Moore v Wilson
[2005] FMCA 870
•1 July 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MOORE v WILSON & ANOR | [2005] FMCA 870 |
| BANKRUPTCY – Sequestration order made by Registrar – review application – evidence of solvency – ‘other sufficient cause’. |
| Federal Magistrates Act 1999, ss.1-3. 104(2) Commonwealth Evidence Act 1995, s.131 Federal Magistrates Court Rules 2001, rr.20.00A(1)(c), 20.01, 20.03(A) Bankruptcy Act 1966 (Cth), ss.52, 52(1), s.51(2)(a), 52(1)(b), 52(2)(b) |
| St George Bank Ltd v Helfenbaum [1999] FCA 1337 Re: Sarina; Ex-parte Wollondilly Shire Council (1980) 32 ALR 596 Ling v Enrobook Pty Ltd (1997) 74 FCR 19 |
| Applicant: | DAVID GERALD MOORE |
| First Respondent | WAYNE STEPHEN WILSON |
| Second Respondent: | GAYLE LAWTON |
| File Number: | ADG 207 of 2004 |
| Judgment of: | Lindsay FM |
| Hearing dates: | 8 & 22 April and 13 May 2005 |
| Date of Last Submission: | 13 May 2005 |
| Delivered at: | Adelaide |
| Delivered on: | 1 July 2005 |
REPRESENTATION
| Counsel for the Applicant: | Self-represented |
| Counsel for the Respondents: | Mr Abbott QC |
| Solicitors for the Respondents: | Iles Selley Lawyers |
ORDERS
That the Application for Review filed on the 1 February 2005 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT ADELAIDE |
ADG 207 of 2004
| DAVID GERALD MOORE |
Applicant
And
| WAYNE STEPHEN WILSON |
First Respondent
| GAYLE LAWTON |
Second Respondent
REASONS FOR JUDGMENT
On 21 January 2005 Registrar Christie sitting in the Federal Magistrates Court in Adelaide made a sequestration order in relation to the estate of the applicant.
Registrar Christie was exercising powers delegated to her by s.103 of the Federal Magistrates Act 1999 (the “Act”) and r.20.00A(1)(c) of the Federal Magistrates Court Rules 2001.
Involving the exercise of a delegated power, then, Registrar Christie’s orders were capable of being the subject of a review pursuant to s.104(2) of the Act.
The applicant filed his Application for Review on 1 February 2005, within the time prescribed for the review by r.20.01 of the Rules of this Court.
The review document itself is unclear as to the nature of the orders sought upon review, but it was agreed at the outset that the application would be treated as one to set aside the sequestration order.
The review proceeds by way of a hearing de novo, as it must do being in relation to the exercise of delegated Commonwealth Judicial Power (see r.20.03(a)). At the hearing of review the applicant relied upon his affidavit filed on 11 March 2005 and one filed on 30 March 2005. The respondent relied upon an affidavit of Megan Eliza Prideaux filed on 5 April 2005 and a further affidavit of that person filed on 1 March and upon an affidavit of Ms Denise Langford filed on 17 January 2005. Both of those affidavits contained numerous exhibits.
Section 52 of the Bankruptcy Act 1966 (Cth) provides as follows:
(1)At the hearing of a creditor’s 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; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
(1A)If the Court makes a sequestration order, the creditor who obtained the order must give a copy of it to the Official Receiver for the District in which the order was made.
(2)If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
(a)that he or she is able to pay his or her debts; or
(b)that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
(3)The Court may, if it thinks fit, upon such terms and conditions as it thinks proper, stay all proceedings under a sequestration order for a period not exceeding 21 days.
(4)A creditor’s petition lapses at the expiration of:
(a)subject to paragraph (b), the period of 12 months commencing on the date of presentation of the petition;
or
(b)if the Court makes an order under subsection (5) in relation to the petition – the period fixed by the order;
unless, before the expiration of whichever of those periods is applicable, a sequestration order is made on the petition or the petition is dismissed or withdrawn.
My summary of events leading to the making of the sequestration order arises from a consideration of the material within the affidavits or material that was put to me by one party and not controverted by the other. Where any part of the chronology is disputed, I will indicate the same and express my reasons for any conclusions reached in relation to such matter.
The creditor’s petition was served upon the application on 12 October 2004. It came before Registrar Christie on 15 November 2004. The debtor sought an adjournment of the petition until February 2005. An order adjourning the petition until 21 January 2005 was made. The debtor was ordered to file a Notice of Intention to Oppose the Petition and any affidavit material upon which he intended to rely by 4 January 2005. Orders were made for the creditor to file and serve material in reply by 18 January 2005.
The applicant did not attend on the adjourned date. The Notice was not filed. Registrar Christie being satisfied of the matters referred to in s.52(1) of the Act, the sequestration order was made.
The creditor’s petition was reliant upon an amount of $4600 said to be owing by the applicant to the respondents in accordance with a judgment entered against the applicant in the Magistrates Court of South Australia on 11 June 2004. That debt was the subject of a bankruptcy notice served upon the debtor on 26 August 2004.
The judgment debt is based upon two orders for costs made by Lander J against the applicant on 24 March 2004 (in the sum of $600) and on the 6 April 2004 (in the sum of $4000).
Both costs orders arose in proceedings in the Federal Court of Australia in which the respondents were applicants and in which Mr Moore was one of a number of respondents. (These proceedings will be described hereafter as “the Federal Court proceedings” in order to distinguish them from these proceedings).
The order for costs of 24 March 2004 arose out of an application in the Federal Court proceedings by the applicants for the extension of the time during which a meeting of the creditors of Manna Hill Mining Co Pty Limited was to occur. Ultimately the applicant consented to the respondent’s application on that day but not before there had been argument during which the applicant had sought leave to cross-examine the respondent’s solicitors upon an affidavit filed by him in support of the application. Lander J regarded the opposition to the application as being completely without merit, and his order for costs reflects his Honour’s view of the unnecessary prolongation of the hearing on that day.
The order for costs made on 5 April 2004 arose in the same proceedings but specifically out of an application by the applicant to adjourn them. The application for adjournment was opposed. Evidence was led from the applicant’s doctor. Ultimately the application for adjournment was abandoned. In making an order for costs, Lander J exercised the powers of the Federal Court pursuant to o.62 r.3 sub-rule 2 which enabled him to depart from the general rule that costs awarded in interlocutory proceedings were payable only upon completion of the proceedings themselves and thus ordered them to be paid forthwith.
On 19 May 2004 proceedings in the Adelaide Magistrates Court were commenced seeking payment of the aggregate of those two costs orders. The applicant did not file an appearance or a defence and, accordingly, summary judgment was entered on 11 June 2004 in the sum sough by the respondents.
That is the relevant history of the matters relating to the sequestration order.
Mr Moore has not paid any amount towards satisfaction of the judgment sum.
No Notice of Appeal has been lodged in respect of either of Lander J’s costs orders or in relation to the Adelaide Magistrates Court summary judgment.
It should also be noted that Mr Moore did not file an application to set aside the Bankruptcy Notice nor (as noted above) did he file a Notice of Opposition to the Creditor’s Petition. As also indicated above, he did not file any process in response to the Magistrates Court proceedings or the application for summary judgment in those proceedings.
This application was heard by me on the 8 April, 22 April 2005 and 13 May 2005.
At an earlier stage of these proceedings, it is clear that I misapprehended the aspect of the Federal Court proceedings in which the costs orders were made. It is not necessary for me to detail the nature of my misapprehension, but it was contributed to by both the applicant and the legal representative for the respondents who appeared before me on 16 March 2005 and 18 February 2005. It appeared during the course of the hearing before me on 8 April that the applicant himself might have not paid careful attention to the aspect of the Federal Court proceedings out of which the costs order arose and might himself have been labouring under a misapprehension at an earlier stage of these proceedings. In any event, it is quite clear as to which aspect of the proceedings gave rise to the judgment debt. The judgment debt did not in any way relate to proceedings in the Federal Court in which the applicant sought orders restraining the respondent’s solicitors from acting for them.
The affidavit of the applicant refers to his having received psychiatric treatment in recent times and at various stages of the Federal Court proceedings and of the progress of the bankruptcy proceedings. He was not hospitalised however, at the time that the sequestration order was made. Mr Moore told me that he was hospitalised in respect of his psychiatric difficulties for the first three weeks of May 2004, for one and a half days in July 2004, and overnight on one occasion in October of 2004. In any event I do not regard the applicant as having an onus to establish any reason relating to his non-attendance on 21 January before Registrar Christie. He is entitled to have this matter determined afresh by a person exercising the judicial power of the Commonwealth. That would be so whether he was in attendance or not in attendance. What matters is whether in the proceedings before me he persuades me that the creditor’s petition should be dismissed. Whilst I have couched his application for review, above, as being one seeking a setting aside of the sequestration order, that is only partially correct. If he were successful before me, that would be the first step I would have to take, but I have also been asked by him to then dismiss the creditor’s petition.
There was no dispute before me as to the creditors being able to establish those matters referred to in s.52(1) of the Act. Thus I turn to the issue as to whether I can be satisfied that Mr Moore is able to pay his debts or whether other sufficient cause as to why the sequestration order ought not to be made exists.
Mr Moore contended that he is able to pay his debts.
Matters relevant to the determination of the applicant’s solvency are conveniently summarised in the decision referred to by the applicant himself in his submissions before me, namely the decision of Sundberg J in St George Bank Ltd v Helfenbaum [1999] FCA 1337 at [20]-[22]:
“Under s.52(2) the respondent must satisfy me that he is ‘able to pay his…..debts’. The word ‘debt’ includes ‘liability’: s.51(1). In Bank of Australasia v Hall (1907) 4 CLR 1514 at 1527-1528 Griffith CJ with whom Barton J agreed, said of the words ‘unable to pay his debts as they become due from his own moneys’ in the Insolvency Act 1874(Q):
‘It was argued that only debts then actually payable and the amounts of which were then actually ascertained should be taken into consideration. One answer to this argument is that the matter for determination is the ability of the debtor, which is a state or condition that cannot be determined without having regard to all the facts. Another answer is that the debts referred to all the facts. Another answer is that the debts referred to are not his debts ‘then’ payable, but his debts ‘as they become due’ – a phrase which looks to the future. No doubt, only the reasonably immediate future is to be looked to …
The words ‘as they become due’ require, as already pointed out, that some consideration shall be given to the immediate future; and if it appears that the debtor will not be able to pay a debt which will certainly become due in, say, a month … by reason of an obligation already existing, ad which may before that day exhaust all his available resources, how can it be said that he is able to pay his debts ‘as they become due’, out of his own moneys?’
A debtor does not establish solvency merely by demonstrating an excess of assets over liabilities: Re Jones; Ex parte Clutter buck Bros (Adelaide) Ltd (1940) 2 ABC 89; Re Noye; Ex parte Deputy Commissioner of Taxation (1958) 18 ABC 77. The test of ability to pay debts is stated in Sandell v Porter (1966) 115 CLR 666 at 670 where Barwick CJ, with whom McTiernan and Windeyer JJ agreed, said of the words in s.95 of the Bankruptcy Act 1924 – ‘unable to pay his debts as they become due from his own money:’
‘Insolvency is expressed in s.95 as an inability to pay debts as they fall due out of the debtor’s own money. But the debtor’s own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time – relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor’s financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor’s inability, utilizing such case resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency.’
Although the words ‘as they become due from his own moneys’ do not appear in s.52(2)(a), the approach adopted in Hall and in Sandell v Porter has been applied to the words ‘unable to pay his or her debts’ in that provision. See Re Eather; Ex parte Polada (unreported, 30 May 1996, Cooper J), Re McVey; Ex parte Carswell & Co (unreported 22 May 1996, Cooper J) and International Alpaca Management Pty Ltd v Ensor [1999] fca 72. In Ensor Katz J said:
‘even if par 52(2)(a) of the Act were to be construed as only requiring the debtor to provide an ability to pay his debts presently payable and that from any money, whether his own or other people’s, it is clear that proof of the matter set out in par 62(2)(a) of the act does not entitle the debtor to the dismissal of the petition; it only enlivens the Court’s discretion under sub-s 52(2) of the Act to dismiss the petition … On the narrower construction of par 52(2) of the Act which I am hypothesising …, relevant considerations in the exercise of the discretion under sub-s 52(2) of the Act would, in my view, nevertheless be whether the debtor also has the ability to pay debts becoming payable in the reasonably immediate future and whether the debtor has the ability to pay the debtor’s debts from the debtor’s own money. That being so, the two matters which I have just mentioned would remain of importance in the determination of the present petition, even on a narrow construction of par 52(2) of the Act.’”
As the last paragraph of the above citation reminds me, even if I were satisfied of the applicant’s solvency or the existence of other sufficient cause, there remains an overriding discretion as to whether or not the petition is dismissed.
The obligation of satisfying me of these matters relating to his solvency rests upon the applicant.
I should note that at no stage has the applicant indicated an intention to pay the sum of $4600 to the respondents or proffered any payment or part-payment thereof. Nevertheless I bear steadfastly in mind that the exercise is one of assessing the applicant’s solvency not his willingness to pay the debt (see Re: Sarina; Ex-parte Wollondilly Shire Council (1980) 32 ALR 596). That was a case involving the payment into Court of the amount referred to in the petition. The Court found there was no basis for construing the expression in s.51(2)(a) as “willing and able to pay his debts”. Incidentally, that case also includes a useful discussion of the facultative and not mandatory nature of the power to dismiss a petition.
I now summarise the evidence available in respect of the debtor’s solvency.
Pursuant to his statutory obligation, the applicant filed a Statement of Affairs dated 11 February 2005. In terms of assets he said he had shareholdings with the following companies with the following value:
Manna Hill Resources Ltd
E $40,000.00
Hedgemore Pty Ltd
E $11,000.00
Manna Hill Mining Company Pty Ltd (shares held in trust)
E $600,000.00
He also indicated that he had monies owing to him by Manna Hill Mining Company Pty Ltd, Manna Hill Resources Ltd, Hedgemore Pty Ltd and Isles Selley Lawyers totalling approximately $45,000.
He listed 20 unsecured creditors. One debt so listed was his estimate of monies owing to the respondents in relation to the Federal proceedings. The respondents were successful in the Federal proceedings. The judgment is presently the subject of an appeal by the applicant, but he estimates the costs owing to the respondents in respect of the judgment to be $400,000. Leaving that debt aside, the balance of the debts amount to approximately $119,000. The individual debts range from $28,660 to $74.50.
Mr Moore spent some time placing this list of unsecured creditors in a context other than one which would see them as indicating substantial indebtedness arising from a variety of debts unpaid.
For example, he asserted to me that the debt to Minter Ellison Lawyers in the sum of $5952 (item 5 in the list of unsecured creditors) could be disregarded because the firm had “written the debt off”. A number of other debts he sought to characterise as disputed and therefore debts that I should not take into account in assessing his solvency. It does appear that one of the creditors (item 20), Brian O’Riley has been the subject of recent activity in the Magistrates Court of South Australia and that the judgment signed for the amount of the debt by Mr O’Riley has been set aside.
Even putting to one side the O’Riley debt, there are a substantial number of other debts which as of 11 February Mr Moore was prepared to include in his list of unsecured creditors. True it is, as he points out, that the pro-forma statement of affairs in paragraph 40 specifically requests all debts to be listed including what are described as “contingent debts”, but the debts do not become contingent debts simply by Mr Moore asserting to me that they are “disputed”. The list of unsecured creditors include debts which might be thought to be commonly incurred during the course of day to day business, for example, monies owing to a landlord for office rent; monies owing to Telstra for a phone account; monies owing to share brokers in respect to a loss on share trade.
I think I am entitled to disregard the listing of the respondent’s unsecured creditors in respect of monies said to be owing in respect of an order for costs arising from the Federal Court proceedings themselves. Those figures have not been quantified. The figure listed in the Statement of Assets and Liabilities is Mr Moore’s estimate only. The respondents did not ask me to take this debt into account on the issue of solvency (neither for that matter did they ask me to take it into account in respect of the exercise of the residual discretion).
In answer to a question from me, Mr Moore indicated that even if he were to exclude from the list of creditors whose debts he disputed or which had been abandoned, he was still left with debts of the order of $15,000 to $30,000. Later in his submission he sought to resile from that concession and attempt to indicate that all of the creditors could be categorised as either having debts which were disputed or written off or finalised in some other way, but at the end of the hearing I was left with nothing more than his assertions in relation to these matters and no explanation from him as to why if he were truly not indebted to these creditors he would list them as recently as February this year in his Statement of Assets and Liabilities.
I will assess Mr Moore’s solvency upon the basis of his having sundry debtors and a total aggregate debt of between $75,000 and $100,000 (in addition to the petitioning creditors debt).
I should also mention in this context a claim faintly raised by Mr Moore that many of the creditors listed in the Statement of Affairs were in truth persons who were owed money by companies of which he was a director, but this assertion was never fleshed out and no specific submissions were made in respect of any identified creditor.
One of the unsecured creditors listed by Mr Moore was one Denise Langford. He described the nature of the debt as a loan to pay company costs etc, says that it was incurred in 2001 and 2002 and estimates that he owes Ms Langford $15,000. Ms Langford filed an affidavit before the sequestration order was made. In that affidavit she explains why she seeks to intervene in the proceedings as claiming an interest as a creditor of Mr Moore for a sum of no less than $67,000. The annexures to her affidavit are letters from her solicitor to Mr Moore and a letter directly to her from Mr Moore. It appears that she claims to have loaned Mr Moore directly the sum of $70,000 of which $3000 was repaid (the letter from the solicitor said that the payment was made to one of the respondents in his action in circumstances which are not clear at all).
It appears that Mr Moore subsequently boarded at premises owned and occupied by Ms Langford and that in some way she claims to be entitled to payment of a further $70,000. In any event the claim for the latter $70,000 is not pressed.
Mr Moore, it will be noted, refers to Ms Langford in his list of unsecured creditors (item 9) as being owed an estimate of $15,000. It is not clear to me the nature of his dispute as to the balance of the monies claimed by Ms Langford, so all I know is that his indebtedness to her is somewhere between $15,000 and $67,000.
I now turn to the question of Mr Moore’s assets and resources, and I deal firstly with monies said to be owing to him by various companies in respect of consulting fees and cash loans and by a firm of solicitors, (the firm of solicitors representing the respondents) in respect of what Mr Iles alleges in his Statement of Affairs are monies placed with that firm estimated to be between $1000 and $3000.
In respect of the latter matter, it was not a fact or circumstance the subject of any submissions or evidence before me. The amount is relatively small and would not seem to have a bearing upon whether or not Mr Moore will ultimately be found to be solvent, and so for that reason I put it to one side.
Of more significance is Mr Moore’s claim that he is owed some $43,000 for consultancy fees and cash loans by Manna Hill Mining Company Pty Ltd, Manna Hill Resources Ltd and Hedgemore Pty Ltd.
I did not receive any further information as to the identity of the latter company, but I assume that it is part of the same group as the former two companies, and I proceed upon the basis that the respondents are persons who have a controlling or significant interest in those companies.
In paragraph 5 of his affidavit of 11 March 2005, Mr Moore states as follows:
“Over the years 2001, 2002, 2003 I paid for work done and other things, the responsibility of Wayne Wilson. I claim to be owed $3,106.85 by Wayne Wilson. I have listed all relevant cheques in “DGM 2”. Wayne Wilson became 70% shareholder of Manna Hill Mining Company. He was obliged to put $100,000.00 in the company and pay bills and provide working capital. He did not. He knew I paid these relevant bills and promised to pay back to me these monies. He did not. Now produced and shown to me and marked “DMG 3” are copies of correspondence when the company was placed in administration on 20th January 2000”.
“DMG 2” referred to above are schedules in the applicant’s own hand. “DMG 3” consists of a series of documents relating to the administration of Manna Hill Mining Company Pty Ltd.
Neither the exhibits nor the assertions in Mr Moore’s affidavit go any way to satisfying me that Mr Moore has a present entitlement to be paid the monies claimed by Mr Wilson. The claim appears to be based upon some suggestion that Mr Wilson as a director of the company was personally responsible for the repayment of advances made by Mr Moore to the company (the evidence of which consists only of Mr Moore’s assertions).
More significantly, Mr Moore claims to be owed monies by the group of companies referred to above and in respect of monies advanced and consultancy fees owing. At page 13 of his affidavit filed on 30 March 2005, Mr Moore states:
“At present Wilson and Lawton are directors and control the company. I have rendered in about February 2003 invoices for work done of years (01, 02, 03) amounts of $13,600.00, $7,200.00, $12,800.00 and $6,400.00. They have these invoices. The consulting rate at $400.00 was in dispute and I agreed at Court it should be $300.00 per day. Ms Lawton, Mr Wilson refused to speak to me and do not attempt to contact me to arrange payment of an appropriate amount. They control company, they could easily pay me, say $10,000.00 as par-payment and/or offset the debt. Their intention is to deliberately ‘starve me of funds’, bankrupt me etc. These are legitimate company debts and owed to me.”
The invoices are then annexed to the affidavit.
They are all addressed to Manna Hill Mining Company Pty Ltd and they total $91,200.
This is considerably in excess of the amount referred to in the Statement of Affairs of February 2005 as owing by that company. There are no invoices at all relating to the other two companies referred to in paragraph 31 of that statement. No explanation was given in relation to the discrepancy between the invoices and the amounts referred to in the Statement of Affairs.
These are amounts owing by a company albeit a company in which the respondents appear to play a significant role.
There was no explanation as to why no attempt had been made to recover the consultancy fees to this date other than the bare rendering of the invoices at the completion of each of the years referred to in the invoices. There was no evidence of any attempt made to have payment made.
This matter is really advanced both as a submission supporting the contention that Mr Moore is solvent and also as establishing a “sufficient cause” in terms of s.52(2)(b). There is no doubt that a cross-claim against the creditors can be a “sufficient cause” within the terms of that section for declining to make a sequestration order (see Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at 25). I do not think there is any difficulty in regarding the cross-claim as being one which is against the respondents even though the invoices have been rendered to a company. There was little dispute but that the respondents exercised a high degree of control over the company’s affairs. But the debtor has to do more than to assert the existence of the cross-claim or as it might be more appropriately described in these circumstances, the set-off. No steps have been taken to procure the money said to be owing by the company, not only have no legal proceedings been instituted but no step preliminary to the institution of proceedings, whether by way of issuing of appropriate notices or otherwise, has occurred. It is a claim for monies said to be owing in a bare form and it is made without explanation for the inconsistencies in relation to the invoices and the matters set out in the Statement of Affairs. In these circumstances I find that the claim for this debt as a set-off falls well short of establishing other sufficient cause and is of very little assistance to me in finding that Mr Moore is solvent.
I turn now to the question of the other asset which Mr Moore puts forward as a matter demonstrating his solvency, and that is his shareholding in Manna Hill Mining Company Pty Ltd. As noted above, he claims in his Statement of Affairs that these parcel of shares, 212 in all, have an estimated value of $600,000.
The other shareholdings referred to in paragraph 29 of his Statement of Affairs to not appear to have featured in any of his subsequent submissions, and I put them to one side for the purposes of this application.
There is no doubt but that he owns these shares and it was conceded that they constitute approximately 20 percentum of the share capital in Manna Hill Mining Company Pty Ltd, now described as Ausfel Pty Ltd.
Mr Moore claims that the shares are held by him in his capacity as trustee of the Moore Family Trust and therefore on trust for the beneficiaries of that trust, and much of the latter part of the hearing before me was taken up with his producing documents and making submissions to demonstrate that the shareholding is indeed held by him upon trust for the Moore Family Trust (see the bundle of documents constituting exhibit 4).
I am prepared to accept for the purposes of this application that the shares are held by Mr Moore in his capacity of trustee of that Trust, and I also accept that he is the only beneficiary of that Trust who could be expected to obtain a beneficial interest in the shareholding.
I had rather more difficulty in ascertaining what value that parcel of shares has. Mr Moore claims in his affidavit of 30 March 2005 at page 3:
“The mine was valued on 5 April 2000, and given a ‘most likely valuation of $2.5 million’. I believe the mine is worth considerably more now, possibly over $5 million. Now produced and shown to me and marked ‘DGM 1’ is the mine valuation.”
What Mr Moore needs to establish, however, is the value of his minority shareholding in that company. Again, the onus is upon Mr Moore to provide evidence in relation to their value. I will return to that issue hereunder.
Mr Moore claimed that monies were owed to him by Gayle Lawton, one of the respondents. Paragraph 33 of his Statement of Affairs indicates that he gave cash or paid bills to or on behalf of Gayle Lawton in 2001 and 2002 in the amount of approximately $15,000. This was information provided in paragraph 33 which is headed “Sale, Transfer or Gift of Assets in the last 5 years”.
Paragraph 2 of his affidavit of 11 March 2005 provides as follows:
“Over the years 2000, 2001, 2002, 2003 I advanced cash funds to Gayle Lawton totalling $14,350.00 which I claim to be owed by Gayle Lawton and over those years I paid for goods and services which Gayle Lawton and her children enjoy totalling $12,667.76. I claim to be owed at least 50% of the $12,667.76 by Gayle Lawton … … During period relevant, I lived at Tennyson with Gayle Lawton, her ex de-facto John Spanos and their children Tobi, Tolla, Tennessee. I slept separately I sleep-out and was not intimate with Lawton. Lawton was book-keeper of Manna Hill Mining Company, I was the managing director. Later Lawton became a director in 2001. This company went through difficult times, was in administration and did not earn income to meet costs. Gayle Lawton was a consultant in Manna Hill Resources Ltd, became a director. This company did not earn income and was in Supreme Court proceedings. Gayle Lawton received monies for services from Manna Hill Mining Company and Manna Hill Resources. During this period Lawton asked me for monies and paid bills. I was in an abusive relationship, very stressed and I advanced these monies on the understanding that they would be repaid in the future. I was pushed into this role of paying for everything and keeping the family afloat.”
Ms Lawton filed an affidavit on 6 April 2005. She disputes that she is indebted to Mr Moore in the sums claimed by him or in any other sum. She disputes receiving cash sums from Mr Moore other than the occasional sum of $200 which, she claims, was paid out of the funds of Manna Hill Resources Ltd in any event. In relation to the claim to be owed at least 50 percentum of the sum of $12,667.76, Ms Lawson appears to acknowledge the payment but says they came not from Mr Moore but from Manna Hill Resources Ltd. She says that Mr Moore occupied various rooms in her house between 2000 and 2003 and did not pay any rent for same. She says that Mr Moore entered into an agreement on 14 January 2001 to assign on half of the net proceeds of his shareholding in Manna Hill Mining Pty Ltd to her in the event that a then proposed disposal of the company to Minerals Corporation Ltd took place. She acknowledges that Mr Moore spent monies in relation to a house at 51 Seaview Road, Tennyson, following the receipt of a bequest from his mother’s estate. She estimates the value of the domestic items purchased to be $4097 and acknowledged that all of them remained at the house. She says the expense of the purchase of these items was incurred by Mr Moore in lieu of rent and other outgoings at the home.
She says that the monies used to purchase the domestic items referred to above were the only personal monies expended by Mr Moore arising from his allegations of her indebtedness to him. There is no suggestion that legal proceedings have ever been instituted by Mr Moore in relation to these sums said to be owing by Ms Lawton or that he has ever instructed a solicitor in relation to same. Monies owing by Ms Lawton are not referred to in paragraph 31 of his Statement of Affairs under the heading of “Money owed to you”. Liability for the sums is disputed. Again Mr Moore relies on these circumstances as a matter that goes to support his contention that I should find that he is solvent and also in relation to the “other sufficient cause” referred to in s.52(1)(b). As noted above, it is clear that the existence of a cross-claim against a petitioning creditor may be “sufficient cause” for declining to make a sequestration order (74 FCR 19 at 25). But I have to be satisfied that the claim against a creditor is a real claim and that it is likely to succeed and if it does succeed, that the fruits of the claim are likely to equal or exceed the creditor’s claim: “While the Court does not try the cross-claim in advance, the debtor must adduce sufficient evidence to show that it is a real claim which is likely to succeed” (per Sunberg J in St George Bank Ltd v Helfenbaum (supra) at paragraph [13])
I have formed the view on the material available to me that the alleged claim against Ms Lawton is speculative at best. It does not assist me in finding that Mr Moore is solvent. It does not constitute a “sufficient cause”. There was absent any explanation from Mr Moore as to why the claim had not been pursued previously either in terms of legal proceedings or even a demand for payment. Unexplained also was the absence of any reference to it in his Statement of Affairs as monies owing to him. The claim relates to a period of time when Mr Moore and Ms Lawton were sharing the same house and arises out of what appear to be reasonably complicated financial relations between them. Mr Moore has the burden of persuading me that a real claim exists against Ms Lawton for these monies. I am very far from being persuaded that such is the case.
I have referred on a number of occasions to matters set out in Mr Moore’s Statement of Affairs. That document was filed on 11 February 2005. Mr Moore has a medical certificate from Dr Chester, psychiatrist, indicating he is “unfit for work” from 18 November 2004 to 18 February 2005 and from 17 February 2005 to 17 May 2005. I did not have the benefit of any report from Dr Chester as to the existence of any incapacity on Mr Moore’s part in terms of dealing with the issues confronting him at these times. On the other hand, it was during this period that Mr Moore apparently took proceedings in the Magistrates Court of South Australia to set aside the judgment entered against him by one Brian O’Riley. Whilst there is no doubt that he presented before me at the various hearings involving this matter in a somewhat agitated and anxious manner, it was perfectly clear to me that he understood the nature of the proceedings and presented his arguments coherently and in a somewhat robust manner. His illness was not put specifically to me as a matter constituting other “sufficient cause” but it may have been Mr Moore’s understanding that he was relying upon the circumstance of his ongoing psychiatric treatment at the relevant periods as such a matter. However, when I bear in mind the nature of the proceedings before me – that is that this is a complete re-hearing of the matter and that I am not constrained by the events of 21 January 2005 – I cannot consider that in the existence of any illness on the day the sequestration order was made or at other relevant times goes any way towards constituting “other sufficient cause”. Mr Moore had the opportunity to put before me all matters pertinent to the question of whether a sequestration order should or should not be made. I am very far from being persuaded that he was suffering from a disability when he appeared before me such that he could not properly put his case to me. He has had every opportunity to put his case both in terms of oral submissions and in terms of two very voluminous affidavits. Mr Moore did complain about my indicating at times during this submissions that only specified time was available for the hearing of the matter and that it had to be apportioned between he and Mr Abbott for the respondents. I also made it clear that he would have sufficient time to put all relevant matters to me. When I reserved judgment on 22 April 2005 I provided Mr Moore with the opportunity to forward documents to me that he did not available to him on that day, but which he said would assist the Court in finding that those shares that he had acquired in Manna Hill Mining Company Pty Ltd were held by him on trust for his family trust. As matters turned out, he was in fact given a further opportunity to address me in relation to those documents on the 13 May 2005.
In this context I also mention that after I reserved my judgment, Mr Moore brought a further Notice of Motion supported by a lengthy affidavit in which he sought the opportunity to put further matters before me. That application came before me on 17 June 2005. I explained to Mr Moore at that hearing that he was not able to have a further opportunity to make submissions after I had reserved my judgment which would warrant me in hearing further submissions, but he was unable to do so. Much of the affidavit material upon which he relied at that hearing raised criticisms of the way in which the hearing had been conducted on 8 and 22 April and on the 13 May 2005.
At that hearing I was labouring under the misapprehension that 22April 2005 had been the last date upon which the matter had been before me, when in fact I had heard further submissions in relation to the documents relating to the issue of the trust on the 13 May 2005 but the difficulty confronting Mr Moore at the hearing on 17 April remained the same. If he has criticisms of the way in which the hearing was conducted on the 8 or 22 April or the 13 May 2005, they are matters that he can pursue upon Appeal if so advised.
As indicated above, I was satisfied at the conclusion of the hearing on the 13 May 2005 that the shares Mr Moore holds in Manna Hill Mining Company Pty Ltd are held on trust for the Moore Family Trust, but the critical issue in relation to the shares was whether there was any evidence of their value.
Mr Moore says in paragraph 1 of his affidavit of 30 March 2005 as follows:
“I am the applicant and say on 21st January 2005 I was solvent and was able to pay this disputed $ amounts of the respondents and also say they owed me more money than the $ amount claimed, that I had a discussion with Iles about 5 months ago where I discussed selling my shareholding as trustee of the Moore Family Trust for $600,000.00 and settle all issues to negotiate.”
The figure of $600,000 is referred to by Mr Moore as the value of the shareholding in paragraph 29 of his Statement of Affairs.
I was not given any further information in relation to these negotiations. It was not put to me that an offer had been made to acquire the shareholdings for that sum only that there had been discussions in relation to that sum. It is difficult for me to know what weight, if any, I can give to those discussions. Matters relating to the privilege in aid of settlement and the statutory exception to that provided in s.131 of the Commonwealth Evidence Act were not agitated before me and the issue of a value for the shareholding arising from these discussions was never developed in argument before me, and I put it to one side.
The affidavit of 30 March 2005 gives some history of the company in which the shares are held and material is produced to suggest that the company has an opportunity of reaping very substantial financial rewards on account of its ownership of Mining leases in relation to sodium feld spa. A valuation from Terrence Wilstead and Associates dated 5 April 2000 in relation to those mining leases suggests a valuation range of $1.8 million to $3.3 million.
I reiterate, however, that the issue before me, however, was what value can be attributed to Mr Moore’s minority shareholding,
Again I look at this issue in the context of whether it is capable of providing evidence of Mr Moore’s solvency and also as to whether or not the circumstances of his holding such a parcel of shares can amount to “other sufficient cause”.
In paragraph 44C of the Statement of Affairs when providing information in relation to assets owned by the Moore Family Trust, Mr Moore indicates when asked to give an indicating of the “re-sale value” of the shares:
“Don’t know”.
Solvency can be established by reference to assets which can be used as collateral for the granting of loans. I had no evidence of this kind before me. Mr Moore did not suggest that he had even approached a financial institution or private individual for the purposes of borrowing on the strength of his shareholding (whether on his own behalf or on behalf of the trust). Mr Abbott QC for the respondents spent some time in developing his argument that the circumstances of the ownership of the shares by the Trust meant that necessarily a prospective purchaser would be highly cautious about acquiring the shares, but I do not see why that need be the case. On the basis of the documents available to me, Nr Moore would have the authority to dispose of the shareholding and deal with the proceeds arising from the sale. He is the primary beneficiary. I was given a document indicating the declaration of trust by Mr Moore on the 2 October 1996. The Trust deed originally gave the settler the power of adding a trustee or removing a trustee (thought the settler was ineligible himself for such appointment). The trustee of the Trust had the power to vary the terms of the Trust deed and on 23 March 2005 Mr Moore varied the deed by revoking the clause enabling the set law to appoint a new trustee and vesting the power of such appointment or replacement in Mr Moore.
But, again, this does not assist in any way with the critical issue of value. I bear in mind that Mr Moore conceded that as recently as July 2004 at the hearing of the substantive proceedings between the respondents and him, he had contended that the company in which he holds the shares on behalf of the trust was insolvent as of July 2004. I am not suggesting that I should be satisfied it was insolvent at the time, but that circumstance is illustrative of the extent to which I am left with nothing more than assertion as to the issue of the value of the shares. The onus was on Mr Moore to provide some meaningful evidence of the valuation of the shareholding and such evidence is entirely absent in my view. I should not infer the value of the minority shareholding from my acceptance of the fact that the mining leases owned by the company are of significant value.
One would have thought that if Mr Moore had an asset of such value, he would have approached a lender at some stage prior to the hearing before me to demonstrate his capacity to borrow on the strength of the shareholding, but no such evidence was ever produced.
Ultimately I am left in a position where I cannot assign any value to the shares owned by the Moore family trust in Manna Hill Mining Company Pty Ltd. It thus does not assist me in any way on the topic of solvency and his ownership of the shares in these circumstances cannot constitute “other sufficient cause”.
The last matter which Mr Moore asked me to take into account in respect of the existence of “other sufficient cause” is the fact that the judgment of Lander J in the principal proceedings in the subject of an appeal by him. The appeal has not yet been determined. The issue of his capacity to prosecute the appeal without the consent of his trustee or the question as to whether that consent will be forthcoming is the subject matter of separate proceedings, but for the purposes of these proceedings I proceed upon the basis that the appeal will ultimately be determined on its merits. Mr Moore indicated that he considered he had also appealed the costs orders which gave rise to the judgment sum and which ultimately formed the basis of the creditor’s petition, but the appeal as it relates to costs can only relate to the general order for costs in relation to the disposal of the proceedings. The two costs orders discussed above are the subject of discrete judgments, and an examination of the court file in relation to the substantive proceedings (an opportunity for which was given to Mr Moore during the course of these proceedings) did not reveal any appeal against either of the orders for costs. I have read the transcript of the hearings which gave rise to each of those orders for costs and the reasons given by Lander J in each matter. Even if Mr Moore is exhibiting an intention to appeal those orders out of time now (and I think that is how I should take his comments on the topic), he has not advanced anything resembling an arguable ground for appeal in relation to either award.
Having considered all of the affidavit material filed by Mr Moore and listened attentively to the submissions he made on each of the three occasions referred to above, I am not satisfied that any grounds for not making the sequestration order have been established.
There was no dispute before me in relation to the matters referred to in s.52(1) and I am satisfied of all of the matters referred to therein.
I am not satisfied that Mr Moore is able to pay his debts or that other sufficient cause why the sequestration ought not to be made has been made out.
For these reasons, his Application for Review filed on the 1 February 2005 is dismissed.
I certify that the preceding eighty-nine (89) paragraphs are a true copy of the reasons for judgment of Lindsay FM
Associate: S. M. Smart
Date: 1 July 2005.
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