Hoy, in the matter of Hurst-Meyers v Hurst-Meyers
[2024] FedCFamC2G 187
•1 March 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Hoy, in the matter of Hurst-Meyers v Hurst-Meyers [2024] FedCFamC2G 187
File number(s): CAG 38 of 2022 Judgment of: JUDGE MANOUSARIDIS Date of judgment: 1 March 2024 Catchwords: BANKRUPTCY – application for review of sequestration order made by Registrar – whether creditor has established right to a sequestration order – whether debtor has shown he is able to pay his debts – whether debtor has shown there is some other sufficient cause for dismissing petition – application for review dismissed. Legislation: Bankruptcy Act 1966 (Cth) ss 5, 43, 47, 52, 95
Federal Circuit and Family Court of Australia Act 2021 (Cth) s 256
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) rr 2.02, 4.02, 4.04, 4.06
Cases cited: Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728
Bechara v Bates [2021] FCAFC 34
Cheung v Burness (Trustee) [2016] FCA 1381
Conlan v Mladenis [2007] FCA 1129
Deputy Commissioner Of Taxation v Caporale [2013] FMCA
Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58
Hoy v Hurst-Meyers (No 3) [2023] ACTSC 6
Hoy v Hurst-Meyers (No 4) [2023] ACTSC 17
Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28
Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596
Rigg v Baker [2006] FCAFC 179
Sandell v Porter (1966) 115 CLR 666
Westview Frames and Trusses (NSW) Pty Ltd v Murabito [2022] FedCFamC2G 897
Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212
Division: General Number of paragraphs: 72 Date of last submission/s: 1 March 2024 Date of hearing: 9 February 2024 Counsel for the Applicant: Ms A Costin, by video Solicitor for the Applicant: Elringtons Lawyers The Respondent: Appeared in person, by telephone ORDERS
CAG 38 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF RALPH GEORGE NOEL NANCY HURST-MEYERS
BETWEEN: GAVIN ROBERT HOY
Applicant
AND: RALPH GEORGE NOEL NANCY HURST-MEYERS
Respondent
ORDER MADE BY:
JUDGE MANOUSARIDIS
DATE OF ORDER:
1 MARCH 2024
THE COURT ORDERS THAT:
1.The application for review of the sequestration order made against the estate of the respondent by the Registrar on 29 September 2023 is dismissed.
2.The respondent pay the applicant’s costs.
3.The applicant’s costs be paid out of the estate of the respondent, and have the same priority as the costs of the petition.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
INTRODUCTION
The respondent, Mr Hurst-Myers, applies for the review of orders made by a Registrar of this Court on 29 September 2023, which include an order that the estate of Mr Hurst-Myers be sequestrated.
The act of bankruptcy on the basis of which the Registrar made the sequestration order is Mr Hurst-Meyer’s failure to comply with the requirements of a bankruptcy notice (Bankruptcy Notice) issued on the application of the petitioning creditor, Mr Hoy, on 5 May 2022. The Bankruptcy Notice demands that Mr Hurst-Myers pay to Mr Hoy $220,142.19. That represents the amount of a judgment (Judgment) entered in the Supreme Court of the Australian Capital Territory (ACTSC) on 6 April 2022 pursuant to an order made by Elkaim J on 30 March 2022.
Mr Hurst-Myers does not dispute that Mr Hoy has satisfied the preconditions for the making of a sequestration order under the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) and the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules). Mr Hurst-Myers submits that a sequestration ought not be made because he is able to pay his debts. Mr Hurst-Myers makes a number of other submissions which I will identify and consider later in these reasons.
NATURE OF REVIEW
Mr Hurst-Myers has applied for a review of the Registrar’s orders under s 256(1) of the Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFC Act) which, together with s 256(2), provides:
(1)A party to proceedings in which a delegate has exercised any of the powers of the Federal Circuit and Family Court of Australia (Division 2) under section 254 may:
(a) within the time prescribed by the Rules of Court; or
(b) within any further time allowed in accordance with the Rules of Court;
apply to the Court for review of that exercise of power.
(2)The Federal Circuit and Family Court of Australia (Division 2) may, on application under subsection (1) or on its own initiative, review an exercise of power by a delegate under section 254, and may make any order or orders it thinks fit in relation to the matter in respect of which the power was exercised.
The time for applying for review has been prescribed by r 2.02(3) of the Bankruptcy Rules, and it is within 21 days after the day on which the power was exercised.
A review under s 256(2) of the FCFC Act is a “hearing de novo”. That means that an: [1]
applicant for review under [s 256(2)] is under no obligation to demonstrate error on the part of the Registrar, and does not need to establish that the Registrar’s exercise of discretion miscarried in the sense described in House v The King [1936] HCA 40; (1936) 55 CLR 499 at 505: Pattison v Hadjimouratis [2006] FCAFC 153 at [153]- [154].
[1] Conlan v Mladenis [2007] FCA 1129, at [5] (Sundberg J)
Further:[2]
The hearing (or rehearing) of the creditor’s petition is not prosecuted by the debtor (applicant for review) but by the creditor in the proceeding in which the registrar’s order was made.
The application for review is a demand that the claim for relief (the sequestration order) be heard by a judge.
The onus is upon the creditor to prosecute its petition. The only onus of the debtor/bankrupt against whose estate a sequestration order has been made is to prove either solvency or any other sufficient cause under s 52(2) of the Bankruptcy Act 1966 (Cth).
[2] Bechara v Bates [2021] FCAFC 34, at [27]
PROOF OF MATTERS IN S 52(1) OF THE BANKRUPTCY ACT AND BANKRUPTCY RULES
Subsection 52(1) of the Bankruptcy Act provides as follows:
At the hearing of a creditor’s petition, the Court shall require proof of:
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
The matters that must be stated in a creditor’s petition are prescribed by s 47(1A) of the Bankruptcy Act, which provides that if “the rules of court prescribe a form for the purposes of this subsection, the petition must be in the form prescribed”. Rule 4.02 of Bankruptcy Rules prescribes a form for the purposes of s 47(1A) of the Act. The form requires the creditor, among other things, to identify the act of bankruptcy on which the creditor relies, and the debt or debts the creditor claims the debtor owes it.
In the creditor’s petition filed on 25 November 2022, Mr Hoy claims Mr Hurst-Myers failed to comply on or before 10 June 2022 with the requirements of the Bankruptcy Notice served on him on 19 May 2022.[3] Mr Hoy relies on the affidavit of service of the Bankruptcy Notice made by Mr Ian Woodward on 28 November 2022. I am satisfied the Bankruptcy Notice was served on Mr Hurst-Myers on 19 May 2022; that Mr Hurst-Myers failed to comply with its requirements by 10 June 2022; and, for that reason, he committed an act of bankruptcy on that day.
[3] Affidavit verifying creditor’s petition G R Hoy 25.11.2022
Mr Hoy filed a creditor’s petition on 25 November 2022. The creditor’s petition is in the prescribed form,[4] and, as required by s 47 of the Bankruptcy Act, Mr Hoy has made an affidavit verifying it.[5] Mr Hoy also filed, at the time he filed the creditor’s petition, an affidavit required by r 4.04(1)(a) of the Bankruptcy Rules,[6] and, on 29 November 2022, Mr Woodward’s affidavit of service of the Bankruptcy Notice. Mr Hoy also filed a “Trustee Consent to Act Declaration” signed by Mr Stephen John Hundy.
[4] Form B6 G R Hoy 25.11.2022
[5] Affidavit verifying creditor’s petition G R Hoy 25.11.2022
[6] Affidavit of Search M J Evelyn, 25.11.2022
The creditor’s petition filed on 25 November 2022, together with the affidavit required by r 4.04(1)(a) of the Bankruptcy Rules,[7] and the affidavit of service of the Bankruptcy Notice,[8] were served on Mr Hurst-Myers on 4 December 2022.[9] Further, I read an affidavit of debt,[10] being an affidavit which, under r 4.06(4) of the Bankruptcy Rules, must be made as soon as practicable before the hearing of the creditor’s petition, and also an affidavit of search,[11] as required by r 4.06(3) of the Bankruptcy Rules.
[7] Affidavit of Search M J Evelyn, 25.11.2022
[8] Affidavit of I Woodward 28.11.2022
[9] Affidavit of Service M Zvidza 15.12.2022
[10] Affidavit of Debt G R Hoy 25.05.2023
[11] Affidavit of Search M J Evelyn, 08.02.2024
I am satisfied Mr Hoy has proved the matters he is required to prove under s 43 and s 52(1) of the Bankruptcy Act and the Bankruptcy Rules and that, subject to the matters on which Mr Hurst-Myers relies, a sequestration order may be made against his estate.
MATTERS ON WHICH MR HURST-MYERS RELIES
In his Notice Stating Grounds of Opposition to the Creditor’s Petition, Mr Hurst-Myers states he is solvent. At the hearing on 9 February 2024, I understood Mr Hurst-Myers to rely on an additional or broader ground, which related to the conduct of Mr Hoy’s lawyers which Mr Hurst-Myers submits prevented him from selling a property or properties in which he has substantial equity and using the proceeds of sale to pay the Judgment.
I will arrange this part of my reasons as follows. First, I will identify the affidavits that were read at the hearing, and the basis on which I read those affidavits. Second, I will identify the affidavit Mr Hurst-Myers provided after the hearing, pursuant to leave I granted him at the hearing. Third, I will set out in narrative form the course of the proceeding or proceedings in which, Mr Hurst-Myers submits, Mr Hoy, through his lawyers, prevented Mr Hurst-Meyers from realising his property or properties to pay the Judgment. (In that section of my reasons, unless the context suggests otherwise, unqualified statements of fact are to be taken to reflect findings of the facts stated.) Fourth, I will identify, and then consider, the grounds on which Mr Hurst-Meyers relies for claiming that a sequestration order should not be made.
Evidence
At the hearing I read an affidavit Mr Hurst-Myers made on 9 February 2021. I did so on the following basis:[12]
. . . I’m going to read this affidavit, but the position I take is as follows. If the material is clearly inadmissible in the sense of its [being] hearsay, or if it’s a contention without it being supported by documents where you would expect a document would exist to support it, it’s not going to be a basis for me to make a finding. And I think, I don’t know how long you've been involved in litigation, but I think you will understand that. So I can only act on evidence. . . . . [T]here seems to be a lot of documents here. But if it’s clear hearsay, or if it’s a contention, or if it’s an opinion unsupported by documents, then it’s not going to be anything that I'm going to take account of or make a finding on.
[12] T19.20
Mr Hurst-Meyers has annexed to this affidavit an affidavit he made on 18 October 2023, and I will treat this as a separate affidavit.[13]
[13] Affidavit of R G N N Hurst-Meyers 18.10.2023
Mr Hoy relied on two affidavits made by his lawyer, Mr Evelyn, on 5 February 2023. I formally read the shorter of the two affidavits, but I omitted to formally read the longer of the two affidavits. The parties, however, proceeded on the basis that I had read the longer of the two affidavit. In that affidavit Mr Evelyn deposes to a number of conversations with Mr Hurst-Myers. Given the time at which Mr Hurst-Myers received Mr Evelyn’s affidavit, I granted Mr Hurst-Myers leave to file and serve an affidavit which responds to the conversations to which Mr Evelyn deposes in his affidavit. Mr Hurst-Myers lodged for filing an affidavit made on 20 February 2024 which was in a form that prevented it from being accepted for filing. I have marked that document as “Exhibit A”.
Evidence and some findings
Background
By a document dated 18 August 2016, Mr Hoy, Mr Hurst-Myers, RHM Industries Pty Ltd (RHM), and Assured-Holdings Australia Pty Ltd entered into a partnership agreement (Partnership Agreement).[14] The purpose of the Partnership Agreement was to develop a property in Old Reynella, Adelaide (Reynella Property). At the time the Partnership Agreement was made Mr Hurst-Myers owned the Reynella Property, having purchased it from the trustee of his mother’s estate.[15]
[14] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [28]
[15] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [30]
The Partnership Agreement provided that Mr Hoy would contribute $200,000 to the partnership, but he could withdraw from the Partnership Agreement at any time and, on his withdrawing, his investment of $200,000 would be returned to him.[16] Mr Hoy made three payments towards the partnership totalling $200,000 - $179,000 on 19 August 2016, $1,000 on 28 September 2016, and $20,000 on 19 October 2016.[17]
[16] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [32]-[34]
[17] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [36]
Sometime before 15 September 2017 Mr Hoy informed Mr Hurst-Myers that he wished to leave the partnership. Mr Hurst-Myers acknowledged this wish in a text message he sent to Mr Hoy on 15 September 2017 in which he stated that he was seeing “my legal people next week and they’ll draw up the withdrawal papers based on our Partnership Agreement”, and that, after Mr Hoy was to sign, date and return the withdrawal papers, Mr Hurst-Myers would “get the funds to you”.[18] Mr Hurst-Myers sent another text message to Mr Hoy on 1 November 2017 stating that all was “on schedule for your 200k”.[19] On 6 May 2019 Mr Hurst-Myers sent an email to Mr Hoy in which he said: “Please don’t worry. I am working on a solution and will return your investment as per our agreement”.[20]
[18] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [38]
[19] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [40]
[20] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [41]
Before he entered into the Partnership Agreement Mr Hurst-Myers and Mr Hoy, on 19 and 20 July 2016 respectively, signed a contract (Residential Contract) to purchase a property (Corn Street Property). The Residential Contract provided for a purchase price of $250,000, and it contained the following clause:[21]
This contract is subject to the Plan of Division for the within described land being accepted for deposit by the Registrar General of Land Titles Office on or before 26th day of September 2016.
[21] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [45]
The plan of subdivision had not been accepted, at least not by 30 March 2022.[22]
[22] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [46]
On 31 July 2019 Mr Hoy commenced a proceeding in the ACTSC against Mr Hurst-Myers and RHM in which he claimed judgment in the amount of $200,000, being the $200,000 he had contributed towards the partnership but which Mr Hurst-Meyers had not returned, and a declaration that the Partnership Agreement had ended. Mr Hurst-Myers defended the claims principally on the basis of the contention that the Residential Contract and the Partnership Agreement constituted a single overriding agreement, and that the Partnership Agreement “was subsequent and subordinate to” the Residential Contract.[23] Mr Hurst-Myers claimed that the Residential Contract extinguished Mr Hoy’s entitlement to the $200,000 and, moreover, rendered Mr Hoy liable to pay damages to Mr Hurst-Myers. Mr Hurst-Myers filed a defence and a cross-claim which relied on these contentions.[24]
[23] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [48]
[24] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [42]
Elkaim J’s judgment of 30 March 2022
Elkaim J heard Mr Hoy’s and Mr Hurst-Myers’s claims on 21, 22, and 25 March 2022, and his Honour delivered reasons for judgment on 30 March 2022. His Honour did not accept Mr Hurst-Myers’s contention that the Partnership Agreement was subsequent and subordinate to the Residential Contract, at least not in a way that defeated Mr Hoy’s right to withdraw from the Partnership on the basis that his contribution of $200,000 be returned to him. His Honour relied on a number of matters. First, his Honour found that no plan for subdivision had been accepted, and his Honour did not accept Mr Hurst-Myers’s contention that the time for acceptance had been extended.[25] Second, what Mr Hurst-Myers alleged was the document that constituted the Residential Contract was different from the document Mr Hoy alleged was the document that constituted the Residential Contract.[26] Third, before the hearing, Mr Hurst-Myers had sent text messages in which he acknowledged Mr Hoy was entitled to the return of the $200,000 he had contributed towards the partnership, and Mr Hurst-Myers did not attempt to rely on the Residential Contract as a reason for not returning the $200,000 to Mr Hoy.[27]
[25] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [46]
[26] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [54]
[27] Hoy v Hurst-Meyers (No 2) [2022] ACTSC 58, [54]
On 30 March 2022, on the basis of the reasons for judgment his Honour published that day, Elkaim J ordered that there be a verdict and judgment against Mr Hurst-Myers and RHM in the sum of $220,142.19, and that Mr Hurst-Myers and RHM pay Mr Hoy’s costs. These orders were entered on 6 April 2022. Mr Hoy’s lawyer filed a bill of costs for assessment, and Mr Hoy and Mr Hurst-Myers agreed that Mr Hoy’s costs should be assessed in the amount of $112,000.[28]
[28] Affidavit of M J Evelyn, 05.02.2024, [6]. Mr Evelyn has made two affidavits on 5 February 2024. In the footnotes to these reasons, I only refer to the longer of the two affidavits (47 paragraphs).
Appeal against Elkaim J’s orders
On about 12 May 2022 Mr Hurst-Myers and RHM filed a notice of appeal against Elkaim J’s orders, which included the Judgment.[29] On 27 May 2022 Mr Hoy applied for an order for security of the payment of his costs on appeal and, on 14 July 2022, Hurst-Myers and RHM were ordered to pay security in the amount of $35,000, and also Mr Hoy’s costs of that application. A certificate for those costs in the amount of $24,500 was later issued.[30] Proceedings on the appeal were also stayed until the security was provided.
[29] Affidavit of M J Evelyn, 05.02.2024, [9]
[30] Affidavit of M J Evelyn, 05.02.2024, [10]
Mr Hurst-Myers and RHM provided the security on 14 July 2022, and the hearing of the appeal was set down to be heard on 8 May 2023, which was later moved to 12 May 2023.
Application to set aside Bankruptcy Notice
In the meantime, on 6 June 2022 Mr Hurst-Myers applied to set aside the Bankruptcy Notice. That application was heard and dismissed, and Mr Hurst-Myers was ordered to pay Mr Hoy’s costs. Those costs have since been assessed, and a certificate of taxation has been issued in the amount of $31,000.[31]
[31] Affidavit of M J Evelyn, 05.02.2024, [17]-[18]
Winding up of FHP
In addition to applying for the issue of a bankruptcy notice against Mr Hurst-Myers, Mr Hoy, through his lawyer, served on FHP a creditor’s statutory demand and, on 22 August 2022, Mr Hoy filed an application to wind up FHP. On 16 February 2023 FHP was ordered to be wound up, and Mr Hurst-Myers was ordered to pay Mr Hoy’s legal costs on an indemnity basis to the extent FHP was unable to do so.[32]
[32] Affidavit of M J Evelyn, 05.02.2024, [8], [19], [20]
Application for stay of Elkaim J’s orders
As I have already noted, Mr Hoy filed his creditor’s petition on 25 November 2022, and it was allocated a first return date at 11.00 am on 20 January 2023. At 3.06 pm on 19 January 2023, Mr Evelyn was notified that there had been listed before the ACTSC, at 4.15 pm on that day, an application Mr Hurst-Myers and RHM had made for a stay of execution of the Judgment. The hearing of the application was adjourned to 10.30 am on 20 January 2020, when Loukas-Karlsson J made an order staying the execution of the Judgment. Later in the day, the creditor’s petition was adjourned to 26 May 2023.[33]
[33] Affidavit of M J Evelyn, 05.02.2024, [21]-[23]; Hoy v Hurst-Meyers (No 3) [2023] ACTSC 6
On 3 February 2023, Loukas-Karlsson J imposed the following conditions on the stay her Honour had earlier made (3 February Orders):[34]
[34] Affidavit of M J Evelyn, 05.02.2024, [24]; Hoy v Hurst-Meyers (No 4) [2023] ACTSC 17
(a) Subject to further order or direction:
(i) The estate of Ralph George Hurst-Meyers (also known as Ralph George Noel Nancy Hurst-Meyers) in 35 Maranboy Street, Fisher, being Fisher Section 29 Block 7, is charged with payment of the judgment debt (including interest under r 1620 of the Court Procedures Rules 2001 (ACT)) and costs ordered by Elkaim J on 30 March 2022.
(ii) The defendants must not by themselves, their servants or agents sell, charge, mortgage or otherwise deal with or dispose of or cause or permit to be sold, charged, mortgaged or otherwise dealt with or disposed of, all or any of their assets whether held beneficially or otherwise except for the purposes of paying expenses incurred in the ordinary course of business, including legal expenses incurred in prosecuting the appeal, or any litigation between these parties in the Federal Court of Australia or the Federal Circuit and Family Court of Australia.
(b) Subject to further order or direction, the defendants have liberty to apply on 3 days’ notice to vary the conditions referred to at order (a)(i) and (a)(ii) on the following conditions:
(i) Any such application is limited to proposing alternative conditions relating to permitting the sale of the Queanbeyan property or substituting a different property for the charge property in (a)(i).
(ii) Any such application is supported by affidavit evidence and supporting documentation.
There is in evidence an email from Mr Satsias, a lawyer from LegalX Group, sent to Mr Hurst-Meyers on 14 February 2023:[35]
Hi Ralph, as discussed, we will not re-consider our decision to cease acting for you.
Upon closer examination of the reasons for the decision, particularly paragraph 40 and 45, it is clear to us that you must apply to the court for permission to sell 5 Leck St, Crestwood.
You cannot settle on the sale without the courts permission.
Please urgently advise us as to whom your newly appointed solicitor is for the sale of 5 Leck Street.
We will need to inform Elrington’s Lawyers that we no longer act for you in due course as we are not allowed to mislead them to think that that we do.
[35] Affidavit of R G N N Hurst-Meyers 09.02.2024, page 21
Consent dismissal of appeal against Elkaim J’s orders
On 11 May 2023 the parties to the appeal consented to its being dismissed with costs, and that the $35,000 that had been paid into court as security for Mr Hoy’s costs be paid to him, although not as part of any agreement that the payment to Mr Hoy of the $35,000 would be in full and final settlement of Mr Hoy’s costs.[36]
[36] Affidavit of M J Evelyn, 05.02.2024, [13]-[16]
Events leading to making sequestration order
On 11 May 2023 Mr Hurst-Meyers filed and served an affidavit with a large volume of annexures which included an agency agreement for the marketing and sale of the Corn Street Property. Mr Evelyn conducted a search on Google and ascertained that the Corn Street Property had been listed for auction on 20 May 2023. That led Mr Evelyn to include in a letter he sent by email on 17 May 2023 to Mr Johannsen, Mr Hurst-Meyers’ then lawyer, the following:[37]
[37] Affidavit of M J Evelyn, 05.02.2024, [26]-[28]; annexure MJE-12
Our client’s material in response is due by 23 May 2023, and the writer and Counsel will then need to prepare for the hearing on 26 May 2023.
Your client has not previously disclosed any intention to deal with 28 Corn Street, Old Reynella.
However, an examination of your client’s affidavit (which included a marketing agreement) has prompted us to investigate that property, and it has come to our attention that your client has listed the property for sale - in particular, for sale by way of an auction set down for this Saturday, 20 May 2023.
It is unclear to us why your client has not disclosed this to us. We accept that the sale of this property may be material to the question of your client’s solvency. Had we not encountered this information by sheer fortune and by our own independent investigations, we would not have been aware that this property was even on the market, let alone due for imminent sale.
We call on your client to provide our client with full and frank disclosure of the following information no later than 12.00 pm on Monday, 22 May 2023:
1. Disclosure of the outcome of the auction on 20 May 2023, including a copy of the contract for sale.
2. Disclosure of the amount currently charged against the title to that property or payable upon disposal, including:
a. The amounts owing under any loans secured against Corn Street. In this regard, we have reason to believe that there is a loan account for RHM Industries Pty Ltd which may also be connected to or secured against Corn Street.
b. The amount charged against the property in respect of the judgment debt noted on the title to the property.
c. An estimate of the capital gains tax liability that your client will incur upon disposal of the Corn Street property.
d. The amount payable to the agent by way of commission upon completion of the sale.
If the above information is provided and demonstrates (either alone or together with other information) that your client’s claim to solvency may have substance, our client would be prepared to consent to an adjournment of the bankruptcy proceedings pending completion of that sale.
If your client should fail to produce this information to our client prior to that time, our client will need to prepare for the hearing in reliance only upon what your client has already produced. If you, or your client then appears at the hearing and seeks an adjournment on the basis that there has been or will be a disposal of Corn Street which is or may be probative of solvency, our client’s costs in preparing evidence and otherwise preparing for the hearing may be wasted.
Our client reserves the right to produce this letter to the Court on the question of costs.
Mr Evelyn did not receive a response.
The creditor’s petition came on for hearing before Registrar Lackenby on 26 May 2028. Mr Hurst Meyers informed the Registrar that he intended to sell the Corn Street Property. He said that property failed to sell at an auction on 20 May 2023, but Mr Hurst-Meyers was negotiating with two prospective purchasers. It was submitted on behalf of Mr Hoy that it was not open to Mr Hurst-Meyers to sell the property in the manner he represented he would without obtaining a variation of the 3 February Orders. Mr Hurst-Meyers disagreed; and in response to the Registrar’s question of the time he needed to sell the Corn Street Property, Mr Hurst Myers said he needed three months. The Registrar adjourned the hearing of the creditor’s petition to 29 September 2023.[38]
[38] Affidavit of M J Evelyn, 05.02.2024, [29]-[34]
According to Mr Evelyn, after the hearing, he and Mr Hurst-Meyers exchanged words to the following effect:[39]
[39] Affidavit of M J Evelyn, 05.02.2024, [35]
Mr Evelyn:Do not leave this to the last minute. You asked for 3 months and you have been given 4 months. It is important that you move on this quickly. We don’t want to turn up in September and be told that you exchanged on a contract yesterday, or that it is listed for auction soon. You need to have sold the property and paid our client, otherwise I can assure you that we will press for the bankruptcy order to be made on the next occasion.
The orders made by Justice Loukas-Karlsson are clear. You can’t dispose of property, except in the way those orders provide - there is nothing in them about selling the property to pay debts, even to pay our client. You need to go to the Court and ask for those orders to be varied. Our client wants to be paid, and will not oppose the orders being varied as long as the proposed sale is reasonable and we can be assured that our client will be paid once the property sells.
Mr Hurst-Meyers: It doesn’t make any sense to bring it back to the Supreme Court until I have found a buyer first.
The orders don’t stop me from selling the property, Justice Loukas-Karlsson just wanted me to come and tell her once I have sold it.
Mr Evelyn:I cannot give you advice in the construction of the orders. All I can say is that your interpretation of the orders does not appear to match what the orders say. Please read the orders carefully.
Mr Hurst-Meyers does not, in Exhibit A, address this part of Mr Evelyn’s affidavit.
According to Mr Evelyn, he continued to monitor the marketing of the Corn Street Property.[40] On 1 September 2023 Mr Evelyn sent to Mr Hurst-Meyers an email in which he said, among other things, that he had not heard from Mr Hurst-Meyers about the proposed sale of the Corn Street Property, and expressed his concern that Mr Hurst-Meyers “may soon enter into a contract for the of” the Corn Street Property “which may (intentionally or otherwise) contravene the terms of” the stay orders.[41]
[40] Affidavit of M J Evelyn, 05.02.2024, [36]
[41] Affidavit of M J Evelyn, 05.02.2024, [37], annexure MJE-14
According to Mr Evelyn, on 9 September 2023 a marketing website showed that the Corn Street Property was off-market; and at 10.40 am on 11 September 2023 he telephoned Mr Hurst-Meyers to inquire why that was so. The following words were exchanged:[42]
[42] Affidavit of M J Evelyn, 05.02.2024, [39]
Mr Hurst-Meyers: I have completed the subdivision payments and am now selling the property as separate blocks with a new agent. I have also paid Jeanes and Sommerville and moved to a new surveyor. I will go back to the Supreme Court once I have a signed Contract.
Mr Evelyn:I am concerned that if the contract is executed that you will breach the Supreme Court order.
Mr Hurst-Meyers: I will bring it back before the Supreme Court once the contract is signed by the buyer.
Mr Evelyn:So only signed by the buyer, and not exchanged?
Mr Hurst-Meyers: Yes
Mr Evelyn:OK. Have you read my letter from earlier this month?
Mr Hurst-Meyers: Yes
Mr Evelyn:If you sell the property, will it settle before the end of this month?
Mr Hurst-Meyers: I hope so, I have had offers from cash buyers of offers of more than a million dollars.
Mr Hurst-Meyers does not dispute he had a conversation with Mr Evelyn on 11 September 2023; and he does not dispute he had a conversation to the effect Mr Evelyn recounts. Mr Hurst-Meyers says that he asked Mr Evelyn to consent to the discharge of the 3 February Orders, but Mr Evelyn refused.[43]
[43] Exhibit A, [14]
On 18 September 2023 Mr Hurst-Meyers telephoned Mr Evelyn, and informed him that the Corn Street Property had been “torrensed off” from the rest of the land (by which Mr Evelyn understood Mr Hurst-Meyers to mean that he had registered a subdivision of the land), and that it would be sold by auction soon.[44] It appears from the email Mr Evelyn sent to Mr Hurst-Myers on 19 September 2023 (to which I refer in the following paragraph),[45] that Mr Hurst-Myers informed Mr Evelyn that he would be going to an online auction on 28 September 2023 with a new agent; he required Mr Hoy to remove the current caveat on the property; Mr Hurst-Meyers would be making an application to the ACTSC to vary the conditions that restrained him from dealing with the property; and that, if one or more properties were sold at an auction, he considered that the hearing of the creditor’s petition that was due to be heard on 29 September 2023 should be adjourned.
[44] Affidavit of M J Evelyn, 05.02.2024, [40]
[45] Affidavit of M J Evelyn, 05.02.2024, [40]; annexure MJE-17
A title search Mr Evelyn conducted on 19 September 2023 revealed that the Corn Street Property remained undivided.[46] That led Mr Evelyn to send an email to Mr Hurst-Meyers at 12:31 pm on 19 September 2023 in which he repeated what Mr Hurst-Meyers said to Mr Evelyn in their telephone conversation on 18 September 2023, and set out a number of concerns, after which he concluded that Mr Hoy intended to press for the making of a sequestration order when the creditor’s petition was next before the Court on 29 September 2023.[47]
[46] Affidavit of M J Evelyn, 05.02.2024, [41]
[47] Affidavit of M J Evelyn, 05.02.2024, [42]; annexure MJE-17
Commencing on 22 September 2023 Mr Hurst-Myers attempted to relist the matter for the ACTSC.[48] The matter was eventually relisted before McWilliam J on 28 September 2023. At the hearing her Honour expressed the view that it was not open to Loukas-Karlsson J to have made orders on 3 February 2023 charging property;[49] and her Honour was critical that it appeared that Mr Hoy was resisting Mr Hurst-Meyers’ application to discharge those orders.[50] Her Honour suggested that the matter be concluded on the following basis:[51]
Well, your client hasn’t run those proceedings, so you’re stuck with what is being litigated. It’s at a conclusion. The court’s power is limited to dealing with these interim orders that should have been dealt with in the Court of Appeal wrap up. I can see why Loukas-Karlsson J thought it was prudent to make a restraint. The charge is going. It was unlawful anyway. The washup for you is I don’t think I can do anything other than vacate the orders. I can’t see a basis for putting any conditions on any sale or restraint of assets. You have got a caveat, that protects you from – it doesn’t protect you from exchange, it protects you from completion and the money walking out the door. So you will have, in the ordinary course, six weeks to work out what you’re going to do.
[48] Affidavit of M J Evelyn, 05.02.2024, [44]
[49] Affidavit of R G N N Hurst-Meyers 09.02.2024, page 54.30: “I have got no idea how a judgment debt for a sum of money translates to an interim charge on a completely different property.”
[50] Affidavit of R G N N Hurst-Meyers 09.02.2024, page 54.15:”Well, it’s not going to look good to the Federal Court if he says, ‘I tried to sell my property. They refused to lift the charge or vary the orders by consent.”
[51] Affidavit of R G N N Hurst-Meyers 09.02.2024, page 60.25
McWilliam J discharged the 3 February Orders.
At 9:44 am on 29 September 2023 Mr Evelyn had a conversation with an agent, Mr Sean Muxlow (being the agent described in marketing material for the Corn Street Property) about whether the Corn Street Property had sold at an auction. Mr Muxlow said he did not run any auction for the Corn Street Property.[52] At 2:07 on 29 September 2023 Mr Muxlow sent a text message to Mr Hurst-Meyers in which he asked Mr Hurst-Meyers to call him “ASAP re some communication that we have just received from lawyers acting on behalf of Gavin Hoy”.[53]
[52] Affidavit of M J Evelyn, 05.02.2024, [46]
[53] Affidavit of R G N N Hurst-Meyers 09.02.2024, page 23
Mr Hurst-Meyers’ contentions
Mr Hurst-Myers has made a number of contentions in the affidavits on which he relies, and in oral submissions.
In his affidavit of 9 February 2024 Mr Hurst-Mayers deposes to or contends the following:
(a)Mr Evelyn sabotaged “the sales process for both properties” by “deliberately stopping the sale of these properties, then seeking improper orders to stop any sale”.[54]
[54] Affidavit of R G N N Hurst-Meyers 09.02.2024, [2], [3]
(b)The contract of sale of the Corn Street Property (that is, the Residential Contract) is still valid “and we ask that the terms and conditions be applied which clearly state that [Mr Hoy] is responsible for all charges and fees associated with his withdrawal of this agreement, which would make him liable for all costs.”[55]
(c)Mr Hurst-Myers has the following assets:
(i)The property at 28 Corn Street, Old Reynella. Mr Hurst-Mayers says “[w]e were offered in writing as $950,0000 see Annexure 1, and increased to $1,000,000”.[56] The offer of $950,000 appears to be a reference to a “Notice of Offer to Purchase Residential Land” dated 8 June 2023, with a proposed settlement date of 8 June 2023.[57]
(ii)The property being lot 101 which is “confirmed as legal to sell in writing by the Conveyancing lawyers”.[58] That appears to be a reference to a letter dated 28 September 2023 from Mr Darren Rollings, of Fentons Conveyancing, informing Mr Hurst-Meyers that the 28 Corn Street Property “is able to be sold as two separate allotments being proposed Allotment 100 & proposed Allotment 101 in accordance with the attached plan” (emphasis added).[59]
(iii)The properties being lots 101 and 100 which had been appraised by Mr Sean Muxlow at $1.35 million and $450,000 respectively.[60] These appraisals are contained in letters from Mr Sean Muxlow of Ouwens Casserly Real Estate to Mr Hurst-Meyers.[61] The properties are subject to a mortgage of $516,552.14, leaving an equity of $1,283,447.86. [62]
(iv)A family home at Fisher, ACT, which was appraised at $1,150,000. That is subject to a mortgage of $516,552.14. [63]
(v)An investment property at Queanbeyan valued at $1,265,000. That is subject to a mortgage of $352,164.97.[64]
(d)On the basis of these figures, Mr Hurst-Meyers states he has an “asset base” of $2,208,728.47 and is “therefore solvent”.[65]
[55] Affidavit of R G N N Hurst-Meyers 09.02.2024, [5]
[56] Affidavit of R G N N Hurst-Meyers 09.02.2024, [6]
[57] Affidavit of R G N N Hurst-Meyers 09.02.2024, [6], page 78
[58] Affidavit of R G N N Hurst-Meyers 09.02.2024 [7]
[59] Affidavit of R G N N Hurst-Meyers 09.02.2024, pages 40, 41
[60] Affidavit of R G N N Hurst-Meyers 09.02.2024, [7]
[61] Affidavit of R G N N Hurst-Meyers 09.02.2024, pages 76, 77
[62] Affidavit of R G N N Hurst-Meyers 09.02.2024, [8]
[63] Affidavit of R G N N Hurst-Meyers 09.02.2024, [9]
[64] Affidavit of R G N N Hurst-Meyers 09.02.2024, [10]
[65] Affidavit of R G N N Hurst-Meyers 09.02.2024, [11]
In his affidavit made on 18 October 2023 Mr Hurst-Meyers deposes or contends as follows:
(a)Mr Hoy and his legal representatives have refused to allow Mr Hurst-Meyers to sell his assets, despite being asked many times to permit the sale. This caused Mr Hurst-Meyers’ assets “to be legally blocked which rendered these assets unable to be sold up until” 28 September 2023.[66]
(b)Mr Hurst-Meyers is not insolvent because he “has the capacity to retire any debt that the Court may order through the sale of his assets”.[67] That Mr Hurst-Meyers has been unable to pay his creditors “was due to circumstances beyond [his] control as this control was maintained by [Mr Hoy] and his legal representatives due to an order they sought in the Supreme Court which frustrated the sale process”.[68]
(c)The Registrar should have exhibited compassion and granted an adjournment “due to 5 heart attacks . . . which were in fact life threatening”.[69]
[66] Affidavit of R G N N Hurst-Meyers 18.10.2023, [3]
[67] Affidavit of R G N N Hurst-Meyers 18.10.2023, [21]
[68] Affidavit of R G N N Hurst-Meyers 18.10.2023, [33]
[69] Affidavit of R G N N Hurst-Meyers 18.10.2023, [37]
At the hearing on 9 February 2024 Mr Hurst-Myers submitted that Mr Evelyn had double counted his costs; that “this has always been a defence of a contract of sale that Mr Hoy signed, and he reneged on”; and by having abandoned that contract Mr Hoy forfeited his deposit, and “all associated costs around his forfeiture are his costs to bear”.[70] Mr Hurst-Meyers also made submissions which reflected the contentions he made in his affidavits. Thus, Mr Hurst-Meyers submitted the following:
(a)He had decided to pay back Mr Hoy’s $200,000; “we went to immediately sell the three apartments in New South Wales, and then that sale was frustrated by the orders put up by Loukas-Karlsson”.[71] Mr Hurst-Myers said that this was further frustrated by the contact Mr Evelyn made to Mr Hurst-Meyer’s conveyancer, “which caused them to withdraw their services”.[72] I find that is a reference to Mr Stasia’s email of 24 February 2023 to which I refer above.
(b)When Mr Hurst-Meyers simultaneously tried to sell the Corn Street Property, Mr Evelyn “contacted the realtors involved, and also the conveyancing lawyers”, and that “caused the seizing up of those transaction”.[73]
[70] T23.30
[71] T24.40
[72] T24.40
[73] T25.45
Principal issues arising
Mr Hurst-Myer’s contentions give rise to the following principal questions or sets of questions:
(a)Did Mr Hoy, through his lawyer, frustrate Mr Hurst-Myer’s ability to realise properties in which he had equity to obtain funds with which to pay the Judgment?
(b)Did Mr Hoy enter into a contract to purchase a property and, if so, does this give rise to a reason for “going behind” the Judgment?
(c)However (a) or (b) are answered, is Mr Hurst-Myers able to pay his debts?
Did Mr Hoy and his legal adviser’s frustrate realisation of assets?
It is the case that the 3 February Orders restrained Mr Hurst-Meyers from disposing of his assets; and it is likely that the 3 February Orders exceeded the bounds of the proper exercise of the discretion to order, on terms, a stay of execution of a judgment pending the determination of an appeal. The 3 February Orders, however, were expressed to be “[s]ubject to further order or direction”, which means it was open to Mr Hurst-Meyer to apply at any time to vary or discharge those orders. That is what Mr Hurst-Meyers did on 28 September 2023. Thus, although the 3 February Orders were an impediment to Mr Hurst-Meyers realising properties in which he had equity to pay the debt or debts he owes Mr Hoy, it was open to Mr Hurst-Meyers to remove these impediments by applying to the ACTSC.
In any event, the Judgment was entered on 6 April 2022; and there was no impediment to Mr Hurst-Myers selling any of his properties between 6 April 2022 and 3 February 2023. On the contrary, Mr Hurst-Meyers had no desire to satisfy the Judgment. He had filed a notice of appeal against the Judgment, and Mr Hurst-Myers sought the ACTSC’s assistance to stay execution of the Judgment. The 3 February Orders were the terms on which Loukas-Karlsson J granted that for which Mr Hurst-Meyers applied, namely, a stay of execution of the Judgment. It was open to Mr Hurst-Myers, on 3 February 2023, not to accept those terms, abandon his application for a stay, and arrange to sell one or more of his properties to satisfy the Judgment and the costs he was ordered to pay.
For these reasons, I am not satisfied that Mr Hurst-Meyers manifested any willingness to sell any of his properties for the purpose of using the proceeds of sale to pay the Judgment and, for that reason, I am not satisfied the 3 February Orders, or any conduct by Mr Hoy or his legal representative, materially interfered with any intention Mr Hurst-Myers might have formed to sell any one or more of his properties, and use the proceeds of sale to pay the Judgment.
Going behind the Judgment
Mr Hurst-Meyers has not used the words “going behind the Judgment”; but his reliance on his and Mr Hoy’s having entered into the Residential Contract, and his contention that Elkaim J had ignored that contract, requires me to consider that question.
Principles
An application for a sequestration order must be based on the debtor owing the petitioning creditor a debt. In most cases the debt will be constituted by a judgment debt. That will be the case where the act of bankruptcy on which the creditor relies is the debtor’s failure to comply with the requirements of a bankruptcy notice. A bankruptcy court has a discretion to “go behind the judgment” in respect of which a bankruptcy notice has been issued if “substantial reasons are given for questioning whether behind that judgment there was in truth and reality a debt due to the petitioner”.[74] Where the Court is satisfied such substantial reasons exist, the petitioning creditor will bear the legal burden of proving the judgment records a true debt.[75]
[74] Wren v Mahony [1972] HCA 5; (1972) 126 CLR 212, at page 225 (Barwick CJ)
[75] Cheung v Burness (Trustee) [2016] FCA 1381, at [79] (Moshinsky J)
The relevant principles were considered by the High Court in Ramsay Health Care Australia Pty Ltd v Compton.[76] Thus, Kiefel CJ, Keane and Nettle JJ said (references omitted):[77]
For the purposes of s 52 of the Act, a judgment may usually be taken to be sufficient evidence of a debt in that a judgment against a debtor in favour of a creditor obtained after a trial is, generally speaking, a reliable indication of the true state of indebtedness as between creditor and debtor. Indeed, such a judgment can usually be expected to provide the most reliable statement of the debt humanly attainable because the ordinary processes of the adversarial system provide a practical guarantee of reliability. The testing of the relative merits of a claim and counterclaim under the rigours of adversarial litigation will usually establish the true state of accounts as between the parties to the proceedings. Accordingly, a Bankruptcy Court will usually have no occasion to investigate whether the judgment debt is a true reflection of the real debt. But where the merits of a claim and counterclaim have not been tested in adversarial litigation, a judgment debt will not have this practical guarantee of reliability.
[76] Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28, at [16], [37]-[38], [54]-[55], [65]-[67]
[77] Ramsay Health Care Australia Pty Ltd v Compton [2017] HCA 28, at [68]
Substantial reasons for questioning the Judgment?
The Residential Contract Mr Hurst-Myers says he and Mr Hoy signed is in evidence.[78] It relates to the sale of 28 Corn Street (that is, the Corn Street Property) for $250,000; and it appears that Mr Hoy signed the contract on 19 July 2016, and Mr Hurst-Meyers on 20 July 2016. Item 7 of the Schedule to the Residential Contract provides that the “deposit payable” is $200,000. The Schedule provides for the parties to select one of five possible dates or events by which the deposit is to be paid; but none of the dates or events has been selected.
[78] Affidavit of R G N N Hurst-Meyers 09.02.2024, pages 26-39
Item 19 of the Schedule is important. It deals with “Special Conditions”. The box before the printed words “Other – refer Annexure” is ticked, and after the printed words there appear in handwriting “A Part 1 & Part 2”. Annexure A to the Residential Contract is as follows:
PART IThis contract is subject to the Plan of Division for the within described land being accepted for deposit by the Registrar General of Land Titles Office on or before 26th day of September 2016
The Vendor shall promptly apply for all necessary consents and approvals and shall cause to be prepared the Plan of Division and any further documents necessary for or incidental to the preparation, deposit and registration of the said Plan of Division and shall use its best endeavours to procure such consents and approvals.
The Vendor shall pay all survey, division, service connections and Land Titles Office costs.
Settlement shall take place within twenty eight (28) days of the Plan of Division being deposited by the Registrar General of Land Titles Office
PART 2This agreement is conditional upon the settlement of another contract pertaining to the land dated the 23rd day of March 2016, between the vendor . . . , and the Purchaser Ralph George Hurst-Meyers as Trustee for the Hurst-Meyers family Trust and or Nominees, such contract must settle prior to the settlement of the within contract.
The Residential Contract gives rise to no substantial reason for questioning the debt that is constituted by the Judgment. The Residential Contract was made conditional on the “Plan of Division for the within described land” being accepted for deposit by the Registrar General of Land Titles Office on or before 26 September 2016, and there is no evidence, and Mr Hurst-Meyers has not suggested, that any such “Plan of Division” had been accepted by 26 September 2016 or at all. That is a basis for finding that the Residential Contract did not ever become binding. This finding is supported by Mr Hurst-Meyers having sent text messages to Mr Hoy in 2017, and an email in 2019, in which Mr Hurst-Meyers represented to Mr Hoy that he was arranging to return to Mr Hoy the $200,000 he contributed to the partnership, without Mr Hurst-Meyers’ referring to the Residential Contract or otherwise asserting that Mr Hoy was not entitled to the return of the $200,000 because of the Residential Contract, or for any other reason.
Conclusion
I am therefore not satisfied the Residential Contract affords a reason for not making a sequestration order.
Is Mr Hurst-Meyers able to pay his debts?
Principles
On a creditor satisfying the matters specified by s 52(1) of the Bankruptcy Act the Court may make a sequestration order. Under s 52(2)(a) of the Bankruptcy Act, however, if the Court is satisfied by the debtor that the debtor is able to pay his or her debts, the Court may dismiss the petition.[79]
[79] I repeat in the following paragraphs what I said in Westview Frames and Trusses (NSW) Pty Ltd v Murabito [2022] FedCFamC2G 897, at [71]-[73], [76]
Subsection 52(2)(a) of the Bankruptcy Act does not use the word “solvent”;[80] nor does it use the words “as and when they become due and payable”.[81] It simply says “he or she is able to pay his or her debts”. In other words, s 52(2)(a) does not in terms require the debtor to be “solvent”. Notwithstanding the omission of “solvent” in s 52(2)(a) of the Bankruptcy Act, that paragraph has been construed as requiring the Court to be satisfied the debtor is “solvent” in the sense of not being “insolvent” as that term was explained in Sandell v Porter:[82]
Insolvency is expressed in s. 95 [of the Bankruptcy Act 1924 (Cth)] as an inability to pay debts as they fall due out of the debtor’s own money. But the debtor’s own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time – relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor’s financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor’s inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency. Whether that state of his affairs has arrived is a question for the Court and not one as to which expert evidence may be given in terms though no doubt experts may speak as to the likelihood of any of the debtor’s assets or capacities yielding ready cash in sufficient time to meet the debts as they fall due.
[80] Being a term which is defined in s 5(2) of the Act.
[81] Which is part of the definition of “solvent” in s 5(2) of the Act.
[82] Sandell v Porter (1966) 115 CLR 666, at 670-671. The cases which so construed s 52(2)(a) of the Act were identified by Cowdroy J in Rigg v Baker [2006] FCAFC 179, at [104].
Some of the relevant principles for determining whether, on this approach, a debtor is able to pay his or her debts were identified by Driver FM (as his Honour then was) in Deputy Commissioner Of Taxation v Caporale as follows (references omitted):[83]
The inquiry emphasises that it involves a consideration of the ability to command cash resources through his or her own assets. The Court must also look at the level of the debtor’s recurrent expenses and earnings in addition to whether there are cash resources from assets.
A respondent debtor bears the onus of proving to the Court that their assets are sufficient to pay their liabilities as and when they become due and payable. It is not sufficient to simply show an excess of assets over liabilities. The respondent debtor must also establish that their assets are available to be realised and that they are capable of ready realisation.
[83] Deputy Commissioner Of Taxation v Caporale [2013] FMCA 5, at [23] and [24]
The words “able to pay his or her debts” that appear in s 52(2)(a) of the Bankruptcy Act do not mean “willing and able” to do so.[84] A debtor, therefore, who is able to pay his or her debts, but who is unwilling to pay the debt owed to the debtor’s petitioning creditor, remains a person who can pay his or her debts, and the Court may, in its discretion, dismiss a creditor’s petition against such a debtor. Thus, in Re Sarina; Ex parte Wollondilly Shire Council, it was said that a debtor is “able to pay his debts but is recalcitrant, his creditors may resort to the remedies otherwise afforded by the law such as execution against his property and garnishee proceedings”.[85]
[84] Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596, at page 599 (Bowen CJ, C A Sweeney and Lockhart JJ)
[85] Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596, at page 599
Finally, I refer to what is required to prove solvency. Speaking in the context of corporate insolvency, Weinberg J in Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd said that to discharge the onus of proving solvency “the Court should ordinarily be presented with the “fullest and best” evidence of the financial position of the respondent”; and that “[u]naudited accounts and unverified claims of ownership or valuation are not ordinarily probative of solvency. Nor are bald assertions of solvency arising from a general review of the accounts, even if made by qualified accountants who have detailed knowledge of how those accounts were prepared”.[86]
[86] Ace Contractors & Staff Pty Ltd v Westgarth Development Pty Ltd [1999] FCA 728, at [44]
Has Mr Hurst-Meyers shown he is able to pay his debts?
Mr Hurst-Meyers’ attempt to prove he is able to pay his debts goes no further than identifying properties he says he owns, assigning asserted values to the properties, and identifying the debts he says are secured by mortgages over the properties. The evidence is insufficient to prove Mr Hurst-Meyers is the beneficial owner of all of the properties; or that the properties have the values Mr Hurst-Meyers assigns to them, or that the debts secured on the properties are those Mr Hurst-Meyers says are so secured. More significantly, however, Mr Hurst-Meyers does not purport to identify all of his current assets and current liabilities; or his recurring or other liabilities that are certain to accrue in the future; or any other liabilities Mr Hurst-Meyers may incur in the future; or the income Mr Hurst-Meyers earns or expects to earn; or assets available to Mr Hurst-Meyers which may readily be converted to cash with which he will be able to pay his current liabilities, and his future liabilities as and when they accrue.
I am therefore not satisfied Mr Hurst-Myers has proved he is able to pay his debts.
Other matters
It is unnecessary to consider whether Mr Evelyn’s costs are excessive because those costs do not form part of the amount of the Judgment in respect of the Bankruptcy Notice was issued. It is also unnecessary to consider whether the Registrar ought to have adjourned the hearing of the creditor’s petition because that is not relevant to the question I must consider on Mr Hurst-Meyers’ application for review of the Registrar’s orders, namely, whether a sequestration order should be made; and Mr Hurst-Meyers did not submit he was not in a position to participate at the hearing of his application of review on 9 February 2024.
DISPOSITION
I am not satisfied Mr Hurst-Meyers is able to pay his debts; and I am not satisfied there is some other sufficient cause a sequestration order ought not to be made. I therefore propose to dismiss the application for review; order that Mr Hurst-Meyers pay Mr Hoy’s costs; and order that Mr Hoy’s costs be paid out of the estate of Mr Hurst-Meyers on the basis that they have the same priority as the costs of the petition.
POSTSCRIPT
At 4:48 am on 1 March 2024, being the day on which I had listed the matter for judgment, Mr Hurst-Myers sent an email to my Associate attaching an affidavit Mr Hoy made on 24 April 2020 in the proceeding he had commenced in the ACTSC; and Mr Hurst-Meyers made a number of submissions in his email. I have considered Mr Hurst-Meyers’ email, and read Mr Hoy’s affidavit. There is nothing in this material that causes me to wish to reconsider anything I say in these reasons.
I certify that the preceding seventy-two (72) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Manousaridis. Associate:
Dated: 1 March 2024
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