Crimeguard International Security Systems Sydney Pty Ltd v Medcalf
[2011] FMCA 258
•17 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CRIMEGUARD INTERNATIONAL SECURITY SYSTEMS SYDNEY PTY LTD v MEDCALF & ORS | [2011] FMCA 258 |
| BANKRUPTCY – Contested creditor’s petition – whether the debt claimed in the bankruptcy notice supporting the creditor’s petition was overstated considered. |
| Bankruptcy Act 1966, s.41 Civil Procedure Act 2005 (NSW), s.101 |
| Applicant: | CRIMEGUARD INTERNATIONAL SECURITY SYSTEMS SYDNEY PTY LTD |
| First Respondent: | JOHN LAWRENCE MEDCALF |
| Second Respondent: | LESLIE FORSYTH STOTT |
| Third Respondent: | GEORGE PATROUNGAS |
| File Number: | SYG 137 of 2011 |
| Judgment of: | Driver FM |
| Hearing dates: | 29 March & 13 April 2011 |
| Delivered at: | Sydney |
| Delivered on: | 17 June 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr M Luitingn |
| Solicitors for the Applicant: | Truman Hoyle Lawyers |
| Counsel for the Respondents: | Mr A W Smith |
| Solicitors for the Respondents: | Paul Bard Lawyers |
ORDERS
A sequestration order is made against the estate of John Lawrence Medcalf.
A sequestration order is made against the estate of Leslie Forsyth Stott.
A sequestration order is made against the estate of George Patroungas.
The petitioning creditor’s costs, including reserved costs if any, be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that the date of the act of bankruptcy in each case is
24 January 2011.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 137 of 2011
| CRIMEGUARD INTERNATIONAL SECURITY SYSTEMS SYDNEY PTY LTD |
Applicant
And
| JOHN LAWRENCE MEDCALF |
First Respondent
| LESLIE FORSYTH STOTT |
Second Respondent
GEORGE PATROUNGAS
Third Respondent
REASONS FOR JUDGMENT
Introduction and background
By a creditor’s petition presented on 28 January 2011, Crimeguard seeks sequestration and other orders against the directors of Crimeguard International Security Systems Pty Ltd (Crimeguard International). The petition is opposed by the respondents on the basis that the bankruptcy notice supporting the petition overstated the amount in fact due by the respondents. The respondents had given notice of the asserted overstatement of the debt, pursuant to s.41(5) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”).
The background circumstances are that the applicant had been in dispute with the respondents since June 2009 over misrepresentations relating to the purchase by the applicant of a franchise concerned with a motor vehicle theft prevention business called Crimeguard. On 11 August 2009 the applicant instituted proceedings against the respondents for loss pursuant to the asserted misrepresentations, under the Trade Practices Act 1974 (Cth) (“the Trade Practices Act”). Those proceedings were resolved in accordance with a deed of settlement (the first deed) on
10 March 2010 in which the respondents agreed to pay the applicant $525,000. In consequence of the settlement, on 11 March 2010, the Federal Court made orders dismissing the Trade Practices Act proceedings with no order as to costs.The respondents failed to make a payment in accordance with the first deed and there were further proceedings in the NSW District Court. Those proceedings were settled by a second deed (the second deed). Pursuant to the second deed the parties signed a consent to judgment for the outstanding balance of the settlement sum due under the first deed as at 23 September 2010. The parties agreed that the consent to judgment would not be entered provided that an initial payment of $33,672 was made and that a further payment of $100,000 would be made on 30 September 2010 and a final payment of the same amount on 15 November 2010.
The first payment was made. The latter two payments were not. Prior to the due date for the second payment the parties agreed to a variation of the due dates for the second and final payments to 30 October 2010 and 30 November 2010 respectively with a proviso that an additional $25,000 would be paid. On 29 September 2010 the respondents paid the sum of $25,000.
The respondents defaulted in respect of the two instalments of $100,000. On 12 November 2010 the applicant’s solicitors made a demand for payment of the outstanding balance of $200,000. There were further negotiations between the parties and the applicant sought an additional payment of $12,500, which was not accepted. Later, the applicant offered to accept an additional payment of a further $25,000 which was again not accepted. On 17 December 2010 the applicant entered judgment for the amount of $194,109.93 plus interest.
On 21 December 2010 bankruptcy notices were issued by the Official Receiver based upon the judgment debt.
The evidence and submissions
The petition is supported by the affidavit of debt of Laurie Charles Fisher made on 4 March 2011 and the affidavit of search made by Rachel Szekely made on the same day. The petition is further supported by the affidavit of service by Colin Dale made on 14 February 2011, the affidavit of service by Andre Pasche made on 21 February 2011 and the affidavit of service by Graham Rose made on 24 February 2011. I also have before me the affidavit by Laurie Fisher made on 21 March 2011. The creditor’s petition is verified by the affidavit of Laurie Fisher made on 27 January 2011. The notice of grounds of opposition is supported by the affidavits by Paul Bard made on 16 March 2011 and 28 March 2011 as well as the affidavit by Leslie Stott made on 29 March 2011. Mr Stott and Mr Fisher were cross-examined on their affidavits. I have also had regard to the second deed of settlement between the parties and correspondence between the parties.
The issue between the parties is a confined one. The respondents contend that the applicant is seeking interest upon interest impermissibly and that the debt claimed in the bankruptcy notice was overstated. They assert that they bankruptcy notice should, on that basis, be set aside and that, in consequence, the creditor’s petition should be dismissed. The applicant creditor denies any overstatement and denies that it is claiming interest upon interest.
Consideration
There is no dispute between the parties as to the essential facts in this matter. The dispute centres upon the proper characterisation to be given to the sum of $25,000 paid on 29 September 2010. That payment is characterised by the respondent debtors as a payment of interest due on the principal debt for which no credit has been given in the bankruptcy notice, resulting in an overstatement of the debt. The applicant creditor contends that the amount of $25,000 paid was an additional payment to the principal and interest due pursuant to the agreement between the parties referred to at [4] above.
The judgment debt is that entered in the District Court of NSW on
17 December 2010 for the sum of $194,109.93 plus interest from the date of judgment calculated in accordance with s.101 of the Civil Procedure Act 2005 (NSW) at the daily rate of $55.84 per day. There was no order as to costs. The bankruptcy notice issued and served upon the respondents identified the principal sum of $194,109.93 plus interest accruing since the judgment of $4,969.76. This provided a total of $199,079.69. The bankruptcy notice was not complied with.
The schedule of post judgment interest states that the amount of $4,969.76 was calculated pursuant to paragraph 3 of the judgment at the rate of $55.84 per day for a period of 89 days, being the number of days, including 24 September 2010 and up to and including 21 December 2010 but excluding the date of judgment. This appears to be consistent with the certificate of judgment which states that the judgment was made on 23 September 2010, although, having regard to the second deed and the subsequent negotiations, the certificate was not obtained until
17 December 2010.Although the notice of opposition to the petition attached correspondence and an affidavit by Mr Bard contesting the accuracy of the bankruptcy notice in respect of several payments made by the respondents, there appears no real doubt that the only payment in issue is the payment of $25,000 made on 29 September 2010, between the date of judgment and the date of the bankruptcy notice. This is confirmed by the correspondence between the parties in January this year. By letter dated 19 January 2011, Mr Bard’s firm stated that the $25,000 must be taken into account on the basis that it was a payment made by the respondents in respect of the judgment referred to in the bankruptcy notice. By letter dated 14 January 2011, the applicant’s solicitors contended that the payment of $25,000 was not made for the purposes of reducing the amount due on the consent judgment but was paid to cover some of the applicant’s costs of earlier proceedings and in exchange for the applicant providing the respondents with additional time within which to pay the amount of $200,000 then due.
The written evidence, as well as the oral evidence of Mr Stott and
Mr Fisher given at the trial of this matter establishes two things. The first is that the dealings between the parties followed a cycle of discussion, compromise, agreement, non payment and further discussion. The parties exchanged the second deed of settlement on 2 September 2010 and $33,672 was paid in two instalments apparently before settlement of that deed later that month. The second deed was an agreement between the parties as to an arrangement for payment of the debt according to a time schedule, in default of which the applicant creditor was entitled to enter the consent judgment in the District Court and execute that judgment.
It soon became apparent to the respondent debtors, however, that they would not be able to meet the payment schedule required for the second and third payments of $100,000 under the second deed. The parties discussed the possibility of a collateral agreement whereby the payments would be deferred in return for a payment of $25,000. That payment was variously described as “interest” or “costs” but, regardless of what labels were attached to it, there is no doubt in my mind that the applicant creditor demanded the sum of $25,000 as the price for deferring the payment schedule under the second deed. It was not a payment of interest on the judgment obtained in the District Court because the judgment had not then been entered in accordance with the second deed and nothing was at that time due under the judgment. Money was due under the second deed and the respondent debtors knew that they could not pay it. The $25,000 sought and paid was the price of delay. It was the consideration for the collateral agreement varying the second deed.In my view, the respondent debtors got what they paid for. The parties agreed on 27 September 2010 to new dates for the payment of the amounts then remaining due pursuant to the second deed. However, no further payments were made and, following the failure of further discussions, the applicant creditor entered judgment in the District Court in accordance with its entitlement under the second deed and pursued payment of the principal due and interest in accordance with the judgment. I am satisfied that there was no overstatement of the debt in the bankruptcy notice. The $25,000 paid was not required to be credited in the bankruptcy notice because it was not paid as part of the principal debt or of interest due under the consent judgment on that debt. It was simply a sum paid in consideration of the collateral agreement.
I am satisfied that the debtors committed the act of bankruptcy alleged in the petition. I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act requires proof. I am not satisfied that the respondent debtors have advanced any reason for the Court not to make sequestration orders. The applicant creditor is entitled to the relief sought in the creditor’s petition and I will make orders in accordance with the petition.
I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 17 June 2011
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