Liberty Funding Pty Ltd v WONG
[2001] FMCA 10
•8 March 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LIBERTY FUNDING PTY LTD v WONG | [2001] FMCA 10 |
| BANKRUPTCY – Composition declared void – giving of false and misleading information at creditor’s meeting – omission of material particular in Statement of Affairs – Bankruptcy Act 1966, ss.187, 222(4), (5), (6). |
| Applicant: | LIBERTY FUNDING PTY LTD ACN 081 982 872 |
| Respondent: | JOANNA WONG |
| File No: | BZ154 of 2000 |
| Delivered on: | 8 March 2001 |
| Delivered at: | Brisbane |
| Hearing Date: | 9 February 2001 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Solicitors for the Applicant: | G. Rodgers of Gadens Lawyers |
| No appearance by Respondent |
ORDERS
The composition entered into on 15 September 2000 is void pursuant to s.222(4) of the Bankruptcy Act 1966.
A sequestration order be made against the estate of JOANNA WONG.
The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ154 of 2000
| LIBERTY FUNDING PTY LTD |
Applicant
And
| JOANNA WONG |
Respondent
REASONS FOR JUDGMENT
Background
The applicant LIBERTY FUNDING PTY LTD seeks a sequestration order against the property of the respondent JOANNA WONG.
The respondent signed an authority on 25 August 2000 under s.188 of the Bankruptcy Act 1966 (“the Act”) in favour of solicitor JEFFREY HARCOURT CROWTHER, appointing him to act as her controlling Trustee.
As a result of his appointment the Respondent gave the Controlling Trustee a Statement of Affairs dated 9 August 2000. The respondent declared the Statement of Affairs to be correct.
The Statement of Affairs did not identify the Applicant as a creditor and as such the Applicant was not invited to the meeting of Creditors originally called for 8 September 2000 and subsequently adjourned to 15 September 2000.
On 15 September 2000, the Minutes of Meeting reflect that a resolution was passed requiring the Debtor to execute a Deed of Arrangement and that GRAHAM ROSS BENDEICH be appointed as Trustee.
The Trustee advised the solicitors for the Applicant by letter dated
1 December 2000 that:
“I do not consider a composition (or, for that matter a Deed of Arrangement) was entered into.”
I am satisfied that O77 Rules 57 & 58 of the Federal Court Rules, relating to service of the application and notice of hearing (in Form 156) have been complied with in all respects.
The Respondent did not appear at the hearing and I note did not appear at the directions hearing before Registrar Baldwin on 8 December 2000.
The issue
The issue is whether the arrangement reflected by the minutes of meeting dated 15 September 2000 should be declared void.
Evidence
The evidence of the Applicant, on the substantive facts, is contained in the affidavit of PETER BUTTIGIEG, the Finance Company Executive of the Applicant, sworn 16 November 2000.
Relevantly he says that:
a)The Respondent entered into two Deeds of Guarantee for borrowings from the Applicant to BROOKFIELD BUILDERS PTY LTD (“the Company”) – one Deed dated 31 August 1999 and another dated 8 October 1999. The Respondent was a Director of the Company.
b)The Company defaulted under its security causing the secured properties to be sold on 8 May 2000 and 22 June 2000. Total losses in respect of both properties are estimated (at paragraphs 11 and 21 of Mr Buttigieg’s affidavit) to amount to $138,393.78. The Company went into liquidation on 28 July 2000.
c)The loan applications signed by the Respondent dated 13 August 1999, makes no disclosure of any unsecured debt to MICHAEL ROLAND EVANS. Dr Evans, a person apparently “sympathetic” to the Respondent’s position, lodged a proof of debt claiming $314,394.00.
d)The Minutes of Meeting of 15 September 2000 reveal an acknowledgment by the Respondent of “a great shortfall” to Liberty Finance from the sale of the properties. The Respondent in her Statement of Affairs or statements to the purported Meeting of Creditors made no disclosure about the liability she had under the Guarantees to Liberty Finance.
Conclusions
A composition is defined in s.187 of the Act as:
“… an arrangement … by which the creditors of a debtor:
a) …
b) agree to accept, in full satisfaction of the debts due to them less
than the full amount of those debts, …”
In the context of this matter the purported “Meeting of Creditors” in my view, agreed to a composition rather than resolving a Deed of Arrangement be entered into. Little ultimately turns in this matter on that distinction.
Section 222(4) of the Act empowers this Court to make an order declaring a composition to be void if it is satisfied that the debtor:
“a) has given false or misleading information in answer to a question put to him or her with respect to any of his or her conduct or examinable affairs at the meeting of creditors …; or
b) has omitted a material particular from the Statement of Affairs given under s.188(2) …”
I am satisfied, on the evidence, that the Respondent knew of the significant shortfall on sale of properties, covered by her personal guarantee, and that her failure to frankly disclose this information lead to the Applicant being denied the opportunity to participate in the Meeting of Creditors. Furthermore the failure by her to fully and frankly disclose the contingent liability to Liberty Finance in her Statement of Affairs is an omission of a “material particular”.
I am not to make an order declaring the composition void under s.222(4) unless I am satisfied:
“that it would be in the interests of creditors to do so.”
[see s.222(5)].
Considering the poor result to creditors flowing from the purported composition (a net payment of only $10,000.00 over 18 months) and the lack of investigation by any party of the alleged unsecured debt of Dr Evans of $314,394.00, I think it is in the interests of creditors to declare the composition void.
Investigations of the debtors affairs which will flow from sequestration are, in my view, likely to be in the interests of creditors (see Tripodi; ex parte Col Johnson Pty Ltd, unreported Federal Court 22.1.1997).
As no payment has been made, the time limits imposed by s.222(6)(c) of the Act have been met.
I am asked to make a sequestration order. When the debtor signed an authority under s188, she committed an Act of Bankruptcy. A sequestration order should be made unless some sufficient cause is shown to outweigh the public interest and that of individual creditors (see Re: Morris; Ex parte Admass (1980) 48 FLR 341). I think it appropriate to order sequestration.
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
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