Oakleigh Holdings v Atkinson
[2001] FMCA 24
•10 April 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
Oakleigh Holdings Pty Ltd v James Christopher Atkinson [2001] FMCA 24
BANKRUPTCY – Creditors Petition – Application for adjournment of hearing of petition to allow Creditors meeting to proceed – Application Refused – Ordinary Residence – Bankruptcy Act 1966 ss 40, 43 and 52
Bendel ex parte Lowe Lippman delivered 19 April 1996 No 262 of 96
Field v Commercial Banking of Sydney Ltd (1978) 22 ALR 403; (1978) 37 FLR 343.
Taylor ex parte Natwest Australia Bank Ltd, (1992) 37 FCR 194.
Re Vassis; Ex parte Leung (1986) 9 FCR 518
Applicant: Oakleigh Holdings Pty Ltd
Respondent: James Christopher Atkinson
File No: MZ77/01
Delivered on: 10th April 2001
Delivered at: Melbourne
Hearing Date: 3rd April 2001 and 6th April 2001
Judgment of: McInnis FM
REPRESENTATION
Solicitors for the Applicant: Mr M Hannan of Abbott Stillman & Wilson
Solicitors for the Respondent: Mr R Flory of Rogers & Gaylard
ORDERS:
Leave is granted to the Creditor to file the Affidavits of Catherine Amy Dwyer sworn 10 April 2001 and John Stone sworn 9 April 2000.
A sequestration order be made against the estate of James Christopher
Atkinson.
The petitioning Creditors costs of and incidental to the petition, including reserved costs in this matter, be taxed and paid in accordance with the Bankruptcy Act 1966.
It is noted that the date of the act of bankruptcy is 30 November 2000.
IN THE FEDERAL MAGISTRATES’ COURT OF AUSTRALIA
AT MELBOURNE
No. MZ77 of 2001
BETWEEN
OAKLEIGH HOLDINGS PTY LTD Applicant
(ACN 000 449 221)
- and –
JAMES CHRISTOPHER ATKINSON Respondent
REASONS FOR JUDGMENT
I should indicate this is a judgment which I propose delivering effectively in an extempore manner. It would be clear to the parties when we concluded the hearing last Friday at around 6 pm I indicated that I would deliver a judgment this morning at 10.30 am. In the circumstances I will direct that the proceedings today that are being recorded be transcribed and upon revision the transcribed recording shall constitute my reasons for decision.
The applicant Creditor Oakleigh Holdings Pty Ltd (the Creditor) applies to the court for a sequestration order pursuant to section 43 of the Bankruptcy Act 1966 (the Act) against the estate of the respondent debtor James Christopher Atkinson (the Debtor). The Debtor seeks an adjournment of the application to enable a meeting of Creditors to be held. Initially the creditors meeting was to be held on 28 March 2001. It was then adjourned by the trustee to 11 April 2001, hence failing the granting of an injunction it is necessary to deliver my decision before that meeting takes place.
I do not need to decide whether an injunction can be granted by the court to prevent a creditors meeting proceeding, though I note that an injunction was granted by Merkel J in the unreported decision of Bendel ex parte Lowe Lippman delivered 19 April 1996 No 262 of 96. In passing I can see no reason why an injunction could not be granted in appropriate circumstances to prevent a creditors meeting from being held whilst the court deals with a creditors petition.
In this application the Creditor relies upon noncompliance with a bankruptcy notice dated 31 July 2000. The bankruptcy notice was based upon a judgment obtained by the Creditor against the Debtor in the District Court of New South Wales on 13 November 1998 after a four-day trial. The debt claimed in the bankruptcy notice amounts to $154,809.64. The judgment in the District Court was the subject of an appeal to the New South Wales Court of Appeal which unanimously dismissed the appeal on 28 June 2000.
On 25 August 2000 the Debtor filed an application for special leave to appeal to the High Court of Australia. The Debtor has claimed that he's unable to proceed with the High Court application having regard to his "intentions to do a Part X under the Bankruptcy Act." The Creditor produced a copy of a letter dated 23 March 2001 to the Debtor's solicitors from the Registrar of the High Court which referred to an earlier letter dated 6 March 2001 whereby the solicitors were advised that:
“The application for special leave to appeal would be deemed abandoned pursuant to order 69A rule 3 of the High Court rules, if the application books are not filed by 23 April 2001”.
On 30 August 2000, the applicant applied to the Federal Court of Australia to set aside the bankruptcy notice. The application to set aside the bankruptcy notice was heard by Heerey J of the Federal Court of Australia on 28 September 2000. His Honour delivered a judgment on 3 November 2000 whereby he upheld the validity of the bankruptcy notice and dismissed the application.
In this court the petition was filed on 13 February 2001. The matter was listed before a Registrar on 22 March 2001.
It's important to note the chronology of events between the date of Heerey J's judgment, namely 3 November 2000, and the first hearing before the Registrar on 22 March 2001. On 22 November 2000 the Debtor's solicitors advised that the Debtor's last-known address was 3 Devonshire Terrace, Lancaster Gate, London. On 30 November 2000 the bankruptcy notice expired pursuant to the order of Heerey J. On 13 February 2001, as I have indicated, the creditors petition was issued and on 14 February 2001 that petition was served upon the Debtor at the Royal Hobart Hospital, Liverpool Street, Tasmania.
On 23 February 2001 the Debtor executed a section 188 authority in favour of the trustee, Mr Rambaldi. On 27 February 2001, Mr Rambaldi consented to act as controlling trustee. The creditors solicitors received a copy of the section 188 authority by facsimile on 15 March 2001, and on 19 March 2001 agents for those solicitors Abbott Stillman and Wilson received a copy circular to creditors and notice of meeting scheduled for 28 March 2001. That proposed Part X arrangement had provided for a return of 19 cents in the dollar to creditors.
It should also be noted from the court file that on 14 March 2001 the Debtor lodged with this court a notice of intention to oppose the creditors petition and in that notice set out various grounds. At the hearing before the Registrar, an order was made that the petition be adjourned to 26 March 2001 at 2.15 pm before me. When the matter came before me on 26 March, the Debtor sought to file and serve 10 affidavits. Despite an objection by Counsel for the Creditor I allowed the affidavits to be filed. Ultimately I permitted the Debtor to rely upon the affidavits. The matter was then adjourned for an audiolink directions hearing on 27 March 2001. On that date I ordered that the Creditor should file and serve any affidavits by 30 March 2001, made other directions and otherwise fixed the application for hearing on 3 April 2001.
A further directions hearing was held on 30 March 2001 and adjourned to 2 April 2001. On 2 April an issue arose in relation to the production of documents in answer to three subpoenas which had been issued by the creditors on 28 March and served upon three alleged creditors of the directions, namely, M.A. Keady Pty Ltd, (MA Keady) Flample Pty Ltd (Flample) and Quest Capital Pty Ltd (Quest). Documents were not produced in answer to the subpoenas. I stood the matter down to 10.30 am and when the documents were not produced I extended the time for production to 3.15 pm that day, upon noting that the solicitor for the Debtor would notify the recipients of the subpoenas of the extension of time.
It should be noted that the subpoenas were addressed to three companies which are conceded to be `friendly creditors’, either connected with the Debtor through family or through an ongoing relationship with the Debtor, to the extent that each supported the Debtor in seeking to allow the creditors meeting to occur and adjourn the petition in this application. In any event, I further extended the time for answering the subpoena to 10 am on 3 April 2001. The Debtor's solicitor filed a notice of motion seeking to set aside the subpoenas, though that notice of motion did not refer to any particular grounds to be relied upon, although affidavit material filed with the notice did make reference to the grounds to be relied upon in that notice of motion.
The notice of motion was not pursued at the hearing. Documents were not produced by any of the alleged creditors named in the subpoenas.
Further problems concerning documents arose after the first day of the hearing which occurred on 3 April 2001. The trustee, Mr Rambaldi, gave evidence and during the course of that evidence the following exchange occurred - and I read from page 114 of the amended transcript. Mr Bigmore appeared for the Debtor.
“HIS HONOUR: I take it from what you said that requests have been made of the Creditors to provide relevant primary documents for your examination and as far as you know that request has been met by most if not all.
WITNESS:The request has been met in terms of providing documents. As to whether they're the actual primary documents, I'm not sure.
HIS HONOUR: Is there any problem with access being made to those documents by the Debtor or indeed by the applicant in these proceedings?
WITNESS:Not at all. I have those documents in my possession now.
MR BIGMORE: Well, I'm not going to look at them now, your Honour, but what I was going to say that we'll take primary responsibility for going to the documents and taking copies. That's not to stop the other side from doing the same thing but ‑ ‑ ‑
HIS HONOUR: I don't think I need to make any formal orders unless you need to be protected by them.
MR BIGMORE: No, but I just thought I'd indicate that we'll be doing that, or my instructor will be doing that.
HIS HONOUR: Why shouldn't your friend also have, if it's material that's otherwise the subject of subpoenas it might short cut the whole process.
MR BIGMORE: Yes, it might.
HIS HONOUR: If you're happy to make arrangements, well, the solicitors can surely do that.
MR BIGMORE: Yes, we'll certainly be on to it”.
As it transpired, documents which were the subject of that exchange were not produced.
The evidence in this matter from the Debtor involved both affidavit and oral evidence. The Debtor relied upon the following affidavits all sworn on 26 March 2001: Gess Michael Rambaldi, who is the trustee; Mr Jay Jethwa, a friend; Mr Richard Flory, a solicitor, and from the material I presume a friend; Mr Brian Keady, the father-in-law of the Debtor; Irene Bielefeld, a sister of the Debtor; Chandra Dahia, an accountant and friend of the Debtor; Gregory Ernest Mark Falk, a solicitor.
The Debtor also relied on affidavits by Brian John McGillivray, sworn 25 March 2001 and 6 April 2001. In addition, the Debtor relied upon his own affidavit sworn 26 March 2001, together with two affidavits of his wife, Dr Mary-Anne Keady exhibited thereto and both also sworn on 26 March 2001. At the hearing the Debtor gave evidence and called in person Mr Rambaldi, Mr McGillivray and by videolink, Dr Mary-Anne Keady.
Mr Keady, the Debtor's father-in-law, did not give evidence due to a medical condition. This was verified by his daughter, Dr Mary-Anne Keady, whose evidence in this regard the court accepts.
The Creditor relied upon the formal affidavits, in addition, an affidavit in reply by Michael Alexander Kreveld sworn 28 March 2001 which also referred to his earlier affidavit sworn 21 March 2001.
By way of background I should indicate at this point that the evidence appears to indicate that the Debtor was admitted to practice as a solicitor in 1983. He does not currently hold a practising certificate. He had practised under the firm name Rushwood Gore. A receiver was appointed on application to the Supreme Court by the Law Institute of Victoria and an order was made to that effect by the Supreme Court of Victoria on 12 March 1999. The receiver is still appointed.
As I have indicated, the applicant no longer holds a practising certificate but the receivership of his firm has not yet been resolved. The Debtor was married in 1995 to Dr Keady. They had lived together from 1993. They had allegedly separated in February 2000. There are no Family Court proceedings, indeed no proceedings, as far as I can understand, between the couple at all. There are two children of that relationship, one aged six and the other aged one.
The documents reveal that from time to time the Debtor had resided at his sister's address and/or his wife's address in Tasmania when not travelling overseas. He holds two passports, an Australian passport issued on 15 February 1996 and a British passport issued on 6 March 2000. He had formerly purchased a property at 212A Clarke Street, Northcote, in 1983 which was sold on 20 June 1998. I do not propose to analyse in detail the circumstances leading to the sale of that property, though note that without consideration, a half share in that property was transferred to the Debtor's wife in 1993 and she thereby became a joint proprietor.
It is relevant to set out the list of alleged creditors and it is convenient to refer to a letter from the Debtor's solicitors to the creditors solicitors dated 15 February 2000, (exhibit A6), which provides a list of those creditors and liabilities as follows: Quest Capital Pty Ltd estimated amount $1,558,624; Oakleigh Holdings Pty Ltd $154,809.64; M.A. Keady Pty Ltd $62,656; Flample Pty Ltd $5000; Flory Partners - Richard Flory - $6200; Dahia Accountants $8500; Dr Mary‑Anne Keady $15,000; Greg Falk Solicitors $7000; Jay Jethwa $300; Law Institute $4000; sundry creditors, G. Parncutt common law solicitors et cetera $30,000.
It is noted by the time the Debtor completed his statement of affairs dated 23 February 2001, (exhibit A5), the amount said to be owing to M.A. Keady had increased from $62,656 to $145,397.05. No documents were produced to explain the change or verify the figures for this and indeed other creditors, save for the limited materials forming part of the statement of affairs in reference to the supporting affidavits to selected documents.
In any event when considering the list of creditors, it is agreed by both Counsel in this matter that the threshold issue is the genuineness or otherwise of the alleged debt owed by the Debtor to Quest.
The Quest debt is alleged to have arisen from a loan agreement between Quest and the Debtor dated 27 August 1996. I refer to the affidavit of Mr Brian John McGillivray sworn the 25th day of March 2001. In that affidavit, Mr McGillivray suggests that he is a person authorised by the company - that is Quest - to make the affidavit on its behalf. It is noted that he is a former director of Quest and he indicates in the affidavit that there was apparently an arrangement to advance moneys pursuant to a loan agreement between Quest and the Debtor. The loan was for the sum of $US 500,000.
Exhibited to the affidavit is a loan agreement dated 27 August 1996. Also exhibited to that affidavit is a document purporting to be evidence of a bank transfer which had been arranged pursuant to the loan agreement. In his affidavit, Mr McGillivray also refers to reading the trustee's report and he states:
“I am of the view that the interests of the company are best served by attending a creditors meeting which is to be held on 28 March 2001”.
He goes on to say that he was:
“moved by the controlling trustee's opinion that James Atkinson had no divisible property and that the interests of the creditors would be best served by accepting the proposed deed of arrangement of James Atkinson”.
He suggests further that in early 1998:
“I made my own inquiries into Mr Atkinson's financial position and concluded there was no advantage in pursuing recovery of the debt at that time”.
He then significantly asserts in the final paragraph of the affidavit:
“In the view of the company it is better to receive some dividends than to receive no dividend and that little purpose is served in seeking a sequestration order of the Debtor”.
In a second affidavit which was filed with the court by leave and relied upon by the Debtor, Mr McGillivray deposes to other matters, including the following:
“I say further that on 24 November 1998 on behalf of Quest I entered judgment against Donald Urquhart - DU - in the High Court of England Queen's Bench Division for a sum of $US 2,143,938.40 being in respect of money advanced to DU and his group for the banking and investment program and the Vietnamese project referred to in BJM1 of the first affidavit.”
That evidence to which I have referred from Mr McGillivray should be compared to the material set out in the trustee's report which is document J in the affidavit of Michael Kreveld sworn 21 March 2001. In that report at page 3, the trustee says:
“My staff have held discussions directly with Quest in relation to this transaction. Quest have confirmed the essence of the Debtor's explanations concerning this venture and have also confirmed that they are not expecting any returns of the funds advanced by them to the venture”.
The authority that was provided by Mr McGillivray and which was asserted to be the basis upon which he was able to depose to the matters set out in the affidavits for and on behalf of Quest, appears to be set out in a letter dated 30 March 2001 addressed to Mr Yeo of Pitcher Partners from a Mr Guy Hodgson, director of Quest Capital Pty Ltd. That letter (exhibit R1) states as follows:
“We refer to your facsimile to Brian McGillivray received today and confirm the acts with full authority of the company in relation to the recovery of funds invested through the Granfe Group and D. Urquhart. Brian McGillivray was authorised by the company to provide the proof of debt in relation to Mr Atkinson's Part X and remains authorised to do all such things on the company's behalf concerning the recovery of lost funds.”
Whilst the author of that letter is Mr Hodgson, the evidence from Mr McGillivray indicated the letter was prepared by him on letterhead then in his possession and it is noted the email address on that letterhead would appear to be the email address of Mr McGillivray. That document is the only document in writing presented to this court which would in any way support the proposition that Mr McGillivray had authority to depose to the matters referred to in the affidavits, from which I have previously quoted.
Accordingly, I am not satisfied in this matter that Mr McGillivray indeed has appropriate authority or indeed even if he had some authority, had sufficient authority and knowledge to give evidence for and on behalf of Quest which might in any way assist in supporting a conclusion that the debt owed to Quest in the circumstances giving rise to that debt was genuine.
I should also add that in assessing Mr McGillivray as a witness, I formed the very strong view that he was a witness who was prepared to reveal information only when pressed and at best was vague in what was occurring in relation to this debt.
For example, it is not until the second affidavit that information is given about a judgment entered, purportedly on behalf of Quest in the High Court of England against Donald Urquhart. It is not until the evidence before this court that we learn that that judgment was entered in the name of Mr McGillivray and was entered, according to his evidence, for and on behalf, not just of Quest but also of the Debtor.
Mr McGillivray is an undischarged bankrupt. He would in my view have some knowledge of the duties and obligations of company directors. He would also in my view have an understanding of legal requirements to produce documents. It was somewhat ironic then to find that Mr McGillivray in his evidence suggested that as early as Tuesday prior to his evidence had had conversed with Mr Hodgson and was told that Quest was not going to respond to subpoenas, yet Mr McGillivray was granted permission by Mr Hodgson to take photocopies of selected documents to be produced to this court, presumably in support of the Debtor's application to adjourn the proceedings.
I was not impressed by Mr McGillivray's response to questions, and in particular his demeanour when answering questions about his role as agent. At one point in the proceedings he said, "I'm an agent for everyone." This somewhat flippant response in circumstances involving significant sums of money, transactions for which there is a total inadequacy of supporting documents, seemed to me at the very least to be surprising. At best, I can simply indicate that I did not place much reliance on Mr McGillivray either as a witness duly authorised to give evidence on behalf of Quest, or indeed as a witness in relation to the truth and accuracy of the arrangements between the Debtor and Quest.
Further material concerning the relationship between Quest and the Debtor appeared to be provided by Mr McGillivray when he suggested that even at this late stage one reason for pursuing the creditor's meeting rather than sequestration would be to enable Quest to employ the Debtor in an attempt to recover moneys which were advanced in 1996 to Mr Urquhart in relation to the Vietnam project by Quest. It was conceded by Mr McGillivray that he last had contact with Mr Urquhart in the first part of the year 2000. He has had no contact since that date. Despite the judgment purportedly being entered on 24 November 1998, there has been no money paid by Urquhart to Quest in relation to the debt. In those circumstances it seems strange indeed that Mr McGillivray, having failed to recover one cent of the money advanced as far back as 1996 in relation to the Vietnam project, should somehow believe that it would be in the interest of Quest to engage Mr Atkinson to pursue a course when Mr McGillivray has obviously failed.
In the circumstances, having regard to the lack of evidence and the view I have taken about the key witness for Quest called for and on behalf of the Debtor, I am not persuaded that there is a genuine debt to Quest and I note therefore, that being a threshold issue, it is really not necessary for me to consider the remaining creditors in detail. I do, however, proceed to consider them for the sake of completeness and in the event that I am incorrect in my conclusion that the Quest debt is the threshold issue.
When one looks at the other creditors, in my view it is clear they are all friendly Debtors. They have common themes. In each and every case no demand has been made for payment; in each and every case documentary material which may have supported the allegations of the debt has not been provided. In particular, I refer to the evidence of Dr Keady. Her evidence in my view was vague and unhelpful in establishing any of the debt to herself or the debt to M.A. Keady Pty Ltd. It is appropriate at this point to briefly indicate the relationship between the Debtor and two of the companies referred to as creditors. M.A. Keady Pty Ltd is a company of which Dr Keady is a director. It is a trustee company. It owns Dr Keady's house in Tasmania which as I recall was valued at somewhere in the region of $700,000 to $800,000.
The Debtor renounced his interest in that company and it is noteworthy that in his evidence, when asked questions about renouncing his interest, the Debtor had this to say (page 49 of the transcript) when questioned by Mr Galvin for the Creditor.
“Why did you renounce all your interest in the company?---Because basically this is my - all of the trust moneys are my wife's moneys.
Isn't it a discretionary trust?---Yes.
Why do you say all the money is your wife's money?---Because I've put no moneys into it. It was purely a medical - M.A. Keady Pty Ltd is a medical service company, trustee company that doctors set up to run their practices.
Why did you renounce your interest in the company in March 1998?---Well, primarily because my wife wanted to go to Tasmania and I didn't want to go to Tasmania, I wanted us to go to London. She was offered a job in London, Munich, in Belgium, in Tasmania and in Sydney and she chose to go to Tasmania. I didn't particularly want to go there. So in a sense that's where our difficulties perhaps began.
Why did you renounce your interest? What made you do it in March 98 - just because your wife was moving to Tasmania, was it?---Well, because I had nothing. She wanted it to be a thing that was of her own. It was her thing.
Did she ask you to renounce your interest?---We talked about it.
Did she ask you to do it?---We talked about it and we came to a mutual agreement that's what we would do.
You're a shareholder in M.A. Keady Pty Ltd?---Held beneficially for my wife”.
The company Flample Pty Ltd is also a company of which Dr Keady is a director, and Mr Keady her father a co-director. That matter becomes significant, both in terms of knowledge by the witness Dr Keady and the lack of documentation produced to the court in answer to a subpoena served upon Flample Pty Ltd. I do note that in the affidavit of Richard Flory, which I have yet not referred, sworn 2 April 2001 in support of a notice of motion to set aside the subpoenas, the deponent states:
“I have been informed by Mary-Anne Keady and verily believe that she was given no more than $20 by way of cheque for conduct money in Hobart, Tasmania.”
41. I was concerned during the course of evidence that Dr Keady had indicated that she had an understanding that documents indeed had been provided by Flample. She did not make any mention of an objection as far as I can recall to producing documents on the basis of conduct money. I can only conclude for reasons that are not known to the court that those acting for and on behalf of the Debtor, whether it be solicitor, accountants or others, have in fact in this case deliberately decided not to comply with the provision of documentary material. If I am wrong about that, at the very least there is concern about the lack of documentary material and is that concern which indeed causes me to have grave doubts about the genuineness of other debts, in particular the debts to M.A. Keady and Flample . Indeed I find that those debts having not been verified to my satisfaction are not genuine debts in this matter.
42. I should also add that there is a striking similarity in the affidavits that have been relied upon by the Debtor from various creditors. Each and every one of the creditors seem to suggest that they would prefer the creditors meeting to proceed. Indeed, the language used in the material seems to follow on from other affidavits. I quote just one of the affidavits - on this occasion the affidavit of the Debtor's sister Ms Bielefeld sworn 26 March 2001, where she says at paragraph 4:
“I also confirm that I would prefer the creditors meeting to proceed and for it to be properly acted upon by the trustee without the need for any sequestration application being proceeded with by Oakleigh Holdings Pty Ltd who I understand is one of the creditors of James Atkinson”.
43. Each of the affidavits has an identical paragraph. In those circumstances, whilst I can appreciate that there may be some vagueness on the party of Dr Keady in relation to the debts, there does not appear to be any adequate explanation as to why appropriate documentary material should not have been produced to the court, at the very least from the witness Rambaldi who gave evidence, and upon the conclusion of that evidence arrangements were made for documents then in his possession to be made available.
44. Dr Keady expressed a very strong view against bankruptcy. Her view in my opinion seemed to be based more on the stigma to be attached to bankruptcy rather than a genuine desire to recover any amount of her debt. Whilst that stigma may be understandable, it seems somewhat odd in circumstances where Dr Keady repeatedly referred to the Debtor as her "former husband" and seemed to indicate that although the Debtor was presently living at her residence this was not to be a long-term arrangement. Hence it's difficult to understand her response and reaction to the prospect of bankruptcy as being one largely based upon stigma in those circumstances where the bankruptcy would be visited upon her former husband who in the future is not going to be residing at her residence.
45. I now deal briefly with other evidence in this matter when considering the genuineness or otherwise of the debts, for the sake of completeness. It is fair to say that Mr Rambaldi had limited material upon which he based his conclusions and to that extent it is difficult to rely upon the evidence he gave, as clearly on a number of occasions he agreed with Counsel for the Creditor that he would need to investigate further, matters that were raised during the course of cross‑examination. It is clear in the evidence that the Debtor could not pay debts from at least 1997 and in fact has been in financial difficulties throughout the 1990s.
46. Just briefly dealing with other deponents, it is also clear that Mr Chandra Dahia continues to be the accountant for both the Debtor and his wife and has apparently based records on a system called MYOB which is an acronym for Mind Your Own Business. This may be regarded as a somewhat appropriate description for documents which have been apparently viewed by a deponent on one affidavit to which access has not been made available to the Creditor. This is just one example of an alleged Creditor where the court is not satisfied as to the genuineness of the debt. An illustration of the lack of genuineness is found in the transcript of the evidence of the Debtor (page 58) where this exchange occurred. The exchange occurred in the context of Mr Dahia's role when the Debtor was questioned by Mr Galvin,
“He's continuing to do work for you, isn't he?---That's correct.
Even now as we speak?---That's correct.
Yet he hasn't been paid and he's not being paid at the moment, is he?---That's correct.
Do you know why he's prepared to do that for you in the absence of having been paid old accounts or an account totalling $8500?
---Well, that may be a question you should ask Mr Dahia.
You haven't discussed it with him?---Well, it may have been mentioned, paying bills, but hasn't formally demanded that I pay his bills.”
47. That's just one example of the nature and extent of the alleged indebtedness that has been raised by the Debtor in support of the application for adjournment.
48. I should indicate a further concern occurred in relation to documentary material that was to be provided during a luncheon break. At page 59 of the transcript this exchange occurred:
“HIS HONOUR: Let me just make sure we're going to receive some documents. What is it over lunchtime that you expect this witness to produce?
MR GALVIN: I think any written demands - and I'm trying to remember what the other documents were.
HIS HONOUR: I thought there was something. I've got bills over lunch from the accountant. I thought there was also a document that had gone to the trustee explaining how the moneys were disbursed from the sale of the property.
MR GALVIN: Yes, that's right. The document that has been handed to the trustee as to how the proceeds of the Northcote property were disbursed.
HIS HONOUR: Do you understand that those documents - I thought you said you could obtain them, presumably a faxed copy of them over lunch. Is that right?
MR GALVIN: Yes.
HIS HONOUR: So I'll make a note: summary of disbursement of proceeds of sale, any bills from accountant and the solicitors.
MR GALVIN: And the solicitor, yes.”
After lunch this exchange occurred at page 65 of the transcript when the Debtor was questioned by Mr Galvin,
“You made no attempt to produce before the court primary documents which would prove the debt of 145,000?---I wasn't asked to.
No, it was your application for an adjournment. You took no steps to produce such documents in support of your application before Registrar Wood on 22 March. In fact you produced no evidence before Registrar Wood, did you?---Yes, that's correct.
Even now you haven't produced any financial records evidencing the debt to M.A. Keady?---They are being prepared now, yes.
But you took no steps prior to the hearing on 22 March to provide that to the court?---That arose from a misunderstanding that I had in relation to who I provided that material to.”
Again that reference in the transcript and the reference to the earlier witnesses confirms my view that in all the circumstances, having made an assessment of the witnesses, that I cannot be satisfied that there is a genuine debt owed to the creditors.
During the course of submissions I was referred to the law in relation to the granting of an adjournment in these circumstances, in particular I was referred to the case of Field v Commercial Banking of Sydney Ltd which is a decision of the Full Court of the Federal Court (1978) 22 ALR 403 and also reported (1978) 37 FLR 343. I refer to the Federal Law Report and in particular pages 349 and 350. In the judgment of Sweeney J in that case, his Honour said,
“It would be unwise to attempt to draw up an exhaustive catalogue in the circumstances to which the court should pay regard in considering an application for an adjournment of a creditors petition. However, to illustrate the point, the circumstances of the execution of an authority should be looked at in the general context of each individual case. One may usefully refer to some other relevant circumstances in such a case as for example (1) the course of dealings between the parties from the time when the obligation to the petitioning creditor is said to have arisen to the date of the hearing; (2) the attitude to the application of a petitioning creditor is prima facie on proof of the matters mentioned in section 52(1) of the Bankruptcy Act 1966. The court will proceed to make an order for sequestration. (See Rosens v Kronhill (1956) 95 CLR 407); (3) the general financial position of the Debtor; (4) the relation between the debt of the petitioning creditor and the total liabilities of the Debtor as it may be seen, for example, that the petitioning creditors opposition would be sufficient to defeat any special resolution proposed at a creditors meeting; (5) any attitude to the application disclosed by other creditors; (6) any evidence bearing upon the question, whether it be for the advantage of the creditors that the Debtor's affairs he administered under Part X of the Act; (7) the likelihood that the Debtor would be able to place before a meeting of creditors a particular proposal or evidence of his general circumstances calculated to persuade them to vote for the administration of his affairs under Part X. It will at once be obvious that many of these circumstances will be in the knowledge of the Debtor rather than of the petitioning creditor and it will be for the former to give evidence of them, such evidence should where practicable be in affidavit form.”
I was also referred during the course of submissions to a decision to which I have already referred of Merkel J in the case of Bendel. In that case his Honour considered a similar situation to the situation in the present case to the extent that there was a creditors meeting proposed and the issue to be decided by the court after granting injunctions to prevent that creditors meeting occurring was whether to proceed to sequestration or allow the creditors meeting to occur. In that case his Honour referred to the relevant authorities and in particular I refer to the following paragraphs:
“8.Absent special circumstances one may accept that an adjournment of the hearing of a bankruptcy petition to enable the creditors to consider a fair and bona fide Part X proposal may enjoy reasonable prospects of success”.
His Honour then went on to consider the facts in that particular case. He also stated at paragraph 20 the following, in relation to the petitioning creditor:
“It has a prima facie entitlement to proceed with its petition”.
He further stated in relation to his conclusion the following:
“21…… the petitioning creditor may be prejudiced by the adjournment. Its debt is a small one. If it wishes to raise issues as to the assets or creditors of the Debtor or to challenge the Part X arrangement, the onus and the expense fall entirely upon it. If it does not take such steps it receives little or nothing”.
His Honour goes on to say at paragraph 22:
“A sequestration order, rather than the vagaries and uncertainties of the Part X arrangement proposed in the present case constitutes a more appropriate vehicle in the present circumstances”.
His Honour further stated at paragraph 23:
“……given the serious questions raised about assets and creditors, including quantum of the Debtor, it's my view that such matters are such determined by a trustee after a sequestration order, if one is to be made, rather than in an arrangement voted on previously, mainly by interested or friendly parties whose entitlement to do so is properly and seriously raised as an issue by the petitioning creditor”
Doing the best I can in this matter by applying the principles to which I have just referred, it is my conclusion that in the present case it is appropriate to decline to grant the application for adjournment. I do so in the circumstances applying the matters set out in Field's case and in particular note the submissions made on behalf of the Creditor in relation to those issues. Further, it is my view, having reviewed the evidence and having considered the material carefully, that the planned creditors meeting is not an appropriate course to take in the circumstances of this case. I adopt and accept what his Honour Merkel J said in Bendel's case that whilst there is a prima facie entitlement to proceed with the petition and whilst there is a countervailing premise that an adjournment in a case like this may well enjoy a reasonable prospect of success, I have concluded in the present case that the creditors to which I have referred cannot be regarded as genuine, and/or if they are genuine there are so many issues raised in relation to the validity of those debts that that inquiry concerning the validity of the debts is better undertaken by a trustee after a sequestration order is to be made.
I turn now to the question of the creditors petition. At the outset it should be noted that the Debtor relied upon ground 3 of the notice of intention to oppose the creditors petition. Ground 3 of the notice of intention to oppose states the following:
“The respondent denies the allegations contained in paragraph 3 of the creditors petition. Particulars: the respondent was not ordinarily resident in Australia; the respondent did not have a dwelling, house or place of business in Australia; the respondent was not carrying on business in Australia, either personally or by an agent or manager”.
Paragraph 3 of the creditors petition states:
“At the time when the act of bankruptcy was committed, the respondent Debtor was ordinarily resident in Australia, had a dwelling, house or place of business in Australia, was carrying on business in Australia either personally or by an agent or manager”.
56. No other matters have been relied upon by the Debtor and nor was it suggested that the requirements of the Act, and in particular section 52, had not been satisfied. Having considered the material before me, I find that the formal requirements of the Act, including section 52, have been so satisfied. I am conscious of the fact that bankruptcy is a significant step. It has quasi criminal consequences and indeed carries with it a certain amount of community and social stigma.
57. The issue for me to determine, however, is the issue raised before this court in relation to whether the Debtor is ordinarily resident in Australia. I have been referred to the following authorities in relation to that issue. The first of those authorities is Taylor ex parte Natwest Australia Bank Ltd, (1992) 37 FCR 194. In that case, at page 197, his Honour Lockhart J said:
“Resident” and “ordinarily resident” are not terms of art in Australian law. Rather they have been used in the statute law of this country and the United Kingdom for many years. The question of residence arises in many different statutory contexts, including legislation concerning bills of sale …”
and his Honour goes on to refer to cases and other areas where the concept is referred to. At page 198 of the same decision, his Honour states:
“To say that a person is ordinarily resident in Australia must mean something more than he is resident in Australia. The word "ordinarily" connotes a comparison, a measure of degree. A person may have more than one residence but he is not necessarily ordinarily resident in each of them. The question must be determined for the purposes of section 43 of the Act at a particular time. One must ask the question whether at that time the person was ordinarily resident in Australia. The concept of “ordinary residence” for the purpose of the act in my opinion connotes a place where in the ordinary course of a person's life he regularly or customarily lives. There must be some element of permanence to be contrasted with a place where he stays only casually or intermittently. The expression "ordinarily resident in" connotes some habit of life and is to be contrasted with temporary or occasional residence….. The concept of ordinarily resident cannot be satisfied in definite terms, each case must be determined on its facts and after taking into account all relevant matters: see Canadian case of Thompson v Minister for National Revenue (1946) SCR 209 per Estey J at 231.
It depends on the facts of each case whether the Debtor is ordinarily resident in Australia at the time of the commission of the relevant act of bankruptcy. At first blush it may seem strange to say that a person can be ordinarily resident in more than one country at the same time, but on closer analysis it is not. Plainly, you cannot be physically present in more than one place at the same time, but the lifestyles of people vary greatly. Some people in the ordinary pursuit of their lives regularly or customarily live in more than one place, each of which has an element of permanence about it and is not merely a place of casual or intermittent resort.
Most people if asked were they ordinarily resident at a particular time would name but one place, their home, because that would be the only place in which they normally or customarily live, although they may travel to other places on holiday or business intermittently”.
I was also referred during the course of submissions to the decision of the Federal Court in Re Vassis; Ex parte Leung (1986) 9 FCR 518. In that case I was particularly referred to pages 524 and 525. At page 524, Burchett J said:
“The question where a person is ordinarily resident is a question of fact Levine v Commissioner of Inland Revenue (1928) AC 217. It's obviously not to be answered in respect of any particular time by asking where that person was then resident. Otherwise, the word "ordinarily" would have no meaning. But even the unqualified concept of residence is not tied to the accidence of a day”.
His Honour goes on to say at page 525:
“If it had not been the proper conclusion that Mr Vassis was ordinarily resident in Australia, the question might have arisen whether within section 43(1)(b)(iii) he was carrying on business in Australia, either personally or by means of an agent or manager”.
59. In the present case, Counsel for the Creditor relied upon this extract and the others to establish on the evidence that the Debtor was indeed ordinarily resident in Australia and/or was carrying on business in Australia. Specifically he relied upon the uncontradicted evidence that the Debtor's business as a solicitor was still in the hands of a receiver, that that matter was not resolved and that there were other matters outstanding in Australia.
60. I accept in the present case the conclusion that the Debtor is in fact ordinarily resident in Australia and/or is carrying on business in Australia to the extent to which I have referred. In dealing with the issue of "ordinarily resident", I take note of the following facts: the applicant is still married and although it is claimed he is separated, resides at the home of his wife; he has two infant children aged one and five; he has in various documents before this court, and documents placed before the trustee, referred to at least two Australian residences, namely that of his sister and that of his wife.
61. If one compares this to the evidence that was given in relation to his alleged residence overseas, at the very best in my view, the most that could be said of the residence in the United States is that that residence is of a temporary nature. He does not have an extended visa, he does not have any property interests. He rents from time to time an apartment. He has no job, no income and indeed on the evidence before me, no immediate prospect of income to be generated from the United States. Of course it will remain a mystery as to how he does spend months at a time in the United States without the prospect of a job, without being gainfully employed, and yet manages to service, no doubt, living expenses and debts whilst remaining in that country.
62. In the circumstances, however, I am satisfied on the material before me, for the reasons I have advanced, that the ground in opposition relied upon by the Debtor cannot be sustained. In those circumstances it is appropriate I make the following orders:
1. Leave is granted to the Creditor to file the Affidavits of Catherine Amy Dwyer sworn 10 April 2001 and John Stone sworn 9 April 2000.
2. A sequestration order be made against the estate of James Christopher Atkinson.
3. The petitioning creditors costs of and incidental to the petition, including reserved costs in this matter, be taxed and paid in accordance with the Bankruptcy Act 1966.
I note that the date of the act of bankruptcy is 30 November 2000.
I certify that the preceding sixty two (62) paragraphs are a true copy of the Reasons for Judgment of McInnis FM.
Associate:
Dated 8th May 2001.
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