Hamood v Hagan
[2011] FMCA 231
•3 March 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HAMOOD & ANOR v HAGAN | [2011] FMCA 231 |
| BANKRUPTCY – Application for annulment of bankruptcy – no evidence to demonstrate that sequestration order ought not to have been made – omission and non-disclosure in statement of affairs. |
| Bankruptcy Act 1966 (Cth), ss.52(3), 153B |
| First Applicant: | DAVID SEMMY HAMOOD |
| Second Applicant: | D & P PROPERTIES PTY LTD |
| Respondent: | JOHN HAGAN |
| File Number: | BRG 1128 of 2010 |
| Judgment of: | Burnett FM |
| Hearing date: | 3 March 2011 |
| Date of Last Submission: | 3 March 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 3 March 2011 |
REPRESENTATION
| Solicitors for the First Applicant: | Holman Webb Lawyers |
| Solicitors for the Second Applicant: | Holman Webb Lawyers |
| The Respondent appeared on his own behalf |
ORDERS
That the application be dismissed.
That the Trustees’ costs be costs in administration of the estate.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 1128 of 2010
| DAVID SEMMY HAMOOD |
First Applicant
| D & P PROPERTIES PTY LTD |
Second Applicant
And
| JOHN HAGAN |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
This is an application made by the bankrupt, John Hagan for orders pursuant to s.153B of the Bankruptcy Act 1966 (Cth) for an annulment of the sequestration order made in respect of him on 23 December 2010. Section 153B provides that if a Court is satisfied that a sequestration order ought not to have been made, the Court may make an order annulling the bankruptcy.
There is some history preceding the making of the sequestration order which is relevant in this instance. The bankrupt was directed on
24 November 2010 to file material relevant to solvency. The matter was subsequently adjourned on 15 December and ultimately the matter was determined on 23 December. Much of the debate preceding the making of the sequestration order concerned the bankrupt’s capacity to cause a sale of certain land held by a company in respect of which he was a director and shareholder.
Nothing had materialised by 23 December and accordingly the sequestration order was made. However, in anticipation of a sale proceeding, he receiving a dividend and the bankrupt being able to discharge the debt which had enlivened the creditor’s application, the sequestration was stayed until 14 January in order to permit him an opportunity to pay the money and bring an application for an annulment of his bankruptcy. That is for the maximum 21 days permitted by s.52(3) of the Act. Orders provided the matter return before me on 17 January with a view to hearing an application for annulment, if any, on that day. In the result it appears the money was paid but the applicant bankrupt did not bring his application in the time which was directed by the orders but rather brought this application on 2 February.
The applicant says that his capacity to file the application was impeded by flooding which notoriously occurred in South East Queensland in the week commencing 14 January 2011. He says that he phoned the registry and was granted an extension in order to file his application and extension was said to be for two days. The orders required the filing of the application by the 14th which was the last day of the effective operation of the stay with a view to the matter being heard on the 17th which was the following Monday.
In the result for reasons that the applicant stated he was allowed two extra days to file his application which in the ordinary course, being two business days, could have meant the application ought to have been filed by the 19th at the latest. The application was in fact filed on 21 January which even on the basis of a Registrar’s permission was out of time not that anything turns particularly upon that matter.
What is important however is to observe that the sequestration order was made on the occasion it was because the Court was satisfied that as at the date of the making of the sequestration order the applicant could not satisfy the Court that he was solvent or that there was other sufficient cause why a sequestration order ought not be made and it is those matters to which I must have particular regard when I consider the application today.
Before addressing those matters specifically it is first necessary to observe this application, having been brought by the bankrupt reposes in him an onus to demonstrate those matters which are necessary to satisfy the making of an annulment order.
The applicant’s material is unquestionably defective. He has admitted as much and to that end has apologised. I have sought from the questioning of the applicant to ascertain whether or not the applicant’s position could be improved by the granting of an adjournment to enable him to procure whatever other documentary evidence might be necessary to satisfy me that his application might have some prospects were he permitted sufficient opportunity to procure that material.
Despite my inquiry of him, I have come to the view that there would be no utility in granting the applicant an adjournment because even with an adjournment, no additional material by him will advance his application. The applicant’s position is best summarised in the affidavit of Mr Rajendra Kumar Khatri a partner at Worrells Insolvency and Forensic Accountants, appointed as joint trustee to administer the affairs of the bankrupt. In his affidavit, he states that following the lifting of the stay he proceeded to administer the estate in what could be described as the usual manner.
He requested and received a copy of the bankrupt’s statement of affairs on 9 February 2011. His statement of affairs identified the bankrupt as having the following significant assets. They included an interest as a director and shareholder in GQL Developments Pty Ltd. The sum of $4,000.00 in the Suncorp Bank, three motor vehicles and an interest in a property at 75 Greening Road, Moodlu. There were requests made by Mr Khatri for further information particularly in respect of the interests in GQL Developments Pty Ltd and in respect of assets that were sold and of the motor vehicles. Unfortunately, no additional material has been received in response to those requests.
Mr Khatri indicated that he had in any event conducted a number of investigations which have raised in his mind a number of inconsistencies and omissions relating to material in the bankrupt’s statement of affairs. For instance, he noted that on 23 December 2010, he received correspondence from the Bendigo Bank confirming that the bankrupt holds an account with the Bendigo Bank jointly with his wife of which the balance was approximately $5,000.00. This sum was not disclosed in the statement of affairs.
Further a search of the database maintained by Queensland Transport identified the bankrupt owned a number of vehicles. One Ford Falcon and two Ford Fairlanes particulars of which are not known and have not been able to be valued. Furthermore, the bankrupt disclosed he had a property with an estimated resale value of $790,000.00 and that it was subject to a mortgage security debt of $680,000.00 leaving notional equity of $110,000.00. Mr Khatri’s inquiries revealed however that the property had something in the value of $600,000.00 to $650,000.00 and it was subject to a mortgage security debt over the property of $745,000.00.
I note in respect of the valuation of property that Mr Hagan has indicated that he regards himself as having some expert knowledge of these matters. Although the basis of his expertise has not been revealed, even allowing for Mr Hagan’s assessment, it would seem having regard to the value of the secured debt that after allowance for sale and disbursements on the sale of a property, it would seem that there is no equity in the property.
Another matter which was not revealed which is related to that property is that on 18 October 2010, a judgment was given against the bankrupt and an enforcement warrant for possession served in respect of the property. It is to be noted that recovery action hasn’t presently commenced. In addition, the trustee received correspondence from the Suncorp Bank confirming that the bankrupt held a number of accounts jointly with some companies but the value of the accounts was minimal. Also inquires revealed that there was a debt due to the Australian Taxation Office in the amount of $63,973,99 which was not disclosed in the statement of affairs.
That sum is particularised in the material attached to the affidavit of
Mr Khatri at page 70 which also encloses a table indicating the outstanding lodgement failures on the part of the bankrupt. It would seem that he has not lodged a tax return for the tax years ending
June 2003, June 2008, June 2009 or June 2010.
The significance of those matters can be seen by reference to the proof of debt lodged by the commissioner which shows that the commissioner claims outstanding tax for the years ended June 2000, June 2001, June 2002, June 2005 and June 2006.
The sums which are claimed are not insignificant although they are not large. However, they would tend to suggest some difficulty by the applicant in paying debts as and when they fall due. The trustee also noted that there was an issue in respect of an alleged unlawful withdrawal of $540,000 from the bankrupt’s bank accounts a matter which he wishes to further investigate.
In his statement of affairs, the bankrupt particularly listed two personal loans in respect of a credit card debt of $11,000.00 and a personal loan with Westpac in the sum of $20,000.00. The trustee’s early investigations reveal that the debt to Westpac Bank is now in the sum of approximately $35,000.00.
In addition, the trustee notes a claim by the bankrupt’s accountants or former accountants for unpaid fees of $4000.00 and a proof of debt from Mr David Hamood in the sum of 1.7 million dollars. That later claim is a matter which was not disclosed in the statement of affairs even as a contingent liability. The bankrupt claims to dispute the debt but despite that matter it was not mentioned. There is also a claim by Mr Bryant Kennedy for a sum of $100,000.00 which is also the subject of legal proceedings.
The expert view of Mr Khatri following the preliminary and limited investigation undertaken by him was that he was not able to conclude whether or not the bankrupt was solvent. He noted that the solvency would in part depend upon the contingent debts that are subject to the Court proceedings being finalised. However, one other matter which was agitated before me this morning and not presented to Mr Khatri concerns the prospective income of the bankrupt. The bankrupt claims in his statement of affairs an income of approximately $1,100.00 per week from a company called GRO Pty Ltd. GRO Pty Ltd is a company in respect of which the bankrupt claims an interest and which by reference to Exhibit 3 it can be seen seems to have a carriage agreement with Allens Asphalt Pty Ltd. The contract has a prospective life of three years. The terms of that agreement had not been disclosed to the trustee and brings into question the source of income to the applicant.
It is to be noted from the agreement that it is a written contract for the provision of transportation and cartage of goods. The document does not appear to provide for GRO Pty Ltd being an exclusive supplier of these services. Accordingly, I assume it is merely one contractor among many to supply services in terms of the agreement. The applicant contends that the contract will provide him with significant income in the future. That is a matter which is entirely contingent upon the quantum of work which the company Allen’s Asphalt Pty Ltd receives from the head contractor and sub-contracts to GRO Pty Ltd, a matter in respect of which there is no evidence before the Court to enable the Court to ascertain whether or not it has any real worth.
Having regard to the general reliability of the applicant’s assessment of matters which have been left to him to assess prior to the date of this contract, I do not have any confidence that the contract represents everything that the applicant would hope of it to ultimately realise. Finally, it will be noted that that contract was concluded on an unknown date, which I infer was after the sequestration order given its commencement date being noted as 15 February 2011. Accordingly, it was not a matter which would have been available to the Court to consider at the time that the sequestration order was made.
When regard is had to the facts as they appear from the trustee’s interim report following his early investigations, it seems apparent to me that at the time that the Court made the order, the affairs of the bankrupt were such that he was not in a position to pay his debts as and when they fell due. Nor was it perceivably likely that there was other sufficient cause as to why the order ought not to be made. Accordingly, in my view, he has failed to satisfy the Court that the sequestration order ought not to have been made. It follows he is not entitled to annulment in terms of s.153B of the Act. I direct that the application be dismissed.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Burnett FM
Associate:
Date: 14 April 2011
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