Austral-Asia Freight Pty Ltd v Turner
[2013] FCCA 298
•17 May 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| AUSTRAL-ASIA FREIGHT PTY LTD v TURNER | [2013] FCCA 298 |
| Catchwords: BANKRUPTCY – Creditor’s application against Trustee of bankruptcy for proof of debt to be reversed or varied – onus of proof on Applicant Creditor –sections 104(1) and 104(2) of the Bankruptcy Act 1966 (Cth) – application acceded to. |
| Legislation: Bankruptcy Act 1966 (Cth), ss. 104(1), 104(2), 181A Instruments Act 1958 (Vic), s. 126 |
| Cases cited: Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 |
| Applicant: | AUSTRAL-ASIA FREIGHT PTY LTD |
| Respondent: | DENNIS TURNER |
| File Number: | MLG 39 of 2012 |
| Judgment of: | Judge Hartnett |
| Hearing date: | 28 February 2013 |
| Delivered at: | Melbourne |
| Delivered on: | 17 May 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr Dudderidge |
| Solicitors for the Applicant: | Nevile & Co, Commercial Lawyers |
| Counsel for the Respondent: | Ms Pierce |
| Solicitors for the Respondent: | Kahns Lawyers |
ORDERS
Pursuant to s.104 of the Bankruptcy Act 1966 (Cth) the Respondent Trustee’s decision to reject the Applicant’s Proof of Debt dated 4 May 2012 is reversed such that the Applicant’s Proof of Debt be accepted by the Trustee.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 39 of 2012
| AUSTRAL-ASIA FREIGHT PTY LTD |
Applicant
And
| DENNIS TURNER |
Respondent
REASONS FOR JUDGMENT
On 28 February 2012, Registrar Caporale made a Sequestration Order against the estate of Mr Van Ly Le on the petition of an Applicant creditor, Capital Finance Australia Limited (ACN 069 663 136). The Court notes that the date of the act of bankruptcy was 9 January 2012.
On 31 October 2012, the Applicant in these proceedings, Austral-Asia Freight Pty Ltd (ABN 53 088 840 831), made application to the Court in the matter of the bankrupt estate of Mr Van Ly Le against the Respondent, Mr Dennis Turner in Mr Turner’s capacity as Trustee in Bankruptcy of the bankrupt estate. The Application was amended by Application filed 28 November 2012. The Applicant seeks the following orders:-
“1. The Trustee’s decision to reject the Applicant’s Proof of Debt dated 4 May 2012 be reversed or varied, pursuant to sections 104(1) and 104(2) of the Bankruptcy Act 1966.
[2.] That distribution of dividends in relation to the bankrupt estate of Van Ly Le be postponed until the determination of this Application.”
Sections 104(1) and 104(2) of the Bankruptcy Act 1966 (Cth)(‘the Act’) are as follows:-
“(1) A creditor, or the bankrupt, may apply to the Court for review of a decision of the trustee under subsection 102(1), (3) or (4) in respect of a proof of debt.
(2) The Court may, upon the application, confirm, reverse or vary the decision of the trustee.”
The Application is supported by the facts as set out in Affidavits of Mr Jeffrey Noel Harrod sworn 30 and 31 October 2012 and 25 February 2013; Mr Dien Truong sworn on 30 October 2012; and Mr Marvin Lyle Ward sworn 25 February 2013. The Respondent relies upon an Affidavit sworn by him on 25 February 2013. In these proceedings, the Applicant bears the onus of proof to reverse the decision of the Trustee of the bankrupt estate.
The Respondent was appointed Trustee of the Bankrupt’s estate on 10 September 2012 in place of the Official Trustee, pursuant to s.181A of the Act. As part of his investigation, the Respondent reviewed the proof of debt of the Applicant, as provided to him by the Official Trustee.
The Respondent also reviewed emails sent to the Official Trustee (and forwarded by the Official Trustee to him) by Mr Matthew Vear on behalf of the Applicant dated from 3 April 2012 to 6 June 2012.
The Respondent deposed in his Affidavit sworn 25 February 2013 at paragraphs 6 and 7, the following:-
“6. Upon my review of Austral’s (Austral-Asia Freight Pty Ltd) Proof of Debt it became apparent to me that Austral’s claim was based on invoices rendered to Le Imports Pty Ltd and J L Plastic Recycling Pty Ltd but that the Bankrupt has not provided a personal guarantee to secure the debt claimed. Accordingly, I caused a letter to be sent to Mr Vear of Austral dated 20 September 2012 stating that as the Bankrupt had not given a personal guarantee for the debt claimed, I was unable to admit the proof of debt, and that if Austral had any further information, it could provide that information to my office for consideration. This letter was sent via email on 27 September 2012…
7. On 4 October 2012, as I had received no response to my previous letter, nor any additional information from Austral, I elected to reject Austral’s Proof of Debt. I signed a Notice of Rejection of Proof of Debt dated 4 October 2012. Later on 4 October 2012 I caused another letter to be sent to Mr Vear of Austral enclosing the Notice of Rejection of Proof of Debt. A copy of my 4 October 2012 letter is annexure L to the affidavit of Mr Harrod sworn 31 October 2012. The letter was sent via e-mail on 5 October 2012….”
Background
Mr Harrod is one of the directors, sole secretary and a shareholder of the Applicant. Mr Truong is a director and a shareholder of the Applicant and is employed by it as a marketing director.
The Applicant provides national and international freight services for businesses in Australia, who are in the business of importing goods to Australia.
From August 2004 to September 2009, the Applicant provided freight services to Le Import Pty Ltd (ACN 109 958 509)(deregistered) (‘Le Import’) and J L Plastic Recycling Pty Ltd (‘J L Plastic Recycling’) which changed its name on 28 October 2010, to Western Plastic Recycling Pty Ltd (ACN 131 219 022)(deregistered) (‘Western Plastic Recycling’) (collectively ‘the Companies’).
Mr Van Ly Le was a director and shareholder of the Companies and he was one of the main people the Applicant dealt with during the business relationship of the Applicant and the Companies. Mr Van Ly Le was also known as John Le Senior.
In 2008, Mr Harrod became concerned about various outstanding accounts owing by the Companies to the Applicant. Mr Harrod raised some concerns with the Companies in October 2008 regarding these outstanding accounts. The total amount outstanding and owing by the Companies to the Applicant is in the sum of $33,884.02 and $2,859.14 (‘the debt’). On 20 October 2008, Mr John Le Senior proposed a payment arrangement to the Applicant via email sent to Mr Harrod, to satisfy payment of the debt. The payment arrangement was not adhered to. In March 2009, two further jobs were in transit for the Companies. As the Companies had not paid the outstanding accounts to the Applicant, the Applicant advised the Companies that it would hold the shipments destined to the Companies, until the outstanding account had been paid to the Applicant, pursuant to clause 16 of the Standard Terms and Conditions which governed the relationship between the Applicant and the Companies and which relevantly stated:-
“16. All Goods (and documents relating to the Goods) shall be subject to a particular and general lien to the Company for any monies due either in respect of those Goods, or for any particular or general balance or other money due from the Customer or any person on behalf of whom the Customer may be consigning the Goods, or in respect of any losses or damages or liability which may be incurred or suffered by the Company for which the Customer indemnifies the Company under this Agreement.”
At around this time Mr Dien Truong advised Mr Harrod that Mr John Le Senior had provided to him a verbal personal guarantee to pay the outstanding accounts, so the Applicant would release the shipment to the Companies, and so the Applicant would continue to undertake work on behalf of the Companies. Mr Harrod advised Mr Truong that Mr John Le Senior also had to speak to Mr Harrod directly regarding any personal guarantees he wished to provide in relation to the outstanding accounts owing by the Companies to the Applicant. Mr Harrod received a telephone call from Mr John Le Senior on or about March 2009. Mr Le advised Mr Harrod that he would personally guarantee the outstanding account which the Companies owed to the Applicant, if the Applicant released the shipment to the Companies. Mr Harrod accepted the personal guarantee on behalf of the Applicant because of the long standing business relationship between the Applicant and the Companies, and authorised the release of the shipment to the Companies. During the conversation in March 2009, Mr John Le Senior said words to the following effect:-
John Le Senior: ‘Hi Jeff, Dien has said that I need to get approval from you for the shipments to be released.”
Jeff Harrod: ‘Yes, John that’s correct. The truth of the matter is that we have no confidence in John Le Junior.”
John Le Senior: ‘Jeff if you can please release the shipment I promise I will take care of your invoices and that my son will have nothing to do with this moving forward. I personally guarantee you that I will pay the debt, I just need a bit of time to sort things out. Your money is safe.’
Further correspondence transpired from August 2009 until 23 August 2011, between the Applicant and the Companies and between the Applicant and Mr John Le Senior regarding the debt. The Applicant argues on this application that the correspondence between Mr Harrod, Mr Dien Truong, Mr John Le Senior and other individuals purporting to represent Mr Le, including Mr Greg Shah, a Manager of J L Plastics Recycling Pty Ltd, in its entirety, establishes a personal guarantee was provided by Mr John Le Senior to the Applicant such that he would be responsible for payment of the Companies debt.
In particular, the Applicant relies upon an email of Mr John Le Senior of 23 March 2010 stating relevantly as follows:-
“… as you know I am trying to sell the property in Footscray and still couldn’t get the right buyer. As soon as I sell the property I will pay all the pending payments and definitely I will pay your invoice too.
Hope you’ll understand the site and kindly bare with me for some time”
and a further email from Mr John Le on 20 July 2011, relevantly:-
“The outstanding amount of 30,000 I will be paying you 500 every month to the day I sale my property then the lump sum will come after…”
Both emails were sent to the Applicant.
Mr Ward, solicitor for the Applicant, deposed in paragraphs 9, 10 and 11 of his Affidavit sworn 25 February 2013, the following:-
“9. On 19 February 2013 I undertook a Land Victoria Historical Title Search of real property located at 13 Cromwell Parade West Footscray in the State of Victoria 3012. The results of the search identified Robatt Pty Ltd as the registered owner until 22 September 2011 when the title was transferred to Astra Petroleum Pty Ltd…
10. On 19 February 2013 I undertook an Australian Securities Investment Commission (‘ASIC’) Company search of Robatt Pty Ltd ACN 078 247 024 (deregistered). The results of the search identified Van Ly Le, Thi Xuan Le and Aitan Zvi Schmideg as the previous Directors of Robatt Pty Ltd. It also identified Van Ly Le and Thi Xuan Le as the shareholders of Robatt Pty Ltd…
11. On 20 February 2013 I undertook a Land Victoria Historical Title Search of property at address 397 Somerville Road, West Footscray in the State of Victoria 3012. The result of this search shows the bankrupt, Van Ly Le, as the registered owner until 22 September 2011 when the title was transferred to Astra Petroleum Pty Ltd…”
The transfer of ownership of both real properties in West Footscray occurred some months prior to the making of the sequestration order referred to in paragraph 1 herein. At the time of the making of the personal guarantee of the bankrupt as asserted by the Applicant, the bankrupt was the registered proprietor of real property in West Footscray.
Consideration
The application before me followed a rejection by the Respondent of a proof of debt which was lodged by the Applicant. That proof of debt was based on what the Applicant says is a personal guarantee given by the bankrupt to pay the debts owing to the Applicant of the Companies, both of which the bankrupt was a director. The debt claimed is as to two amounts, one of $33,884.02 and the other of $2,859.14 in respect of the two different companies (herein described as the debt). The rejection by the Respondent of the proof of debt had as its basis that there was no signed personal guarantee from the bankrupt. As such, the bankrupt was said to be not personally liable for the Applicant’s claim for payment of outstanding invoices.
The requirements of a personal guarantee, that it be in writing and signed and evidence an intention to be legally bound and personally liable by the person providing the guarantee, are said by the Applicant to be satisfied in the circumstances of this case when looking to the earlier oral agreement between the bankrupt and the Applicant which was confirmed by the subsequent email correspondence and sale of the bankrupt’s real property owned personally by him in West Footscray.
Section 126 of the Instruments Act 1958 (Vic) is as follows:-
126. Certain agreements to be in writing
(1) An action must not be brought to charge a person upon a special promise to answer for the debt, default or miscarriage of another person or upon a contract for the sale or other disposition of an interest in land unless the agreement on which the action is brought, or a memorandum or note of the agreement, is in writing signed by the person to be charged or by a person lawfully authorised in writing by that person to sign such an agreement, memorandum or note.
(2) It is declared that the requirements of subsection (1) may be met in accordance with the Electronic Transactions (Victoria) Act 2000.
Sections 7, 8 and 9 of the Electronic Transactions (Victoria) Act 2000 is as follows:-
“7 Validity of electronic transactions
(1) For the purposes of a law of this jurisdiction, a transaction is not invalid because it took place wholly or partly by means of one or more electronic communications.
(2) The general rule in subsection (1) does not apply in relation to the validity of a transaction to the extent to which another, more specific, provision of this Part deals with the validity of the transaction.
8 Writing
(1) If, under a law of this jurisdiction, a person is required to give information in writing, that requirement is taken to have been met if the person gives the information by means of an electronic communication, where—
(a) at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference; and
(b) the person to whom the information is required to be given consents to the information being given by means of an electronic communication.
(2) If, under a law of this jurisdiction, a person is permitted to give information in writing, the person may give the information by means of an electronic communication, where—
(a) at the time the information was given, it was reasonable to expect that the information would be readily accessible so as to be useable for subsequent reference; and
(b) the person to whom the information is permitted to be given consents to the information being given by means of an electronic communication.
(3) This section does not affect the operation of any other law of this jurisdiction that makes provision for or in relation to requiring or permitting information to be given, in accordance with particular information technology requirements—
(a) on a particular kind of data storage device; or
(b) by means of a particular kind of electronic communication.
(4) This section applies to a requirement or permission to give information, whether the expression give, send or serve, or any other expression, is used.
(5) For the purposes of this section, giving information includes, but is not limited to, the following:
(a) making an application;
(b )making or lodging a claim;
(c) giving, sending or serving a notification;
(d) lodging a return;
(e) making a request;
(f) making a declaration;
(g) lodging or issuing a certificate;
(h) making, varying or cancelling an election;
(i) lodging an objection;
(j) giving a statement of reasons.
9 Signatures
(1) If, under a law of this jurisdiction, the signature of a person is required, that requirement is taken to have been met in relation to an electronic communication if—
(a) a method is used to identify the person and to indicate the person's intention in respect of the information communicated; and
(b) the method used was either—
(i) as reliable as appropriate for the purpose for which the electronic communication was generated or communicated, in the light of all the circumstances, including any relevant agreement; or
(ii) proven in fact to have fulfilled the functions described in paragraph (a), by itself or together with further evidence; and
(c) the person to whom the signature is required to be given consents to that requirement being met by way of the use of the method mentioned in paragraph (a).
(2) This section does not affect the operation of any other law of this jurisdiction that makes provision for or in relation to requiring—
(a) an electronic communication to contain an electronic signature (however described); or
(b) an electronic communication to contain a unique identification in an electronic form; or
(c) a particular method to be used in relation to an electronic communication to identify the originator of the communication and to indicate the originator's intention in respect of the information communicated.
(3) The reference in subsection (1) to a law that requires a signature includes a reference to a law that provides consequences for the absence of a signature.”
The Applicant submits that the email of 23 March 2010 from Mr John Le Senior meets all the requirements necessary as set out in s.126 of the Instruments Act 1958 (Vic) to establish that it was a memorandum or note, regardless of being in electronic form with an electronic signature, which identified the parties, the subject matter and the terms and further that it imputed or acknowledged an agreement between the Applicant and the bankrupt.
The Respondent’s submission in reply was that the correspondence upon which the Applicant relies, namely the 23 March 2010 email and the later email of 20 July 2011, do not indicate any mutual assent. Rather it was said by the Respondent such emails were part of a continuing series of negotiations for a payment plan initially proposed by the Companies on 19 November 2009, and accepted in the terms as proposed in the email of 20 July 2011. Any earlier oral guarantee given was not referred to in the email correspondence and thus the Respondent argued that the correspondence could not be said to constitute a note or memorandum of any such oral promise.
The Respondent referred to the email sent on 19 November 2009 to the Applicant from Mr Greg Shah ostensibly acting on behalf of Mr John Le Senior. That email said in part the following:-
“…
I would like to propose a payment plan to clean up the amounts that we owe you and I want it to be sensible for us and give you some comfort that you will be paid.
I propose that the plan be flexible for AAF such that we pay small affordable amounts initially and after three months increase the level of payment. If circumstances should change regarding our funding strategy then we would of course pay out the amount as soon as practicable.
To be begin with and stating on December 11th we can pay $1,000 per month for the first three months. We would then increase this to $2000 per month thereafter at or around the same date.
This is a long period that we are asking for but I do envisage that we will be able to pay any balance in full prior to the end of the 2010 financial year.
..”
Such email emanated eight months after the conversation that is deposed to by the Applicant as constituting an oral guarantee. The Respondent argued that the contents of this email was not confirmation of an existing promise. Rather the email contents proposed a payment plan by the Companies who wished to retain some flexibility in the repayment of the debt.
The proposed repayment plan was not acceptable to the Applicant. In email correspondence from Mr Jeff Harrod to Mr Greg Shah sent 20 November 2009, marked exhibit JH-3 of the Affidavit of Mr Jeff Harrod sworn 25 February 2013, the Applicant contemplated there might be security for the debt in the form of Mr John Le Senior’s property and further that interest should be paid on the outstanding debt. Mr Harrod said also “I was given a personal guarantee by Mr Le that we would be looked after and we haven’t been.” The email reply from Mr Greg Shah as general manager of J L Recycling Pty Ltd was that that company was endeavouring to repay the debt and exploring options as to how to do it. It was relevantly as follows:-
“…
I had spoken to Kylie a few months ago that we were approaching the Bank to raise some capital in order to fix up affairs and revitalise the business. At the time I was optimistic that we would achieve this fairly quickly however the bank and their policies have led me on a long and never ending road such that I have moved to the next strategy and that is to sell off some of John’s assets and/or find an equity partner for the business. As such we have put the property on the market and we have approached several investors to come into the business. John is committed to selling the West Footscray Property and is hopeful of a reasonably quick sale. (Of course the time from sale to settlement could be up to 90 days.)
As I indicated I do expect the business to improve dramatically and as soon as possible we would pay the outstanding in full; and yes we would agree to fair interest payments as you are quite correct that you are not a financier and should not be out of pocket.
I would like to meet with you as soon as practicable. Unfortunately I am not available until Thursday next week for a meeting as I will be in hospital with my baby daughter until Wed night. I am happy to meet with you at a time convenient to yourself on Thursday.
I do want to reiterate that the payment plan is the bottom line as I expect the funds to be available to pay you in a much quicker time frame than that proposed in the plan.
…”
It was put by the Respondent that this email further evidences that there was no intent of the bankrupt to be personally liable for the debts owing to the Applicant. Rather the Respondent argued the email asserts that assets are owned by the proprietors of the business and that they are trying to sell such assets as part of a wide strategy to restructure that business.
The Respondent argued the proper construction of the totality of the email exchanges was that they went to a repayment proposal. They did not purport to record an existing agreement and should be understood as being inconsistent with the idea that such an arrangement already existed.
In Padstow Corporation Pty Ltd v Fleming (No 2) [2011] NSWSC 1572 Giles J said at paragraph 21 as to the intention of the bankrupt the following:-
The decision in Cheung was doubted and not following in Clark Equipment Credit of Australia Ltd v Kiyose Holdings Pty Ltd (1989) 21 NSWLR 160. In that case it was held that signatures to a factoring agreement did not bind the signatories as guarantors. Giles J rejected the dictum of Atkin LJ in Ariadne Steamship at 174 and said:-
“In the result, I concluded that the proper approach is to inquire whether there is to be found an intention that the signatory be personally bound to the contract evidenced in the document, meaning thereby not a subjective intention but an intention to be found objectively, notwithstanding a qualification attached to the signature. The intention, or lack thereof, is to be found upon the construction of the document as a whole, including but not being limited to the qualification attached to the signature, in light of the surrounding circumstances to the extent to which the evidence thereof is permissible. The inquiry is not limited to consideration of the signature and its qualification in order to determine whether or not the signature indicates an asent to be personally bound.”
The email note or memorandum signed by Mr John Le Senior in electronic form of 23 March 2010, followed his oral guarantee of March 2009, and was followed by the email of 20 July 2010. The question argued before the Court was the construction of the written communications as a whole and the importance of the circumstances (in particular the oral guarantee that preceded the written communications) surrounding the communications, or agreement as argued by the Applicant.
In addressing the question to be posed, as was said by Edelman J in Alonso v SRS Investments (WA) Pty Ltd [2012] WASC 168 at paragraph 53, the Court is to look to:-
“… whether the parties conduct, viewed objectively, reveals a tacit understanding or agreement or a manifestation of mutual assent, which evinces an intention to create legal relations.”
I conclude there was an objectively manifested intention to be legally bound by the bankrupt and that it was conveyed in sufficient writing and signature for the purposes of s.126 of the Instruments Act 1958 (Vic). Furthermore, the presence of the signature on the email of 23 March 2010 is a relevant circumstance in looking to whether there appears an objective intention to be legally bound. In addition, the following circumstances are relevant:-
(a)the Applicant and the bankrupt were aware of the debt;
(b)they had a long standing business relationship;
(c)at the time the Applicant withheld shipments because of the unpaid debts, the bankrupt spoke personally with Mr Harrod and offered his personal guarantee to repay the debt owing to the Applicant for those shipments to be released. Accepting the oral personal guarantee of Mr John Le Senior, the Applicant released such shipments; and
(d)this oral guarantee to personally pay the debts owing by the Companies to the Applicant was subsequently confirmed by the emails of 23 March 2010 and 20 July 2011 (and referred to in paragraph 15 herein) in the written statement of the bankrupt’s intent to sell his personal real property.
In light of the surrounding circumstances, being the earlier oral agreement, and upon a construction of the email correspondence between the Applicant and the bankrupt as a whole, viewed objectively, I find the intent of the bankrupt was to be personally liable to repay the debts of the Companies to the Applicant and that there was a tacit understanding between the Applicant and the bankrupt that the bankrupt would personally pay the debt. Accordingly, the application should be granted.
I certify that the preceding thirty-one (31) paragraphs are a true copy of the reasons for judgment of Judge Hartnett
Date: 17 May 2013
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