BP Australia Pty Ltd v Menzies

[2010] FMCA 375

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BP AUSTRALIA PTY LTD v MENZIES & ANOR [2010] FMCA 375

BANKRUPTCY – Substitution of petitioner pursuant to s.49 of the Bankruptcy Act 1966 – exercise of discretion – disputed debt – whether to make sequestration order when proceedings pending in Supreme Court – solvency asserted – sequestration order made.

Bankruptcy Act 1966 (Cth), ss.5(2) and (3), 43, 44(1)(b), 44(3), 49, 52(1) and (2)
Corporations Act 2001 (Cth), s.440J
Bankruptcy Regulations 1996 (Cth), reg.16.01

Dean v QUF Industries Ltd (1981) 51 FLR 317
Australian Steel Company v Bianco [2002] FMCA 159
Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785
Sandell v Porter [1966] HCA 28

Applicant: BP AUSTRALIA PTY LTD (ACN 004 085 616)

First Respondent: IAN DAVID MENZIES

Second Respondent: COLLEEN ANNE MENZIES

File Number: MLG 1191 of 2009

Judgment of: Hartnett FM

Hearing dates: 19 & 20 May 2010

Delivered at: Melbourne

Delivered on: 11 June 2010

REPRESENTATION

Counsel for the Applicant: Mr Fary

Solicitors for the Applicant: Hopkins Lawyers

Counsel for the Respondents: Mr Washington

Solicitors for the Respondents: Hall Partners

ORDERS

1. Paccar Financial Pty Ltd (ACN 005 592 049) be substituted as petitioning creditor in place of BP Australia Pty Ltd (ACN 004 085 616) pursuant to section 49 of the Bankruptcy Act 1966 (Cth) and the creditor’s petition be amended accordingly.

2. The Court dispenses with the requirement for re-verification and re-service of the creditor’s petition as amended.

3. There be a sequestration order against the estates of Ian David Menzies and Colleen Anne Menzies.

4. The applicant’s costs of and incidental to the petition and interlocutory application be taxed and paid in accordance with the statute.

5. All exhibits tendered in the proceedings be returned to the parties immediately after the expiration of the time allowed for the filing of an appeal.

AND THE COURT NOTES THAT:

1. The date of the act of bankruptcy is 4 September 2009.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT MELBOURNE

MLG 1191 of 2009

BP AUSTRALIA PTY LTD (ACN 004 085 616)

Applicant

And

IAN DAVID MENZIES

First Respondent

COLLEEN ANNE MENZIES

Second Respondent

REASONS FOR JUDGMENT

1. Paccar Financial Pty Ltd (“Paccar”) appeared by Notice of Appearance filed 14 October 2009 as a supporting creditor to the creditor’s petition filed by the applicant BP Australia Pty Ltd on 18 September 2009. The respondents to the petition are Ian David Menzies and his wife Colleen Anne Menzies. By order made by Registrar Luxton on 10 November 2009 the applicant was excused from further attendance and the further hearing of the petition was adjourned with the supporting creditor to file and serve an application for substitution and affidavit by 24 November 2009. Paccar filed such application on 19 November 2009 seeking to be substituted as a petitioning creditor pursuant to section 49 of the Bankruptcy Act 1966 (Cth) (hereafter referred to as “the Act”) and consequential orders. The respondents seek such application be dismissed.

2. Paccar applies further for a sequestration order against the estates of the respondents and an order for costs.  The respondents oppose the making of such orders and seek the application be dismissed with costs.

3. The affidavit evidence and documents tendered in evidence relied on by both parties is as set out in the contentions of Counsel for Paccar filed 20 May 2010.  In addition to that is a letter of 1 December 2009 from BP Australia Pty Ltd to the respondents which was marked exhibit “RD5”.

4. In the amended notice of grounds of opposition to the application of Paccar filed 21 January 2010 the respondents claimed the following:

   (1)PACCAR is not a creditor of the respondents and that the substituted creditor is not otherwise entitled to the relief claimed under the petition or in accordance with the Act.

   (2)The claim of the substituted creditor is a claim to which the respondents seek to file a defence or counterclaim that they have not been able to set up in any original proceedings because there are presently no finally determined original proceedings.

   (3)The proceedings are an abuse of process in that the substituting petitioner claims to be a secured creditor and does not intend to relinquish its security, but wishes to achieve the collateral purpose of preventing the respondents from litigating proceedings presently before the Supreme Court in the State of Victoria numbered 6823/09.

   (4)That the respondents are solvent.

5. In addition and in closing the respondents raised a further ground that Paccar had not surrendered its security in accordance with section 44(3) of the Act.  Section 44(3) of the Act is as follows:

   (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.

   The term “secured creditor” is defined in section 5 of the Act as to mean:

   in relation to a debtor, means a person holding a mortgage, charge or lien on property of the debtor as a security for a debt due to him or her from the debtor.

6. There is no merit to this ground of opposition and section 44(3) of the Act has no relevance to these proceedings.  Paccar’s security, albeit presently in the possession of the respondents, is on the property of a third party, Menzies Haulage Pty Ltd (in liquidation) (“the company”) and not over the assets of the debtors.

7. In opening the respondents also sought to rely on one further ground to that set out in the amended notice of grounds of opposition namely that the judgment relied upon by the original petitioning creditor was obtained at a time when the proceedings against it were stayed by operation of section 440J of the Corporations Act 2001 (Cth). This ground was subsequently effectively abandoned by Counsel for the respondents.

8. Section 49 of the Act is as follows:

   49  Change of petitioners

   Where a creditor’s petition is not prosecuted with due diligence or where for any other reason the Court considers it proper to do so, the Court may permit to be substituted as petitioner or petitioners another creditor or other creditors to whom the debtor is indebted in the amount required by this Act in the case of a petitioning creditor, and the petition may be proceeded with as if the substituted creditor or creditors had been the petitioning creditor.

9. The power to permit substitution is a discretionary one.  I am satisfied that the creditor’s petition is not now being prosecuted by the original petitioning creditor and that the debt claimed to be owed by the respondents to Paccar existed at the time of the act of bankruptcy on which the original petition was founded.  The decision of the Full Court of the Federal Court in Dean v QUF Industries Ltd (1981) 51 FLR 317 confirms that a party may be substituted as petitioner if it claims a debt which has occurred before the act of bankruptcy on which the petition is founded even if that claim is disputed.

10. The claim is disputed.  Whether there in fact exists a genuine dispute about the existence of the debt is required to be considered.  In Australian Steel Company v Bianco [2002] FMCA 159 Driver FM stated:

    6.In the context of the equivalent section in the Corporations Law, s.465B, his Honour Ryan J in South-East Water Limited v Kitoria Pty Limited (1996) 21 ACSR 465-472 stated:

    “In my view, the proper exercise of the discretion conferred by section 465B of the Law requires the court to weigh in the balance two competing policies.  The first is that an insolvent company should not be permitted to continue to trade to the detriment of its existing or future creditors, and should be wound up as expeditiously as possible.  If the achievement of this objective is jeopardised by the inaction or lack of diligence of the petitioning creditor, another creditor should be substituted as contemplated by section 465B(1)(a) to allow the winding up proceedings to continue in the interests of the generality of creditors, some of whom may have refrained from initiating their own proceedings in the knowledge that the original petition had been instituted.  On the other hand, the Court should not allow winding up proceedings to be used as a debt-collecting mechanism or an instrument of oppression to be held over the head of a company otherwise trading satisfactorily by a creditor whose debt is the subject of a genuine dispute.”

    7.It seems to me that the position is essentially the same in relation to s.49 of the Bankruptcy Act. There are competing public interests as well as private interests involved. Section 49 permits another creditor to be substituted in circumstances of collusion or dilatoriness on the part of a petitioning creditor, and it ensures that if a debtor is insolvent his affairs are brought under the operation of the Bankruptcy Act as expeditiously as possible. On the other hand, the Court should not allow bankruptcy proceedings to be brought through substitution as a means of oppression of a debtor where there is a genuine dispute about the existence of a debt.

11. Counsel for the applicant argued that there is no genuine dispute as to the existence of the debt owed to it in these proceedings.  I find that to be the case.  The respondents contended that the debt claimed by Paccar is the subject of a genuine dispute as evidenced by the existence of proceedings in the Supreme Court of New South Wales.  These proceedings were instituted by Paccar in May 2009 and transferred from the Supreme Court of Victoria by Justice Habersberger in a discretionary determination to transfer such proceedings.  The mere existence of proceedings does not establish a genuine dispute.  The claims made by the respondents in the New South Wales Supreme Court proceedings in a defence and counterclaim are disputed by Paccar and there is a strike out application in respect of the whole of the pleading in proceeding 12545/10.  Counsel for the applicant referred the Court to that said – and often relied upon – by McLellan CJ in Eyota Pty Ltd v Hanave Pty Ltd (1994) 12 ACSR 785 in the context of an application to set aside statutory demands:

    It is, however, necessary to consider the meaning of the expression “genuine dispute” where it occurs in s.459H.  In my opinion that expression connotes a plausible contention requiring investigation, and raises much the same sort of considerations as the “serious question to be tried” criterion which arises on an application for an interlocutory injunction or for the extension or removal of a caveat.  This does not mean that the court must accept uncritically as giving rise to a genuine dispute, every statement in an affidavit “however equivocal, lacking in precision, inconsistent with undisputed contemporary documents or other statements by the same deponent, or inherently improbable in itself, it may be” not having “sufficient prima facie plausibility to merit further investigation as to [its] truth” (cf Eng Mee Yong v Letchumanan [1980] AC 331 at 341), or “a patently feeble legal argument or an assertion of facts unsupported by evidence”: cf South Australia v Wall (1980) 24 SASR 189 at 194.

12. Essentially the following grounds of dispute are relied upon by the respondents:

    (a)     the principal debt sued upon is not proved;

    (b)    the guarantee is not my deed (the doctrine of non est factum);

    (c)     only the execution pages of the guarantee were signed.

13. Paccar claims to be a creditor of the respondents in the sum of $373,541.09 pursuant to a guarantee and indemnity dated 10 May 2006 wherein the respondents are said to have signed such personal guarantees in respect of the obligations of the company.  It is the guaranteed debt which is petitioned on.  Paccar has established the existence and amount of the principal debt owed by the company.  Paccar tendered in evidence an extract from the business records of Paccar that establishes the debt (which is clearly in excess of the statutory minimum).  Ms Gillian Harvey, Operations Manager of Paccar was cross-examined as to the contents of her affidavits and other documents including Supreme Court proceedings and in particular as to discrepancies in the sum in which she stated the respondents were indebted to Paccar pursuant to the deed of guarantee and indemnity dated 10 May 2006.  Those sums were stated as being variously $373,541.09 and $390,455.09 being the balance owing of a loan amount pursuant to the amended loan agreements in November 2006 of $513,229.12.  I am satisfied that such discrepancies were a result of the inclusion of legal costs in the larger sum in relation to which the respondents are liable to indemnify Paccar pursuant to the Deed of Guarantee and Indemnity.  Ms Hopkins solicitor for the applicant was also cross-examined as to the quantum of the debt as she had in correspondence referred to a debt of $424,690.33 as being the amount borrowed pursuant to the amended loan agreements in November 2006.  I am satisfied on her evidence and that of Ms Harvey that this was an arithmetical error of Ms Hopkins, she having omitted the loan amount due under amending contract no.7470-20395 in the sum of $88,538.79.  It thus becomes incumbent on the respondents to establish there is a triable issue as to indebtedness which would justify dismissal or adjourning of the petition (pending resolution of the Supreme Court proceedings).

14. The respondents allege that only the execution pages of the guarantee were signed and rely on the doctrine of non est factum.  The following are my findings on the balance of probabilities as to the evidence before the Court.  In essence, the evidence of the respondents where it differs from that of the applicant is not accepted.  On all of the evidence before the Court including that given by the respondents in the witness box the Court does not accept that a genuine dispute exists.

    a)On or about 12 May 2006 Paccar entered into four loan agreements (“the Loan Agreements”) with Menzies Haulage Pty Ltd (in liquidation) pursuant to which it lent approximately $570,000 to the company for the purchase of two long haul trucks and trailers.  Prior to this and on 10 May 2006 the respondents entered into a guarantee of all present, future and/or contingent obligations of the company under the Loan Agreements.  The respondents also agreed to indemnify Paccar for any default and/or non-performance of obligations of the company – including payment of Paccar’s costs and legal costs of enforcing the Loan Agreements.  Mr Jeffrey Philip Penter has sworn an affidavit in the proceedings.  He was employed as a Regional Finance Manager for Paccar between June 2005 and December 2006.  His evidence as to the execution of the four contract documents and one guarantee document is unequivocal and is as follows:

    9.On about 8 May 2006, I was advised that credit was approved and I received letters and four contract documents and one guarantee document (in PDF format) from Head Office (“Documents”).

    10.I printed all of the Documents received, stapled each of them and bound them with blue binding tape down the left hand side, ready to be executed.

    11.At the end of April or start of May 2006, I attended the rural residence of Ian and Colleen Menzies in Wyong.  I took the stapled, bound and complete documents with me.  I asked Ian and Colleen Menzies to sign the stapled, bound and complete documents.  I recall that the documents were signed by Ian Menzies and Colleen Menzies as directors of a company named Menzies Haulage Pty Ltd (in liquidation) (“Menzies”).

    12.At the time of execution of the documents by Menzies, the documents were definitely stapled, bound and complete with all terms and conditions attached together with execution pages.

    13.I specifically recall that at the time of execution I sat with Ian Menzies.  Ian Menzies spent some time to read and review the documents.  Colleen Menzies was in the kitchen while Ian Menzies was reading the documents.  After Ian Menzies reviewed the documents he signed them in my presence.  Ian Menzies called for Colleen Menzies to come in from the kitchen and sign the documents.  Colleen Menzies then reviewed and signed the documents in my presence.

    14.After Ian Menzies and Colleen Menzies had signed the documents on behalf of Menzies and themselves I then placed my signature as a witness on the complete and bound Guarantee document.  Now produced and shown to me and marked JP-1 is a true copy of the documents signed by Menzies and Ian and Colleen Menzies including the Guarantee document that bears my signature as a witness and the letters to Menzies and Mr & Mrs Menzies.  After the documents were signed, I posted the originals to Head Office.

    Mr Penter was not cross-examined about his evidence as contained in affidavit sworn by him on 29 January 2010.  I accept his evidence.  The contrary evidence given by the respondents was that on about 8 May 2006 Mr Penter attended at their then home in Wyong New South Wales to arrange finance for the purchase of two Kenworth trucks and trailers.  Mr Menzies evidence is that Mr Penter showed the respondents one, three or four single pages being attestation pages of documents and requested that they sign same which they duly did without documents attached or being shown any other documents.  Mrs Menzies gave evidence on the hearing of the matter that she signed six or seven execution pages and then “four to six pages” and then “about six I think I don’t know”.  She had previously deposed in an affidavit jointly sworn with her husband that the respondents had signed three or four separate pages not bound to any others.  No plausible explanation was provided by Mrs Menzies as to the difference between her various accounts.  In fact five execution pages were signed comprising the four loan agreements and one guarantee document.  The respondents acknowledge receiving contractual documents sent by the applicant thereafter but say that such copy documents were destroyed in a flood at their home in June 2007.  I reject the evidence of the respondents as to their signing of single execution pages.  I am satisfied on the evidence of each of the respondents that their usual business practice was to read and understand documents signed by them and in the giving of their evidence no credible explanation as to why they signed single execution pages without an agreement attached was forthcoming.  Each of them were experienced in the signing of contractual and guarantee documents and in particular in relation to the operations of the company known as “Menzies Excavations” which had operated for approximately ten years.  Mr Menzies is a justice of the peace who claimed experience and practice in the signing of documents in a business context.  I am also satisfied that letters confirming execution of the Guarantee and Indemnity dated 10 May 2006 was sent by Paccar to the respondents on or about 17 May 2006 as were copies of the Loan Agreements dated 12 May 2006.  Further Paccar sent copies of the executed guarantee to the respondents.

    b)Mr Penter also gave evidence as to the request for Amending Deeds which were executed on 12 November 2006 and which is as follows:

    19.On or about 5 October 2006 I was contacted by Ian Menzies.  Ian Menzies said he wanted to defer the GST portion of the payments due.  I then telephoned Head Office and advised them that Ian Menzies had contacted me and asked to defer the GST portion of the repayments due under the loan.  I was advised by Rodney at Head Office that PACCAR would agree to rewrite the repayments as requested and would send the rewritten documents to Ian Menzies and Colleen Menzies to sign.

    20.I met with Ian and Colleen Menzies on or about the middle of November 2006 and gave them the rewritten Contracts.  I recall that I left the rewritten Contracts with them to sign and send back to PACCAR.

    21.On or about 13 December 2006 I was contacted by Ian Menzies who asked for an explanation of the payments due under the re-written contracts.  After my discussion with Ian Menzies I called Head Office and spoke with David Mueller and advised him that Ian Menzies had queried the re-written Contracts and the repayments due under them.  David Mueller explained the repayment structure to me and I relayed the information to Ian Menzies.

    c)Evidence was also given in relation to the Amending Deeds by Mr David Mueller in affidavit sworn 29 January 2010.  His evidence was that he is a Collections Manager employed by Paccar for the period 15 December 2003 to 8 February 2007 and again since 7 July 2008.  He was not cross examined in the proceedings.  I accept his evidence.  His evidence is as follows:

    11.On or about 5 October 2006 Jeff Penter telephoned me and advised that Menzies has requested whether PACCAR could defer the GST portion of the payments.  I said to Jeff Penter that PACCAR would prefer to re-write the contracts over the entire term and advised that there would be a fee of $1,100.  Jeff Penter was going to seek instructions from the Menzies and get back to me about how Menzies wished to proceed that is whether they wished to rewrite over the term or not.

    12.I verily believe from my records that the contracts were re-written at Head Office of PACCAR and contract documents were posted to Menzies on or about 23 October 2006.

    13.On 12 December 2006 I reviewed the account and made a telephone call to Ian Menzies.  Ian Menzies said words to the effect that:

    “we signed the documents and sent them to our accountant about a week ago for her to review…the accountant is Mortaxfin ph. 02 4393 9690, 0407 668 882 the person is Sue.”

    I then tried to telephone the Accountant Sue and I left a message on both the landline and the mobile number given to me by Ian Menzies.

    14.On 13 December 2006 I received a telephone call from Jeff Penter who advised that Menzies had a question about how the payments were structured.  I advised Jeff Penter of the new repayment structure and Jeff Penter said he would relay the information to Menzies.

    15.I verily believe that the re-written Contracts were then sent back to head office on behalf of Menzies by Ian Menzies and/or Colleen Menzies.  PACCAR is in possession of the original documents.  The re-written Contracts are dated 12 November 2006.  True copies of the re-written Contracts are annexed to the Affidavit of Gillian Harvey sworn on 19 November 2009 and filed herein (pages 93-116).

    d)The company fell into arrears in respect of the re-written Contracts and from about November 2008 failed, neglected or refused to make repayments pursuant to the Loan Agreements as re-written.  On or about 29 January 2009 Mr Mueller received notice that the company had gone into administration.  Mr Mueller deposes to the period of his contact with the respondents which was from about May 2006 to 17 December 2008 and states as follows:

    33.At no time during my contact in the above period with Menzies, did Ian Menzies or Colleen Menzies say words to me or write to me or give me any other communication stating that Menzies did not execute the four Deed of Loan and Charge documents and/or that they personally did not sign the Guarantee document in May 2006 or that they did not understand how their repayment obligations to PACCAR arose.  At all times Ian and Colleen Menzies appeared to me to understand that Menzies was liable to make payments to PACCAR for purchase of the Trucks and Trailers.  Ian Menzies and Colleen Menzies also appeared to me to understand that they were guarantors of Menzies.  Both Ian and Colleen Menzies seemed desirous to repay the money but because they did not have sufficient funds at their disposal they were always wanting to enter into repayment arrangements.  Ian Menzies and Colleen Menzies at no time during the conversations above said words to me indicating that they only signed loose sheets of paper and did not consider that they owed money to PACCAR.

    e)Such evidence as in the preceding sub-paragraph was also given by Ms Harvey, Graeme Miller, Collections Manager at Paccar from April 2007 to May 2008 and Stephen Brown, Director of credit at Paccar since May 2004 as to their dealings with the respondents.  Mr Roland Hollingsworth, Managing Director of Paccar deposed in his affidavit sworn 29 January 2010 as to his dealings with the respondents and/or their solicitor between July 2008 and December 2008, those dealings relating to the arrears on the account payable by the company and the manner in which a solution to the arrears might be reached.  He likewise gave evidence as follows:

    13At no time during my above dealings with Ian Menzies or Colleen Menzies or their Solicitors did Ian Menzies or Colleen Menzies or their Solicitors say words to me or write to me or give any other communication that Menzies did not execute the entire Deed of Loan and Charge documents and/or that they did not sign the entire Guarantee document in May 2006.  At no time did Ian or Colleen Menzies or their Solicitors suggest to me that they did not understand how their repayment obligations to PACCAR arose.  At all times prior to the commencement of legal proceedings, Ian Menzies and Colleen Menzies appeared to me to understand that Menzies was liable to make payments to PACCAR for purchase of the Trucks and Trailers and that they were liable for any shortfall as guarantors of Menzies.

    He was not cross-examined as to his evidence nor was Mr Brown or Mr Miller.  I accept their evidence.

    f)There is no necessary inconsistency between the evidence of Mr Penter and Mr Mueller and in any event the evidence of each of the respondents is that they signed the Amending Deeds.

    g)On 25 November 2008 the respondent husband dictated and the respondent wife typed a letter to Mr Roland Hollingsworth which on the evidence of the respondents was not sent.  In that correspondence tendered in evidence and as to which Mrs Menzies gave evidence that she agreed with the majority of its content, the respondent Ian Menzies said:

    “We signed the contract in front of Jeff without any legal advice.  When one looks at the documents they are very complicated and seem to be entirely in favour of Paccar and do not on appearance give any rights to us.”

    There is no suggestion in the correspondence that the documents signed were not complete – in fact the contrary.  Further there is an acknowledgement that the documents signed are “very complicated” and there is no complaint that the respondents did not know what it was they were signing nor that the documents signed were merely execution pages.

    h)By letter of 25 March 2009 the Loan Agreements were terminated by Paccar and Paccar demanded payment from the company of the sum of $373,541.09.  On or about 26 March 2009 Paccar also demanded payment from the respondents of the sum of $373,541.09 by way of a letter of demand pursuant to the Guarantee and Indemnity.  Earlier letters of demand had been sent to the company and the respondents under the guarantee (dated 26 June 2008) claiming arrears then due in response to which the respondents proposed to sell investment properties and apply inheritance monies to clear the debt.  No claim such as that now made by the respondents in these proceedings was raised.

    i)The respondents owe Paccar a substantial amount of money and have asserted defences in other proceedings which on the evidence before me do not go to establishing that there is a genuine dispute about the existence of the debt.  Mrs Menzies in her evidence stated that she believed the respondents were personally liable to Paccar for an amount of $100,000 to $200,000 but resiled from same upon a leading question asked in re-examination.

Debt not a liquidated sum

1. The respondents contend that the debt claimed by Paccar is not a liquidated sum for the purposes of section 44(1)(b) of the Act.

2. Section 44(1)(b) provides that a petition shall not be presented against a debtor unless:

   (b)that debt, or each of those debts, as the case may be:

   (i)is a liquidated sum due at law or in equity or partly at law and partly in equity; and

   (ii)is payable either immediately or at a certain future time; and

3. The amount owed under guarantee by the respondents is a sum certain albeit one that is disputed (on grounds that Paccar contends are not genuine and which I find).

Solvency

1. I now turn to the Court’s discretionary powers under section 52(2) of the Act.  Section 52(2) of the Act provides:

   (2)If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:

   (a)that he or she is able to pay his or her debts; or

   (b)that for other sufficient cause a sequestration order ought not to be made;

   it may dismiss the petition.

2. A person is “solvent” if, and only if, that person is able to pay all his, her or it’s debts as and when they become due and payable (s.5(2) of the Act).  A person who is not solvent is “insolvent” (s.5(3) of the Act).

3. In Sandell v Porter [1966] HCA 28, Barwick CJ (with whom McTiernan J agreed (at 672)) said (at 670-71), when dealing with section 95 of the 1924 federal bankruptcy legislation (a similar provision) said:

   “[T]he 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 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 as 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.”

4. It is the position of the respondents that they are solvent.  The onus is on the respondents to prove that they are solvent.  The evidence adduced by the respondents does not provide such proof.

5. The respondents cannot pay their debts “as and when they fall due”.  The evidence of the respondents in the proceedings is that they have taken no steps to sell or borrow further monies against their real property situate at 54 Upper Smiths Creek Road Kundabung in the State of New South Wales.  The evidence of Mrs Menzies is that this real property has an estimated value of $300,000 and an encumbrance to the Commonwealth Bank of Australia in the sum of approximately $280,000.  Her evidence like that of her husband is that the mortgage repayments are not currently in default as a result of an arrangement entered into between the respondents and the Commonwealth Bank of Australia where interest is capitalized on the mortgage and no payments are required by the Commonwealth Bank of Australia for a period of six or seven months whilst Mr Menzies is unable to work and the parties are in receipt of Commonwealth pension benefits.  Her evidence was further that the respondents have sold real property in Wyong with no money from that sale available to deal with the debt claimed by Paccar and further that the September 2009 sale by the respondents of real property in Maryborough likewise provided no funds to deal with the debt claimed by Paccar.  The respondents otherwise referred to ownership of household furniture and effects together with a tin boat valued at $4,000 approximately and farm equipment, neither of which have been placed on the market for sale or in relation to which the respondents have taken steps to obtain borrowings against.  Mr Menzies evidence was that the Kundabung real property had a value of that attributed to it by a market appraisal provided by Port Macquarie Hastings dated 13 January 2010 wherein the total value of the four properties comprising the respondents ownership was approximately $750,000.  His evidence was that the mortgage encumbrance was approximately $293,905.55.  This of course was not an expert valuation as to the value of the real property and I give little weight to this evidence.  The respondents put forward no probative evidence of value of any assets claimed to be owned personally (or controlled by) them.  As against this the respondents have debt to the Commonwealth Bank of Australia including credit card debt secured over the real property at Kundabung in the sum of approximately $4,000 or $5,000 together with the mortgage outstanding.  Further the respondents owe monies to BP Australia Pty Ltd pursuant to a judgment debt in the sum of approximately $32,000 and in relation to which they have entered into a further agreement to delay the payment but have same secured by the lodgement of a caveat by BP Australia Pty Ltd over their real property in Kundabung.  Otherwise the respondents put before the Court no details as to arrangements made with the Commonwealth Bank of Australia or BP Australia Pty Ltd or any other evidence as to the repayment of these loans.  As to their income, the respondents are presently in receipt of Centrelink benefits and there is no evidence as to the likely cessation of receipt of such benefits.

6. There is no evidence of any motivation on the part of the applicant to draw an inference that the creditor’s petition is a proceeding brought for an improper purpose which was suggested in opening by Counsel for the respondents but otherwise abandoned.  The Court is satisfied as to all those matters required by section 52(1) of the Act.  The affidavit of Christine Hopkins sworn 4 March 2010 establishes service of the creditor’s petition.  Verification of the petition is provided by the affidavits of Travis Moore sworn 17 September 2009 (verifying paragraphs 1 to 3) and Lauren Jade Babray sworn 18 September 2009 (verifying paragraph 4).  The affidavits of Noel Hart Austin sworn 19 August 2009 provide proof of service of the bankruptcy notice on each of Ian and Colleen Menzies at the last known address of the respondents in accordance with regulation 16.01 of the Bankruptcy Regulations 1996 (Cth). Other evidence before the Court also established the respondents residence as being at their property in Kundabung New South Wales. Ms Hopkins swore an affidavit on 19 May 2010 as to her search of the records of the National Personal Insolvency Index of the Insolvency Trustee Service of Australia and the records of the Federal Court and Federal Magistrates Court. I formally dispense with the requirement for the filing of a further affidavit of debt, oral evidence having been given in the proceedings that the debt owed to Paccar remains outstanding. Paccar shall be substituted as the petitioning creditor and a sequestration order against the estates of the respondents shall be made.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Hartnett FM

Deputy Associate:  Kate Gray

Date:  11 June 2010