Australian Private Networks Pty Ltd v Bailey
[2015] FCCA 253
•13 February 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| AUSTRALIAN PRIVATE NETWORKS PTY LTD v BAILEY & ANOR | [2015] FCCA 253 |
| Catchwords: BANKRUPTCY – Petitioning Creditor holding 2 securities over property of debtor respondents – securities allotted “nil” value in Creditor’s Petition – whether valuation erroneous and constituting reason to dismiss Petition – whether creditor took proper steps to obtain valuation – whether creditor acted improperly in enforcing security when matter set down for trial – respondent’s objections not upheld – Sequestration Orders made. |
| Legislation: Bankruptcy Act 1966, ss.33, 44(2), 44(3), 44(4), 52(1), 52(2), 52(2)(b) |
| Bryant v Commonwealth Bank of Australia [1995] FCA 1687 Biron Capital Limited v Anstee [2005] FMCA 1100 |
| Applicant: | AUSTRALIAN PRIVATE NETWORKS PTY LTD |
| First Respondent: | PETER GEORGE BAILEY |
| Second Respondent: | SUZANNE BAILEY |
| File Number: | MLG 284 of 2014 |
| Judgment of: | Judge Burchardt |
| Hearing date: | 22 December 2014 |
| Date of Last Submission: | 22 December 2014 |
| Delivered at: | Melbourne |
| Delivered on: | 13 February 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr Moffatt |
| Solicitors for the Applicant: | Mills Oakley Lawyers |
| Counsel for the Respondents: | Mr Watson-Jones |
| Solicitors for the Respondents: | Snowton Saje |
ORDERS
Further compliance with r.4.06 of the Federal Court (Bankruptcy) Rules 2005 be dispensed with.
A Sequestration Order be made against the estate of each of the Respondents.
The cost of the Petitioning Creditor be paid out of the bankrupts’ estates in accordance with the Bankruptcy Act 1966.
THE COURT NOTES THAT:
(a)The date of the act of bankruptcy was 22 August 2013.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT MELBOURNE |
MLG 284 of 2014
| AUSTRALIAN PRIVATE NETWORKS PTY LTD |
Applicant
And
| PETER GEORGE BAILEY |
First Respondent
| SUZANNE BAILEY |
Second Respondent
REASONS FOR JUDGMENT
Introductory
Although substantial tranches of material have been filed in this proceeding, counsel for the applicant is correct to submit that there are two issues presently before the court. The first is the application by the applicant creditor to amend the Creditor’s Petition. The second are the matters arising from the respondents’ Notice Stating Grounds of Opposition to Application filed 28 March 2014 and the various other objections articulated by the respondents to both the original Petition and the application to amend.
Put broadly, the respondents’ objection is to the effect that the two securities that the applicant held over property of the respondents, which securities were identified in the Petition but valued therein as of nil value, should have been valued at a level which would extinguish the amount asserted to be owed by the respondents to the applicant. The respondents complained that the applicant did not take appropriate steps to value the securities prior to the lodgement of the Petition, and that it is inappropriate for that reason and for other reasons to permit the amended Petition.
For the reasons that follow, I do not accept the position contended for by the respondents and it follows that the applicant will be permitted to amend the Petition and Sequestration Orders will be made against the estate of each of the respondents.
Some background facts that are not controversial
The Petition in this proceeding was filed on 19 February 2014. It was based on a judgment of Mukhtar AsJ in favour of the applicant against the respondents in the sum of $812,354.68 made on 4 March 2013. The Petition noted security held by the applicant over property of the respondents to the value of $0, consisting of:
a)a charge over two ordinary shares held in Peter Bailey & Associates Pty Ltd (subject to Deed of Company Arrangement) and beneficially owned by the respondents; and
b)an equitable charge over the second respondent’s property at 11 Holyrood Drive, Vermont (“the property”).
The Petition noted that the respondents had failed to comply with the Bankruptcy Notice served on each of them on 1 August 2013 and that the applicants had not set up any counter-claim, set-off or cross-demand. I do not understand the date of service or the absence of any cross-demand at that time as being controversial.
The order made by Mukhtar AsJ on 4 March 2013 is exhibit AB1 to the affidavit of Anthony Bundrock filed 20 June 2014. The order confirms that an antecedent proceeding between the parties was “reinstated for the purpose of enforcing default provisions for the consensual entry of judgment in a deed of settlement made between the parties”.
The settlement deed was executed on or about 6 September 2012 and is exhibit AB2 to the Bundrock affidavit. In clause 2.3(h) of the deed the second respondent acknowledged an indebtedness at the date of the execution of the deed of $1,107,818.96 to the Commonwealth Bank of Australia (“the CBA”) and the settlement document also noted two mortgages to that bank.
The deed expressly charged the second respondent’s interests in the property in favour of the applicant (clause 5.1) and charged the shares (of which there are one each) of the respondents in Peter Bailey & Associates Pty Ltd (“PBA”) in favour of the applicant (clause 7.1).
In order to understand the slightly convoluted history of the way in which these secured interests have been articulated from time to time it is appropriate to traverse, at least in outline, the affidavit material filed before the court.
The affidavit of Peter Bailey filed 28 March 2014
Mr Bailey deposed that the value of the applicant’s security over the property was approximately $650,000. This was based on a kerbside valuation (put forward on a hearsay basis) of between $1,200,000 and $1,300,000. The affidavit referred to the two mortgages to the Commonwealth Bank of Australia and asserted that the amount owing under one of them (mortgage number AE552948U) was approximately $540,000 at the date of the affidavit. He went on to depose that he and his wife, the second respondent, were then unable to explain the existence of the second mortgage number AH347925B.
The value of $650,000 earlier referred to is the difference between the $1,200,000 estimate and the amount then outstanding on the first mortgage of about $540,000.
The affidavit went on to assert that PBA had ceased to be externally administered on 21 February 2014 and attributed a value to the two shares in it, on a conservative estimate, as at least $200,000. Accordingly, he concluded that the secured interests held by the applicant creditor were worth at least $850,000.
The second respondent filed an affidavit, also on 28 March 2014, which essentially confirmed what the first respondent had already deposed.
The affidavit of Sandro Di Donato filed 5 May 2014
Mr Di Donato is a director of the applicant. He responded to the respondents’ affidavits. Relevantly, he deposed that inquiries made by his solicitors to the CBA about the two mortgages had elicited a response that the bank would not provide the amount owing under the mortgages, owing to privacy laws. Mr Di Donato also confirmed that lawyers for the bank had served a notice of default upon the respondents on 7 January 2014, with a payout figure of $556,867.14 as at 6 January 2014.
The affidavit further confirmed that the applicant’s solicitors had inquired from the administrator of PBA and that at the date of the affidavit no response had been received from the administrator. Mr Di Donato noted that the first respondent had stated that on 21 February PBA had ceased to be externally administered. The affidavit concluded:
“9. The values of both securities are valued as nil and it is my belief that this estimate is a genuine estimate.”
The affidavit of Rawle Watson-Jones filed 6 May 2014
Relevantly, Mr Watson-Jones exhibited a valuation report for the property in a value of $1,200,000. He also deposed to endeavours to find out the level of indebtedness secured by mortgage number AH347925B (the second mortgage). The response from the bank indicated that the bank was not aware of any accounts related to the mortgage.
The only other matter of relevance for present purposes was that Mr Watson-Jones foreshadowed a valuation report from a Mr Meggs in relation to the value of PBA.
The affidavit of Peter Bailey filed 6 June 2014
This affidavit annexes a copy of Mr Meggs’ foreshadowed valuation report which ascribes a value of $485,000 to the accounting practice PBA. The affidavit also annexed a balance sheet and profit and loss statements for PBA and asserted Mr Bailey’s estimation of the value of PBA as $614,877.35, and therefore ascribed a value of $307,438 to each of the shares in that entity.
Mr Bailey further annexed a certificate showing that the amount of money owed pursuant to mortgage AE552948U (the first mortgage) was, as at 21 May 2014, $555,118.90.
Accordingly, Mr Bailey concluded that the total value of the applicant’s securities over the respondents’ property was at least $850,000.
The affidavit of Anthony Bundrock filed 20 June 2014
Some of the matters asserted in Mr Bundrock’s affidavit have been noted earlier under the agreed section of facts.
I note that at paragraph 11 Mr Bundrock deposed to the fact that Mills Oakley, one of the applicant’s lawyers, had issued the CBA with a subpoena designed to produce documents disclosing the outstanding amounts owed to the bank by the first and second mortgage. Put shortly, Mr Bundrock deposed that investigations of his solicitors’ had not clarified any moneys owing under the second mortgage and sought further time to investigate the matter.
The affidavit of Ariel Currie Borland filed 25 July 2014
Ms Borland is the partner of the applicant’s solicitors who has conduct of the proceeding. Relevantly, she deposed as to endeavours to discover what moneys might be owed pursuant to the second mortgage and various other matters. For these purposes, relevantly, the solicitors for the CBA confirmed on 11 July 2014 that the second mortgage had been paid out in full but the CBA had not yet discharged the mortgage. As a result the indebtedness owing to the CBA in respect of the property was approximately $555,118.90, as deposed by Peter Bailey on 6 June 2001.
The affidavit went on to depose to endeavours to obtain documentation from PBA and the engagement of Greg Meredith, of Ferrier Hodgson, as an expert witness to prepare a report providing his opinion on the value of the shares in PBA.
The affidavit of Gregory Pollard Meredith filed 4 August 2014
Mr Meredith’s affidavit effectively tenders his report. Relevantly to these purposes, in the report itself (exhibit GPM3 to Mr Meredith’s affidavit) Mr Meredith said, at paragraph 8:
“8. Based on the above, I am unable to form a view as to the value of the shares in PBA, as:
(a) There are a number of unexplained discrepancies in the financial information provided; and
(b) I have not otherwise been provided with the information which I require to perform the valuation.”
I note that Mr Meredith accepted the multiple of fees methodology for valuing the client base and net assets of PBA as an appropriate methodology in the Meggs valuation. At paragraph 11, however, Mr Meredith set out various reasons, which seem to be cogent on their face, as to why, in his view, the Meggs valuation was not reliable. He went on to say why he did not accept Mr Bailey’s estimate of the value of the shares in PBA. It is sufficient to say that once again Mr Meredith’s reservations seem cogent on their face. Furthermore, Mr Bailey is simply not a non-partisan witness in the proceeding, on any view of the matter.
The affidavit of Peter Bailey filed 4 August 2014
This affidavit responded to Ms Borland’s affidavit and clarified that there was in fact no money owing on the second mortgage. He deposed the only debt secured by the second mortgage as at 19 February 2014 was the between $555,000 and $560,000 owed in respect of his bank account. The affidavit concluded:
“5. At no time prior to the service on me of the creditor’s petition was I asked by the applicant, its directors or lawyers, to provide them with details of the debt which was owed by Suzanne Bailey and myself to the Commonwealth Bank which was secured by the 2 mortgages nos. AE552948U and AH347925B.”
The affidavit in opposition filed 29 September 2014
The first respondent’s affidavit in opposition filed 29 September 2014 further asserts that he had put a proposition to the applicant on 17 February 2014 that he expected to have sufficient funds in hand to make a payment to the applicant of at least $200,000 by 21 February 2014. He also deposed in that affidavit that the sum he had offered was greater than the sum now sought to be the subject of the amended Creditor’s Petition.
The affidavit of Ariel Currie Borland filed 19 December 2014
Ms Borland relevantly deposed that solicitors for the CBA had informed her office by email that the CBA sold the property for $930,000 on 18 December 2014, with settlement to occur 10 February 2015. The email (ACB2), having confirmed these details, relevantly asserted, “At this stage I cannot confirm the outstanding debt to the Bank until all enforcement expenses and selling accounts are finalised.”
The affidavit went on to refer to orders made by the court on 26 August 2014 for the provision of documentation to the applicants, by the respondents, relating to PBA. She deposed that she had not yet received or inspected the documents.
The affidavit further deposed that on 15 September 2014 the applicant served the respondents with notices of demand pursuant to the specific security agreement executed in October 2012. Upon failure by the respondents to satisfy the demand, the applicant enforced its security and took possession of the shares of PBA. I note that following passages of correspondence between the solicitors for the parties on 15 October 2014 the applicant appointed a liquidator to PBA in its capacity as shareholder after taking possession of the shares of PBA on 15 September 2014. A Mr Richard Rohrt was appointed as liquidator. Mr Rohrt’s letter (ACD6) to Ms Borland, dated 17 September 2014, suggested that the liquidation of PBA was not likely to return anything to shareholders.
The evidence given at Court
Mr Di Donato was required for cross-examination and adopted his affidavits as true and correct.
Under cross-examination he said he valued the value of the shares as zero. He said he did not know the value of the mortgages and had not made any personal inquiries. He had relied upon his lawyers’ inquiries and took their advice. He said he was not aware of any other matters he could have checked to enable him to value the shares or property, and was not aware that he could have got a kerbside appraisal of the property. He was not aware whether the various instruments executed by the respondents would have entitled him to check the mortgage level. He confirmed that he took security over every asset possible at the time the settlement was entered into, in case Mr Bailey was able to get out of the deed of company arrangement that he had entered into in relation to PBA. He confirmed that security had been taken despite the acknowledgement of the $1,000,000 mortgage.
Mr Bundrock was likewise called and adopted his affidavits as true and correct. He confirmed that the value of the securities at nil in the Petition. He said he had looked at the available information in relation to the mortgages and the shares and confirmed that if he had had evidence of the value of the property the Petition might have been otherwise. He was not able to say if information about the property was available. No information was available about the shares. There were privacy problems at the bank at some stage. He confirmed that there was no contact with the respondents before the Petition was issued.
Mr Rohrt was called. He was appointed as liquidator of PBA on 15 October 2014. He said he was seeking to sell PBA as a going concern and had engaged brokers to assist him. There had been three possible purchasers, of whom the preferred one was Knightstone Partners. Knightstone had, however, just very recently pulled out. He was trying to market it to the second possible purchaser, Tiernan Parsons, whose offer was $200,000 all in. The third offer was only for $50,000.
Mr Rohrt was not able to say, because of developments, how valuable the PBA debtors ledger was. He noted that Wilson Pateras had valued it at $40,000. He affirmed that, in addition to other matters, the ATO has lodged a $200,000 proof of debt, but that would go up because no BAS had been lodged for several years. He said that the schedule annexed to his letter to Mills Oakley of 17 December 2014 was based upon the first respondent’s information.
Under cross-examination, Mr Rohrt confirmed that the CBA had not lodged a proof of debt and he had not yet prepared a solvency report. He agreed that the question as to who should have lodged BAS statements was a vexing one, given the deed of company arrangement. He confirmed that he had not had the chattels of the business valued. He further confirmed that while generally the going rate for the valuation of a business, which would be dollar for dollar, would not obtain in liquidation.
It should be noted that each of the witnesses called were clearly truthful. Their answers were responsive and direct. I do not believe, indeed, that the respondents’ counsel has suggested that they were not to be believed.
The law in relation to Petitions
Sections 44(2), (3) and (4) of the Bankruptcy Act 1966 (“the Act”) read:
“44(2) Subject to subsection (3), a secured creditor shall, for the purposes of paragraph (1)(a), be deemed to be a creditor only to the extent, if any, by which the amount of the debt owing to him or her exceeds the value of his or her security.
44(3) A secured creditor may present, or join in presenting, a creditor’s petition as if he or she were an unsecured creditor if he or she includes in the petition a statement that he or she is willing to surrender his or her security for the benefit of creditors generally in the event of a sequestration order being made against the debtor.
44(4) Where a petitioning creditor is a secured creditor, he or she shall set out in the petition particulars of his or her security.”
It is clear that the applicant has not taken the course of surrendering its securities pursuant to s.44(3) of the Act.
It seems to me that there are two issues to be considered at this stage. First, do the value of the securities held by the applicant exceed the asserted debt of $814,000? Second, does the attribution of a nil value in the Petition invalidate the Petition for noncompliance with s.44(4) or otherwise lead to the conclusion that the Petition should be dismissed?
It is true that the securities held by the applicant had not been valued and/or crystallised at the time the Petition was filed. On one view this might suggest that the debt, therefore, is not a liquidated sum. I have been provided with authority in relation to this matter but it is sufficient, in my view, for these purposes, to quote the judgment of the Full Court of the Federal Court in Bryant v Commonwealth Bank of Australia [1995] FCA 1687, at [25], where the Court said:
“The requirements of s44 were explained by Lockhart J in Re Wiggins; Ex parte Credit Assistance Pty Ltd (1979) 36 FLR 182. In that case his Honour rejected a submission that s44(2) required a petitioning creditor to state in its petition not its estimate of the value of the security, but the actual value thereof. His Honour held that a petitioning secured creditor may in its petition estimate the value of its security, provided the creditor acts in good faith, and that, in the event of a sequestration order being made, it is not bound by the estimate when it seeks to prove its debt. This construction is consistent with the prescribed form of Petition required by s47(1)(a) of the Act, which envisages a global value being placed on a creditor’s security and not a separate value for each mortgage, charge or lien. See too the definition of “secured creditor” in s5(1) of the Act. Once it is appreciated that the “value” referred to in s44(2) is an estimated value, there is no difficulty in calculating the excess (or “unsecured balance” as it is termed in the prescribed form) in respect of which a secured creditor is deemed to be a creditor. Such an amount is plainly a “liquidated sum” within the meaning of s44(1)(b)(i) of the Act. Of course, as Sheppard J observed in Re O’Leary; Ex parte Bayne (1985) 61 ALR 674 (at 682), the petitioning creditor’s estimate “must bear a close relationship to the realities of the matter…(and) not be arbitrary or capricious”.”
The arguments of the parties
Counsel for the applicant noted that prior to the filing of the Petition, the applicant had sought by its lawyers to find out the amounts owing under the mortgages in favour of the CBA and had received a response to the effect that the amounts would not be released owing to privacy laws. Likewise, a request for information from the then administrator of PBA had produced no response.
Counsel pointed to the fact that as recently as 2012 the second respondent had acknowledged an indebtedness of over $1,100,000 pursuant to the mortgages. It was submitted that in these circumstances the nil estimate was not capricious or unreasonable.
Although after the event, so to speak, counsel pointed to the fact that the first respondent and the second respondent were not, at the time of the filing of their first affidavits, themselves able to say with certainty what moneys were owed under the mortgages (because of the then unascertained circumstances of the second mortgage). Counsel also pointed to the fact that Mr Meggs had expressly stated in his report that he was not competent to value the shares.
Counsel noted that the CBA has since sold the property for $930,000 and a net amount less the debt due as at 21 May 2014 was likely to be $374,881. To that would need to be added the bank’s costs, expenses and interest accrued since 21 May 2014.
Counsel for the respondents submitted that the applicants could have valued the property, whether by kerbside valuation or pursuant to the facultative clauses in the settlement deed. Counsel pointed out that no request was made to the respondents to permit a valuation or otherwise to seek the respondents’ consent to have CBA reveal the relevant figures owing on the mortgages.
Counsel submitted it was not reasonable for the applicant to pay regard to the moneys acknowledged in the settlement deed as long ago as 2012. Counsel submitted that the precipitating factor was simply that the six month period from the service of the Bankruptcy Notice was about to expire.
Considerations
In Biron Capital Limited v Anstee [2005] FMCA 1100, at [21], Driver FM, as His Honour then was, said an estimate of nil value on a security was based more upon an absence of knowledge than knowledge, given that the land in question remained in the possession of another party who had not co-operated with the Creditor.
His Honour also indicated at [28] that:
“It is only necessary for me to satisfy myself that the estimate is a genuine one. If the estimate is a genuine one, the court will not inquire into its correctness…”
Here, the respondents’ submissions all have the benefit of hindsight. So, to an extent, do those of the applicant.
The reality is that the applicant took what seemed to me to have been reasonable steps to clarify the value of its securities before the Petition was issued. An approach was made to the bank to try and discover how much money was owed to the CBA. The CBA refused to cooperate. Even when cooperation was obtained, as it transpired, the picture remained considerably unclear for a protracted period of time, until it was eventually established that the second mortgage did not have any money owing on it.
Similarly, PBA was in administration at the time and the administrator failed to cooperate.
In my view, in these circumstances, it was reasonable for the applicant to ascribe a nil value to the securities. They were simply not known.
Indeed, as with the valuation of the property, the passage of time only goes to show how unclear things are. I have already said that I find the report of Mr Meredith persuasive. It seems to me that the value, if any, of the second security is likely to be very little or nothing.
This brings us on to the second part of the matter, namely, whether the securities exceed the sum claimed. The sum claimed is over $800,000. The value of the property is now known to be a little over $300,000 and the value of the shares is unascertainable. Plainly the court cannot be satisfied that the value of the securities exceeds the debt.
The application to amend
Once the value of the mortgages was known the applicant, through its lawyers, took what in my view were timely steps to amend the Petition. This was a perfectly proper way to proceed, in my opinion. Plainly the court has power, pursuant to s.33 of the Act, to allow an amendment to a Creditor’s Petition. The most significant issue raised in relation to the amendment to the Petition, in my view, is whether there will be irremediable prejudice caused to the respondent if the amendment is allowed. Clearly the respondents have had an opportunity to meet the matters raised by the proposed amended Petition and, as I already indicated, I think that the course of the proceeding, whereby the applicant in due course became aware of the true level of the mortgages and the resultant adjustments that needed to be made to the value of the securities, does no discredit to the applicant.
The position as to prejudice was essentially asserted by counsel for the respondents to be that set out in Mr Bailey’s affidavit filed 29 September 2014. At paragraphs 7 and 8 of that affidavit Mr Bailey deposed:
“7. Another such proposal is that set out in an email from my solicitor Mr Watson-Jones to the Applicant’s legal representatives at 10:05am on 17 February 2014. In that email, Mr Watson-Jones stated as follows:
Ms Borland,
Snowton Sage act for Mr and Mrs Bailey
I understand that your client is poised to take further steps to enforce its rights in relation to a judgement obtained against our clients.
I am in a position to confirm that my clients expect to have sufficient funds in hand to make a payment to your client of at least $200,000 by 21 February 2014.
Please thank your client for his patience to date.
In view of the foregoing could you please urgently confirm whether your client is prepared to forebear from filing the creditor’s petition?
We await your prompt response.
8. At 12:09 pm on 17 February 2014 Ms Ariel Borland of the applicant’s legal representative responded saying “Absent payment in full, our instructions are to proceed with enforcement action against both your clients.””
Mr Bailey went on to depose that if the applicant was granted leave to amend the Petition now, the amount to which the Petition would be amended would be less than what he was prepared to pay.
The respondents also took issue with the appointment of the liquidator despite the court having made orders on 26 August 2014 to progress the matter to trial. It was asserted that this would give rise to a counter-claim from the respondents because PBA was not being sold in an orderly manner and, accordingly, the court should not exercise its discretion to make a Sequestration Order.
The difficulty with the respondents’ submission that the proposal to which Mr Bailey referred in his affidavit was, as the applicant’s written submissions assert (at paragraph 11):
“(a) the proposal put by the First Respondent is nothing more than an expectation. There is no substance to the matters detailed in the email;
(b) the proposal does not address what is to occur in relation to the balance of the debt; and
(c) the Creditor’s Petition was filed on 17 February 2014. At the time of the proposal was put the value put on the Security in the Creditor’s Petition was not “capricious, contrived, false, intentionally illusory or excessively low.””
It is further submitted by the applicant that there is no irremediable prejudice to the respondents by reason of the amendment, as they have not shown the capacity to pay the amount of $167,473.58 contained in the amended Petition.
In my view, consideration of all the relevant circumstances, which I hope have been sufficiently traversed above, leads to the conclusion that the court should exercise its discretion to admit the Petition to be amended.
Should a Sequestration Order be made
There has been no issue about the matters in s.52(1) of the Act raised in this case. I indicated during the currency of the hearing that I would make an order dispensing with further compliance with rule 4.06 of the Federal Court (Bankruptcy) Rules 2005. An order to that effect will be made.
The respondents have not, at any stage, sought to put on material to suggest that they are solvent. I cannot, therefore, be satisfied that they are able to pay their debts within the meaning of s.52(2) of the Act.
Counsel for the respondents, as I indicated above, submitted that the court should not exercise its discretion to make a Sequestration Order. This was partly on the footing that the respondents had a counter-claim arising out of the liquidation of PBA. This was said, in effect, to be sharp practice.
It was further put that Mr Bailey would have paid out the debt in February 2001, as earlier described.
In my view, none of these matters give rise to other sufficient cause why a sequestration order ought not be made (s.52(2)(b) of the Act).
The appointment of the liquidator was undertaken pursuant to a previous security interest. A party secured, in my view, is entitled to protect its interests as best it may. I suspect, in any event, it arose from frustration over the failure to obtain a definitive value of the shares (and by implication, the business as a whole). Whether that surmise be true or not, I am not prepared to find, without more, that the conduct of the applicant in moving on its security to appoint a liquidator was in any way improper. No such assertion was put to either Mr Di Donato or Mr Bundrock in cross-examination.
Likewise, the assertion that Mr Bailey’s offer in February 2014 should prevent the making of a Sequestration Order cannot be sustained. Not only was the so called offer properly the subject of the criticisms advanced by the applicant, to which I have already referred, but at the time that the offer was declined, for the reasons I have already given, the value of the securities was simply not known with anything like sufficient precision to give rise to proper criticism of the applicant’s conduct in issuing the Petition. Indeed, cogent material some 18 months later suggested that the CBA mortgages greatly exceeded any value that the property might be likely to have generated.
In all the circumstances, in my opinion, a Sequestration Order should issue against the estate of each of the respondents. I note that the date of the act of bankruptcy was 22 August 2013.
I certify that the preceding seventy-one (71) paragraphs are a true copy of the reasons for judgment of Judge Burchardt
Associate:
Date: 13 February 2015
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