PASCOE

Second Respondent

REASONS FOR JUDGMENT

(revised from transcript)

1. I have before me an application filed on 1 April 2011 seeking the annulment of a bankruptcy arising out of a sequestration order made on 3 September 2010 by Smith FM. The application also seeks other relief, some of which would be beyond the jurisdiction of the Court. The application does not set out the grounds in support of it, although the application is supported by three affidavits filed by Dr Liprini on 1 April 2011, 3 May 2011 and 17 May 2011.
2. The grounds of the application may be derived from paragraph 5 of the affidavit filed on 3 May 2011:
   • I had intended to provide a completed application that included further evidence to support all the grounds for applying for this annulment under Section 153B [82,320.15] of the Bankruptcy Act 1966 [(Cth) (“the Bankruptcy Act”)].
     • (i) Fraudulent concealment of Notice of Intention to Distribute being inserted in SMH newspaper on 2nd April 2005.
     • (ii) Fraudulent absence of Kevin Liprini from fraudulent originating process on 6th December 2007.
     • (iii) Failure of Kevin Liprini to produce banking statement by ORDER OF THE COURT on 9th July 2009 filed and served by Neil Lyon, my legal advisor at that time.
     • (iv) Highly vexatious nature of all the litigation by the respondent Kevin Liprini.
3. The bankruptcy arises out of a liability under a judgment of the Supreme Court of New South Wales. The facts behind that liability are somewhat complex, and I was addressed at length about those facts by Dr Liprini. The background facts and circumstances were addressed in some detail by Smith FM in his judgment on the creditor's petition in Liprini v Liprini [2010] FMCA 687:
   • The indebtedness of Dr Liprini to Kevin Liprini relates back to family provision proceedings in the Supreme Court of New South Wales concerning both the estates of their deceased parents. As I shall narrate, the litigation has extended over several years. It is now apparent that Dr Liprini has committed himself to opposing his brother receiving any provision from his parents’ estates, including by opposing efforts at enforcement of consent orders of the Supreme Court agreed at a mediation. In the course of the litigation he has employed, and become disillusioned with, the efforts of a series of barristers and solicitors, and has become embroiled in further litigation over the payment of their fees. I addressed one such claim in Liprini v Kerem & Anor (No. 2) [2010] FMCA 244, without needing to make findings of fact in relation to the performance by those solicitors of their professional responsibilities. No submission was made in the present proceedings, which have been in my docket since December last year, that I should recuse myself by reason of my involvement in the other matter, and after reviewing my reasons in that case I do not consider that I need to do so.
   • The petition filed on 15 Jan 2010 relies upon a debt of $851,335.96, which is claimed to be due to Kevin Liprini by Dr Liprini from his personal estate by reason of orders made by Nicholas J in the Supreme Court of New South Wales, Equity Division, on 10 July 2009 in proceedings 2468 of 2008, plus some accrued interest. I am satisfied that that amount remains owing from Dr Liprini today. This is not disputed, except on the grounds which I shall examine below.
   • ...
   • The background and course of the Supreme Court proceedings are best found in the judgment of Nicholas J given ex tempore on 10 July 2009. His Honour noted that proceedings under the Family Provision Act 1982 (NSW) were commenced by Kevin Liprini on 18 July 2006, naming Dr Liprini as defendant as the executor of their father’s estate, their father having died on 21 January 2005. Under their father’s will, his estate went in substance to their mother, and thereafter to Dr Liprini. After the commencement of the proceedings, their mother died on 26 November 2006. By that time, it appears that the father’s estate had been substantially distributed. The mother’s death had the effect of vesting Dr Liprini’s remainder interest in his father’s estate. He also inherited further substantial property from his mother under her will. There are suggestions in the evidence, that correspondence from Kevin Liprini after their mother’s death foreshadowed an intention by him to make a further claim for family provision in relation to the mother’s estate. However, no such claim was ever commenced.
   • On 6 December 2007, Dr Liprini was present at meetings with his then solicitor and barrister, in the course of a proceeding which was subsequently referred to as a ‘mediation’ conducted to explore settlement of the Family Provision Act proceedings. I infer that this was an expected, if not mandatory, occurrence in the case management of Family Provision Act matters in the Supreme Court, and it appears to have been presided over by a registrar or former judge. Both parties appear to have been represented by counsel and solicitors on that occasion, and the negotiations were conducted by them, without Dr Liprini meeting his brother.
   • Consent orders were signed by counsel for each party at the end of the mediation, in the following terms:
     • (1) Order under section 7 of the Family Provision Act that provision be made in favour of the plaintiff out of the estate of the late James Natale Liprini in the sum of $750,000;
     • (2) That the plaintiff’s costs agreed in the sum of $20,000 be paid out of the estate of the late James Natale Liprini, and
     • (3) Order that the defendant’s costs be paid out of the estate of the late James Natale Liprini on an indemnity basis.
     • The Court notes:
     • A. The above orders were signed by the parties in contemplation of a claim by the plaintiff against his mother’s estate under section 7 of the Family Provision Act. The plaintiff agrees to execute a deed, if called upon to do so, releasing the defendant (as executor of the estate of his late mother) from any claim under section 7 of the Family Provision Act.
   • There is in evidence a handwritten memorandum made by
     Dr Liprini’s solicitor, presumably before his counsel signed the consent orders, which bears signatures which Dr Liprini does not deny are his, although he now claims to have no memory of signing them. It states:
     • Authority
     • I, Allen Stephen Liprini, the executor of the estates of James Natale Liprini and Anne Mary Liprini, of 220 Belgrave Esplanade, Sylvania Waters in the state of NSW, instruct my solicitor (Ricky Kerem) and Martin Rush (Barrister) to accept the plaintiff’s (Kevin Liprini) offer of $770k inclusive of legal costs.
     • I confirm Martin Rush (Barrister) advised me that if the matter was to proceed to the Supreme Court, the likely outcome would be a verdict to the plaintiff of between 300k to 1.2 million
     • According to the judgment of Nicholas J, the orders which were signed by counsel were subsequently “taken to have been entered when they were recorded in the Court’s computerised record section pursuant to UCPR Pt.36, r.36.11”.
   • Dr Liprini has tendered a letter he sent to Mr Kerem on the day after the mediation, in which he appears to confirm having agreed to the settlement, but expresses concerns about the mediation and dissatisfaction with the settlement. He referred to his memories of the event as being “unreal, dreamlike perhaps”, and claimed that he had been suffering from a dental condition. He said:
     • I was hoping to check off a few things with you, as I feel more strongly that my brother needs to be accountable for the things that he has done. It seems ridiculous that he collects $770,000.00 and all his allegations and deeds continue on uncontested. If anything, it has made everything worse for me, especially with how to explain this turn of events to Liz. So, I will try to reconstruct what was integral to the outcome of yesterday’s mediation session.
   • He then complains about having misconceptions about the purposes of the meeting, and complains that the options presented to him by his lawyers and the mediators were “Hobson’s choice”. Other complaints are made, and these have been subsequently repeated and embellished over the subsequent years. In circumstances which I referred to in my previous judgment,
     Mr Kerem and Mr Rush ceased to act for Dr Liprini soon after the consent orders were made.
   • Dr Liprini now challenges the consent orders made on
     6 December 2007, with a number of contentions presented in an imprecise manner with little or no supporting evidence. He maintains that he was misled by his then lawyers about the mediation being a compulsory event, and about how he was induced to attend. He claims to have had an expectation only that it would be an opportunity for him to present a letter to his brother, which analysed their sibling relationships. He claims now that his health rendered his consent to the settlement suspect, and that he now has no memory of giving instructions to accept the settlement. He is convinced that, in fact, his brother was not in attendance at the mediation, since he never saw him and believes that he probably remained in North Queensland. In effect, he suggests that his consent was procured by fraud or serious professional misconduct on the part of his legal representatives.
4. In addition to the affidavits of Dr Liprini, I have the benefit of a report prepared by the trustee pursuant to an order of a registrar of this Court. That report and its annexures was filed on 16 May 2011. As I told Dr Liprini in the course of argument in this case earlier today, in order to obtain an annulment under s.153B of the Bankruptcy Act, the Court must be satisfied that the sequestration order under challenge should not have been made. If the Court is so satisfied, the Court then has available to it a discretion to annul the bankruptcy. The authorities provide guidance as to the considerations that a court might properly take into account in the exercise of that discretion.
5. The first hurdle, however, for Dr Liprini to overcome is to satisfy the Court that the sequestration order made by this Court should not have been made. The judgment of Smith FM addresses in detail the arguments advanced by Dr Liprini in opposition to the creditor's petition. In addition, Smith FM considered, apparently of his own volition, an issue of whether the liability arising out of the New South Wales Supreme Court proceedings was properly a personal liability supporting bankruptcy proceedings, or rather a liability of the estate which Dr Liprini had the obligation to administer in accordance with law. Smith FM concluded on that issue that a personal liability arose out of the proceedings in the Supreme Court[1].
6. That judgment also dealt with a challenge by Dr Liprini to the bankruptcy notice supporting the petition. The proceedings were the subject of a stay application to the Federal Court, which was dealt with by Jagot J on 8 October 2010[2]. At [15] of that judgment her Honour said that on review of the Federal Magistrate's decision, the notice of appeal and Dr Liprini's evidence, it seemed to her to be clear that there had not been put forward by Dr Liprini any arguable ground of appeal. Appeal proceedings in the Federal Court relating to both judgments of Smith FM were dealt with by Emmett J on 19 November 2010[3].
7. At [9], his Honour, after referring to the judgment of Jagot J, concluded that it was not appropriate to accede to the application made by
   Dr Liprini, either in relation to the disputed bankruptcy notice, or in relation to the sequestration order, and that the two appeals then extant should be dismissed summarily on the basis that there were no prospects of success. I am obviously bound by the two judgments of the Federal Court. In the light of those proceedings I pressed Dr Liprini to explain to me what there was in the present annulment application which could provide a proper basis for this Court's intervention.
8. Dr Liprini addressed me at length on the same matters that were dealt with by Smith FM in his judgment on the creditor's petition. I am satisfied that there is nothing new in the application as advanced by Dr Liprini. In my view, the only basis on which it might have been argued that an annulment order should be made is that Dr Liprini might hypothetically be solvent and may have been solvent at the time the sequestration order was made. He had an interest, prior to bankruptcy, in two valuable pieces of real estate. The report of the trustee discloses a range of values for that real estate, and further discloses the distinct possibility that the administration of the estate could result in a surplus of assets over liabilities.
9. Nevertheless the trustee concludes, at paragraph 48 of his report, that having regard to the necessary steps in a sale of real estate, at the time of bankruptcy Dr Liprini did not have available sufficient funds to pay his debts as they fell due, and was therefore insolvent. Solvency of course may be proved by establishing an ability to realise funds to discharge one's debts within a reasonable time. It might have been argued by Dr Liprini before Smith FM, or before me, that he could have realised assets to discharge his debts within a reasonable time. He chose, however, to argue that he was not indebted to the petitioning creditor, his brother, at all. That has proved to be a fruitless argument. I have no evidence that, at the time the sequestration order was made, Dr Liprini had the capacity to borrow funds on the security of the real estate in order to discharge his debts within a reasonable time. There is no proper basis on which the Court could found a different view on solvency to that of the trustee.
10. It is unfortunate that very substantial sums have been expended in legal costs in resistance to Dr Liprini’s brother's claim on the deceased estate, which, as has been observed in several courts at various times, was settled by consent, notwithstanding Dr Liprini’s denials. He is unfortunately unwilling to accept that his brother should receive anything from the deceased estate, and the funds available have been, and continue to be, consumed as a consequence of that attitude.
11. In the event that Dr Liprini continues to agitate the same issues that he has previously agitated in this Court, and in the Federal Court and the Supreme Court and in the New South Court of Appeal, it may be necessary for the Courts dealing with such applications to consider whether orders should be made preventing further such proceedings. This Court has authority to prevent proceedings which are vexatious or an abuse of process. The present proceeding is not an occasion for the exercise of that power, having regard to the issue of solvency, which was properly addressed by the trustee in his report.
12. I am satisfied that Dr Liprini has failed to demonstrate a reason for the Court to disturb the sequestration order made by this Court. In my view, and including the issue of solvency, the sequestration order was properly made.
13. In the circumstances, it is unnecessary to consider the hypothetical question of what attitude the Court might take to the exercise of its discretion.
14. I will order that the application filed on 1 April 2011 be dismissed. The trustee’s costs of the application will be costs in the administration of the bankrupt estate. I will further order that the second respondent be released forthwith from the undertaking given on 3 May 2011 relating to the realisation of assets and distribution of proceeds from the estate.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 19 May 2011

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[1] see in particular [39] of the judgment of Smith FM
[2] see Liprini v Liprini [2010] FCA 1117
[3] Liprini v Liprini (No 2) [2010] FCA 1495