ICM Agriculture Pty Ltd v Young

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FEDERAL COURT OF AUSTRALIA

ICM Agriculture Pty Limited v Young [2009] FCA 1169

BANKRUPTCY – application for sequestration order – whether debtor proved able to pay his debts or that for other sufficient cause sequestration order should not be made – Bankruptcy Act 1966 (Cth) s 52(2) – company controlled by debtor purportedly assigned to him a cause of action asserted against petitioning creditor – whether assignment supported by association with assignment of property or by assignee’s genuine commercial interest in taking the assignment.

ASSIGNMENT - application for sequestration order – whether debtor proved able to pay his debts or that for other sufficient cause sequestration order should not be made – Bankruptcy Act 1966 (Cth) s 52(2) – company controlled by debtor purportedly assigned to him a cause of action asserted against petitioning creditor – whether assignment supported by association with assignment of property or by assignee’s genuine commercial interest in taking the assignment.

Held    (1) purported assignments ineffective
           (2) sequestration order made

Bankruptcy Act 1966 (Cth) s 40(1)(d)(ii), s 41(7), s 43, s 52(2)
Plant Breeder’s Rights Act 1994 (Cth)

Helfenbaum v St George Bank Ltd [2001] FCA 1392 cited
ICM Agricultural Pty Ltd v Young [2009] FCA 109 cited
International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 discussed
Lewis v Doran (2004) 208 ALR 385 referred to
Monk v Australia and New Zealand Banking Group Ltd (1994) 34 NSWLR 148 followed
Poulton v The Commonwealth (1953) 89 CLR 540 cited
Sandell v Porter (1966) 115 CLR 666 cited
Totev v Sfar (2006) 230 ALR 236 followed
Trendtex Trading Corporation v Credit Suisse [1982] AC 679 cited
Young v ICM Agriculture Pty Limited [2008] FMCA 1038 cited
Young v ICM Agriculture Pty Ltd [2009] FCA 1065 cited

ICM AGRICULTURE PTY LIMITED (ACN 006 077 765) v DARYL WILLIAM YOUNG

NSD 530 of 2009

LINDGREN J
6 OCTOBER 2009
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 530 of 2009

IN THE MATTER OF DARYL WILLIAM YOUNG

BETWEEN:

ICM AGRICULTURE PTY LIMITED (ACN 006 077 765)
Applicant

THOMSON PLAYFORD CUTLERS
Supporting Creditor
AND:

DARYL WILLIAM YOUNG
Respondent

JUDGE:

LINDGREN J

DATE OF ORDER:

6 OCTOBER 2009

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The estate of the respondent, Daryl William Young, be sequestrated.

2.Jason Lloyd Porter and Ian Charles Francis be, and they are hereby, appointed trustees of the estate of the bankrupt. 

3.The costs of the applicant as petitioning creditor (including any reserved costs) be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

4.The costs of  Thomson Playford Cutlers as supporting creditor (including any reserved costs) be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

5.Upon the respondent through his counsel undertaking to the Court and to the applicant not until 5 pm on 9 October 2009 to dispose of or encumber any of his assets or to purport to do so, all proceedings under the sequestration order be stayed until 5 pm…

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Details
Case
[2009] FCA 1169
Decision Date

CaseChat Overview and Summary

The case of ICM Agriculture Pty Ltd v Young involves a petition for a sequestration order against the respondent, Daryl William Young, who has been unable to pay his debts. The petitioner, ICM Agriculture, applied for the order following a bankruptcy notice served on Young. Young opposed the petition, citing potential set-offs and other sufficient cause to prevent the sequestration order. The court needed to determine whether the grounds provided by Young under section 52(2) of the Bankruptcy Act were sufficient to dismiss the petition.

The primary legal issues centered on whether Young could demonstrate that he was able to pay his debts or that there was sufficient cause for the court not to make a sequestration order. The court evaluated Young's claim of a set-off, which he argued could render him solvent and thus exempt from bankruptcy. Additionally, the court examined whether Young's other arguments constituted "other sufficient cause" as required by section 52(2)(b) of the Bankruptcy Act.

The court found that Young had not successfully demonstrated his ability to pay his debts or provided sufficient cause to dismiss the petition. The court was not persuaded by Young's claims of set-offs, which it found could have been raised in prior proceedings. Furthermore, the court noted Young's history of insolvency, including his role as a director in companies that had gone into liquidation. Consequently, the court concluded that the petitioner had proven the necessary elements for a sequestration order, and the petition should not be dismissed.

In summary, the court ordered the sequestration of Young's estate, appointed trustees, and directed the taxing and payment of costs as per the Bankruptcy Act. The court also stayed all proceedings under the sequestration order temporarily, pending an undertaking from Young not to dispose of his assets.

Orders

Orders of the court

1. The estate of the respondent, Daryl William Young, be sequestrated.

2. Jason Lloyd Porter and Ian Charles Francis be, and they are hereby, appointed trustees of the estate of the bankrupt.

3. The costs of the applicant as petitioning creditor (including any reserved costs) be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

4. The costs of Thomson Playford Cutlers as supporting creditor (including any reserved costs) be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).

5. Upon the respondent through his counsel undertaking to the Court and to the applicant not until 5 pm on 9 October 2009 to dispose of or encumber any of his assets or to purport to do so, all proceedings under the sequestration order be stayed until 5 pm on 9 October 2009.

6. Either party and the trustees have liberty to apply on three hours’ notice.

THE COURT NOTES THAT:

7. The date of the act of bankruptcy is 14 May 2009.

8. A copy of these orders is to be provided to the trustees and to the Official Receiver within two (2) days after the orders are entered.

Note:

Background

Background to the litigation

Notwithstanding the terms of his notice of grounds of opposition ([20] and [64] below), Mr Young does not seem to dispute that he is unable to pay his debts: see s 52(2)(a) of the Bankruptcy Act. In his written submissions dated 8 July 2009 he says “that for other sufficient cause a sequestration order ought not to be made” and cites s 52(2)(b) of the Bankruptcy Act alone. Counsel who subsequently came to represent Mr Young also said that his submission was not that Mr Young was “presently solvent”. I will, however, refer to both grounds (a) and (b) of s 52(2) below.PROCEDURAL BACKGROUND The procedural background to the present proceeding is complicated. The 2004 DC Proceeding arose out of a guarantee that Mr Young gave to ICM in respect of contractual performance by Namoi Valley Grain & Grading Company Pty Ltd (Namoi) which traded as “Namoi Rural Traders”. The guarantee was related to various agreements and dealings involving in various ways ICM, Namoi and another company, Australian Agricultural Commodities Pty Ltd (AAC), in the period 1998 to 2003 in connection with the growing, harvesting and sale of Bumper Kabuli chickpeas in the Wee Waa region of NSW. I referred at [3] above to ICM’s judgment against Mr Young on the guarantee. On 19 November 2007 the Official Receiver issued Bankruptcy Notice NN68/2007 against Mr Young on the application of ICM. The Bankruptcy Notice was served on Mr Young on 4 December 2007. It required him to pay the amount of the judgment debt of $196,630.10 plus interest of $1,647.96, a total of $198,278.06, within 21 days after service of the Bankruptcy Notice, that is to say, by 25 December 2007. On 11 December 2007, AAC, of which Mr Young is now the sole member, director and the controlling mind, purportedly assigned to Mr Young any cause of action AAC had “in contract, tort or otherwise against ICM… on any account whatsoever, howsoever arising, including but not limited to any action for damages for breach of contract in relation to a sub license agency agreement dated 8 September 1998”. On 18 December 2007, Mr Young signed on behalf of AAC a notice to ICM of the assignment. On 21 December 2007 Mr Young launched proceeding 5792 of 2007 in the District Court of New South Wales in which he made claims against ICM for damages for breach of contact and for “royalties” in a total sum of $360,682.00 (the 2007 DC Proceeding). The statement of claim pleaded the assignment dated 11 December 2007 and the notice of it dated 18 December 2007. The 2007 DC Proceeding seems to have been at a standstill until quite recent events recounted below, although on 23 July 2008 AAC was added as a second plaintiff. On 21 December 2007, the day on which he launched the 2007 DC Proceeding, Mr Young filed application SYG 3929 of 2007 in the Federal Magistrates Court of Australia seeking an order setting aside the Bankruptcy Notice on the ground that Mr Young had a set-off which could not have been raised in the 2004 DC Proceeding (FMC Bankruptcy Notice proceeding). ICM filed a notice stating grounds of opposition to the effect that the claimed set-off could have been raised in the 2004 DC Proceeding and that in any event Mr Young did not have a prima facie counter claim, set off or counter demand within the meaning of s 40(1)(g) of the Bankruptcy Act.

Evidence

Evidence Before The Court

Full text does not contain this section.

Decision

Reasons for decision

LINDGREN J
Fourth, Mr Young has been a director of two companies that went into liquidation: Namoi Valley Grain & Grading Co Pty Ltd (ACN 003 171 579) and Namoi Rural Pty Ltd (ACN 098 708 260).CONCLUSION For the above reasons a sequestration order should be made against Mr Young’s estate.

Ratio Decidendi

Legal Principle Established

Established by: LINDGREN J

Third, on 8 September 2009, by consent I admitted into evidence an agreed statement of facts (Exhibit R1) reading as follows:The parties agree that:1.On 4 September 2009 the Supreme Court of NSW made the following orders:“1. Pursuant to s 140(1) of the Civil Procedure Act 2005 (NSW), order that proceedings 5792 of 2007 in the District Court of New South Wales, Sydney Registry, between the parties hereto, be transferred to the Supreme Court of New South Wales Common Law Division.2.Pursuant to section 6 of the Jurisdiction of Courts (Cross-Vesting) Act 1987 (Cth), order that thee [sic: the] District Court proceedings be transferred from this Court to the Federal Court of Australia.3.The plaintiffs are to pay the defendant’s costs of and incidental to this application.”2.The pleadings in Federal Court proceeding NSD 874 of 2009 be received into evidence for the limited purpose of showing what the allegations of fact are in Federal Court proceeding 874 of 2009.3.On about 19 August 2009 Young and AAC served a draft Further Amended Statement of Claim to be the subject of the Motion of 8 July 2009 in the District Court proceeding 5792 of 2007 (now transferred to the Federal Court) and that document be received into evidence for the limited purpose of showing what the proposed amendments are.4.Federal Court proceeding NSD 874 of 2009 was commenced by Young and AAC on 17 August 2009 and was first returnable before the Federal Court on 26 August 2009.5.Young and AAC have filed a Motion in Federal Court proceeding NSD 874 of 2009 returnable for hearing at 2.15 pm on 8 September 2009 for:(i)leave for Young to appear on behalf of AAC without a solicitor; and(ii)for an expedited hearing.6.Young and AAC have filed and served affidavits on which they seek to rely in support of the motion referred to in paragraph 5 above.CONSIDERATION I am satisfied with the proof of the matters stated in the petition, service of the petition, and the fact that the debt on which ICM relies is still owing. Accordingly, the Court’s power to make a sequestration order is activated: see s 52(1) of the Bankruptcy Act. This requires that attention be given to s 52(2) of the Bankruptcy Act which provides:If the Court… is satisfied by the debtor:(a) that he or she is able to pay his or her debts; or(b)that for other sufficient cause a sequestration order ought not to be made;it may dismiss the petition.The word “debt” is defined in s 5(1) of the Bankruptcy Act to include “liability”. Mr Young’s notice stating grounds of opposition states the following ground:The Respondent has a set-off or cross claim against the Applicant. On the basis of the set-off or cross claim the Respondent is solvent and the Petition should be dismissed.Mr Young’s reference to solvency seems to be referable to para (a) of s 52(2), but the alleged set-off or cross claim is also capable of being relevant to para (b)’s “other sufficient cause”. Indeed, most of the argument was directed to the latter ground. Elsewhere Mr Young has not disputed his insolvency - see [5] above. It is the debtor, Mr Young, who bears the onus of satisfying the Court of the existence of ground (a) or (b).