Coshott v Prentice
[2015] FCCA 241
•29 May 2015
FEDERAL CIRCUIT COURT OF AUSTRALIA
| COSHOTT & ANOR v PRENTICE | [2015] FCCA 241 |
| Catchwords: BANKRUPTCY – Determination of the status of creditors – consideration of debts purportedly assigned to the applicants – trustee seeking the Court’s direction as to how to treat the claimed debts. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.30, 64, 64ZB, 82, 134 Corporations Act 2001 (Cth), ss.244, 286, 601AD |
| Bechrose Pty Ltd v Jefferson (1999) 94 FCR 494; [1999] FCA 1153 Talacko v Talacko (2010) 183 FCR 311; [2010] FCAFC 54 Westpac Banking Corporation v Worrell (1993) 47 FCR 478; 119 ALR 265 |
| First Applicant: | RONALD MICHAEL COSHOTT |
| Second Applicant: | FEWIN PTY LIMITED |
| Respondent: | MAXWELL WILLIAM PRENTICE |
| File Number: | SYG 2055 of 2013 |
| Judgment of: | Judge Driver |
| Hearing date: | 5 February 2015 |
| Delivered at: | Sydney |
| Delivered on: | 29 May 2015 |
REPRESENTATION
| Counsel for the Applicant: | Mr A Cheshire |
| Solicitors for the Applicant: | Martin Place Lawyers |
| Counsel for the Respondent: | Mr J T Johnson |
| Solicitors for the Respondent: | Sally Nash & Co |
ORDERS
The parties are to forward to chambers short minutes of order consistent with these reasons within 14 days.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2055 of 2013
| RONALD MICHAEL COSHOTT |
First Applicant
FEWIN PTY LIMITED
Second Applicant
And
| MAXWELL WILLIAM PRENTICE |
Respondent
REASONS FOR JUDGMENT
Introduction and background
The first applicant, Mr RM Coshott, is the brother of Robert Gilbert Coshott (the bankrupt) who was made bankrupt by a sequestration order made on 7 November 2008. The second applicant (Fewin) is a company controlled by Mr RM Coshott. The respondent (the trustee) is the present trustee of the bankrupt estate of the bankrupt, having been appointed at a meeting of creditors on 21 March 2013. That meeting had been called by the Official Trustee, following the resignation of the first trustee, Mr John Burke.
There has been a great deal of litigation over many years leading up to the bankruptcy of the bankrupt and flowing from it. In these proceedings, the applicants seek to have their status as creditors in the bankruptcy determined and confirmed and seek an order compelling the trustee to call a meeting of creditors.
There is no dispute that the trustee is the current trustee of the bankrupt, and that the trustee considers, subject to there being a reason to vary decisions made by Mr Burke, the former trustee, that he is bound by those decisions. The trustee has sought a direction from the Court concerning the applicants’ claims pursuant to s.134(4) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act).
The pleadings, evidence and submissions
These proceedings were commenced by application filed on 2 September 2013. The applicants now rely upon an amended application filed on 20 September 2013. They further rely upon their points of claim filed with the amended application. The trustee relies upon a Notice of Grounds of Opposition filed on 27 September 2013 and his defence to the points of claim filed on the same day. A jurisdictional issue raised by the trustee was overtaken by his request for directions.
The applicants rely upon three affidavits by Mr RM Coshott made on 20 September 2013, 21 October 2014 and 23 January 2015. Mr Coshott’s affidavits annexe numerous documents. Those documents generally speak for themselves and I treated as submissions assertions made by Mr Coshott as to the conclusions that should be drawn from the documents. Mr Coshott was cross-examined on his affidavits.
The trustee relies upon three affidavits made by him on 19 September 2013, 7 November 2013 and 21 January 2015. He further relies upon the affidavit of Robert John Cruikshanks made on 26 September 2013 and the affidavit of Christie Boyd made on 29 September 2014. None of those deponents were required for cross-examination.
Consistently with rulings I made in relation to the evidence of Mr Coshott, I treated as submissions assertions made in the trustee’s affidavit evidence about the conclusions that should be drawn from the available documents. His affidavit introduced further documents. Again, the documents generally speak for themselves. As I pointed out during the course of argument, this case is essentially a documents case.
I also received the following exhibits:
A1 Account Ledger;
R1 St George Bank Statement 05.05.2014 – 04.08.2014;
R1A Bundle of letters to Fewin Pty Ltd from RM Coshott;
R2 Interim Application in NSD1412/2009;
R3Letter from Director of Fewin Pty Ltd to Michael Coshott, 24.12.2014;
R4 Company extract for Voits Holdings Pty Ltd;
R5Affidavit of Service attaching Consumer, Trade and Tenancy Tribunal Notice of Order;
R6Affidavit of Service attaching Judgment/Order of District Court of NSW in matter of Stephen Barry Coshott and Liljana Coshott.
The parties made both oral and written submissions.
Consideration
The applicants’ case
Upon bankruptcy, the creditors became entitled to prove in respect of the debts owed by the bankrupt[1]. Where there is a subsequent assignment by a creditor, the assignee becomes entitled to prove in respect of the assigned debt[2]; this applies even if the assignment was only in equity, such as by virtue of an absence of notice of the assignment[3]. Although the amount for which the assignee may prove is dictated by the amount of the debt assigned, the assignee's voting entitlement is determined by the consideration given by the assignee for the assignment[4], irrespective of whether that consideration was less than, equal to, or indeed greater than the value of the original debt[5].
[1] Section 82
[2] Pitman v Pantzer(Trustee of the Bankrupt Estate of Wenkart) (2001) 115 FCR 361; [2001] FCA 1743
[3] ibid at [47]-[51]
[4] Section 64ZB(8)
[5] Bechrose Pty Ltd v Jefferson (1999) 94 FCR 494; [1999] FCA 1153 at [54]
Fewin claims that it took by assignment debts owed by the bankrupt in respect of which proofs of debt had already been admitted as follows:
Creditor Debt
Shipton Lodge Cobbitty Pty Ltd $228,639.10
Voits Holdings Pty Limited $ 61,327.60
Windows Pty Limited $ 20,772.00
Principal Strategic Options Pty Ltd $ 37,916.98
Gary Doyle $ 10,831.70
$359.487.38
Fewin claims to have assigned those debts to Mr RM Coshott for full consideration of $359,487.38.
Fewin also claims to have paid certain debts owed by the bankrupt and in respect of which proofs of debt had already been admitted as follows:
Creditor Debt
Stephen Michael Barry $303,599.25
Rui Oliviera $ 11,100.00
$314.699.25
Fewin asserts that it is thereby entitled to prove in respect of those debts. Alternatively, those debts are said to have been paid by Ljiljana Coshott, who then became entitled to prove in the bankruptcy in respect of those sums (by virtue of s.3 of the Law Reform (Miscellaneous Provisions) Act 1965 (NSW)) and assigned those debts and the entitlement to prove in the bankruptcy to Fewin for full consideration.
The applicants' voting entitlement is therefore claimed to be as follows:
Mr RM Coshott $359,487.38
Fewin $314,699.25
Total $674,186.63
The applicants contend that, where, as here, proofs have previously been submitted (and indeed accepted) in respect of the original debts prior to the assignment, the appropriate course is for an order to be made giving leave to the applicants to substitute their proofs of debts following assignment for those lodged by the original creditors[6]. Such an order is sought in prayer l(a) of the amended application.
[6] Pitman v Pantzer (supra) at [36] to [37] and [54]
Total debts
On 30 March 2011 Rares J in proceedings NSD1208/2009 noted the calculation of the bankrupt's trustee of $1,211,801.22 as to the bankrupt's unsecured creditors.
On 6 May 2013 the then trustee swore in an affidavit in proceedings NSD1412/2009 that the total of the unsecured debts (which included the debts, prior to their assignment, now claimed by the applicants) was $1,490,974.00.
The trustee’s report to creditors, dated 28 November 2014, discloses the following unsecured creditors, which excluded the debts claimed by the applicants:
Disclosed Creditor Debt
Woollahra Council $ 91,000.00
SP4889 $240,000.00
Sydney Professional Plumbing $ 5,500.00
Michael Lenin $ 61,000.00
Milica Kulevska $ 12,000.00
NSW Government $ 5,000.00
$214.500.00
Undisclosed Creditor Debt
Commonwealth Bank of Australia $316,557.84
Paul Donnan $ 30,206.10
PGA Rendering Pty Ltd $ 12,972.55
Law Society of NSW $ 24,866.38
The Owners Strata Plan 48892 $ 80,691.84
Australian Taxation Office $201,207.00
$666.501.71
It is not clear what the position is in respect of all of these alleged debts nor as to the trustee’s attitude in that regard; there may be some overlap between at least some of the disclosed and undisclosed debts (eg The Owners of Strata Plan 48892) and a dispute in respect of at least some (eg the Australian Taxation Office).
The maximum of those other debts (disclosed and undisclosed), however, is $881,001.71, which together with the applicants' claimed debts of $674,186.63 yield a total of $1,555,188.34. The applicants' debts (and voting rights) would on that basis exceed 43% of the potential total.
Based upon the various figures put forward by the bankrupt's trustee, the applicants' claimed debts (and voting rights) would then represent between about 43% and 56% of the total of the unsecured debts.
Remedies
The applicants have requested the trustee on several occasions to call a meeting of creditors. The then trustee refused to do so on 24 May 2013. Further requests were made in 2014 and 2015.
The applicants submit that once, as here, a valid request has been made pursuant to s.64(1)(b), the trustee was (and remains) obliged to call a meeting and he has no discretion in that regard[7].
[7] see for instance Australian Litigation Fund Pty Ltd v Burton [2002] FCA 567 at [9]-[11], Dunwoody v Jefferson [2000] FCA 456 at [16]-[17] and Liprini v Pascoe (2012) 292 ALR 778; [2012] FCA 886 at [17]
Although the Court's power to order the trustee to comply with his statutory duty is discretionary, that power ought to be exercised unless the calling of the meeting would be improper or against public interest[8], which is not the case here. An order ought therefore to be made for the trustee to convene a meeting of creditors.
[8] see Dunwoody v Jefferson at [18] and Liprini v Pascoe at [17]-[24]
The Court has the power to determine such issues under s.30(1), which is a broad facultative provision[9]. That power would clearly extend to the status of the applicants as creditors and their voting rights[10].
[9] Talacko v Talacko (2010) 183 FCR 311; [2010] FCAFC 54 at [18] to [19], Vale v Sutherland (2009) 237 CLR 638; [2009] HCA 26 at [19] and Hingston v Westpac Banking Corporation (2012) 200 FCR 493; [2012] FCAFC 41 at [125]
[10] Meriton Apartments Pty Ltd v Industrial Court ofNSW (2008) 171 FCR 380; [2008] FCAFC 172 at [97]-[103], citing Forshaw v Thompson (1992) 35 FCR 329; 106 ALR 633 and Westpac Banking Corporation v Worrell (1993) 47 FCR 478; 119 ALR 265
Whatever the position in respect of the trustee’s refusal to call a meeting in May 2013, the disputed status of the applicants as creditors and their voting rights are matters that need to be resolved.
The trustee’s case
The trustee submits that on the materials that have been made available by the applicants, they have not satisfied the trustee (and by implication cannot satisfy the Court) to the extent necessary under the Bankruptcy Act that they are entitled to act in the capacity as a “creditor” in respect of a proven and currently admitted indebtedness due by the bankrupt at the date of his bankruptcy or the value paid by one or other of them for the purposes of any such assignment[11].
[11] Pitman v Panizer (supra) at [10], [19]-[37] and [47]-[54] and the authorities referred to therein
There are in relation to each of the applicants a number of substantive issues that need to be determined, namely:
a)the extent to which there has been a valid and effectual assignment of an admitted proof of debt in respect of the bankrupt to Fewin and/or Mr RM Coshott;
b)the extent to which there has been a valid and effectual assignment of an admitted proof of debt in respect of the bankrupt from Fewin to Mr RM Coshott;
c)in respect of any assignment of an admitted proof of debt the value actually paid by the assignee for the assignment;
d)whether Garry Doyle of Little Bay Plumbing was an undischarged bankrupt, entitled to give an assignment of the debt admitted in respect of the bankrupt;
e)whether B&W Windows Pty Ltd, subsequently known as Voits Holdings Pty Ltd, by its Director was at the time of the purported assignment to Fewin able to assign the admitted proof of debt in respect of the bankrupt;
f)whether any amount paid by Ljiljana Coshott for the purposes of procuring satisfaction of a judgement debt claimed against her by Mr Rui Oliveira could be treated as a valid and effectual consideration for any assignment by Mr Oliveira to Fewin;
g)whether and to what extent payments that were made to creditors whose proofs of debt had been admitted in respect of the bankrupt were made by Fewin or some other party;
h)the extent to which and nature of any dealings between Ljiljana Coshott and or any member of her family and Fewin in respect of utilisation of loan proceeds intended to be made available to her;
i)the extent to which and nature of any dealings between Mr RM Coshott and Fewin giving rise to any loan account said to exist between Fewin and Mr RM Coshott and the capacity in which Fewin entered into such transactions;
j)the effect of the withdrawal of a proof of debt previously admitted by Mr Stephen Michael Barry in respect of the bankrupt;
k)the power of the Court to make a declaration as to the value of debts in respect of the bankrupt estate of the bankrupt in circumstances where the administration of the estate has not been finalised; and
l)the power of the Court to order the convening of a meeting of creditors of the bankrupt.
together with ancillary possible related issues.
In all respects the burden of proof in relation to the relief which is sought by the applicants is a burden imposed upon the applicants.
The trustee has on several occasions drawn his concerns as to the approach of the applicants in letters forwarded to their solicitors in the proceedings:
a)18 March 2013 letter from AFSA to Fewin[12];
[12] Affidavit Mr RM Coshott 16 September 2013, Ann A page 119
b)26 April 2013 letter from trustee to Spencer Whitby & Co[13];
c)24 May 2013 letter from trustee to Spencer Whitby & Co[14];
d)29 May 2013 letter from trustee to Spencer Whitby & Co[15];
e)5 June 2013 letter from trustee to Spencer Whitby & Co[16];
f)21 June 2013 letters from trustee to Spencer Whitby & Co[17];
g)21 June 2013 letter from trustee to Spencer Whitby & Co[18];
h)28 August 2013 letter from trustee to Spencer Whitby & Co[19];
i)withdrawal of proof of debt by Mr Barry[20];
j)12 December 2014 letter from trustee to Martin Place Lawyers[21]; and
k)affidavit Maxwell William Prentice 21 January 2015.
[13] Affidavit Mr RM Coshott 16 September 2013, page 103
[14] Affidavit Mr RM Coshott 16 September 2013, Exh RMC-1 page 98 and in Affidavit Mr Robert John Cruickshanks 26 September 2013, page124
[15] Affidavit Mr Cruickshanks 26 September 2013, page 128
[16] Affidavit Mr Cruickshanks 26 September 2014, page 161
[17] Affidavit Mr RM Coshott 16 September 2013, Exh RMC-1 pages 100 and 101
[18] Affidavit Mr Cruickshanks 26 September 2013, page 164
[19] Affidavit Mr Cruickshanks 26 September 2013, page 201
[20] Affidavit Mr Cruickshanks 26 September 2013, [12]
[21] Affidavit Mr RM Coshott 23 January 2015, page 4
The trustee submits that on the materials that have been made available the applicants have not established to the extent necessary under the Bankruptcy Act that they are entitled to act in the capacity as a “creditor” in respect of a proven and currently admitted indebtedness due by the bankrupt at the date of his bankruptcy or the value paid by one or other of them for the purposes of any such assignment[22].
[22] Pitman v Pantzer (supra) at [10], [19]-[37] and [47]-[54] and the authorities referred to
A review of the trust account records maintained by Spencer Whitby & Co indicates that very few of the payments that were deposited clearly from the Coshott Superannuation Fund account were utilised in satisfaction of assignment costs. Many of the costs recorded on the general trust account record appear to relate to personal matters for Mr RM Coshott and/or Bay Pacific Management or one of several broking businesses.
Fewin maintained two accounts with St George Bank: one in its own name – in respect of which there is no record of any payment that is “akin” to one of the payments that are made after the initial payments in July 2012; the other account is on behalf of the superannuation fund and it is from this account that the payments in respect of Mr Barry and Mr Oliveira appear to have been sourced.
So far as the payment said to have been made to Mr Doyle is concerned this is reflected as some form of “set-off” arrangement which the trustee submits could not be maintained.
In respect of the payments that are said to have been made to:
a)Principal Strategic Options Pty Ltd;
b)Shipton Lodge Cobbitty Pty Ltd;
c)Voits Holdings Pty Ltd;
d)Windows Pty Ltd,
there is no record of any payment either from the general trust account of Spencer Whitby & Co or either of the bank accounts maintained by Fewin.
No documents have been produced by the applicants which would evidence or record or support payments made, as it is alleged by Fewin, or which would make up the facility that is said to exist between Fewin and Mr RM Coshott in respect of which there is some agreement for set-off which is the subject of the assignment between those parties.
The foregoing does not seek to ignore the acknowledgement of receipt said to exist in each of the documents entitled “Deed of Assignment” that are relied upon between Fewin and creditors who have an admitted proof of debt. This is the only evidence in respect of those where there is no documentary record where it could be suggested that a payment has been made by Fewin.
In summary the trustee submits that:
a)the evidence is that in respect of Mr Barry he was paid by Ljiljana Coshott and the only evidence of an assignment is that arising under paragraph 4 of a Deed of Loan entered into between Fewin and, among others, Ljiljana Coshott. This clause does not evidence or record a relevant assignment. In any event there is no evidence that Ljiljana Coshott has sought to lodge a proof of debt and has not given any evidence in these proceedings. Further, Mr Barry has following payment of his debt withdrawn his proof of debt so his debt is no longer required to be taken into account in any calculation of creditors in the bankruptcy;
b)the evidence is that in respect of Mr Oliveira the amount paid by Ljiljana Coshott was paid to satisfy a judgement debt which he had obtained as against Ljiljana Coshott independently of the judgment debt in respect of which Mr Burke, as the then trustee of the property of the bankrupt, had admitted a proof of debt. There is evidence that out of the monies in the general trust account of Spencer Whitby & Co Mr Oliveira was paid, this being for the purposes of satisfying his position in seeking to be substituted in the bankruptcy. The difficulty is that the payment was not made to Mr Oliveira in satisfaction of or for the assignment of the existing proof of debt but rather to satisfy another debt. For that reason the trustee submits that there was no valid and effectual consideration paid for the assignment even if there was an acknowledgement of receipt in the Deed of Assignment;
c)in respect of each of the other creditors there is no record to show that Fewin made any payment from a bank account which has been disclosed in the proceedings. There are no financial statements that have been provided, being financial statements required to be brought into existence for the purposes of enabling Fewin to maintain appropriate financial records in accordance with its obligations under the provisions of s.286 of the Corporations Act 2001 (Cth) (Corporations Act), that obligation being imposed upon Mr RM Coshott under the provisions of s.344 of the Corporations Act. This has been the subject of Notices to Produce. Even if there is evidence of an assignment of the proof of debt as evidenced by the Deed of Assignment for the purposes of voting there is no evidence of payment of any consideration by Fewin (otherwise than that which is contained on the face of each Deed of Assignment);
d)in respect of Mr Doyle, he was not in a position to be able to effect an assignment, even though on the face of the document itself it is said to have been a “set-off”, because of his intervening bankruptcy. He remains, of course, a creditor in the estate and any entitlement as a creditor whose proof of debt has been accepted would have to be accounted for to the Official Trustee in Bankruptcy as trustee of his estate. Fewin has no entitlement as a creditor and no entitlement to vote in respect of these amounts;
e)the position of Voits Holdings Pty Ltd (in liquidation) (deregistered) formerly, B&W Windows Pty Ltd is that Mr Burke as the then trustee of the bankrupt had accepted proofs of debt lodged separately by each of them in respect of judgements held. Prior to the Deed of Assignment being entered into with B&W Windows Pty Ltd it is apparent from an ASIC search that it was in liquidation and therefore Mr Voits was not in a position to give an effective assignment in favour of Fewin. Any entitlement in respect of what in reality is Voits Holdings Pty Ltd is an entitlement that vests in the ASIC in accordance with the requirements of s.601AD of the Corporations Act. This does not interfere with the assignment by Voits Holdings Pty Ltd (in liquidation) to Fewin signed by its liquidator in respect of the separate accepted proof of debt. There being no evidence however of payment of the consideration by Fewin (other than as reflected on the Deed of Assignment) the conclusion should be that no consideration was paid by “Fewin” but rather by some unknown third-party whose identity has not been disclosed.
The trustee submits that, having regard to the available documentation, there is no evidence either of assignment or valid and effectual payment of consideration which would enable Fewin as the primary party said to have acquired the proven debts of creditors to claim to be a creditor and, most importantly, to vote at any meeting of creditors for any amount.
The trustee’s position on the payments for the assignments to Fewin is set out in tabular form at annexure A to these reasons.
Trustee’s position on the bankrupt’s creditors
The trustee’s position on the asserted assignments is represented in tabular form as follows.
| Item No | Creditor Name | Admitted value | Purchase value | Holder by Ass’t | Creditor entitled | Paid By | Voting Rights |
| 1 | Stephen Michael Barry | $303,599.25[23] (now Nil) | Nil | Nil | Nil | Nil | Proof of Debt withdrawn |
| 2 | Rui Oliveira | Nil[24] | Nil | Nil | Nil | Nil | |
| 3 | Shipton Lodge Cobbity | $228,639.10 | $214,831.76[25] (not proven) | Fewin | Nil | Nil | Nil |
| 4. | Garry Doyle T\as Double Bay Plumbing | Nil | Nil | Nil | Nil | Nil | Nil |
| 5 | Principal Strategic Options | $37,916.98 | $25,000.00 | Fewin | Ronald Michael Coshott | Fewin | Nil |
| 6 | Voits Holdings[26] | $61,327.60 | $12,265 | Fewin | Ronald Michael Coshott | Fewin | Nil |
| 7 | Windows[27] | $20,772.00 | Nil | Nil | Nil | Nil | Nil |
| 8 | Garry Doyle T/as Little Bay Plumbing | $10,831.70[28] | Nil | Nil | Nil | Nil | Nil |
[23]The admitted Proofs of Debt was withdrawn by Mr Barry on 18 June 2013 and there has been no subsequent debt the subject of a claim.
The admitted proofs of debt was withdrawn by Mr Barry on 18 June 2013 and there has been no subsequent debt the subject of a claim
[24]This debt was paid by Ljiljana Coshott relating to her judgment. This was not a joint judgment. This is a direct claim against the estate of the bankrupt. The amount of the debt paid by Liljana Coshott was as a consequence of a separate determination against her in the Consumer Trade and Tenancy Tribunal post date of bankruptcy and a judgment following upon that claim.
[25]Partial assignment effected on 26 July 2012 – subsequent assignment. There is a question as to what is and was assigned and the position of the earlier partial assignment.
[26]The former name of this company was B&W Windows. The company has been wound up and deregistered
[27]This company changed its name to Voits Holdings. The Deed of Assignment dated 8 January 2013 was signed by Mr Voits after the commencement of the winding up on 23 April 2010. The company has now been deregistered and the assignment is ineffective and cannot be rectified
[28]At time of assignment relied upon Mr Doyle was undischarged bankrupt whose interest in any debt was vested in his Trustee in Bankruptcy – Official Trustee in Bankruptcy = the assignment is invalid
Trustees summary listing of creditors in the administration[29]
[29]Excluding remuneration costs charges and expenses of the administration
The trustee’s position concerning the creditors in the administration of the estate is as follows:
| Commonwealth Bank of Australia | $316,558.00 |
| Stephen Michael Barry | Withdrawn |
| Paul Michael Donnan | $30,206.00 |
| Milica Kulevska | $16,638.00 |
| Michael P Lenin | $76,822.00 |
| Little Bay Plumbing | $10,832.00 |
| Rui Oliviera | $11,100.00 |
| PGA Rendering Pty Ltd | $12,973.00 |
| Stephen Michael Barry & Martin Pearce Board t/as CKB Partners | $2,145.00 |
| Sydney Professional Plumbing Services Pty Ltd | $5,361.00 |
| The Law Society of New South Wales | $24,866.00 |
| The Owners Strata Plan No. 48892 | $80,692.00 |
| Woollahra Municipal Council | $268,189.00 |
| B&W Windows Pty Ltd (In Liquidation) | $20,772.00 |
| Australian Taxation Office for the year ended 2008 | $201,207.60 |
| Shipton Lodge Cobbity Pty Ltd | $228,639.00 |
| Principal Strategic Options Pty Ltd | $37,917.00 |
| Voits Holdings Pty Ltd | $61,328.00 |
| Total unsecured claims | $1,406,245.60 |
| Peter James Ryner – this Proof of Debt is yet to be determined | $75,000.00 |
| Total | $1,481,245.60 |
Resolution
The controversy between the parties centres upon a number of debts (in respect of which proofs of debt have generally been lodged and accepted by Mr Burke) in relation to the claims of the original creditors. Fewin purported to take assignments of those debts from those creditors and to have given consideration (which was generally less than the full value of the debts) for the assignments. Mr RM Coshott claims to have then taken assignments of the debts from Fewin and to have given consideration for the full value of the debts thus assigned. Mr Prentice disputes that Mr RM Coshott is a creditor at all and in any event disputes that he is a creditor for the amount claimed. It appears to be not in serious doubt that, if Mr RM Coshott is not a creditor, then Fewin is a creditor for some amount.
I have a general difficulty with the asserted assignments of debt from Fewin to Mr RM Coshott. That is because there is no reliable evidence of any consideration for those assignments. The evidence advanced by the applicants consists of the minutes of a meeting of Fewin held on 23 August 2013[30] where it was resolved that $359,487.08 payable by Mr RM Coshott under the deed of assignment of debts from Fewin to Mr RM Coshott be paid by way of repayment by Fewin of moneys allegedly owed by Fewin to Mr RM Coshott and that the company’s accounting records be adjusted to reflect this. The minutes are signed by Mr RM Coshott. There is, however, no other evidence of the asserted debt owed by Fewin to Mr RM Coshott. He was called upon to produce the books and records of Fewin for the purposes of these proceedings but nothing material was produced. I infer that such records of the company as may exist would not have assisted him.
[30] the year of the meeting has been amended in handwriting
Further, Mr RM Coshott proved to be a reluctant, and at times evasive witness under cross-examination in relation to the financial affairs of himself and Fewin. His credibility also suffered in dealing with questions from counsel for the trustee about his motivation in his dealings with Mr Prentice, including in respect of numerous legal proceedings instituted by him and Fewin. In my view, the purported assignment of debts from Fewin to Mr RM Coshott was simply an artificial device intended to permit him to either gain control of the administration of the bankrupt estate or at least to exert a substantial influence upon it. That would not matter if there had been valid assignments to him by Fewin for good consideration. However, the evidence of any real consideration is lacking which reflects the artificiality of the arrangement. The arrangement reflected in the Fewin company minutes is in my opinion a sham. I have concluded that none of the debts passed by way of assignment from Fewin to Mr RM Coshott.
There remains the question of what debts were assigned from the original creditors to Fewin and what is the value of those assignments?
There are five asserted assignments of debt to Fewin in issue and two payments of debt by Fewin otherwise said to give rise to an entitlement to prove in the bankruptcy. The applicants accept that Fewin paid less than 100 cents in the dollar for the assignments. They also concede, based upon s.64ZB(8) of the Bankruptcy Act that, if the assignments to Fewin were effective, while it could prove for the full debt assigned, it could only vote to the value of the consideration it gave for the assignments.
Further, in relation to the payments of debt by Fewin, the applicants conceded in final submissions that funds were advanced by Fewin to Mr Barry to satisfy his claim against Liljana Coshott. However, the costs liability in respect of which those funds were paid was a joint and several one as between Liljana Coshott and the bankrupt. It follows, in my opinion, that no more than half of the amount paid to Mr Barry could have been assigned to Fewin by Liljana Coshott.
Likewise, the money advanced by Fewin to pay the debt owed to Mr Oliviera was owed jointly and severally by the bankrupt and Liljana Coshott and she could only claim in the bankruptcy for half of the amount of the debt. The trustee has contended that the debt paid by Fewin to Mr Oliviera was a different debt from that claimed by the applicants, and was a debt owed by Liljana Coshott alone. I find the evidence on that equivocal. There appears to be some confusion over judgment dates but I proceed on the basis that Mr Oliviera was paid in respect of his claim against both the bankrupt and Liljana Coshott. Any further claim Mr Oliviera has against Liljana Coshott can be pursued against her by him.
I am prepared to accept that Liljana Coshott assigned her entitlement to prove in the bankruptcy to Fewin in respect of the two debts to Mr Barry and Mr Oliviera. It is not, in my view, material that Mr Barry withdrew his proof of debt following payment to him of the amount he claimed. That was simply a consequence of the payment made to him.
I conclude that the trustee should accept proofs of debt from Fewin in respect of 50% of the amounts paid to Mr Barry and to Mr Oliviera.
In relation to the debt owed to Mr Doyle, I accept the trustee’s submission that he lacked the capacity to give an assignment to Fewin as he was already a bankrupt. To the extent that Fewin may have a claim against Mr Doyle, it can prove in his bankruptcy.
The position in relation to the debts claimed by Voits Holdings and B&W Windows is complicated although the evidence produced at trial provided some clarification. The ASIC records show that B&W Windows was a previous name of Voits Holdings. Voits Holdings went into liquidation. It has since been deregistered. The liquidator of Voits Holdings signed the assignment to Fewin and I accept that the assignment was effective.
It is not entirely clear whether a separate debt was owed to B&W Windows. The assignment document was signed by a director, Mr Adrian Voits. The applicants submit that B&W Windows was in fact a different company to Voits Holdings and there is no evidence that it was ever in liquidation. Counsel for the applicant in closing submissions put to me that different company numbers were used but I have been unable to verify that from the ASIC records. The only evidence to support that submission is the deeds of assignments themselves. The Voits deed identifies the company by its company number which is typewritten and corresponds with the ASIC record. The B&W Windows deed identifies the company by a different company number which is handwritten and does not correspond with the ASIC record. Another handwritten amendment to the deed is verified by the parties to the deed signing it. The handwritten company number is unverified and it is impossible to tell whether it was an amendment and, if so, when the amendment was made. I prefer the ASIC records to the evidence of the deeds and I find that only one legal entity was involved.
The proofs of debt by the company, under its different names, were signed by two different legal firms. The two claims were admitted by Mr Burke. To the extent that he properly admitted the proof of B&W Windows, following the deregistration of the company by operation of s.601AD of the Corporations Act, that claim now vests in ASIC. I find that Mr Voits had no power to give an assignment as the company was then in liquidation. I find that there was no effective assignment of any debt from B&W Windows to Fewin.
As to the remaining debts, I accept that there were effective assignments to Fewin by Shipton Lodge Cobbitty Pty Ltd and Principal Strategic Options Pty Ltd. Much was made at the trial by the trustee as to the source of funds used by Fewin to acquire those debts. In my view, for present purposes, nothing turns on that. The two creditors were willing to give assignments to Fewin for consideration which was less than the value of the debt. In the case of Shipton Lodge Cobbitty Pty Ltd it appears that the consideration was $214,831.76 and in the case of Principal Strategic Options Pty Ltd the consideration was $25,000. I have no reason to believe that these were sham transactions. Fewin is entitled to prove in the bankruptcy for the debts acquired and to vote for the consideration given.
Conclusion
Fewin has established to my satisfaction that it has acquired certain debts from creditors in the bankrupt estate of the bankrupt and that it is entitled to prove in the bankruptcy in respect of those debts. Its capacity to prove, and its voting rights in the administration of the bankrupt estate, are readily ascertainable from these reasons. Given that the outcome is significantly different from that sought to be established by the application, it is inappropriate to grant the relief sought in the application. To the extent that declarations remain appropriate, in the context of these reasons, the parties should agree as to the terms of these declarations. The time is fast approaching when the trustee will need to convene a meeting of creditors in order to deal with the bankrupt estate and no order from the Court is currently required.
I will hear the parties as to any issue of costs.
I certify that the preceding fifty-eight (58) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 29 May 2015
ANNEXURE A
Payments for assignments to Fewin
| Description |
Facts asserted by the trustee to bear on payments for assignment:
| Date & Time | Fact Text | Source(s) |
| Thu 22/02/2001 | Fewin Pty Ltd opens bank account with STG styled "Fewin Pty Ltd Pty Ltd - No 2 Trustee A/C" with business described as "superannuation" Account number 551725761 | 2055 13 Subpoena STG docs Packet 2 No 2 Acc Page 60 |
| Tue 27/03/2012 | Cheque drawn by ANZ Caringbah in favour of Fewin Pty Ltd for the amount of $700,000.00 | 2055 13 Subpoena ANZ docs packet S21 Page 7 |
| Tue 27/03/2012 | Bank cheque for $700,000.00 deposited to bank account 5517 28761 | 2055 13 Subpoena ANZ docs packet S21 Page 19 |
| Tue 27/03/2012 | Bank statement for Fewin Pty Ltd account number 551725761 records receipt of $700,000.00 | 2055 13 Subpoena STG docs Packet 2 No 2 Acc Page 42 |
| Fri 06/07/2012 | NAB issues Credit Advice in respect of amount of $430,000.00 by order of Fewin Pty Ltd in respect of "credit beneficiary account loan to Ljiljana Coshott | 2055 13 Notice to produce docs 15 October 2013 pt1 Page 3 |
| Fri 06/07/2012 | Bank statement of Fewin Pty Ltd records transfer of funds of $430,000.00 The Statement of Account has been partly redacted as to the name of the account holder and the account number | 2055 13 Notice to Produce documents 15 October 2013 pt2 Page 1 |
| Fri 06/07/2012 | Bank statement for Fewin Pty Ltd account number 551725 761 records transfer of $430,000.00 | 2055 13 Subpoena STG docs Packet 2 No 2 Acc Page 32 |
| Tue 10/07/2012 | Cheque on trust account of Spencer Whitby & Co to Stephen Michael Barry for an amount of $390,085.50 Said to be in respect of district court judgement | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 11 [Exh RMC-1 4] |
| Tue 10/07/2012 | Authority from Fewin Pty Ltd to Spencer Whitby & Co to draw trust account cheques made payable to: Stephen M Barry $390,085.50 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 53 [Exh RMC-1 46] |
| Tue 10/07/2012 | Trust account cheque drawn by Spencer Whitby & Co to Stephen Michael Barry four amount of $390,085.50 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 54 [Exh RMC-1 47] |
| Tue 10/07/2012 | Trust account cheque drawn by Spencer Whitby & Co to Stephen Michael Barry four amount of $10,154.78 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 55 [Exh RMC-1 48] |
| Tue 10/07/2012 | Trust account cheque drawn by Spencer Whitby & Co to Rui Oliveira four amount of $11,442.47 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 62 [Exh RMC-1 55] |
| Tue 10/07/2012 | Deed of Loan Agreement between Fewin Pty Ltd, as lender, Ljiljana Coshott as Ljiljana, James Coshott and Michael Coshott (the Coshotts being jointly and severally the "Borrower") and Michael Coshott and James Coshott (jointly and severally "the Guarantor") The "Repayment date" is upon the 24 hours Notice of Repayment | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 113 [Exh RMC-1 106] |
| Tue 10/07/2012 | Letter from Spencer Whitby & Co to Stephen Michael Barry enclosing cheque for $10,154.78 to satisfy Local Court judgement in Proceeding No: 2011/1691916 | 2055 13 Affidavit Robert John Cruickshanks 26 September 2013 Page 44 |
| Tue 10/07/2012 | Letter from Spencer Whitby & Co to Stephen Michael Barry with cheque for payment of $390,085.50 in satisfaction of District Court judgement obtained 7 September 2009 | 2055 13 Affidavit Robert John Cruickshanks 26 September 2013 Page 45 |
| Tue 10/07/2012 | Letter from Spencer Whitby & Co to Stephen Michael Barry enclosing cheque for $10,154.78 to satisfy Local Court judgement in Proceeding No: 2011/1691916 | 2055 13 Affidavit Robert John Cruickshanks 26 September 2013 Page 106 |
| Tue 10/07/2012 | Letter from Spencer Whitby & Co to Stephen Michael Barry with cheque for payment of $390,085.50 in satisfaction of District Court judgement obtained 7 September 2009 | 2055 13 Affidavit Robert John Cruickshanks 26 September 2013 Page 107 |
| Tue 10/07/2012 | Spencer Whitby & Co issues Trust account cheque to Stephen Michael Barry for an amount of $390,085.50 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 78 [Ann A p78] |
| Tue 10/07/2012 | Spencer Whitby & Co issues Trust account cheque to Stephen Michael Barry for an amount of $10,154.78 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 79 [Ann A p79] |
| Tue 10/07/2012 | Spencer Whitby & Co issues Trust account cheque to Rui Oliveira for an amount of $11,442.47 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 85 [Ann A p85] |
| Tue 10/07/2012 | Deed of Loan Agreement between Fewin Pty Ltd, as lender, Ljiljana Coshott as Ljiljana, James Coshott and Michael Coshott (the Coshotts being jointly and severally the "Borrower") and Michael Coshott and James Coshott (jointly and severally "the Guarantor") The "Repayment date" is upon the 24 hours Notice of Repayment | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 88 [Ann A p88] |
| Tue 10/07/2012 | General Trust Account of Spencer Whitby & Co records receipt described as "Fewin Pty Ltd P/L (Ron Coshott" in respect of loan money is $430,000.00 | 2055 13 Notice to Produce R to A1 and A2 sup production 81013 Page 1 |
| Tue 10/07/2012 | General Trust Account of Spencer Whitby & Co records cheque drawn in favour of Stephen Michael Barry for amount of $10,154.78 in respect of District Court judgement | 2055 13 Notice to Produce R to A1 and A2 sup production 81013 Page 1 |
| Tue 10/07/2012 | General Trust Account of Spencer Whitby & Co records payment in respect of 17/9/09 District Court judgement of Stephen Michael Barry in the amount of $390,085.50 | 2055 13 Notice to Produce R to A1 and A2 sup production 81013 Page 1 |
| Tue 10/07/2012 | General Trust Account of Spencer Whitby & Co records drawing of cheque for settlement monies to Rui Oliveira in the amount of $11,442.47 | 2055 13 Notice to Produce R to A1 and A2 sup production 81013 Page 1 |
| Tue 10/07/2012 | Bank statement of Fewin Pty Ltd records transfer of funds of $25,000.00 The Statement of Account has been partly redacted as to the name of the account holder and the account number | 2055 13 Notice to Produce documents 15 October 2013 pt2 Page 1 |
| Tue 10/07/2012 | Bank statement for Fewin Pty Ltd account number 551725 761 records transfer of $25,000.00 | 2055 13 Subpoena STG docs Packet 2 No 2 Acc Page 32 |
| Thu 19/07/2012 | General Trust Account of Spencer Whitby & Co records receipt from "Ron Coshott" of loan money is in the amount of $45,000.00 | 2055 13 Notice to Produce R to A1 and A2 sup production 81013 Page 1 |
| Thu 19/07/2012 | Spencer Whitby & Co Trust Account bank statement records receipt of $45,000.00 "on behalf of "Lily Coshott" | 2055 13 Notice to produce docs 15 October 2013 pt1 Page 2 |
| Thu 19/07/2012 | Bank statement of Fewin Pty Ltd account number 551725761 records payment of $45,000.00 | 2055 13 Subpoena STG docs Packet 2 No 2 Acc Page 32 |
| Tue 24/07/2012 | General Trust Account of Spencer Whitby & Co records drawing of 2 trust account cheques in favour of Slater & Gordon Trust Account in the amount of $55,000.00 and $40.21 | 2055 13 Notice to Produce R to A1 and A2 sup production 81013 Page 1 |
| Thu 26/07/2012 | Deed of Assignment between Principal Strategic Options and Fewin Pty Ltd in respect of assignment of certificates of taxation of costs in proceedings numbers NSD 954 of 2003 and NSD 7559 of 2000 as against Ljiljana Coshott for an amount of $25,000.00 The debts assigned by this Deed of Assignment are liability solely of Ljiljana Coshott | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 64 [Exh RMC-1 57] |
| Thu 26/07/2012 | Deed of Assignment entered into between Shipton Lodge Cobbity and Fewin Pty Ltd in respect of 75% of original judgement obtained on 25 May 2004 jointly against James Coshott and Robert Gilbert Coshott for $35,862.92 together with all interest accrued on such judgment after that date. This assignment is a partial assignment. Any entitlement to claim, subject to legal estate passing would be restricted to a right of contribution | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 68 [Exh RMC-1 61] |
| Thu 26/07/2012 | Deed of Assignment entered into between Shipton Lodge Cobbity and Fewin Pty Ltd in respect of 75% of original judgement obtained on 25 May 2004 jointly against James Coshott and Robert Gilbert Coshott for $35,862.92 together with all interest accrued on such judgment after that date. This assignment is a partial assignment. Any entitlement to claim, subject to legal estate passing would be restricted to a right of contribution The amount paid under Deed was $55,040.21 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 19 [Ann A p19] |
| Thu 26/07/2012 | Deed of Assignment between Principal Strategic Options and Fewin Pty Ltd in respect of assignment of certificates of taxation of costs in proceedings numbers NSD 954 of 2003 and NSD 7559 of 2000 as against Ljiljana Coshott for an amount of $25,000.00 The debts assigned by this Deed of Assignment are liability solely of Ljiljana Coshott | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 32 [Ann A p32] |
| Fri 03/08/2012 | Supplementary Deed of Loan Agreement entered into between Fewin Pty Ltd, Ljiljana Coshott, James Coshott and Michael Coshott. The copy of document attached to the affidavit has not been stamped as required by s. 211 Duties Act 1997 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 131 [Exh RMC-1 124] |
| Thu 30/08/2012 | Supplementary Deed of Loan Agreement entered into between Fewin Pty Ltd, Ljiljana Coshott, James Coshott and Michael Coshott. The copy of document attached to the affidavit has not been stamped as required by s. 211 Duties Act 1997 | 2055 13 Affidavit Robert John Cruickshanks 26 September 2013 Page 189 |
| Thu 30/08/2012 | Supplementary Deed of Loan Agreement entered into between Fewin Pty Ltd, Ljiljana Coshott, James Coshott and Michael Coshott. The copy of document attached to the affidavit has not been stamped as required by s. 211 Duties Act 1997 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 106 [Ann A p106] |
| Wed 12/09/2012 | Deed of Assignment between Garry Doyle and Fewin Pty Ltd in respect of indebtedness of $10,000.00 Garry Doyle was an undischarged bankrupt at this time and not entitled to deal with his property and give effective assignment | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 60 [Exh RMC-1 53] |
| Wed 12/09/2012 | Deed of Assignment between Garry Doyle and Fewin Pty Ltd in respect of indebtedness of $10,000.00 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 43 [Ann A p43] |
| Tue 08/01/2013 | Deed of Assignment between B&W Windows and Fewin Pty Ltd in respect of assignment of debt of $20,772.00 Having regard to the winding up of Voits Holdings , being the new name of B&W Windows this document could not have been executed with appropriate authority as it was not executed by the liquidator | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 58 [Exh RMC-1 51] |
| Tue 08/01/2013 | Deed of Assignment entered into between B&W Windows and Fewin Pty Ltd Having regard to the winding up of Voits Holdings , being the new name of B&W Windows this document could not have been executed with appropriate authority as it was not executed by the liquidator | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 69 [Ann A p69] |
| Mon 18/02/2013 | Deed of Assignment between Voits Holdings and Fewin Pty Ltd in respect of assignment of debt in the amount of $61,327.60 | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 56 [Exh RMC-1 49] |
| Mon 18/02/2013 | Deed of Assignment between Voits Holdings and Fewin Pty Ltd | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 56 [Ann A p56] |
| ??/03/2013 | Deed of Assignment between Shipton Lodge Cobbity and Fewin Pty Ltd in respect of Admitted Debt of $214,831.76 The calculation of the payment of the amounts is set out in recital D | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 70 [Exh RMC-1 63] |
| ??/03/2013 | Deed of Assignment between Shipton Lodge Cobbity and Fewin Pty Ltd in respect of Admitted Debt of $214,831.76 The calculation of the payment of the amounts is set out in recital D An amount of $51870.19 paid under this Deed | 2055 13 Affidavit Ronald Michael Coshott 16 September 2013 Page 21 [Ann A p21] |
| Thu 29/01/2015 | Notice to Produce issued to Applicants | 2055 13 Notice to Produce to Applicants (filed) 29 January 2015 Page 2 |
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