Landpower Developments Pty Ltd v Osborne
[2003] FMCA 257
•27 June 2003
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LANDPOWER DEVELOPMENTS PTY LTD v OSBORNE | [2003] FMCA 257 |
| BANKRUPTCY – Application for sequestration order on creditor’s petition – s.52(2) considerations – stay on making of sequestration order. |
Bankruptcy Act 1966 (Cth), ss.41.6A, 43, 47, 52, 86
Corporations Act 2001 (Cth), s.553C
Re Verma; Ex parte Deputy Commissioner of Taxation (1985) 4 FCR 181
Re Williams (1963) 13 FLR 10
Byron v Southern Star Group (1997) 73 FCR
| Applicant: | LANDPOWER DEVELOPMENTS PTY LTD (IN LIQUIDATION) (ACN 064 989 073) |
| Respondent: | RAMON RONALD THEODORE OSBORNE |
| File No: | WZ 135 of 2002 |
| Delivered on: | 27 June 2003 |
| Delivered at: | Melbourne |
| Hearing date: | 12 December 2002 |
| Further submissions: | 22 & 24 January 2003 |
| Judgment of: | Hartnett FM |
REPRESENTATION
| Counsel for the Applicant: | Mr T. Brickhill |
| Solicitors for the Applicant: | Brickhills Barristers & Solicitors |
| Counsel for the Respondent: | Mr C Stokes |
| Solicitors for the Respondent: | Chris Stokes & Associates |
ORDER
The matter be adjourned for telephone mention on 28 July 2003 at 4:00pm Eastern Standard Time before Hartnett FM at which time a sequestration order will be made against the estate of the respondent in the event payment of the judgment sum together with interest and costs has not been made.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MZ135 of 2002
| LANDPOWER DEVELOPMENTS PTY LTD (IN LIQUIDATION) (ACN 064 989 073) |
Applicant
And
| RAMON RONALD THEODORE OSBORNE |
Respondent
REASONS FOR JUDGMENT
By Creditor’s Petition dated 1 July 2002 and filed 9 July 2002 the applicant creditor applied to the Court for a sequestration order under s.43 of the Bankruptcy Act 1966 (Cth) against the estate of the respondent claiming $46,641.76 pursuant to a judgment obtained in the Supreme Court of Western Australia at Perth on 28 March 2002. The total sum claimed was $46,412.88. That amount included interest from 29 March 2002 to 28 May 2002 in the sum of $228.88. That petition was founded on a failure to comply with a Bankruptcy Notice No. 92/2 served on 30 May 2002 and a claimed failure to satisfy the Court that the Respondent Debtor had a counterclaim, set-off or cross demand equal to or exceeding the amount claimed in the Bankruptcy Notice being a counterclaim, set-off or cross demand that the Respondent Debtor could not have set up in the action in which the judgment referred to in the Bankruptcy Notice No. 92/2 was obtained.
The respondent filed, during the currency of the proceedings a “Notice of Intention to Oppose Application or Petition” on the ground that the summary judgment obtained in the Supreme Court was intended to be appealed by him. Application for the leave of the Master of the Supreme Court to bring such application had been adjourned from
19 July 2002 to 8 August 2002.
Procedural History
Affidavits verifying paragraphs 1, 2, 3 and 4 of the Creditor’s Petition and as required by s.47 of the Act were filed on 9 July 2002. An Affidavit of personal service of the Petition was filed 6 August 2002. An Affidavit of Search of the National Personal Insolvency Index was filed 6 August 2002. An Affidavit of Debt was also filed 6 August 2002. These documents were filed in compliance with s.52 of the Act.
On 6 August 2002 the Petition was adjourned to 20 August 2002 by Order of Registrar Jan. The respondent was given an opportunity to file a Notice of Appearance and Notice of Intention to Oppose the Creditor’s Petition which he had not done to that time. Accordingly he filed a Notice of Motion seeking to set aside the Bankruptcy Petition and in addition sought an extension of time and/or a stay of proceedings. The respondent was at that time a litigant in person. There was no claim by the respondent that the bankruptcy notice itself was defective nor was s.41.6A of the Act a relevant provision given the expiration of the time fixed for compliance with the requirements of the bankruptcy notice. The respondent argued pursuant to s.52 of the Act that the Court should exercise its discretion to dismiss the petition.
Further affidavits of search of the Insolvency Index and of debt were filed. On 20 August 2002 Registrar Jan further adjourned the hearing of the Petition to 10 September 2002. The applicant sought that adjournment in light of a sequestration order being made on an unrelated party Creditor’s Petition and as against the respondent to these proceedings. No appearance was entered as a consequence for the respondent on that day.
On 10 September 2002 Registrar Jan again adjourned these proceedings to 8 October 2002.
On 24 September 2002 an Affidavit opposing the review of the sequestration order obtained 20 August 2002 was sworn by Calvin Chung Kee Ko, Solicitor for the applicant in these proceedings. Mr Ko had appeared for the applicant before Registrar Jan on the various adjournment hearings. He deposed in that affidavit to a lack of notification of the re-listing of the Creditor’s Petition No. WZ 93 of 2002 and sought that the sequestration order obtained therein remain operative.
In proceedings No. WZ 93 of 2002 between Demostine Nominees Pty Ltd as applicant and the respondent, the sequestration order obtained on 20 August 2002 was set aside by consent order of McInnis FM on 26 September 2002.
On 8 October 2002 Registrar Stanley adjourned these proceedings to 22 October 2002. The parties agreed to this further adjournment as the respondent’s application for leave to appeal the judgment upon which the Creditor’s Petition was based was listed for a special appointment on 11 October 2002 in the Supreme Court.
Prior to the hearing on 22 October 2002 further Affidavits of Search and Debt were filed and sworn and an Affidavit in support of the sequestration order was filed on 21 October 2002 and sworn by Gregory Dudley, Chartered Accountant, an employee of the liquidator (Kimberly Andrew Strickland and Christopher Michael Williamson are the joint and several liquidators of the applicant company). Mr Dudley deposed to one Bryan Stokes, a registered industrial agent, acting as the respondent’s agent being present at a meeting on 19 June 2002 wherein Mr Stokes advised as agent for the respondent that the respondent admitted that he owed the full sum of money claimed against him by Landpower in the Supreme Court action. The respondent takes objection to the disclosure of the discussions had during the course of that meeting but in any event denies the making of any such admission against interest.
A further affidavit in support was sworn and filed 21 October 2002 by Trevor Brickhill, Solicitor for the applicant and the applicant’s Counsel. He noted the respondent’s application for an extension of time for leave to appeal the judgment obtained by the applicant against the respondent on 28 March 2002 had been filed on 16 July 2002 in the Supreme Court. He confirmed the contents of Mr Dudley’s affidavit as to the 19 June 2002 meeting. He deposed to there being no order by the Supreme Court for a stay of execution on the judgment at that time.
On 22 October 2002 further procedural orders were made wherein the respondent was granted leave to amend his Notice of Opposition and to do so by 25 October 2002. In fact he filed this document on 6 November 2002. He also filed an Affidavit in Opposition on 5 November 2002.
The respondent submitted that the judgment debt in the bankruptcy notice was in respect of a claim for unpaid rent in Supreme Court action CIV2687 of 2001. Such judgment debt was the subject of an application for leave to appeal (which has since been granted) and for the respondent’s appeal against the making of the order. In addition, the respondent claimed to be a creditor in the liquidation of the applicant company in the sum of $70,000.00. No proof of debt has ever been provided. He remains a defendant in Supreme Court action CIV2687 of 2001 wherein the balance of the sum claimed against him is $1,471,275.20.
The grounds of opposition include the following:-
a)that the respondent is solvent; and
b)that the respondent has a counterclaim and is a creditor of the applicant in the sum of $681,000.00 and damages pursuant to a claim for breach of contract by the applicant company in or about July 1999. That claim, the respondent argues, is to be the subject of a counterclaim in the Supreme Court proceedings referred to in paragraph 13 above.
Further Affidavits of Debt and Search were filed 11 November 2002 by the applicant. An affidavit in support of the Petition was filed on
11 November 2002 and sworn by Mr Trevor Brickhill. He deposed in that affidavit to the summary judgment hearing which was conducted before the Master on 8 March 2002 submitting that argument was put before the Court by each of the parties. The Master reserved his decision, handing it down on 28 March 2002. At all times throughout the proceedings Mr Osborne was represented and at no time did he raise an allegation of set-off or counterclaim, save that he sought on
27 March 2002 to file further material and was unable to do so by order of the Master.
A further Affidavit in Support of the Petition was filed on 11 November 2002 and sworn by Mr Christopher Williamson, liquidator of the applicant. He referred to the respondent’s affidavit as to the purported debt claimed to be owed to Mr Osborne and stated that the purported debt was not admitted by the applicant. Mr Williamson deposed to informing Mr Osborne prior to the execution of Leases of Lots 22, 23 and 25 between the applicant and respondent (hereafter described) that the company had been put into administration as it was insolvent and had come out of administration by entering a Deed of Company Arrangement and that Mr Osborne entered into the Leases as foreshadowed in the Deed of Company Arrangement. Mr Williamson deposed to the respondent providing the liquidators with no proof whatsoever in support of his purported set-off or counterclaim and stated that had Mr Osborne thought to earlier set-off the purported debt against the applicant it would have been rejected by the liquidators pursuant to s.553C(2) of the Corporations Law (as it then was). Mr Williamson further deposed to no endeavour to settle the claim by the respondent between 28 March 2002 and 5 July 2002 save discussions had at the meeting on 19 June 2002.
a)Annexed as an Exhibit to the Affidavit of Mr Williamson was the following: the decision of Master Bredmeyer published 3 April 2002 in proceedings No. CIV2687 of 2001 between the applicant and respondent who were in those proceedings the plaintiff and defendant respectively. Those reasons dealt with the plaintiff’s application for summary judgment. The plaintiff claimed for monies due by a tenant to a landlord under a lease. There were in fact three leases of rural land, Lots 22, 23 and 25, with the leases being in identical terms. The plaintiff company was placed in administration on 10 August 1999 and signed a Deed of Company Arrangement on 25 November 1999. Rent with respect to the leases was due and payable each month on the first day of the month. The Master found that the plaintiff was entitled to rent from the 1st to the 17th of December 1999 on the three leases. The Master noted that he was satisfied that the defendant had raised no question of law or fact as a defence to that claim. Summary judgment was thus entered against the defendant but the defendant had leave to defend the balance of the claim on the basis of alleged frustration of the leases occasioned by a non-party. The defendant agreed that he had made no payments to the plaintiff pursuant to the terms of the leases and claimed that neither he, his representatives nor his agents ever took actual physical possession of Lots 22, 23 or 25, the subject of the leases.
By way of elaboration of this history:
i)the applicant, when it was subject to a Deed of Company Arrangement, entered into three agricultural leases with the respondent on 1 December 1999 over three properties located at Southern Estuary Road, Lake Clifton in the State of Western Australia. The proceedings in the Supreme Court commenced in November 2001 claiming the sum of $1,588,775.20, arose out of Mr Osborne’s default under the lease agreements by the failure to pay his lease payments. In consideration of the leases the respondent was to pay annual rent of $300,000.00 for the first three years and $1,000 per annum for the next seven years. The leases were signed by the respondent and the common seal of Landpower Developments Pty Ltd was affixed to the leases in the presence of Mr Williamson as Deed Administrator. Mr Osborne argued that he and the plaintiff entered into an oral collateral agreement with respect to Lot 24 or alternatively that the leases were subject to express verbal conditions with respect to his access to and use of Lot 24. On or about 17 December 1999 Mr Osborne claimed to be refused access to the land the subject of the leases and the land and nursery on Lot 24;
ii)the applicant denied entering into any oral collateral agreement with the respondent. The applicant denied the leases were subject to any express verbal conditions. Prior to the receipt of the respondent’s affidavit as to it, the liquidators claimed to have had no knowledge of the alleged collateral agreement or expressed verbal conditions alleged by the respondent. As administrators under the Deed of Company Arrangement the liquidators stated they were never a party to any alleged agreement or authorised any alleged verbal conditions between the applicant and respondent. The applicant denied ever refusing access to the respondent to Lots 22, 23 or 25 or to Lot 24. Further it deposed that there were no gates to Lots 22 and 23.
On 12 November 2002 the matter was listed for hearing.
In opposition to the making of the sequestration order there was further filed on behalf of the respondent an Affidavit sworn by his Solicitor, Mr Stokes, and filed 5 December 2002 and an Affidavit sworn by the respondent and filed 5 December 2002. Although the filing of both these documents did not comply with the time restraint imposed by order of Registrar Jan on 12 November 2002 I was satisfied that the applicant had ample opportunity to peruse the contents and take instructions with respect thereto. There was nothing prejudicial to the applicant in the filing of these documents out of time and it was a matter of procedural fairness to be accorded to the respondent.
I consequently allowed the documents so filed to form part of the evidence of the respondent in the proceedings.
In respect of the Affidavit of Mr Stokes I observe the following:-
a)Whether or not a Trustee of the Bankrupt Estate of Mr Osborne determines to continue with the Supreme Court proceedings in action CIV2687 of 2001 in which the respondent has been granted leave to defend with respect to the sum claimed of $1,471,275.20 is a matter for the Trustee at the relevant point in time to determine. That determination will no doubt involve an assessment of the defence proffered by the defendant and the likely outcome of those proceedings;
b)
By annexure marked “CPF1” Mr Stokes produced a copy of the Statutory Declaration said to be sworn by the respondent on
25 June 2002 and in particular in paragraph 8 disclosing the assets in the sole name of the respondent said to be totalling $588,000.00. No evidence of valuation is provided and nor any other evidence as to the calculation of the said assets. No statement of liabilities is included nor any explanation of the liabilities very clearly existing in the name of the respondent.
Mr Osborne deposed in particular to the following:-
a)On 22 November 2002 Acting Master Chapman in the Supreme Court of Western Australia heard submissions in relation to his application for an extension of time in which to lodge his application for leave to appeal from the decision of Master Bredmeyer entering judgment against him. Acting Master Chapman at that time reserved his decision. Leave has now been granted although no stay of the operation of the order was granted albeit the existence and status of these proceedings were known to the acting Master;
b)his statement of assets contained in paragraph 8 of his Statutory Declaration annexed to the Affidavit of Mr Stokes which he deposed remained accurate as at the date of his swearing of his Affidavit, namely 5 December 2002. No further elaboration upon his asserted net asset position was provided in his affidavit material;
c)for the period between 20 August and 26 September 2002 when the respondent was the subject of the sequestration order as referred to above and before it being set aside, a list of the respondent’s creditors was prepared by the Official Receiver. That list of creditors disclosed total liabilities of $1,219,405.00. In respect of that list the respondent challenged the liability amounts as set out in paragraph 19 of his affidavit. No proofs or other substantiating evidence as to those challenges were provided.
Once again Affidavits of Debt and Search of the National Personal Insolvency Index had been filed and sworn on 11 December 2002.
A further Affidavit in support of the Petition and in answer was filed and sworn on 11 December 2002 by Mr Williamson, liquidator of the applicant company. That document I also allowed to be admitted into evidence in the proceedings. In particular Mr Williamson deposed to the following:-
a)that the Statutory Declaration referred to by Mr Osborne made no reference to the debts outlined in the List of Creditors as prepared by the Official Receiver and failed to disclose the liabilities of Mr Osborne;
b)Master Bredmeyer made no finding that a third party denied Mr Osborne access to Lots 22, 23 and 25 and that the leases were in fact frustrated. Master Bredmeyer found that this was an arguable point.
The respondent filed a further affidavit on 14 January 2003. As this affidavit was unilaterally filed and following the conclusion of the hearing I disregard its contents in my deliberations.
Consideration
In entering into the leases for Lots 22, 23 and 25 Mr Osborne was receiving credit from the company which was subject to a Deed of Company Arrangement with knowledge that the company was insolvent. I accept the applicant’s argument that he would not have been entitled to his alleged set-off pursuant to s.553C(2) of the Corporations Act had he claimed it at the time of settlement of the leases. The leases stipulated the rent payable by Mr Osborne under the leases was free of any deduction.
The question for this Court is to determine whether there are circumstances that justify the exercise of its discretion to go behind the judgment debt. Whilst the question of whether the respondent is in the process of attempting or has attempted to set aside the judgment is relevant to the exercise of the Court’s discretion, the mere fact that an appeal is pending does not give the respondent a right to a stay of proceedings or to have the petition adjourned or dismissed. The appeal brought by the respondent must be based on genuine and arguable grounds. The grounds argued in the case before me related to the alleged collateral agreements in relation to Lot 24 and/or that leases of Lots 22, 23 and 25 were subject to a security of tenure in respect of Lot 24 and the water supply on that lot.
The onus is on the respondent to adduce evidence to this Court to indicate the substantive nature of the grounds of the appeal pursued by him to show the existence of a genuine dispute (see Re Verma; Ex parte Deputy Commissioner of Taxation (1985) 4 FCR 181).
The summary judgment obtained in the Supreme Court in Western Australia was a judgment obtained after a hearing on the merits. No case of fraud has been made out before me nor indeed argued. The evidence before me, I conclude, is that the debt is due and owing and there is no evidence of solvency of the respondent to enable the Court to exercise its discretion to decline to make a sequestration order (see Re Williams (1963) 13 FLR 10). The respondent claimed his net asset position to be $588,000.00 but this is contrary to the evidence before me and was not substantiated in any real way by the respondent. The lack of convincing evidence as to the status of his liabilities and the lack of valuation of the asset position claimed by him did not put the Court in the position wherein it could conclude there was evidence of the solvency of the respondent. No details were before the Court as to the income of the respondent nor his readily realisable assets. Debts admitted by him totalled $651,133.00 approximately. There is nothing to suggest that the respondent has an ability to meet his debts as they fall due.
Insufficient evidence was provided by the respondent as to why the purported set-offs and counterclaims were not raised in the Supreme Court proceedings before the Master.
Clearly leases were entered into between the applicant and respondent with respect to Lots 22, 23 and 25. No lease was entered into between the parties in respect to Lot 24 – that lot indeed involving a third party and possibly the respondent.
Taking all of the matters into account in the evidence before it, the Court does not consider it germane to exercise its discretion to reconsider the judgment and go behind it in declining to make a sequestration order in these proceedings.
The respondent has not put before me material to show that there is a dispute between he and the applicant genuinely based on substantial grounds. He has relied upon assertions but without more provides no sufficient basis to conclude that there are serious questions based on substantial grounds for resolution between the parties. In the circumstances I decline to grant an adjournment or to exercise the discretion invested in the Court by s.52(2)(b) of the Bankruptcy Act 1966.
Whilst I propose that there be a sequestration order I do not propose to make it at the present time but rather to accede to the request of the respondent for a stay of 28 days on the making of the order itself to allow the respondent to make payment to the applicant in such manner as required and foreshadowed by the respondent in his submissions. In the event of non-payment I shall order as follows:
1)Pursuant to s.43 of the Bankruptcy Act 1966 there be a sequestration order against the estate of RAMON RONALD THEODORE OSBORNE.
2)The Official Trustee in Bankruptcy be appointed as the Trustee in Bankruptcy.
3)The applicant’s costs of and incidental to the petition, including reserved costs, be taxed pursuant to order 62 of the Federal Court Rules and paid in accordance with the statute.
The date of bankruptcy that shall be included in any order to be made hereafter shall be 20 June 2002.
I propose to order that the matter be adjourned for telephone mention before me on 28 July 2003 at which time the sequestration order will be made against the estate of the respondent in the event payment of the judgment sum together with interest and costs has not been made.
I certify that the preceding thirty-four (34) paragraphs are a true copy of the reasons for judgment of Hartnett FM
Associate: L.M.Dorian
Date: 27 June 2003.
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