Hymix Australia Pty Ltd v Official Trustee
[2011] FMCA 268
•15 March 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| HYMIX AUSTRALIA PTY LTD v OFFICIAL TRUSTEE & ORS | [2011] FMCA 268 |
| BANKRUPTCY – Section 58 application for leave to proceed to enforce guarantee – guarantee secured by charge over bankrupt’s real estate – charge noted by caveat – intention to apply for appointment of statutory trustees for sale to enforce charge. |
| Bankruptcy Act 1966 (Cth), ss.30, 31(1)(f), 58(3)(b) Federal Magistrates Court Rules, Order 13, Rule 3A |
| Applicant: | HYMIX AUSTRALIA PTY LTD |
| First Respondent: | THE OFFICIAL TRUSTEE AS TRUSTEE OF THE BANKRUPT ESTATE OF DAVID LINSLEY FELTON |
| Second Respondent: | DAVID LINSLEY FELTON |
| Third Respondent: | ANN MAREE FELTON |
| File Number: | BRG 449 of 2009 |
| Judgment of: | Burnett FM |
| Hearing date: | 15 March 2011 |
| Date of Last Submission: | 15 March 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 15 March 2011 |
REPRESENTATION
| Solicitors for the Applicant: | Patane Lawyers |
| There was no appearance for the Respondent |
ORDERS
That the Applicant be given leave to commence this proceeding pursuant to section 58(3)(b) of the Bankruptcy Act 1966 (Cth).
That pursuant to sections 30 and 31(1)(f) of the Bankruptcy Act 1966 (Cth), declarations that:
(a)By a written Guarantee made between the Applicant and the Second and Third Respondents on or about 20 October 2008 (“the Guarantee”), the Second and Third Respondents granted an equitable mortgage to the Applicant in respect of their interest in the estate of fee simple in the Land described as Lot 21 on Deposited Plan 877961, Parish of Condong, County of Rous (“the Land”);
(b)The equitable mortgage charges the Second and Third Respondents’ interest in the Land with the payment of all monies due and owing by the Second and Third Respondents’ to the Applicant on any account whatsoever (including claims for interest and legal costs on a solicitor and own client basis) associated with a credit facility held in the name of David Felton Construction Pty Ltd (A.C.N.108 345 642) (In Liquidation) all of which sums are due and owing by the Second and Third Respondents to the Applicant under the Guarantee;
(c)The sum of $32,117.14 plus costs and interest incurred in the exercise of the Applicant’s powers and remedies is owing by the Second and Third Respondents to the Applicant and that the Land be charged with payment of that sum.
That without disturbing the priorities applicable to the interests of other parties in the Land:
(a)Pursuant to Federal Magistrates Court Rules 2001, Regulation 16.01, the Land be sold.
(b)A Statutory Trustee be appointed pursuant to section 66G of the Conveyancing Act 1919 (NSW) to conduct the sale of the Land and to convey the Land upon the sale, and that the Land vest in that Trustee for the purposes of the sale.
(c)The Trustee recover against the Second and Third Respondents possession of the Land.
(d)The Trustee sell the Land in a way he considers appropriate.
(e)The Trustee be entitled to incur and charge reasonable fees for his time and outlays in conducting the sale of the Land and that those fees and outlays be deemed part of the cost of the sale of the Land.
(f)The Trustee be entitled to deduct the costs of the sale of the Land from the proceeds of sale of the Land.
(g)The Trustee be entitled to pay the Applicant, from the proceeds of the sale of the Land, after deduction of the costs of the sale of the Land and after deduction of any monies due to the Registered Mortgagee, funds sufficient to discharge the sum owed to the Applicant being $32,117.14 together with costs and interest incurred in the exercise of its powers and remedies.
That the Second and/or Third Respondents pay the Applicant’s costs of the Application (including reserved costs) on the Indemnity basis.
That the Orders and Declarations provided for above are subject to the Applicant causing to be filed in the Registry on or before 4.00pm on 15 March 2011 an Affidavit of Debt deposed to by an officer of the Applicant charged with direct knowledge of those matters.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 449 of 2009
| HYMIX AUSTRALIA PTY LTD |
Applicant
And
| THE OFFICIAL TRUSTEE AS TRUSTEE OF THE BANKRUPT ESTATE OF DAVID LINSLEY FELTON |
First Respondent
| DAVID LINSLEY FELTON |
Second Respondent
| ANN MAREE FELTON |
Third Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
In this application, the applicant creditor seeks orders against the respondent debtors, David Linsley Felton and Anne Marie Felton and against the second respondent debtors, Trustee in Bankruptcy the first respondent. None of the respondents have appeared at the hearing today. So far as the trustee is concerned, I am satisfied by reason of an email forwarded by the trustee to the applicant’s solicitors on 16 July 2009, that the trustee has no interest in the proceeding except generally insofar as his role as trustee is concerned.
In his correspondence to the applicant, he noted, “The official trustee has completed its review of your client’s application and the supporting affidavit. It is satisfied with the basis of your client’s claim, it does not object to the final orders being sought. Consequently, the official trustee does not intend to appear at the hearing set down.” So far as the second and third respondents are concerned, they have been served with the proceedings and they are on notice that the application was to proceed today.
Having regard to the general state of their solvency and the issues that arise in the application, it is not surprising that they have not appeared. In the circumstances, I am satisfied it is appropriate to proceed to determine the application in their absence, as I am permitted by order 13, Rule 3A of the Court’s rules and proceed accordingly.
The application seeks the following orders: first, that the applicant be given leave to commence this proceeding pursuant to s.58(3)(b) of the Bankruptcy Act 1966 (Cth) (the Act). In this instance, there is no reason why the applicant should not have that leave and I make an order in those terms.
It then seeks for orders pursuant to s.30 and s.31(1)(f) of the Act for declarations:
a)Firstly, that by written guarantee made between the applicant and the second and third respondents on or about 20 October 2008, the second and third respondents were granted an equitable mortgage to the plaintiff in respect of their interests in the estate of the land described as lot 21 on deposited plan 877961, Parish of Condong, County of Rous.
b)The equitable mortgage charges the second and third respondents interest on the land with the payment of all moneys due and owing by the second and third respondents to the plaintiff on any account whatsoever, including a claim for interest and legal costs on a solicitor and client basis associated with a credit facility held in the name of David Felton Constructions Proprietary Limited, ACN 108 345 642 (in liquidation) all of which sums are due and owing by the second and third respondent to the applicant under the guarantee.
c)The land in the sum of $30,878.98 plus costs and interest incurred in the exercise of the applicant’s powers and remedies is owing by the second and third respondents to the applicant and that the land be charged with payment of that sum.
d)They seek orders that the land be sold.
e)That a statutory trustee for sale be appointed to conduct a sale of the land and then convey the land upon sale, and the land invest in the trustee for the purpose of the sale.
f)The trustee recover against the second and third respondents’ possession of the land.
g)The trustee sell the land in a way he considers appropriate.
h)The trustee be entitled to incur charge and charge reasonable costs, so reasonable fees for his time and outlays in conducting the sale of the land, and that those fees and outlays be deemed part of the cost of the sale of the land.
i)The trustee be entitled to deduct the costs of the sale of the land referred to in paragraph [9] of the application from the proceeds of the sale of land, prior to paying any proceeds to the registered mortgage or the applicant discharged with those parties’ securities.
j)That the trustee be entitled to pay the applicant from the proceeds of sale of the land after deduction of the costs pursuant to paragraph [9] and after deduction any moneys due to the registered mortgagee, funds sufficient to discharge the sum owed by the applicant being $30,878.98 together with costs incurred for the exercise of its powers and remedies and interest.
k)Finally, that the second and third respondents pay the applicant’s costs of this application on an indemnity basis.
By way of background, the second and third respondents were the directors of a company titled David Felton Constructions Pty Ltd, ABN 108 345 642 (in liquidation). In their capacity as directors and in support of an application for credit made by that company of the applicant creditor, a credit arrangement was entered into on 21 October 2008. The material terms of the credit agreement were that the applicant creditor would supply materials and products on credit on a running account to the company, that moneys payable by the company to the creditor pursuant to the running account would be paid within 30 days from the date of invoice. If the company did not pay any amount to the creditor by the due date of payment, then it would be liable to pay continuing interest until payment of the debt plus all costs, charges and expenses incurred by the creditor, that all amounts then owing by the company to the creditor became immediately due and payable and it would be liable to pay continuing interest to the creditor of the debt plus all costs, charges and expenses incurred by the creditor and further, the company was to pay all costs and expenses incurred by the creditor, its legal advisors and others in respect of anything instituted by the company.
At the same time as entering into the credit arrangement with the company and in support and in consideration of that credit arrangement, the second and third respondents each provided a guarantee to the creditor in respect of the company’s indebtedness. So far as it’s material, the terms of the guarantee provided that the second and third respondents guaranteed to the creditor the payment by the company for all of the materials and products supplied by the creditor to the company, and to pay the creditor all moneys and perform all obligations including any past, present and future indebtedness or obligations by the company arising from any past, present or future dealings with the creditor.
Further, it was agreed that the guarantee would be a continuing guarantee for the whole of the company’s indebtedness to the creditor on any account however and whatsoever arising. Further, that in consideration of the creditor entering into the credit agreement, the second and third respondents would indemnify the creditor against all losses and damage arising from any past, present or future dealings with the company or arising from any default on the part of the company under the credit agreement, the intent being that the second and third respondents were to be primarily liable for the company’s indebtedness to the creditor.
Finally, in order to better secure the performance of all moneys which the second and third respondents may have to become liable to pay to the creditor pursuant to the guarantee, the second and third respondents charged to the creditor all their estate and interest in any land which they had then or might in the future have, in order to make payment of all moneys owed by the company to the creditor. The express terms of the credit agreement can be found in the affidavit of Bruce Blaze Patane, filed 8 July 2009.
Ultimately, the company took goods on credit from the creditor but finally defaulted in respect of the repayment as was provided for under the agreement. Subject to one matter which I will address shortly, I am satisfied that there was indebtedness by the company with it ultimately becoming indebted to the creditor, at least by March 2009, in the sum of $32,117.14. That level of indebtedness remains outstanding. In support of the creditor’s rights, the creditor subsequently lodged a caveat over the land with the New South Wales Department of Lands, Land and Property Information Division.
The caveat claimed that the creditor as caveator was owed the sum of $30,878.98, pursuant to an equitable charge arising out of clause 7 of the guarantee dated 20 October 2008, which was granted by the first and second respondents to the caveator creditor entitling the caveator to an equitable mortgage over the property. That caveat remains in place. It follows then having regard to the matters sought by the applicant creditor in his application:
a)I am satisfied that by reason of the written agreement made between the applicant and the second and third respondents on or about 20 October 2008, that they did indeed grant an equitable mortgage to the plaintiff in respect of their interest in the land in the estate on lot 21, in deposited plan 877961 at Nunderi, local government area Tweed, Parish of Condong, County of Rous, and that they are entitled to a declaration in those terms.
b)Further, I am satisfied that by reason of the deed and particularly acknowledged by the subsequent registration of the caveat which is evidenced in annexure BBP2 to the affidavit of Bruce Blaze Patane, that the land is now charged by an equitable mortgage by the second and third respondents in respect of all their interest in that land, that the payment of or moneys due and owing by the second and third respondents to the applicant creditor although on any account whatsoever, particularly at the moment in respect of the outstanding debt together with any claims for interest and legal costs on a solicitor and client which may accrue in respect of the credit facility held in the name of David Felton Constructions Proprietary Limited, ACN 108 345 642 (in liquidation).
All the sums are presently due and owing by the second and third respondents to the applicant creditor under the guarantee and accordingly, a declaration may be made in those terms. Finally, and subject to one matter which I will address in a short time, I am satisfied that there is a sum of $30,878.98 plus costs and interest incurred in the exercise of the applicant creditor’s powers and remedies, and it is owing by the second and third respondents to the applicant creditor. Accordingly, the land ought to be charged with the payment of that sum. Again, a declaration ought to be made in those terms.
My caveat in relation to the matter that I have earlier identified is that as this is an application for final relief it is appropriate that in the context of an application for final relief, the affidavit attesting to the debt or the indebtedness of the respondents ought to be one which is sworn to in first hand form rather than relying upon hearsay, which is presently the position.
Subject to an order I will make concerning the filing of an affidavit, I am prepared to accept for present purposes the information provided by Mr Patane in his affidavit concerning information provided to him by Carolyn Skerritt, who is the Queensland and Northern Territory credit manager of the applicant. But I will make my orders subject to an affidavit of debt sworn by an appropriate officer authorised by the applicant being filed in the Court by 4 pm on 16 March 2011.
The applicant creditor also seeks orders that the land be sold, that there be the equivalent of a statutory trustee for sale to conduct the sale of the land and to convey the sale of the land, and for consequential orders. There is, in my view, no reason why that order ought not be made. It will be made pursuant to the equivalent provision to s.38 of the Property Law Act 1974 (Qld).[1]
[1] Conveyancing Act 1919 (NSW), s.669
Concerning the matter of costs, the applicant creditor seeks costs on an indemnity basis. The provisions of the guarantee provide in clause 9:
“That the guarantor must pay to Hymix all costs, charges, fees and expenses including without limitation all stamp duty and legal fees included by Hymix in connection with any entry into this guarantee, the exercise or alternative exercise of any power, right or remedy under the guarantee and the failure of the guarantor to comply with any obligations under this guarantee.”
In this instance there is, in my view, no doubt that the applicant creditor is entitled to recover costs fro the guarantors including their full legal costs and accordingly, an order in terms of paragraph 10 of the orders sought in the application is, in these circumstances, appropriate. I will make an order in those terms.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 19 April 2011
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