Bendigo and Adelaide Bank Limited v Williamson
[2021] FCCA 1987
•27 August 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Bendigo and Adelaide Bank Limited v Williamson [2021] FCCA 1987
File number(s): SYG 377 of 2021 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 27 August 2021 Catchwords: BANKRUPTCY – creditor’s petition – whether there is a question whether behind the judgment debt on the basis of which a bankruptcy notice was issued there lies a true debt – no question that behind the judgment debt there lies a true debt – sequestration order made Legislation: Bankruptcy Act 1966 (Cth), ss 40(1)(g), 41(6A), 43, 47, 52, 156A
Federal Circuit Court (Bankruptcy) Rules 2016 (Cth), rr 4.02(1), 4.02(2), 4.04(1)(a), 4.04(1)(b), 4.05, 4.06(3), 4.06(4)
Cases cited: Burrell v Reavill Farm Pty Ltd & Ors [2014] FCCA 1449
Cheung v Burness (Trustee) [2016] FCA 1381
Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28
Williamson v Bendigo and Adelaide Bank Limited [2021] FCCA 296
Williamson v Bendigo and Adelaide Bank Ltd [2020] NSWSC 934
Wren v Mahony [1972] HCA 5
Number of paragraphs: 35 Date of hearing: 2 August 2021 Place: Sydney Counsel for the Applicant: Ms A Avery-Williams, by telephone Solicitor for the Applicant: Turks Legal The Respondent: Appeared in person, by telephone ORDERS
SYG 377 of 2021 IN THE MATTER OF HUGH WILLIAMSON
BETWEEN: BENDIGO AND ADELAIDE BANK LIMITED ACN 068 049 178
Applicant
AND: HUGH WILLIAMSON
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
27 AUGUST 2021
THE COURT ORDERS THAT:
1.The estate of the respondent, Mr Hugh Williamson, is sequestrated under the Bankruptcy Act 1966 (Cth).
2.The applicant creditor’s costs (including any reserved costs) be paid from the estate of the respondent, Mr Hugh Williamson, in accordance with the Bankruptcy Act 1966 (Cth).
3.The applicant’s creditor’s costs are set in the amount of $10,623.53.
THE COURT NOTES THAT:
4.The date of the act of bankruptcy is 18 February 2021.
5.A consent to act as trustee signed by Mr John Melluish has been filed under s 156A of the Bankruptcy Act 1966 (Cth).
6.A copy of these orders is to be provided to the Official Receiver in Sydney within two business days.
REASONS FOR JUDGMENT
INTRODUCTION
The applicant (Bank) applies for a sequestration order against the estate of the respondent, Mr Williamson.
The act of bankruptcy on which the Bank relies is Mr Williamson’s failure to comply with the requirements of a bankruptcy notice. Mr Williamson does not deny he failed to comply with the requirements of the bankruptcy notice; and he does not dispute that the preconditions for the making of a sequestration order, as prescribed by s 52 of the Bankruptcy Act 1966 (Cth) (Act) and the Federal Circuit Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules), have been satisfied. Mr Williamson submits he is not indebted to the Bank because the Bank has not established that any money was lent to him.
BACKGROUND
The starting point is a proceeding (Proceeding) the Bank commenced in 2010 in the Supreme Court of Victoria against Mr Williamson and Great Southern Finance Pty Limited (GSF). From the material Mr Williamson filed to which I refer later in these reasons, it appears that in the Proceeding the Bank sought to recover from Mr Williamson a debt the Bank alleged he had owed to GSF but which GSF had assigned to the Bank. It further appears the Bank alleged the debt arose out of a loan GSF made to Mr Williamson to fund an investment Mr Williamson made in a managed investment scheme known as “Great Southern Plantations”. Mr Williamson filed a defence and a counterclaim against the Bank, GSF, and three other parties. On 28 April 2017 Croft J ordered that Mr Williamson’s counterclaim be discontinued, and that the Proceeding be transferred to the Supreme Court of New South Wales (SCNSW).
On 18 August 2017, after the Proceeding was transferred to the SCNSW, Mr Williamson and a representative, or representatives, of the Bank participated in a court annexed mediation. That resulted in the Bank and Mr Williamson signing an agreement (Settlement Agreement). Under that agreement Mr Williamson agreed to pay to the Bank $400,000 (Settlement Sum) “in full and final settlement of the proceeding”, and that he would do so by the earliest of three dates, these being: thirty days after judgment were to be delivered in a proceeding Mr Williamson brought against Elders Rural Services Ltd or thirty days after that proceeding were to be settled or discontinued; the day on which Mr Williamson becomes bankrupt; or 30 September 2018. The Settlement Agreement provided that if the Settlement Sum were not paid in the circumstances and by the time provided for by the Settlement Agreement, Mr Williamson would consent to the entry of judgment against him for the Settlement Sum in accordance with the Settlement Agreement.
Mr Williamson made no payment under the Settlement Agreement by 30 September 2018. On 16 October 2018 the Bank filed a notice of motion in the Proceeding for judgment in the amount of the Settlement Sum. Rees J heard the notice of motion on 6 November 2018 and, on 16 November 2018, her Honour delivered judgment and ordered that judgment be entered against Mr Williamson in the amount of $403,863.01.
In the meantime, on 27 September 2018 Mr Williamson commenced a proceeding against the Bank in the District Court of New South Wales in which he sought to set aside the Settlement Agreement. On 23 November 2018 Mr Williamson consented to orders that the statement of claim be dismissed, and that he pay the Bank’s costs in the amount of $2,500.
On 21 December 2018 a bankruptcy notice was issued on the application of the Bank demanding that Mr Williamson pay the Bank $406,767.50. That represents the amount of the judgment for $403,863.71 that was entered in the Proceeding pursuant to the orders Rees J made on 16 November 2018, together with interest of $2,904.49 that had accrued on the judgment sum.
On 4 March 2019 a Registrar of this Court made orders (Orders) that by 1 April 2019 the Bank serve the bankruptcy notice on Mr Williamson by the methods provided by the Orders, these being by handing the bankruptcy notice to a person apparently over the age of 16 years at a property in Hay or, if that is not possible, by affixing it to the front door of the property or leaving it in the mailbox of the property; by sending a scanned copy of the bankruptcy notice to a specified email address; and by sending a text message to a specified number stating that the bankruptcy notice had been sent to and left at the Hay address. The Registrar also ordered that the bankruptcy notice would be deemed to be served on Mr Williamson on 12 April 2019, and that the bankruptcy notice be amended by replacing the words “after service on you of the Bankruptcy Notice” in paragraph 1 of page 2 with “after 12 April 2019”.
The bankruptcy notice, the amended bankruptcy notice, and the Orders were left at the Hay property on 19 March 2019, and, on the same day a text message was sent to the number specified in the Orders stating that the “Bankruptcy Notice documents in a plain envelope have been left securely in the front door of your premises at” the address specified in the Orders.[1] Also on 19 March 2019, a scanned copy of the bankruptcy notice, the amended bankruptcy notice, and the Orders were sent to the email address specified in the Orders.[2]
[1] Affidavit of Service of Bankruptcy Notice made by K G Hopkins 22.03.2019
[2] Affidavit of service made by R Maiorana 05.04.2019
On 5 April 2019 Mr Williamson filed an application in this Court to set aside the bankruptcy notice.
On 11 September 2019 Mr Williamson commenced a proceeding against the Bank in the SCNSW in which he sought to set aside the Settlement Agreement. In his statement of claim Mr Williamson alleged the Bank had not advanced any money to him, but he “agreed to make payment because he was unwell and could not maintain litigation”. According to Mr Flamer-Smith, a senior manager within the Bank’s insolvency litigation section, whose evidence is not contested and which I accept, Mr Williamson asserted in the SCNSW proceeding that the Settlement Agreement should be set aside because he was under a legal incapacity when he signed it. On 19 June 2020 the SCNSW ordered that the proceeding be transferred to the Common Law Division for the separate determination of the question whether on the day Mr Williamson signed the Settlement Agreement he was a person under a legal incapacity.[3] The determination of that separate question was set down for hearing before Bellew J on 21 July 2020.[4]
[3] Affidavit of S Flamer-Smith 07.06.2021, [22]
[4] Affidavit of S Flamer-Smith 07.06.2021, [23]
On 20 July 2020 Mr Williamson sent the following email to the Bank’s lawyer:[5]
[5] Exhibit SFS1, page 60
Fiona
This is the email I meant to send you.
I will not rely on the state I was in in August 2017.
You have your judgment and otherwise I agree with Ms Avery-Williams that my mental health was quite alright. Johnson J. said as much too.
Regards
Hugh Williamson
---------- Forwarded message ---------
From: hugh Williamson . . . .
Date: Mon, 20 Jul 2020, 3:40 pm
Subject: Re: Attn Dr Pockley - Court case involving Mr Williamson tomorrow
To: Christopher Pockley . . . . , Dr Chris Pockley
. . . .
Dear Fiona
I have discontinued the case in which Dr Pockley was to appear. Therefore he's not giving evidence for me and he's not giving evidence for you.
I totally accept what Ms Avery -Williams says. She concludes that I am fine and she is agreed with. Therefore you have your judgment against me and I will get a much larger judgment against your client.
There is no ruse any more about me being unable to conduct litigation. PTW have been dismissed and so you are now dealing with me.
I advise Dr Pockley not to come to court. There is nothing upon which his evidence touches. I agree with your barrister!
Regards
Hugh Williamson
. . . .
The hearing before Bellew J proceeded on 21 July 2020. At the hearing Bellew J asked Mr Williamson how the separate question should be determined. Mr Williamson, who appeared for himself, said:[6]
I withdraw any suggestion I was unwell […] I don’t think on reflection that I was under an incapacity […] I agree with Ms Avery‑Williams that I was quite able to understand and conduct the proceedings […] and I made that abundantly clear to my solicitors, PTW, who did not want to follow it.
[6] Williamson v Bendigo and Adelaide Bank Ltd [2020] NSWSC 934, at [12]
Bellew J answered “no” the question whether Mr Williamson was a person under legal incapacity on 18 August 2017 when the proceeding the Bank commenced against him in the SCNSW was the subject of a Court annexed mediation.[7]
[7] Exhibit SFS1, page 66
On 15 February 2021 Mr Williamson filed an amended application to set aside the bankruptcy notice. Judge Driver heard that application on 18 February 2021 and dismissed it on that day. His Honour published his reasons for doing so on 25 February 2021.[8]
[8] Williamson v Bendigo and Adelaide Bank Limited [2021] FCCA 296
PRINCIPLES
Before the Court can make a sequestration order it must be satisfied that the matters specified in s 43 and s 52(1) of the Act have been proven. These include the matters stated in the creditor’s petition, and that the debt or debts on which the petitioning creditor relies is or are still owing. The Court must also be satisfied that the relevant provisions of the Bankruptcy Rules have been complied with, subject to the Court’s discretion to dispense with compliance with those rules. [9] If the Court is satisfied with the proof of the matters specified in s 43 and s 52(1) of the Act, and that the requirements of the Bankruptcy Rules have been met, the Court may make a sequestration order. If the Court is not so satisfied it must dismiss the petition, or if it is satisfied the debtor is able to pay his or her debts, or “that for other sufficient cause a sequestration order ought not be made”, the Court may dismiss the petition[10]
[9] See Burrell v Reavill Farm Pty Ltd & Ors [2014] FCCA 1449 at [48]
[10] Act, s 52(2)
An application for a sequestration order must be based on the debtor owing the petitioning creditor a debt. In most cases the debt will be constituted by a judgment debt. That will be the case where the act of bankruptcy on which the creditor relies is the debtor’s failure to comply with the requirements of a bankruptcy notice. A bankruptcy court has a discretion to “go behind the judgment” if “substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner”.[11] Where the Court is satisfied such substantial reasons exist, the petitioning creditor will bear the legal burden of proving the judgment records a true debt.[12] The relevant principles were considered more recently by the High Court in Ramsay Health Care Australia Pty Ltd v Compton.[13] Thus, Kiefel CJ, Keane and Nettle JJ said:[14]
For the purposes of s 52 of the Act, a judgment may usually be taken to be sufficient evidence of a debt in that a judgment against a debtor in favour of a creditor obtained after a trial is, generally speaking, a reliable indication of the true state of indebtedness as between creditor and debtor. Indeed, such a judgment can usually be expected to provide the most reliable statement of the debt humanly attainable because the ordinary processes of the adversarial system provide a practical guarantee of reliability. The testing of the relative merits of a claim and counterclaim under the rigours of adversarial litigation will usually establish the true state of accounts as between the parties to the proceedings. Accordingly, a Bankruptcy Court will usually have no occasion to investigate whether the judgment debt is a true reflection of the real debt. But where the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability.
PROOF OF MATTERS SPECIFIED IN S 43 AND S 52(1) OF ACT
[11] Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212 at page 225 (Barwick CJ)
[12] Cheung v Burness (Trustee) [2016] FCA 1381 at [79] (Moshinsky J)
[13] Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28, at [16], [37]-[38], [54]-[55], [65]-[67]
[14] Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28, at [68]
As I have already noted, the act of bankruptcy on which the Bank relies is Mr Williamson’s failure to comply with the requirements of a bankruptcy notice. That bankruptcy notice was served on Mr Williamson on 19 March 2019, and by operation of the Orders it is deemed to have been served on him on 12 April 2019.
On a number of occasions this Court made orders under s 41(6A) of the Act extending the time for compliance with the requirements of the bankruptcy notice. The last order was made on 23 September 2020 which extended the time for compliance up to and including the day on which Mr Williamson’s application to set aside the bankruptcy notice was to be adjudicated. That occurred on 18 February 2021, when Judge Driver dismissed Mr Williamson’s application to set aside the bankruptcy notice. Mr Williamson did not comply with the requirements of the bankruptcy notice by that time. That means that Mr Williamson committed an act of bankruptcy within the meaning of s 40(1)(g) of the Act on 18 February 2021.[15]
[15] Creditor’s petition, [4]; affidavit of S Flamer-Smith 07.06.2021 verifying creditor’s petition
The Bank filed a creditor’s petition with this Court on 11 March 2021. The creditor’s petition is in the prescribed form,[16] and, as required by s 47 of the Act, an officer with authority has made an affidavit verifying it.[17] The Bank also filed, at the time it filed the creditor’s petition, an affidavit required by r 4.04(1)(a) of the Bankruptcy Rules,[18] and the affidavits of service of the bankruptcy notice, as required by r 4.04(1)(b).[19]
[16] Bankruptcy Rules, r.4.02(1); Form B6
[17] Bankruptcy Rules, r 4.02(2)
[18] Affidavit of C G M Mills 11.03.2021
[19] Affidavit of Service of Bankruptcy Notice made by K G Hopkins 22.03.2019; Affidavit of service made by R Maiorana 05.04.2019
As required by r 4.05 of the Bankruptcy Rules, the creditor’s petition was served on Mr Williamson on 19 March 2021, being more than five days before the date fixed for the hearing of the creditor’s petition, together with the affidavit required by r 4.04(1)(a) of the Rules, and the affidavits of service of the bankruptcy notice.[20] Finally, at the hearing of the creditor’s petition I read an affidavit of debt,[21] being an affidavit which, under r 4.06(4) of the Bankruptcy Rules, must be made as soon as practicable before the hearing of the creditor’s petition, and also an affidavit of search,[22] as required by r 4.06(3) of the Bankruptcy Rules
[20] Affidavit of Service of Creditor’s Petition made by T Gajic 24.03.2021
[21] Affidavit of Debt made by A Bellizia 20.07.2021
[22] Affidavit of Search made by C N Isaias 30.07.2021
I am satisfied the Bank has proved the matters it is required to prove under s 43 and s 52(1) of the Act and that, subject to the matters on which Mr Williamson relies, a sequestration order should be made against the estate of Mr Williamson.
GROUNDS OF OPPOSITION
Mr Williamson opposes the making of a sequestration order on the grounds set out in his Notice Stating Grounds of Opposition filed on 24 May 2021 (Notice of Opposition). In that document Mr Williamson claims that the debt the Bank claims is owed to it is a supposed loan of $282,000 from GSF to Mr Williamson dated 1 July 2004. Mr Williamson contends, however, that GSF never lent any money to him. The Notice of Opposition refers to a finance application having purportedly been completed on behalf of Mr Williamson in relation to Mr Williamson entering into a “Land and Management Agreement in respect of the Great Southern Plantations Project Management Investment Scheme for the number of woodlots as specified in the enclosed application”; and a “Loan Deed” dated 6 January 2005 between GSF and Mr Williamson; and an “affidavit prepared by the Group Manager of the Bendigo Balance Sheet management Division”. The Notice of Opposition then makes a number of claims, the central claim being that GSF undertook all dealings with borrowers in organising loans, with the consequence that GSF was “selling loans” without being required by the Bank to “rigorously assure that the loan funds were disbursed as the borrower directed”. The Notice of Opposition also refers to “Croft J of the Victorian Supreme Court” having made a number of findings. It is unnecessary to set out the particular findings the Notice of Opposition claims Croft J made.
Mr Williamson supports the Notice of Opposition with an affidavit made on 24 May 2021. He there deposes that the “Notice of Opposition to the petition is true”, and annexes a number of documents. The first is a document titled “Application for Term Finance”. In a section headed “Loan Details” in a box next to the printed words “Investment Amount”, there is written “282,000”. In a section headed “Loan term and Payment Options” there is a tick placed in a box appearing next to the printed words “2 years interest only then 2 years principal & interest”. The document also contains a section headed “Risk Disclosure Statement & Declaration”, which includes the following:
Great Southern Finance Pty Ltd (GSFPL) recommends that each Borrower, and where applicable, each Guarantor, obtains appropriate independent legal, financial and taxation advice with respect to the terms of the proposed GSFPL (as per the attached Loan Deed) and its suitability for their individual requirements.
Mr Williamson has also annexed as annexure 2 a document titled “Terms of Loan Deed”. The recital to that document states that “GSMAL” (which is defined to be “Great Southern Managers Australia Limited”) had developed the “Project” in accordance with the “Project Disclosure Statement”, the “Borrower”, namely, Mr Williamson, had decided to participate in that project, and the Lender, namely, GSF, will finance “a portion of the Borrower’s interest in the Project”. Mr Williamson also annexes the cover and table of contents of what appears to be the “Product Disclosure Statement”, a statement issued by the Bank in which Mr Williamson is named and identified by reference to a particular “Investor No”, and a newspaper article which reports on “Great Southern” having undertaken “a partial sale of its loan book, to what is believed to be Bendigo Bank, for 38 cents in the dollar”.
Mr Williamson further supports the Notice of Opposition with an affidavit made on 2 July 2021. Mr Williamson deposes there was never any transfer of money from GSF to Mr Williamson. Mr Williamson again annexes the “Terms of Loan Deed”, and makes a number of submissions in relation to its terms. He also attaches a loan application.
In written submissions filed on 10 June 2021 Mr Williamson submits that the judgment that was entered in November 2018 was based on the Settlement Agreement, but there “never was a time when the facts of the debt were completely set out”. Mr Williamson submits there is no record of “cash or money’s worth” passing from GSF or from Great Southern Management Limited to him. Mr Williamson also refers to Adelaide Bank Limited and the Bank being assignees of the debt, but submits the Bank has not discharged the burden which it bears of proving the debt.
Mr Williamson also relies on written submissions he filed on 26 July 2021. He there refers to “paragraph 6 of the Statement of Claim” alleging that on or about 1 July 2004 GSF loaned Mr Williamson $282,000. Mr Williamson submits GSF “most assuredly” did not. Mr Williamson submits there is no evidence that $282,000 was used in connection with the project for which the amount was purportedly lent; and to the extent money was advanced for use in any such project, it was not in fact used for such purpose. In further written submissions filed on 30 July 2021 Mr Williamson responded to the Bank’s written submissions.
At the hearing of the creditor’s petition Mr Williamson repeated the submissions he made in his written submissions that no money had been paid to him, and no loan was made to him.
SUFFICIENT CAUSE WHY SEQUESTRATION ORDER OUGHT NOT BE MADE?
The question is whether the evidence and other materials on which Mr Williamson relies, and the submissions he makes, support a finding there is some “other sufficient cause a sequestration order ought not be made”.
Mr Williamson’s evidence and submissions ignore the source of the judgment debt on the basis of which the bankruptcy notice was issued against him. The source is not the loan the Bank alleged in the Proceeding GSF lent to Mr Williamson, the benefit of which was assigned to the Bank. The source of the judgment is the Settlement Agreement. By that agreement Mr Williamson agreed to pay the Bank $400,000, and the Bank agreed to accept payment of that amount, by the time provided for in the Settlement Agreement. The Bank and Mr Williamson so agreed “in full and final settlement of the proceeding”.
While in force, the Settlement Agreement renders irrelevant the amount the Bank had claimed in the Proceeding, and the grounds on which it claimed that amount; the Settlement Agreement also renders irrelevant the grounds on which Mr Williamson relied or intended to rely in the Proceeding for denying liability to pay the amount the Bank claimed in the Proceeding. In particular, it renders irrelevant whether GSF transferred or paid any money to Mr Williamson, or whether any money that was supposed to have been paid to him was used for the purposes for which the money was supposed to be used. What is relevant are the obligations the parties assumed by entering into the Settlement Agreement. In the case of Mr Williamson, his principal obligation was to pay the Bank $400,000 by no later than 30 September 2018. He failed to do so; and the Bank, as it was entitled to do under the Settlement Agreement, applied for and recovered judgment against Mr Williamson in the amount of $400,000.
Although Mr Williamson had filed two proceedings in which he claimed the Settlement Agreement was not binding, he did not proceed with those claims; and he has not submitted in the proceeding before me that the Settlement Agreement is not binding or, if binding, it is liable to be set aside. Nor has Mr Williamson submitted he did not become liable under the Settlement Agreement to pay $400,000 when he failed to pay that amount to the Bank by 30 September 2018, or that the Bank was not entitled to apply to the SCNSW for judgment in the amount of $400,000 when Mr Williamson failed to pay to the Bank all or any of the $400,000 by 30 September 2018.
None of the matters on which Mr Williamson relies, therefore, raises any question about whether behind the judgment the Bank obtained pursuant to the Settlement Agreement, and on the basis of which the bankruptcy notice was issued, there lies a true debt. The evidence and submissions on which Mr Williamson relies, therefore, do not reveal some “other sufficient cause a sequestration order ought not be made”. The question, therefore, whether there is some other sufficient cause a sequestration order ought not be made against the estate of Mr Williamson must be answered in the negative.
DISPOSITION
I propose to make an order sequestrating the estate of Mr Williamson, and that the Bank’s costs be paid out of the estate of Mr Williamson. The Bank has filed a bill of costs which assesses the Bank’s costs at $10,623.53. I am satisfied it is appropriate to make an order for costs, and that those costs be fixed in the amount of $10,623.53. The Bank has filed a consent to act as trustee signed by Mr John Melluish, and I will note that fact in the orders I propose to make.
I certify that the preceding thirty-five (35) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 27 August 2021
0
6
0