Evewall Pty Ltd v Carroll - [2010] FMCA 608

FEDERAL MAGISTRATES COURT OF AUSTRALIA

EVEWALL PTY LTD v CARROLL & ANOR

[2010] FMCA 608

BANKRUPTCY – PRACTICE & PROCEDURE – Application for adjournment of petition where finance to purchase property in which debtors are said to have an interest is forthcoming from the UK – where there are concerns about the genuineness of the finance offer.

Bankruptcy Act 1966, s.153A

Applicant:

EVEWALL PTY LIMITED
ABN 64 097 185 996

First Respondent:

GLENN RAYMOND CARROLL

Second Respondent:

MICHELLE ANNE CARROLL

File Number:

SYG 202 of 2010

Judgment of:

Raphael FM

Hearing date:

27 July 2010

Date of Last Submission:

27 July 2010

Delivered at:

Sydney

Delivered on:

27 July 2010

REPRESENTATION

Solicitor for the Applicant:

Mr R King

Solicitors for the Respondent:

Trisley Lawyers

ORDERS

Application for adjournment dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 202 of 2010

EVEWALL PTY LIMITED
ABN 64 097 185 996

Applicant

And

GLENN RAYMOND CARROLL

First Respondent

MICHELLE ANNE CARROLL

Second Respondent

REASONS FOR JUDGMENT

There comes before me today an application for an adjournment of the hearing of an application for a sequestration order against Glenn and Michelle Carroll. I found on the file a helpful chronology which would indicate that this matter has been before the court on a number of occasions. I am advised by Mr King, who appears on behalf of the applicants, that they number approximately seven. The debtors have against them a Supreme Court judgment in the sum of $181,227.44. They claim, in their notice of opposition, that they are solvent. It would appear that their solvency arises from their ownership of certain assets including a 25 per cent ownership in land at Singleton which is the subject of a contract for sale in the sum of $16,500,000, to a company known as Hellix Constructions Pty Limited.
The vendor of the land is a company known as Overdean Group Pty Ltd, which the contract of sale reveals is the trustee for a number of trusts. I assume that the debtors are the beneficiaries of one or more of those trusts and that is how they claim to be entitled to some of the proceeds of sale.
The contract was exchanged on 9 April 2010 and it would appear that time was of the essence and completion was due on 4 June. That did not occur. There was little point in the vendor rescinding the contract and taking a deposit because the deposit was only one dollar. It would appear that the vendor agreed with the purchaser that the purchaser would have a further opportunity to find finance to enable it to complete.
The vendor, through its director, Mr Robert Mitrevski, who has sworn affidavits on 29 June and 27 July 2010, apparently found finance from an English company known as Savitur Limited. That company, by way of a facility offer letter dated 23 May 2010, purported to offer Hellix Constructions a commercial loan of $50 million. It is an interesting letter. The company boasts no telephone number and an email address associated with a search engine. The letter is signed by a director, Mr Barra, who is also the secretary. A document tendered to the court by the applicant and marked “1”, their company search by Clawdens, United Kingdom, indicates that Mr Barra is something of a professional director, being a director of 26 companies, from three of which he has resigned, he remains with one, and the balance have been dissolved. The one company that he remains a director of is known as A1 Workwear Limited.
The company which formed Savitur was known as A1 Company Services Limited. Mr Barra’s current address is in Wolverhampton but A1 Company Services appears to operate out of 788 to 790 Finchley Road, London, and I would infer, from that documentation, that Mr Barra is the promoting director of the company rather than the person currently running it, who may be the second director, a Mr Ferretti, who has given an address in Moorebank, Sydney, and was appointed on 1 June 2010
The facility letter, offering a facility of $50 million is commendably brief. It has very few conditions. One is that Savitur’s solicitor, who is unnamed, is to complete all necessary searches and documentation. One wonders who they may be. Another is that prior to settlement Savitur requires the borrowers to take out policies of insurance, including public liability for a minimum of $10 million, a remarkably small amount for what would appear to be such a large piece of land which is about to undergo many millions of dollars worth of development.
The security for the facility is the land and the plans and specifications relating to the development but does not include a charge upon the company. There is no facility fee, other than an establishment fee of two per cent that is not paid until settlement, a most unusual situation for finance companies, and the rate of interest is a generous 9.75%. Interest is said to be debited “from the nominated cash account” on the last day of each month but the nominated cash account is not described.
That was the situation on 23 May 2010. On 26 July 2010 Mr Mitrevski received a further letter, presumably by fax, or possibly by email, from Mr Barra, which states:
“We write in reference to our letter of 23 May 2010 to Hellix Constructions Pty Limited and our recent discussions of the same.
We acknowledge the error of the date of the Facility Offer Letter and advise that the true date of the letter is 23 June 2010.
Furthermore, we advise the following:
(1) Due to various regulatory issues between our European partners and Australian Banking authorities, unforeseen details occurred in finalizing your loan facility.
(2)We confirm that the facility agreement between Savitur Limited and Hellix Constructions Pty Limited is valid and binding.
(3)We advise that the funds allocated to your loan facility are being held in trust awaiting settlement.
(4)We advise that you will be at liberty to make the first drawdown on your loan facility on 14 August 2010. The first drawdown will enable settlement of the security property referred to as “Gowrie Links Estate” being Lots 1, 1221 & 41 Maison Dieu Road, Singleton, New South Wales, 2330.
Should you have any questions, please contact the undersigned.”
The debtors argue that these affidavits indicate that the sale of the property is to go ahead and that they should be entitled to yet another adjournment so that this can occur and sufficient funds will be released to enable them to repay any debts that they owe, including the debt of the creditor. This court takes a generous view of applications for adjournment where it would seem that debts can be paid so that parties need not enter into bankruptcy. But in this particular case the creditor’s petition was issued on 3 February and the matter has had a large number of adjournments already. I have to say that I am concerned about the genuineness of the finance offer to the purchasers of the property.
In my experience, as a solicitor of almost 30 years in practice, including practice in London in large commercial firms and 10 years on this Bench, I have seldom seen such a vague document purporting to constitute a genuine loan agreement for $50 million. What I have seen is documents of this type being produced to stave off unpleasant legal effects, and the letter of 26 July, making reference to “various regulatory issues between our European partners and Australian banking authorities” only adds to that suspicion.
The vendor of the property is a company. It is not the debtors themselves. So, even if this application for a sequestration order proceeded today and I made the order it would not affect the sale of the property. If the sequestration order was made against the debtors they would still be able, once the funds had flowed through to them as was advised would happen, to make an application to the court for annulment on the basis that all their debts had been paid pursuant to the provisions of s.153A of the Bankruptcy Act 1966 (the “Act”).
If an annulment is obtained under that provision it is as if the applicants were never bankrupt and any distress they may have felt as a result of the orders being made would be only temporary. The amount owed is not inconsiderable. The debtors have had ample opportunity to resolve their indebtedness. It is now time that the process take its course. The application is denied.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: