Arwon Finance Pty Ltd v Wilson (No 2)

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FEDERAL COURT OF AUSTRALIA

Arwon Finance Pty Ltd v Wilson (No 2) [2023] FCA 657

File number: WAD 215 of 2021
Judgment of: BANKS-SMITH J
Date of judgment: 21 June 2023
Catchwords: BANKRUPTCY - creditor's petition against respondent following non-compliance with bankruptcy notice founded on judgment debt - challenge to bankruptcy notice previously unsuccessful - where respondent sought adjournment of petition based on cross claim for tortious conspiracy - substantive factual and legal claims the subject of alleged conspiracy proceeding dismissed in earlier Supreme Court trial brought by the respondent - appeal from trial orders dismissed - where respondent did not seek to rely on 'other sufficient cause' under s 52(2)(b) of the Bankruptcy Act 1966 (Cth) but sought adjournment in exercise of general power to adjourn under s 33(1) of Bankruptcy Act - matters relevant to exercise of discretion - whether cross claim has insufficient merit to justify adjournment - sequestration order made
Legislation: Bankruptcy Act 1966 (Cth) ss 33, 40, 41, 43, 44, 52
Cases cited:

Arwon Finance Pty Ltd v Wilson [2019] WASC 244

Arwon Finance Pty Ltd v Wilson [2021] FCA 1599

Australian Wool Innovation Ltd v Newkirk [2005] FCA 290

Barton v Malcolm Johns Legal Pty Ltd (No 2) [2015] FCA 166

Blair v Curran (1939) 62 CLR 464

Central Exploration Pty Ltd v Zuks [2020] WASC 46

Clapham v Commonwealth Bank of Australia [2013] FCAFC 84

Endresz v Australian Securities and Investments Commission (No 2) [2015] FCAFC 33; (2015) 228 FCR 334

Fatimi Pty Ltd v Bryant [2004] NSWCA 140; (2004) 59 NSWLR 678

Ghosh v Miller [2016] FCA 1293

Jackson v Goldsmith (1950) 81 CLR 446

Liang v LV Property Investments Pty Ltd [2015] FCA 1057

Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111

Rigg v Baker [2006] FCAFC 179; (2006) 155 FCR 531

Wilson v Arwon Finance Pty Ltd [2020] WASCA 137

Wilson v Arwon Finance Pty Ltd [2021] FCA 1052
Division: General Division
Registry: Western Australia
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 177
Date of hearing: 3 February 2022
Counsel for the Applicant: Mr VN Ghosh
Solicitor for the Applicant: Allens
Counsel for the Respondent: Mr JRC Sippe
Solicitor for the Respondent: Laird Lawyers

ORDERS

WAD 215 of 2021
BETWEEN:

ARWON FINANCE PTY LTD

Applicant
AND:

FRANK CULLITY WILSON

Respondent

ORDER MADE BY:

BANKS-SMITH J

DATE OF ORDER:

21 JUNE 2023

THE COURT ORDERS THAT:

1.The respondent debtor's application for an adjournment of the creditor's petition is refused.

2.The estate of Frank Cullity Wilson be sequestrated under the Bankruptcy Act 1966 (Cth).

3.The applicant creditor's costs as agreed, or failing agreement, as taxed on a lump sum basis by a registrar of this Court, be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act.

THE COURT NOTES THAT:

A.The date of the act of bankruptcy is 1 September 2021.

B.A consent to act as trustee signed by Ian Charles Francis and…

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Details
Case
[2023] FCA 657
Decision Date

CaseChat Overview and Summary

In Arwon Finance Pty Ltd v Wilson (No 2), the applicant, Arwon Finance, sought to have the respondent, Mr Wilson, declared bankrupt following his failure to comply with a bankruptcy notice. Mr Wilson sought to adjourn the hearing of the petition on the basis of a cross-claim for tortious conspiracy. The court was required to determine whether the cross-claim had sufficient merit to justify the adjournment of the petition. The court found that the cross-claim was weak and of insufficient validity to justify an adjournment of the petition. The court found that the evidence relied upon by Mr Wilson was insufficient to infer any combination or agreement between Arwon and any other party to injure him. The court refused the application for an adjournment and made a sequestration order against Mr Wilson.

The court considered the nature and strength of the cross-claim, and whether it had sufficient merit to justify the adjournment of the petition. The court found that the cross-claim was speculative and lacked evidentiary support, and that the matters relied upon by Mr Wilson were insufficient to infer any combination or agreement between Arwon and any other party to injure him. The court held that the cross-claim did not have sufficient merit to justify the adjournment of the petition, and that the petition should proceed as scheduled. The court made a sequestration order against Mr Wilson and ordered that the applicant's costs be paid from the estate of the respondent debtor.

Orders

Orders of the court

1. The respondent debtor's application for an adjournment of the creditor's petition is refused.

2. The estate of Frank Cullity Wilson be sequestrated under the Bankruptcy Act 1966 (Cth).

3. The applicant creditor's costs as agreed, or failing agreement, as taxed on a lump sum basis by a registrar of this Court, be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act.

THE COURT NOTES THAT:

A. The date of the act of bankruptcy is 1 September 2021.

B. A consent to act as trustee signed by Ian Charles Francis and Joanne Emily Dunn has been served.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

For the reasons that follow, I am not satisfied that the petition should be adjourned.Background to debt Arwon has pursed Mr Wilson for repayment of a loan for a considerable period of time. The key events are set out in the reasons of McKerracher J in Wilson v Arwon Finance Pty Ltd [2021] FCA 1052 (Wilson v Arwon FCA) and the following background is adopted from his Honour's reasons. The history to the debt is to be found in the sandalwood tree schemes implemented by the Quintis Group of companies. For present purposes, the relevant entities that constitute the Quintis Group are Quintis Ltd and its wholly owned subsidiaries, Arwon and Sandalwood Properties Ltd (SPL) (formerly TFS Properties Ltd). The Quintis Group's business consists of owning and managing Indian sandalwood tree plantations and producing and selling products harvested from those trees. As part of the business, the Quintis Group operates managed investment schemes (MIS) and offers of financial products to sophisticated and institutional investors.Administrators and receivers appointed to Quintis Group On 20 January 2018 Richard Tucker, Scott Langdon and John Bumbak of Korda Mentha were appointed as administrators of Quintis and certain of its subsidiaries, including Arwon and SPL. On 23 January 2018 BTA Institutional Services Australia Limited, in its capacity as trustee of the trust established under a collateral trust deed dated 21 June 2011, appointed Jason Preston, Shaun Fraser and Robert Brauer of McGrath Nicol as receivers of Quintis and the various subsidiaries. The receivers recapitalised the Quintis Group and this was implemented by way of a deed of company arrangement (DOCA) dated 8 June 2018 and a creditors' scheme of arrangement approved by the Court under Part 5.1 of the Corporations Act 2001 (Cth). In October 2018 the Quintis Group exited external administration and continued trading on a solvent basis.Arwon's role According to John Louden, general counsel of the Quintis Group, the role of Arwon in the Quintis Group was to provide finance to MIS investors, including offers to sophisticated investors (SIOs). Individual investors in MIS and SIOs, known as 'growers', were required to pay an establishment fee to obtain certain rights over parcels of land on which sandalwood plantations were established by the Quintis Group. Arwon often provided finance to the grower in the form of a loan in order for the grower to pay the establishment fee. Most loans provided by Arwon to growers are at a fixed rate over seven years with monthly repayments of principal and interest. Loans are secured against the grower's trees, with Arwon having contractual rights to enforce its security over the trees in the event of default. Mr Louden said that Arwon has not entered into any new loans with growers since 2016, when the Quintis Group last sold plantation investments to MIS and SIO investors. Plantation sales to MIS and SIO investors do not form part of the business model of the Quintis Group following the 2018 recapitalisation.

Evidence

Evidence Before The Court

Mr Wilson relies on the following in support of the adjournment application:(a)he has a bona fide and reasonably arguable cross claim;(b)the claim relates to the litigation that gave rise to the judgment debt;(c)Arwon has been responsible for delay in the progress of the claim; and(d)there is no evidence of particular urgency.Affidavit evidence relied upon Mr Wilson relied on the following affidavits: first affidavit of Frank Wilson filed 14 October 2021; second affidavit of Frank Wilson filed 20 January 2022; third affidavit of Frank Wilson filed 28 January 2022; affidavit of Geoffrey Daniels (labourer who did work for Mr Wilson and his family trustee company) filed 20 January 2022; first affidavit of Graeme Scott (retired accountant) filed 21 April 2021 (originally filed in separate proceedings); and second affidavit of Graeme Scott filed 20 January 2022. Counsel for Mr Wilson stated that despite that significant body of evidence (some 889 pages), the material that Mr Wilson relied on for the purpose of the adjournment application was that identified in particular paragraphs of the written submissions. Leaving aside a number of affidavits that establish the formalities to be proved under s 52(2)(a) of the Bankruptcy Act, Arwon relied on: first affidavit of John Louden (Quintis Group general counsel) filed 2 November 2021; second affidavit of John Louden filed 28 January 2022; and affidavit of Chris Prestwich (partner at Allens acting for Arwon) filed 1 February 2022.The tort of conspiracy Conspiracy may be by 'unlawful means' or 'lawful means': Central Exploration Pty Ltd v Zuks [2020] WASC 46 at [119]. Mr Wilson accepts that for him to establish a claim for tortious conspiracy, he must prove that:(a)there was a combination or agreement between two or more persons;(b)there was an intention to injure, which must be the sole or predominant purpose (for conspiracy by lawful means), but need not be the predominant purpose (for conspiracy by an unlawful act);(c)the combination or agreement was executed in whole or in part; and(d)some pecuniary loss as a result of the defendants' acts in furtherance of the combination or agreement. As to the relevant principles, counsel for Mr Wilson adopted McKerracher J's summary in Wilson v Arwon FCA:[42]There must be a combination or agreement between the conspirators. To be a party to the alleged combination or agreement, each party must be sufficiently aware of the surrounding circumstances and share the same purpose or intention: Australian Wool Innovation Ltd v Newkirk [2005] FCA 290 per Hely J at ([62]).[43]As conspirators will ordinarily conceal their combination or agreement, it will often be the case that there is no direct evidence of the same. The combination or agreement can therefore be proved as a matter of inference from the overt acts of the relevant parties done in pursuance of the apparent common purpose between them. It is the weight which is to be given to the united force of all of the circumstances which must be considered: Chong v CC Containers Pty Ltd [2015] VSCA 137 (at [133]-[134]).Mr Wilson's case against ArwonThe inferred conspiracy agreement

Decision

Reasons for decision

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

As to the quantum the subject of the Conspiracy proceeding, Arwon submitted that it was not necessary for this Court to deal with it, as the other elements of the alleged conspiracy have no prospect of being established, but submitted that Mr Wilson's evidence on quantum should be treated with a degree of scepticism, submitting that the primary judge in Arwon v Wilson WASC had noted the potential range of different valuations referred to by Mr Wilson.Consideration - the merit of the conspiracy claims Acknowledging (consistently with Re Schmidt) that I am not purporting to determine the Conspiracy proceeding, in my view, for the following reasons the case against Arwon is weak and of insufficient validity to justify an adjournment of the petition. I am not satisfied that the matters relied upon by Mr Wilson are sufficient for a court to infer that there was any combination or agreement between Arwon and any other party to injure Mr Wilson. The matters fall well short of suggesting that. Importantly, no conduct on the part of Arwon is relied upon in support of the claim. To the extent 'group' knowledge is relied upon, Mr Wilson's argument ignores several features. Apart from a cursory reference to the corporate structure of the 'group', there has been no real attempt to address those features: the change of management after Mr Wilson's resignation and the effect it may have had on the former practices of the Quintis Group with respect to any debt recovery policies; why and how there might be any attribution of knowledge across the companies said to be parties to the conspiracies; the separate functions of the companies; and the ramifications of the appointment of external receivers as controllers of the companies. The receivers were also the decision makers with respect to the events of September 2018. There is considerable overlap in addressing the six matters relied upon by Mr Wilson, and the reasons are to be read together. However, attempting to address each, as to the first matter, Mr Wilson's assertion that Mr Xang told him that Quintis representatives had raised with Mr Xang his financial position and the litigation in which his family was said to have an interest is second hand hearsay and has little forensic value. In any event, it is unclear why disclosure to a potential investor of matters that may be relevant to the recoverability of a receivable are to be viewed as inappropriate. The evidence does not provide any foundation for inferring that Quintis did not proceed with CMIG because of any conversations between Mr Wilson and Mr Xang, nor for inferring that CMIG did not proceed with any investment because of any such conversations. According to Mr Louden, the Quintis board rejected CMIG's offer because it was too low. Having regard to the lack of probative weight to be accorded to Mr Wilson's evidence on this issue, there is no reason to doubt Mr Louden's evidence for the purpose of this application. The evidence does not suggest any conspiracy to injure.