Bank of Western Australia Limited v Kwok
[2012] FMCA 106
•10 February 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| BANK OF WESTERN AUSTRALIA LIMITED v KWOK | [2012] FMCA 106 |
| BANKRUPTCY – Creditor’s petition – territorial jurisdiction – failed businessman absent from Australia for one year before act of bankruptcy – continued to be ‘ordinarily resident’ – sequestration order made. |
| Bankruptcy Act 1966 (Cth), ss.43(1), 43(1)(b), 43(1)(b)(i), 43(1)(b)(ii), 43(1)(b)(iii), 52(2)(b) Bankruptcy Regulations 1996 (Cth), reg.16.01(1)(c) Migration Act 1958 (Cth) |
| Battenberg v Restom [2007] FCAFC 195 Brighten Pty Ltd v Lombe [2011] NSWSC 817 In the Matter of Brighten Pty Limited (Receivers and Managers Appointed) [2011] NSWSC 801 Kwok v Bank of Western Australia Limited [2011] FMCA 559 Re Taylor; Ex parte Natwest Australia Bank Limited (1992) 37 FCR 194 Re Vassis; Ex parte Leung (1986) 9 FCR 518, [1986] FCA 21 |
| Applicant: | BANK OF WESTERN AUSTRALIA LIMITED ACN 050 494 454 |
| Respondent: | MICHAEL WILSON KWOK AKA WAI HING KWOK |
| File Number: | SYG 1627 of 2011 |
| Judgment of: | Smith FM |
| Hearing date: | 10 February 2012 |
| Delivered at: | Sydney |
| Delivered on: | 10 February 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr J White |
| Solicitors for the Applicant: | Gadens Lawyers |
| Counsel for the Respondent: | No appearance by or on behalf of the Respondent |
| Counsel for Perpetual Trustee Company Limited ACN 000 001 007, First Supporting Creditor: | Mr A East |
| Solicitors for the First Supporting Creditor: | Gadens Lawyers |
| Counsel for National Mutual Funds Management Ltd ACN 006 787 720, Second Supporting Creditor: | Mr A East |
| Solicitors for the Second Supporting Creditor: | Gadens Lawyers |
| Counsel for Citigroup Pty Ltd ABN 44 004 325 080, Third Supporting Creditor: | No appearance by or on behalf of the Third Supporting Creditor |
ORDERS
A sequestration order be made against the estate of Michael Wilson Kwok, also known as Wai Hing Kwok.
The applicant creditor’s costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note that the date of the act of bankruptcy is 9 June 2011.
Note that a consent to act as trustee has been signed by Barry Anthony Taylor.
The applicant must give a copy of this order to the Official Receiver within 2 working days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1627 of 2011
| BANK OF WESTERN AUSTRALIA LIMITED ACN 050 494 454 |
Applicant
And
| MICHAEL WILSON KWOK AKA WAI HING KWOK |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
This is a bankruptcy petition, in which the Bank of Western Australia Limited (“the Bank”) relies on a debt owed by Mr Kwok of $13,583,412.13 under a judgment entered in the commercial list of the Supreme Court of New South Wales on 16 March 2011. The debt arose from a guarantee given by Mr Kwok in support of his interest in a company which had operated the Fairmont Resort at Leura before receivers were appointed by the Bank.
A bankruptcy notice relying on that judgment was issued on 12 May 2011, and was served on Mr Kwok pursuant to reg.16.01(1)(c) of the Bankruptcy Regulations 1996 (Cth) on 19 May 2011. Although the affidavit of service does not refer to the bankruptcy notice being left in his post box in an envelope marked with his name, I am prepared to infer that this requirement was probably satisfied since the process server was so instructed. It is also important to note that due service has never been put in issue by Mr Kwok in the course of the two proceedings in this Court, in which he has been legally represented.
The first proceeding was an application by Mr Kwok to set aside the bankruptcy notice. I note from the judgment given by Lloyd‑Jones FM when dismissing that application on 22 July 2011, that the Bank’s reliance on the affidavit of service and the date of an act of bankruptcy calculated from 9 June 2011 was expressly raised and not disputed by Mr Kwok (see Kwok v Bank of Western Australia Limited [2011] FMCA 559 at [12]).
More significantly, in the present proceedings Mr Kwok’s solicitors on the record until quite recently gave clear notice when the matter was set down for hearing today, that their client would not be relying upon any grounds of opposition other than a ground which raises the Court’s jurisdiction under s.43(1)(b) of the Bankruptcy Act 1966 (Cth). This raises issues whether Mr Kwok was, at the date of the act of bankruptcy, ordinarily resident in Australia or otherwise sufficiently connected to Australia.
Once I accept the evidence of due service on Mr Kwok on 19 May 2011, then an extension of time for compliance with the notice contained in an order of a Registrar on 3 June 2011 was of no effect, since that order was conditional upon the notice having been served on 23 May 2011, which was incorrect. I note that no other purported extension of time was given in the course of the proceedings decided by Lloyd‑Jones FM.
I am therefore satisfied that non‑compliance with the bankruptcy notice occurred on 9 June 2011, and that the act of bankruptcy alleged in the petition and amended petition is established and occurred on that date.
The petition and amended petition assert the continued non‑payment of the original judgment debt, and the continued existence of that state of indebtedness is proved today by the most recent affidavit of debt. The existence of the indebtedness was not put in issue by Mr Kwok in either his proceedings to set aside the bankruptcy notice or his opposition to the petition.
In his application to set aside the bankruptcy notice, Mr Kwok contended that he had an off‑setting claim against the Bank arising from proceedings which he contemplated taking against the Bank’s receivers, who had been appointed over the Fairmont Resort. Mr Kwok presented evidence of applications in the Supreme Court of New South Wales seeking preliminary discovery, and seeking to stay a statutory demand on his company, Brighton Pty Limited, which was a co‑guarantor of the indebtedness to the lending of the Bank. However, both of his applications were dismissed, McDougall J dismissing the application for preliminary discovery on 20 July 2011 (see Brighten Pty Ltd v Lombe [2011] NSWSC 817), and Hammerschlag J dismissing the application to stay the statutory demand on 19 July 2011 (see In the Matter of Brighten Pty Limited (Receivers and Managers Appointed) [2011] NSWSC 801).
In all three of those concurrent pieces of litigation subsequent to the service of the bankruptcy notice, that is the proceeding before Lloyd‑Jones FM and the two Supreme Court proceedings, Mr Kwok was a party either in person or through his direction of Brighton Pty Limited, and he was represented by solicitors, Jackson Lalic Lawyers. He presented himself to all three courts as a person actively committed in pursuing claims against the receivers, including for his personal benefit either directly or indirectly. Mr Kwok did not himself swear any affidavits in the proceedings in this Court, but an affidavit was relied upon on his behalf sworn by Helen James who described herself as:
… the former business partner of Michael Wilson Kwok, the applicant, and I handle his business affairs in Australia. I have knowledge of his affairs and am authorized to swear this affidavit on his behalf.
She then presented evidence about his efforts to pursue the receivers, and about his pending proceedings in the Supreme Court which I have referred to above. She gave her address as a domestic residence at Telegraph Road, Pymble which appears to have two street addresses and two titles. It also appears from other evidence that Ms James is or was the wife of Mr Kwok, and that her address at Telegraph Road is an address which Mr Kwok has until recently identified as his own residential address in various places. It was the address where the bankruptcy notice was served, and came to his attention.
At the time of the service of the bankruptcy notice at that address and at the date of the act of bankruptcy on 9 June 2011, Mr Kwok was not himself present in Australia. This is now accepted by the Bank. It has tendered his last two passenger cards completed by him when leaving Australia on 14 November 2009 and 1 July 2010. In both of these Mr Kwok has described himself as “Australian resident departing temporarily”, as distinct from being a visitor or temporary entrant or an Australian resident departing permanently. The concept of ‘Australian resident’ thus encompasses persons who are also Australian citizens or persons who are permanently domiciled in Australia, as well as persons who might be ordinarily resident under permanent residence visas under the Migration Act 1958 (Cth). In his July 2010 passenger card Mr Kwok indicated that he lived in New South Wales, that his intended length of a stay overseas was one month, and that he expected to spend “most time abroad” in “Hong Kong” on “business”. His previous departure from Australia was to the USA.
Notwithstanding Mr Kwok’s absence from Australia since July 2010, plainly his business affairs continued to be pursued in Australia, including by Ms James and by his solicitors in the proceedings I have referred to above. In addition, there is evidence of other business activities and litigation being actively pursued by Mr Kwok in Australia since his departure. In various ASIC documents tendered by the Bank, Mr Kwok appears as a director and sole owner of a number of corporations. Their registered offices are in Australia, and most recently he has filed a number of changes of address forms signed by him in March 2011, giving his own residential address as a place in Sydney at Regents Park.
In relation to other business interests being pursued through litigation, there is evidence of at least one actively pursued by him during 2011 as the sole director and member of Goldana Investments Pty Ltd, in relation to its interests in a shopping centre at Greystanes which in 2011 was in the hands of receivers. In September 2011, his lawyers on his behalf were pursuing the receivers for a distribution of moneys available after the conclusion of the receivership.
In 2011, he was also employing his solicitors actively to resist efforts of the HSBC Bank to take possession of the property at Telegraph Road, Pymble, pursuant to securities over its title given by Mr Kwok in support of guarantees for borrowings by his companies. Mr Kwok has been, and remains, the sole registered proprietor of the two parcels constituting that property. In his solicitor’s correspondence with the HSBC Bank, they asserted in a letter of 4 May 2011 that:
… our client’s wife, Helen James, resides in the security premises. Neither our client nor Ms James are voluntarily giving up possession of the security properties. …
The claim for possession then reached the Supreme Court of New South Wales, and Mr Kwok instructed his lawyers to defend possession proceedings which appear to have been on foot in June 2011.
The jurisdictional issues which were put in issue by Mr Kwok in an amended notice of opposition filed by his solicitors on 20 September 2011, are raised by its assertions:
1.Within the meaning of section 43(1)(b) of the Bankruptcy Act 1966 (Cth), the Court does not have jurisdiction to make orders because at the time when the act of bankruptcy was committed, the “debtor” (following the numbering used in that section):
i.Was NOT personally present or ordinarily resident in Australia;
ii.Did NOT have a dwelling‑house or place of business in Australia;
iii.Was NOT carrying on business in Australia, either personally or by means of an agent or manager; and
iv.Was NOT a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager.
This ground puts in contention all of the four alternative pathways by which territorial jurisdiction of this Court to make a sequestration order against Mr Kwok could arise under s.43(1):
43 Jurisdiction to make sequestration orders
(1)Subject to this Act, where:
(a)a debtor has committed an act of bankruptcy; and
(b)at the time when the act of bankruptcy was committed, the debtor:
(i) was personally present or ordinarily resident in Australia;
(ii) had a dwelling‑house or place of business in Australia;
(iii) was carrying on business in Australia, either personally or by means of an agent or manager; or
(iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.
As well as establishing the circumstances which I have sketched above, the Bank tendered numerous additional pieces of evidence in support of their contention that subparagraphs (i), (ii) and (iii) all apply to Mr Kwok’s circumstances as at 9 June 2011. This evidence has been addressed in great detail in a written submission prepared by its counsel, and I generally agree with his submissions. However, particularly since Mr Kwok has chosen not to appear today to defend the petition, I consider it necessary for me only to explain shortly why I am at least satisfied that Mr Kwok was “ordinarily resident” in Australia at the time of the act of bankruptcy.
Mr Kwok was clearly on notice of the listing today. The absence of his previous legal representatives is explained by a notice of withdrawal by his lawyer filed on 15 December 2011. In this notice, which is supported by an affidavit of Mr Kwok’s former solicitor, reference is made to a notice of intention to withdraw having been served on Mr Kwok on 28 September 2011. I am satisfied from this material, that Mr Kwok was notified as to today’s listing, and that it would proceed in his absence if he failed to attend or to appoint a new legal representative.
Notably for the jurisdictional issues, the solicitor’s notice of withdrawal stated:
… the client’s last known residential or business address and telephone number are set out in the notice of intention to withdraw.
This refers to their client’s last known such address as being one of the street addresses for the Telegraph Road, Pymble premises.
In my opinion, the Court is entitled in these circumstances to place significant weight on the information given to it by a solicitor on the record in relation to their former client. Particularly in the present circumstances, where the same solicitors have been actively representing Mr Kwok in his various litigation during 2010 and 2011 which I have referred to above, including all of Mr Kwok’s previous proceedings to set aside the bankruptcy notice and to oppose the present petition.
In my opinion, all the present evidence points towards Mr Kwok being ordinarily resident in Australia at the time of the act of bankruptcy.
In particular, I consider that this finding is supported by the information from the solicitor as to their client’s last known address, in combination with:
i)Mr Kwok’s statements upon his last departure from Australia showing that at that time he still regarded himself as a permanent resident of Australia and as departing temporarily only, and the absence of any evidence tendered before me showing an intention to adopt another location outside Australia as his sole ordinary place of residence;
ii)the evidence pointing to his extensive business structure and substantial businesses conducted in Australia in recent years and continuing beyond June 2011, including in relation to at least two shopping centres in Sydney and the Fairmont Resort, albeit recently in the course of winding up these interests voluntarily or involuntarily; and
iii)the evidence pointing to Mr Kwok’s ownership and possession of the residential property at Telegraph Road in June 2011, and to his use of it both as a home apparently occupied with his wife or former wife, as well as for security for borrowings for his business purposes based on his being the registered and beneficial owner.
The concept of ‘ordinarily resident’ was referred to by Burchett J in Re Vassis; Ex parte Leung (1986) 9 FCR 518, [1986] FCA 21, which was a case which is not dissimilar to the present, of an Australian permanent resident absenting himself overseas at a time of financial difficulty. His Honour said at 524‑525:
The question where a person is ordinarily resident is a question of fact: Levene v Commissioners of Inland Revenue [1928] AC 217. It is obviously not to be answered, in respect of any particular time, by asking where that person was then resident. Otherwise, the word “ordinarily” would have no meaning. But even the unqualified concept of residence is not tied to the accidents of a day; for, as Viscount Sumner said in Commissioners of Inland Revenue v Lysaght [1928] AC 234 at 245: “One thinks of a man’s settled and usual place of abode as his residence.” At the same time, his Lordship pointed out that “in many cases in ordinary speech one residence at a time is the underlying assumption and, though a man may be the occupier of two houses, he is thought of as only resident in the one he lives in at the time in question”. In s 43 of the Bankruptcy Act, the phrase is not “resident in Australia”, but “ordinarily resident in Australia”, and it expresses an alternative to “personally present … in Australia”. In such a context, it must convey the former of the meanings which I have quoted from Viscount Sumner’s speech rather than the latter. If a man’s home is in Australia, a merely temporary absence will not prevent his being “ordinarily resident in Australia”. It is a question of fact and degree at what point a temporary absence might, if sufficiently prolonged, prevent its being proper to continue to regard him as ordinarily resident in Australia. In Akbarali v Brent London Borough Council [1983] 2 AC 309 at 344, Lord Scarman said: “For if there be proved a regular, habitual mode of life in a particular place, the continuity of which has persisted despite temporary absences, ordinary residence is established provided only it is adopted voluntarily and for a settled purpose.”
…
Having regard to this evidence, it seems to me that the proper conclusion of fact is that Mr Vassis was ordinarily resident in Australia, both at the time that he departed, and throughout the period until his return two years later in February 1985, or at least until the crucial date, 28 December 1983, which was barely a year from his departure. There is no suggestion that during his absence he established any other ordinary residence at any particular place in Greece. His own evidence, to which I have referred, clearly indicates that he regarded his journey overseas, desperate flight though it was, as no more than a temporary interruption of his ordinary residence in Victoria. I do not think the law requires it to be regarded in any different light. It may be compared, for example, to an absence overseas by a Melbourne university lecturer upon sabbatical leave at Athens University who would, in my opinion, still be correctly described as ordinarily resident in Australia if at the conclusion of his sabbatical leave he intended to resume life here.
…
(emphasis in original)
It is also well established that the concept of being ordinarily resident encompasses persons having other places of ordinary residence outside Australia, and also the possibility of lengthy absences from Australia (see Re Taylor; Ex parte Natwest Australia Bank Limited (1992) 37 FCR 194 at 198, and Battenberg v Restom [2007] FCAFC 195 at [12]).
In the present case, Mr Kwok has chosen not to appear to oppose the assertion that he was ordinarily resident in Australia at the critical time. The Court has no inconsistent evidence contradicting the evidence tendered by the Bank suggesting a likely continuity of Mr Kwok’s previous connections to Australia, as a place where he was undoubtedly ordinarily resident for the purposes of both his personal and his business life. I do not consider that the mere fact that he had been temporarily absent from July 2010 overcomes the inference that his previous status probably remained in existence in June 2011.
In my opinion, on the authorities to which I was referred, jurisdiction has been established in relation to this petition pursuant to s.43(1)(b)(i) of the Bankruptcy Act.
The evidence, as is explained exhaustedly in the written submission of the counsel for the Bank, also points to Mr Kwok having a “dwelling‑house or place of business in Australia” at June 2011 within s.43(1)(b)(ii), in particular at his properties at Telegraph Road, whose possession and enjoyment was shared with his wife or former wife.
The litigation and ASIC documents also point to his continuing to carry on business in Australia for his own benefit at that time, both directly or through corporate vehicles. Some or all of his business interests might have failed and ceased operations, but the processes of winding up in which he was actively involved during 2011 can themselves be regarded as evidence of “carrying on business in Australia” within s.43(1)(b)(iii) (see Re Vassis (supra) at 526).
However, I prefer to rest my present judgment on my finding that Mr Kwok was “ordinarily resident in Australia” at the time when the act of bankruptcy was committed.
I am satisfied as to the other requirements of the Bankruptcy Act and Rules, and that the Bank has an entitlement to the making of a sequestration order today.
At one stage, Mr Kwok presented a ground of opposition under s.52(2)(b) of the Bankruptcy Act. This asserted that there was “other sufficient cause” for the Court to dismiss the petition, being his “legitimate claim to funds against the Creditor and against Receivers and Managers appointed by the Creditor”. The ground referred to his hopes to have discovered evidence of malpractice by the Bank’s receivers in relation to the Fairmont Resort, in effect, making the contentions which were previously unsuccessfully raised in this Court and the Supreme Court. However, this ground of opposition was withdrawn by Mr Kwok’s legal representative appearing before me on 1 November 2011, and no evidence has been filed in support of it.
Particularly in the absence of Mr Kwok, I am not persuaded that there is any discretionary or other ground for declining to make a sequestration order today. The evidence before me, and the presence of several supporting creditors, points to Mr Kwok being hopelessly insolvent owing very large sums of money, and to a public interest in a sequestration order being made today.
I shall therefore make the sequestration order in the terms sought.
I certify that the preceding thirty‑two (32) paragraphs are a true copy of the reasons for judgment of Smith FM
Date: 22 February 2012
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