ANZ Bank Ltd v Hassin - [2002] FMCA 281

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ANZ BANK LTD v HASSIN

[2002] FMCA 281

BANKRUPTCY – Application for sequestration order – previous application to set aside bankruptcy notice dismissed – whether Federal Magistrate was able to hear present matter – new evidence admitted – whether evidence of sale of property by creditor is evidence that it was sold at an undervalue – whether debtor has a set-off against the creditor – whether the debtor would be able to pay his debts – effect of offer of assistance from relations – sequestration order granted.

Bankruptcy Act 1966 (Cth) ss.40(1)(g); 52; 52(2); 156A
Corporations Act 2001(Cth) s.601AD

Hassin v ANZ [2002] FMCA 97
Re Ling; ex-parte Ling v The Commonwealth (1995) 58 FCR 129

Applicant:

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
(ACN 005 357 522)

Respondent:

ROGER SOLOMON HASSIN

File No:

SZ 402 of 2002

Delivered on:

15 November 2002

Delivered at:

Sydney

Hearing Date:

12 November 2002

Judgment of:

Raphael FM

REPRESENTATION

Counsel for the Applicant:

Mr R Beasley

Solicitors for the Applicant:

Blake Dawson Waldron

Counsel for the Respondent:

Mr M Abdul-Karim

Solicitors for the Respondent:

McKell’s

ORDERS

Sequestration order made against the estate of Roger Solomon Hassin.
Maxwell William Prentice and MJ Robinson to be appointed as trustees of the bankrupt estate.
Applicant’s costs to be paid from the estate of the debtor in accordance with the provisions of the Bankruptcy Act and shall be calculated in accordance with the provisions of the Federal Court Rules.
Orders 1 and 2 stayed until 5 pm on Tuesday 19 November 2002.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SZ 402 of 2002

AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED
(ACN 005 357 522)

Applicant

And

ROGER SOLOMON HASSIN

Respondent

REASONS FOR JUDGMENT

This is an application for a sequestration order by the ANZ Bank against its customer Mr Hassin. The petition which was dated 12 June 2002 claimed a debt of $281,633.86. The petition was required to be served by substituted service which took place in accordance with the court’s orders on or about 7 August 2002. The act of bankruptcy referred to in the petition was non-compliance with a bankruptcy notice on or before 29 May 2002. There were two supporting creditors, the St. George Bank and BMW Australia Finance Limited.
The bankruptcy notice had itself been the subject of an application to set aside on the grounds that the applicant (debtor) had a counter claim, set off or cross claim of the kind referred to in s.40(1)(g) of the Bankruptcy Act 1966 (Cth). I heard the application to set aside the bankruptcy notice and dismissed it (Hassin v ANZ [2002] FMCA 97).
At the commencement of the hearing of these proceedings I was asked by Counsel for the debtor to step down. Although Mr Abdul-Karim did not go so far as to suggest either actual or ostensible bias he submitted that as I had already made findings on matters which were due to be re-agitated in these proceedings it would be more appropriate that they be heard by another Federal Magistrate. I declined the invitation on the basis that, to the extent that any matter to be

re-agitated was not res judicata, the decision had been made in the absence of any oral evidence or cross examination and therefore in no way reflected upon the credit of any person who was likely to be called as a witness in these proceedings. I was aware that the Federal Magistrates Court in Sydney has a full list of several months and believed that it was in the interests of justice that this application be heard as soon as possible. I reminded Mr Abdul-Karim that his client’s evidence in the set aside application, such as it was, had been noted, but in my opinion, even if fully accepted did not provide any legal basis to set aside the bankruptcy notice (see [22] Hassin v ANZ [2002] FMCA 97). No appeal had been made from my judgment.
The debtor opened his case by advising that he relied on four grounds upon which I should exercise my discretion under s.52(2) of the Act. The first was that he had a set off or cross claim against the ANZ. The second was that he was solvent. The third was that the judgment of the ANZ was a default judgment and not given on its merits. The fourth ground was that the debt claimed by the bank was confusing.
Before these matters could be considered in any detail I pointed out to Counsel for the creditor that the two copies of the affidavit of service of bankruptcy petition, which I had in front of me, indicated that the petition that was served by post was a petition taken out against a person other than the debtor. A further affidavit of service was speedily prepared which has been filed in court. After a considerable amount of sparring between Counsel and exhortations from myself, Mr Abdul-Karim correctly conceded that the petition which had reached the hands of his instructing solicitors was indeed directed at the debtor. No further point was taken on this matter.
Mr Hassin was then called to give evidence. He had sworn an affidavit dated 23 August 2002 in which he referred to two affidavits dated 26 February 2002 and 8 February 2002 filed in the bankruptcy notice proceedings. I did not admit these documents as they related to the bankruptcy notice proceedings and to issues which had already been decided. I informed Mr Abdul-Karim that I was prepared to consider evidence that had not been before me in May and for that purpose allowed in Exhibit “E” to the affidavit. I struck out the whole of paragraph 3 of the affidavit on the grounds that there were no details of the agreement or arrangement referred to therein other than the bald assertion of its existence.
Annexure “E” was a copy of the front page of a contract for the sale of land being Lot 7, Paradise Palms Resort, 675 Pacific Highway Coffs Harbour. The contract indicates that the vendor is the ANZ Bank, but it does not contain the name of any purchaser. The price in the contract is $84,000.00 and the contract is unsigned. I later admitted into evidence as Exhibit 1 a series of documents that purported to be the full contract of which annexure “E” was the first page. These documents did not take the matter further so far as identification of a purchaser or the existence of an actual or proposed sale at that price. It is agreed between the parties that Lot 7, Paradise Palms Resort was later sold by the bank for $50,000.00. The purpose of exhibiting these contractual documents was to persuade me that there was evidence that the bank had sold the property at an undervalue.
In my judgment in the bankruptcy notice proceedings I made reference to this potential claim and indicated that from the documents that were then before me I did not believe it had much prospect of success as there existed a valuation indicating that the property was only worth $60,000.00. I do not regard this finding as binding upon me in the present proceedings. If appropriate evidence had been brought I believe it would have been open to me to make a finding that there were reasonable prospects of success in a claim brought by the debtor against the creditor for conducting a sale at an undervalue. However, the evidence before me today does not allow me to do that. There is simply no evidence of any real prospect of a sale at $84,000.00 which the bank did not progress. Whilst dealing with this matter I would make the additional point that even if there was proof that the bank sold the property for $50,000.00 when it could have sold it for $84,000.00 the damages recoverable by the debtor would not exceed $34,000.00 plus interest. The debt owed to the bank is over $230,000.00. There would be a significant debt still owing to the bank.
In Mr Hassin’s evidence he indicated that he was aware that his sister, Rachel Abaron, was prepared to pay the amount of $84,000.00. Ms Abaron did not give evidence. I am not prepared to accept this uncorroborated assertion as proof that Ms Abaron would have completed the purchase.
Mr Hassin’s evidence in chief was mostly taken up with indicating that he had received help from his brother and sister in the past when he had been in financial difficulties. He said that his brother had lent him about $250,000.00 in the late 1980s when a property development had run over cost. He said that his sister had lent him money for stock in a business which he had operated in the early '90s. Mr Hassin explained how the debts to BMW and St George arose. He claimed that he had no notice of the proceedings brought by these companies and that he was attempting to set aside the judgment that BMW had obtained. He had given his solicitors instructions to do that over a month ago, but no proceedings had yet been commenced.
In his affidavit Mr Hassin deposed to being a director and shareholder of a company known as Ceecal Pty Limited which was involved in the motor industry. I upheld the creditor’s objections to paragraph 5 of the affidavit which dealt with the valuation of that company. In cross-examination Mr Hassin was forced to agree that an ASIC search indicated that he was not a director of the company and that the company was in the process of undergoing a strike off procedure. If this procedure was successful then any assets which were owned by the company would automatically devolve to the ASIC [s.601 AD Corporations Act2001 (Cth)]. In these circumstances I cannot be satisfied that the debtor was able to produce any evidence of being a shareholder (or having an interest of any value) in this company in respect of which, he said in cross examination, had never held a board meeting and never filed an annual return. The applicant had previously agreed that he had defaulted on his obligations to St George and BMW.
In his submissions Counsel for the debtor argued that the set off which his client had against the ANZ was one which he could not have raised in the principal proceedings which resulted in the judgment debt. He said that this situation arose because the sale of the property by the bank in the sum of $50,000.00 had not been completed until after judgment had been entered. Mr Beasley for the creditor, submitted that the contract was dated 28 June 2001 which was prior to the default judgment of 4 July and long prior to the application before McClellan J on 22 March 2002 to set aside the default judgment. I am not satisfied from the evidence which I have seen in either these proceedings or the previous proceedings before me, that the debtor was given notice of this sale. I would distinguish that situation from the one which was referred to in my previous judgment and discussed by Hill J in Re Ling; ex-parte Ling v The Commonwealth (1995) 58 FCR 129 at 132. But this point is moot. I have found that there is no proof that the sale was one at an undervalue. I am therefore not satisfied (to the extent that it is now of any relevance at all) that the debtor has a set off against the creditor.
I am likewise not satisfied that the debtor is “able to pay his debts”. The debtor’s evidence concerning his assets was limited to the alleged interest in Ceecal. I have already found that this evidence is unreliable. The other evidence is that he is able to receive assistance from his brother or sister. Mr Hassin’s brother did put on an affidavit which was not challenged and which states the following:
“1I am the brother of the respondent.
2I am aware of proceedings filed by the applicant claiming approximately $315,000.00 from the respondent.
3I am also aware that my brother has a claim in the Supreme Court against the bank claiming damages and should those proceedings not be successful, I may be prepared to assist him financially should the bank’s claim exceed his claim for damages.”
The money due under the judgment to the creditor is due now. There is no indication in that affidavit that Mr Gil Hassin is ready to put his hands in his pocket on behalf of his brother until after the completion of proceedings being brought by his brother against the bank. That affidavit does not satisfy me of Mr Hassin’s solvency. There is no evidence from the debtor’s sister that she is prepared to help and in those circumstances I do not accept the debtor’s uncorroborated assertions.
The third matter raised by the debtor was that the judgment of the ANZ was a default judgment and one not obtained on the merits. I was not provided with any authorities as to how this allows me to exercise my discretion in favour of refusing the sequestration order but I also note that in his judgment of 22 March 2002 McClellan J said:
“[14] These are not the usual proceedings to set aside a default judgment. In the ordinary course, those proceedings involve circumstances where no defence has been filed and the plaintiff has entered into judgment. In the present circumstances, of course, a notice of appearance by a solicitor was filed, together with a defence, and on more than one occasion an opportunity was afforded to the applicant by Hunter J to file an amended defence and actively defend the bank’s claim. This was not done.”
I am not convinced that there is any merit in the debtor’s argument on this ground.
The final point raised by the debtor was that the debt claimed was confusing. This seems to arise out of credits being given by the bank for various payments received as a result of the sale of properties. These matters may be confusing to the debtor and his counsel but they seem clear to me. I do not accept this submission.
At the commencement of the proceedings counsel for the creditor provided me with up to date affidavits as required under s.52 of the Bankruptcy Act. I am satisfied of the matters required by that section. For the reasons given I do not believe that the debtor is able to pay his debts and I do not believe there are any grounds upon which I could find that there is sufficient cause why a sequestration order ought not to be made.
In those circumstances I make a sequestration order against the estate of Roger Solomon Hassin. I note that Maxwell William Prentice and M J Robinson have consented to act as trustees pursuant to s.156A of the Bankruptcy Act and I so appoint them. I order that the respondent debtor pay the applicant creditor’s costs pursuant to the Federal Court Rules to be taxed if not agreed.
In my judgment in the bankruptcy notice proceedings I gave the debtor a period of one week in which to comply with the bankruptcy notice.

I have considered whether or not to stay these orders so that his family can have one last opportunity to come to his assistance. I have decided not to do so because of the existence of at least two other creditors. It seems to me that the respondent debtor is a man without funds whose estate should be sequestrated at the earliest possible opportunity in order to protect all of his creditors.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: