Cooley, T.L. v Westpac Banking Corporation
[1995] FCA 282
•3 May 1995
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE
STATE OF VICTORIA
GENERAL DIVISION No VP 134 of 1994
Re: TERRENCE LAMBERT COOLEY
Debtor
Ex parte: WESTPAC BANKING CORPORATION
Creditor
Coram: Olney J
Place: Melbourne
Date: 3 May 1995
MINUTE OF ORDERS
THE COURT ORDERS THAT:
A sequestration order be made against the estate of the debtor Terrence Lambert Cooley.
The petitioning creditor's costs of and incidental to the petition including any reserved costs be taxed and paid in accordance with statute.
THE COURT NOTES:
Date of Commission of act of Bankruptcy - 18 November 1993
Trustee: Paul Anthony Pattison
NOTE:Settlement and entry of orders is dealt with in
Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE
STATE OF VICTORIA
GENERAL DIVISION No VP 134 of 1994
Re: TERRENCE LAMBERT COOLEY
Debtor
Ex parte: WESTPAC BANKING CORPORATION
Creditor
Coram: Olney J
Place: Melbourne
Date: 3 May 1995
REASONS FOR JUDGMENT
The petitioning creditor seeks a sequestration order against the estate of the debtor.
The petition was presented on 11 February 1994 and was served on 26 March 1994. For various reasons which are not presently relevant the hearing of the petition was adjourned on a number of occasions. It was finally heard by me on 24 April 1995 when I reserved my decision.
On 8 July 1994 Paul Anthony Pattison a registered trustee in bankruptcy within the meaning of s 5 of the Bankruptcy Act (the Act) consented to act as the trustee of the estate of the debtor in the event that he becomes a bankrupt.
On 10 February 1995 an order was made pursuant to s 52(5) of the Act that the period at the expiration of which the petition will lapse be a period of 24 months commencing on the date of presentation of the petition.
In the petition the petitioning creditor claimed to be a creditor of the debtor in respect of a debt of $957,625.64 pursuant to a guarantee dated 29 January 1991 given by the debtors to the petitioner.
The petition asserts that the debtor committed the following acts of bankruptcy:
(a)On 18 November 1993 he signed an authority under
s 188 of the Act (s 40(1)(i)).
(b)On 3 December 1993 a meeting of his creditors was called pursuant to such authority (s 40(1)(j)).
(c)On 21 December 1993, having been required by a special resolution of a meeting of his creditors so called to present a debtor's petition within 7 days, he failed without sufficient cause to present such petition within the time specified in the resolution (s 40(1)(b)).
On 27 July 1994 the debtor filed a notice of intention to appear at the hearing of the petition and to oppose the same on the ground that the petitioning creditor is not a creditor of the debtor or alternatively, the debtor has a counterclaim, set-off or cross-demand equal to or exceeding the balance of the debt owed by the debtor to the petitioning creditor.
Upon the hearing of the petition the debtor did not pursue the alternative ground of objection and did not call any evidence. Nor did his counsel seek to cross-examine the deponents of the several affidavits relied upon in support of the petition.
In the circumstances it is unnecessary to canvass the rather complex series of loans, mortgages and guarantees entered into by the debtor and several companies with which he was at the relevant time associated. It is sufficient to say that the guarantee upon which the petitioning creditor relied was executed by the debtor on 29 January 1991. It is what is commonly called an "all moneys" guarantee in respect of the liability to the petitioning creditor of a company then known as Cooley-Jones & Co Pty Ltd which later changed its name to Flo-Bin (Australia) Pty Ltd. Under the guarantee the debtor guaranteed to the petitioning creditor the payment when demanded in writing from the debtor of the moneys secured by the guarantee.
The only live question on the hearing of the petition was whether the petitioning creditor had proved that a demand had been made under the guarantee so as to render the debtor liable to pay the petitioning creditor the moneys thereby secured.
The evidence relating to the demand was contained in a single paragraph of the affidavit of Edward John Cumper (Cumper)
sworn on 11 January 1995 and a copy document exhibited thereto.
In his affidavit Cumper deposed to being a Senior Manager, Recoveries in the full time employ of the petitioning creditor and as such to have access to the books and records of the petitioning creditor. After setting out in considerable detail particulars of the various security documents executed in favour of the petitioning creditor by the debtor and his companies (including the guarantee referred to above which he described as the Cooley guarantee) Cumper said (at paragraph 20):
My solicitors, Minter Ellison, advise me and I verily believe that they served a demand dated 22 September 1993 on Mr Cooley under the Cooley Guarantee on or about 22 September 1993. Now produced and shown to me and marked with the letters "EJC-10" is a copy of the demand.
The following is a copy of the document marked EJC-10:
(03) 617 4517
NOTICE OF DEMAND
22 September 1993
Terrence Lambert Cooley
378 Main Road
LOWER PLENTY
Dear Sir,
Westpac Banking Corporation
Guarantee and Indemnity dated 29 January 1991 ('Guarantee')
Flo-Bin (Australia) Pty Ltd formerly known as
Cooley-Jones and Co Pty ltd ('Borrower')
We act for Westpac Banking Corporation ('Bank').
Default has been made by the Borrower under the facilities granted to the Borrower by the Bank and the Bank hereby demands payment by you of the Moneys Hereby Secured as defined in the Guarantee dated 29 January 1991 given by you to secure the obligations of the Borrower to the Bank.
Immediate payment of the Moneys Hereby Secured should be made to the Bank at 591 Grimshaw Street, Bundoora.
This demand is made without prejudice to the Bank's right to claim any further money for which you are liable under the Guarantee and the mortgage.
Yours faithfully
MINTER ELLISON MORRIS FLETCHER
(This document is hereafter referred to as the notice of demand).
In relation to the making of demand, the guarantee provides (at clause 19):
THAT any notice given to or any demand to be made upon the Guarantor or the Debtor by or on behalf of the Bank hereunder shall be deemed to be duly given or made if it be in writing and be signed by any Manager or by any other person authorised by the Bank and if it be left at or sent through the post in a prepaid envelope or wrapper addressed to the Guarantor or the Debtor as the case may be at the usual place of abode or business or the registered office of the Guarantor or the Debtor as the case may be last known as such to the person signing such notice or demand or be delivered personally to the Guarantor or the Debtor as the case may be or be advertised in the Government Gazette of the State country or place in which this instrument is executed by the party to whom such notice is given or upon whom such demand is made and any such mode of service shall in all respects be valid and effectual notwithstanding that at the date of such service the Guarantor or the Debtor as the case may be mentally ill or mentally defective dead bankrupt or absent from the said State country or place and notwithstanding any other matter or event whatsoever and any such notice or demand if sent through the post as aforesaid shall be deemed to have been received by the Guarantor or the Debtor as the case may be at the time when the envelope or wrapper containing such notice or demand would in the ordinary course of post have reached the address to which it was posted and notwithstanding that it may never do so or if advertised upon the date of publication of the said Gazette.
Counsel for the debtors raised several issues concerning the notice of demand. First, the document said to be a copy of the notice does not purport to bear the signature of any person. Second, there is no evidence that the person who gave the notice was authorised by the petitioning creditor. Third, there is no evidence as to the manner of service of the
notice. Fourth, the testimony of Cumper in relation to the giving of notice was pure hearsay.
But for the matters to which reference will shortly be made, I would have no hesitation in concluding that the petitioning creditor has failed to adequately prove service of a notice of demand so as to render the debtor liable under the guarantee.
Section 52(1) of the Act provides:
52.(1) At the hearing of a creditor's petition, the Court shall require proof of:
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b)service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
In the recent decision of the Full Court of the Federal Court in Daly v Watson and Another 128 ALR 309 the Court had occasion to consider in a different context a somewhat similar question as the one presently under consideration. In that case the facts deposed to by the petitioner's solicitor in an affidavit purporting to verify a bankruptcy petition were said to be true within the deponent's own knowledge but it was conceded on the hearing of the petition that the deponent's only knowledge of the matter was hearsay. However, at first instance before Hill J further evidence was adduced which established that the facts sworn to were true and correct. On the basis of that evidence Hill J made a sequestration
order. An appeal to the Full Court (Davies, Beaumont and Gummow JJ) against Hill J's decision was dismissed.
In a joint judgment Beaumont and Gummow JJ said (at pp 365-6):
... In exercising that jurisdiction, his Honour was bound by the provisions of s 52(1) of the Act to require proof of the matters there specified. Although s 52(1)(a) contemplates the possibility that the court may accept the affidavit verifying the petition as sufficient proof of the matters stated in the petition, this is not to say that this evidence cannot be supplemented for the purposes of the final hearing. Indeed, it is well settled that, at the hearing, a petitioning creditor may supplement the formal affidavit material; see Parsons v Bunge (1941) 64 CLR 421; Re Chu; Ex parte RSL Permanent Building Society Ltd(1976) 15 ALR 173 per Riley J at 176-7.
It is true that at a final hearing, a different question could arise as to the admissibility of any of this material, whether original or supplementary. It is clear that, in this connection, the usual rules of evidence apply, as Gibbs J pointed out in Re Williams (1968) 13 FLR 10 (at 22-3) as follows:
... although the evidence in support of a sequestration order may be given by affidavit, that does not mean that the ordinary rules of admissibility are relaxed or that affidavits containing hearsay statements may be used. The petition must be strictly proved, by admissible evidence, and the affidavits in support of the petition must be the affidavits of persons who can swear to the statements contained therein of their own knowledge ... except that where there is a large business or company proof of non-payment of the debt may be given inferentially as the result of the general evidence of a person who has inquired and bases his negative evidence on the regular course of recording payments and whatever other routine information is relevant ... In the present case the affidavits were founded on hearsay, although some of them were expressed in a form that did not reveal this fact. The evidence on which the sequestration order was founded was inadmissible.
It is hardly necessary to add that, even if some evidence is technically inadmissible, it does not follow that a sequestration order ought not to be made upon other evidence. In Williams, Gibbs J went on to say (at 25):
While I agree that it is right for this court to insist upon a strict adherence to the rules of evidence in the conduct of bankruptcy proceedings, it does not follow that because hearsay evidence has been received it can necessarily be said that there has been a miscarriage of justice, and if the direct evidence that has been given in relation to the issues shows that what was stated on hearsay was true, justice has not miscarried. In the present case Williams has had an opportunity to present all the evidence that he wished to present on the issues whether the debt was owed and the act of bankruptcy committed. On the evidence which he has seen fit to put before me, I have, as I have said, found that the findings made by Clyne J were correct.
In the present case, the affidavit verifying was expressed in a form that did not reveal that it was founded on hearsay. The deponent was not called to give oral evidence in chief, or cross-examined.
Although the respondents conceded that, if called, the deponent would have acknowledged that the source of his knowledge was hearsay, they were able to rely on other evidence, which was accepted by his Honour, to prove the matters which s 52 required to be established. It is now acknowledged by the appellant that the primary judge's findings on the supplementary evidence is not challenged. It must follow, in my opinion, that the question whether the evidence in the affidavit verifying the petition was, in truth, in admissible form, is in the present circumstances, immaterial. It is clear that there was other evidence on the point and that this evidence, which was not seriously disputed, established the requisite facts.
In my opinion similar considerations apply in this case. The hearsay evidence of Cumper referred to above is not probative of the fact of a demand having been made pursuant to the guarantee, but the petitioning creditor is not limited to reliance on that hearsay. Properly admissible evidence adduced at the hearing may be relied on to support a finding that demand was duly made.
I turn now to consider whether there is any evidence which would support a finding or an inference that written notice was given under the guarantee to render the debtor liable to pay the amount thereby secured.
Cumper had personal knowledge of the meeting of creditors called pursuant to the s 188 authority signed by the debtor. He attended the meeting as proxy for the petitioning creditor and took an active part in the proceedings. The minutes of the meeting are in evidence. Indeed, it was as a result of Cumper's attitude to the debtor's proposal that it was not accepted, and it was he who moved the motion (which was passed as a special resolution) that required the debtor to present a debtor's petition within 7 days. In his affidavit sworn 11 January 1995, Cumper has identified and exhibited a copy of
the debtor's statement of affairs prepared for the purpose of the meeting of creditors and verified by the debtor by affidavit sworn 18 November 1993.
The debtor's affidavit verifying his statement of affairs, which is in the standard form, states:
I Terrence Lambert Cooley of 378 Main Road, Lower Plenty, 3093, (unemployed), make oath and say that the Statement of Affairs annexed to this Affidavit and consisting of sheets numbered I. to VII. (inclusive) contains, to the best of my knowledge and belief, a true and complete statement of my affairs as at the 18th day of November 1993.
Included in the annexures to the affidavit is a list of 15 unsecured creditors representing a total liability of $1,665,692. With 2 exceptions the nature of the debt is described as "personal guarantee". The exceptions are a debt of $12,000 to the Australian Taxation Office for "company group tax", and a debt of $20,000 to a named individual for "loan". The petitioning creditor is included in the list in respect of a debt of $950,000 for "personal guarantee". It is to be noted that the petitioning creditor's address is shown as "C/- Minter Ellison Morris Fletcher, 40 Market Street Melbourne 3000".
The evidence adduced on behalf of the petitioning creditor established that at the time the meeting of creditors was called the amount outstanding on the various accounts guaranteed by the debtor was of the order of $950,000.
The final sheet annexed to the debtor's affidavit is as follows:
FORM 11 - PART VII
GENERAL
I am not an undischarged bankrupt or insolvent under a Commonwealth Act or under a State Act and I have never previously become a bankrupt.
I have not previously compounded with my creditors, or made any assignment or arrangement for the benefit of my creditors.
I have not, during the past five years, carried on any business on my own account or in partnership.
Particulars of my contingent liabilities and any other liabilities not specified in a previous Part of this Statement are as follows:
___________________________________________________________________
Name of Nature of Est. Real Est. to
Creditor Liab. Gross Value Rank for
_____________________________________________________________
Barclays Personal 30,065 30,065
Australia Guarantees for
Finance Ltd 2 motor vehicles
PO Box 12102 contract
MELBOURNE 3001 2772355 & 2103442
Particulars of my contingent assets not included in a previous Part of this Statement are as follows:
Nil
DATED this 18th day of November 1993
(Sgd) T.L. Cooley
(Signature of Debtor)
From the debtor's statement of affairs dated 18 November 1993 and the other evidence adduced by the petitioning creditor I am able to draw the following inferences:
a)As at 18 November 1993 the debtor admitted that he was under a liability to the petitioning creditor pursuant to a personal guarantee in the sum of $950,000;
b)The debtor had entered into numerous personal guarantees and was aware of the difference between a debt due to an unsecured creditor pursuant to a personal guarantee and a contingent liability pursuant to a personal guarantee.
c)The admitted liability to the petitioning creditor arose as a result of demand being made pursuant to the guarantee.
Apart from the mere denial of liability asserted in his notice of intention to appear the debtor has put no material before the Court. He did not adduce evidence to support his denial of liability nor did he seek either by evidence or cross-examination to contest any of the evidence adduced by the petitioning creditor. In these circumstances I can more readily infer from the contents of the debtor's statement of affairs and the other evidence adduced that prior to 18 November 1993 a demand was made by or on behalf of the petitioning creditor pursuant to the guarantee, and that as a result of that demand the debtor became liable to pay to the petitioning creditor the moneys thereby secured.
I am satisfied from the evidence adduced on behalf of the petitioning creditor that -
a)the debtor committed the acts of bankruptcy referred to in the petition;
b)the petition was duly served on 26 March 1994;
c)that at the date of the petition the petitioning creditor was a creditor of the debtor pursuant to a guarantee dated 29 January 1991 given by the debtor to a petitioner;
d)the debt on which the petitioning creditor relies is still owing. (The amount of the debt at 24 April 1995 had been reduced to $256,946.83 as a result of the petitioning creditor having realised various securities it held from the debtor's companies which resulted in the reduction of the amount of the liability guaranteed by the debtor).
The debtor has not asserted that he is able to pay his debts nor that there is any other reason why a sequestration order ought not to be made.
Accordingly, a sequestration order will be made against the estate of the debtor. The earliest act of bankruptcy which occurred within 6 months before the presentation of the petition was committed on 18 November 1993.
Paul Anthony Pattison is appointed as trustee of the debtor's estate.
The petitioning creditor's costs of the petition including any reserved costs are to be paid in accordance with the Act.
I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney
Associate:
Dated:
Heard: 24 April 1995
Place: Melbourne
Judgment: 3 May 1995
Appearances:
Mr N. Mukhtar (instructed by Minter Ellison) appeared for the
petitioning creditor.
Ms J. Davies (instructed by Richard A. Licardy & Co) appeared for the debtor.
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