Lloyd Jones v Estate of Tombs
[2005] FMCA 292
•16 March 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| LLOYD JONES v ESTATE OF TOMBS | [2005] FMCA 292 |
| BANKRUPTCY – Application for administration of deceased estate in bankruptcy – where applicant and deceased were business associates – where parties agreed by deed to contribute equally to debts of their ventures – where deceased agreed by deed to indemnify the applicant if he paid more than his one third share – whether moneys allegedly due under deed constituted a liquidated sum – whether sums could be calculated discretely of the accounts between the parties – whether court can be satisfied all provisions of s.244(1) and (6) have been complied with. |
| Bankruptcy Act 1966 (Cth), s.244 Pleading and Practice 5th Ed Odgers |
| Spain v The Union Steamship Company of New Zealand Limited (1923) 32 CLR 138 Official Trustee in Bankruptcy v C S & G J Handby Pty Ltd (1989) 87 ALR 734 Alexander v Ajax Insurance Co Ltd (1956) 56 VLR 436 Odyssey Re (Bermuda) v Reinsurance Australia [2001] 19 ACLC 982 Crampton v Walker (1860) 3 E & E 321 Finn v Gavin (1905) VLR 93 Dalgety Futures Pty Ltd v Poretsky [1980] NSWLR 646 |
| Applicant: | CHARLES BEYNON LLOYD JONES |
| Respondent: | ESTATE OF THE LATE GRAHAM FRANCIS TOMBS |
| File Number: | SYG3012 of 2004 |
| Judgment of: | Raphael FM |
| Hearing date: | 1 March 2005 |
| Date of Last Submission: | 1 March 2005 |
| Delivered at: | Sydney |
| Delivered on: | 16 March 2005 |
REPRESENTATION
| Counsel for the Applicant: | Ms A Seward |
| Solicitors for the Applicant: | Atiken McLachlan Thorpe |
| Counsel for the Respondent: | Mr A Abadee |
| Solicitors for the Respondent: | Magney & Magney |
ORDERS
Application dismissed.
Applicant to pay the respondent’s costs to be taxed if not agreed pursuant to the Federal Court Act and Rules on a party and party basis together with the costs of the hearing upon 9 March 2005 on an indemnity basis.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG3012 of 2004
| CHARLES BEYNON LLOYD-JONES |
Applicant
And
| ESTATE OF THE LATE GRAHAM FRANCIS TOMBS |
Respondent
REASONS FOR JUDGMENT
Introduction
These proceedings are the hearing of a Creditors Petition filed on 7 October 2004 by the applicant creditor for an Order of Administration in Bankruptcy of the Estate of the Late Graham Francis Tombs who died on 23 August 2004. The creditor claims that the estate of the debtor owes him the amount of $506,617.00. The creditor claims that this debt is a liquidated sum payable immediately.
The power to obtain an order of administration is contained in s.244 of the Bankruptcy Act 1966 (Cth) (the “Act”) which relevantly states:
(1) Subject to this section, where:
(a) a debt of not less than $2,000 was owing by a deceased person at the time of his or her death to a creditor, or debts amounting in the aggregate to not less than that amount were so owing to any 2 or more creditors;
(b) a debt incurred by the legal personal representative of a deceased person of not less than $2,000 is owing to a creditor, or debts so incurred amounting in the aggregate to not less than that amount are owing to any 2 or more creditors; or
(c) a debt of not less than $2,000, or debts amounting in the aggregate to not less than that amount, which a deceased person would have been liable to pay to a creditor or any 2 or more creditors if he or she had not died becomes or become owing after his or her death;
the creditor or creditors to whom the debt or debts is or are owing may present a petition to the Court for an order for the administration of the estate of the deceased person (in this section referred to as the deceased debtor ) under this Part…
(5) A petition under this section shall be verified by the affidavit of a person who has knowledge of the facts.
(6) A petition under this section shall not be presented unless:
(a) the debt, or each of the debts, in respect of which it is presented:
(i) is a liquidated sum due at law or in equity or partly at law and partly in equity; and(ii) is payable immediately or at a certain future time; and
(b) at the time of his or her death, the deceased debtor:
(i) was personally present or ordinarily resident in Australia;
(ii) had a dwelling-house or place of business in Australia;
(iii) was carrying on business in Australia, either personally or by means of an agent or manager; or
(iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners, or of an agent or manager.
(11) At the hearing of the petition, the Court shall require proof of:
(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b) service of the petition, unless service of the petition has been dispensed with; and
(c) the fact that the debt or debts to which the petition relates is or are still owing;
and if it is satisfied with the proof of those matters, may make an order that the estate be administered under this Part.
(12) If the Court is not satisfied with the proof of any of those matters or is of the opinion that for other sufficient cause the order sought ought not be made, it may dismiss the petition.
(13) Where proceedings have been commenced in a court for the administration of a deceased person's estate under a law of a State or Territory, a petition for an order under this section in relation to the estate shall not be presented by a creditor except by leave of the Court and on such terms and conditions (if any) as the Court thinks fit.
(14) If the Court makes an order that the estate be administered under this Part, the creditor who obtained the order must give a copy of the order to the Official Receiver.”
The background facts
Charles Lloyd Jones, Graham Tombs and John Kelly met whilst Mr Tombs and Mr Kelly worked under the direction of Mr Lloyd Jones in the David Jones Department Store business. In the 1980s they all left that business and through a series of companies set up what Mr Lloyd Jones in his affidavit dated 20 February 2005 described as a partnership for the purposes of property development and later goldmining. Although it is convenient to describe the association as a partnership it was not argued before me that this was the situation. Each development or project was carried out through a separate company. One of the major companies was Holenet Pty Limited (“Holenet”) which Mr Lloyd Jones alleges, was the holding company of Carapooee Mining Pty Limited (“Carapooee”), through which the parties entered into a goldmining venture. To the extent to which I refer to “the partnership” between these three gentlemen or to them as “partners” in these reasons the word is used in its loosest possible form without any legal connotations.
The ventures into which the partners entered needed to be financed. Mr Lloyd Jones confirmed that he was the most financially secure of the three and this does not seem to be disputed. Finance was obtained from a merchant bank known as Scandinavian Pacific Ltd (“Scanpac”) which operated in Australia at this time. Guarantees were required for the obligations of the various enterprises and were given. Mr Lloyd Jones put up his home at Watson Bay as security for the financial arrangements with Scanpac. He also gave a mortgage over a farm property he owned at Yarramalong and over certain shares he owned in the business of David Jones Limited. At [14] of his affidavit Mr Lloyd Jones says:
“Within a few years it became clear to me that Carapooee wasn’t producing any gold and was costing more than we could afford to pay. In about 1992, Graham, John and I decided to abandon the project. Scanpac asked for payment out of the funding facility. None of the businesses had any unencumbered assets or money to use to pay out the facility. Since my Watsons Bay home was the security, I had no choice but to sell it and pay the sale proceeds towards a discharge of the facility. I am not aware of Graham or John providing any funds or any other security to Scanpac to pay out or satisfy that facility. I have no reason to believe that they did provide such funds or other security.”
In 1991 the three partners entered into the first of the series of deeds which appear to have been drafted for the purpose of clarifying the relationship between them and their liabilities as between themselves. This would not have been necessary if they had been true partners where, in the absence of a partnership agreement to the contrary, they would be co-obligors and liable to contribution between themselves on an equal basis. The first deed dated 21 May 1991 recites that the parties or the related companies which are controlled by them or their relatives are involved with each other in property development; that the parties are interested either directly or indirectly in the business of Holenet and another company and that the parties have liabilities pursuant to undertakings or guarantees given to Scanpac in connection with financial accommodation provided by that company for two projects which facilities needed to be extended. The operative part of the deeds states:
“1.Insofar as their respective related companies fail to do so, the parties shall each contribute to all liabilities, losses and outgoings whether on account of the said facilities or otherwise in respect of each of the Artarmon Project, Neutral Bay Project, Holenet and Probus equally so that all such liabilities, losses and outgoings are borne in equal one third shares.
2.The parties hereby indemnify each other to the extent that one party’s share of such liabilities, losses or outgoings exceeds a one third share.
3.This Deed shall bind each parties’ respective legal personal representatives, heirs and assigns.”
The ventures of the partnership were not successful. By 1992 Scanpac was asking for its money back and the partners determined to abandon the Carapooee gold venture. Mr Lloyd Jones sold his house in Woollahra and from the sale proceeds the sum of $1,518,852.62 was paid out to Scanpac. Mr Lloyd Jones states that that money was paid to Scanpac in reduction of the Carapooee debt.
On 12 November 1992 the partners entered into another deed. That deed recited the various business enterprises into which the parties or companies controlled by them or their relatives were involved with each other in various business enterprises. It recited that the parties had incurred liabilities pursuant to undertakings and guarantees given to Scanpac in connection with financial accommodation for some of the business enterprises and that they intended to seek further financial accommodation from Scanpac in this regard. Recital 3 is in the following form:
“Lloyd Jones has lent Carapooee Mining Pty Limited ACN 003 896 606 funds used to pay out a facility from Scandinavian Pacific Limited to Carapooee Mining Pty Limited (Lloyds Jones Loan).”
The operative part of the deed is in the following form:
“1.Insofar as their respective related companies fail to do so, the parties shall personally each contribute to all liabilities loses and outgoings whether on account of the said facility or otherwise (including the Lloyd Jones Loan) in respect of each of the business enterprises equally so that all such liabilities losses and outgoings are borne between the parties in equal on-third shares.
2.Each party hereby indemnifies a party up to a one-third share of all such liabilities losses and outgoings where the second named party has paid liabilities losses or outgoings in excess of his one-third share.
3.The obligations of this Deed shall bind each party’s respective personal representatives heirs and assigns and the benefit of this Deed shall enure for the benefit of any party’s respective personal representatives heirs and assigns.”
On 12 September 1994 the partners and certain of their companies, including Carapooee and Holenet, entered into a comprehensive agreement with Scanpac pursuant to which Scanpac agreed to release the partners and those companies described as “the debtors” from liability to it on the basis of certain payments. Scanpac also agreed to release certain securities given by Mr Lloyd Jones including security over the Yarramalong farm and the David Jones shares if the terms of the deed were complied with. The terms required a payment of $100,000 by each of the partners and offered the release of the Yarramalong securities on payment of $1,030,000 by Mr Lloyd Jones. On the same day the three partners entered into a deed between themselves reciting that they were indebted to Scanpac noting that by the 1992 deed they had agreed to contribute to all liabilities losses and outgoings of the business enterprises and the Lloyd Jones loan equally, that the business enterprises were in default of their obligations to Scanpac and that Scanpac had agreed to forebear from realising its securities on the terms of the Scanpac deed. Importantly it further recited:
“ELloyd Jones has raised finance in the amount of $1,108,000.00 (the “Yarramalong Debt”) to fulfil the condition referred to in Recital D(c) and to pay other present and future liabilities of the said Business Enterprises.
FIn consideration of Lloyd Jones providing the securities and making certain payments referred to above, Tombs and Kelly have agreed to enter into this Deed upon the terms and conditions hereinafter appearing.”
The operative part of the agreement referred to the payment of the Yarramalong debt described in Recital E and indemnified Mr Lloyd Jones as to one third of that debt respectively by Tombs and Kelly. Tombs and Kelly agreed to affect compliance with this obligation by each paying the sum of $3,000 each per month commencing on 1 October 1994:
“Until the Yarramalong debt and their respective debts to Lloyd Jones shall be paid in full.”
The parties also confirmed the terms of the 1992 deed and agreed to continue to be bound thereby and stated that the obligations of the deed would bind their personal representatives heirs and assigns.
Mr Tombs and Mr Kelly’s obligations to Mr Lloyd Jones under the 1994 deed in respect of the Yarramalong debt would appear to be one third of the $1,108,000 namely $369,333. Payment of the debt at the rate of $3,000 per month would take approximately ten and a quarter years, i.e. until 2004. In April 2001 Mr Lloyd Jones received some distressing news from his doctors. He was informed that he had inoperable lung cancer. Consequently he wrote a letter to Mr Tombs which is Exhibit “H” to his affidavit and is in the following form:
“30 April 2001
Mr G F Tombs
41 Alkrincton Avenue
FISHING POINT NSW 2283
Dear Graham
Following our recent discussions I confirm my agreement to forgive you as and from four months from the date of my death all debts due by you to me. The one proviso is that payments in respect to the Yarramalong Debt are paid on time so that if there is any default then this forgiveness shall be nullified.
This forgiveness would mean that your monthly payments of the Yarramalong Debt will continue up to 4 months after my death. Should I survive the life of the Yarramalong Debt arrangement, we would then discuss any other debts outstanding to me.
I will send a copy of this letter to my executor.
Sincerely
Charles Lloyd Jones”
In evidence Mr Lloyd Jones explained that he had been using the $3,000.00 per month as “income” or “money to live on”. He did not see any point in requiring the payment of that sum after his death. But Mr Lloyd Jones’ doctors were mistaken. Some four years later Mr Lloyd Jones appeared in court before me having outlived both Mr Tombs and Mr Kelly. As I understand the situation Mr Kelly complied with his obligations under the Yarramalong debt before his death.
Mr Lloyd Jones comes to this court claiming that the estate of Mr Tombs is liable to him for one third of the Lloyd Jones loan pursuant to the November 1992 deed and that the amount of the Lloyd Jones loan is the sum of $1,516,852.62 and that this sum constitutes a relevant liability which is:
i)A liquidated sum and is
ii)due and payable immediately
iii)at law or in equity; and
iv)from the deceased debtor who was at the time of his death personally present or ordinarily resident in Australia.
He also argues, and this is not disputed, that no relevant proceedings have been commenced in a court for the administration of Mr Tombs’ estate under New South Wales law.
Discussion
An important matter to note is that s.244 does not require an act of bankruptcy to have been committed by the deceased but the legislature has made it clear that the sum owed must be a liquidated sum due at law or in equity and unless the debt has those qualities it will not found the relief.
The first matter of debate between the parties was whether or not the claim was a liquidated one. It was argued on behalf of the respondents that it was not a liquidated claim because it was a claim under a covenant of indemnity. The applicant argues that the amount claimed is an amount which can be ascertained by calculation or fixed by any scale of charges or other positive data and thus falls within the definition of liquidated amount. The applicant argues that the deeds of November 1992 and September 1994 provide a binding method of calculating the amount each party to the deed must contribute or indemnify. It seems to me that this may well be the case and it would not be difficult for a jury to calculate as between the three parties to the deed the amount of the overpayments made by one and consequently the amount of the required indemnify from the others. But I do not think that is to the point. The authorities seem to me to indicate that it is the nature of the claim that distinguishes it as either liquidated or unliquidated not the ease with which an amount could be calculated. The concentration on the ability to calculate seems to have grown out of the reliance placed on the writings of Mr Odgers (Pleading and Practice 5th Ed p41) that:
“Whenever the amount to which the plaintiff is entitled… can be ascertained by calculation or fixed by any scale or charges, or other positive data, it is… liquidated.”
Reference to the learned author was made by the court in Spain v The Union Steamship Company of New Zealand Limited (1923) 32 CLR 138 at [142] and the quotation is usefully reviewed in Official Trustee in Bankruptcy v C S & G J Handby Pty Ltd (1989) 87 ALR 734 at [739]. In that case reference is also made to Alexander v Ajax Insurance Co Ltd (1956) 56 VLR 436. It is clear from that case and from Odyssey Re (Bermuda) v Reinsurance Australia [2001] 19 ACLC 982 and the cases therein cited that a claim for indemnity under a contract of insurance is a claim in damages and is unliquidated. Ms Seward for the applicant seeks to isolate the insurance cases saying they are a sub group to be distinguished from cases concerning general contracts of indemnity where historically the cause of action lay under the common money counts as money paid for the defendant’s use to which set off was available. I did not think that the authorities she cites; Crampton v Walker (1860) 3 E & E 321; and Alexander supra go that far. I am of the view that the ratio is Crampton v Walker was the following dicta of the Chief Justice:
“Once it is seen that a declaration contains, mixed up in the same count, distinct courses of action, some for liquidated claims, others sounding only in damages; the defendant must be entitled to separate them and plead accordingly.”
I do not think that Crampton is authority to the effect that a claim under a contract of indemnity is not an unliquidated claim sounding in damages. The reference which Ms Seward makes to Alexander is to the quotation from Odgers referred to in Spain and I don’t think that that establishes her assertion.
But even if I was to leave aside the clear authority concerning contracts of insurance, the short case of Finn v Gavin (1905) VLR 93 per Madden CJ appears to put the matter beyond question. When an applicant sued under a covenant of indemnity in a lease for the costs of destroying rabbits and thistles under the Rabbit Act 1890 and the Thistle Act 1890 the learned Chief Justice said:
“This is an action on a covenant of indemnity. It is an action for damages which as far as I can see the proof of the damages will be exceedingly easy as to their extent. But suppose no proof was given of any damage, the plaintiff would be entitled to one shilling. I think that is the test. If the plaintiff were suing for a liquidated money demand, and proved none, he could not get anything; but if he was suing for unliquidated damages, he would be entitled to one shilling damages for breach of the covenant if he proved no other loss. Therefore it seems to me that this is an action on a contract under seal, not for a liquidated money demand, but for damages for breach of covenant. For that reason I think that it does not fall within the rule of special endorsements.
The covenant in this case, which the late Mr Tombs is said to have breached, is the covenant contained in paragraph 1 of the 1992 deed to “personally contribute to all liabilities losses and outgoings whether on account of the said facility or otherwise (including the Lloyd Jones Loan) in respect of each of the business enterprises equally…”
20. It is consequent upon the breach of that covenant that Mr Tombs is required to indemnify Mr Lloyd Jones under the second operative clause in the deed. Adopting the analysis of the learned Chief Justice Mr Lloyd Jones could sue Mr Tombs for breach of his covenant not to pay his share even if no proof were given of any damage and he would recover a nominal sum. Madden CJ makes no suggestion that the ease with which the amount in the indemnity can be found has the effect of turning a claim in damages into a liquidated claim.
21. I think the instant case can also be distinguished from that which came before Rogers J in Dalgety Futures Pty Ltd v Poretsky [1980] NSWLR 646 where His Honour held an obligation to pay losses incurred in a futures contract that was closed out constituted a liquidated claim and referred to the decisions in Spain and Alexander. My reading of that case does not indicate that the defendant gave a deed of indemnity. He entered into contracts for differences and agreed to pay the differences if they should fall against him. The fact that the contracts were closed out because of other default on his part merely accelerated the time when the differences were to be paid.
On the above analysis the applicant would fail because he has been unable to satisfy me that he has a debt which is a liquidated sum. But if I am wrong about that it seems to me that there are other problems which the applicant faces. The first problem relates to the identification of the indemnified amount (the Lloyd Jones Loan). In the 1992 deed the recitals state that Mr Lloyd Jones has lent Carapooee funds used to pay out a facility from Scanpac to Carapooee. When the matter was being heard before me the evidence did not appear to bear out this assertion. However, after the case was closed I was requested and agreed to allow it to be reopened so that new evidence which had come to light could be tendered. This evidence consisted of a copy of a letter of offer from Scanpac to the Board of Directors of Carapooee dated 19 January 1990 offering a facility of $1,000,000 “to be utilised by the company to allow it to take up a 50% joint venture interest in a goldmining prospect commonly known as Kooreh Carapooee in the State of Victoria with Kinex Mining Pty Limited.” There was also produced a letter dated 14 March 1990 on the letterhead of Carapooee Mining Pty Limited addressed to Mr Lloyd Jones and signed by Mr Kelly setting out the amounts drawn down from Scanpac to that date. These totalled approximately $409,773.60. The copy letter of offer bears a 50¢ stamp over which a date is written that appears to be 19/1/90. The existence of this loan is corroborated by the accounts of Carapooee which were produced in evidence at the hearing as Exhibit B. These unsigned financial statements for the year ended 30 June 1992 indicate as a current liability a bank loan of $985,425.00. The same amount is included in the column for the 1991 year.
Mr Abadee for the respondent argues that the copy document does not prove that Scandinavian Pacific lent the amount offered in the letter because the offer letter contains a number of conditions precedent and there is no evidence that any of them were fulfilled. But I have heard Mr Lloyd Jones in the witness box and I have taken into consideration the apparently corroborative evidence of the financial statements and the recitals to the deeds which I have previously set out. I think I am entitled to infer that on the balance of probabilities there was such a loan to Carapooee.
What I do have difficulty with is being satisfied that the whole of the sum of $1,516,852.62 claimed by Mr Lloyd Jones as being the total paid on account of Carapooee and constituting the Lloyd Jones Loan was in fact paid on behalf of Carapooee. The reason that I say this is because the accounts do not reveal an amount of that magnitude as owing. They reveal an amount one third less. I have not been given any evidence of how the $1,516,852.62 is made up. The letter from Aitken and Magney dated 21 August 1992 annexed to Mr Lloyd Jones’ affidavit does not provide that information nor does it say in terms that it relates purely to Carapooee. I quite accept that Mr Lloyd Jones sold his house because he was being put under pressure by Scanpac. I accept that the pressure that was being put upon him may well have been to a significant degree the result of the failure of Carapooee. But it is clear from the deeds that Scanpac lent money to the partners for other ventures and it may well be that the difference between the amount acknowledged by Carapooee as owing to Scanpac in its accounts and the amount paid by Mr Lloyd Jones is made up by loans to Holenet or others in the group. Whilst I am prepared to accept that the late Mr Tombs had obligations to Mr Lloyd Jones in respect of the amount that he paid to Scanpac to satisfy Carapooee’s debt I am unable to say how much that figure was.
At the adjourned and reopened hearing of the case there was tendered by the respondent two documents which had been provided to him by the applicant. These were copies of a series of three reconciliation accounts prepared for the partners on 24 June 1996. At the first hearing the court only had that referable to Mr Lloyd Jones. In that document the payment to Scanpac on the sale of Watsons Bay featured in the Holenet section of the document and there was also on 13 August 1992 an alleged loan of $120,000 to Carapooee. The document did not therefore provide any assistance to me in establishing either that Mr Lloyd Jones paid the money to Scanpac on behalf of Carapooee or what the net amount owing to him on an account between the partners was. The two new documents referable to Mr Tombs and to Mr Kelly do not really take the matter very much further. Tombs appears to have lent Carapooee Mining $11,000.00 and Holenet a very much larger sum of money. Kelly, with whom we are not really concerned, lent Carapooee $48,050.00. Ms Seward submits that her case stands or falls on my accepting that the Lloyd Jones Loan is a discrete matter. It consists of an obligation independent of all other obligations between the partners and is entitled to be sued for without the necessity of an accounting between them. She says that to the extent that some moneys may have been due by Carapooee to the partners there would be a set off in relation to the debt claimed in the petition.
I do not think that this is the appropriate way to deal with such matters. The obligation contained in the deed is for the parties to “personally each contribute to all liabilities losses and outgoings whether on account of the said facility or otherwise (including the Lloyd Jones Loan) in respect of each of the business enterprises equally.” (emphasis added) Even if I was to find the existence of the Lloyds Jones Loan in the sum claimed by Mr Lloyd Jones how could I be sure that as at the hearing date the reconciliation of all the contributions to all liabilities losses and outgoings would indicate a debt due to Mr Lloyd Jones in excess of $2,000.00? Unless I could do that I cannot permit the applicant to petition the court.
As I said at the commencement of these reasons the absence of a requirement of an act of bankruptcy accentuates the importance of an applicant being able to establish his case on the balance of probabilities. If I accept Ms Seward’s argument that the Lloyd Jones Loan should be looked at discretely in the absence of clear agreement to that effect it would mean that every payment by any of the parties could be treated in that way and the possibility of a plethora of actions would loom. I do not accept that this is either the intention of the document nor would it be permitted on policy grounds. There should be a general accounting between the parties.
This seems to me to be the vice of the whole application. Mr Lloyd Jones has sought, using s.244, to avoid the necessity of calling for accounts between himself and Mr Tombs and Mr Evans. He has sought to avoid the necessity of bringing proceedings to recover that to which he may well be entitled. I am not satisfied that the applicant has established those matters required by s.244 and in the circumstances I dismiss the application and order that the applicant pay the respondent’s costs to be taxed if not agreed pursuant to the Federal Court Act and Rules.
I certify that the preceding twenty-eight (28) paragraphs are a true copy of the reasons for judgment of Raphael FM
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