Australian and New Zealand Banking Group v Daher
[2014] FCCA 365
•28 February 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED v DAHER | [2014] FCCA 365 |
| Catchwords: BANKRUPTCY – Application for review of sequestration order made by Registrar – principles governing review of Registrar’s order for the sequestration of estate – whether creditor has established right to a sequestration order – whether debtor has shown he is able to pay his debts – whether debtor has shown there is some other sufficient cause for dismissing petition – application dismissed. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.5, 52 Evidence Act 1995 (Cth), s.131 |
| Cain v Whyte (1933) 48 CLR 494 Conlan v Mladenis [2007] FCA 1129 Deputy Commissioner of Taxation v Caporale [2013] FMCA 5 Ex parte Fewings (1883) 25 Ch. D. 338 Ling v Enrobook Pty Ltd (1997) 143 ALR 396 Macintosh v Shashoua (1931) 46 CLR 494 Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596 Re Svir; Ex parte Commissioner of Taxation (1988) 83 FCR 314 Sandell v Porter (1966) 115 CLR 666 Totev v Sfar (2008) 167 FCR 193 |
| Applicant: | AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) |
| Respondent: | SPIRO GEORGES DAHER |
| File Number: | SYG 564 of 2013 |
| Judgment of: | Judge Manousaridis |
| Hearing dates: | 2 September 2013 and 13 February 2014 |
| Delivered at: | Sydney |
| Delivered on: | 28 February 2014 |
REPRESENTATION
| Solicitor for the Applicant: | Mr Foley |
| The Respondent in person. |
ORDERS
The application for review of the sequestration order against the estate of the applicant made by the Registrar on 18 July 2013 is dismissed.
The applicant pay the respondent’s costs.
The respondent’s costs be paid out of the estate of the applicant, and have the same priority as the costs of the petition.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 564 of 2013
| AUSTRALIA AND NEW ZEALAND BANKING GROUP LIMITED (ACN 005 357 522) |
Applicant
And
| SPIRO GEORGES DAHER |
Respondent
REASONS FOR JUDGMENT
Introduction
By an application filed on 18 July 2013, Mr Daher seeks a review of a sequestration order made by a Registrar of this Court on 28 June 2013. The sequestration order was made on the petition of Australia and New Zealand Banking Group Limited (Bank). The relevant act of bankruptcy was Mr Daher’s failure to comply with a bankruptcy notice demanding payment of $214,985.96. That is the amount of a judgment the Bank recovered against Mr Daher in the Supreme Court of New South Wales on 17 August 2009.
The procedural history of this application has not been straightforward, largely because I had difficulty understanding the grounds on which Mr Daher relied for the review of the sequestration order. I do not, however, attribute these difficulties to the manner in which Mr Daher, who was not legally represented, conducted his application. At any rate, by the conclusion of the hearing on 13 February 2014, I satisfied myself I understood the substance of the grounds on which Mr Daher seeks the review of the sequestration order. Those grounds may be stated as follows:
a)A third party, Mr Daher’s mother, is in a position to pay up to $290,000 towards the amount Mr Daher accepts he owes the Bank.
b)The $290,000 is more than sufficient to pay what Mr Daher says is the amount he owes the Bank and that, upon payment of that amount, the sequestration order made against him should be set aside.
c)To the extent the Bank claims Mr Daher owes the Bank more than $290,000, Mr Daher says that he does not owe the Bank the amount the Bank claims he owes.
d)If, contrary to (c), Mr Daher owes the Bank the amount the Bank claims he owes it:
i)the amount in excess of $290,000 the Bank claims Mr Daher owes consists of interest that has accrued on the judgment debt since 17 August 2009;
ii)the Bank, through its conduct, delayed Mr Daher’s mother’s ability to procure the $290,000 to pay to the Bank;
iii)therefore, the Bank should not be entitled to claim interest for the period of the delay for which the Bank was responsible.
e)In any event, the sequestration order should be set aside at least temporarily. That is so because Mr Daher’s mother is not competent to enter into legal transactions; in 2004 she appointed Mr Daher and his brother joint attorneys under an enduring power of attorney; the sequestration order against Mr Daher had the effect of terminating both Mr Daher’s and his brother’s authority to be attorneys; accordingly, Mr Daher’s mother is not in a position to obtain and pay the $290,000.
These reasons are arranged as follows. First, I set out the facts as revealed by the documents Mr Daher tendered into evidence. Second, I identify the principles that govern the Court’s jurisdiction to review a decision of a Registrar of the Court. Third, I consider whether the Bank has made out a case for a sequestration order. And fourth, assuming the Bank has made out such a case, I consider whether Mr Daher has established the grounds on which he relies and, if so, whether those grounds are an answer to the making of a sequestration order against his estate.
Facts
Until November 2003 Mr Daher’s mother (Georgette) lived in a house at Marrickville. In November 2003 Georgette sold that house and used $691,104 of the proceeds of sale to purchase from Mr Daher’s former wife, Ms Doulaveras (Helen), a 66% interest in a property at 26 Ocean Avenue, Newport (Newport Property). Georgette then moved into the Newport Property, where she currently lives.
In July 2005 Georgette executed two transfers. That resulted in Georgette transferring to Helen a 16% interest in the Newport Property, and Georgette and Helen consequently holding the Newport Property in equal shares as joint tenants.
In November 2007 Mr Daher and Helen purchased a property at St Ives for $1,060,000 (St Ives Property). Mr Daher later transferred his interest in the St Ives property to Helen. Except for the 10% deposit, the purchase money was provided by a loan Mr Daher and Helen obtained from the Bank. The loan was secured by mortgages over the St Ives Property and the Newport Property.
In a judgment delivered on 19 June 2008, Windeyer J, sitting in the Supreme Court of New South Wales, held that Georgette transferred to Helen the 16% interest in the Newport Property as a result of unconscionable conduct by Helen. Helen was ordered to re-transfer a 16% interest in the Newport Property to Georgette.
In August 2008, Mr Daher and Helen defaulted on their loan from the Bank. On 17 August 2009 the Bank obtained a judgment against Mr Daher and Helen for possession of the St Ives Property, and a judgment for $1,288,617.70. The Bank caused to sell the St Ives Property and used the proceeds of sale to reduce the judgment debt.
By no later than June 2010 the Bank demanded payment of the balance of the debt from Georgette. Georgette disputed the demand. On 17 March 2011 the Bank’s solicitor wrote to Georgette’s tutor confirming that the matter had been settled, and set out the terms of the settlement. Under that proposed settlement, Georgette was to pay the Bank $310,000 in return for the Bank’s discharging the mortgage it held over the Newport Property. For reasons not apparent on the evidence, the settlement did not proceed.
On 7 November 2011 Georgette lodged a dispute with the Financial Ombudsman Service. The dispute was settled on or about 8 June 2012. The Bank agreed it would only look to the 34% interest that Helen had in the Newport Property to recover the outstanding amount of the loan Mr Daher and Helen owed the Bank. The Bank also agreed it would make available to the Land and Property Information office the certificate of title for the Newport Property, and to provide an endorsement to the stamped transfer of land to amend the property ownership from 50/50 to 66/34 “between Ms Georgette Daher and Helen respectively".
In the meantime, on or before 21 October 2011, Helen went into bankruptcy. By letter dated 21 October 2011, her trustee enquired of Georgette’s lawyer whether Georgette would be able to raise the required money to acquire Helen’s interest in the Newport Property and whether Georgette would be prepared to pay for a valuation.
On 4 November 2012, Mr Daher was served with a bankruptcy notice demanding payment of $214,985.96. On 25 November 2012 Mr Daher sent an email to the Bank’s lawyers in which he noted that he had received ambiguous information from the Bank and its lawyers about the amount he owed the Bank. He noted there “is expectation [sic] that [Helen’s] disposal of her 34% share of the Newport home will more than cover the debt amount claimed”.
By 18 December 2012, two valuations of the Newport Property had been obtained, one by Helen’s trustee, and one by Georgette. The trustee’s valuation valued the Newport Property at $980,000 and Georgette’s valued it at $855,000.
By letter dated 14 January 2013, the solicitors for the Bank wrote to the solicitor for Georgette noting that Georgette’s solicitor had informed the Bank that Georgette was finalising a proposal regarding the purchase of Helen’s interest in the Newport Property, but that the Bank had received no proposal. The Bank’s solicitor said that if the Bank did not receive a satisfactory proposal by 28 January 2013, the solicitor anticipated that the Bank would proceed with further enforcement.
Georgette’s solicitor responded by letter dated 23 January 2013 in which he stated:
With reference to your letter of 14 January, 2013 our client will not be in a position to make a formal offer until such time as the title deed for the Newport property has been amended to show Georgette Daher’s interest as 66/100th. The transfer of the 16/100th share from Helen Doulaveras to Georgette Daher was lodged with the Office of State Revenue in early December with an application for stamping under Section 65(24) of the Duties Act. To date we have not received any response.
As soon as the Transfer issues, we will be requesting that you produce the title deed so that the transfer can be registered at which time our client will be in a position to seek lending to acquire the remaining interest of Helen Doulaveras.
The transfer from Helen to Georgette of the 16% interest in the Newport Property was registered by the Land and Property Information office on 17 April 2013.
On 21 March 2013 the Bank filed a creditor’s petition seeking a sequestration order against the estate of Mr Daher. After a number of adjournments, the petition came before a Registrar of this Court on 13 June 2013. Mr Daher, in his affidavit of 24 July 2013, claimed as follows:[1]
A few days prior to the sequestration judgment date of 28 June 2013, there was an offer of $290,000 made (received by Gadens solicitors acting as a conduit to ANZ) by a potential vendor for the purchase of the 34% of [the Property]
Gadens cannot verify that on or prior to 28 June 2013, they passed on to ANZ the offer made for [the Property] and that ANZ accordingly responded to Gadens and asked them to nevertheless press ahead with the sequestration judgment of 28 June 2013.
During the 28 June 2013 judgment, Mr Foley (Gadens) stated to the Registrar that ANZ maintained their position to press ahead with my being made bankrupt.
Aside from the Judgment outcome of $214,000 and without presenting any independently assessed financial liability documents, Mr Foley remarked to the Registrar that the offer made for [the Property] might not be enough to cover the debt sought by the ANZ bank and “the bank should not be forced to accept the offer made”.
[1] I admitted this part of Mr Daher’s affidavit, not as evidence of what is asserted, but as submission.
On 6 December 2013, Mr Daher’s brother (Basil) sent an email to a loans officer from the Commonwealth Bank of Australia (CBA) in which he stated that the Bank had agreed to accept $290,000 to release the mortgage it held over the Newport Property, and to provide Georgette the certificate of title for that property. Basil’s reference to the Bank’s agreement appears to be a reference to a “without prejudice” letter dated 6 November 2013 from the Bank’s solicitors to Basil,[2] in which the Bank’s solicitors indicated the Bank was prepared to discharge its mortgage over the Newport Property upon receipt of $290,000 and subject to the satisfaction of the conditions set out in the letter.
[2] The solicitor for the Bank objected to the tender of this letter on the ground it was privileged under s.131 of the Evidence Act1995 (Cth) (EA). At the hearing I ruled against the objection but noted that I would reconsider my decision. Having reconsidered the matter, I am still of the opinion the letter does not come within the terms of s.131(1) of the EA. That is so because Georgette (on behalf of whom Basil received the letter) and the Bank were not in dispute, and the communication was not made to resolve any dispute. Even if the letter falls within s.131(1) of the EA, I am of the opinion that it falls within the exception provided by s.131(2)(c) of the EA. The tender of Basil’s email, without objection, was a partial disclosure of the substance of the Bank’s solicitor’s letter of 6 November 2013, and full disclosure of the letter was reasonably necessary to enable a proper understanding of Basil’s email.
On 6 December 2013, the loan officer from CBA responded to Basil’s email as follows:
The loan is approved for $300,000 subject to:
1.Receipt of the title.
2.All loan documents being signed, accepted and certified by the CBA.
3.I will need a copy only before, of the signed discharge and transfer to image to the application.
4.Insurance can be set either monthly or yearly (there is no additional cost either way). I suggest maybe monthly could work, but please confirm and I get this set up.
Sometime before 7 January 2014, Basil provided to the Bank’s solicitors the power of attorney Georgette had executed appointing him and Mr Daher joint attorneys. That resulted in the Bank’s solicitors writing a letter to Basil dated 7 January 2014 stating, among other things, as follows:
Given the appointment under the power of attorney is a joint appointment, upon Spiro Daher’s bankruptcy, the power of attorney was terminated pursuant to section 46 of the Powers of Attorney Act 2003 (NSW).
By separate letter dated 7 January 2014, the Bank, through its solicitors, made another without prejudice offer to Basil.[3] That offer was in substance the same as the offer contained in the Bank’s solicitor’s letter of 6 November 2013, but instead offered that the Bank would accept payment of the $290,000 from Basil in his personal capacity. Basil responded with an email sent on 11 January 2014. In that email, Basil rejected the offer because, if accepted by Basil, that would “complicate estate matters and contravene Mum’s desire and security to be 100% owner of her home” and that another reason was that “Mum has already secured her financier’s funding for the 34% purchase”. Basil continued:
However, without prejudice and as a gesture of Mum’s goodwill to honour our response of 13 Nov 2013 to the ANZ Bank’s requisite terms for the Deed of Settlement to be drawn up and following your suggestion in your telephone conversation with the writer on 11 December 2013, on the 17 Dec 2013 an application for the urgent review of Mum’s Power of Attorney has been lodged with the Guardianship Tribunal in order that I continue to serve as Mum’s attorney.
We’ve received a verbal date for the review of mid February 2014 and are confident my appointment to continue as her sole Power of Attorney and that your client can continue to deal with me in relation to Mum’s financial affairs and execution of your client’s agreed terms of 13 Nov 2013 and the associated drawing up of the Deed of Settlement.
[3] The solicitor for the Bank also objected to the tender of this letter on the ground it was privileged under s.131 of the EA. In my opinion, the privilege under s.131(1) does not apply for the reasons I have held the privilege does not apply to the Bank’s solicitor’s letter of 6 November 2013.
Principles of review
Having set out the relevant facts, I next identify some of the principles that should guide me when considering Mr Daher’s application for review.
Mr Daher’s application is made pursuant to s.104(2) of the Federal Circuit Court of Australia Act 1999 (Cth) (FCCA). A review under s.104(2) of the FCCA is a hearing de novo. That means that an “applicant for review under s.104(2) is under no obligation to demonstrate error on the part of the Registrar, and does not need to establish that the Registrar’s exercise of discretion miscarried in the sense described in House v The King (1936) 55 CLR 499 at 505”.[4]
[4] Conlan v Mladenis [2007] FCA 1129 at [5] (Sunberg J)
Where the decision sought to be reviewed is a sequestration order made under s.52 of the Bankruptcy Act1966 (Cth) (Act), the judge who hears the application for review:[5]
[5] Totev v Sfar (2008) 167 FCR 193 at 197 ([14] [15]) (Emmett J); see also the reasons of Cowdroy J (with whom Bennett J agreed) at [97] and [100]
must hear the petition afresh and must be satisfied as to the matters referred to in s 52 of the Bankruptcy Act. Thus, the reviewing judge must herself or himself be satisfied with the proof of:
· the matters stated in the petition;
· the service of the petition; and
· the fact that the debt or debts on which the petitioning creditor relies is or are still owing.
The reviewing judge must also exercise afresh the discretions conferred by s 52(2).
In particular, unless the Bankruptcy Rules are waived, the judge must have the affidavits referred to in r.4.06 of the Bankruptcy Rules, which must be sworn shortly before the hearing. Except in the case of a review on the same day as the sequestration order was made, affidavits relied upon before the registrar would not satisfy r 4.06 [of the Federal Magistrates Court (Bankruptcy) Rules]. In the absence of fresh affidavit, it would be necessary that compliance with the Bankruptcy Rules be waived.
Thus, in this application, I must consider two things. The first is whether the Bank has proved the matters specified in s.52(1) of the Act. If the Bank proves those matters, I must consider whether Mr Daher can satisfy the Court of the matters set out in s.52(2), and, if so, whether the Court should, in the exercise of its discretion, dismiss the Bank’s petition.
Proof of matters prescribed by s.52(1)
I am satisfied of the following:
a)The creditor’s petition filed by the Bank on 21 March 2013, and returnable before the Court on 24 May 2013, is in accordance with Form 6 of the Federal Circuit Court (Bankruptcy) Rules 2006 (Rules).[6]
b)The matters stated in paragraphs 1, 2, 3, and 4 of the Bank’s petition are verified in accordance with Part 2 of Form 6 and those matters, therefore, are proved.[7] Those matters are that Mr Daher owes the Bank $214,985.96 pursuant to a judgment entered in the Supreme Court of New South Wales, the Bank holds no security over any property of Mr Daher, that, at the time when the act of bankruptcy was committed, Mr Daher was personally present in Australia and was ordinarily resident in Australia; and Mr Daher failed to comply, on or before 26 November 2012,with the requirements of a bankruptcy notice or satisfy the Court that he had a counter-claim, set-off or cross demand equal to or more than the sum claimed in the bankruptcy notice, being a counter-claim, set-off or cross demand that he could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained.[8]
c)The creditor’s petition was accompanied by an affidavit stating that on 21 March 2013 the computer records of the Federal Court and of this Court had been searched and no application had been made in relation to a bankruptcy notice issued to Mr Daher.[9]
d)An affidavit deposing to the service on Mr Daher on 5 May 2013, being more than five days before the date fixed for the hearing of the creditor’s petition filed by the Bank together with the affidavit verifying the creditor’s petition, the affidavit referred to in (c), and the affidavit of service of the bankruptcy notice.[10]
[6] R.4.02(1)
[7] R.4.02(2)
[8] R.4.02(2); affidavit of G Lee made on 4 March 2013
[9] R.4.04(1)(a); affidavit of P A Liggins made on 19 March 2013
[10] R.4.06(2); affidavit of B Andrew made on 7 May 2013
Further, on 28 June 2013, the day on which the sequestration order was made, the Bank filed the affidavits required by r.4.06(3) and r.4.06(4) of the Rules. And on the hearing on 13 February 2014 the Bank filed in Court further affidavits as required by r.4.06(3) and r.4.06(4) of the Rules.
In my opinion, therefore, the Bank has proved the matters required under s.52(1) of the Act, and is, therefore, entitled to a sequestration order.
Sub-section 52(2) – legal principles
Even if the Court is satisfied the matters specified in s.52(1) of the Act are proved, the Court may dismiss the petition if it “is satisfied by the debtor” that, the debtor “is able to pay his or her debts” (s.52(2)(a) of the Act) or if there is some “other sufficient cause” for dismissing the petition (s.52(2)(b) of the Act). Before I consider whether Mr Daher’s grounds fall within either or both paragraphs of s.52(2) of the Act, it would be useful to first identify some relevant legal principles concerning those paragraphs.
Debtor is able to pay his or her debts
Subsection 52(2)(a) of the Act does not use the word “solvent”;[11] nor does it use the words “as and when they become due and payable”.[12] Nevertheless, s.52(2)(a) has been construed as requiring the Court to be satisfied the debtor is “solvent” in the sense of not being “insolvent” as that term was explained in Sandell v Porter:[13]
Insolvency is expressed in section 95 [of the Bankruptcy Act 1924] as an inability to pay debts as they fall due out of the debtor’s own money. But the debtor’s own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time – relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor’s financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor’s inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they may fall due which indicates insolvency. Whether that state of his affairs has arrived is a question for the Court and not one as to which expert evidence may be given in terms though no doubt experts may speak to the likelihood of any of the debtor’s assets or capacities yielding ready cash in sufficient time to meet the debts as they fall due.
[11] Being a term which is defined in s.5(2) of the Act.
[12] Which is part of the definition of “solvent” in s.5(2) of the Act.
[13] (1966) 115 CLR 666 at 670. The cases which so construed s.52(2)(a) were identified by Cowdroy J in Rigg v Baker [2006] FCAFC 179 at [104]. His Honour referred to Lawman v Queensland Building Services Authority [1999] FCA 1781 (Full Court at [21]); Stankiewicz v Plata [2000] FCA 1185 (Full Court at [30]); St George Bank Ltd v Helfenbaum [1999] FCA 1337 at [22]; Re Eather; Ex parte Palada (unreported 30 May 1996 FCA, Cooper J); McVey, re Ex Parte Carswell & Company (unreported 22 May 1996 FCA, Cooper J) and International Alpaca Management Pty Ltd v Ensor [1999] FCA 72.
Some of the relevant principles for determining whether, on this approach, a debtor is able to pay his or her debts were usefully stated by Driver FM (as his Honour then was) in Deputy Commissioner Of Taxation v Caporale as follows:[14]
The inquiry emphasises that it involves a consideration of the ability to command cash resources through his or her own assets.[15] The Court must also look at the level of the debtor’s recurrent expenses and earnings in addition to whether there are cash resources from assets.[16]
A respondent debtor bears the onus of proving to the Court that their assets are sufficient to pay their liabilities as and when they become due and payable.[17] It is not sufficient to simply show an excess of assets over liabilities.[18] The respondent debtor must also establish that their assets are available to be realised and that they are capable of ready realisation.[19]
[14] [2013] FMCA 5 at [23] and [24]
[15] Trevaskis v Deputy Federal Commissioner of Taxation (1993) 93 ATC 5037at 5040
[16] Lakatos, Re; Ex parte Lakatos v Deputy Commissioner of Taxation (1996) 33 ATR 145 at 148
[17] Esanda Finance Corp Limited v Velissaris [1999] FCA 1359
[18] Trojan v Corporation of Hindmarsh (1987) 16 FCR 37 at 48
[19] Australia & New Zealand Banking Group Pty Ltd v Foyster [2000] FCA 400 per Hely J at [17]
The Court will not necessarily dismiss the creditor’s petition if it is satisfied the debtor is able to pay his or her debts. In Re Sarina; Ex parte Wollondilly Shire Council the Full Federal Court said:[20]
The power conferred upon the court by s 52(2) is permissive, not mandatory, although it seems that the occasions on which the discretion not to dismiss the petition might be exercised would not be frequent. It may, in a proper case, require the refusal of a sequestration order, yet permit the adjournment of the petition rather than its dismissal. The variety of circumstances that may arise in particular cases renders plain the undesirability of seeking to define parameters of the exercise of the power.
[20] (1980) 32 ALR 596 at 599 at 600 (Bowen CJ, CA Sweeney and Lockhart JJ)
Sub-section 52(2)(b) – other sufficient cause
As noted by Burchett J in Re Svir; Ex parte Commissioner of Taxation,[21] the leading authority on the meaning of “other sufficient cause” as used in s.52(2)(b) of the Act is Cain v Whyte[22] where all members of the Court expressed agreement with the judgment of Henchman J sitting as a Judge in Bankruptcy. In that judgment, Henchman J said:[23]
I rule then that I am fully entitled to examine the contention . . . that there is, in the present case, other sufficient cause sufficient to justify the dismissal of this petition. I approach that question with the full appreciation that, prima facie, on proof of the matters mentioned in sec.56(2), the Court will proceed to make an order for sequestration, and that it is for the debtor to show some cause overriding the interest of the public in the stopping of unremunerative trading, and the rights of individual creditors who are unable to get their debts paid to them as they become due. Something has to be put before the Court to outweigh those considerations before it can be said that sufficient cause is shown against the making of a sequestration order.
[21] (1998) 83 FCR 314 at 316
[22] (1933) 48 CLR 639
[23] (1933) 48 CLR 639 at 645-646
One circumstance which may constitute an “other sufficient cause” for not making a sequestration order is “the fact that the debtor has pending before a court a legitimate claim to funds sufficient to satisfy the petitioning creditor's debt”, and the “circumstance that the legitimate claim of the debtor is one against the judgment creditor is likely to be a significant circumstance for the purposes of s 52(2)(b)”. [24]
[24] Ling v Enrobook Pty Ltd (1997) 143 ALR 396 at 400 (Davies, Wilcox, Branson JJ)
One circumstance which has consistently held not to amount to an “other sufficient cause” for dismissing a creditor’s petition is the debtor’s tendering the whole or part of the debt on which the creditor’s petition is founded. In Macintosh v Shashoua, it was held that a petitioning creditor is entitled to refuse payment tendered by the debtor after the presentation of the petition, and proceed with the petition.[25]
[25] (1931) 46 CLR 494
Grounds on which Mr Daher relies
In my opinion, the following issues arise in relation to the grounds on which Mr Daher relies for setting aside the sequestration order.
a)Is Mr Daher’s mother in a position to pay $290,000 to the Bank on account of the debt Mr Daher accepts he owes the Bank?
b)If (a) is answered in the affirmative, is that sufficient to discharge the debt Mr Daher owes the Bank?
c)If (b) is answered in the negative, is any indebtedness above $290,000 attributable to any conduct of the Bank and, if so, is the conduct such as would disentitle the Bank to claim any amount above $290,000?
d)If the $290,000 is sufficient to discharge the Bank’s debt, and Mr Daher’s mother is in a position to pay that debt, will that mean that Mr Daher will have proved he is able to pay his debts, or will that constitute some “other sufficient cause” for dismissing the Bank’s petition?
e)If the $290,000 is sufficient to discharge the Bank’s debt, and if, as Mr Daher claims, the sequestration order prevents that from occurring, does that constitute some “other sufficient cause” for dismissing the Bank’s petition?
Is Mr Daher’s mother in a position to pay $290,000 to the Bank?
In my opinion, the evidence establishes, and I find, there is a substantial prospect that Georgette will be in a position to obtain a loan from the CBA and purchase from Helen’s trustee the 34% interest the trustee holds in the Newport Property for $290,000 and will otherwise be in a position to comply with the terms on which the Bank has indicated it would be prepared to release the certificate of title on the Newport Property. I base my finding principally on the correspondence I have summarised in paragraphs 18 to 21 of these reasons, and in particular, Basil’s email of 11 January 2014 to the Bank’s solicitors.
There is an issue about when Georgette will be in a position to pay the $290,000. Mr Daher submitted that the sequestration order made against him is preventing Georgette’s ability to purchase the 34% interest Helen has in the Newport Property because the sequestration order had the effect of terminating the power of attorney Georgette had made in favour of Mr Daher and Basil, and Georgette does not have the capacity to act on her own behalf. He further submitted that this was another reason the sequestration order should be set aside, even temporarily, if possible.
I accept Georgette did execute an enduring power of attorney appointing Mr Daher and Basil her attorneys, that Mr Daher and Basil were appointed joint attorneys, and that, because Mr Daher was made bankrupt, both Basil and Mr Daher vacated their office of attorneys. I cannot accept, however, Mr Daher’s submission that this prevents or significantly impedes Georgette’s ability to acquire Helen’s 34% interest in the Newport Property.
As I record in paragraph 21 of these reasons, on 11 January 2014 Basil informed the Bank’s solicitors that he had applied for a guardianship order, that he received verbal advice that a review would take place in mid February 2014, and he was confident he would be appointed as Georgette’s sole attorney. Mr Daher, however, asserted the following from the bar table:[26]
[M]y brother did go back to the tribunal in order that my name be struck off. And I applied as well for my name to be struck off, but the tribunal basically said, “Well, there can’t be a POA in place at the moment because of the sequestration order, so we can’t review this. If you want, you can make an application for a financial manager to come in . . . .
[26] T39.35
Assuming what Mr Daher says is correct (and I have no reason to doubt him), that does not indicate to me that arrangements cannot be put in place so that some person, properly appointed for that purpose, can enter into the proposed transaction on behalf of Georgette, assuming, of course, such person considers it in Georgette’s best interests to do so.
Is the $290,000 sufficient to discharge Mr Daher’s indebtedness to the Bank?
The Bank claims Mr Daher owes the Bank $446,431.59, and tendered into evidence a business record which purported to record that indebtedness.[27] Mr Daher, however, appears to deny he owes such sum. The question arises whether the onus is on the Bank to prove it is owed this amount or whether the onus lies on Mr Daher to prove he does not owe that sum.
[27] Exhibit 1. I admitted the document into evidence solely as evidence of the debt the Bank claims is owed to it.
In my opinion, to the extent Mr Daher seeks to rely on the claim that the $290,000 is sufficient to discharge the debt he owes the Bank, the onus lies on Mr Daher to prove that claim. That follows from the terms of s.52(2) of the Act. It is the debtor who must satisfy the Court either that the debtor is able to pay his or her debts or there is some other cause for dismissing the bankruptcy notice.
Mr Daher has not adduced any evidence relevant to his indebtedness to the Bank. He has not, for example, adduced any document which records the terms on which he and Helen borrowed money from the Bank. Thus, Mr Daher cannot satisfy me that his indebtedness to the Bank is less than the $290,000.
It is appropriate to note at this point that Mr Daher seems to have assumed that the only amounts he may be liable to pay above the amount of the judgment the Bank recovered against him ($214,985.96) is simple interest that has accrued on that amount after judgment. Whether or not that assumption is correct, however, depends on the terms of any mortgage or other agreement between Mr Daher and Helen and the Bank. The relevant principle regarding whether the obligation to pay interest payable under a mortgage or other instrument or agreement ceases when the creditor obtains judgment was stated by Fry LJ in Ex parte Fewings as follows:[28]
When there is a covenant for the payment of a principal sum, and a judgment has been obtained upon the covenant for that sum, it is plain that the covenant is merged in the judgment, and, if there is a covenant to pay the principal debt, that covenant also is merged in a judgment on the covenant to pay the principal debt. Of course a covenant to pay interest may be so expressed as not to merge in a judgment for the principal; for instance, if it was a covenant to pay interest so long as any part of the principal should remain due either on the covenant or on a judgment.
[28] (1883) 25 Ch. D. 338 at 355
It is unlikely that any mortgage or other agreement between the Bank and Mr Daher and Helen would not contain a term which provides that interest would continue to be paid on the amount of a judgment or would continue to accrue so long as the principal amount remains outstanding. I do not, however, make any finding about whether or not Mr Daher is bound by any such term because the onus is on Mr Daher to prove he is not indebted to the Bank in the amount claimed by the Bank.
Did the Bank delay Georgette’s ability to purchase the 34% interest in the Newport Property?
The grounds on which Mr Daher relies for claiming the Bank delayed Georgette’s ability to purchase Helen’s 34% interest in the Newport Property are contained in a document titled “points of claim”. In that document, Mr Daher makes the following allegations:
a)The Bank failed to make available to the Land and Property Information office the title deeds to the Newport Property for the transfer of the 16% share of the Newport Property from Helen to Georgette even though the Bank was aware of the orders made in June 2008 requiring Helen to transfer a 16% share to Georgette.
b)The Bank insisted that Georgette pay 41% of the Newport Property’s market value before the Bank would release the certificate of title for the Property even though the Bank was aware that Georgette “was willing to purchase the remaining share at market price and that the 16/100ths share transfer needed to take place first so that [Georgette] could negotiate purchase of the remaining 34% and not 50%”.
c)From 19 June 2008 until 17 April 2013 the Land and Property Information office register showed that Georgette owned 50% of the Newport Property.
d)Throughout the time referred to in (c), the Bank was pressuring Georgette to pay between 41% and 50% of the value of the Newport Property.
e)The 34% market value of the Newport Property was $290,000 and Georgette was willing to pay that amount which would have paid off Mr Daher’s liability of $214,000. “Instead, ANZ’s inaction with the presentation of the title deed to the LTO has benefitted ANZ by enabling them to maintain Helen and I as clients and arming them with the instrument to charge compound interest and additionally huge monthly loan enforcement expenses to the magnitude where the amount they are now demanding is more than double what it was on the Judgment of 19 August 2009 statement of claim”.
f)The Bank continued to charge compound interest and loan enforcement expenses while Georgette was pursuing a dispute with the Financial Ombudsman Service and, during a dispute Mr Daher had “in order to obtain documents outlining our relationship with them and interest, fees and costs they were charging us”.
It will be seen from paragraphs (a), (c), and (e) of the points of claim that Mr Daher’s principal allegation is the Bank failed to make available the certificate of title to the Land and Property Information office to enable Georgette to have re-transferred to her the 16% interest in the Newport Property that Helen had acquired through unconscionable conduct. The facts that I have found do not support this allegation. The truth is that Georgette did not lodge with the Land and Property Information office the relevant transfer, and hence the need for the Bank to produce to that office the certificate of title for the Newport Property did not arise, until after 23 January 2013; and when the relevant transfer were lodged, the Bank produced the certificate of title enabling Georgette’s transfer to be registered by 17 April 2013.
Another allegation is that the Bank at some stage insisted that Georgette pay between 41% and 50% of the value of the Newport Property. By itself, that does not disclose any actionable or even unmeritorious conduct by the Bank. Moreover, as I have recorded in paragraph 9 of these reasons, in March 2011 the Bank appeared willing to consent to the transfer of Helen’s interest on Georgette’s paying $310,000. The evidence does not reveal why that did not occur.
Another allegation is that the Bank continued to charge interest, including compound interest, during the pendency of the dispute between the Bank and Georgette before the Financial Ombudsman Service. That by itself discloses no improper conduct on the part of the Bank. It was either entitled to charge that interest under the terms of its agreements with Mr Daher, or it was not so entitled. Mr Daher has produced no evidence that the Bank was not so entitled; and, in any event, paragraph (e) of the points of claim impliedly accepts the Bank had a contractual entitlement to charge compound interest as well as the expenses of enforcement.
Accordingly, I find that Mr Daher has not established his case that the Bank was the cause of the delay in Georgette’s being in a position to acquire Helen’s interest. I find the Bank was ready and willing to produce to the Land and Property Information office the certificate of title it held in relation to the Newport Property to facilitate the re-transfer to Georgette of a 16% interest in that property, and the Bank did so when Georgette’s solicitor informed the Bank Georgette was in a position to take that transfer.
Position assuming $290,000 sufficient to discharge debt
Even if the $290,000 Georgette may pay for Helen’s 34% interest is sufficient to discharge the debt owed by Mr Daher, that by itself would not constitute a ground for dismissing the Bank’s petition. First, that would not by itself establish that Mr Daher is able to pay his debts. He has not led evidence of his assets and liabilities. Second, the fact that the $290,000 may be available to be tendered to the Bank would not by itself constitute an “other sufficient cause” for dismissing the Bank’s petition. As I have noted earlier in these reasons, the tender of the debt owed to the creditor does not by itself constitute an “other sufficient cause” for dismissing a creditor’s petition. The tender must be accepted or, at the very least, the creditor must have bound itself to accept it once made. Although the Bank has indicated it would accept the $290,000, it has not bound itself to do so; and, in any event, it has indicated that one of the terms on which it would be prepared to accept the $290,000 is that it would be “without prejudice” to “the Bank’s rights to pursue Spiro Daher and Ms Doulaveras”.
Relevance of bankruptcy terminating power of attorney
The final matter I consider is, assuming Mr Daher’s being a bankrupt puts it out of the power of Georgette to acquire Helen’s interest, whether that would constitute a “sufficient cause” for dismissing the Bank’s petition. In my opinion, it would not. As I have already concluded, even if it is assumed the $290,000 is sufficient to discharge Mr Daher’s indebtedness to the Bank, that would not constitute a sufficient cause. It follows, therefore, that Mr Daher’s inability to cause the payment of the $290,000 to be made also cannot constitute a “sufficient cause”.
Conclusion and disposition
For these reasons, I conclude the Bank is entitled to a sequestration order against the estate of Mr Daher; and that Mr Daher has not established to my satisfaction he is able to pay his debts or that there is some other sufficient cause to dismiss the Bank’s petition.
Accordingly, I propose to dismiss Mr Daher’s application for review. I also propose to order that Mr Daher pay the costs of this application, the costs be paid out of Mr Daher’s estate, and that such costs have the same priority as the costs of the petition.
I certify that the preceding fifty-five (55) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 28 February 2014
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