Matheson v Clancy - [2009] FMCA 880

FEDERAL MAGISTRATES COURT OF AUSTRALIA

MATHESON v CLANCY

[2009] FMCA 880

BANKRUPTCY – Substitution of petitioning creditor – extension of the life of the creditor’s petition.

Bankruptcy Act 1966, ss.49, 52
Federal Court Rules

Federal Magistrates Court Rules 2001 (Cth)
Income Tax Assessment Act 1936, s.222AOE

Hyams v Elder Smith Goldsbrough Mort Ltd (1976) 133 CLR 637
Owners of Strata Plan Number 53267 v Prestia [2001] FCA 363

Applicant:

SCOTT ROBERT MATHESON

Respondent:

PAUL JOHN CLANCY

File Number:

SYG 1800 of 2008

Judgment of:

Driver FM

Hearing date:

7 September 2009

Delivered at:

Sydney

Delivered on:

7 September 2009

REPRESENTATION

Counsel for the Applicant:

Mr E Finnane

Solicitors for the Applicant:

McCabe Terrill Lawyers

Counsel for the Respondent:

Mr P Coady

Solicitors for the Respondent:

Parry Carroll

INTERLOCUTORY ORDERS

Pursuant to Order 35 Rule 7(3) of the Federal Court Rules that the orders made on 2 June 2009 be amended non pro tunc as follows:
Pursuant to s.52(5) of the Bankruptcy Act 1966 (Cth), the time for the expiration of the creditor’s petition presented on 11 July 2008 be extended up to and including 11 July 2010.
On the interim application filed on 7 October 2008, that Scott Robert Matheson be substituted as petitioning creditor in proceedings SYG1800 of 2008 in accordance with s.49 of the Bankruptcy Act 1966 (Cth).
The respondent debtor is to pay the applicant substituted creditor’s costs of the application made under s.49 of the Bankruptcy Act 1966 (Cth) and costs of the day be otherwise costs in the proceedings.
Any subpoenas issued in accordance with the Federal Magistrates Court Rules 2001 (Cth) be listed on 7 October 2009.
The applicant is to file and serve on the respondent any further evidence by 16 October 2009.
The respondent is to file and serve on the applicant any further evidence by 6 November 2009.
The applicant is to file and serve on the respondent any evidence in reply by 13 November 2009.
The matter be listed for hearing at 10.15am on 19 November 2009.
Parties have liberty to apply on three days notice.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 1800 of 2008

SCOTT ROBERT MATHESON

Applicant

And

PAUL JOHN CLANCY

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me for ex tempore judgment an application under s.49 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) for the substitution of Scott Robert Matheson for the petitioning creditor in this matter.
The application for substitution is supported by the affidavits of Mr Matheson made on 1 October 2008 and 4 February 2009. The relevant facts relating to the application are set out in paragraphs 42 through to 46 of the applicant’s written submissions:
The debt in this case is comprised of a series of claims for contribution from the debtor, by reason of the applicant’s payments of debts for which the two were co-sureties, as well as payments of ATO debts of a company of which the two were directors.
By his affidavit sworn 1 October 2008, Mr Matheson asserts that there were several such debts, and gives details of them. By his further affidavit sworn 4 February 2009, Mr Matheson indicates that he does not rely on certain on the claims, and adds to the evidence in support of others (the amount of which claims are in some cases varied by this later affidavit).
The claims under guarantees include:
Hardware & General Supplies: $13,028.56 paid between 5 and 30 October 2006. The claim is for $6,514.28.
Crane Distribution: $5,298.95 paid on 20 may 2006. The claim is for $2,649.48.
Active Hire Group Pty Ltd $3,099.22 paid. The claim is for $1,549.61.
Boral Limited: $15,000 paid between 1 May 2006 and May 2008. The claim is for $7,500.
The claims in relation to ATO payments are detailed in the first affidavit of Mr Matheson. Mr Matheson says that he made payments of $93,500 between 30 September 2006 and 30 March 2007. Annexed to his affidavit is a notice under s.222AOE of the Income Tax Assessment Act 1936, which evidences some liabilities that were payable to the ATO by Mr Matheson as a director of the company, Arrow Constructions (NSW) Pty Ltd.
Mr Matheson’s evidence is that Mr Clancy was a director of Arrow Constructions between 11 October 2000 and 1 June 2006, as was Mr Matheson. The notice at p38 of his affidavit relates to debts accruing within this period.
Mr Matheson was not required for cross-examination.
The application is opposed by the debtor Paul Clancy, who relies upon his own affidavit made on 24 November 2008 and also the affidavit of Ivan Leong made on 19 November 2008.
The relevant principles relating to the application for substitution are dealt with in the parties’ submissions and the authorities referred to by them, and I do not need to repeat them here. It is sufficient to note that a substituted petitioning creditor need not prove the matters relating to his or her debt at the time of substitution unless there is material before the Court suggesting a defect of the debt that would make it impossible for the new creditor to obtain a sequestration order, in which case the application for substitution would be refused unless the creditor could refute the suggestion: Hyams v Elder Smith Goldsbrough Mort Ltd (1976) 133 CLR 637.
The position in this matter is that the debt asserted by Mr Matheson is not supported by a judgment, but by his own evidence of dealings between him and Mr Clancy. The asserted debts fall into five categories, but all relate to the parties’ dealings with the company of which they were both directors. Mr Matheson asserts that he made a number of payments which were due from himself and Mr Clancy jointly and severally, and that in equity Mr Clancy is liable to him for the payments made by him on behalf of them both. His evidence is disputed by Mr Clancy, but I am satisfied on the basis of the material advanced by Mr Matheson that there is a bona fide claim in respect of the sums alleged, although on the present state of the evidence, there would be a concern about whether there is in fact in law a debt in relation to the first four categories of claimed debt. Those concerns relate to gaps in the evidence in terms of the asserted guarantees, the fact that in some cases payments were made by a third party and assertions made by Mr Clancy about forgery of his signature and the settlement of certain proceedings.
The last category of the debts concerns a liability owed to the Australian Taxation Office (“ATO”) which, at $46,750, makes up more than half the total amount claimed by Mr Matheson. There seems little doubt that there was an ATO liability and that both Mr Matheson and Mr Clancy made payments to the ATO although, on his evidence, Mr Matheson’s payments were substantially greater than those of Mr Clancy. I accept that there is a bona fide claim by Mr Matheson arising out of his payments to the ATO.
In addition to disputing the existence of the debts asserted by Mr Matheson, Mr Clancy also asserts a cross-claim, which might potentially be another reason for the Court to refrain from making a sequestration order. However, in my view, his intention to institute proceedings to agitate that cross-claim is not a reason for the Court to refrain from making a substitution order under s.49.
In the case of Owners of Strata Plan Number 53267 v Prestia [2001] FCA 363 at [14], his Honour Hely J said:
It was then submitted the existence of the relationship of debtor and creditor between ANZ and the respondent is an issue in the Supreme Court proceedings, and that I should not pre-empt the determination of that issue by the Supreme Court in proceedings instituted by ANZ. But the decision of the Full Court in Dean v Q.U.F. Industries Ltd (1981) 51 FLR 317 confirms that a party may be substituted as petitioner if it claims a debt which has accrued due before the act of bankruptcy on which the petition is founded, even if that claim is disputed. If there is a genuine dispute as to whether the respondent is indebted to ANZ then the appropriate order, when the petition comes on for hearing, may be that the petition be dismissed. But as there is evidence before me of indebtedness, which at least at this stage has not been contradicted, it would not be appropriate for me to refuse to permit substitution merely by reason of the pendency of the Supreme Court proceedings. An order for substitution is interlocutory in character, hence, contrary to the respondent's submission, it does not give rise to an issue estoppel.
I am satisfied that the possibility of proceedings by Mr Clancy against Mr Matheson on a cross-claim is not a reason for the Court to refrain from exercising its interlocutory power under s.49. I am also satisfied that, notwithstanding some doubts and gaps in the evidence relied upon by Mr Matheson, there is a sufficient claim of debt to support the making of an order under s.49 which can, in due course, be tested on the hearing of the petition.
I will, therefore, order in accordance with the interim application filed on 7 October 2008 that Scott Robert Matheson be substituted as petitioning creditor in proceedings SYG1800 of 2008 in accordance with s.49 of the Bankruptcy Act.
I will also order that pursuant to Order 35 Rule 7(3) of the Federal Court Rules that the orders made on 2 June 2009 be amended non pro tunc as follows:
Pursuant to s.52(5) of the Bankruptcy Act 1966 (Cth), the time for the expiration of the creditor’s petition presented on 11 July 2008 be extended up to and including 11 July 2010.
I will also order that the respondent debtor is to pay the applicant substituted creditor’s costs of the application made under s.49 of the Bankruptcy Act and costs of the day be otherwise costs in the proceedings.
Any subpoenas issued in accordance with the Federal Magistrates Court Rules 2001 (Cth) will be returnable on 7 October 2009. The applicant is to file and serve on the respondent any further evidence by 16 October 2009. The respondent is to file and serve on the applicant any further evidence by 6 November 2009. The applicant is to file and serve on the respondent any evidence in reply by 13 November 2009. The matter is to be listed for hearing at 10.15am on 19 November 2009. The parties have liberty to apply on three days notice.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 19 October 2009