Orix Australia v Macquarie Leasing
[2005] FMCA 1940
•21 December 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ORIX AUSTRALIA v MACQUARIE LEASING | [2005] FMCA 1940 |
| BANKRUPTCY – Application to set aside Sequestration Order – where the proceedings are a hearing de novo – whether the applicant creditor had established matter necessary to comply with s.52 Bankruptcy Act – whether an intent to defeat the creditors can be established on the evidence – whether there is evidence that a demand was issued against the debtor by the creditor for payment of the amount alleged to be owed. |
| Bankruptcy Act 1966 (Cth), ss.52,.40(1)(c) |
| ReAndrews: Ex parte Manning and Other (1966) 8 FLR 56 Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 Re Burrows: Ex parte Official Receiver v Steel (1944) 1 Chancery 49 |
| Applicant: | ORIX AUSTRALIA CORPORATION LIMITED |
| Respondent: | MACQUARIE LEASING PTY LTD |
| File Number: | SYG 2242 of 2005 |
| Judgment of: | Raphael FM |
| Hearing date: | 21 December 2005 |
| Date of Last Submission: | 21 December 2005 |
| Delivered at: | Sydney |
| Delivered on: | 21 December 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr Chippindall |
| Counsel for the Respondent: | Ms Glover |
ORDERS
Application dismissed.
Orix Australia Corporation Limited pay the costs of Macquarie Leasing Pty Limited to be taxed if not agreed according to Federal Court Act and Rules.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 2242 of 2005
| ORIX AUSTRALIA CORPORATION LIMITED |
Applicant
And
| MACQUARIE LEASING PTY LIMITED |
Respondent
REASONS FOR JUDGMENT
On 11 October 2005 Registrar Hedge made a sequestration order against the Estate of Raymond Alexander McCormick. The petitioning creditor in that case was Macquarie Leasing Pty Limited. Macquarie Leasing was one of a number of companies who had lent money to a company known as Queensland Construction Equipment Pty Limited of which the respondent debtor and his wife were directors. At the hearing before Registrar Hedge, Orix Australia Corporation Limited, another creditor of the debtor, sought to be allowed to intervene. That intervention was permitted by the Registrar. The purpose of the intervention by Orix was to argue that the applicant creditor had not established those matters necessary to comply with section 52 of the Bankruptcy Act. It would appear that there are reasons why Orix would prefer that the debtor was not bankrupt even though he owes it a substantial amount of money.
The proceedings before me today are a hearing de novo but Ms Glover who appears on behalf of the creditor accepted Mr Chippindall's right to appear here on behalf of Orix and to argue the same case that he argued before Registrar Hedge. The creditor's petition which was filed in this court on 18 August 2005 states that the respondent debtor owes the applicant creditor (Macquarie Leasing) $679,045.54 and states in paragraph 4 the following:
4. The following act of bankruptcy was committed by the respondent debtor within six months before the presentation of the petition:
A. The respondent debtor did with intent to defeat or delay his creditors did begin to keep house [sic]
B. The respondent debtor did with intent to defeat or delay his creditors did depart from his dwelling house and usual place of business [sic]
C. The respondent debtor did with intend to defeat or delay his creditors did otherwise absent himself [sic]
It will be seen immediately that no date is put upon any of the actions referred to in subparagraphs A, B or C so that in order to satisfy oneself that these things occurred within the six months before the presentation of the petition certain evidence was required to be presented. Some evidence was presented and Registrar Hedge held herself satisfied of the matters required. Before me today Mr Chippindall objected to some of the evidence that had been before Registrar Hedge. I dealt with those objections by deleting parts of certain affidavits and refusing leave to read one. Otherwise, I have maintained the affidavits in the form they were before the Registrar.
The facts surrounding the creation of the debt which is the subject of the petition and the matters which form the basis of the alleged acts of bankruptcy are shortly as follows. The debtor through his company appears to have adopted a course of conduct that those who have some experience with companies which work in the field of contract equipment hire know to be only too familiar. Equipment is leased from various financiers who advance money for that purpose. But the equipment which is leased is seldom found to be that which it is stated to be. Sometimes the equipment never exists at all, other times the equipment is of a considerably less value than that amount which has been advanced for its purchase. The debtor entered into a number of commercial hire purchase agreements with Macquarie Leasing under which money was advanced for the purchase of equipment. By the end of September 2004 payments in respect of those agreements had ceased. The bankrupt was a guarantor under the agreements which all contain the following clause:
23.3: The obligations of the guarantor under this guarantee and indemnity are principal obligations imposed upon the guarantor as a principal debtor. Accordingly, the guarantor acknowledges that the owner has the right to make a claim or demand against the guarantor pursuant to this guarantee and indemnity without having first taken any proceedings against the hirer or any other person.
In an affidavit of Nicholas Crouch dated 26 September 2005 the deponent, who is the trustee of the estate of the bankrupt pursuant to the orders of Registrar Hedge, there is exhibited a letter from the bankrupt's son together with a printed document that Mr Darren McCormick states was received by him from his father on or about
25 September 2004. The document reads as follows:
Well, Darren, I fucked up big time. You are going to have to take care of your mother. First, you have to get here [sic] money out of St George Bank, give it to you, hide it in your account. You will have to move quick. The super fund I don't know how to get it out. You will have to find out.
You better get your mother out of that unit because the banks all be coming for her. I would move the furniture with the Sorswski as soon as possible and store it in your name, all you bought it.
Ring Guy Tickle, he will sell the boat. There is money owing on it to Capital Finance A/C number 141589 phone number 02.9843.3700, amount owing is 258,000. It is worth 350,000 or a bit more. Tell Guy he is probably better off moving to hide it 'til you sell it. He will know what to do. Get him to pay out finance company. He knows them. Tell them to pay you the balance.
Sorry son, I love you all, you will have to tell the kids I die.
I won't be back by the time you get this, I will get across the Pacific. Darren, don't fuck around because this is going to blow up within two weeks. I told Darren Kitson, boat mechanic, to call in you to pay him for repairs and get keys. I am so sorry for your mother, I just fucked up big time. Goodbye, good luck.
There does not appear before me to be any serious suggestion that this note was not received by the bankrupt's son and I accept that it was. To my mind this document forms the basis to the assertions made in the creditor's petition although I am not satisfied that it forms the basis for the assertion found under A that the debtor intended to keep house. In this regard there is some evidence by way of a report from an inquiry agent which seems to suggest that far from leaving the country, as was hinted at in the note, the debtor went to his girlfriend's premises on the Gold Coast and hid there. I do not think it is necessary for me to make any finding as to whether the evidence from the inquiry agent, which is annexed to an affidavit, and is not established by the evidence of the inquiry agent himself, does prove keeping house because I am satisfied that the note and the continued absence of the debtor do establish that he departed from his dwelling house and usual place of business and that he otherwise absented himself.
The question is whether this departure and absenting are, in the case before me, continuing matters so that they come within the definition in the Act of actions which took place within six months of the filing of the petition. Mr Chippindall also argues that I must find intent to defeat creditors, which he says is not established on the evidence.
I will deal first with the intent. In ReAndrews: Ex parte Manning and Other (1966) 8 FLR 56 Clyne J said at [57]:
“Intent to defeat or delay is a question of fact and must be alleged by a petitioning creditor in his petition and proved. It is seldom that the intent of the debtor can be proved by a debtor's own statements and it is usually shown by inference from the circumstances in which the debtor departed from his dwelling house or place of business. The evidence necessary to prove the intent must differ according to the circumstances of each particular case. The conduct of a debtor in various forms may give rise to a presumption of the intent obliging the debtor to rebut the presumption, but in the end this intent must be established.”
I think it is quite clear from the note written by the father to the son that he is leaving the scene in the hope that the son can salvage something from his assets. All those assets would normally be available for distribution amongst his creditors and so to vanish with the intention of having some of them salvaged would seem to me to be vanishing with an intention to delay or defeat his creditors. I think that the facts and circumstances surrounding the debtor's disappearance which are contained in the affidavits and the annexures thereto and accepted by Orix point to only that conclusion.
The question of intent was also considered by the High Court in Barton v Deputy Commissioner of Taxation (1974) 131 CLR 370 where his Honour Stephen J gave the principal judgment. His Honour went through the facts of that disappearance by Mr Barton and stated at [376]:
“These facts of themselves, if not explained by exculpatory circumstances lead in my view to the inference of the appellant's departure and his subsequent absence from Australia adhered to no ordinary reason but rather to some fear of consequences awaiting him in Australia. No exculpatory circumstances were ever put forward on the appellant's behalf although the protracted proceedings in bankruptcy involving a number of successful applicants for adjournment followed by a lengthy hearing afforded ample opportunity for an explanation consistent with the absence of alleged intent.”
The case before me is unusual in that the bankrupt himself has not appeared at any time. Although it is known that he is now in custody that would not have prevented an appearance either by telephone or in person if the bankrupt had wished to argue any of the matters raised, apparently on his behalf, by Orix. The task facing Orix is therefore more difficult because it is a task that requires me to make a finding that the petitioning creditor has not established its case rather than impugning that case by any evidence.
In Re Burrows: Ex parte Official Receiver v Steel (1944) 1 Chancery 49 Morton J considers whether departing from a dwelling house is what one might describe as a continuing act of bankruptcy and states:
“It was in fact decided in Re: Alderson (1895) 1 QB 183 that the absence was a continuing act, Vaughan Williams J expressed it as follows. "I think that for a debtor to absent himself with the intent to defeat or delay his creditors is a continuing act of bankruptcy".
The evidence which is before me appears to be that the debtor absented himself from or around 24 September 2004. Efforts were made to find him which are described by Mr Nikolaidis in the one affidavit from him which I permitted to be read. There is reference to those efforts in the affidavit of Mr McCulloch which exhibits the report from the inquiry agent. It seems to be accepted that the debtor was still absent on the day when the petition was issued and there is evidence that he was arrested a few weeks later and placed into custody.
I am satisfied that his departure from his dwelling house and/or his otherwise absenting himself commenced around September 2004 but were continuing as at the date upon which the petition was issued and therefore the petitioning creditor was correct in its assertion that the debtor had within six months before the presentation of the petition acted in breach of s.40(1)(c)(ii) and/or s.40(1)(c)(iii).
Mr Chippindall makes one final point, he argues that there is no evidence that a demand was issued against the debtor by the creditor for payment of the amount alleged to be owed. It used to be thought that in an ordinary contract of guarantee a guarantee could not be enforced without the issue of a demand. But modern drafting has caught up with that difficulty and it is now made clear in most guarantee documents that the guarantors are principal obligors along with the entity which they are guaranteeing.
A principal obligor has the responsibility to make payments co-extensive with those of the entity and there is therefore no need to make a demand under the guarantee before the guarantor becomes liable. This guarantee contains the clause which I have already extracted and I am satisfied that the failure to issue a demand is not fatal to an assertion that the debt is owed. I have been provided with up-to-date affidavits of search and debt. The applicant otherwise relies upon the affidavits that were before the learned Registrar. These all lead me, for the reasons which I have just given, to be satisfied of the matters required under section 52 of the Bankruptcy Act and I would therefore decline to review the decision of Registrar Hedge so that her orders remain as promulgated including her orders concerning the identity of the trustee.
I order that Orix Australia Corporation Limited pay the costs of Macquarie Leasing Pty Limited to be taxed if not agreed according to the Federal Court Act and Rules.
I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Raphael FM
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