Macquarie Bank Limited v Ponnampalam
[2014] FCCA 1685
•28 July 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| MACQUARIE BANK LIMITED v PONNAMPALAM | [2014] FCCA 1685 |
| Catchwords: BANKRUPTCY – Opposed creditors petition – debtor relying upon a purported bill of exchange to assert payment of the debt – bill of exchange rejected by the creditor – no reason not to make sequestration order. |
| Legislation: Bankruptcy Act 1966 (Cth), s.52 Bills of Exchange Act 1909 (Cth), ss.5, 8, 50 |
| Duncan Properties Pty Ltd v Donald Alan Keith Neal and Colin John Taylor [1993] FCA 373 National Australia Bank Limited v Acheson [2011] FMCA 437 Totev v Sfar [2006] FCA 470 |
| Applicant: | MACQUARIE BANK LIMITED (ACN 008 583 542) |
| Respondent: | ADRIAN PONNAMPALAM |
| File Number: | SYG 191 of 2014 |
| Judgment of: | Judge Driver |
| Hearing date: | 28 July 2014 |
| Delivered at: | Sydney |
| Delivered on: | 28 July 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr A d'Arville |
| Solicitors for the Applicant: | Johnson Winter & Slattery Lawyers |
| The Respondent appeared in person |
ORDERS
A sequestration order is made against the estate of Adrian Ponnampalam.
The petitioning creditors costs, including reserved costs, if any, be fixed in the sum of $5,000 and paid in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that the date of the act of bankruptcy is 26 December 2013.
The Court notes the obligations on the applicant creditor to notify, enter and serve these orders in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth).
Pursuant to s.52(3) of the Bankruptcy Act 1966 (Cth), all proceedings under the sequestration orders are stayed for 21 days.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 191 of 2014
| MACQUARIE BANK LIMITED (ACN 008 583 542) |
Applicant
And
| ADRIAN PONNAMPALAM |
Respondent
REASONS FOR JUDGMENT
(revised from transcript)
I have before me a creditor’s petition filed on 28 January 2014 seeking a sequestration order and ancillary orders in relation to the estate of Adrian Ponnampalam. The petition is based upon non-compliance with a bankruptcy notice which, in turn, is based upon a default judgment in the Local Court for $23,695.52. The debt arose by reason of non-repayment of a loan apparently provided to Mr Ponnampalam by Macquarie Bank (Bank). The Bank’s written submission in relation to grounds of opposition filed by Mr Ponnampalam deal with the procedural background.
Following the presentation and filing of the petition, an order for substituted service was made by Registrar Segal on 15 May 2014.
On 26 June 2014 the creditor’s petition was listed for hearing before Registrar Tesoriero. Mr Ponnampalam appeared by telephone. The hearing was adjourned to 7 July 2014.
On 7 July 2014 the creditor’s petition was listed for hearing before Registrar Ng. Mr Ponnampalam appeared by telephone. Registrar Ng made the following orders:
1.On the application of the Respondent, the hearing of the Creditor’s Petition is adjourned to 10 am on 28 July 2014 at JMT 88 Goulburn Street Sydney.
2.The Respondent’s Notice of Opposition, any further submissions and affidavits in support be filed with the Registry and served on the Applicant Creditor’s solicitor on or before 18 July 2014.
3.The Applicant’s submissions in reply are to be filed and served by 25 July 2014 and emailed to the Respondent at: [email protected].
4.Unless the Respondent is represented by a lawyer, he is required to appear in person to argue his Notice of Opposition in a hearing before the bankruptcy list Judge on 28 July 2014.
5.Costs be reserved.
On 18 July 2014, Mr Ponnampalam filed:
a)a notice of appearance;
b)a notice stating the grounds of opposition to the creditor’s petition (the Notice of Opposition); and
c)an affidavit affirmed by Mr Ponnampalam on 15 July (the Ponnampalam affidavit);
The Ponnampalam affidavit annexes a document entitled “SUBMISSIONS, OUTLINE & AUTHORITIES regarding: BILLS OF EXCHANGE”. This contains Mr Ponnampalam’s submissions supporting his Notice of Opposition to the creditor’s petition[1].
[1] This document is referred to as Mr Ponnampalam’s submissions.
For its part, the Bank relies upon the affidavit of Katie Chalmers made on 28 January 2014 verifying the contents of the petition; the affidavit of service of Phoebe Jane Donaldson-Sheahan made on 20 June 2014 to which are annexed a bundle of documents; the affidavit of search of Phoebe Jane Donaldson-Sheahan made on 25 July 2014; a further affidavit by Ms Sheahan made on the same day which addresses issues in relation to the notice of grounds of opposition by Mr Ponnampalam; and the final affidavit of debt by Graham Mayden made on 25 July 2014.
On the basis of that material, I accept that the Bank has prima facie established an entitlement to the relief sought in the petition. That relief is opposed by Mr Ponnampalam, who has filed a notice stating grounds of opposition on 18 July 2014. That ground of opposition is that payment was tendered before the due date. Mr Ponnampalam relies upon his own affidavits, made on 25 June 2014 and 15 July 2014.
Mr Ponnampalam also tendered a notice of payment filed in the Local Court on 29 November 2012. That notice relevantly states that on 12 November 2012 Mr Ponnampalam posted to the bank a registered post envelope containing a bill of exchange presented in full accord and satisfaction of the debt.
In essence, Mr Ponnampalam’s case against the making of a sequestration order is that the debt has been paid through the presentation of the bill of exchange. I accept that such a bill of exchange was tendered to the bank. That is evidenced by Mr Mayden’s affidavit.
The document begins on page 6 of the annexures to Mr Mayden’s affidavit, and continues to page 9. The bill of exchange was apparently sent to the bank in response to a letter of demand sent to Mr Ponnampalam by the bank, and the institution of the Local Court proceedings. On its face, the documents appear to be an attempt to convert the debt being pursued in the Local Court to a sum of $1 in respect of which the bill of exchange provides a mechanism for payment.
Interestingly, the document contains a default and liability clause which seeks to establish a liability by the bank to Mr Ponnampalam if the terms of the bill of exchange are not adhered to. Also, the main body of the bill of exchange itself contains the words “one Australian dollar” as well as the numbers $21,943.40. Mr Ponnampalam relies upon the Bill of Exchange Act 1909 (Cth) (Bills of Exchange Act) in order to assert, that by reason of the fact that the Bank did not deal with the bill of exchange within the period prescribed and in the manner prescribed in it, the Bank has lost its entitlement to pursue him for the amount of the outstanding loan, and is indeed indebted to him because of the default and liability provision of the bill of exchange.
Mr Ponnampalam has instituted proceedings in the Federal Court in order to advance those propositions. The parties in the Federal Court proceedings include a trust. As explained to me by Mr Ponnampalam, the trust is the assignee of the benefit of the default and liability provision in the bill of exchange. Those proceedings in the Federal Court were filed last month, and I understand that the first return date is in Brisbane this Friday, 1 August 2014.
Mr Ponnampalam pressed upon me that I should not grant the relief sought in the creditor’s petition at least until he has had the chance to agitate his proceedings in the Federal Court. In my view, however, there is no substance to the Federal Court proceedings. The reason for that is that it is plain from the affidavit of Ms Sheahan of 25 July annexing a letter dated 20 November 2012 from the Bank’s solicitors to Mr Ponnampalam that the bill of exchange was rejected and at least a copy of it was returned to him.
While Mr Ponnampalam might tender a bill of exchange to the Bank in offer of a full and final settlement or compromise of the Bank’s claim, it is plain that that offer was rejected. Mr Ponnampalam could not unilaterally impose on the Bank either terms of settlement, or compromise, or the mechanism for dealing with his own document in default of which an asserted liability arose. I otherwise agree with and adopt the Bank’s submissions concerning the notice of opposition.
Paragraph 5 of the Mr Ponnampalam’s affidavit states:
The alleged debt said to be totalled at $23,695.52 has already been discharged by the statutory operation of Section 50(1) of the Bills of Exchange Act 1909 (Cth).
Mr Ponnampalam’s affidavit goes on to explain that Mr Ponnampalam has filed proceedings in the Federal Court seeking orders:
validating the payment and awarding the counterclaim for damages Macquarie Bank Limited’s default in bringing these proceedings
It appears that the central contention of Mr Ponnampalam’s submissions is that Mr Ponnampalam’s indebtedness (which underlay the bankruptcy notice issued by the Bank) has been discharged by reason of s.50(1) of the Bills of Exchange Act[2]. This appears to be based on the following contentions:
a)that the Bank made a demand for payment for $21,943.75[3];
b)that the demand for payment was an inchoate bill of exchange[4];
c)that under the bill of exchange, said to have been completed by Mr Pollanpalam, he (as drawer of the bill of exchange) instructed himself (as drawee of the bill of exchange) to pay the Bank $1[5];
d)that by reason of these matters the original debt was “bargained for and re-negotiated”[6];
e)that the judgment debt on which the bankruptcy notice was based was “misleadingly obtained” because the debt was discharged by reason of s.50(1) of the Bills of Exchange Act[7].
[2] Mr Ponnampalam’s submissions, page 1, opening paragraph (“the indebtedness in issue has been “Discharged” by the unequivocal application of the Law in the supervening embodiment of Statute”); page 2, penultimate paragraph (“The debt has by overriding force of Law, been discharged, however still this putative creditor dishonourably defaulted, whilst under legitimate estoppel conditions.”)
[3] Mr Ponnampalam’s submissions, page 2, point 1.
[4] Mr Ponnampalam’s submissions, page 3, point 9.
[5] Mr Ponnampalam’s submissions, page 4, point 11.
[6] Mr Ponnampalam’s submissions, page 4, point 13.
[7] Mr Ponnampalam’s submissions, page 4, point 16.
These matters do not provide any reason to prevent the Court from making a sequestration order for at least two reasons:
a)the Bank did not agree to accept anything other than payment in full in satisfaction of its debt. It expressly rejected such an offer[8];
b)assuming that there was some valid bill of exchange created (which the Bank does not accept), any “discharge” brought about by reason of s.50 of the Bills of Exchange Act is a discharge of the parties’ obligations under that bill of exchange. It is not a discharge of any of the parties’ other obligations.
[8] Affidavit of Phoebe Jane Donaldson Sheahan sworn 25 July 2014, Annexure PJDS4.
After a brief discussion of the applicable legal principles, these matters are addressed below.
Legal principles
The principles applicable to a creditor’s petition in circumstances where it is said that the debtor has a claim against the creditor were summarised by Raphael FM (as he then was) in National Australia Bank Limited v Acheson[9].
[9] [2011] FMCA 437 (at [4]-[5])
The question for the Court is whether it can be said that Mr Ponnampalam’s claim is:
a)a claim which is “likely to succeed”,[10] so as to justify the refusal of the sequestration order; or
b)a claim which is a “real claim” with “sufficient prospect to warrant the debtor being granted an opportunity to have it litigated”.[11]
[10] Rigg v Baker (2006) 155 FCR 531 at [66].
[11] Rigg v Baker (2006) 155 FCR 531 at [66]; see also Totev v Sfar [2006] FCA 470 at [44].
The Bank submits, and I accept that, for the reasons set out below, Mr Ponnampalam’s claim does not meet either of these descriptions.
No acceptance of bill of exchange by the Bank
Mr Ponnampalam suggests that the original debt owed to the Bank has been “bargained for or renegotiated in accord and satisfaction”[12]. This is wrong.
[12] Mr Ponnampalam’s submissions, page 4, point 13.
A bill of exchange is a form of negotiable instrument by which a party, (the drawer) can direct another person (the drawee) to pay money to the holder of the bill of exchange (the payee).
The giving of a bill of exchange by one party to another may be valid consideration provided by one party to another, where those parties have agreed as much. The case referred to in Mr Ponnampalam’s submissions is illustrative.
In Duncan Properties Pty Ltd v Donald Alan Keith Neal and Colin John Taylor[13], Duncan Properties Ltd obtained a judgment against Mr Neal and Mr Taylor. Following the issue of a bankruptcy notice and a creditor’s petition, the parties entered into a deed of settlement under which one obligation was to provide a particular bill of exchange. The bill of exchange was provided to the appellant but was not presented on its due date. There was a dispute about whether the party responsible for providing the bill of exchange had complied with the deed.
[13] [1993] FCA 373
The Court held that providing the bill of exchange, as required by the deed, meant that the relevant party had performed its obligations. I accept that where the parties have agreed as much, the provision of a bill of exchange can amount to valid consideration.
The difference between Duncan Properties and the present case is the settlement deed. In that case, the parties agreed the form in which they would resolve their dispute and it was reflected in a settlement deed.
In the present proceedings, there was no agreement of any description. Rather:
a)on 6 November 2012, the Bank provided information in relation to a debt of $21,943.40 owed to it by Mr Ponnampalam[14];
b)on 16 November 2012, Mr Ponnampalam sent back various documents to the Bank, including the 6 November 2012 letter, which he had annotated[15];
c)those documents including a document purporting to be a bill of exchange directing himself to pay $1 to the Bank[16];
d)on 20 November 2012, the Bank’s solicitors returned the documents, stated that the documents “do not constitute a binding contract, agreement and/or Bill of Exchange between you and our client” and stated that if the documents were intended to amount to an offer to settle the Local Court proceedings that were on foot, the offer was rejected[17].
[14] Affidavit of Graham Maiden sworn 24 July 2014, Annexure GM1.
[15] Affidavit of Graham Maiden sworn 24 July 2014, Annexure GM2.
[16] Affidavit of Graham Maiden sworn 24 July 2014, Annexure GM2, Affidavit of Phoebe Jane Donaldson Sheahan sworn 25 July 2014, Annexure PJDS3.
[17] Affidavit of Phoebe Jane Donaldson Sheahan sworn 25 July 2014, Annexure PJDS4.
There is no evidence of the Bank accepting a bill of exchange in any form in payment of its debt. Any suggestion that it would do so was rejected in the Bank’s solicitors’ letter dated 20 November 2012. No renegotiation occurred, there was no new bargain and there was no accord and satisfaction.
“Discharge” under s.50
Section 50(1) of the Bills of Exchange Act states:
(1) Subject to the provisions of this Act, a bill must be duly presented for payment. If it be not so presented, the drawer and indorsers shall be discharged.
The “discharge” referred to in s.50 is a discharge of the various parties’ liability under the bill of exchange if the bill of exchange is not presented for payment.
The Bills of Exchange Act governs the operation of bills of exchange (as defined in s.8). It does not purport to govern the rights and obligations of parties other than in respect of their rights and liabilities arising under any bill of exchange. Section 5 of the Act specifically preserves the rules of common law and bankruptcy in relation to bills of exchange (other than in the case of direct inconsistency with common law rules). It cannot seriously be suggested that the Bills of Exchange Act affects anything other than the operation of bills of exchange.
In Rigg v Commonwealth Bank of Australia[18], the appellants sought to appeal an order for summary judgment against them. It was said that they had a separate action arising out of a bill of exchange which could be set off against the debt that was the subject of the summary judgment. In respect of this, Gleeson CJ stated:
no set-off for unliquidated damages can be pleaded against an action on a bill of exchange. The reason for this is that courts treat the execution of a bill of exchange as being, for relevant purposes, analogous to a payment of cash or at least as involving an independent contract to be dealt with apart from the other aspects of the specific transaction giving rise to its existence. (James Lamont and Co Ltd v Hyland Ltd [1950] 1 KB 585). This is an important principle which, in its practical operation, supports the commercial efficacy of bills of exchange. The existence of the principle was recognised and affirmed in England in Henriksens Rederi A/S v THZ Rolimpex (‘The Brede’) [1974] 1 QB 233 where what was called the “like rule” concerning freight due under a charterparty was held to exclude an equitable set-off in respect of claims for damages for breach of the charterparty. Lord Denning MR, at 249, explained the latter rule by saying that: “the good conduct of business demands that freight should be paid according to the terms of the contract.” That rule has recently been re-examined in detail and re-affirmed by the House of Lords in Bank of Boston v European Grain and Shipping Ltd (1989) 2 WLR 440.
[18] (1989) 97 FLR 261
The only matter that might be “discharged” by reason of s.50 of the Bills of Exchange Act is the parties’ obligations under a bill of exchange. Section 50 does not affect any other rights and obligations between the parties.
Other matters
The above matters are sufficient for the Court to conclude that Mr Ponnampalam’s claim in the Federal Court has no prospect of success, so does not warrant the refusal or adjournment of the creditor’s petition.
There are two further points which tell against Mr Ponnampalam’s claim.
First, Mr Ponnampalam says that the Local Court judgment was “misleadingly obtained” by reason of the purported bill of exchange[19]. In respect of this, the documents relied upon by Mr Ponnampalam were sent to the Bank some two months prior to the default judgment of the Local Court. Had there been any real basis for Mr Ponnampalam to deny the Bank’s debt claim, it could have been raised as a defence in the Local Court proceedings. The notice of payment filed in the Local Court on 29 November 2012 was ineffectual, and appears to have been ignored.
[19] Mr Ponnampalam’s submissions, page 4, point 16.
Secondly, it appears to be said that the Bank’s letter of 6 November 2012 was an inchoate bill of exchange[20]. Nowhere in that letter are the words “bill” or “exchange” used. It cannot seriously be suggested that this letter amounted either to an offer to settle the debt or to an inchoate bill of exchange in satisfaction of that debt.
[20] Mr Ponnampalam’s submissions, page 3, point 9.
Conclusion
The only matter which Mr Ponnampalam has raised in opposition to the Bank’s creditors petition is the suggestion that the debt has been paid by reason of a bill of exchange having been provided.
For the reasons set out above, this claim should be rejected. Most importantly, the Bank did not agree to accept any bill of exchange in satisfaction of its debt. This fundamental defect in the claim means that it is not a claim with sufficient prospect to warrant this Court allowing it to be litigated prior to making a sequestration order.
I have concluded that the proceedings in the Federal Court do not provide a basis for me to either go behind the judgment debt in the Local Court, or to refrain from making a sequestration order, or to defer a judgment on the petition.
I make the following findings and orders: I am satisfied that Mr Ponnampalam committed the act of bankruptcy alleged in the petition, and I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) requires proof. I am not satisfied that Mr Ponnampalam has advanced any reason for the Court to refrain from or defer making a sequestration order.
I order that a sequestration order is made against the estate of Adrian Ponnampalam.
The petitioning creditors costs, including reserved costs, if any, be fixed in the sum of $5,000 and paid in accordance with the Bankruptcy Act.
The Court notes that the date of the act of bankruptcy is 26 December 2013.
The Court notes the obligations on the applicant creditor to notify, enter and serve these orders in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth).
The Bankruptcy Act permits the Court to stay proceedings under a sequestration order for a maximum period of 21 days. It is not my intention to interfere with the proceedings instituted in the Federal Court in Queensland, and I understand from Mr Ponnampalam that he may well wish to pursue this issue further, including possibly by appeal against my orders.
I will order that pursuant to s.52(3) of the Bankruptcy Act, all proceedings under the sequestration orders are stayed for 21 days.
I certify that the preceding fifty (50) paragraphs are a true copy of the reasons for judgment of Judge Driver
Associate:
Date: 31 July 2014
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