Lion Finance Pty Ltd v Blake
[2014] FCCA 1404
•27 May 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| LION FINANCE PTY LTD v BLAKE | [2014] FCCA 1404 |
| Catchwords: BANKRUPTCY – Sequestration order – review of registrar’s decision – s.52(2) Bankruptcy Act 1966 (Cth) – debtor unable to demonstrate solvency – debtor unable to demonstrate other sufficient cause as to why a sequestration order ought not be made – application for review dismissed – sequestration order affirmed – costs awarded. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.52, 306 |
| Applicant: | LION FINANCE PTY LTD |
Respondent: Supporting Creditor: | JOHN BLAKE AUSTRALIAN TAXATION OFFICE |
| File Number: | BRG 22 of 2014 |
| Judgment of: | Judge Burnett |
| Hearing date: | 27 May 2014 |
| Date of Last Submission: | 27 May 2014 |
| Delivered at: | Brisbane |
| Delivered on: | 27 May 2014 |
REPRESENTATION
| Solicitors for the Applicant: | Jones King Lawyers |
| The Respondent appeared on his own behalf |
| Solicitors for the Supporting Creditor : | ATO Dispute Resolution |
ORDERS
The application for review filed 24 March 2014 be dismissed.
The sequestration order made by Registrar Baldwin on 13 February 2014 be affirmed.
The Respondent Debtor, John Blake, pay the Applicant Creditor and Supporting Creditor’s costs of and incidental to the petitioning application and the application for review, such costs to be taxed if not agreed and paid as first charge on the bankrupt estate.
The Court notes that the date of the act of bankruptcy is 2 January 2014.
| FEDERAL CIRCUIT COURT AT BRISBANE |
BRG 22 of 2014
| LION FINANCE PTY LTD |
Applicant
And
| JOHN BLAKE |
Respondent
| AUSTRALIAN TAXATION OFFICE |
Supporting Creditor
REASONS FOR JUDGMENT
(Ex tempore)
On 29 September 2011 Lion Finance Pty Ltd (“the creditor”) obtained judgment against Mr John Blake (“the debtor”) in the Magistrates Court of Western Australia for the sum of $16,000.00. Subsequently, on 21 October 2013, a bankruptcy notice issued for that sum together with statutory interest. That notice was served on the debtor on 5 December 2013, and despite the demand made on the notice, the debtor failed to comply with the requirements of the notice. He committed an act of bankruptcy on 2 January 2014.
On 10 January 2014, the petitioning creditor made application for sequestration. The creditor’s petition was served upon the debtor on 5 February 2014, and the matter was returnable before Registrar Baldwin on 13 February 2014. On that date, all the matters required to be established pursuant to s.52(1) of the Bankruptcy Act 1966 (Cth) (“the Act”) were established to the satisfaction of the Registrar and she accordingly made a sequestration order against the debtor. She also ordered that the debtor pay the petitioning creditor’s costs. The order was in the usual form.
On 24 April 2014 the debtor made application for the judgment to be set aside. In effect he pursues the setting aside of the Registrar’s sequestration order, and I proceed on that basis. From the petitioning creditor’s perspective, nothing has changed since the hearing on 13 March 2014 when the Registrar’s order was made. Save for a necessity to file updated Affidavits of Search and Debt, the petitioning creditor has established a prima facie entitlement to a sequestration order.
The questions that arise in this case are, firstly, whether the debtor is insolvent and/or, secondly, whether other sufficient cause can be demonstrated to warrant the dismissal of the creditor’s application pursuant to s.52(2) of the Act.
The application was filed on 24 March 2014. It came before me on 7 May 2014, at which time I made procedural orders with a view to progressing the matter to hearing. In particular, on 7 May 2014, I directed that the debtor file and serve any material in support of his application by 16 May 2014 and that the petitioning creditor respond by 21 May 2014. The debtor did file some material. However, that material was not received on 16 May 2014, but filed by leave on 22 May 2014, when the matter came on for hearing.
The creditor, consistent with the orders made and probably in anticipation of material from the debtor, did file material electronically on the afternoon of 21 May 2014. In any event, when the matter returned before me on the morning of 22 May 2014, the debtor complained that the volume of material filed by the applicant creditor was such as to be oppressive and that he had not been afforded sufficient opportunity to consider that material. The matter was stood down until later in the day to permit the debtor an opportunity to review the material.
When the matter resumed later that afternoon, the debtor indicated that he wanted a further opportunity to file material in response to that which the creditor had filed the day before. Accordingly, an adjournment was granted to today’s date to permit the debtor to do precisely that.
He has not filed any material today. I have asked whether he has any further material that he intends to rely upon and he has asked for an adjournment for 14 days to file a “written submission.” I note that except in respect of an affidavit of one potential person (Mr Mann) there has been no request to file further material.
In the course of addressing me on the application for an adjournment, he took me through the material which has been filed by the creditor and which the debtor seeks to challenge. In particular, the debtor wishes to challenge material attached to the affidavit of Ms Alessandra Navarro,[1] a solicitor acting on behalf of the creditor, to challenge correspondence which is annexed to her affidavit and which she says was forwarded to him.
[1] Filed 22 May 2014.
For instance, he challenges Annexure AN-04, which is the “Certificate of Proof of Service by Bailiff” of the proceedings which gave rise to the judgment in the Magistrates Court of Western Australia. He challenges the address evidenced in correspondence forwarded by the creditor’s solicitors to him, saying that it is the wrong address.[2] He challenges correspondence of 7 August 2013 addressed to him at another address,[3] again alleging that it is incorrect. That particular correspondence was also sent by email,[4] which he says he did not receive owing to difficulties with his computer. I note that on 10 May 2014 an email was forwarded by Mr Blake to Ms Navarro.[5] That email was sent from [email protected], the very same address which apparently was not working only a matter of months earlier and which Mr Blake concedes was set up for him some time in the early 2000s. I find his complaints on these points to be unpersuasive.
[2] 12 Victoria Street, Bunbury, Western Australia 6230.
[3] “11 Saphire Brace,” Australind, Western Australia 6233.
[5] AN-02 to Ms Navarro’s affidavit.
Further, he complains that Annexure AN-03 to Ms Navarro’s affidavit, which is another email of 10 February 2014, misled him. He says that he did not understand that the effect of the emails was that they would result in a bankruptcy hearing. He claims to have thought that the emails pertained only to a court mention.
The fact remains that emails are not of moment to this Court; what was of moment, and what ought to have been of moment to Mr Blake, was the form of the creditor’s petition itself. It is quite clearly stated on the face of the petition that he was to attend Court 8, Level 6 at the Commonwealth Law Courts in Brisbane for the hearing of the petition on 13 February 2014 at 9:30 am. There was no ambiguity concerning that matter, irrespective of how he sought to interpret the correspondence between himself and the creditor’s solicitors, which incidentally did not discuss in any formal sense this hearing except for an email of 10 February 2014, which stated:
“Good Morning Mr Blake,
We refer to the repayment proposal you have put forward in the attached statement of financial position. Our client has instructed us to reject your proposal and proceed to seek a sequestration order at the hearing of the creditor’s petition set for 13 February 2014.”
It is difficult to see how that email could have been construed to suggest that the matter was being adjourned for mention only. I do not accept Mr Blake’s contentions that he was not given sufficient opportunity to answer the case based upon the correspondence between him and the solicitors, as evidenced in the affidavit of Ms Navarro. I do not think that those matters warrant an adjournment, and I do not think given what he has told me this morning that there is any material he can advance to suitably address those matters. I further note that no material has been forthcoming to demonstrate any basis upon which he can rebut the assertion that he is insolvent.
The next affidavit that Mr Blake sought to rely upon in seeking an adjournment was that of Mr Paul Robinson. Mr Robinson is the “Manager Business Strategy” for the petitioning creditor. His complaint about Mr Robinson’s affidavit is that the figures set out in a number of proofs of debt annexed to the affidavit are incorrect. In particular, Annexure PR-03, which is a proof of debt prepared by the creditor addressed to the Trustee, has attached to it a spreadsheet which adds additional interest from the date of judgment to the date of the proof of debt. There is a similar spreadsheet attached to PR-04. Those matters are arithmetic, and in any event do not bear upon the principal claim which is in respect of the judgment debt, a matter which has been deposed to in the Affidavit of Debt which was filed in the proceedings before the Registrar.
I note that the judgment debt is for $16,000.00. The spreadsheet calculation in respect of interest is for a sum of $2246.75. Even if there was to be an error in those calculations, that error is one which would be readily waived pursuant to s.306 of the Act as immaterial to the outcome of the proceedings. Again, there is no justification on that basis for an adjournment.
The final affidavit which Mr Blake claims warrants the justification of an adjournment is his desire to respond to the affidavit of Mr Jason Cronan,[6] who is the Trustee of Mr Blake’s bankrupt estate. That affidavit includes a number of important documents which are not only significant in relation to the debtor’s application for the adjournment, but in answering the application generally in respect of the s.52(2) elements.
[6] Filed 22 May 2014.
Mr Cronan’s affidavit attaches the debtor’s statement of affairs. The debtor admits that the statement of affairs was signed by him and acknowledges its content. On the basis of that document Mr Cronan prepared his report to creditors. I will not rehearse all of the material contained within that document, but will address the key pieces of information relevant to this proceeding.
The estimated net deficiency of the debtor’s estate is $6,469,243.00, made up principally of unsecured creditors of $6,509,402.00 and secured creditors of $723,885.000. When one considers those figures against Mr Blake’s own affidavit, the inescapable conclusion is that he is hopelessly insolvent.
Mr Blake, in his affidavit,[7] seeks to answer many of the debtors which he otherwise has acknowledged in his statement of affairs. At paragraphs 65 to 69 he answers the statement of affairs. He simply disregards all of the creditors whom he says are not real creditors and, accepting the existence of a number of personal debts, says:
“[65] My total actual personal debts as stated in the above table [$802,817] have been managed every month by way of payment arrangements firmly in place as it always has been prior to 13 February 2014.
[66] The actual personal debts with payment arrangements in place may continue to be managed every month beginning 31 May 2014 once my Bankruptcy is overturned on 22 May 2014.
[67] There is also a chance that all my debts could be consolidated under the one loan for a low interest rate.
[68] The prospect put forward that I could trade my way out of financial difficulty is within the realms of possibilities.
[69] With my bankruptcy being overturned, I will be able to increase my combined real estate kerb side valuations from the guesstimated fire sale figures of 740,000 - 800,000, to properly saleable properties for the longer term in the vicinity of 850,000 - 900,000 and above.”
[7] Exhibit 1 sworn 16 May 2014. The affidavit was served upon the creditor but not filed.
All that Mr Blake’s affidavit serves to do is to highlight his hopeless financial position. Against his liabilities of approximately $7,000,000.00 he says that he might have, if one assumes an orderly sale, access to funds from the sale of property worth $850,000.00. He also says that he has the ability to “trade out” of his circumstances. The stark reality is that Mr Blake’s arguments are fanciful, to say the least.
Mr Blake’s inability to repay the creditors currently in pursuit is compounded by his wilful ignorance of other significant creditors and debts, including that owed to the Supporting Creditor, the Australian Taxation Office, which claims for a sum of approximately $1,700,000.00. It is no answer to that claim to say that there is no judgment for that amount, nor is it any answer to say that a debt of $4,200,00.00 owed to the Bank of Western Australia has no substance because it too is not the subject of judgment. The fact remains that Mr Blake has no capacity to meet even the creditors that he acknowledges, let alone the more significant debts listed in his statement of affairs.
I am satisfied that he is insolvent. There would be no utility in granting him a further opportunity to call, for instance, evidence from Mr Mann. Mr Mann states that he would be happy to wait for his money, apparently in the belief that he will receive more money from Mr Blake personally than he will in his administration. That proposition ignores the prospect that Mr Mann, who is only owed $92,000.00, could ultimately be found to be in the position of a preferential creditor, in which case he would have to pay the money back.
It follows that I refuse the debtor a further adjournment. He has had sufficient time to put material before the Court and ultimately he has no further material of relevance to put before the Court. All he wants to do is make further submissions, which, in my view, would be entirely inutile. There is nothing on the material which satisfies me that he has any other sufficient cause to challenge the sequestration order.
All other matters being in order, I dismiss the application for review and affirm the sequestration order made by Registrar Baldwin on 13 February 2014.
I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Judge Burnett
Date: 27 May 2014
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