DuluxGroup (Australia) Pty Ltd v Hado (No 3)
[2021] FCCA 59
•19 January 2021
FEDERAL CIRCUIT COURT OF AUSTRALIA
DuluxGroup (Australia) Pty Ltd v Hado (No 3) [2021] FCCA 59
File number(s): BRG 14 of 2020 Judgment of: JUDGE JARRETT Date of judgment: 19 January 2021 Catchwords: BANKRUPTCY – proceedings in connection with sequestration – petition and sequestration order – hearing of creditor's petition and form of sequestration order – going behind judgment – particular cases. Legislation: Bankruptcy Act 1966 (Cth) s 52(2) Cases cited: DuluxGroup (Australia) Pty Ltd v Hado [2020] FCCA 1077
DuluxGroup (Australia) Pty Ltd v Hado [2020] FCCA 1887
Number of paragraphs: 66 Date of last submission/s: 10 August 2020 Date of hearing: 10 August 2020 Place: Brisbane Solicitor for the Applicant: Rostron Carlyle Rojas Lawyers Counsel for the Respondent: Ms Carruthers Solicitor for the Respondent: Joseph Burke Law Pty Ltd ORDERS
BRG 14 of 2020 BETWEEN: DULUXGROUP (AUSTRALIA) PTY LTD
Applicant
AND: GEORGE MATTE HADO
Respondent
ORDER MADE BY:
JUDGE JARRETT
DATE OF ORDER:
19 JANUARY 2021
THE COURT ORDERS THAT:
1.The orders made on 20 February, 2020 be set aside;
2.The creditor’s petition filed on 10 January, 2020 be dismissed.
REASONS FOR JUDGMENT
JUDGE JARRETT
On 20 February, 2020 a Registrar of this Court made a sequestration order against the estate of Mr Hado. The order was entered on 20 February, 2020 but amended on 21 February, 2020 to record the correct date of the act of bankruptcy committed by Mr Hado.
On 24 March, 2020 Mr Hado applied to review the Registrar’s decision. The petitioning creditor opposes the application. The application initially came before me on 9 April, 2020. On 7 May, 2020 I delivered reasons granting Mr Hado an extension of time within which to apply for a review of the sequestration order against him. I made some directions for the parties to file further material in support of their respective cases in the event that they wished to do so: DuluxGroup (Australia) Pty Ltd v Hado [2020] FCCA 1077.
Both parties filed further material. Mr Hado filed three further affidavits, one on 18 May, 2020, another on 29 May, 2020 and a final affidavit on 1 June, 2020. The petitioning creditor filed the necessary statutory affidavits and an answering affidavit to Mr Hado’s claims. Mr Hado argued that there is in truth no debt sufficient to support the making of a sequestration order owing by him to the petitioning creditor. He invited the Court to go behind the judgment debt upon which the sequestration order is based (a default judgment given in the Magistrates Court of Victoria at Moorabbin) and reach that conclusion.
For the reasons I delivered on 10 July, 2020 (DuluxGroup (Australia) Pty Ltd v Hado [2020] FCCA 1887), I determined to exercise the Court’s discretion to go behind the judgment upon which the bankruptcy notice relied upon by the petitioning creditor was based. I considered it appropriate to go behind the judgment because the judgment was a default judgment given in the absence of an appearance and defence by Mr Hado, Mr Hado had applied to have the judgment by default set aside but apparently those proceedings were on hold on the basis of a perception that he does not have standing to bring those proceedings, there has been no adjudication on the merits of the petitioning creditor’s claim and Mr Hado’s response to it, the evidence for each of the parties demonstrates substantial issues of fact between them and if Mr Hado’s case is accepted, then apart from the sum of $825 there is no debt owing sufficient to support the making of the sequestration order.
There were directions made for the parties to file any further affidavits of evidence in chief upon which they intended to rely and the matter was fixed for hearing.
THE EVIDENCE
The petitioning creditor relied upon affidavits sworn by four witnesses. The first was an affidavit sworn by Ellen Kate Nowland a solicitor from the firm of solicitors engaged by the petitioning creditor and filed on 7 April, 2020. She was not cross-examined. Her evidence satisfies me that on 8 July, 2019 Mr Hado was personally served with a complaint that commenced proceedings in the Magistrates Court of Victoria at Moorabbin. The petitioning creditor was the plaintiff and Mr Hado was the defendant.
Ms Nolan’s evidence shows that the petitioning creditor obtained a default judgment upon that complaint against Mr Hado on 1 August, 2019 for $13,221.59 plus interest of $105.05 and costs of $1592.60. The nature of the claim stated in the judgment is “goods sold and delivered”.
A bankruptcy notice was issued on 14 October, 2019 and personally served on Mr Hado on 17 October, 2019. There is no dispute about service. Nor was there any dispute that Mr Hado failed to comply with the bankruptcy notice or satisfy the Court that he had an appropriate counter-claim, set-off or cross demand by 7 November, 2019. Accordingly, Mr Hado committed an act of bankruptcy on 7 November, 2019. The creditor’s petition presently before the Court was filed on 10 January, 2020. There is no dispute that it was personally served on Mr Hado on 22 January, 2020.
As I have just observed, the nature of the claim made in the Magistrates Court by the petitioning creditor against the respondent was for “goods are sold and delivered”. The evidence of Ms Nowland establishes that on or about 8 August, 2018 a trading account or credit application was made to the petitioning creditor by Mr Hado trading under the name “The Render Group”. Despite the application being made by a sole trader (Mr Hado) there was also a form of guarantee and indemnity executed by him and witnessed by another person described in the document as Paul Lumani. Mr Lumani was a friend of Mr Hado’s and Mr Hado gave evidence that he knew Mr Lumani because he had worked with him on about three different Henley construction sites in 2018.
The petitioning creditor’s case is that between 1 November, 2018 and 14 January, 2019 Mr Hado bought and received from the petitioning creditor certain goods for a total price of $11,858.66. He also attended a training course for which he was invoiced $825 making the total amount owing $12,683.66. The petitioning creditor claims that Mr Hado has never paid for those goods or for the training course. Mr Hado’s case is that he never purchased or received those goods. He accepts that he underwent the training and that he has now discharged his liability to the petitioning creditor for that
The petitioning creditor relied upon an affidavit sworn by Denis Flannery and filed on 25 May, 2020. Mr Flannery was cross-examined. Mr Flannery swears that he is the “Team Leader” at the petitioning creditor’s Keilor Park store. He has been employed by the petitioning creditor since about July, 2017. His usual place of work is the petitioning creditor’s store at Keilor Park and he works there five days per week. Over the period of time that Mr Flannery has been at the stall the number of other staff there has ranged between five and six. On average 15 people come into the store per day. Mr Flannery will know some of the people and others he will not know. The store is not open on weekends. That store carries specialised rendering and cladding products.
According to Mr Flannery’s evidence, a person who comes into the store and seeks to purchase products will be asked for their account details. The individual customer will not be asked for any identification. Mr Flannery accepted that if he was given the name of an account he would have no way of knowing whether the person giving the name of the account and ordering the relevant goods was authorised to use that account. According to Mr Flannery’s evidence in re-examination, some accounts are password protected and the person ordering the goods on a particular account needs to be able to provide the relevant password.
In respect of the debt the subject of these proceedings, Mr Flannery confirmed that there were no purchase orders given to the petitioning creditor by Mr Hado or by anyone on his behalf. Nor are there any invoices made out to Mr Hado in evidence nor any delivery dockets signed by Mr Hado evidencing delivery of any goods ordered by him.
Mr Flannery gave evidence in chief that he met Mr Hado and his work colleague, “Paul”, in the Keilor Park store “over the period from about August 2018 to about December 2018”. He swore that Mr Hado and Paul would attend the Keilor Park store in distinctive uniforms. He swore that he had discussions at the Keilor Park store with Mr Hado and Paul between about August and December, 2018 during which one or other of them informed him to the effect that Mr Hado was working out of a garage at Diggers Rest in or about November to December, 2018. He says that he was told that the Diggers Rest property belonged to Frank Lumani who was a relative of Mr Hado or Paul. Mr Flannery recalled this information because he resides at Sunbury which is an adjacent suburb to Diggers Rest. Mr Flannery swears that he can recall drivers complaining to him about making deliveries at Diggers Rest because the orders were about 2 to 3 pallets and it was difficult to unload the goods at the back shed of the property.
However, despite his evidence in chief, Mr Flannery said in cross examination that he could not confirm or deny that Mr Hado had ever attended the Keilor Park store. That seems a curious proposition if in fact Mr Flannery had a recollection of the discussions deposed to by him in his affidavit with Mr Hado or Paul.
Mr Flannery also swears that he cannot recall whether he saw Mr Hado attend what is described in the evidence as Exsulite training on 27 November, 2018 in the Keilor Park store. Exsulite is a product sold by the petitioning creditor. One of the issues revealed by the evidence is whether Mr Hado attended Exsulite training in the Keilor Park store. In cross examination it was put to Mr Flannery that Exsulite training was not held at the Keilor Park store but was held at Holmesglen TAFE. Mr Flannery’s answer was that there “could have been a couple of courses held through November, and one of them would have been held” at the Keilor Park store. He did not recall Mr Hado attending that training in the Keilor Park store. He did not respond to the suggestion that Exsulite training was held at Holmesglen TAFE. In re-examination he reaffirmed his evidence in chief that Exsulite training took place at the Keilor Park store in November, 2018.
I was not persuaded by Mr Flannery’s evidence that Mr Hado had ever attended the Keilor Park store. I am not satisfied that Mr Flannery ever had a conversation with Mr Hado about Mr Hado’s business working out of Diggers Rest. It may have been the case that Mr Flannery had discussions with Paul, but in light of Mr Hado’s denials (which I have accepted below) and the absence of any evidence at all from Paul, I have concluded that Mr Flannery is mistaken when he gives evidence that he has had conversations with Mr Hado at the Keilor Park store.
The petitioning creditor also called evidence from Mr Bart van Riel, an employee of the petitioning creditor who is described as the Team Leader- Risk and Recoveries. The affidavits from Mr van Riel – one filed on 25 May, 2020 another filed on 27 July, 2020 and a final affidavit filed on 7 August, 2020 do not suggest that he has had any personal contact with Mr Hado. His evidence is limited to giving evidence about the state of accounts between the petitioning creditor and Mr Hado.
Mr van Riel’s first affidavit annexes ten tax invoices which he says are those “referenced in the Applicants (sic) Account Statement and issued by the Applicant to the Respondent”. He swears that the invoices were sent to Mr Hado’s address as recorded in the petitioning creditor’s records, namely 18 Oak Leaf Street, Greenvale. He swears that the petitioning creditor has two branches that are close to Mr Hado’s address, one at Campbellfield (12.6 km from Mr Hado’s address) and the other at Keilor Park (16 km from Mr Hado’s address). He swears that the Keilor Park branch carries “specialised rendering and cladding products, which would be relevant to the Respondent’s business – The Render Group”. The inference I am invited to draw from this evidence is that given the geographical proximity of Mr Hado’s address to the Keilor Park store it is likely that he purchased goods from that store.
Each of the invoices is addressed to “The Render Group” the trading name of Mr Hado. The invoices range from 1 November, 2018 to 14 January, 2019. None of them have a customer order number. Each of them records that the goods were dispatched on the date of the invoice “to 18 OAK LEAF ST, GREENVALE, VIC, 3059”. Each invoice records the identity of the petitioning creditor’s store from which the goods were dispatched. In each case, save one, the goods were dispatched from the Keilor Park store. One invoice relates to goods dispatched from the Sunshine store.
Mr van Riel also annexes to his affidavit three delivery dockets. The deliveries were made to an address at Diggers Rest. Mr van Riel swears that he was informed by Denis Flannery that he was informed by Mr Hado and Mr Hado’s work colleague Paul, over the period from about August, 2018 to about December, 2018 to the effect that Mr Hado was working out of a garage at the Diggers Rest address in or about November to December, 2018 and that the Diggers Rest address was the address of Frank Lumani who was a relative of Mr Hado or Paul. In that regard, his evidence mirrored that given by Mr Flannery in his affidavit of evidence in chief. These delivery dockets relate to three invoices presently an issue.
Mr van Riel swears that on 28 December, 2018 goods were ordered with the customer reference “Craigieburn” and invoiced to Mr Hado on 31 January, 2019. The goods were accepted by “Paul” and the goods were dispatched from the petitioning creditor’s Sunshine store.
Mr van Riel also swears that the Exsulite training which Mr Hado says he attended on 27 November, 2018 was conducted on-site at the petitioning creditor’s store at Keilor Park. Mr van Riel swears that the respondent purchased goods at the Keilor Park store on the same day as the training. It is one of the invoices attached to his affidavit. He suggests that his records contradict Mr Hado’s claim that he had not purchased anything from the Keilor Park store on that day or at any other time.
However, in his affidavit filed on 27 July, 2020, Mr van Riel concedes that he was mistaken in his recollection about the Exsulite training and the location of the training on 27 November, 2018. The concession came after Mr Hado was able to provide evidence which corroborated his case that he had attended the relevant training at the Holmesglen TAFE. He accepted that the relevant training took place not at the petitioning creditor’s Keilor Park store, but at the Holmesglen TAFE.
Mr van Riel also gave evidence that there was a password attached to Mr Hado’s account and that the process of ordering goods in-store required the petitioning creditor’s employees to have the password given to them before they were authorised to complete the order process. Mr Flannery’s evidence made it clear that the absence of a proper password did not prevent an order being processed even if the account was password protected. Mr van Riel was not cross-examined.
Mr Hado gave evidence by way of affidavit (affidavits of George Matte Hado filed on 13 March, 2020, 18 May, 2020, 29 May, 2020, 1 June, 2020, and 3 August, 2020). He was cross-examined.
In his affidavit filed on 13 March, 2020 Mr Hado bases his dispute with the petitioning creditor upon work which he did for another company called Henley Arch Pty Ltd at Keysborough, Heathmont and Wantirna South. In that affidavit he refers to being sent “an invoice” for $12,731 for work conducted at those sites. However that invoice is not in evidence.
In his affidavit filed on 18 May, 2020 Mr Hado swears that when making his previous affidavit he assumed that he was being overcharged for materials that arose out of work he did for Henley Arch Pty Ltd but he has since realised that this is not the case. Having regard to the invoices relied upon by the petitioning creditor to make up the amount claimed by it, Mr Hado identified that eight purchases were said to have been made at the petitioning creditor’s Keilor Park store and one purchase at its Sunshine store. Mr Hado swears that he has never purchased anything from the petitioning creditor’s Keilor Park store or the Sunshine store. His evidence is that he has “never stepped foot in [the Keilor Park branch of the petitioning creditor] or ever had a phone call from any Dulux staff from either of those stores”. According to his evidence he has always made his purchases from the petitioning creditor’s stores at Dandenong South, Bayswater, Surrey Hills, Springvale, Clayton and Narre Warren. His case is that the petitioning creditor has made a mistake although he did accept that he was responsible for $825 which is owing for “the Exsulite onsite training”.
In his second affidavit filed on 29 May, 2020, Mr Hado takes issue with some of Mr van Riel’s evidence. In particular, he swears that the Exsulite training did not take place at the Keilor Park store but rather at the Chadstone campus of Holmesglen TAFE on 27 November, 2018 and he was there all day.
Mr Hado also takes issue with Mr van Riel’s evidence that the goods the subject of the relevant invoices were delivered to the address of a Frank Lumani in Diggers Rest. Mr Hado swears that he did not authorise anyone named Frank Lumani or Paul to either order or accept goods on his behalf at that address or any other address.
The petitioning creditor accepts that there is no proof of delivery for any of the items in invoices 51120, 51292, 52341, 52764, or 54023.
Mr Hado swears that he does not and did not operate any business from Diggers Rest. He swears that he did not order the relevant goods. He says that the items for which he has been invoiced were not ordered by him and have not been received by him. In cross examination, Mr Hado was not directly challenged about this evidence. It was not suggested to him that he in fact did order the goods or that he caused Mr Lumani to order them for him. That case was not put to him. Accordingly, I accept his evidence about this. I am satisfied that he did not order the goods the subject of the invoices sued upon by the petitioning creditor and those goods have not been received by him. The exception, of course, is the amount owing for training.
In cross-examination, Mr Hado accepted that Mr Lumani was a friend of his between August and December, 2018. He accepted that he might have given him one of his businesses’ T-shirts that carried the logo of The Render Group.
Mr Hado denied in cross examination that he ever requested for somebody to make orders or sign for deliveries on behalf of him or his business. He accepted that he had set up a password for his account with the petitioning creditor. His evidence about the password most recently assigned to that account matches the evidence about that given by Mr van Riel. Mr Hado gave evidence that he did not give the password to anyone else. I accept his evidence about that. He said that other people who are present in the petitioning creditor’s stores waiting to be served when Mr Hado was served might have overheard his password. He gave evidence that he was asked for his password on about half of the occasions when he ordered goods at one of the petitioning creditor’s stores. He thought he might have been present with Mr Lumani at one of the petitioning creditor’s stores when he has given his password to the person serving him and Mr Lumani might have heard it. I accept his evidence about these matters.
Mr Hado accepted that in July, 2019 he was contacted by Mr Thomas Torpey, a collections agent about the amount claimed to be owed to the petitioning creditor. He accepted that he told Mr Torpey that he was owed a debt by the Henley Group and that he would attend to payment of the petitioning creditor when he was paid by the Henley Group. Mr Hado accepted that he had another conversation with somebody in January, 2020 but he did not recall if he asked that person if he could enter into a repayment arrangement. I have evidence from Mr Torpey by way of affidavit that suggests that on that occasion Mr Hado asked whether a repayment arrangement could be made for the money owed to the petitioning creditor. I accept that there was then some email correspondence between Mr Hado and Mr Torpey and some further conversations between Mr Torpey and Mr Hado in which Mr Hado did not dispute the debt claimed by the petitioning creditor. No repayment arrangement was ever proposed by Mr Hado. Mr Hado accepted that at no time prior to the present proceedings did he raise in writing with the petitioning creditor any dispute about the amounts claimed by the petitioning creditor. Mr Hado did not accept that he had been provided with copies of the invoices to which the present claims relate.
Mr Hado accepted in cross examination that he received the complaint issued from the Magistrates Court at Moorabbin. He accepted that it set out the full amount claimed by the petitioning creditor. He accepted that he took no steps to dispute the debt at that time. He accepted that he was served with the bankruptcy notice and still took no steps after receiving it to dispute the debt. It was only after he was served with the creditor’s petition that he commenced to take steps to dispute the debt.
Mr Hado also takes issue with Mr Flannery’s evidence. He swears that he has never met Mr Flannery or attended the Keilor Park store operated by the petitioning creditor. He denies being a relative of the person called Frank Lumani. He also denies ever having “worked out of a garage at Diggers Rest”. I accept his evidence about those things.
In his evidence in chief filed on 3 August, 2020 Mr Hado swears that:
(a)From early 2018 until approximately 1 March, 2019 he was a sole trader, operating under the business name "The Render Group";
(b)He did not have any employees, partners or subcontractors. He completed his work himself;
(c)when he opened his account with the petitioning creditor, he did not include any second account holder, or name any person who was permitted to use the account;
(d)he would usually collect goods from the applicant’s stores when he was on his way to a particular job. He would purchase from the petitioning creditor any products that he needed to complete that job;
(e)he generally made purchases at the stores in Dandenong South, Bayswater, Surrey Hills, Springvale, Clayton and Narre Warren;
(f)when he went to one of the petitioning creditor’s stores to purchase goods, the staff member would sometimes ask for his name to type into the point of sale tax invoice, and would generally then print and give him a copy of the POS Tax Invoice on the spot;
(g)he set up a password for the account, as no one else had permission to make purchases on the account. Mr Hado said that he would periodically change the password, and never gave it out to third parties;
(h)the staff at the applicant's stores would only ask for his password a little over half the time;
(i)he never arranged for the products to be delivered by the applicant, and he never received a delivery from them, he would always collect them himself;
(j)he would pay any amount owing on the Business' account either by cash, credit card or EFT, either in store, or at an Australia Post outlet;
(k)when he ceased operating his business in March, 2019 he had paid the applicant in full for every purchase of goods he had made and collected. The only amount outstanding was an amount in relation to Exsulite training undertaken by Mr Hado but in respect of which, he said, he had not received an invoice;
(l)after receiving a copy of the invoice attached to the affidavit of Mr van Riel in these proceedings, Mr Hado paid the invoice for the training in the amount of $825;
(m)despite the invoices for the goods at issue in these proceedings indicating that goods were dispatched to 18 Oak Leaf St, Greenvale he never ordered any goods to be delivered to any job site or to his home; and
(n)he is solvent and that he has a home which has a mortgage substantially lower than the value of the home, “a good job with a steady income” and no outstanding debts or demands other than the petitioning creditors claim.
Annexed to Mr Hado’s affidavit is a report from his accountant of the past 20 years about his solvency.
THE PARTIES’ SUBMISSIONS
In submissions, Mr Hado’s counsel pointed out that of the ten invoices that make up the amount claimed by the petitioning creditor one invoice – that relating to the Exsulite training has now been paid. The other nine amounts relate to one purchase from the Sunshine store and eight purchases from the Keilor Park store and Mr Hado has been steadfast in his evidence that he has never attended either of those two stores. Nor has he given any other person authority to transact on the account that he held with the petitioning creditor.
Counsel for Mr Hado submitted that the petitioning creditor had not provided any evidence showing a point of sale invoice from either the Sunshine store or the Keilor Park store made out to Mr Hado. It had not provided any delivery docket or other document signed by Mr Hado “related to that store or at all”. Mr Hado’s evidence was that he never made purchases from the petitioning creditor by delivery – he always collected the goods himself – and the delivery slips provided by petitioning creditor do not bear his signature.
It was submitted that Mr van Riel’s evidence was characterised by reconstruction and speculation and his evidence about the geographical proximity of Mr Hado’s home to the Keilor Park store was an example of that reconstruction and speculation. Mr Hado submitted that Mr van Riel’s evidence did not assist in identifying who ordered the relevant goods and who received delivery of them. Counsel for Mr Hado also submitted that the evidence from Mr Flannery was of no assistance as he has confirmed that when people come into the store they were not asked for identification and he would have no way of knowing if the account name given or the name given is truthful. She submitted that the evidence demonstrated that passwords were not always used to access accounts. She pointed to Mr Hado’s evidence that passwords in his experience were asked for a little over half the time.
Counsel for Mr Hado submitted that the evidence did not permit of any suggestion that Paul Lumani or any other person had actual or ostensible authority to make purchases on Mr Hado’s account with the petitioning creditor. She summarised her submissions by saying that Mr Hado had made purchases on his account, for which he has paid and there were currently nine amounts outstanding on that account which he did not purchase and does not personally owe. He has given no other person permission to make those purchases on his behalf and the court should not be satisfied that those are debts which, in truth, are owed by Mr Hado to the petitioning creditor.
Alternatively, she submits the evidence demonstrates that Mr Hado is solvent. Mr Hado’s accountant has provided a written report noting, that Mr Hado is on a salary of approximately $113,000 per annum, that his outgoings are less than his income, that he has a home, which currently has over $400,000 in equity, and that he has no other relevant debtors. She submits that the material provided shows that both on a cash flow and balance sheet test Mr Hado is solvent and given the substantial equity in his home, he clearly would have other funds to call upon should they be required. The court should be satisfied that Mr Hado can and does pay his debts as and when they fall due and that he is solvent for present purposes.
The petitioning creditor submitted that the Court should conclude that there is in truth a debt owed by Mr Hado to the petitioning creditor and that it is in excess of the $5,000 statutory requirement. It was submitted that the debt arises in two ways. The first is by reason of the judgment debt for the goods that were ordered on Mr Hado’s account and not paid for. The second is for costs that have been incurred by the petitioning creditor in recovering or attempting to recover the debt owed to them, which is a contractual debt owed pursuant to clause 11c) of the terms and conditions of the account between Mr Hado and the petitioning creditor. Finally the petitioning creditor submitted that the evidence going to Mr Hado’s solvency was insufficient to satisfy the court that Mr Hado was indeed solvent.
Counsel for the petitioning creditor emphasised that whilst the relevant invoices were not addressed to the debt or personally, they were addressed to his trading name. It was also emphasised that the petitioning creditor’s evidence was that copies of statements summarising those invoices were sent to Mr Hado’s address which he confirmed was current. The petitioning creditor highlighted that at no time prior to the proceedings in February, 2020 did Mr Hado make any written dispute to the petitioning creditor about the amount claimed by it.
Counsel for the petitioning creditor pointed out that the terms and conditions applicable to the credit contract required Mr Hado to bring in writing notice of any dispute of an invoice amount within 90 days of that invoice becoming due and if he did not do so he waived any right to dispute that contractually. He did not raise any dispute. It was submitted that the Court should draw an inference that Mr Hado’s failure to raise a dispute about the amount claimed prior to the commencement of proceedings for his bankruptcy tells against the veracity of his evidence.
It was submitted that “On the agency point the respondent’s evidence is a bit cute, but – in that it doesn’t say much, save that the applicant has provided a number of delivery dockets that are signed by Mr Paul Lumani, Paul Lumani who witnessed Mr Hado’s signature on the credit application and guarantee on 8 August, 2018 where he says he’s a friend known to him at the time and, at least in the five month period approximately from August to December of 2018, they worked together on at least three other sites at the time.” Mr Hado’s evidence that he and Mr Lumani might have been in one of the petitioning creditor’s stores together when he made orders was highlighted. I was reminded of Mr Flannery’s evidence that he said that he saw them together in the Keilor Park store in the period August 2018 to December 2018 wearing shirts that stood out with their business uniforms. Indeed, his evidence was that he may have spoken to them.
The petitioning creditor submitted that I should not accept Mr Hado’s evidence about him not purchasing product from the Keilor Park store because the evidence of Mr van Riel demonstrated that throughout the trading relationship from August to December, 2018 and consistently from August to October, 2018 there were many orders made from the Keilor Park store on Mr Hado’s account that were paid.
Counsel for the petitioning creditor took me to a number of tax invoices put into evidence by Mr van Riel. The submission was that some of those tax invoices which were signed by Mr Lumani were evidence of the fact that the petitioning creditor only would have made the orders and delivered on them had the orders been properly made on Mr Hado’s account or by someone holding a “sensible authority” on his behalf. It was submitted that Paul Lumani had been seen in the store wearing the Render Group logo shirt and it was conceded that he possibly could have heard the password for Mr Hado’s account. It was submitted that “the agency of Mr Paul Lumani should be inferred in the circumstances for those reasons, that there were – there is quite a number of orders being made and paid for, including orders from the Keilor Park store.” The absence of any dispute by Mr Hado in respect of the invoiced amounts now in dispute was argued to support the notion that Mr Lumani had proper authority from Mr Hado to place orders on his account.
The petitioning creditor also argued that further debts are due to it by reason of the credit contract. I was directed to clause 11c) of the credit contract which provides that upon the happening of certain events, monies are owing and outstanding to the petitioning creditor on any invoice irrespective of whether the due date on the invoice has occurred or passed, and petitioning creditor reserves the right to charge the buyer any and all expenses incurred by it in order to recover the outstanding money owed to the petitioning creditor in terms of clause 11c).
Further, it was pointed out the clause 1(c) of the guarantee signed by Mr Hado requires him to indemnify the petitioning creditor against any loss it might suffer if Mr Hado has not met his obligations to the petitioning creditor under the credit contract. The petitioning creditor submits that by reason of Mr Hado’s admission that he owed $825 in respect of the Exsulite training, all of its recovery costs deposed to by Mr van Riel are due and payable and that represents a sufficient debt upon which the sequestration order might nonetheless be made.
The petitioning creditor then submits that given that the only amount paid by Mr Hado is $825, he cannot establish solvency because the amount owed to the petitioning creditor and claimed by it (less $825) remains. The petitioning creditor points out that there is no proper evidence of value of Mr Hado’s assets so as to establish solvency. There is no evidence of the actual mortgage via a bank statement and so the evidence of solvency is insufficient. Nor is there an assertion that he is trying to realise the alleged equity in this house by an impending sale or refinance of that property, so the court cannot find that he could use this property to pay the debt owed. He does not give any evidence of any cash at bank that would be sufficient to pay any amount owed to the applicant.
CONSIDERATION
I am satisfied that there was a credit agreement entered into between the petitioning creditor and Mr Hado on Mr Hado’s application in August, 2018. He also entered into a guarantee and indemnity notwithstanding that Mr Hado was a sole trader. His signature on the guarantee and indemnity was witnessed by Mr Lumani.
I have not accepted Mr Flannery’s evidence that he was familiar with Mr Hado or that he saw Mr Hado in the Keilor Park store at any time. I have accepted Mr Hado’s evidence that he has never attended the Keilor Park store. I accept Mr Hado’s evidence that he did not order the goods the subject of each of the invoices (save for the Exsulite training). None of the documents produced by the petitioning creditor demonstrate that Mr Hado ordered or collected those goods. Those documents tend to suggest that others, but particularly Mr Lumani may have done so.
Mr Lumani was not an authorised person to operate the account having regard to the terms of it. There is no evidence before me that Mr Lumani was given any actual authority to operate that account. Indeed, that proposition was not put to Mr Hado in cross examination. It was never suggested to him that Mr Lumani was acting as his agent for the purposes of ordering products from the petitioning creditor.
Moreover, the evidence is entirely insufficient to establish a case of ostensible or implied authority on the part of Mr Lumani. Even if he had been seen in the company of Mr Hado from time to time, there is no evidence to suggest that the person that served Mr Lumani on the occasions giving rise to the relevant invoices knew of any association between Mr Lumani and Mr Hado. There is no evidence from any person who was responsible for taking the orders from Mr Lumani at the time they were placed by him about what was said or observed at that time. Those matters would be critical to a proper determination about any liability on the part of Mr Hado for any goods ordered and taken by Mr Lumani. There is no evidence that at the relevant times Mr Hado associated himself in any way with Mr Lumani so as to clothe Mr Lumani with ostensible authority to transact on his account. There is no evidence for example that he was in fact wearing a shirt that was emblazoned with Mr Hado’s business logo. But even if there was, that of itself would be insufficient to establish ostensible authority in my view. The argument is like suggesting that a person ordering goods and wearing a T-shirt with the brand on was acting with the ostensible authority of the brand owner. There is no evidence to suggest that those serving Mr Lumani had ever seen him in the company of Mr Hado.
In my view there is simply no basis in the evidence whatsoever to suggest that Mr Lumani had ostensible or implied authority to operate on Mr Hado’s account with the petitioning creditor.
The onus to prove its case lies the petitioning creditor. It was open to the petitioning creditor to call Mr Lumani to give evidence that clarified the situation in relation to the receipt of orders and delivery of the relevant goods. The petitioning creditor did not do so. Nor did it lead any evidence about why it did not do so, although Mr Hado gave evidence that he had tried to contact Mr Lumani and was unable to do so. The absence of Mr Lumani to give evidence in the petitioning creditor’s case is significant given that the petitioning creditors case relies upon the proposition that Mr Lumani was an agent for Mr Hado.
The petitioning creditor’s evidence establishes that somebody has ordered goods on Mr Hado’s account and those goods have been taken by that person. The evidence does not establish and I am not satisfied that it was Mr Hado himself who ordered those goods or that the goods were ordered by anybody who was authorised to do so on his behalf. I am not satisfied that they were delivered to Mr Hado.
The onus to establish a debt sufficient to support the making of a sequestration order lies on the petitioning creditor. The petitioning creditor has not discharged that onus. I am not satisfied on the balance of probabilities that there is any debt owing by Mr Hado to the petitioning creditor. For that reason alone the creditor’s petition must be dismissed.
Mr Hado admitted that he owed $825 to the petitioning creditor for a training course. I accept Mr Hado’s evidence that he had never received an invoice for that amount and had repeatedly asked the petitioning creditor to provide an invoice to him for that amount. I accept his evidence that it was not until these proceedings and the first affidavit of Mr van Riel was provided to him that he received a copy of an invoice in relation to that training program. He then paid. That amount is no longer owing and in any event, of itself, is insufficient to support the making of a sequestration order.
Nor am I satisfied that the petitioning creditor’s recovery costs are appropriately claimed by the petitioning creditor against Mr Hado. Whilst the terms of the credit contract and the guarantee and indemnity provide for the petitioning creditor to recover its own recovery costs where debts are outstanding and action needs to be taken to obtain satisfaction for them, this is not one of those cases. Here, apart from the $825, I am not satisfied that there was ever a legitimate debt owing by Mr Hado to the petitioning creditor. Nor is the existence of the outstanding $825 sufficient in my view, to warrant a finding that all of the costs of recovery claimed by the petitioning creditor are due and payable under the credit contract or the guarantee and indemnity. That is because on the evidence that I have accepted an invoice in respect of those training costs was never provided to the respondent until he received a copy of that tax invoice through Mr van Riel’s affidavit in these proceedings.
Finally, in the event that I am in error to reach the conclusion I have just expressed, I am satisfied that Mr Hado has established solvency. He has given evidence via a report from his accountant about his solvency. The admissibility of that evidence was not challenged. It is therefore available to me as evidence in these proceedings. There was no challenge to any of the factual matters upon which the accountant had operated when Mr Hado was cross-examined. There is, in my view, no reason not to take the accountants opinion at face value.
I am satisfied and I find, that Mr Hado is solvent for the purposes of s.52(2)(a) of the Bankruptcy Act 1966 in that he is able to pay his or her debts such that even if there were debts sufficient to support the making of a sequestration order, as a matter of discretion I would refuse to make a sequestration order.
It follows that the sequestration order made by the Registrar must be set aside and the creditor’s petition dismissed. I so order.
I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Jarrett delivered on 19 January, 2021. Associate:
Dated: 19 January 2021
0
2
1