Loiterton v Bank of Western Australia Ltd
[2006] FCA 1100
•14 AUGUST 2006
FEDERAL COURT OF AUSTRALIA
Loiterton v Bank of Western Australia Ltd [2006] FCA 1100
PHILLIP RONALD LOITERTON v
BANK OF WESTERN AUSTRALIA LIMITED & ANORNSD 1065 OF 2006
LINDGREN J
14 AUGUST 2006
SYDNEY
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1065 OF 2006
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:
PHILLIP RONALD LOITERTON
AppellantAND:
BANK OF WESTERN AUSTRALIA LIMITED
(ACN 050 494 454)
First RespondentLEASEBANK (AUSTRALIA) PTY LIMITED
(ACN 078 312 302)
Second Respondent
JUDGE:
LINDGREN J
DATE OF ORDER:
14 AUGUST 2006
WHERE MADE:
SYDNEY
THE COURT ORDERS THAT:
1.The appeal be dismissed.
2.The appellant pay the respondents’ costs of the appeal.
Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
NSD 1065 OF 2006
ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA
BETWEEN:
PHILLIP RONALD LOITERTON
AppellantAND:
BANK OF WESTERN AUSTRALIA LIMITED
(ACN 050 494 454)
First RespondentLEASEBANK (AUSTRALIA) PTY LIMITED
(ACN 078 312 302)
Second Respondent
JUDGE:
LINDGREN J
DATE:
14 AUGUST 2006
PLACE:
SYDNEY
REASONS FOR JUDGMENT
The appellant appeals from a judgment of Federal Magistrate Smith given on 1 June 2006 (Bank of Western Australia Ltd v Loiterton (No. 2) [2006] FMCA 821). By that judgment the Federal Magistrate made a sequestration order against the estate of the appellant. The act of bankruptcy was committed on 26 September 2005 and was the appellant’s failure to comply with a bankruptcy notice given by the first respondent. When necessary to distinguish between the respondents, I will refer to them as “the Bank” and “LeaseBank” respectively.
FACTS
The appeal papers do not reveal all of the background facts, however some of them are set out in an earlier judgment of the same Federal Magistrate in Bank of Western Australia Ltd v Loiterton [2006] FMCA 361, in which his Honour upheld the validity of the bankruptcy notice.
By a hire purchase agreement dated 7 March 2002, the appellant, as hirer, hired from LeaseBank five used automated teller machines (ATMs). By the agreement he undertook to pay instalments. The total amount payable (excluding fees and charges associated with the provision of credit) was $145,705.80. The hiring was for 60 months commencing on 7 March 2002.
The appellant defaulted and the Bank gave a notice of termination dated 5 July 2004. By the notice of termination the Bank claimed that the appellant was liable to pay to it the “termination value” of the goods, namely, $70,461.56 (at the date of the notice of termination), plus “arrears” of $16,000.71 – a total of $86,462.27. In fact the Bank obtained judgment against the appellant on 5 April 2005 in the District Court of New South Wales for $94,789.78.
THE PROCEEDINGS BELOW
Apparently in the earlier proceeding before the Federal Magistrates Court, in which the application was made to set aside the bankruptcy notice, the only point taken related to a claim for interest, and the identification of the statutory provision under which it was claimed.
In the later proceeding, from which the present appeal is brought, the appellant filed a notice of intention to oppose petition raising the following three grounds:
“1.The Respondent debtor is solvent and will be able to pay his debts upon the sale of his business ‘ATM QuickCash’.
2.The Respondent debtor has agreed in principal [sic: principle] to sell his business for the sum of $400,000.
3.The Applicant Creditors hold security by ownership of five ATM machines the subject of a Commercial Hire Purchase Agreement.”
Subsequently, a further notice of intention to oppose petition dated 7 February 2006 was filed in which the following two additional grounds were raised:
“4.The First Applicant, Bank of Western Australia Limited, has no standing in the proceedings.
5.The Second Applicant, LeaseBank (Australia) Pty Ltd, holds security over the property of the Respondent.”
THE GROUNDS OF APPEAL
The grounds of appeal are relevantly as follows:
“1.His Honour ought not to have made an order for the sequestration against the estate of the Appellant.
2.His Honour ought to have granted a stay of all proceedings under the sequestration order for 21 days pursuant to s 52(3) of the Bankruptcy Act 1966.
3.His Honour failed to take into account that or misconstrued the meaning of clause 18.1 of the Hire Purchase Agreement between the Appellant and the Second Respondent which provides that upon payment of all moneys due under the Agreement the whole of the sales proceeds of the equipment is payable to the Appellant.
4.His Honour erred in not finding pursuant to s 52(2)(a) that the Appellant is able to pay his debts.
5.His Honour erred in not finding pursuant to s 52(2)(b) that for other sufficient cause a sequestration order ought not be made.
6.Such other grounds as may be advised by counsel.”
In relation to the third ground of appeal, reference must be made to the hire purchase agreement. Clause 18 of that agreement provided that as soon as practicable after the goods were returned to LeaseBank following the giving of a notice of termination by it, LeaseBank would offer them for sale or attempt to re-lease them. By the same clause, LeaseBank undertook to pay to the appellant the gross proceeds it received from selling or re-leasing, subject to certain deductions.
The appellant’s argument based on clause 18 is that LeaseBank was a secured creditor, and, therefore, by s 44(2) of the Bankruptcy Act 1966 (Cth) (“the Act”), it was deemed to be a creditor of the appellant only to the extent, if any, by which the amount of the debt owing to it exceeded the value of its security.
The expression “secured creditor” is defined in s 5 of the Act to mean, in relation to a debtor, “a person holding a mortgage, charge or lien on property of the debtor as a security for a debt due to him or her from the debtor”.
The hire purchase agreement makes it clear that the arrangement between the appellant and LeaseBank conformed to the familiar form of hire purchase agreement in which title to the goods remains at all times in the financier, and the hirer has only a right to use them upon maintaining payments, with an option to acquire title to them upon paying the last instalment: see McEntire v Crossley Brothers, Limited [1895] AC 457 and Helby v Matthews [1895] AC 471. The ATM machines were not the property of the appellant, LeaseBank did not hold a mortgage, charge or lien on them, and Leasebank was not a secured creditor.
I raised on the hearing the question whether the appellant may have been entitled to a set-off against LeaseBank on the basis of cl 18. This would have raised factual questions. In any event, s 41(7) of the Act provides for such a matter to be raised at the bankruptcy notice stage. In the present case, it was not raised at the petition stage either.
Another way in which the appellant puts the cl 18 argument is to say that until allowance is made for it, LeaseBank could not be said to be a creditor in respect of a liquidated sum: see s 44(1)(b) of the Act. It is clear however that LeaseBank was a creditor for a liquidated sum – the only point of a set-off based on cl 18 would have been to reduce the amount of that sum to a lesser liquidated sum, or even to eliminate it.
This whole question of set-off has not been explored and was raised by me as a response to the appellant’s “secured creditor” argument. No more need be said of it.
The various other grounds of appeal related to discretionary considerations. It is true that under s 52 of the Act the Federal Magistrate was not bound to make a sequestration order. However, there had been numerous adjournments with a view to the appellant’s selling his business, but, unfortunately, nothing had come of his attempts down to the time of the hearing. By that time, in addition to the applicants, there were three supporting creditors who desired that a sequestration order be made and that there be no further adjournment. The Federal Magistrate was entitled to come to the view that the appellant was insolvent and that there should be no further time allowed to him with a view to his redeeming the situation.
The appellant also raised various matters in his oral submissions at hearing.
One of these concerns the inclusion of the Bank as co-applicant before the Federal Magistrate. The appellant, who appears in person on the present appeal, explained that when he received the notice of termination issued by the Bank, he telephoned the Bank and pointed out that the hire purchase agreement was with LeaseBank, but he was told that the Bank and LeaseBank were associated. The appellant has also said today from the bar table that in the Federal Magistrates Court, initially only the Bank was applicant until he raised the point, after which LeaseBank was added as second applicant.
Apparently the main point made by the appellant is that the Bank should not be in a better position than LeaseBank was vis-a-vis himself. Mr Skinner of counsel, who appears for the respondents accepts that this is so.
The way in which the Federal Magistrate dealt with this argument was to say that for all he knew, the Bank may have been an undisclosed principal of LeaseBank. He pointed out that cl 1.9 of the hire purchase agreement provided that LeaseBank was at liberty to enter into that agreement either as principal or as agent. The point of time at which to challenge the status of the Bank was in the District Court proceeding. For all that is known, the Bank may have been entitled to obtain judgment in the District Court. That possibility was not excluded before the Federal Magistrate. I think that the Federal Magistrate was entitled to decide, as he did, not to go behind the judgment in the present respect.
There is one last matter which concerns the proof of the matters referred to in s 52(1) of the Act. There was affidavit evidence before the Federal Magistrate that the appellant was indebted to the Bank and to LeaseBank. The affidavit evidence seems to have been to the effect that there was a debt owed to them jointly, that is to say, that the full amount was owed to each of them. The Federal Magistrate was entitled to conclude that s 52(1) of the Act had been satisfied.
CONCLUSION
It is unfortunate, in view of the appellant’s attempts over a long period to salvage the situation, that the appellant was unable to avoid a sequestration order being made, but I think that the Federal Magistrate was perfectly correct in law in making it and that no error is demonstrated.
For the above reasons the appeal will be dismissed.
I certify that the preceding twenty-three (23) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren. Associate:
Dated: 14 August 2006
The appellant appeared in person Solicitor for the Appellant: Dennis & Co Solicitors Counsel for the Respondents: Mr B J Skinner Solicitor for the Respondents: Jones King Lawyers Date of Hearing: 14 August 2006 Date of Judgment: 14 August 2006
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