Anderson v Sizer
[2011] FMCA 895
•24 November 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ANDERSON v SIZER | [2011] FMCA 895 |
| BANKRUPTCY – Application for substituted petitioning creditor. BANKRUPTCY – Application for review of decision of Registrar – application out of time – whether extension of time ought to be granted – factors relevant to extension of time. BANKRUPTCY – Application to annul bankruptcy – whether sequestration order ought to have been made – whether discretion to annul bankruptcy ought to be exercised. |
| Bankruptcy Act 1966 (Cth), ss.49, 153B Federal Magistrates Act 1999 (Cth), s.104(2) and (3) Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), rr.2.03(1), 7.01, 7.02, 7.06 Federal Magistrates Court Rules 2001 (Cth), r.20.01(2)(a) |
| Cameron v Cole (1944) 68 CLR 571 Nathan v Burness (No.2) [2011] FCA 289 |
| Applicant: | WARREN PERRY ANDERSON |
| Respondent: | WARREN FRANCIS SIZER |
| File Number: | PEG 223 of 2011 |
| Judgment of: | Lucev FM |
| Hearing date: | 15 November 2011 |
| Date of Last Submission: | 15 November 2011 |
| Delivered at: | Perth |
| Delivered on: | 24 November 2011 |
REPRESENTATION
| For the Applicant: | No appearance |
| For the Respondent: | No appearance |
| Counsel for the Substituted Petitioning Creditor: | Mr Cornes |
| Solicitors for the Substituted Petitioning Creditor: | Gilchrist Connell |
ORDERS
That:
(a)Clambake Pty Ltd be substituted as the petitioning creditor in lieu of Warren Francis Sizer, and the creditor’s petition be amended accordingly, including as to the details of the debt owed by the applicant to Clambake Pty Ltd; and
(b)any requirement for re-verification and re-service of the amended creditor’s petition be dispensed with.
That the application:
(a)for review of the decision of the Registrar dated 21 June 2011; and
(b)for annulment of the applicant’s bankruptcy,
be dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT PERTH |
PEG 223 of 2011
| WARREN PERRY ANDERSON |
Applicant
And
| WARREN FRANCIS SIZER |
Respondent
REASONS FOR JUDGMENT
Application
The application in this case is for:
a)a review of the decision of a Registrar of this Court[1] to issue a sequestration order making the applicant, Warren Perry Anderson,[2] bankrupt; or
b)alternatively, annulment of Mr Anderson’s bankruptcy.[3]
[1] Federal Magistrates Act 1999 (Cth), s.104(2) (“FM Act”); Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), r.7.06 (“FMC (Bankruptcy) Rules”).
[2] “Mr Anderson”.
[3] Bankruptcy Act 1966 (Cth), s.153B (“Bankruptcy Act”); FMC (Bankruptcy) Rules, rr.7.01 and 7.02.
Mr Anderson seeks orders that:
a)
the sequestration order made on 21 June 2011 by a Registrar of this Court be set aside and the creditor’s petition filed
9 December 2010 be dismissed;
b)alternatively to (a), that his bankruptcy be annulled; and
c)an order as to the costs of, and incidental to, the application.
Sequestration order
The sequestration order was made on 21 June 2011 by a Registrar of this Court. The sequestration order notes that the date of the act of bankruptcy is 25 November 2010. The creditor’s petition was presented on 9 December 2010 by Warren Francis Sizer[4] alleging a debt of $1,100,000 owed by Mr Anderson under a guarantee,[5] the liability being the subject of a judgment by the Supreme Court of Western Australia in matter CIV 1716 of 2010.
[4] “Mr Sizer”.
[5] “Sizer Guarantee”.
Directions – 5 September 2011
On 5 September 2011 the Court made the following orders at a directions hearing:
1. Any party appearing who intends to oppose the application:
a) file a notice of appearance if not already filed; and
b) file and serve:
i) a form 5 notice of the grounds of opposition to the application; and
ii) any affidavits in support of the notice of opposition,
by 26 September 2011.
2. The applicant file and serve:
a) any reply; and
b) any affidavits in support of the reply,
by 17 October 2011.
3. The applicant serve a copy of the sealed Order of the Court on the Official Trustee by 19 September 2011.
4. The Official Trustee provide an affidavit annexing a report for the purposes of Rule 7.04(1) of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) no later than 14 days prior to hearing.
5. Any documents required to be filed for the purposes of Rule 4.05 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) be filed in accordance with that rule.
6. The applicant file and serve an outline of contentions of law and fact by 24 October 2011.
7. The respondent file and serve an outline of contentions of law and fact by 31 October 2011.
8. The matter be listed for hearing at 10:15am on 15 and 16 November 2011.
9. Costs be reserved.
Mr Anderson’s affidavit
Mr Anderson filed an affidavit in support of the application.[6]
[6] Affidavit of Warren Perry Anderson, sworn 9 August 2011 (“Mr Anderson’s Affidavit”).
Mr Anderson disputes that he owes any money to Mr Sizer, and says that the Sizer Guarantee is a “purported agreement”[7] and that he does not owe any money to Mr Sizer because, in summary:
a)the Sizer Guarantee refers to a loan agreement to which key terms of the Sizer Guarantee are linked, but which was not shown to him;
b)Mr Sizer told him that the loan agreement was secured by a guarantee from a bank, which is incorrect;
c)his signature on the Sizer Guarantee was not witnessed, although it purports to be witnessed; and
d)although he signed the Sizer Guarantee, he told Mr Sizer he was not prepared to fully execute the document until he was shown the loan agreement.[8]
[7] Mr Anderson’s Affidavit at para.5.
[8] Mr Anderson’s Affidavit at para.6, see also paras.7-22.
Mr Anderson’s evidence indicates that by reason of orders made in 2008 and 2009 by the Family Court of Australia with respect to the corporate vehicle through which Mr Anderson usually paid his legal and other expenses, namely Owston Nominees (No 2) as trustee for the Warren Anderson Trust,[9] and the subsequent liquidation of Owston, Mr Anderson has no ability to raise funds for ongoing legal representation.[10] Otherwise, Mr Anderson’s Affidavit indicates that:
a)he has no discernable source of income, either intermittent or ongoing;[11]
b)he has no money in any bank accounts;[12]
c)his living expenses are now funded by funds advanced to him from family and friends;[13]
d)he does not own a motor vehicle;[14]
e)his shareholdings in companies of which he remains a director, secretary or shareholder have only “nominal value”;[15] and
f)substantial debts owed to Mr Anderson from Owston ($90,000,000), and owed to Tipperary Developments (of which he is a shareholder) by Owston ($23,000,000), are not expected to be paid.[16]
[9] “Owston”.
[10] Mr Anderson’s Affidavit at paras.59-61 and 64-65.
[11] Mr Anderson’s Affidavit at paras.67-73.
[12] Mr Anderson’s Affidavit at para.70.
[13] Mr Anderson’s Affidavit at para.70.
[14] Mr Anderson’s Affidavit at para.71.
[15] Mr Anderson’s Affidavit at para.72.
[16] Mr Anderson’s Affidavit at paras.67 and 73.
Mr Anderson’s Affidavit reveals that in proceedings involving him, and a company called Rapid Metal Developments (Australia) Pty Ltd, default judgment was entered against him in the Supreme Court of Western Australia on 29 July 2009 for $3,034,688.57, plus interest.
Mr Anderson has applied to set aside a bankruptcy notice arising from that judgment, in the sum of $7,093,978.34, but those proceedings, in this Court (before another Federal Magistrate), appear to have been stayed by reason of the sequestration order.[17]
[17] Mr Anderson’s Affidavit at paras.74-76.
Mr Anderson’s Affidavit also discloses an amount owing of $35,000 to the ANZ Bank on a credit card (of which no particular details are provided).[18]
[18] Mr Anderson’s Affidavit at para.78.
Opposing creditors
A number of creditors[19] who appeared at the directions hearing on 5 September 2011 indicated they intended to oppose the application and filed notices of opposition and affidavits in support of their opposition. The Opposing Creditors were as follows:
a)Angas Securities Limited, which alleges a debt owed by Mr Anderson (as guarantor) of $1,000,000;[20]
b)Barker Mortgages Pty Ltd, which alleges a debt owed by Mr Anderson (as guarantor) of $700,000;[21]
c)Clambake Pty Ltd,[22] which alleges a debt owed by Mr Anderson (as judgment debtor) of $1,589,951.81;[23]
d)Mortgaged Funds Management Pty Ltd, which alleges a debt owed by Mr Anderson (as guarantor) of $35,299,749;[24] and
e)Solomon Brothers, who allege a debt owed by Mr Anderson (for legal fees) of $757,276.65.[25]
[19] “Opposing Creditors”.
[20] Affidavit of Christopher James Venus, sworn 2 September 2011, para.5.
[21] Affidavit of Paul Stephen McCarthy, sworn 2 September 2011, paras.2-4.
[22] “Clambake”.
[23] Affidavit of Ivor Frederick Cohen, sworn 1 September 2011, paras.4, 8, 17, 26 and 27 (“Mr Cohen’s September 2011 Affidavit”).
[24] Affidavit of Matthew John Hower, sworn 2 September 2011, para.4.
[25] Affidavit of Peer Benjamin Hanich, sworn 30 September 2011, paras.3-4.
No reply
Mr Anderson did not file any reply or any affidavits in support of a reply to the various notices of opposition and affidavits in support of the notices of opposition filed by the Opposing Creditors. Any reply and affidavits in support of the reply were due to be filed by 17 October 2011. On that day the lawyers who had previously acted for Mr Anderson in these proceedings filed a notice of withdrawal as lawyers for Mr Anderson.
Final hearing
Mr Anderson did not appear at the final hearing. The creditor whose creditor’s petition founded the sequestration order, Mr Sizer, did not appear at the final hearing, and otherwise has taken no part in the proceedings since the application was filed on 10 August 2011.
Of the Opposing Creditors, only Clambake appeared at the final hearing.
The Trustee did not appear at the final hearing, but filed a report[26] in which he indicated that his position is to abide by the direction of the Court. The Trustee’s Report indicates that:
[26] “Trustee’s Report”. The Trustee’s Report was Annexure GAL 1 to the Affidavit of George Aubrey Lopez, sworn 14 November 2011 (“Trustee’s Affidavit”).
a)Mr Anderson has failed to:
i)respond to correspondence from the Trustee;
ii)contact the Trustee or the Trustee’s office;
iii)provide a Statement of Affairs to the Trustee; and
iv)provide any books and records in respect of his financial affairs to the Trustee;[27]
b)there are projected creditor claims against Mr Anderson (as at 11 October 2011) of $42,042,332.05;[28] and
c)two proofs of debt have been received:
i)the first from Clambake for $1,575,296.77; and
ii)the second from Rapid Metal Developments (Australia) Pty Ltd for $7,249,619.54.[29]
[27] Trustee’s Report, Part 2, and Annexure GAL 6.
[28] Trustee’s Report, Annexure GAL 7.
[29] Trustee’s Report, Part 3.
Application for substituted petitioning creditor
In an interim application filed on 11 November 2011, Clambake sought interim orders that:
a)Clambake be substituted for Sizer as the petitioning creditor;[30] and
b)Clambake have leave to amend the creditor’s petition of 9 December 2010 to include its details as the petitioning creditor and details of the debts owed to it.
[30] Bankruptcy Act, s.49.
The substituted creditor application was supported by an affidavit of Ivor Frederick Cohen, sworn 10 November 2011.[31] Mr Cohen’s November 2011 Affidavit refers to and confirms facts in Mr Cohen’s September 2011 Affidavit. The effect of those two affidavits is summarised in Mr Cohen’s November 2011 Affidavit, in the final few paragraphs, as follows:
5. Clambake is owed the sum of $1,419,164.61 pursuant to two judgments of the Supreme Court of Western Australia and interest on the judgment sums pursuant to the Civil Judgments Enforcement Act 2004 (WA).
6. Clambake has received no payment from Mr Anderson to diminish or discharge the sums owing to it pursuant to either of the two judgments of the Supreme Court of Western Australia, nor any proposal to diminish or discharge either or both of the two judgments.
7. The first judgment debt of $1,055,119 was due and payable to Clambake as at the date of the act of bankruptcy on 25 November 2010.
8. The combined judgment debt of $1,419,164.71 was due and payable to Clambake as at the date of the sequestration order on 21 June 2011.
9. The sums owing to Clambake pursuant to the two judgments remain due and payable and judgment interest is accruing on both debts at a rate of $233.28 per day ….[32]
[31] “Mr Cohen’s November 2011 Affidavit”.
[32] Mr Cohen’s November 2011 Affidavit at paras.5-9. The amount referred to in para.8 of Mr Cohen’s November 2011 Affidavit is overstated by 10 cents.
The two judgments of the Supreme Court of Western Australia to which Mr Cohen refers are:
a)a judgment in proceedings in CIV 1707 of 2003 in which Mr Anderson was a guarantor for payments of rent and outgoings owed by Tipperary Projects Pty Ltd[33] in respect of its lease of part of Clambake’s premises at 201-207 Stirling Highway, Claremont, and in respect of which judgment was delivered in Clambake’s favour on 20 March 2009 against Tipperary and Mr Anderson for the sum of $1,055,119,[34] and, in respect of which an appeal by Tipperary and Mr Anderson was dismissed by the Supreme Court of Western Australia Court of Appeal on 21 October 2010;[35] and
b)a further judgment in the same proceedings in Clambake’s favour on 28 February 2011 against Tipperary and Mr Anderson in the sum of $364,045.61, which appears to be the costs of the action giving rise to the earlier judgment.[36]
[33] “Tipperary”.
[34] Mr Cohen’s September 2011 Affidavit, para.8 and Annexure ICF 1.
[35] Mr Cohen’s September 2011 Affidavit, para.16 and Annexure ICF 3.
[36] Mr Cohen’s September 2011 Affidavit, para.17 and Annexure ICF 4.
Section 49 of the Bankruptcy Act provides as follows:
Where a creditor's petition is not prosecuted with due diligence or where for any other reason the Court considers it proper to do so, the Court may permit to be substituted as petitioner or petitioners another creditor or other creditors to whom the debtor is indebted in the amount required by this Act in the case of a petitioning creditor, and the petition may be proceeded with as if the substituted creditor or creditors had been the petitioning creditor.
A substitution order under s.49 of the Bankruptcy Act can be made on an application for review of a sequestration order made by a Registrar of this Court.[37]
[37] O’Meara v Hitwise Pty Ltd & Anor (2007) 160 FCR 518 at 521 per Kiefel, Sundberg and Gyles JJ; [2007] FCAFC 114 at para.9 per Kiefel, Sundberg and Gyles JJ (“Hitwise”).
In circumstances where Sizer, as the original petitioning creditor, has not appeared at final hearing, nor taken any steps with respect to this application since its filing on 10 August 2011, the Court can conclude that the creditor’s petition is not being prosecuted with due diligence in the review application, which is a fresh hearing. Therefore, the requirements of s.49 of the Bankruptcy Act for substitution of another creditor as substituted petitioning creditor are met.
Clambake has done sufficient to establish that it ought to be substituted for Sizer as the petitioning creditor. Clambake is owed a debt by Mr Anderson of at least $1,419,164.61 pursuant to two judgments of the Supreme Court of Western Australia. The Court notes that the relevant act of bankruptcy did not occur more than six months before the creditor’s petition was originally presented.[38] There will therefore be an order that Clambake be substituted as petitioning creditor in lieu of Sizer, and that the creditor’s petition be amended accordingly, including as to the details of the debt owed by the applicant to Clambake. Any requirement for re-verification and re-service of the amended creditor’s petition can be dispensed with as Mr Anderson has had adequate notice of the application to substitute Clambake as petitioning creditor, and, more particularly, of the judgment debts relied upon by Clambake when it was an Opposing Creditor. Moreover, Mr Anderson has not filed a reply, or any affidavit in reply in relation to the Clambake judgment debts. Mr Anderson’s failure to respond allows the Court to infer, and the Court does so infer, that Mr Anderson’s judgment debts to Clambake are not disputed.
[38] Owners Strata Plan No 53267, in the matter of Owners Strata Plan No 53267 v Prestia [2001] FCA 363 at paras.14-15 per Hely J; Re Buckley; Ex parte James Hardie & Co Pty Ltd (1976) 27 FLR 496.
Review application – extension of time
A decision of a Registrar of this Court to issue a sequestration order can, upon application, be reviewed by a Federal Magistrate.[39] There is a 21 day time limit to make an application for a review of a Registrar’s decision in bankruptcy proceedings.[40] The 21 day time limit may be extended by the Court on any terms that the Court thinks fit.[41] The Court notes that there is no consent to an extension of time for the filing of the review application by Mr Anderson, and each of the Opposing Creditors who filed notices of opposition, but did not appear at the final hearing, formally opposed the review application, either on the basis that there is no application for an extension of time in which to file the review application, or that if there is a review application it is out of time and that time ought not be extended. Clambake, which did appear at the final hearing, opposed the application for review on both of the above bases.
[39] FM Act, s.104(2) and (3); FMC (Bankruptcy) Rules, r.7.06.
[40] FMC (Bankruptcy) Rules, r.2.03(1).
[41] Federal Magistrates Court Rules 2001 (Cth), r.20.01(2)(a) (“FMC Rules”).
Because there is no application for extension of time in which to file the review application the Court is of the view that no extension of time can, or ought to, be granted. There is, simply, no application for an extension of time by Mr Anderson. Further, and in any event, there is no evidence led by Mr Anderson as to why the review application is out of time.[42] Mr Anderson’s Affidavit does contain a number of paragraphs under the heading “Reasons for not appearing earlier” but those paragraphs do not relate to any facts relating to events following the making of the sequestration order by the Registrar on 21 June 2011, or the circumstances leading to the making of the review application.
[42] See generally Mr Anderson’s Affidavit.
Even if the Court were to consider the application for an extension of time in which to file the review application it would not be granted for reasons set out below.
In the exercise of its discretion to extend time in which to file a review application, this Court’s discretion is unfettered. It is, however, generally accepted that it may have regard to the factors set out by the Federal Court in Hunter Valley Developments Pty Ltd v Cohen[43] namely:
a)extent of the delay;
b)explanation for the delay;
c)prejudice to the respondent; and
d)prospects of success of the underlying application (that is, any review application), with the emphasis generally being on this latter issue.[44]
[43] (1984) 3 FCR 344 (“Cohen”).
[44] Cohen at 348-349 per Wilcox J; Winn v Blueprint Instant Printing Pty Ltd [2011] FCA 292 at paras.15-16 per Ryan J.
Extent of delay
The delay here is approximately four weeks, or about one and a third times beyond the 21 day time limit. This is a not inconsiderable delay in the context of that time limit.
Explanation for delay
Mr Anderson’s Affidavit contains no explanation at all for the delay of approximately four weeks beyond the 21 day time limit.
Prejudice
Prejudice to the respondent in a sequestration order review case is prejudice to the petitioning creditor(s), and, in this case, Clambake, as substituted petitioning creditor. There is significant prejudice to Clambake in extending the life of bankruptcy proceedings by way of review of a sequestration order where:
a)there is uncontradicted evidence that Mr Anderson is indebted to Clambake in the sum of at least $1,419,164.61; and
b)payment of the Clambake judgment debts is long overdue.[45]
[45] Mr Cohen’s September 2011 Affidavit, Annexures ICF 1 and ICF 4.
Prospects of success underlying application
The review application (and the application for annulment of bankruptcy) relate to circumstances where there is uncontradicted evidence that Mr Anderson is indebted to Clambake in the sum of at least $1,419,164.61.
The Court also notes that the sequestration order was in respect of a judgment debt for an amount of $1,100,000 for which Mr Anderson was found to be indebted to Mr Sizer. Thus, even if the contentions made by Mr Anderson about his indebtedness to Sizer, arising from the Sizer Guarantee, were made out, there would be ample grounds to find, on review, which is a fresh hearing, that a sequestration order ought to issue in respect of the Clambake debt. In short, excluding the debt to Sizer, there is uncontradicted evidence that Mr Anderson is indebted to Clambake in at least the amount of $1,419,164.61. Therefore, any review application would have no prospects of success, at all.
Consideration – review application – extension of time
There is no basis on which to grant an extension of time for Mr Anderson to file the review application, because:
a)there is no explanation for a not inconsiderable delay;
b)Clambake would suffer significant prejudice; and
c)a review application would have no prospects of success.
In the circumstances, the application for review of the sequestration order must be dismissed.
Annulment of bankruptcy
An application under s.153B of the Bankruptcy Act involves the Court undertaking a two stage process to determine:
a)firstly, whether a sequestration order ought not to have been made; and
b)secondly, if the Court is satisfied that a sequestration order ought not to have been made, whether, in the Court’s discretion, the order should be annulled.[46]
[46] Re Deriu (1970) 16 FLR 420; Pollock v Deputy Commissioner of Taxation (1994) 94 ATC 4148; Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315 at para.20 per Carr, Finn and Sundberg JJ.
The power to annul is to be exercised cautiously, and only in special circumstances.[47] An applicant for an annulment under s.153B of the Bankruptcy Act carries a heavy burden, and must make full and frank disclosure of financial affairs.[48] Full and frank disclosure requires that there be an overt “show and tell”, not a game of “hide and seek”, with respect to the assets and liabilities of the bankrupt seeking annulment under s.153B of the Bankruptcy Act.
[47] Cameron v Cole (1944) 68 CLR 571 at 594 per Starke J.
[48] Re Papps; Ex parte Tapp (1997) 78 FCR 524; Nathan v Burness (No 2) [2011] FCA 289; Demarco v Pascoe [2000] FCA 1771 at para.16 per Emmett J (“Demarco”).
In these proceedings, Mr Anderson has sworn that he had no other significant creditors, other than Mr Sizer.[49] By reason of the uncontradicted evidence of Clambake, it is apparent that Mr Anderson’s evidence is in that regard untrue, and that he has failed to make the full and frank disclosure required of an applicant seeking an order under s.153B of the Bankruptcy Act.[50] Failure in such a fundamental matter causes the Court to consider with suspicion Mr Anderson’s evidence about the nature of the Sizer Guarantee. However, it is unnecessary to make any specific findings with respect to the Sizer Guarantee. That is because even if the Court were to find that the sequestration order ought not to have been made on 21 June 2011 in respect of the debt said to arise from the giving of the Sizer Guarantee, there is ample evidence before this Court on review, in respect of the judgment debts owing to Clambake, the substituted creditor, as at the date the sequestration order was made, which would warrant the Court finding that the sequestration order ought to have been made.
[49] Mr Anderson’s Affidavit at para.79.
[50] Demarco at para.16 per Emmett J.
In the circumstances, an uncontradicted debt of at least $1,419,164.61, incurred by a person who, on his own evidence, has no realisable assets and no income sufficient to pay the debt, does not establish the exceptional circumstances required to annul a bankruptcy, and has persuaded the Court that the sequestration was properly made. Furthermore, the size of the debt owed to Clambake, and the time for which it has been due and outstanding, compounded by Mr Anderson’s:
a)lack of income and realisable assets;
b)failure to co-operate with the Trustee, and
c)failure to make full and frank disclosure of his financial affairs, and, in particular, his liability to Clambake,
persuade the Court that, were it required to consider the exercise of its discretion (which it is not), it would not exercise its discretion to annul the bankruptcy of Mr Anderson.
Conclusions
It follows from the foregoing reasons that the application:
a)for review of the Registrar’s decision to issue a sequestration order on 21 June 2011; and
b)for annulment of Mr Anderson’s bankruptcy under s.153B of the Bankruptcy Act,
must be dismissed.
There will therefore be an order dismissing the application.
The Court will hear the parties as to costs.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Lucev FM
Date: 24 November 2011
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