I and L Securities Pty Ltd v Burckhardt

[1999] FCA 1502

FEDERAL COURT OF AUSTRALIA

I & L Securities Pty Ltd v Burckhardt [1999] FCA 1502

BANKRUPTCY – creditor’s petition – evidence as to judgment debt – whether sufficient reason for Court to go behind judgment

Bankruptcy Act 1966 (Cth)

Re Riviere; ex parte Original Mont De Piete Limited (1990) 20 SR (NSW) 77
Olivieri v Stafford and Others (1989) 91 ALR 91
Re Longo; ex parte Longo (1995) 57 FCR 523
Udovenko v Mitchell (1997) 79 FCR 418
Seymour v Housing Guarantee Fund Limited (1999) FCA 1441

I & L SECURITIES PTY LTD (ACN 061 852 355) v BARRY RAYMOND BURCKHARDT

QG 7289 OF 1998

DOWSETT J
26 OCTOBER 1999
BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 7289 OF 1998

BETWEEN:	I & L SECURITIES PTY LTD (ACN 061 852 355) Applicant
AND:	BARRY RAYMOND BURCKHARDT Respondent
JUDGE:	DOWSETT J
DATE OF ORDER:	26 OCTOBER 1999
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1.        A sequestration order be made against the estate of the respondent.

2.The petitioning creditor have its costs of the petition, including reserved costs, and that such costs take the appropriate priority in the administration of the estate as prescribed in the Bankruptcy Act 1966 (Cth).

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 7289 OF 1998

BETWEEN:	I & L SECURITIES PTY LTD (ACN 061 852 355) Applicant
AND:	BARRY RAYMOND BURCKHARDT Respondent

JUDGE:	DOWSETT J
DATE:	26 OCTOBER 1999
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1. This is a petition in bankruptcy. It is based upon a bankruptcy notice, which was in turn based upon a judgment of Williams J in the Supreme Court of Queensland, delivered on 4 August 1997, in the amount of $167,750.85. This represented the amount due by the present respondent on a guarantee of the debt of a company, including interest. The judgment was a summary judgment, his Honour concluding that the present respondent had been unable to demonstrate any defence to the claim. He had attempted to establish a defence based upon the proposition that the mortgagee had sold a security for the debt at an undervalue in breach of the duty prescribed by s 85 of the Property Law Act 1974 (Qld). His Honour rejected that argument because there appeared to have been an appropriate advertising campaign, and there was a current valuation which justified sale at $300,000, the actual sale price.

2. The present respondent had put before his Honour a valuation at $530,000.  I gather from what the respondent has told me that this was a valuation by a person called Conroy.  In this hearing, the respondent initially said that Mr Conroy's valuation was obtained more than a year before the sale.  However today, Mr Burckhardt has asserted that, in fact, it had been upgraded from time to time until quite soon before the sale.  I will return to this matter at a later stage.  Williams J considered that the evidence as to sale at an undervalue was not sufficiently substantial to justify giving leave to defend.  His Honour also dealt with some other minor arguments, but they are not relevant for present purposes.  That judgment was the subject of an appeal to the Court of Appeal which was heard and dismissed on 13 July 1998.

3. The respondent also applied to set aside the bankruptcy notice based on the judgment.  This application was heard by Heerey J of this Court in Melbourne on 27 July 1998 and dismissed.  That judgment was, itself, the subject of an appeal to the Full Court of this Court.  That appeal was dismissed on 10 February 1999.

4. The respondent now seeks to resist the petition upon the basis that the debt upon which it is based was not due because of the allegation that the sale of the security was at an undervalue, in other words, the same defence as was raised before Williams J.  He submits that there was evidence as to the way in which the sales promotion campaign was conducted which was not known to him at the time of the proceedings before Williams J.

5. There may be some truth in this in that Williams J appears to have assumed that a proposed program (which was in evidence) was followed.  The evidence to which the respondent refers may indicate that it was not.  However it is quite clear that this information was known to the respondent at the time of the appeal to the Court of Appeal.  There was no attempt at that time to support the appeal on the basis of fresh evidence.  Of course, it would have been necessary to show that it was likely to have affected the outcome and to explain the failure to lead it before Williams J.  No explanation is now offered as to why this material was not available to be led before Williams J.  Its worth, in any event, remains speculative because material before me shows that a relatively substantial advertising campaign was conducted, although not one which satisfies the respondent or some of his witnesses.

6. As to the Conroy valuation, this matter came on for hearing yesterday.  The respondent initially conducted the case upon the basis that the market price of the property as at the date of sale was $400,000.  His material included a valuation by a Mr Clasher, valuing it, as at that date, in that amount.  The respondent referred yesterday, as I have previously mentioned, to Mr Conroy’s valuation at a sum in excess of $500,000 but maintained that it had been obtained at a much earlier date; at least a year, or perhaps more, before the sale.  In the course of the hearing, he suggested that the valuation had been upgraded from time to time for the purpose of “stamping up” the security, that is, for the purpose of increasing the stamp duty paid to reflect increases in the amount secured.  However that valuation was not in evidence before me yesterday, nor was it led before Heerey J.  His Honour had a valuation at $400,000, presumably that of Mr Clasher.  The Conroy valuation is, I infer, that referred to by Williams J in his reasons, but his Honour apparently did not act upon it, perhaps because he, too, understood that it related to a time well before the sale and because sale had been effected at the price disclosed in another valuation.

7. In the course of argument yesterday, I pointed out to the respondent that his valuation of $400,000 as at the date of sale would not be a sufficient basis to justify going behind the judgment because the calculations which appear in the affidavit of Mr Ingwerson indicate that even had the property been sold for that price at the relevant sale date, there would still have been a substantial amount outstanding on the guarantee.  Had the property been sold for $400,000 on 6 May 1997, the actual sale date, the shortfall would have been $77,692.51.  Had it been sold for $400,000 on 21 July 1997, a time which one of the respondent's witnesses suggests would have been a better time for sale, the shortfall would have been $96,134.86.

8. I referred the respondent yesterday to my own decision in Re Worrell (1999) FCA 1336 in which I referred to the judgment in Re Riviere; ex parte Original Mont De Piete Limited (1990) 20 SR (NSW) 77 at 84 where Owen AJ said:

   At the same time I think it is equally clear that the Court will only reconsider the judgment in order to ascertain whether the petitioning creditor's debt on which the bankruptcy proceedings have been founded should be struck out altogether.  The Court does not reconsider the judgment merely with a view to seeing whether the judgment debt should be reduced but in order to ascertain whether the creditor has a debt upon which the bankruptcy proceedings can be founded.

9. This statement of the law was cited with apparent approval by Gummow J in Olivieri v Stafford and Others (1989) 91 ALR 91. It was also cited by Cooper J in Re Longo; ex parte Longo (1995) 57 FCR 523 at 530. At this point, the respondent suggested that there may be other material which he would want to put before me. In those circumstances, and as it was by that time 4.30 pm, I adjourned the matter until today. My understanding was that he was referring to other material already in evidence . This morning, he sought to read a further affidavit by himself which included, I think, affidavits by other people.

10. Much of this material was argumentative, but to the extent that it was relevant, the thrust of it was to tender the Conroy valuation with some suggestion that it was current as at the date of sale, or shortly before that time.  I have refused leave to read this further material.  Directions were given as to the filing of affidavits in this matter as long ago as September 1998, although there may have been further directions hearings thereafter.  It is quite clear that as at the commencement of the hearing yesterday, the only valuation evidence upon which the respondent wished to rely was the Clasher valuation.  Although it is true that he referred to the Conroy valuation in argument, it was not in evidence.  Mr McQuade objected to the receipt of the Conroy valuation at this late stage, indicating that he had not taken instructions which would enable him to cross-examine the valuer or make appropriate submissions concerning the valuation.

11. There was no good reason why the respondent should have been allowed to change the direction of his defence at that late stage, he having evinced a clear intention in his material to rely upon the valuation of Mr Clasher.  It related directly to the date of sale, and so it was an entirely rational decision to rely on it.  In those circumstances the only evidence before the Court demonstrates that even if there is a valid defence to part of the claim represented by the judgment of Williams J, it would not be sufficient to extinguish the whole of the debt upon which the petitioner relies.  As I have said, the affidavit by Mr Ingwerson indicates that there would still be a substantial shortfall.  In those circumstances, no good point would be served by going behind the judgment. 

12. Further, there was a ventilation of the matter on the merits leading to the judgment in question.  The Court will not generally go behind such a judgment unless it can be shown that there is a prima facie case of fraud, collusion or miscarriage of justice.  See Corney v Brian (1951) 84 CLR 343 at 356-357 and Udovenko v Mitchell (1997) 79 FCR 418. Both cases were cited with approval by the Full Court in Seymour v Housing Guarantee Fund Limited (1999) FCA 1441. Although there was no trial before Williams J, the judgment was, in no sense, a judgment by default. The respondent had an opportunity to advance any defence and was unable to satisfy his Honour that he had one. To the extent that he claims now to be able to do so, he relies upon evidence concerning marketing, but does not seek to demonstrate that such evidence was not reasonably available to him at the time of the proceedings before Williams J. For that reason, too, it is inappropriate to go behind the judgment. I decline to do so. There should be a sequestration order.

13. I make a sequestration order against the estate of the respondent.  I order that the petitioning creditor have its costs of the petition, including reserved costs, and that such costs take the appropriate priority in the administration of the estate as prescribed in the Bankruptcy Act 1966 (Cth).

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Dowsett.

Associate:

Dated:             29 October 1999

Counsel for the Applicant:	Mr P McQuade
Solicitor for the Applicant:	Deacons Graham & James
Counsel for the Respondent:	The Respondent appeared in Person
Date of Hearing:	25-26 October 1999
Date of Judgment:	26 October 1999