ING Bank Australia Ltd v Athanasakis
[2010] FMCA 307
•7 May 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ING BANK AUSTRALIA LTD v ATHANASAKIS | [2010] FMCA 307 |
| BANKRUPTCY – Application in a Case seeking orders that a Notice to Produce be set aside – whether amount claimed in Bankruptcy Notice was an overstatement – mortgagee in possession – claimed failure to account for occupation rent during possession – whether the estimated value of secured property is not reasonable. |
| Bankruptcy Act 1966, ss.33, 41, 44 Federal Court Rules, o.13, r.2 |
| Adams v Lambert (2006) 228 CLR 409 Australia & New Zealand Banking Group v Coutts [2003] FCA 968 Bailey v Beagle Management Pty Ltd [2001] FCA 60 Biron Capital Ltd v Anstee [2005] FMCA 1100 Chaplin v Young (1864) 33 BEAV 330 Deputy Commissioner of Taxation v Cumins [No.5] (2008) FCA 794 GR Finance Limited v Francis Waldron [2009] FMCA 418 Green v Solomon [2001] FCA 698 Hudson v Donald & Whalan [1997] FCA 852 MacDonald v Official Trustee in Bankruptcy [2001] FCA 140 National Australia Bank Ltd v Westbrook [2000] FCA 246 O’Shea & Anor v Athanasakis & Ors [2009] NSWSC 1150 Re O’Leary and Anor; Ex Parte Bayne and Anor (1985) 61 ALR 674 Re Button; ex parte Voss [1905] 1KB 602 Re Wiggan; Ex Parte Credit Assistance Pty Ltd [1979] 30 ALR 443 Seven Network Ltd v News Ltd (No.11) [2006] FCA 174 St George Wholesale Finance Pty Ltd v Spalla (2000) 181 ALR 682 Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90 Trustee of the Franciscan Missionaries of Mary v Weir |
| Applicant: | ING BANK AUSTRALIA LTD |
| Respondent: | HELEN ATHANASAKIS |
| File Number: | SYG 2887 of 2009 |
| Judgment of: | Lloyd-Jones FM |
| Hearing date: | 23 February 2010 |
| Delivered at: | Sydney |
| Delivered on: | 7 May 2010 |
REPRESENTATION
| Counsel for the Applicant: | Ms K Britton |
| Solicitors for the Applicant: | Gadens Lawyers |
| Counsel for the Respondent: | Mr D Price |
| Solicitors for the Respondent: | Horton Rhodes Lawyers |
ORDERS
The application to set aside paragraph [1] of the Notice to Produce is dismissed.
The application to set aside paragraphs [2] and [3] of the Notice to Produce is allowed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2887 of 2009
| ING BANK AUSTRALIA LTD |
Applicant
And
| HELEN ATHANASAKIS |
Respondent
The proceedings
The Applicant in these proceedings has issued a Creditor’s Petition against Mrs Helen Athanasakis on 25 November 2009. A Notice Stating Grounds of Opposition to the Petition was filed on 3 February 2010. On 4 February 2010, a Notice to Produce was served on the Applicant by the Respondent. On 18 February 2010 the Applicant filed an Application in a Case seeking orders that the Notice to Produce dated 4 February 2010 be set aside.
The matter was listed before a Registrar on 23 February 2010 at which time the parties sought to have it referred to this Court on the basis that the Applicant wished to have both the Application set-aside, the Notice to Produce and the Creditor’s Petition heard together. Mr Price for the Respondent submitted that the matter should be dealt with separately because if the documents are produced in answer to the Notice to Produce, the Respondent will be seeking time to consider those documents to work out what documents ought to be tendered and whether or not any further material might be sought, either by way of a Notice to Produce, or Subpoenas to third parties.
In order to resolve this issue, I elected to hear the Application to set-aside the Notice to Produce. This provided me with the opportunity to adjourn the matter and let it stand part-heard, or to proceed with the Creditor’s Petition.
Notice to Produce Rule
Rule 15A.17 of the Federal Magistrates Court Rules 2001 (Cth) states
i)A party may, by notice in writing, require another party to produce, at the hearing of the proceedings, a specified document that is in possession, custody or control of that other party.
ii)Unless the Court otherwise orders, the party given notice to produce shall produce the document at the hearing.
Notice Stating Grounds of Opposition
The Notice filed on 3 February 2010 indicates that Helen Athanasakis the Respondent Debtor, intends to oppose the Petition on the following grounds:
Bankruptcy Notice NN 3394-09, on which the petition is founded, is invalid in that the debt has been overstated by failing to take into account rental income obtained by the Applicant Creditor from security given by the Respondent Debtor known as 34 Alma Street, Clontarf, in the State of New South Wales.
2. Paragraph 2 of the Petition is defective in that:
(a)…
(b) …
(c) The estimated value of the property is not a reasonable estimate.
Ms Britton advised the Court that paragraphs 2(a) and 2(b) of the Notice of Grounds of Opposition appear to have fallen away as a result of the discussions between the solicitors of the respective sides. The Applicant’s solicitor has instructions to seek leave to file an amended Creditor’s Petition and this has been consented to by the Respondent’s solicitor.
Notice to Produce
The Notice to Produce seeks that the Applicant produce the following:
1) Documents recording or evidencing:
a. any rental or leasing of the property at 34 Alma Street, Clontarf, in the State of New South Wales (the Property) by or on behalf of the Applicant;
b. rental income or other income received by or on behalf of the Applicant from the Property,
from 1 December 2008 to date, including without limitation rental or leasing arrangements, without limitation, valuations, reports or expert reports.
3. Save as is caught by any other category, all documents relied on by the Applicant in stating that the Applicant holds security over the property of the Respondent is estimated in the value of $1,450,000.00 as set out in paragraph 2 of the Creditor’s Petition.
Applicant’s submissions
Ms Britton indicated that she moved on the Application in a Case which was filed in Court on 18 February 2010 and the Affidavit in support of that application sworn by her, Kylie Maree Britton on 17 February 2010 which was read. Mr Price indicated, there was no objection and there was no need for cross-examination on the affidavit.
Ms Britton submits that the documents sought under the Notice to Produce are irrelevant for the purposes of the Court determining whether the Respondent has a Notice of Grounds of Opposition to the Creditor’s Petition. It is submitted that it is established that any document sought under a Notice to Produce must be relevant and relies on the decisions in Trade Practices Commission v Arnotts Ltd (1989) 88 ALR 90 at [101] – [103]; Seven Network Ltd v News Ltd (No.11) [2006] FCA 174; Bailey v Beagle Management Pty Ltd [2001] FCA 60. Further, the onus is on the Respondent to demonstrate the apparent relevance of a document that is sought by the Notice to Produce: Seven Network Ltd v News Ltd (supra).
Paragraph [1] of the Notice to Produce appears to seek documents in connection with the first ground of the Notice of Opposition, namely that the Bankruptcy Notice is invalid on the basis that there is an overstatement of the amount claimed. It is submitted that it appears the Respondent is relying on s.41(5) of the Bankruptcy Act 1966 (Cth) (“the Act”) in that the Bankruptcy Notice is invalid by reason that the sum specified is an overstatement. However, the Creditor has received no such notice and the Respondent is precluded from making an application pursuant to s.41(5) of the Act at this time. Ms Britton relies upon the decision in Adams v Lambert (2006) 228 CLR 409.
Ms Britton argues that in order to rely on s.41(5) of the Act at the hearing of the Creditor’s Petition, a debtor must show that there are separate but related defects in the Bankruptcy Notice and not only that there is an overstatement: St George Wholesale Finance Pty Ltd v Spalla (2000) 181 ALR 682 and GR Finance Limited v Francis Waldron [2009] FMCA 418.
Ms Britton argues that the Court should set aside paragraph [1] of the Notice to Produce on the basis that the documents requested are not reasonably likely to add to the relevant evidence in the case.
In respect to paragraph [2(c)] and [3] of the Notice to Produce, it is submitted that these are not relevant for the Court in determining whether or not a Sequestration Order ought to be made. Paragraph [2] of the Creditor’s Petition lists the value of the security as being $1.45 million. Ms Britton referred the Court to s.44(2) and s.44(4) of the Act and submits that there is no requirement for the Creditor’s Petition to annex to it any valuation which the Petitioner may have obtained for the purpose of setting out the estimate of security in the Petition. There is only a requirement that the particulars are set out and that the Creditor’s Petition be verified by a person who knows the facts of the matter. That is, that paragraphs [1], [2] and [3] of the Creditor’s Petition are within their own knowledge, true.
Ms Britton argues that the Applicant has complied with s.44(2) and s.44(4) by providing a genuine estimate of security in the Petition which leaves the debt outstanding in excess of $2000.00: Capital Finance Aust Pty Ltd v Nathan [2008] FMCA 1363 and Wiggins, Re; Ex parte Credit Assistance Pty Ltd (1979) 36 FLR 182.
The Court was referred to Re Button; ex parte Voss [1905] 1KB 602 where the Court held that
where a secured creditor presents a petition in bankruptcy and gives an estimate of his security, if the estimate is a genuine one, the Court will not enquire into its correctness.
In my opinion when one arrives at the conclusion that the estimate is real and not a sham, we ought not to go into the question of what is the true value after the declaration of the estimated value.
This case was followed in the more recent judgment in Biron Capital Ltd v Anstee [2005] FMCA 1100. The Court held in this matter that the Court need only be satisfied that the estimate of security given is genuine. Ms Britton submits that there is no evidence before the Court to suggest that the estimate of the value of the security declared by the Applicant in the Creditor’s Petition is other than correct. The Respondent has not produced any evidence, by way of her own valuation of property, which satisfies the Court that the estimate of security given in the Petition is not genuine. The Respondent has had ample opportunity to obtain a valuation of the property. Accordingly, paragraphs 2(c) and 3 of the Notice to Produce should be set aside on the basis that the documents requested are not necessarily likely to add to the relevant evidence in the case.
Respondent’s submissions
Mr Price read an affidavit of his instructing solicitor Mr Stephen Douglas Watt sworn 3 February 2010. There are no objections to that affidavit and no requirement for cross-examination of Mr Watt.
Mr Price submits that the Respondent seeks to challenge the Creditor’s Petition on the basis that the Bankruptcy Notice overstates the amount of the debt owing. No authority is cited for the proposition that it is too late to do so and that the Respondent is bound to bring such an application within the time specified in the Bankruptcy Notice. The Court was referred to the decisions in National Australia Bank Ltd v Westbrook [2000] FCA 246 per Gray J and St George Wholesale Finance Pty Ltd v Spalla (2000) 181 ALR 682 per Heerey J. Both of these cases concern an application to challenge the validity of a Bankruptcy Notice at the Petition stage. In Westbrook’s case at [15] His Honour Gray J stated
… If the bankruptcy notice is a nullity, the Court’s jurisdiction to make the orders sought by the Applicant has not been invokedvalidly. Once the Court acquires knowledge that the jurisdictional facts which s.40(1)(g) of the Bankruptcy Act 1966 (Cth) provides cannot be established because the Bankruptcy Notice is a nullity, it is impossible for the Court to proceed to make a Sequestration order.
I note that Westbrook’s case has been disapproved in Trustee of the Franciscan Missionaries of Mary v Weir [2000] FCA 574 on another ground concerning the illegibility of a signature on a document as it was not possible to ascertain who had issued the Bankruptcy Notice. Mr Price acknowledges that subsequent cases have determined that a mere overstatement is not a defect that will render the Bankruptcy Notice invalid. However, it will not change the particular finding that if the Bankruptcy Notice is not valid, then the Creditor’s Petition must also fall simply because the Court does not have jurisdiction.
Mr Price submits that in determining whether a Bankruptcy Notice is invalid, there is ample authority for the proposition that an overstatement of the amount owing will render the Bankruptcy Notice invalid. Again, Mr Price acknowledges the decision in Adams v Lambert (supra) for the proposition that an overstatement will not necessarily render the Bankruptcy Notice invalid, however it will depend on an analysis of what the defect is and a failure to bring into account rental amounts may constitute a mere overstatement.
Mr Price acknowledges that the failure to bring to account rental amounts may constitute a ‘mere’ overstatement. However in St George Wholesale Finance Pty Ltd v Spalla (supra) His Honour Heerey J indicated that it was not simply a matter of mere overstatement. The debtor in this matter was misled as there is no reference in the Bankruptcy Notice to the fact that the property appears to be leased out. The affidavit of Mr Stephen Douglas Watt deposes to having a paralegal conduct a search on the property in about December 2009 and discovered reference to the secured property being 34 Alma Street as being leased out since April 2009 and the rental for the property was $1900.00 per week. It is argued that this supports the proposition that the Applicant has failed to account for rental income received in respect of this property. This failure to account has accordingly overstated the amount owing in the Bankruptcy Notice, which has misled the debtor with the effect that the Bankruptcy Notice is therefore invalid and the Creditor’s Petition should therefore be dismissed as there is no jurisdiction in the Court to make a Sequestration Order.
Mr Price drew the Court’s attention to the decision in Deputy Commissioner of Taxation v Cumins [No.5] (2008) FCA 794 per Gilmour J where the Court decided not to follow St George Wholesale Finance Pty Ltd v Spalla (supra) on the basis that there had been a mere overstatement of the debt. Instead, Her Honour followed the decision in Hudson v Donald & Whalan [1997] FCA 852 per Lindgren J that had been handed down prior to Spalla and had not sited the argument before Heerey J in Spalla.
Mr Price submits that Deputy Commissioner of Taxation v Cummins should be distinguished as that case concerned the failure to pay income tax for a significant number of years and the claimed overstatement of the debt for amounts that were particularly within that party’s knowledge and he had no difficulty in being able to identify and quantify those particular items. Whereas, the matter before this Court concerns an order that was made by the Supreme Court of New South Wales in about April 2009 giving possession of the property to the Applicant. Therefore it was in the Applicant’s knowledge as to whether the property had been leased and what amounts had been received in rental payments.
Mr Price argues that such matters are not on the public record and would only be available to his client by way of Court process, such as a Notice to Produce. At a minimum, it has been demonstrated on behalf of Ms Athanasakis at least on a prima facie level that the Applicant has leased the property and has received rental.
Mr Price submits that the documents requested in paragraph [1] of the Notice to Produce are admissible as business records, they may be subject to an argument of weight and for that reason his client seeks the full set of documents with respect to leasing the property and the amount of rental that has been received.
The second category of documents sought in paragraphs [2] and [3] concern the valuation of the property and the issue of whether it is a genuine estimate. A Supreme Court judgment granted possession of the property to ING in April 2009. However in subsequent proceedings delivered on 20 November 2009 cited as O’Shea & Anor v Athanasakis & Ors [2009] NSWSC 1150 involved an application by Mr & Mrs O’Shea to remove an easement over their property, the benefit of which attached to Ms Athanasakis’ property over which ING held security and obtained possession.
In the course of those proceedings ING called evidence by a valuer, Mr Edmonds, who expressed the opinion that the value of the Adelaide Street property, if unburdened by such an easement, would be worth $2.14 million. Mr Foley-Jennings, the valuer, called by the O’Sheas’ was of the opinion that the value of the property would be $2.5million. His Honour Forster J considered the appropriateness of those valuations and came to the conclusion that if the easement over the O’Sheas’ property would have the effect of reducing the value of Ms Athanasakis’ property by an amount of around $110,000.00 or perhaps a little more.
Mr Price contends that the valuation provided by ING was put to the test in the Supreme Court litigation and rejected by His Honour Forster J. Mr Price submits that at the time of the Bankruptcy Notice it could not be said that ING had any reason to doubt that the valuation was correct. However, when it comes to the Creditor’s Petition issued on 25 November 2009, five days after the judgment delivered by Forster J, the valuation issue arises. To summarise the facts, the particular easement allowed the occupiers of Ms Athanasakis’ property to cross O’Shea’s property to access the garage at the rear. The evidence presented by O’Shea’s discloses that most of the houses on that street in fact had their garages at the front of the property. Forster J rejected the argument that the easement was reasonably necessary under s.88K of the Conveyancing Act1919 (NSW) and the owner occupier, Ms Athanasakis could apply to Manly Council to obtain permission to construct a driveway and garage at the front of the property and that was likely to cost in the vicinity of $110,000.00. Therefore, His Honour held that the purported valuation of Mr Edmonds attributed a reduction in value something in the order of $650,000.00 to be unreasonable.
It was argued that, in those circumstances, Ms Athanasakis should be entitled to see the documents in relation to valuation which are relevant to the validity of the Petition. Mr Price acknowledges that Mr Edmonds having read Forster J’s judgment, has gone back and reconsidered his opinion and has been able to substantiate his valuation on some alternative basis, but that is a matter particularly within the knowledge of ING. Accordingly, the Notice to Produce seeks documents relating to the valuation and are relevant to the validity of the Petition and therefore such documents should be produced.
Consideration
The Application in a Case seeks orders that the Notice to Produce dated 4 February 2010 be set aside. Rule 15A.17(ii) of the Federal Magistrates Court Rules 2001 (Cth) provides that power. The documents sought under a Notice to Produce must be relevant and the lack of apparent relevance is a ground for setting aside a Notice to Produce: Trade Practices Commission v Arnotts Ltd (No 2) (1989) 88 ALR 90 at 101 – 103. The test of apparent relevance is whether the documents are reasonably likely to add, in the end, in some way or other, to the relevant evidence in the case: Seven Network Limited v News Limited (No.11) [2006] FCA 174 at [11].
The Full Court of the Federal Court in Bailey v Beagle Management Pty Ltd [2001] FCA 60 per Heerey, Branson and Merkel JJ at [24] their Honours stated
[24]… in determining whether a notice to produce should be set aside, the Court will consider the relevance of the document sought and the extent to which notice might be fishing, vexatious, oppressive or inappropriate for any other reason.
The onus is on the issuer of the Notice to Produce to demonstrate the apparent relevance of the documents sought: Seven Network Limited v News Limited (No.11) (supra) at [7].
Paragraph 1 of the Notice to Produce
The Affidavit of Service of the Bankruptcy Notice has attached the judgment of the Supreme Court of New South Wales, Common Law Division, Possession list dated 1 December 2008 which contains the following terms of judgment
1. The Plaintiff is given possession of the land described in “item 1” of the Schedule
2. The Defendant pay the Plaintiff $2,953,039.12
Schedule
1. The whole of the land comprising the folio identifier at 2/738470 being the land situated and known as 34 Alma St, Clontarf, in the State of New South Wales.
The Bankruptcy Notice NN3394-09 issued by the Official Receiver on 31 July 2009 claims a debt of $2,953,039.12 which is the exact amount contained in the above judgment order. The affidavit of Stephen Douglass Watt indicates that his enquiries reveal that the property was leased on 30 April 2009 and the advertised rental for the property was $1900.00 per week. If this in fact did occur, income prior to the issue of the Bankruptcy Notice, is in the vicinity of $24,700.00 without a consideration of any outgoings. The argument advanced in the affidavit of Mr Watt is that the failure to account for this rental income would mean that the Bankruptcy Notice is invalid, as the debt in the Bankruptcy Notice has been overstated by not recording payments made and/or credits allowed since the date of judgment.
A mortgagee in possession has a duty to account and must account to a mortgagor all rents and profits actually received: Chaplin v Young (1864) 33 BEAV 330; Parkinson v Hanbury 1867 LR2HL1 at 15; National Bank of Australia v United Hand-in-Hand and Band of Hope Company (1879) 4APPCAS 391 at 409. In O’Shea & Anor v Athanasakis & Ors [2009] NSWSC 1150 per Forster J at [2] states that ING Bank (Australia) Limited (“ING”) is the Mortgagee in Possession of Ms Helen Athanasakis’ property identified as 34 Alma Street, Clontarf. Then at [21] His Honour states that in 2002, Ms Helen Athanasakis executed a mortgage of the Alma Street property in favour of ING and in 2007. She defaulted under the various loan agreements secured by ING’s mortgage.
In December 2008, ING obtained judgment for possession for the Alma Street property by an order of the Supreme Court of New South Wales. In February 2009 ING took possession of the Alma Street property and that had remained in possession of it ever since. Then at [26] His Honour indicated that having entered into possession of the Alma Street property, ING appointed a selling agent, scheduling an auction on 20 June 2009. On receiving a notice of the Supreme Court proceedings, ING cancelled its plan for auction pending the outcome of those proceedings. In the Schedule to the Bankruptcy Notice, item 5 is blank under “payments made and/or credits allowed since date of judgment or orders”.
In the circumstances I believe it is appropriate that the representatives of Mrs Athanaskis be provided with the information requested in paragraph 1 of the Notice to Produce and the application to have it set-aside should be dismissed.
Paragraphs 2 and 3 of the Notice to Produce
Paragraphs 2 and 3 of the Notice to Produce seek:
documents recording or evidencing the value of the property including, without limitation, valuation reports or experts reports and all documents relied upon by the Applicant in stating that the Applicant holds security over the property of the Respondent estimated in the value of $1.45 million as set out in paragraph 2 of the creditors petition.
The Notice of Grounds of Opposition contends that paragraph two of the Creditor’s Petition is defective in that:
a) It fails to identify the nature of the security;
b) It fails to properly identify the property of the Respondent debtor; and
c) The estimated value of the property is not a reasonable estimate.
This defect was acknowledged by Ms Britton in her oral submissions and she indicated that ING Bank intends to file an amended Creditor’s Petition on the hearing of the Petition. The amended Petition addressed a) and b) above so the remaining issue is whether the Creditor’s Petition is defective on the basis that the estimated value of the Alma St property is not reasonable.
The Court has power under s.33 of the Act which states:
33(1) the court may –
a)…
b)At any time allow an amendment of any written process, proceeding or notice under this Act.
In Green v Solomon [2001] FCA 698 Wilcox J stated at [7]:
[7] I think there was a mistake, in the date inserted in the petition. However, I cannot see any basis for a finding that prejudice was occasioned to Mr Solomon by that fact. Mr Solomon was involved in the proceedings before the Registrar. He was aware of the position and of the extensions of time that were granted. The question, in dealing with prejudice, is whether Mr Solomon is now any worse off than if the correct date had been inserted in the petition in the first place. I cannot see any basis for concluding he is in any way disadvantaged by the error. Accordingly, this seems to me a proper case in which to grant leave to amend the petition.
In Australia & New Zealand Banking Group v Coutts [2003] FCA 968 per Conti J at [20], referred not only to s.33 of the Act as the source of the Court’s power to allow an amendment to a Creditor’s Petition, but also to o.13, r. 2 of the Federal Court Rules which states:
2(1) subject to the following provisions of this Rule, the Court may, at any stage of any proceedings, on application by any party of its own motion, order that any document in the proceedings be amended, or that any party having leave to amend any document in the proceedings, in either case as such manner as the Court thinks fit
2(2) All necessary amendments shall be made for the purpose of determining the real question raised by or otherwise depending on the proceedings, or of correcting any defect or error in (?) or of multiplicity of proceedings.
Under r.7.01 of the Federal Magistrate Court Rules 2001 (Cth), this Court at any stage in the proceedings may allow a party to amend a document in the way and condition that the Court thinks fit. There is no provision in the Federal Magistrate Court Rules 2001 (Cth) rules equivalent to o.13, r.2(2) of the Federal Court Rules. However the principle in o.13, r.2(2) provides guidance as to the circumstances in which it is appropriate for the Court to exercise its discretion to allow an amendment.
Section 44(2) of the Act provides:
(2)…a secured creditor shall, for the purposes of paragraph 1(a) be deemed to be a creditor only to the extent, if any, by which the amount of the debt owed to him or her exceeds the value of his or her security.
Section 44(4) provides:
(4) Where a petitioning creditor is a secured creditor, he or she shall set out in the petition particulars of that security.
The Creditor’s Petition filed on 25 November 2009 in paragraph [2] states:
2. The Applicant creditor holds the security over the property of the Respondent debtor estimated in the value of $1,450,000.
It has been acknowledged that paragraph two fails to identify the nature of the security and properly identify the property of the Respondent debtor. As discussed above, it is intended that these two issues will be rectified by the issuing of the amended Creditor’s Petition.
The affidavit verifying the Creditor’s Petition sworn by Ryan D’Souza on 19 November 2009 states that paragraphs [1], [2] and [3] of the Creditor’s Petition are within his knowledge to be true. The Applicant creditor has complied with ss. 44(2), 44(4) to the extent that by providing an estimate of the security which leaves a debt outstanding in excess of $2,000. In MacDonald v Official Trustee in Bankruptcy [2001] FCA 140 at [24] the Full Court suggested that s.33(1)(b) conferred on the Court
…an unqualified discretion to amend process in bankruptcy, a discretion exercisable in all cases according to the circumstances of the particular case and, in particular, whether the exercise of the discretion would inflict injustice on or avoid injustice to any person.
If the amended Creditor’s Petition is filed, it should remedy the issue of identification. As this is not in dispute between the parties I do not believe that this needs to be further addressed.
The critical issue remaining is whether the petition is defective on the basis that the estimated value of the property is not reasonable. In Re Button; ex parte Voss [1905] 1 KB 602, the Court held that “where a secured creditor presents a petition in bankruptcy and gives an estimate of his security, if the estimate is a genuine one, the Court will not enquire into its correctness.
In that judgment, His Honour Williams LJ
In my opinion where one arrives at a conclusion that the estimate is real and not a sham, it ought not to go into question what is the true value after the declaration after the estimated value.
More recently this was followed by Driver FM Biron Capital Ltd v Anstee [2005] FMCA 1100. The Court held in that matter that the Court need only be satisfied that the estimate of the security given is genuine. I note the findings of His Honour Foster J in O’Shea v Athanasakis & Ors (supra) which notes that there would be a diminution in the value of the Alma Street property but makes no reference to the overall value that would cast doubt on the verified valuation appearing at paragraph [2] of the Creditor’s Petition. Nor is there any evidence before the Court that Mrs Athanasakis or her representatives have obtained a valuation that would cast serious doubt on the verified valuation appearing in the Creditor’s Petition.
Mrs Athanasakis and her representatives have had ample opportunity to obtain a valuation of the Alma St property and the onus lies with her to establish that the estimate of the security given is not genuine.
There is no express requirement in s.44(4) of the Act that the creditor set out an estimate of the value of its security. It is well established that a secured creditor must either estimate the value of its security (in which case it will be deemed to be an unsecured creditor of the debtor for the amount by which the value of the debt exceeds the value of the security) or state its willingness to surrender the security for the benefit of the creditor’s generally in the event of a Sequestration Order being made against the debtor: Re Wiggan; Ex Parte Credit Assistance Pty Ltd [1979] 30 ALR 443. A genuine estimate must be made as to the value of the security and a false or excessively low estimate can be grounds for dismissing a petition. However, this does not mean that in all cases the creditor must provide affidavit evidence for the basis of the estimate beyond that contained in the affidavit verifying the petition and the affidavit of debt. In Re Button; Ex Parte Voss [1905] 1KB602 Vaun Williams LJ rejected a submission that the Court should, when the Petitioning Creditor estimates his security, enquire whether the estimate is right.
In Re O’Leary and Anor; Ex Parte Bayne and Anor (1985) 61 ALR 674 per Shepherd J at [682] stated:
It is the fact that the petitioning creditor is not bound by the estimate when it comes to prove his debt in the bankruptcy of a debtor… that leads me to think that a petitioning creditor is obliged to do more than to make the best estimate he can of the value of his security when presenting his petition.
Re O’Leary and Anor; Ex Parte Bayne and Anor (supra) does not establish that the Applicant bears an onus to put evidence before the Court to address the possibility that the estimate could be arbitrary or capricious.
In this matter, the affidavit verifying the petition was sworn by Ryan D’Souza, the asset recovery officer of the Applicant who had access to the books and records of the Applicant and was authorised to make the verifying affidavit on the Applicant’s behalf. It is his evidence that the statements in paragraphs [1], [2] and [3] of the Petition, including the estimated value of the security are “within [his] own knowledge true”. Mr Price did not seek to challenge Mr D’Souza’s evidence through cross-examination. The evidence before the Court does not suggest that the estimate given by the Applicant and verified by Mr D’Souza is not a genuine one, or is arbitrary or capricious.
Consequently paragraphs [2] and [3] of the Notice to Produce should be set aside on the basis that the documents requested are not reasonably likely to establish an invalidity in the Petition.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Lloyd- Jones FM
Associate:
Date: 7 May 2010
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