Nan v Sweeney
[2004] FMCA 607
•13 July 2004
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| NAN v SWEENEY & ANOR | [2004] FMCA 607 |
| BANKRUPTCY – Application pursuant to section 178 of the Bankruptcy Act for review of a decision of the Trustee to admit a proof of debt. |
Bankruptcy Act 1966 (Cth), ss.19, 153, 153A, 178
Federal Magistrate Court Rules 2001, Rule 21.15
| Applicant: | YIN WU NAN |
| Respondent: | PAUL DESMOND SWEENEY & ANOR |
| File No: | BZ422 of 2003 |
| Delivered on: | 13 July 2004 |
| Delivered at: | Brisbane |
| Hearing date: | 13 July 2004 |
| Judgment of: | Rimmer FM |
REPRESENTATION
| Counsel for the Applicant: | A J Taylor |
| Solicitors for the Applicant: | Colwell Wright |
| Counsel for the 1st Named Respondent: | Mr J Davies |
| Solicitors for the 1st Named Respondent: | Freehills |
| Counsel for the 2nd Named Respondent: | R.J Clutterbuck |
| Solicitors for the 2nd Named Respondent: | Wellners Lawyers |
ORDERS
That all applications be dismissed but in particular, the final amended application filed on 14 October 2003.
That the applicant pay the respondents costs.
THAT pursuant to rule 21.15 of the Federal Magistrates Court Rules 2001, the Court certifies that it was reasonable for the parties to employ an advocate in these proceedings.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ422 of 2003
| YIN WU NAN |
Applicant
And
| PAUL DESMOND SWEENEY & ANOR |
Respondent
REASONS FOR JUDGMENT
Introduction and applications
This is an application which was brought by the applicant, Yin Wu Nan, in this Court originally by application on 30 July 2003. In that application, he seeks to review, pursuant to section 178 of the Bankruptcy Act 1966 (Cth), a decision made by his trustee, the first respondent, Paul Desmond Sweeney, to admit a proof of debt which had been submitted to the trustee by Shau Xiang Ling in administration of the applicant's bankruptcy. In support of that application, the applicant relied upon an affidavit which was filed the same date, 30 July 2003.
That application was then amended on 19 August 2003, and the amendment was to include, as the second respondent - clearly a person affected by the outcome of the decision in respect of the proof of debt, the person who is now the second respondent, Shau Xiang Ling. The applicant has amended his application further. On 14 October 2003, and in that further amended application, he seeks that the Court again reverse or reconsider the decision made by the trustee not to annul the bankruptcy pursuant to the provisions of section 153A. I have already, in separate reasons, set out the fact that the applicant has today, through his counsel who appeared for him earlier today, made an application for an adjournment. That application was unsuccessful.
I do not need to transverse all of those matters again, save and except to say that this matter has proceeded before me this afternoon, after I refused the adjournment at 10.00am that morning and then indicated the hearing would commence at 2.15pm, and there is no appearance by the applicant. On that basis, both the first and second respondent, seek to proceed today, and seek that the application be dismissed.
They seek no order, apart from reserving, of course, their right to make application for costs at the conclusion of the proceedings, but no order in the substantive two applications which are before me, other than that the application be dismissed. The first respondent the trustee, Paul Desmond Sweeney, has provided to the Court written submissions and has identified in those submissions all of the documents which they rely upon, and that includes documents which are filed on behalf of the applicant, being the application.
But most importantly, in respect of the evidence before the Court, this comes from the trustee, the affidavit of Paul Desmond Sweeney which was filed 11 September 2003; the affidavit of Paul Desmond Sweeney which was filed 16 January 2004; and a further affidavit of Paul Desmond Sweeney filed on 5 July 2004. The second respondent has also provided to the Court written submissions and they have not set out in those written submissions any material by their client to be relied upon. They rely upon the evidence already before the Court.
The orders sought by the applicant in the first application pursuant to section 178 the court review the decision of the trustee to admit a proof of debt which has been lodged by Shau Xiang Ling is opposed by the second respondent on two bases, and they submit to the Court that the Court should conclude that her proof of debt is bona fide.
Background facts
In this matter, the background facts relate to an agreement which was signed between the applicant, the bankrupt, and the second respondent, Ms Ling, and that agreement was, firstly, written and signed in the English language; it was signed and witnessed appropriately. Secondly, there is a further document which is written in the Chinese language, both Mr Nan and Ms Ling being of Chinese origin, and Ms Ling living and being resident in China.
The applicant says, as his case unfolds, that both of those agreements were intended to reflect the terms of an agreement he had reached with Ms Shau. He says that monies that had been advanced by Ms Ling to him of $100,000. The first agreement was signed on 11 December 1998, and that was in the English language. The trustee has properly reviewed the documents presented by both the applicant to the trustee, which includes all of the documents that he has provided to the Court in relation to this issue, and he has reviewed all of the documents provided by the second respondent in relation to this proof of debt.
In essence, the applicants claim is that Ms Ling was never to have a personal guarantee provided by him with respect to repayment of any loan of $100,000 - either a loan to Rodan International Proprietary Limited, a company which was established by the applicant within a day of Ms Ling providing those funds to the applicant - but in fact Ms Ling’s payment of $100,000 was simply an investment into the company. The trustee has considered that argument. It has been put to him by Mr Nan very forcefully in correspondence which is annexed to both the affidavit of the applicant and also the affidavits of Paul Desmond Sweeney.
The respondent, Paul Desmond Sweeney, the trustee, has also obtained legal advice with respect to the nature and construct of the two agreements and the legal effect of them. There are a number of matters which are raised by the trustee, with which I agree, that have caused the trustee to form their decision and come to the conclusion that they have with respect to the fact that the sum of $100,000, together with any interest under the terms of the agreement, was a debt due and owing by the bankrupt to the second respondent, Ms Ling, and was therefore a debt which, being a liquidated sum, she was entitled to claim as a proof of debt.
Clearly, the trustee is entitled to rely upon a written document which was entered into in the country of Australia under the law of Australia, written in the English language, signed by each of the parties, and witnessed. That document, it is important to note, was witnessed in the presence of a solicitor, Mr Mark Richards. In the absence of this Court having any evidence to the contrary, this Court can rely upon that solicitor to having fulfilled all proper steps required to be undertaken with respect to satisfying themselves that a person who is signing a document in their presence does understand the language and does understand, or have the basis of forming an understanding, of the words in the document that are read.
It is important that there is nothing on the face of that agreement, which the agreement first in time, which would indicate, as the applicant now seeks to agitate to the Court, that he was unable to speak English, understand it, and therefore has been misled by Ms Ling, who he says has a much better grasp and understanding of the English language.
One would have expected, in a matter such as this, to see the applicant call that solicitor, or at least have some affidavit before the Court by that solicitor, to put those issues to rest. While the applicant has not been before the Court to properly run this matter, these are matters which he should have put before the trustee, given that it has been a clear and contentious point raised by the applicant and answered in full by the trustee on numerous occasions, and of course it is significant that the matter before me today involves the review of that decision made by the trustee.
On the face of that document, I am satisfied that what was agreed between Ms Ling and Mr Nan was that she would advance the sum of $100,000 to Mr Nan, and that it would be used for the purpose of putting and injecting funds into a company, Rodan Proprietary Limited. It is also clear that the applicant was seeking, in both agreements, to make it very clear that Ms Ling would be protected in the legal sense by Mr Nan if circumstances arose whereby the company became subject to a wind-up or insolvency, and that the form of words used clearly provided her with a personal guarantee from the applicant, Mr Nan.
I make that finding based on a number of factual matters, and in my view the trustee has properly covered all of these in communications with the applicant through his solicitors, and this Court is not, today, in a position where it is required to make these findings quite separate and apart from the trustee, nor in circumstances where the trustee has not properly - and very completely, in my view - provided explanation to the applicant as to the reasons why such proof of debt is accepted.
As I have already said, the trustee relies upon the wording of the written agreement, signed on 11 December 1998, between Mr Nan and Ms Ling. The trustee also relies on the fact that, in their view, on assessment of all of the evidence, and upon taking legal advice, that injection of capital as an investment by Ms Ling into the company would normally be supported by a number of things which are not present in this transaction.
Firstly the issue of shares to the value of money which was allegedly placed as an investment is not present in this matter. The second respondent received shares to the value of $2 and yet it is contended by the applicant that she did so in return for an investment of $100,000. As the trustee has pointed out, that appears incongruent.
Secondly, there is no ratification by the company as required under Corporations Law of a decision which was made prior to the incorporation of the company. There are no minutes of the meeting provided to the trustee or this Court to provide some understanding as to the background nature of the transaction between Ms Ling and Mr Nan. Again, this would be usual and expected if this transaction was a transaction for which the company alone was to stand responsible.
The trustee, as I have said, has quite amply pointed all of these matters out to the applicant. There are a number of other issues which are tangential to the decision of the trustee but in my view I have already disposed of those matters upon which I place the greatest weight and in my view I concur in my findings with the decision of the trustee. Having found that, on consideration of all of the available evidence, there is a debt which is capable of being proved in the bankruptcy I am satisfied that the trustee has fulfilled duties and obligations in accordance with the legal obligations placed upon him both in relation to section 19 of the Bankruptcy Act and generally in admitting this proof of debt and discharging duties of a trustee of a bankrupt.
I am satisfied that the second respondent has an entitlement to the lodgement of a proof of debt and I propose to dismiss the application that is made pursuant to section 178 of the Bankruptcy Act for a review of the trustee's decision in bankruptcy to admit the proof of debt of Shau Xiang Ling. The second issue which is raised is a matter which only the first respondent is submitting and that is the decision that the trustee made not to accept an offer that was made by the applicant through his solicitors to pay certain moneys to his solicitor's trust account in the sum of $120,000 in satisfaction of the debt and to then seek a certificate be issued by the trustee pursuant to section 153A to annul the bankruptcy.
In relation to this matter I accept the submissions which have been made both in writing and also orally by counsel for the trustee in bankruptcy. In this matter I am satisfied that the trustee has acted appropriately at all times and has had put to them through correspondence from the applicant's solicitors the offer to pay the sum stated into the trust account of those solicitors which clearly, as it is submitted by the trustee, does not properly satisfy the requirements of section 153A for the payment of the debt and, all outstanding costs, charges and expenses of the trustee properly incurred.
This application, on the very face of it, in my view, was doomed to failure from the start. It was an application brought at the same time as the first application before the Court as to proof of debt was still outstanding and had not been determined by the Court. The trustee clearly was the respondent and the first respondent to such an application. They had no choice as the trustee in bankruptcy but to present to the Court as an assistant to the Court in its role to assist the Court with the provision of information all information as relevant to the issues at hand.
Whilst those proceedings were ongoing, as properly submitted by the trustee, there could be no proper assessment by the trustee or anybody else as to what the trustee's proper costs, charges or expenses might be. I take into account that in this matter, both the applicant and the respondent were of Chinese descent, there were serious issues of credit raised on the documents that had been presented to the trustee and when this matter was set down for hearing was an assessment of the amount of time needed by the Court for determination of approximately three days.
There was clear indication to the Court by the applicant that they would require the services of Chinese interpreters and to say that it was complex litigation both in terms of the process and procedure and also the determination of the facts, is to state the position correctly. I am satisfied that the trustee in the discharge properly of their duties could not have to particularly as at the relevant date, and that is in September 2003 made a decision other than the decision that they made to reject the offer on the basis that they needed resolution of the s 178 application brought by the applicant, firstly to understand the nature of the claims which would properly be made in the bankrupt estate on a determination of admission or rejection of the proof of debt of the second respondent; and, secondly, given the nature of how this litigation unfolded, to be able to ascertain properly what the proper costs, charges and expenses would be.
I am also of the view that it is proper - and I accept that the Court should, in a decision under section 178 of the Act, look on a review somewhat retrospectively as to what has unfolded from September 2003, when the decision was made by the trustee to reject the offer made under section 153A to the present date and to reflect upon those matters which have unfolded to properly ascertain what the trustee really had before them (to deal with) in the administration of this bankruptcy.
What, clearly, the evidence discloses today is that since September 2003, as disclosed in the most recent affidavit of Mr Paul Sweeney filed on 5 July 2003, significant further proofs of debt have been lodged for consideration of the trustee. Annexed to Mr Sweeney's affidavit is documentation which have been provided together with the proofs of debt. That documentation clearly raises matters which I am satisfied would have been in the expectation of the trustee or the consideration of the trustee with respect to the interests which the applicant may hold in overseas assets and the nature of any financial dealings which may have given rise to the existence of further creditors, in relation to the applicant's overseas business dealings.
What the trustee says today, is that since September of 2003, significant proofs of debt have been lodged. Those proofs of debt, if accepted, will be in excess of half a million dollars Australian. Secondly, these proofs of debt raise for the trustee's consideration, significant issues with respect to the overseas dealings, both property interests and debt of the applicant that require some further investigation by the trustee. I accept that it is important for the Court to look to the nature of the duties of the trustee, under section 19 of the Bankruptcy Act.
Mr Davies, on behalf of the trustees, properly submitted, they have a duty and obligation to any potential creditors' to notify those creditors of the bankruptcy. Given that on the face of all of the evidence before me, it is clear that the applicant, in his business dealings, has substantially been involved in overseas interests, it, in my view, was a proper and appropriate decision for the trustee to make. Notwithstanding the findings I've already made in relation to the existing application before a Court to further and properly investigate the bankrupt's affairs, rather than simply accept some offer which was made for the payment or lodgment of monies into a solicitor's trust account, and clearly, as the trustee says in the first instance, that payment into the trust account did not satisfy the proper provisions or the requirements under the provision of section 153A in the first instance, in any event.
For all of those reasons, then, I am satisfied that the second application made for review of the trustee's decision not to accept the offer and issue the certificate under section 153A of the bankruptcy should be dismissed. I propose, then, to dismiss all applications including the final amended application filed on 14 October 2003.
Costs
Both the first and second respondent today make an application for costs. Having regard to the findings that I have already made. I am satisfied the applicant has been wholly unsuccessful in his applications. I have found that in respect of the second application was doomed to failure from its inception. I find that costs should follow the cause. I am satisfied that the orders for costs should be made in the favour of both the second and the first respondents against the applicant. I will certify that, apart from any time when this matter was listed for mention, that the matter should be certified as one appropriate for counsel because, in my view, the matter has now been set down for hearing on three occasions. I understand counsel has been briefed on every occasion.
I certify that the preceding thirty (30) paragraphs are a true copy of the reasons for judgment of Rimmer FM
Associate: Peter Smith
Date: 15 September 2004
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