Allan Paul Endresz v ASIC
[2013] FCCA 1167
•23 August 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| A. ENDRESZ v AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION | [2013] FCCA 1167 |
| Catchwords: BANKRUPTCY – Application to set aside bankruptcy notice pursuant to s.41(7) – counter-claim relied on to enliven the subsection that relates to another party – judgment creditor that issued notice (ASIC) an instrumentality of the Commonwealth of Australia – counter-claim against the Commonwealth – applicant claimed mutuality that entitled the counter-claim against the Commonwealth to enliven the provisions of s.40(1)(g) and s.41(7) and empowered the Court to set aside the notice – long outstanding reserved judgment in ACT Supreme Court where merit of counter-claim was tested – judgment delivered, with counter-claim being dismissed – no basis, therefore, under s.41(7) to set aside the notice – application dismissed with costs. |
| Legislation: Corporations Act 2001 |
| Commonwealth of Australia v Davis Samuel Pty Ltd and Ors (No.7) [2013] ACTSC 146 Dawn Endresz v ASIC [2013] FCCA 1169 Jozsef Endresz v ASIC [2013] FCCA 1168 Forge & Ors v ASIC [2003] FMCA 58 Forge v ASIC [2013] FCCA 1170 |
| Applicant: | ALLAN PAUL ENDRESZ |
| Respondent: | AUSTRALIAN SECURITIES & INVESTMENTS COMMISSION |
| File Number: | MLG 135 of 2012 |
| Judgment of: | Judge O'Dwyer |
| Hearing date: | 24 August 2012 |
| Date of Last Submission: | 24 August 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 23 August 2013 |
REPRESENTATION
| The Applicant: | In person |
| Counsel for the Respondent: | Mr Fary |
| Solicitors for the Respondent: | Mr Andrew Tregear, Australian Securities & Investments Commission |
ORDERS THAT:
The application filed on 10 February 2012, as amended, to set aside Bankruptcy Notice BN 9545 (issued on 23 November 2011) is dismissed.
The Applicant pay the Respondent’s costs of, and incidental to, this proceeding.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 135 of 2012
| ALLAN PAUL ENDRESZ |
Applicant
And
| AUSTRALIAN SECURITIES AND INVESTMENTS COMMISSION |
Respondent
REASONS FOR JUDGMENT
Introduction
By an amended application, the applicant seeks to set aside a bankruptcy notice (BN 9545 issued on 23 November 2011) pursuant to s.41(7) of the Bankruptcy Act 1966 (“the Act”).
This application was heard in conjunction with three other applications seeking the same order in respect of bankruptcy notices served on the parents of the applicant, and a friend and former business partner of the applicant.[1]
[1] See Forge v ASIC [2013] FCCA 1170; Jozsef Endresz v ASIC [2013] FCCA 1168; and Dawn Endresz v ASIC [2013] FCCA 1169.
Background
The factual matrix giving rise to this application is exceptional, both in respect of the length of the history surrounding various proceedings and the variety of associated litigation that the applicant (and others) have been involved in.
A brief history of related proceedings gives insight as to the nature, force and effect of the applicant’s contentions in this matter.
The applicant is an accountant by profession. In 1989 he was a majority shareholder in CTC Resources NL, previously known as EMU Hill Goldmines NL. During the early 1990’s CTC Resources retained Davis Samuel Pty Ltd (“Davis Samuel”) as a corporate adviser. Davis Samuel was, in part, owned by Kamanga Holdings Pty Ltd, being an Endresz family company.
On 20 April 1998 Davis Samuel misappropriated $6 Million from the Commonwealth. Again on 24 September 1998, Davis Samuel misappropriated $2.725 Million from the Commonwealth[2]. By a proceeding in the Supreme Court of the Australian Capital Territory filed on 29 January 1999 (“the ACT Supreme Court proceeding”), the Commonwealth of Australia (“the Commonwealth”) sought to recover these monies. The trial commenced on 10 June 1998 and after 44 days of hearing, judgment was reserved. Injunctive orders were made that, in effect, froze the personal assets of the applicant (and others). These injunctions had the effect of inhibiting the applicant’s capacity to conduct his business ventures or deal with personal assets; including his residential home in Albury, New South Wales. Those injunctions are still extant and, as a consequence, the applicant complains of a significant restriction of his capacity to function in his business, resulting in losses to him which he seeks to recover by way of
counter-claim against the Commonwealth.
[2] See findings in Commonwealth of Australia V Davis Samuel Pty Ltd and Anors (No 7) [2013] ACTSC 146.
The Commonwealth provided, in order to satisfy the Court that the injunctions should be granted, an undertaking as to the payment of damages that may arise. The applicant, amongst others (including his parents Jozsef and Dawn Endresz and his former business partner,
Mr William Arthur Forge – collectively hereafter referred to as “the others”) counter-claimed against the Commonwealth in the sum of
$4.3 Billion. The counter-claim is put on two bases. First, that monies were due as a consequence of the undertakings given by the Commonwealth in respect of damages allegedly suffered and they are therefore entitled to a consequent award of compensation; and secondly, in respect of claims under the Trade Practices Act 1974.
It is this counter-claim by the applicant that he says establishes his entitlement to set aside the bankruptcy notice; namely, that he, in the terms of s.41(7) of the Bankruptcy Act 1966, has “a counter-claim,
set-off or cross demand”. Although the global claim by the applicant and the others against the Commonwealth is put at $4.3 Billion, in respect of himself, he claims $1.3 Billion.These are very significant sums, to say the least. Whilst it cannot be considered proof of the claim or its quantum, the applicant points out that the Federal Budget in 2012 provided for this amount
(i.e. $4.3 Billion) as a contingent liability. In my view, this can only be said to reflect prudential accounting in respect of the budget. Nonetheless, the applicant maintains, as provided in s.41(7) of the Act, that he has a counter-claim, set-off or cross demand as referred to in s.40(1)(g) of the Act, which subsection provides that where there is a “counter-claim, set-off or cross demand equal to or exceeding the amount of the judgment debt or sum payable under the final order, as the case may be, being a counter-claim, set-off or cross demand that he could not have set up any action or proceeding in which the judgment or order was obtained” the bankruptcy notice should be set aside.
In the civil penalty proceedings undertaken by Australian Securities and Investments Commission (“ASIC”), which is discussed below, he could not have set up such a claim.
The respondent to these proceedings, ASIC, on 26 April 2001 initiated proceedings in the Supreme Court of New South Wales in respect of contraventions of the Corporations Act 2001 by the applicant’s (and the others) in their capacity as company directors, seeking declarations and penalties for the transactions in 1998 resulting in the misappropriation of the two advances from the Commonwealth totalling $8.75 Million.
On 28 August 2002 the Supreme Court of New South Wales delivered judgment in respect of these contraventions. Findings were made that the applicant, together with the others had committed contraventions of the Corporations Act 2001. As a consequence, the Court imposed penalties, plus orders for the payment of ASIC’s costs. The directors were also banned from acting in that capacity for 8 years. In respect of the applicant, however, on a rehearing on 21 December 2007, his ban was extended to 10 September 2021, a period of 20 years.
Thereafter followed an appeal by the applicant to the Court of Appeal in New South Wales in late 2002. That appeal was unsuccessful.
There remained, therefore, extant orders against the applicant in respect of the payment of penalties and costs. This situation also applied to the others.
A bankruptcy notice was issued against Mr Forge based upon the penalty ordered to be paid, but, I emphasise, not based on the costs ordered to be paid by him. FM Raphael (as he then was) delivered a judgment setting aside the bankruptcy notice on the basis that the penalty, under the Act, was not capable of ‘proof of debt’, and accordingly did not properly found a basis for the bankruptcy notice.[3] The notice was accordingly set aside. However, in reaching that determination his Honour also addressed another issue pertinent in this case concerning whether there was a reasonable prospect that the judgment debtor that a reasonable prospect of success on the counter-claim. He concluded that he would not have a prospect of success.
The respondent in this proceeding sought to rely upon the analysis and findings of FM Raphael as an answer to the application before me.
[3] Forge & Ors v ASIC [2003] FMCA 58.
The bankruptcy notice, the subject of this proceeding, is properly founded on the order for costs to be paid to ASIC by the applicant and in that regard, there is no issue about the debt claimed and no challenge to the notice per se.
A public servant, who I understand had the responsibility of advancing the monies to CTC Resources NL, Mr David Miller, was convicted on 19 October 2004 for his criminal activity. The applicant, however, has not been charged with any criminal offences in respect of the misappropriation of the Commonwealth’s funds.
In September 2006 there was an attempt to gain special leave to appeal to the High Court in respect of a challenge to the appointment of the trial judge in the ASIC proceedings in the Supreme Court of
New South Wales. That application was dismissed.
Before me the applicant attempted to establish an argument that s.41(7) of the Act was enlivened because, although the counter-claim in the ACT Supreme Court proceeding was against the Commonwealth, it should be considered a counter-claim for the purposes of s.41(7) and s.40(1)(g) of the Act as against ASIC because it is an instrumentality of the Commonwealth and, as such, there was mutuality between the Commonwealth and ASIC. In other words, the applicant contended that, although on the face of it there was a different judgment creditor to that against which the counter-claim is made, they should for the purposes of s.41(7), be considered the same.
The contention of the applicant was predicated upon an acceptance that the counter-claim against the Commonwealth had a reasonable prospect of success. Then on that foundation, the applicant built his mutuality argument. If there was no prospect of success on the counter-claim, then the carefully constructed edifice which was said to enliven s.40(1)(g) and s.41(7) would collapse.
Although there was a delay in excess of 4 years before judgment in the ACT Supreme Court proceeding was delivered, it was delivered on
1 August 2013. In short, the applicant (and the others) who
counter-claimed against the Commonwealth were wholly unsuccessful. The counter-claim by the applicant (and the others) was dismissed.
Conclusion
With the judgment of the ACT Supreme Court proceeding dismissing the applicant’s counter-claim, the basis for the setting aside of the bankruptcy notice evaporated. Accordingly, the application filed on
10 February 2012, as amended, is dismissed, with costs.
I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Judge O'Dwyer
Associate:
Date: 23 August 2013
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