Cummins v Hotien Holdings
[2007] FMCA 282
•28 February 2007
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CUMMINS v HOTIEN HOLDINGS | [2007] FMCA 282 |
| BANKRUPTCY – Application to set aside bankruptcy notice – where creditor had signed a deed of release – whether deed prevented the issue of a second notice after first had been withdrawn. |
| Bankruptcy Act 1966 |
| Federal Magistrates Court (Bankruptcy) Rules 2006 |
| Applicant: | PAMELA CUMMINS |
| Respondent: | HOTIEN HOLDINGS PTY LIMITED |
| File Number: | SYG2337 of 2006 |
| Judgment of: | Raphael FM |
| Hearing dates: | 5 December 2006, 7 December 2006, 28 February 2007 |
| Date of Last Submission: | 28 February 2007 |
| Delivered at: | Sydney |
| Delivered on: | 28 February 2007 |
REPRESENTATION
| Counsel for the Applicant: | Mr P Newton |
| Solicitors for the Applicant: | Heidtman & Co |
| Counsel for the Respondent: | Mr P Dowdy |
| Solicitors for the Respondent: | Church & Grace |
ORDERS
Bankruptcy Notice NN2947/06 be set aside.
The respondent creditor pay the costs of the applicant debtor to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG2337 of 2006
| PAMELA CUMMINS |
Applicant
And
| HOTIEN HOLDINGS PTY LIMITED |
Respondent
REASONS FOR JUDGMENT
At the hearing on 28 February Mr P Dowdy of counsel appeared for the respondent company. He advised the court that a Notice of Ceasing to Act had been filed by his instructing solicitors. He sought leave to withdraw. I gave that leave. The applicant’s counsel, after taking instructions, requested the court to determine the matter on the basis of the evidence heard on 5 and 7 December 2006 and filed in the proceedings. Needless to say there was no request for cross examination on the applicant’s affidavits from the absent respondent.
This proceeding is an application to set aside a bankruptcy notice numbered NN2947/06 which was served upon the applicant Pamela Robin Cummins on 3 August 2006. The application was filed in this court on 23 August 2006 prior to the time for compliance. The ground of the application was explained in an affidavit of Ms Cummins, also filed on 23 August 2006, and was, shortly, that she had entered into an agreement with the creditor, a copy of which agreement was annexed to her affidavit.
On or about 20 March 1998 the applicant debtor formed a company known as Sun Zapper Pty Limited of which she was director/secretary and sole shareholder. She had invented a sun visor and sun shield device for adaptation for use in vehicles. She made a patent application in respect of the sun visor and sun shield devices. She also owned a trademark for the word Sun Zapper which she licensed either formally or informally to the company which then manufactured and sold the visors and shields and associated products using the trademark in Australia and elsewhere.
It would appear that the company was under capitalised and on 18 September 2000 Ms Cummins granted a charge in favour of a Mr Yip over the assets of the company in consideration of Mr Yip advancing certain funds to it. On 26 June 2001 it is alleged that the company gave a further fixed and floating charge to the respondent company to secure an advance. On 18 February 2003 Mr Yip appointed a Peter Hillig to be the receiver of the company. On 4 July 2003 the respondent obtained a judgment against the company and the debtor in respect of loans from Hotien to Sun Zapper which had been guaranteed by the debtor. The judgment was for the sum of $1,500,000.
On 28 July 2003 a bankruptcy notice was issued against the debtor in respect of the judgment which was served upon her on 5 August 2003. There were thereafter discussions between the debtor and those representing her and the creditor company through its director Mr Lord. These discussions are alleged by the debtor to have resulted in the deed of warranty and assignment annexed to her affidavit and also in a clearer version annexed to the affidavit of an Anthony Beavan, her accountant, sworn on 28 September 2006 and filed in these proceedings.
The deed of warranty and assignment recites that “there has been a long running dispute between the parties resulting in Hotien having obtained judgments in the Supreme Court of New South Wales against each of the debtor and the company which are unsatisfied at the date hereof.” The deed goes on to recite that Hotien holds registered securities over the assets and undertaking of the company and the appointment of the receiver Mr Hillig pursuant to the prior charge. The issue of the bankruptcy notice has been recited and then that the terms of the deed record and effect arrangements between the parties to enable the proceedings in bankruptcy to be discontinued. There is a final handwritten recital which states:
PC [the debtor] and Hotien are desirous of bringing to an end once for all any issues between them arising out of their dealings and court process and the proceedings in bankruptcy.”
Pursuant to the agreement the debtor agreed to transfer to Hotien all her right, title and interest in the whole of the issue and paid up capital of Sun Zapper for the sum of $1 and assigns to Hotien the whole of the debt due to her from Sun Zapper except the sum of $45,000 which remained a debt due and payable to her by the company.
Finally, the agreement states:
“Upon completion, stamping and registration of all documents necessary to give effect to the terms hereof Hotien warrants that it will forthwith cause all proceedings in the bankruptcy court to be terminated.”
It is the debtor's case that the document, which I have just described, was handed to Mr Lord at a meeting on or around 12 January 2004. It is fairly uncontentious that a document in this form did make its way into the custody of Hotien but there is a dispute as to whether it contained the holograph recital 8 and whether the effect of the document was to bring to an end the disputes between the parties.
There have been filed on behalf of the debtor further affidavits by herself affidavits of the accountant Mr Beavan and the debtor’s then solicitor Mr McMurran. The effect of these affidavits is to indicate that there was a meeting, which probably took place on 13 January 2004 at the offices of Mr Beavan, who was a partner in Horvath's, attended by Mr Lord at which the document in the form annexed to Mr Beavan's affidavit was handed to Mr Lord and accepted by him.
Mr Lord in an affidavit denied these occurrences. Mr Lord is suffering from a terminal illness and so on 7 December 2006 his evidence was taken at his home. The effect of Mr Lord's evidence was that he had travelled up to Sydney on 12 January from his parent's accommodation in Wollongong in order to bring an end to the receivership of Mr Hillig which he, Mr Lord, considered was draining the company of all funds. He claims that he attended meetings with persons associated with himself on that day and then travelled to his own home north of Sydney from where he sent on 13 January 2004 a fax to his partner Mr Mare. The fax reads:
“Frits
Arrived at Valley View after dodging the kangaroos. Now that we have paid out Hillig and taken the positive steps to enforce the Hotien security we can probably discontinue the bankruptcy action for the time being and see if we Pam can assist us with Tesco.
We'll talk in the morning.” [Ex 1]
Mr Lord claims that this fax is inconsistent with him having attended the meeting with Mr McMurran and Mr Beavan on the 13th. One of the reasons being that the facsimile printout is dated 13 January 2004 and timed at 11.54 am. Mr Lord says that it would be impossible for him to have attended the meeting, driven up to Valley View and sent the fax by 11.54 am. The meeting between Mr Lord and Mr Beavan which was attended by Mr McMurran is said in Mr McMurran's diary to have taken place between 9 am and 10 am.
The evidence of Mr McMurran and of Mr Beavan is corroborated by entries in their diaries. They are both professional men of high standing. If I was to prefer the evidence of Mr Lord it would mean that those diaries and all that evidence was incorrect, as would be the entries in the costing system exhibited by Mr McMurran. I would be saying this on the basis of the facsimile document itself being accurate as to the time at which the facsimile was sent and by a belief in the evidence of Mr Lord over the evidence (albeit not the subject of cross examination) of Mr McMurran and Mr Beavan. I am afraid that I am unable to be satisfied to the required standard by the evidence of Mr Lord. I know nothing about Mr Lord’s facsimile machine but it is notorious that these machines are not necessarily 100 per cent accurate in their date or timing, particularly those used at homes as opposed to those used in professional businesses where the timing mechanisms would be consistently checked. It may be that the timing mechanism was not reset for daylight saving and therefore the actual time of sending was 12.54 as opposed to 11.54. My recollection of Mr Lord's evidence is that his home is approximately two hours plus from Sydney and he could easily have made it from the meeting by that time.
I put this hypothesis only to show that there are available hypotheses which would indicate that Mr Lord is merely mistaken as to the time and date and not deliberately telling the court an untruth. It is the failure of Mr Lord to satisfy me over the clear and corroborated evidence of Mr McMurran and Mr Beavan that brings me to the conclusion on the balance of probabilities that the handing over of the document took place on 13 January at the meeting deposed to by Mr Beavan and Mr McMurran.
I am also of the view that of the agreement which was handed to Mr Lord and accepted by him was the agreement contained in the affidavits of the debtor and Mr Beavan which contains the holograph recital. But in any event the agreement without the holograph recital in its operative clause (d) does, to my mind, require the creditor to bring bankruptcy proceedings to a halt. Lest I be misunderstood bring the proceedings "to a halt" means terminating them completely and does not mean that they can be renewed some three years later as was done here.
What did occur after the original bankruptcy proceedings were withdrawn was that Mr Lord, through his company, took charge of the assets of Sun Zapper as a "controller". This was a word used by Mr Lord frequently in his testimony that was taken in December 2006. Mr Lord was well aware that what he was doing was running the company for the benefit of the chargee (Hotien) in place the former receiver who had been paid out. But he had also taken possession of Ms Cummins' shares. The transcript reveals that Mr Lord thought this was some form of hypothecation. He felt that holding those shares would better enable him to get back the loan that his company had made but, according to his own evidence, he then proceeded to do something which seems to me to be contrary to the duties and responsibilities of a controller and which would only be consistent with him having bought the company from Ms Cummins. What he did was to sell the assets and undertaking of the business to a company controlled by himself and Mr Mare. He did not seek the approval of the court to do this. It is inconsistent with him wishing to give back to Ms Cummins her shares because there would be nothing left for those shares to represent.
I make these observations because they also tend to support a suggestion that the arrangement that was made in 2004 was intended to be a permanent one so that after Hotien had utilised the assets of Sun Zapper to the best of its ability and recovered approximately one half of its debt it was not able to resurrect the bankruptcy proceedings by the issue of a new bankruptcy notice such as the one numbered NN2947/06 that claimed from Ms Cummins the sum of $740,053.10 out of a judgment debt of $1.5 million.
In all these circumstances I accept the evidence of Ms Cummins, Mr Beavan and Mr McMurran and I find that there was an agreement between the parties which would prevent Hotien from issuing the bankruptcy notice that is the subject matter of this application.
I order that bankruptcy notice NN2947/06 be set aside. I order that the respondent creditor pay the costs of the applicant debtor to be taxed if not agreed in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2006.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date:
0
0
1