Delic v Kazar and Slaven as Joint Trustees in the Bankrupt Estate of Delic (No 2)
[2021] FCCA 130
•5 February 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
Delic v Kazar and Slaven as Joint Trustees in the Bankrupt Estate of Delic (No 2) [2021] FCCA 130
File number(s): SYG 2492 of 2019 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 5 February 2021 Catchwords: BANKRUPTCY – Application for review by bankrupt of decision of trustees in bankruptcy to accept proof of debt – whether there is any burden on bankrupt to disturb trustees’ acceptance of proof of debt – whether the amounts claimed as debts in proof of debt are amounts that became payable by a lessee under a chattel lease which the bankrupt guaranteed – whether an amount claimed as a debt is not a debt because the clause on the basis of which it is claimed to be a debt is a penalty – whether the amounts claimed to be debts are not payable because of asserted ignorance by bankrupt that the lessee was deregistered at the time the chattel lease was made – whether the amounts claimed as debts are not payable because of asserted misunderstanding by bankrupt of the effect of the chattel lease agreement – whether the amounts claimed as debts are not payable because of asserted failure of disclosure by finance broker who is alleged to have acted as agent for the lessor – trustees’ decision to admit proof of debt reversed. Legislation: Australian Consumer Law, s 18(1)
Bankruptcy Act 1966 (Cth), ss 5, 52(1), 58(1), 82, 83, 84, 102, 104, 116, 121, 122
Competition and Consumer Act 2010 (Cth), Schedule 2
Corporations Act 2001 (Cth), ss 601AD, 601AH, 604AB
Cases cited: AMEV-UDC Finance Ltd v Austin [1986] HCA 63; (1986) 162 CLR 170
Andrews v Australia and New Zealand Banking Group Ltd [2012] HCA 30; (2012) 247 CLR 205
Carlton & United Breweries Ltd v Tooth & Co Ltd (1985) 6 IPR 319
Commissioner for Corporate Affairs v Harvey [1980] V.R. 669
Daevys v Official Trustee in Bankruptcy; In the Matter of Daevys [2011] FCA 398
Dairy Farmers Pty Ltd v Issa & Anor [2017] FCCA 1238
Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
In re Van Laun; Ex parte Chatterton [1907] 2 K.B. 23
Integral Home Loans Pty Ltd v Interstar Wholesale Finance Pty Ltd [2007] NSWSC 406
Interstar Wholesale Finance Pty Ltd v Integral Home Loans Pty Ltd [2008] NWCA 310
Lamson Store Service Co Ltd v Russell Wilkins & Sons Ltd [1906] HCA 87; (1906) 4 CLR 672
O’Dea v Allstates Leasing System (WA) Pty Ltd [1983] HCA 3; (1983) 152 CLR 359
P T Garuda Indonesia Limited v Richard John Grellman [1994] FCA 913
Paciocco v Australia and New Zealand Banking Group Ltd [2016] HCA 28; (2016) 90 ALJR 835
Payne & Ors. ex parte Levi [1986] FCA 320
Ringrow Pty Ltd v BP Australia Pty Ltd (2005) 224 CLR 656
Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332
Totev v Sfar [2008] FCAFC 35
Waters Lane Pty Limited v Sweeney [2006] NSWSC 222
Number of paragraphs: 130 Date of hearing: 25 June 2020, 25 and 26 August 2020 and 3 September 2020 Place: Sydney Solicitor for the Applicant: Mr S Moss of Panetta Lawyers, by video Counsel for the First Respondents: Mr H Somerville, by video (other than on 3 September 2020 when Mr S Calabretta appeared, by telephone) Solicitor for the First Respondents: Emerson Lewis Lawyers Counsel for the Second Respondent: Mr D Weinberger, by video Solicitor for the Second Respondent: ERA Legal ORDERS
SYG 2492 of 2019 IN THE MATTER OF DAMIR JAKOV DELIC
BETWEEN: DAMIR JAKOV DELIC
Applicant
AND: HENRY KAZAR AND MICHAEL SLAVEN AS JOINT TRUSTEES IN THE BANKRUPT ESTATE OF DAMIR JAKOV DELIC
First Respondents
FIDELITY CAPITAL (AUSTRALIA) PTY LTD (ACN 604 621 589)
Second Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
5 FEBRUARY 2021
THE COURT ORDERS THAT:
1.Pursuant to s 104(2) of the Bankruptcy Act 1966 (Cth) the decision of the first respondents made on 2 September 2019 to admit the second respondent’s proof of debt for $285,142.46 is reversed.
2.By 19 February 2021 each party file and serve written submissions on the order or orders for costs each party contends should be made.
3.By 26 February 2021 each party inform by email the associate to Judge Manousaridis whether he or it requires a hearing in relation to the issues that will be addressed in the submissions filed under order 2 or whether they instead consent to Judge Manousaridis determining those questions on the basis of the written submissions without any further hearing.
REASONS FOR JUDGMENT
INTRODUCTION
Mr Delic, a bankrupt, applies under s 104(1) of the Bankruptcy Act 1966 (Cth) (Act) for a review of a decision made by his trustees in bankruptcy (Trustees) under s 102(1) of the Act to admit in whole an amended proof of debt (POD) submitted by the second respondent (Fidelity). The POD claims Mr Delic is indebted to Fidelity in the amount of $285,142.46.[1] This is the sum of a number of amounts the POD claims Mr Delic owes Fidelity as a guarantor under a lease agreement Fidelity purportedly made with a company called Composite Installations (NSW) Pty Ltd (Composite), less two amounts Fidelity accepts ought to be credited to Mr Delic.
[1] Exhibit JC-1, pages 122-129
Before I identify the debts Fidelity claimed in the POD, and the grounds on which Mr Delic relies for submitting he is not indebted to Fidelity, it will be necessary to identify this Court’s function when exercising the jurisdiction under s 104 of the Act, and some principles relevant to the exercise of that jurisdiction. I will then set out the evidence and my findings of fact. Most of the evidence relates to events that occurred after Mr Delic became bankrupt, and is relevant because Mr Delic claims that Fidelity had agreed to accept $60,000 in settlement of the amount Fidelity claims Mr Delic owes it.
PRINCIPLES
On the making of a sequestration order under s 52(1) of the Act, s 58(1) of the Act vests the bankrupt’s property in a trustee in bankruptcy (trustee). The trustee must then collect and realise the bankrupt’s property, and apply any available proceeds towards the payment of the bankrupt’s debts and liabilities that had accrued by, or which were liable to accrue after, the date on which the bankrupt committed the act of bankruptcy on the basis of which the sequestration order was made. The Act defines the “property” the trustee is required or entitled to collect.[2] The Act also defines the debts and liabilities – which the Act identifies as “provable debts” – to which the trustee must apply the available proceeds of sale of the bankrupt’s property;[3] and it prescribes the procedure the trustee must follow to identify the bankrupt’s provable debts.
[2] See, for example, s 5 (definition of “property”); s 116 (property divisible among creditors); s 121 (transfers to defeat creditors), and s 122 (avoidance of preferences)
[3] See s 5 (definition of “debt” as including liability; definition of “provable debt”) and s 82 (identification of debts and liabilities that are “provable” in the bankrupt’s bankruptcy)
Under that procedure a person who claims to be a creditor of the bankrupt must lodge with the trustee a proof of debt;[4] and such person will not be taken to be a creditor until “that debt has been admitted”.[5] The word “admitted” is a reference to two of the outcomes of the tasks s 102(1) of the Act requires the trustee to undertake after a person has submitted a proof of debt. That subsection provides:
The trustee shall examine each proof of debt and the grounds of the debt sought to be proved and, subject to the power of the Court to extend the time, shall, not later than 14 days after the expiration of the period specified in the notice of intention to declare a dividend as the period within which creditors may lodge their proofs of debt, either:
(a)admit the proof of debt in whole;
(b)admit it in part and reject it in part;
(c)reject it in whole; or
(d)require further evidence in support of it.
[4] Section 84 of the Act
[5] Section 83 of the Act.
In Tanning Research Laboratories Inc v O’Brien,[6] Brennan and Dawson JJ spoke of the functions of a liquidator – who stands in a parallel position to that of a trustee[7] – when determining whether to admit or reject a proof of debt. Their Honours said that “when determining whether to admit or reject a proof of debt, a liquidator has been said to act in a quasi-judicial capacity . . . according to standards no less than the standards of a court or judge”.[8] Their Honours also said:[9]
The principles which determine enforceability of the liability to which a proof of debt relates are, in the main, the same as the principles which would be applied in an action brought directly against the company to enforce that liability.
[6] Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332
[7] “[T]he trustee in bankruptcy for practical purposes may be regarded as occupying a position in parallel to that of the liquidator.” – Commissioner for Corporate Affairs v Harvey [1980] V.R. 669, at page 686 (Marks J)
[8] Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332, at pages 338-339
[9] Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332, at page 339
Their Honours referred[10] to a passage from the judgment of Buckley LJ in In re Van Laun; Ex parte Chatterton, which includes the following:[11]
Whether the creditor alleges that there has resulted, and that he relies upon an account stated, or a covenant entered into by the debtor, or a judgment which he has obtained, the principle, I apprehend, is exactly the same, and is this – that the trustee is not the person who has stated the account, is not the covenantor, is not the judgment debtor, but is entitled to say, “It is my business to see that those who rank against this estate are persons who are really creditors of that estate.”
[10] Tanning Research Laboratories Inc v O’Brien (1990) 169 CLR 332, at pages 339-340
[11] In re Van Laun; Ex parte Chatterton [1907] 2 K.B. 23, at page 31
A trustee’s decision to admit or reject a proof of debt is not, however, final. Subsection 104(1) of the Act provides that a creditor or a bankrupt may apply “to the Court for review of a decision of the trustee under” s 102(1), among other provisions; and under s 104(2) the Court may “upon the application, confirm, reverse or vary the decision of the trustee”. Subsection 104(1) of the Act: [12]
empowers the Court to “review” a trustee’s decision and, in my view, that term carries with it the notion that the parties may place before the Court such material as they wish, provided of course that it is relevant and otherwise admissible. . . . The function of the Court is not to consider the correctness or otherwise of the trustee’s decision in the light of the material before him but to determine, in the light of the material before it, whether the applicant has a debt that should be admitted to proof. Of course, inconsistencies in the material provided to the trustee and that offered to the Court may properly be taken into account.
[12] Payne & Ors. ex parte Levi [1986] FCA 320, at [10]
An application for review under s 104(1) of the Act, therefore, is “by way of a rehearing”; it is a “hearing de novo”.[13] That means the Court “must determine the matter in the light of the evidence before it”.[14] In Totev v Sfar Emmet J considered the nature of a de novo hearing in the context of a rehearing of a Registrar’s decision to make a sequestration order. His Honour said:[15]
In the case of a hearing de novo, however, the judge reviewing the order begins afresh and exercises for himself or herself any discretion exercised by the registrar. The parties commence the proceeding again, subject to any rules concerning the use of evidence adduced before the registrar. The hearing de novo involves the exercise of the original jurisdiction and the petitioner, in the case of a bankruptcy petition, must start again, call witnesses and make out the petitioner’s case . . . .
[13] P T Garuda Indonesia Limited v Richard John Grellman [1994] FCA 913, at [13]
[14] P T Garuda Indonesia Limited v Richard John Grellman [1994] FCA 913, at [13]
[15] Totev v Sfar [2008] FCAFC 35, at [13]
There is the question of the burden of persuasion in applications for review under s 104(1) of the Act. Flick J considered that question in Daevys v Official Trustee in Bankruptcy; In the Matter of Daevys:[16]
[16] Daevys v Official Trustee in Bankruptcy; In the Matter of Daevys [2011] FCA 398, at [14], [21]
[14] There has been said to be an onus upon the party seeking “review” of a decision taken by the trustee. In circumstances where a creditor was seeking review of a decision to reject a proof of debt, in Re Masters; Ex parte Gerovich (Unreported, Federal Court of Australia, Toohey J, 30 July 1985) Toohey J thus concluded:
[5] ... However, the trustee’s decision to reject the proof of debt in respect of the $16,000 must be confirmed, simply because there is no basis upon which it can be reversed. The claim for $16,000 is expressed in such vague terms and is so lacking in precision that it is not possible to characterize it as a claim arising by reason of a contract, promise or breach of trust. Even if it were possible so to characterize the claim, there is no information which would enable the Court to conclude that the trustee erred in rejecting the proof of debt. Section 104 requires the Court, on application, to review a decision of a trustee but it is for the alleged creditor to satisfy the Court that a decision rejecting a proof of debt should be reversed. The applicants have failed entirely in this regard.
In respect to a separate claim, His Honour further concluded:
[9] How does the Court determine the application in the light of this contentious issue which is at the very heart of the applicants’ claim? Counsel for the applicants submitted that the Court must make a decision, however unsatisfactory and inadequate the materials made before it may be. This is no doubt true but equally it is for an applicant to persuade the Court that a trustee’s rejection of a proof of debt should be reversed. If an applicant fails to do this, the trustee’s decision must be affirmed. As it is the applicant who claims to be a creditor of the debtor, this approach seems to me to be inevitable. On ordinary principles of evidence, one who seeks the intervention of the Court to alter an existing situation, in this case the rejection of a proof of debt, carries the burden of persuading the Court that it should intervene.
[10] On the affidavits themselves, I must conclude that the applicants have failed to satisfy the onus that they bear.
. . . .
[21] There is no factual basis before the Court upon which any conclusion can be founded other than that each of the debts was properly admitted. Even in the absence of any onus upon Mr Daevys, there is no basis to “review” the decision of the Trustee so as to reach any different conclusion.
This passage might suggest that in an application for review under s 104(1) of the Act there is a burden to disturb the trustee’s decision to admit or reject a proof of debt, and that the burden rests on the person who applies for a review of the trustee’s decision. Such suggestion, however, would not be correct. Flick J did not hold that a bankrupt who applies for a review of a trustee’s decision to accept a proof of debt bears the onus of proving there is no debt; and his Honour decided the application before him on the basis there was no evidence before his Honour which could have led to any conclusion other than the debts had been properly admitted. In any event, given that, when considering proofs of debt, the trustee must determine whether persons claiming to be creditors “are persons who are really creditors of that estate”,[17] and the task of a court hearing an application for review is to hear de novo whether there is a provable debt, the burden of persuasion must rest on the person claiming to be a creditor to establish there is a provable debt. That would remain the case where the trustee has admitted a proof of debt and the bankrupt applies for a review of that decision.
[17] In re Van Laun; Ex parte Chatterton [1907] 2 K.B. 23, at page 31
The ultimate question for the Court on an application for review of a decision made by a trustee under s 102 of the Act, therefore, is whether there is in truth a debt as claimed in the proof of debt the trustee considered; and the burden of persuading the Court there is such a debt must rest on the person claiming such debt exists. That does not mean, however, that the person claiming to be a creditor will necessarily bear the burden of persuasion in relation to all issues that may be relevant to determining whether there is a debt. It may be that the bankrupt raises issues in relation to which, on the ordinary rules governing the allocation of the burden of persuasion, [18] the bankrupt will bear the burden of persuasion. That will be the case where the bankrupt relies on affirmative grounds for claiming the debt does not exist, such as fraud, performance, release, or that the debt is based on a clause which is void for being a penalty. The burden of persuasion in an application for review under s 104 of the Act, therefore, is to be allocated according to ordinary principles as if the Court were hearing a claim by the person who has been admitted, or who claims ought to have been and should be admitted, as a creditor, that the bankrupt owed the debt claimed in the proof of debt as at the date on which the bankrupt committed the relevant act of bankruptcy.
[18] See, for example Waters Lane Pty Limited v Sweeney [2006] NSWSC 222, at [30] where Rein AJ said: “It has been said that as a general rule the burden of proof lies on the person who affirms a particular thing (expressed in the maxim ei incumb it pro batio qui dicit, non que negat Digest, xxii 3, 2) per Lopes LJ in The Glendarroch [1894] P 226 at 234, and see at 231 per Lord Esher MR”.
The question for determination in the case before me, therefore, is whether Mr Delic owes the debt Fidelity claimed in the POD he owes. I begin by setting out in chronological order the evidence and my findings. Unless I say or the context suggests otherwise, my stating without qualification a fact is to be taken as a finding of the fact I state.
EVIDENCE AND FINDINGS
As at November 2017 Mr Delic had been involved in the business of providing facades to buildings. He had conducted that business through a company called Composite Industries Group Pty Ltd for more than ten years until that company went into liquidation,[19] and, later, through Composite.[20] Composite was incorporated on 1 July 2015; and Mr Delic was appointed sole director of that company on that day.[21] From this it is reasonable to infer, and I find, that Mr Delic conducted the building facade business through Composite since around 1 July 2015.
[19] 25.08.2020 T29.10
[20] 25.08.2020 T29.30
[21] Exhibit JC-1, pages 1-2
Request for $60,000 loan
On 30 November 2017 a Mr Jim Volonakis sent an email to Mr John Crawley (J Crawley) and Mr Chris Crawley (C Crawley).[22] J Crawley was and currently is the general manager of Fidelity,[23] and C Crawley, the father of J Crawley, provides consultancy services to Fidelity.[24] Fidelity was then, and continues to be, in the business of sourcing and providing predominantly secured finance facilities, including “buy and lease agreements”.[25] Fidelity provided loans in response to applications submitted by finance brokers. Mr Volonakis was a finance broker who had in the past submitted loan applications to Fidelity.[26]
[22] Exhibit JC-1, page 4
[23] Affidavit of J Crawley 30.01.2020, [1]
[24] Affidavit of C Crawley 24.07.2020, [1]
[25] Affidavit of J Crawley 30.01.2020, [3]
[26] Affidavit of J Crawley 27.07.2020, [6]-[9]
In his email of 30 November 2017 Mr Volonakis said (errors in original):
Damir’s [i.e., Mr Delic’s] solicitor just called me and they are waiting on Discharging Funder for Payout. Jack (incoming) is talking to Michael Simone, this will be sorted to day to book settlement in next couple of days
Also, if possible, Damir desperately needs the $60K to get container off wharf. Is it possible to settle Tomorrow?
I’ll send updated DEAL’s sheet little later this morning.
Mr Volonakis attached to his email two motor vehicle registration certificates.[27] One related to a truck; and the other to a “MERBNZ”, which I take to be a Mercedes Benz vehicle. The certificates identified Composite as the registered operator of the truck and the Mercedes Benz vehicle (Vehicles).
[27] Exhibit JC-1, pages 5-6
Mr Volonakis sent the email of 30 November 2017 after he had a conversation with Mr Delic. According to Mr Delic, he had a conversation with Mr Volonakis to the following effect:[28]
[28] Affidavit of D J Delic 23.09.2019, [16]
Mr Delic:Jim I need $60k for the company to buy some supplies in China. Can we do it the same as the earlier loan?
Mr Volonakis: Sure I will need same security and a guarantee.
Mr Delic:I can give you security over two cars that should be enough and I will guarantee it.
Mr Volonakis: That should be fine I will get the paperwork done.
Mr Delic:The terms will be the same, 3 years and it can be paid out in full at any time right?
Mr Volonakis: Yes just like before.
Mr Delic:What will the payments be?
Mr Volonakis: They will be $1500 per month.
Mr Delic deposes that Composite had previously borrowed $70,000 from a company called “Infac Finance”, and that Mr Volonakis had arranged that loan. Mr Delic says he believed the loan for $60,000 would be similar to the loan from “Infac Finance”.[29]
[29] Affidavit of D J Delic 23.09.2019, [13]
There is in evidence a document headed “Finance Application” which appears to be a standard form used by a business conducted by INFAC Finance Pty Ltd (Infac Finance).[30] The “Finance Application” records an application by “Composite Industries” for a loan, although the document does not record the amount of the loan. The document contains a statement of assets and liabilities. There is also in evidence a “Master Lease” made between Renfleet Pty Ltd as lessor, Composite Industries Pty Ltd as lessee, and Mr Delic as guarantor (Renfleet MLA). [31] The Renfleet MLA is in similar terms to the Master Lease Agreement between Fidelity and Composite to which I refer later in these reasons. It provided for the lease of two vehicles for 60 months at a monthly rental of $2,747.80 for the first month, and $1,867.80 for each of the remaining 59 months.
[30] Exhibit A
[31] Exhibit A
Mr Delic says that on 30 November 2017 he had another conversation with Mr Volonakis to the following effect:[32]
Mr Volonakis: I have spoken to the lender. They can move quickly and they can do you a loan tomorrow.
Mr Delic:Great, let me know when the money will be available, there is no time to put it in the Company account it must go straight to the supplier’s account because the boat is in Botany Bay and I will be charged for storage.
Mr Volonakis: It will be ready tomorrow, I will come out and see you with the paperwork and the money will then be paid once we give you the loan.
[32] Affidavit of D J Delic 04.03.2020, [22]
I find that Mr Delic had a conversation with Mr Volonakis in which he said Composite needed $60,000; and that Mr Volonakis said there would need to be a guarantee and security. I also find that after this conversation Mr Volonakis made enquiries of Fidelity about the possibility of Fidelity lending $60,000 to Composite, and that he reported that fact to Mr Delic. I do not accept, however, Mr Delic asked Mr Volonakis whether, or Mr Volonakis said words to the effect that, the loan would be for three years, or that it could be paid out in full at any time, or that the repayments would be $1,500 per month. First, on Mr Delic’s account, Mr Volonakis said that a loan of $60,000 would be paid over three years by monthly instalments of $1,500. That is inherently unlikely because the total repayments would have been $54,000, which is $6,000 less than the amount of the loan. Second, it is unlikely Mr Volonakis would have known the terms on which he could obtain a loan of $60,000 to Composite. Third, Mr Delic’s evidence is inconsistent with documents he signed, one of which referred to Composite paying 60 monthly instalments of $2,682.33.[33] The reasons for which I have not accepted Mr Delic’s evidence, and the reasons for which I do not accept Mr Delic’s evidence of conversations he says he had with M Crawley to which I refer later, also lead me to find that Mr Delic is not a witness on whose uncorroborated evidence I can rely. Of particular significance is the inherent implausibility of Mr Volonakis telling Mr Delic that there would be loan of $60,000 for three years which would be repayable by amounts that would be less than the principal advanced, and the clear inconsistency between the conversations Mr Delic says he had with M Crawley after 24 January 2018 and the contemporaneous email exchanges between Mr Delic and M Crawley.
[33] Exhibit JC-1, page 41
On receiving Mr Volonakis’ email of 30 November 2017 J Crawley says he made an “ABN search” of Composite to determine whether it was a company, made enquiries relevant to determining the approximate value of the Vehicles, and arranged for enquiries to be made for an opinion about the value of the Vehicles.[34] I do not accept J Crawley made a company search. Had he done so, he would have become aware that Composite had been deregistered on 26 November 2017, and, as I find later, he would not have committed Fidelity to the transaction Fidelity entered into purportedly with Composite and Mr Delic.
[34] Affidavit of J Crawley 30.01.2020, [9]
1 December 2017 – Mr Delic signs documents
On 1 December 2017 J Crawley sent to Mr Volonakis an email attaching a number of unexecuted documents;[35] and on that day Mr Delic signed those documents. These included the following.
[35] Affidavit of J Crawley 30.01.2020, [10]; Exhibit JC-1, page 7
Lease Vehicle Order Form
Mr Delic signed purportedly on behalf of Composite a document headed “Lease Vehicle Order Form and Tax Invoice” (Lease Vehicle Order Form).[36] I say “purportedly on behalf of Composite” because Composite had been deregistered on 26 November 2017.[37] The Lease Vehicle Order Form is the second schedule to the “Master Lease” to which I will shortly refer. It is addressed to Fidelity. It requests that Fidelity “purchase and deliver the vehicle described below which is to be leased from you under the provisions of the Master Lease Agreement between us”. The Lease Vehicle Order Form provides for the inclusion of information that identifies a vehicle, but that information was not included in the Order Form. The Lease Vehicle Order Form, however, contains the following information:
[36] Exhibit JC-1, page 41
[37] Exhibit DJD-2, page 1
Operating Lease:
Terms in Months: 60 Rental @ 1: $2,682.33 including
GST of $243.85
Followed by 59 @: $2,682.33 including
GST of $243.85
The Lease Vehicle Order Form provides that the order is subject to the terms and conditions “set out in the Master Lease Agreement” between Fidelity and Composite.
Tax invoice
Mr Delic signed a document titled “Tax Invoice” (Tax Invoice), which is as follows:[38]
[38] Exhibit JC-1, page 9
Composite Installations (NSW) Pty Ltd
[Address and ABN number]
DATE: 01/12/2017
SOLD TO:
Fidelity Capital (Australia) Pty Limited ATF the Fidelity Capital (Australia) Unit Trust [ABN and address]
EQUIPMENT DESCRIPTION
[Registration and other details of the Vehicles]
TOTAL COST PRICE: $61,000.00 (INC GST OF $5,545.45)
DEPOSIT: $0.00
TOTAL DUE: $61,000.00
We Authorise Fidelity Capital (Australia) to pay for this vehicle in any means necessary to clear any encumbrances on this vehicle or the below:
A/C/Name [Name and account details]
Mr Delic placed his signature above the printed words “Signature of Vendor”.
Delivery Receipt
Mr Delic signed a document titled “Delivery Receipt”. It states that, pursuant to the “Master Lease” agreement, it is certified that the Vehicles identified in the document had been received by the Lessee. The “Delivery Receipt” is the Third Schedule to the “Master Lease” agreement.[39]
[39] Exhibit JC-1, page 42
Master Lease Agreement
There is a document headed “Master Lease” (MLA) between Fidelity as lessor and Composite as lessee referred to in the Lease Vehicle Order Form and Delivery Receipt. The MLA recites that Fidelity “may from time to time purchase at its discretion Vehicles for the purpose of leasing such Vehicles to the Lessee subject to” the MLA. The MLA contains terms that include the following:
(a)Composite may request Fidelity to lease a vehicle by giving a completed “Lease Vehicle Order Form” which on delivery will constitute an irrevocable offer by Composite to Fidelity to lease the Vehicles on the terms set out in the MLA (cl 2.1(a)).
(b)On receipt of the Lease Vehicle Order Form Fidelity may purchase the Vehicles for the purpose of leasing the Vehicles to Composite (cl 2.1(c)(i)).
(c)Fidelity shall lease the Vehicles to Composite for the term stated in the Lease Vehicle Order Form, namely, 60 months (cl 2.4).
(d)On taking delivery of the Vehicles Composite shall complete a “Delivery Receipt” (cl 3(c)).
(e)On each “Rent Payment Date” Composite must pay to Fidelity in advance “the Rent” (cl 4.1). “Rent” in relation to the Vehicles is defined in cl 1.1 to mean “the monthly amount specified in the Lease Vehicle Order Form under the heading “Total Monthly Payment””. The monthly amount stated in the Lease Vehicle Order Form is $2,682.33. The expression “Rent Payment Date”, when used in relation to the Vehicles, is defined in cl 1.1 to mean “the same day of each month as the day of the Commencing Date”.
(f)Composite acknowledges: it has no right of property in the Vehicles, and is only a bailee of the Vehicles; the Vehicles have been used as security or collateral, or leased by Fidelity to obtain finance or credit from an external funder; Fidelity “has assigned all of its rights” in relation to the Vehicles “to an external funder” whose interests in the Vehicles “supersedes any interest of the Lessee”; and that a default by Fidelity may result in the external funder taking possession of the Vehicles (cl 6.1).
(g)Fidelity may issue a “Termination Notice” at any time after an “Event of Default”, being any one of the events specified in cl 11.1. These events include a failure by Fidelity to pay any Rent (cl 11.1(a)), Fidelity or Mr Delic being unable to pay its or his debts as they fall due (cl 11.1(d)), or the liquidation of “the Lessee or Guarantor” (cl 11.1(j)).
(h)If Fidelity gives Composite a Termination Notice, Composite must, among other things, give up possession of and deliver to Fidelity the Vehicles, and pay to Fidelity the “Termination Sum in respect of the Vehicle[s]” (cl 11.2(g)(i)) together with “all other moneys due by the Lessee” under the MLA (cl 11.2(g(ii))). The expression “Termination Sum” is defined in cl 1.1 of the MLA to be either the amount specified as the “Payout in Annexure C”, if there is an amount specified as the “Residual Value in the Second Schedule” (there is no such amount specified) or, if there is no such amount specified, the amount that is arrived at by the application of the formula B - (C x D)/E where:
(i)“B” is the sum of: the aggregate of the Rent payable for the period commencing on the “Terminating Date” (being the date specified in the Termination Notice) and ending on the “Lease Expiry Date” (being “the last day of the period specified in the Lease Vehicle Order Form under the heading “Lease Period”); all Rent and other amounts due or accrued but unpaid; and the “costs and expenses (including legal costs) of recovering or attempting to recover possession of the” Vehicles;
(ii)“C” is the sum of the aggregate of the Rent payable during the term of the MLA as specified in the Lease Vehicle Order Form under the heading “Lease Period” and the “Anticipated Termination Value” (which is defined in cl 1.1 of the MLA as the “anticipated value of the Vehicle[s] (determined by [Fidelity] in its absolute discretion) as at the Terminating Date”);
(iii)“D” is the sum of the number of months from the “Terminating Date” to the “Lease Expiry Date”; and
(iv)“E” is the number of months of the term of the MLA.
(i)Clause 11.3 deals with the monetary consequences if Fidelity does not recover possession of the Vehicles on termination of the MLA:
(a)(Lessee to pay current market value) If Fidelity Capital does not recover possession of the Vehicle within 28 days of the termination of this Agreement (however occurring), the Lessee shall pay to Fidelity Capital on demand the current market value for which the Vehicle would have been insured under Clause 9.
(b)(Refund) If the Lessee pays the amount specified in Clause 11.3(a) and Fidelity Capital subsequently recovers possession of the Vehicle, Fidelity Capital will (subject to the payment by the Lessee of any other moneys due but unpaid by the Lessee to Fidelity Capital) refund to the Lessee the current market value for which the Vehicle would normally have been insured under Clause 9 (after deduction of all expenses relating to the return of the Vehicle to Fidelity Capital including, without limitation, any storage fees).
(j)Finally, there is cl 15 of the MLA which concerns the payment of “default interest” at the “default rate”(which in cl 1.1 is defined as 25% per annum):
The Lessee shall pay interest at the Default Rate (such interest to accrue on a daily basis after as well as before judgment) on:
(a)all moneys which are not paid to Fidelity Capital on due date; and
(b)any moneys expended by Fidelity Capital to remedy any default by the Lessee or in the enforcement or protection or attempted enforcement or protection of Fidelity Capital’s rights under this Agreement or in respect of the Vehicle (including without limitation, all legal fees as between solicitor and own client and other professional fees, costs of enforcement and repossession) from the date Fidelity Capital expends such moneys to the actual date of repayment thereof.
Guarantee and indemnity
The MLA contains a guarantee by Mr Delic, the relevant provisions of which are as follows:
(a)Under cl 23.2 Mr Delic unconditionally and irrevocably guarantees to Fidelity the payment of Rent and any other money payable under “the Documents” (which is defined in cl 23.1 to include the MLA); the performance and observance by Composite of its obligations contained or implied in the “Documents”; and the payment by Composite of any damages payable by Composite for any failure by it to comply with its obligations under the MLA.
(b)Clause 23.3 provides:
If the Lessee defaults in:
(a)(payment) payment of any amount due under the Documents (including Rent), the Guarantor shall on demand pay that amount to Fidelity; and/or
(b)(obligations) the performance and observance of any of the Lessee’s other obligations under the Documents.
the Guarantor shall on demand pay to Fidelity Capital all losses, damages, expenses and costs which Fidelity Capital is entitled to recover because of that default whether or not Fidelity Capital has exercised or exhausted Fidelity Capital’s remedies for their recovery from the Lessee.
(c)Clause 23.4 relevantly provides:
The liability of the Guarantor is not affected by anything which, but for this provision, might release, prejudicially affect or discharge that liability or in any way relieve the Guarantor from any obligation including any of the following (whether with or without the consent of the Guarantor):
. . . .
(i)(limitation) any legal limitation, disability, incapacity or other circumstances relating to the Lessee, the Guarantor and/or any other person . . .
(d)Clause 23.5 of the MLA provides:
This Clause is a principal and independent obligation. Except for stamp duty purposes, it is not ancillary or secondary to another right or obligation.
In addition to the guarantee, there is the indemnity provided for by cl 23.11 of the MLA:
As a separate and additional liability, the Guarantor Indemnifies Fidelity Capital in respect of. [sic]
(a)(obligations) all liability, including all actions, proceedings, judgments, damages, losses, costs and expenses of any nature which may be incurred by, brought, made or recovered against FIDELITY CAPITAL consequent on or arising directly or indirectly out of any default or delay by the Lessee in the performance and observance of the Lessee’s obligations contained or implied in the Documents; and
(b)(money) any money payable under the Documents (including money which would have been payable if it were recoverable) which is not recoverable from the Lessee for any reason, including any legal limitation, disability or incapacity affecting the Lessee or an obligation in the Documents or becoming unenforceable, void or illegal and whether or not:
(i)(void) any transaction relating to any money payable under the Documents was void or illegal or has been avoided, or
(ii)(knowledge) anything relating to that transaction was or ought to have been known to Fidelity Capital.
Acknowledgement of a caveatable interest
Mr Delic signed a document that contained the following:
I, Damir Delic . . . hereby freely acknowledge that Fidelity Capital (Australia) Pty Limited in its own right and as Trustee of the Fidelity Capital (Australia) Unit Trust has a caveatable interest in any real estate held by us now, or in the future, and further acknowledge that the loan agreement entered into by us with Fidelity Capital (Australia) Pty Limited, creates an estate or interest in said real estate, entitling Fidelity Capital (Australia) Pty Limited in its own right, and as Trustee of the Fidelity Capital (Australia) Unit Trust, its nominee or solicitor, on its behalf, to lodge either now or in the future, a caveat on the tile of said real estate, to secure moneys owed under said loan agreement, and any fees associated with the collection of same.
We also acknowledge that we have read the said loan agreement and had it explained to us to our satisfaction. We have not relied on anything said to us by Fidelity Capital (Australia) Pty Limited or its representatives as to the obligations contained in the said rental agreements, what they mean, or what their effect maybe [sic].
Mr Delic signed the MLA as director of the Lessee, that is, Composite,[40] and also as guarantor.[41] Mr Delic placed his signature as guarantor next to the following printed words (emphasis in original):
I have read this document and had it explained to me to my satisfaction. In particular, I have read and had explained Clause 23 and the notice on the front cover. I understand that by signing this document I may be obliged to pay Fidelity Capital moneys which the Lessee owes to Fidelity Capital. I have not relied on anything said to me by Fidelity Capital or the Lessee as what the meaning of the effect of this
[40] Exhibit JC-1, page 44
[41] Exhibit JC-1, page 46
In his affidavit of 23 September 2019 Mr Delic deposes to the circumstances in which he says he signed these documents. Mr Delic says he went into Mr Volonakis’ office to sign “the paperwork” which “stated the loan was from” Fidelity, and not Infac Finance from whom Mr Delic thought the loan would come. Mr Delic says he then had a conversation with Mr Volonakis to the following effect:[42]
Mr Delic:Jim what is this company and what is this paperwork about?
Mr Volonakis: That is the company we are using for the loan. The paperwork is for the security. Its [sic] just the same as before but a different company.
Mr Delic:So the loan is the same.
Mr Volonakis: Yes all the same we just used a different lender.
[42] Affidavit of D J Delic 23.09.2019, [18]
Mr Delic says he signed documents without reading them. He says he believed the terms of the loan from Fidelity were the same as the terms of the loan from Infac Finance. Mr Delic also says he did not obtain independent legal advice, English is not his first language, and he relied on Mr Volonakis “to prepare this documentation”.[43] In his affidavit of 4 March 2020 Mr Delic says he met Mr Volonakis at Mr Delic’s office, not at the office of Mr Volonakis. Mr Delic also says Mr Volonakis was in a hurry, and Mr Volonakis provided Mr Delic “with single page documents for” Mr Delic to sign. Mr Delic says he knows “these were parts of a suite of documents that [he] did not see and did not read”.[44]
[43] Affidavit of D J Delic 23.09.2019, [19]
[44] Affidavit of D J Delic 04.03.2020, [23]
I do not accept Mr Delic’s evidence of the conversation he says he had with Mr Volonakis. Although it is likely Mr Delic did not read the documents he signed in any detail, I do not accept Mr Delic’s evidence about his state of mind in relation to the documents. I do not accept Mr Delic’s evidence of the conversation he says he had with Mr Volonakis before Mr Delic signed the documents. First, I have already found that I do not consider Mr Delic to be a witness on whose uncorroborated evidence I can rely. Second, it is inherently improbable that Mr Delic would not have sought to acquaint himself with the basic details of the transaction into which he was committing Composite and himself, such as the payments of principal and interest Composite was required to make under the loan. Further, assuming Mr Delic asked Mr Volonakis questions about the essential details of the transaction, there is no reason why Mr Volonakis would not have accurately informed Mr Delic of what those details were. Further, it is implausible Mr Volonakis separated from the documents Fidelity provided to him only those pages that required to be signed, and that he provided only those pages to Mr Delic for him to sign. That would have required work – disassembling and then reassembling the documents – that would not have been required had Mr Volonakis simply provided the documents in the form he had received them and identified to Mr Delic the pages at which he needed to sign. I therefore do not accept Mr Delic’s evidence that Mr Volonakis presented to Mr Delic only those pages that Mr Delic was required to sign.
Evidence of knowledge of Composite’s deregistration
As I have already noted, Composite was deregistered on 26 November 2017 and has remained deregistered since that time. In his affidavit of 4 March 2020 Mr Delic deposes that at no time during or before he signed the MLA and the other documents did Fidelity or Mr Volonakis inform Mr Delic that Composite had been deregistered; and he further deposes that, had he been informed of that fact he would not have signed the MLA or the guarantee.[45] From this evidence I infer that Mr Delic says he was not aware at the time he signed the MLA and the other documents that Composite had been deregistered, and he would not have signed the documents had he been aware of that fact. J Crawley has also given evidence that at the time Fidelity entered into the MLA he was not aware Composite had been deregistered; and he deposes that had Mr Delic told J Crawley of that fact he “would not have allowed the Master Lease to proceed”.[46]
[45] Affidavit of D J Delic 04.03.2020, [28]
[46] Affidavit of J Crawley 27.07.2020, [20]
I am not prepared to accept Mr Delic’s evidence, which amounts to nothing more than a bare assertion, that he was not aware Composite had been deregistered. First, I have already found that Mr Delic is not a witness on whose uncorroborated evidence I can rely. Second, Mr Delic was the sole director and shareholder of that company.[47] The deregistration occurred on the initiation of the Australian Securities and Investment Commission (ASIC) acting under s 601AB of the Corporations Act 2001 (Cth) (Corporations Act). Subsection 601AB(3) of that Act would have required ASIC to give Composite and Mr Delic notice of its intention to deregister Composite. Mr Delic has given no evidence about whether he or Composite had received notice from ASIC about any intention to deregister Composite, or whether he or Composite had received notice under s 601AB(3A) of the Corporations Act that Composite had been deregistered. This is evidence which it was within the power of Mr Delic to have provided, and his bare assertion of ignorance must be weighed against his failure to provide such evidence.
[47] Exhibit DJD-2, pages 2-3
I accept J Crawley’s evidence that he was not aware Composite was deregistered at the time he caused Fidelity to enter into the MLA and to pay money to purchase the Vehicles. It is inconceivable that a person in the position of J Crawley would have committed Fidelity to a financial transaction with an entity that to his knowledge did not exist.
Executed documents sent to Fidelity
On 1 December 2017 Mr Volonakis sent an email to J Crawley attaching the documents Mr Delic had signed purportedly on behalf of Composite and as guarantor. Mr Volonakis said Mr Delic “has authorised us to pay funds into nominated account as per documents”, and he requested that Fidelity “pay as cleared funds and deduct fees as necessary”. Mr Volonakis also said that Mr Delic had requested that the application fees be taken from the loan amount, with the balance to be deposited into the nominated account.[48] J Crawley arranged to transfer $56,767.67 into the account Composite had nominated. The $56,767.67 reflected the difference between the $60,000 price for the Vehicles less the first rental payment, the application fee of $1,050, and the “real time transfer fee”.[49]
[48] Exhibit JC-1, page 8
[49] Affidavit of J Crawley 30.01.2020, [12]
14 December 2017 – Mr Delic is made bankrupt
On 14 December 2017 Mr Delic was made bankrupt, and the Official Receiver was appointed trustee in bankruptcy of Mr Delic’s estate. Fidelity was not made aware of that fact until 16 January 2018 when Mr Volonakis sent an email to J and C Crawley.[50]
[50] Exhibit JC-1, page 62
24 January 2018 – Fidelity issues Notice of Termination
On 24 January 2018 Fidelity sent a “Notice of Termination” to Mr Delic stating that “pursuant to Clauses 11.1(d) and (j) of the Rental Agreement, we write to advise you of its Termination”.[51] The notice demanded Mr Delic return the Vehicles to Fidelity, and noted that $160,939.80, being “the balance of the rentals”, was due and payable.
[51] Exhibit JC-1, page 69
Mr Delic’s engagement of M Crawley
According to Mr Delic, Mr Volonakis telephoned Mr Delic in early 2018 and told him that Mr Volonakis was in a meeting with C Crawley who wanted to know whether Mr Delic had appointed anyone to advise him about his bankruptcy. Mr Delic said he did not know he needed one. Mr Volonakis said C Crawley has a brother, Mr Michael Crawley (M Crawley), who is “very experienced in this”, and if Mr Delic wanted to, M Crawley could call Mr Delic. Mr Volonakis said Mr Delic “can sort out all the Fidelity problems with him and he can help” Mr Delic with “any other problems [Mr Delic] may have associated with [his] bankruptcy”.[52] Mr Delic says that “several days later” M Crawley telephoned Mr Delic and told him his brother, C Crawley, asked him to “call you and sort out the Fidelity debt”. Mr Delic and M Crawley agreed to meet.[53]
[52] Affidavit of D J Delic 03.07.2020, [8]
[53] Affidavit of D J Delic 03.07.2020, [9]
M Crawley says he is a “partner” of Suggero Risk Management Pty Ltd, and describes his occupation as a “director’s advocate” who provides “advisory services to directors”. M Crawley deposes he had a telephone conversation with Mr Delic on 15 January 2018, although he says he did not call Mr Delic but Mr Delic had called him. M Crawley says Mr Delic said he was “referred to you by finance broker Jim Volonakis and your brother Chris”. Mr Delic and M Crawley agreed to meet on 17 January 2018.[54]
[54] Affidavit of M A Crawley 27.07.2020, [7]
According to Mr Delic, he met M Crawley, and had conversation with him to the following effect:[55]
[55] Affidavit of D J Delic 03.07.2020, [10]-[12]
M Crawley:I have spoken with Chris and we want to work with you to resolve the Fidelity debt.
. . . .
Mr Delic:What do you guys propose?
M Crawley:Your company owes Fidelity $61,000 and we want full repayment. If you pay the full amount then Fidelity will go away. If we get all our money back after you are out of bankruptcy we will be happy to lend money to you or your company again. Put some money in my account which will get the process started. This will go to my fee and the Fidelity debt. I will need $5,000 now to go towards my fees and the Fidelity debt to show that you are serious.
Mr Delic:Ok I will arrange for some money from my wife so the Composite debt is at an end.
Mr Delic says that “[f]rom that time I believed Composite’s debt was settled”.[56]
[56] Affidavit of D J Delic 03.07.2020, [11]
M Crawley agrees he met with Mr Delic; but he gives a different account of the discussion he and Mr Delic had. According to M Crawley,[57] he and Mr Delic discussed matters relating only to Mr Delic’s bankruptcy. Mr Crawley informed Mr Delic it appeared Mr Delic’s assets far exceeded his liabilities, and he could therefore either “pay out the bankruptcy and have it annulled”, or the trustee in bankruptcy would have to realise Mr Delic’s assets “to satisfy the bankrupt estate”. Mr Delic said he preferred to have his bankruptcy annulled, and asked whether M Crawley could help him with that. M Crawley said he would be able to help Mr Delic, but it would take at least three months because “there is quite a lot of statutory paperwork we need to provide to the trustee”. M Crawley also said his fees will be $12,000 plus GST, and those fees had to be paid before M Crawley could start. Mr Delic said he would do so later in the day. On 22 January 2018 Mr Delic informed M Crawley he was having “banking problems dues to the bankruptcy” and, for that reason had been unable to pay an amount for M Crawley’s fees.
[57] Affidavit of M A Crawley 27.07.2020, [10]
On 22 January 2018 M Crawley sent an email to Mr Delic attaching a document titled “Authority to Act”.[58] The document authorised M Crawley to act as Mr Delic’s agent to do a number of things, including to instruct, contact, and liaise with any third party in relation to Mr Delic’s affairs. In his email M Crawley said:
If you can print this off, sign it, scan and email back; I will contact the trustee and start the process.
[58] Affidavit of M A Crawley 27.07.2020, annexures AC-1, AC-2
Although I find it plausible and, for that reason find, that Mr Volonakis suggested to Mr Delic that M Crawley could assist Mr Delic in relation to his bankruptcy and that Mr Delic might consider contacting M Crawley, I do not accept Mr Delic’s evidence of his conversation with Mr Volonakis in relation to Mr Delic’s speaking with M Crawley. Nor do I accept Mr Delic’s evidence of his conversations with M Crawley. Mr Delic’s evidence is inconsistent with the Authority to Act M Crawley sent to Mr Delic on 22 January 2018, and with the email communications between M Crawley and the office of the Official Trustee, and between M Crawley and Mr Delic, to which I will shortly refer. As contemplated by the authority, the email communications reveal M Crawley communicated with both the office of the Official Trustee and with Mr Delic about annulling Mr Delic’s bankruptcy. Further, in his email to M Crawley sent on 26 April 2018 (to which I refer later), Mr Delic said “I am your client”, “you have been paid to work on my behalf”, and “I want you to negotiate with Fidelity”.[59]
[59] Affidavit of M A Crawley 27.07.2020, annexure AC-12, page 50
On the other hand, M Crawley’s evidence of the discussion he had with Mr Delic is consistent with those email communications. For that reason I accept the evidence of M Crawley. I therefore find that, on the suggestion of Mr Volonakis, Mr Delic contacted M Crawley by telephone during which he and M Crawley agreed to meet on 17 January 2018; Mr Delic and M Crawley met on 17 January 2018 and discussed the services M Crawley could provide to Mr Delic in relation to his bankruptcy; in that discussion Mr Delic said he desired to have his bankruptcy annulled, and he agreed he would engage M Crawley to deal with the Official Trustee and otherwise assist Mr Delic to seek to have his bankruptcy annulled.
It follows I do not accept Mr Delic discussed with M Crawley Mr Delic’s liability to Fidelity under the MLA, or that there was any settlement of that debt, or that Mr Delic believed he and M Crawley had “settled” any liability Mr Delic had to Fidelity under the MLA or otherwise. Quite apart from the reasons I have already given for not accepting Mr Delic’s evidence, Mr Delic has not given evidence that he did not receive the “Notice of Termination” Fidelity sent to him on 24 January 2018 demanding the payment of $160,939.80, or the “Notice of Demand” Fidelity sent on 10 March 2018 demanding payment of the same amount together with the return of the Vehicles; and there is no evidence Mr Delic responded to these demands by stating he and M Crawley had settled Fidelity’s claims on the basis that Fidelity would be paid $60,000. Further, Mr Delic did not in his statement of affairs include Fidelity as a creditor.
22 January 2018 to 5 March 2018: communications with Official Trustee
By 22 January 2018 Mr Delic completed a statement of affairs,[60] although it was not submitted to the Official Trustee until 1 February 2018.[61]
[60] Affidavit of D J Delic 03.07.2020, exhibit DJD-3
[61] Affidavit of M A Crawley 27.07.2020, annexure AC-3, page 13
On 23 January 2018 Mr Delic forwarded to M Crawley an email Mr Burke, the case manager attached to the office of the Official Trustee, had sent to Mr Vasta, the solicitor for Mr Delic.[62] In that email Mr Burke discusses a number of matters, including Mr Delic’s not having yet filed his statement of affairs, and the possibility of Mr Delic considering proposing a composition with his creditors. Mr Burke requested M Crawley respond as soon as possible about Mr Delic’s position because Mr Burke’s preliminary position was that if “no other viable alternative comes to light” he would need to “commence discussions with Mrs Delic regarding” the “joint sale” of a property or Ms Delic raising money to buy out the Official Trustee’s interest in that property.
[62] Affidavit of M A Crawley 27.07.2020, annexure AC-3, pages 15-16
After he received Mr Burke’s email from Mr Delic, M Crawley sent an email to Mr Burke in which M Crawley stated (errors in original):[63]
Our firm has been engaged by Mr Damir Delic to act as his agents in this matter in accordance with the attached “authority to act”, and as such would you please note that I am now the point of contact; albeit Mr Delic will be made available to the trustee as and when required.
We confirm Mr Delic is solvent, and I am told this bankruptcy is a result of a dispute in relation to one particular creditor, and of course his failure to address the various notices in relation to that debt. As such our firm has been appointed to act on Mr Delic’s behalf to ensure all the trustees requirements are met and all creditors, as well as the trustees remuneration, repaid in a manner that achieves an annulment in accordance with section 153A of the Bankruptcy act.
In light of our late appointment, may we respectfully request that the Trustee provide a further extension until 5pm on Wednesday 31st January to lodge all of the completed documentation? Please confirm the extension is acceptable to the trustee.
We look forward to working with you in resolving the matter.
[63] Affidavit of M A Crawley 27.07.2020, annexure AC-3, page 15
The Official Trustee agreed to an extension. On 1 February 2018 M Crawley forwarded to Mr Burke Mr Delic’s statement of affairs, and, in an email sent on 2 February 2018, M Crawley informed Mr Delic that all was in hand, and that M Crawley would be in Sydney the following week to “run through the matter and explain any concerns anyone may have”.[64]
[64] Affidavit of M A Crawley 27.07.2020, annexure AC-3, page 12
On 15 February 2018 Mr Burke sent an email to M Crawley setting out Mr Burke’s calculation “of the cost of annulment of bankruptcy”.[65] The email lists debts totalling $182,522, but it does not include Fidelity among the creditors; and it estimates that $261,027 would need to be paid. On 22 February 2018 Mr Burke sent an email to M Crawley stating he had left a message for M Crawley “just checking in to see if you were able to speak to Mr and Mrs Delic this week regarding the annulment estimate”. Mr Burke sent a follow up email to M Crawley on 27 February 2018.[66] M Crawley forwarded these emails to Mr Delic on 27 February 2018 by email in which M Crawley said as follows (errors in original):[67]
Refer following from trustee.
I will need to know what we are doing in relation to the annulment or the trustee will issue against your wife and move to realise the entire estate.
Let me know mate and also I’d like to get my discounted fees of $12,000.00 paid quickly or the trustee will need to put me down as a creditor which isn’t good in these scenarios; so maybe Chris can assist there?
[65] Affidavit of M A Crawley 27.07.2020, annexure AC-4
[66] Affidavit of M A Crawley 27.07.2020, annexure AC-5, page 22
[67] Affidavit of M A Crawley 27.07.2020, annexure AC-5, page 21
At 9:43 am on 5 March 2018 M Crawley sent an email to Mr Burke in which he referred to “a couple of developments”. Mr Delic “has a medical issue”; Ms Delic had not been able to provide M Crawley “with a complete response on addressing the bankruptcy annulment payment”; M Crawley had been contacted by “a lender who holds a finance contract with the company Mr Delic had been a director of”; and Mr Delic had not paid fees owing to M Crawley.[68] M Crawley forwarded this email to Mr Delic by email in which he stated as follows:[69]
My response to Trustee follows.
In light of your default last week I will require the full payment including GST today for the discounted rate to stand, and for our office to continue to act on behalf of you and your wife. That payment will need to be a total of $13,200.00 being $12,000.00 fees plus GST of $1,200.00
In the event the funds are not received then our arrangement will default to standard rates and the amount will be adjusted accordingly and incorporated into the bankruptcy to be realised upon the sale of assets, or any alternate settlement arrangement you may agree with the trustee.
[68] Affidavit of M A Crawley 27.07.2020, annexure AC-6, page 25
[69] Affidavit of M A Crawley 27.07.2020, annexure AC-6, page 24
Mr Delic pays amounts to M Crawley
Mr Delic says that after his meeting with M Crawley on 17 January 2018 he “caused to be deposited $5,000” into M Crawley’s account “as part payment for this settlement”, that is, the $60,000 for which Mr Delic deposes he believed the amount he owed Fidelity was settled.[70] Mr Delic further says that a “few days later” M Crawley telephoned him and said he needed “another $8,000 to be paid into the account or just give it in cash to Chris my brother”. Mr Delic says he arranged for $8,200 to be paid to M Crawley on 9 March 2018.[71] Finally, Mr Delic says that “[s]ome weeks” after he first met M Crawley, Mr Delic had a conversation in which he asked M Crawley when Fidelity will “need the last payment for the debt”. M Crawley said he had “been thinking about it” and M Crawley thought he had to deal with Mr Delic’s “whole bankruptcy”. M Crawley said he needed “an amount of $100,000 and with this I will sort out not just Fidelity but all your creditors and you will be annulled”.[72] M Crawley denies he had conversations to this effect with Mr Delic.[73]
[70] Affidavit of D J Delic 03.07.2020, [12]
[71] Affidavit of D J Delic 03.07.2020, [13]
[72] Affidavit of D J Delic 03.07.2020, [15]
[73] Affidavit of M A Crawley 27.07.2020, [16], [22]
I do not accept Mr Delic’s evidence. First, I have already not accepted Mr Delic’s evidence that he had a conversation with M Crawley in which he and M Crawley agreed to settle Mr Delic’s liability to Fidelity. Second, Mr Delic’s evidence is inconsistent with the emails to which I have already referred. In particular, it is inconsistent with the email M Crawley sent to Mr Delic on 5 March 2018 to which I have already referred, in which Crawley referred to payment of an amount for his fees, not for an amount for which Mr Delic is liable to pay Fidelity. Third, Mr Delic’s evidence is inconsistent with the email communication after M Crawley sent the email of 5 March 2018 to which I have referred.
This ground relies on Mr Delic misunderstanding the true effect of the MLA. I have not accepted Mr Delic’s evidence about his state of mind and, for that reason, this ground for challenging any debt that arose under the MLA also fails. Even if I had accepted Mr Delic’s evidence about his state of mind, I have not accepted Mr Delic’s evidence of his conversations with Mr Volonakis. Thus, there is no basis on which to find that any misunderstanding Mr Delic had about the nature of the MLA was induced by Mr Volonakis.
Even if I had accepted Mr Delic’s evidence of his conversations with Mr Volonakis, I am not satisfied Mr Volonakis acted as an agent for Fidelity. There is no evidence Fidelity expressly appointed Mr Volonakis as its agent. Mr Delic has not referred to any statute or authority that suggests that persons who act as finance brokers have any actual express or implied actual authority to make representations on behalf of lenders in the course of arranging loans;[129] and Mr Delic has not pointed to any evidence emanating from Fidelity which could reasonably be characterised as a holding out by Fidelity that Mr Volonakis was the agent of Fidelity or had the authority to make representations on behalf of Fidelity. Thus, I do not accept that Fidelity contravened s 18(1) of the Australian Consumer Law.
[129] As for the different kinds of authority see Hely-Hutchinson v Brayhead Ltd [1968] 1 QB 549
CONCLUSION AND DISPOSITION
On the findings I have made, Mr Delic as guarantor was liable to pay only two debts under the MLA: the $165 recovery costs, and interest on that amount. On 11 October 2018 Fidelity accepted $50,000 from Ms Delic on account of the debt Fidelity claimed Mr Delic owed it, and on 12 December 2018 Mr Delic paid $1.00. The $50,001 is obviously sufficient to cover the $165 recovery costs, and the interest payable on that amount. On these findings, the trustees ought not to have admitted the POD. I propose, therefore, to make an order under s 104(2) of the Act reversing the trustees’ decision to admit the POD.
As for costs, I propose to direct the parties file and serve within 14 days written submissions about the order for costs I should make. I will direct the parties to inform my associate within 21 days whether they wish to have a hearing on costs, or whether they consent to my considering the question of costs on the basis of the written submissions that the parties will file without further hearing.
I certify that the preceding one hundred and thirty (130) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 5 February 2021
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