How bankruptcy operates in Australia
Michael Vescio writes:
1. I am a building designer and set up in 1983 the Leunam Pty Ltd (the company) to
incorporate the building and development activities that were assisted financially and
by directorships held by my parents and my brother. I guaranteed the finance
2. In 1984 the company purchased a commercial property at Fairymeadow with a
mortgage of $250,000 from the Bank and another property at Rozelle.
3. In 1985 the company developed six town houses on the Rozelle property that were
sold off for approximately $1 million over time in order to maintain payments for the
Fairymeadow property which was non-income producing.
4. In 1993 the Bank mortgage was $300,000 over the Fairymeadow property with
development approval for $1.6 million plus land value of $1.5 million totalling $3.1
5. In 1993 the bank forcibly sold the Fairymeadow property for $247,000 by private
treaty, avoiding a public auction and withholding the fact of the approved development
6. In 1994 the Bank demanded payment for a "shortfall" of $77,000 for the
Fairymeadow property. This is in addition to $44,000 from the mortgage insurance.
7. In order to repay some of the loan to the bank and to assist my company with the
construction costs for another project at Wonoona, I obtained $100,000 from a finance
trust company. The property at Guildford No. 1 was used as collateral for this loan.
8. I repaid part of a previous loan of $50,000 to my mother and my brother. Both
resigned from the company. My brother paid $30,000 to release them from her
obligation under the bank guarantee.
9. In 1998 a major lender (L N Pty Ltd - P T - solicitor) frustrated the finance of the
company. Due to their failure to transfer the loan accordingly to the contract the
company came into financial difficulties.
10. In late 1998 J B, an investment advisor, introduced A W, a chartered accountant,
to place the company into voluntary administration for the purpose to prepare a deed
of arrangement so the Woonona and Guildford no. 2 projects would be allowed to
complete. The funds were already approved so that all creditors could be paid.
11. In March 1999 a company creditors meeting was called by administrator A W. In
the Notice to Creditors A W advised that he would support a Deed of Arrangement for
the company in order to survive and to ensure that all creditors would be paid. The
administrator A W however aligned himself with P T solicitor and J B to liquidate the
company by using the proxy votes vested on him by the creditors solely for the
purpose of producing the Deed of Arrangement.
12. I was the secretary/director when the company was liquidated in 1999 and the
company and myself appealed to the NSW Supreme Court to stop this abuse of
process. The court refused to act.
13. In August 1999 P T having obtained control of the Woonona property then sold it
to a company under the directorship of J B for half of the market value.
14. In December 1999 I was told by Mr J M, bank manager, mortgagor for the
Guildford No. 2 property, that my property had been sold and that he did not have to
disclose to me how much the property was sold for, that the bank did not have to
advertise to sell it nor did it have to put it to auction. As it happened the property was
sold for approximately a quarter of its value in the current rising market to another
company, with the directorship of J B.
15. In May 1999 I applied for a Part 10 arrangement under the Bankruptcy Act through
the administrator G MD. He used his discretion and allowed only some creditor
petition amounts in order to disqualify me from obtaining the 75% required by law to
enter into a Deed of Arrangement.
16. The result was a notional 74.2% instead of the mandatory 75%. Because of this
notional 0.8% gap G MD advised me to enter under a part 73 arrangement. This part
73 arrangement would have given me the possibility to negotiate with the creditors. I
signed relying on his advice, but G MD failed to submit the part 73 form to the Court.
Therefore a week later one Bank took action in the Federal Court and bankrupted me
based on the previous disputed debt.
17. By bankrupting me, the bank and all other parties involved in the asset stripping
prevented me from pursuing an appeal in the NSW State Court. In the Australian legal
system people who have been bankrupted have also been stripped of their rights to
18. The Federal Court of Australia appointed the government agency Insolvency &
Trustee Service Australia (ITSA) as my current administrator.
19. The facts, matters and circumstances should have been referred to statutory
Government authorities such as, the Police Fraud Squads, ICAC, ACCC,
Ombudsmen, etc. to properly investigate the fraudulent bankruptcy proceedings.
20. In the second instance the various statutory bodies have a duty of care to myself,
my family, my company and the Australian people to properly investigate the plethora
of other cases such as those in the recent broadcast on the ABC's national TV
program "4 Corners" highlighting the systemic corruption and conflicts of interest
abound between banks, lawyers, liquidators and various members of the bureaucracy
similar to those in experienced in my case.
View a tabulated listing of the violations of local statute law and international
covenants this case has involved.
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