Paras v Westpac Banking Corporation

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FEDERAL COURT OF AUSTRALIA

Paras v Westpac Banking Corporation [2021] FCA 616

Appeal from: Westpac Banking Corporation v Paras & Anor [2020] FCCA 1156
File number(s): VID 434 of 2020
Judgment of: ANDERSON J
Date of judgment: 10 June 2021
Catchwords:

BANKRUPTCY AND INSOLVENCY – appeal from Federal Circuit Court – appeal against sequestration orders made against appellants – whether respondent bank entitled to issue a bankruptcy notice – whether deed of settlement between appellants and respondent was an accord and satisfaction – whether respondent bank engaged in unconscionable conduct or other disentitling conduct

BANKRUPTCY AND INSOLVENCY – respondent bank entitled to issue bankruptcy notice – deed of settlement was an accord executory – no disentitling conduct on part of respondent bank – appeal dismissed  

Legislation:

Bankruptcy Act 1966 (Cth), ss 52, 245

Federal Court of Australia Act 1976 (Cth), Pt III, Div 2

Cases cited:

Australian Competition and Consumer Commission v Geowash Pty Ltd (Subject to a Deed of Company Arrangement) (No 3) [2019] FCA 72

Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93

Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447

Electricity Generation Corporation v Woodside Energy Ltd (2014) 251 CLR 640

Findex Group Limited v McKay [2020] FCAFC 182

Gomez v Kuhadas (No 2) [2015] FCA 561

Issa v Dairy Farmers Pty Ltd [2018] FCA 542

Liang v LV Property Investments Pty Ltd [2015] FCA 1057

McDermott v Black (1940) 63 CLR 161

Paciocco v Australia and New Zealand Banking Group Limited [2015] FCAFC 50

Reckitt Benckiser Healthcare (UK) Ltd v Glaxosmithkline Australia Pty Ltd (No 5) [2015] FCA 486

Westpac Banking Corporation v Paras & Anor [2020] FCCA 1156

Division: General Division
Registry: Victoria
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 128
Date of hearing: 24 May 2021
Counsel for the Appellants: Graeme McEwen
Solicitor for the Appellants: Patrick & Associates
Counsel for the Respondent: Christopher R Brown
Solicitor for the Respondent: DLA Piper Australia

ORDERS

VID 434 of 2020
BETWEEN:

JOHN PARAS

First Appellant

STEPHEN MATTHEW APPERLY

Second Appellant
AND:

WESTPAC BANKING CORPORATION

Respondent

ORDER MADE BY:

ANDERSON J

DATE OF ORDER:

10 JUNE 2021

THE COURT ORDERS THAT:

1.The appeal is dismissed.

2.The appellants will pay the respondent’s costs of and incidental to the appeal, to be taxed if not agreed.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

ANDERSON J:

INTRODUCTION

  1. By their notice of appeal dated 23 June 2020, the appellants appeal from a judgment of the Federal Circuit Court of Australia delivered on 22 May 2020: see Westpac Banking Corporation v Paras & Anor [2020] FCCA 1156 (Primary Judgment).  Following delivery of the Primary Judgment, the primary judge made the following orders on 23 June 2020:

    1. The deceased estate of John Paras be sequestrated under the Bankruptcy Act 1966

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Details
Case
[2021] FCA 616
Decision Date

CaseChat Overview and Summary

In the case of Paras v Westpac Banking Corporation, the appellants, John Paras and Stephen Matthew Apperly, appealed against sequestration orders made against them by the Federal Circuit Court of Australia. The orders were made following a creditor's petition by Westpac Banking Corporation, which claimed that the appellants were insolvent and unable to pay their debts. The primary issues for the court to decide were whether Westpac was entitled to issue a bankruptcy notice, whether the Deed of Settlement between the parties constituted an accord and satisfaction or an accord executory, and whether Westpac engaged in any disentitling conduct, such as lack of good faith, breach of the Deed of Settlement, or unconscionable conduct.

The court found that Westpac was entitled to issue a bankruptcy notice as it was not precluded from doing so by the terms of the Deed of Settlement. The Deed was considered an accord executory, as it provided for future performance of the obligations by the appellants, rather than an accord and satisfaction, which would have extinguished the original debt. The court also found that Westpac did not engage in any disentitling conduct, as there was no evidence of lack of good faith, breach of the Deed of Settlement, or unconscionable conduct on the part of Westpac.

The court rejected the appellants' claims that the primary judge had failed to consider or give sufficient weight to certain evidence, as it was clear that the primary judge had taken into account the relevant evidence in his findings. The court concluded that the appeal should be dismissed, and ordered that the appellants pay the respondent's costs of and incidental to the appeal.

The final orders of the court were as follows: 1) The appeal is dismissed. 2) The appellants will pay the respondent's costs of and incidental to the appeal, to be taxed if not agreed.

Orders

Orders of the court

1. The appeal is dismissed.

2. The appellants will pay the respondent’s costs of and incidental to the appeal, to be taxed if not agreed.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

It was in that statutory context that the present appeal arose. I turn to set out relevant facts which underpin the appeal. FACTUAL BACKGROUND On 2 December 2020, the appellants filed a chronology of relevant events, which provided the following background in respect of what the appellants referred to as the “Sanctuary demand” and the “Epping matter”. The Sanctuary demand In respect of the “Sanctuary demand”, the appellants’ chronology provided the following relevant factual overview. On 5 February 2007, Westpac agreed to advance $4.8 million to re-finance Sanctuary Townhouses Pty Ltd (Sanctuary Townhouses) secured by 13 completed but unsold townhouses (from a development totalling 40 townhouses). On 22 March 2007, a guarantee and indemnity was provided by Mr Apperly (and another person) for the Westpac Sanctuary Townhouses loan facility. On 11 February 2009, Westpac appointed receivers to Sanctuary Townhouses. On 1 June 2009, Mr Apperly commenced work with receivers to sell the remaining Sanctuary Townhouses’ assets and repay the Westpac debt. On 7 September 2009, Longreach Capital Partners Pty Ltd entered into a put option deed with Sanctuary Townhouses and Westpac to better secure Westpac’s outstanding debt. On 1 December 2012, Mr Apperly completed the sale of all 13 of the relevant Sanctuary Townhouses’ properties. On 21 May 2013, the Sanctuary Townhouses receiver resigned. On 6 March 2014, Westpac issued a notice of demand to Mr Apperly regarding the Sanctuary loan facility guarantee. On 23 June2017, Westpac issued a notice of demand to Mr Apperly for $1,881,155 in relation to Sanctuary Townhouses. In late July 2017, Mr Apperly met with a developer regarding “tak[ing] over” the “Doncaster Project”. On or around 3 August 2017, it is said that Mr Apperly met with Westpac and Minter Ellison to discuss the Sanctuary demand and its consequences for the Doncaster project. On 5 September 2017, Westpac’s solicitors wrote to Mr Apperly and reduced Westpac’s Sanctuary demand to $500,000 to be paid in two $250,000 instalments, with the first payment to be an upfront payment by 31 October 2018. The Epping matter The appellants’ chronology provided the following factual overview in respect of the “Epping matter”. On 29 November 2007, Westpac agreed to advance $6.195 million to Epping Fresh Food Market Pty Ltd under a business finance agreement. On 5 December 2007, a guarantee and indemnity was given by Mr Paras and Mr Apperly to Westpac in respect of the Epping Fresh Food Market Pty Ltd facility. On 23 December 2007, Epping Fresh Food Market Pty Ltd acquired vacant leasehold land at 551 High Street, Epping. On 1 October 2008, construction of a pre-leased fresh food market commenced at 551 High Street, Epping. On 1 January 2010, Epping Market opened, and then closed in 2012. In the period 2012 to 2015, Epping Fresh Food Market Pty Ltd undertook re-zoning of the site. On 11 August 2015, Westpac commenced a proceeding in the Supreme Court of Victoria (proceeding S ECI 2015 000294) against the appellants, Mr Paras and Mr Apperly.

Evidence

Evidence Before The Court

For the reasons given, there was no error in the reasons or findings of the primary judge. It follows that each of the grounds identified in grounds of appeal 8, 9 and 10(c) must be rejected.GROUNDS OF APPEAL 10(A) AND 10(B) – WHETHER THE PRIMARY JUDGE CONSIDERED OR GAVE SUFFICIENT WEIGHT TO CERTAIN EVIDENCE Grounds of appeal 10(a) and 10(b) contend the primary judge failed to take into account and consider the evidence of a telephone call on 10 April 2017. I reject these grounds of appeal as it is apparent that the primary judge was cognisant of the letter sent to Westpac by Mr Apperly’s solicitors, R B Flinders, dated 31 March 2017, and the subsequent telephone call on 10 April 2017, which his Honour considered at [80]-[82] of the Primary Judgment. For the reasons stated, these grounds must be rejected.GROUND 11 Finally, there were no specific submissions advanced in respect to ground of appeal 11. This ground will also be dismissed.DISPOSITION For the reasons given, each of the grounds of appeal relied upon by the appellants must be rejected. I will order that the appeal be dismissed and that the appellants pay the respondent’s costs of the appeal.

Decision

Reasons for decision

By their notice of appeal dated 23 June 2020, the appellants appeal from a judgment of the Federal Circuit Court of Australia delivered on 22 May 2020: see Westpac Banking Corporation v Paras & Anor [2020] FCCA 1156 (Primary Judgment). Following delivery of the Primary Judgment, the primary judge made the following orders on 23 June 2020: 1. The deceased estate of John Paras be sequestrated under the Bankruptcy Act 1966 (Cth).2. The estate of Stephen Matthew Apperly be sequestrated under the Bankruptcy Act 1966 (Cth).3. [Westpac Banking Corporation’s] costs, including reserved costs, be taxed and paid on a joint and several basis from the estates of the … debtors in accordance with the Bankruptcy Act 1966 (Cth). For the reasons that follow, the appeal will be dismissed with costs. GROUNDS OF APPEAL The appellants’ notice of appeal dated 23 June 2020 raises 11 grounds of appeal. Those grounds fall within the following broad categories:(1)Whether the respondent (Westpac) was entitled to issue a bankruptcy notice upon default under a Deed of Settlement (grounds of appeal 1 to 5) (Competency Grounds).(2)Whether the Deed of Settlement was an accord and satisfaction or accord executory (grounds of appeal 6 and 7) (Construction Grounds).(3)Whether there was conduct of Westpac that disentitled it to remedies under the Deed of Settlement, being either lack of good faith, breach of an express term of the Deed of Settlement and/or unconscionable conduct (grounds of appeal 8, 9, 10(c)) (Good Faith/Unconscionable Grounds).(4)Whether the primary judge considered or gave sufficient weight to evidence of events prior to the settlement (grounds of appeal 10(a) and 10(b)) (Evidentiary Grounds).(5)There was then what might be described as an overarching ground, ground of appeal 11, which stated:It ought to have been found that there was no default as alleged; that [Westpac] engaged in unconscionable conduct; and that otherwise the claims made summarised in [ground] 8 …, and alleged as to Westpac’s breaches of the settlement deed and its conduct in the appellants’ amended grounds of opposition dated 9 October 2019 … and in their Amended Application, were made out, and that the bankruptcy notice was bad, the creditor’s petition was incompetent, and that the [first instance] proceeding should [have been] dismissed.NATURE OF APPELLATE REVIEW Before turning to consider the grounds of appeal, it is instructive to recall that the exercise of this Court’s appellate jurisdiction under Div 2 of Pt III of the Federal Court of Australia Act 1976 (Cth) involves an appeal by way of a rehearing: Branir Pty Ltd v Owston Nominees (No 2) Pty Ltd [2001] FCA 1833; 117 FCR 424 (Branir) at [20] per Allsop J (as his Honour then was) with Drummond and Mansfield JJ agreeing, and Aldi Foods Pty Ltd v Moroccanoil Israel Ltd [2018] FCAFC 93; 261 FCR 301 (Aldi) at [45] per Perram J. The task of the appellate court is the correction of error: Branir at [22]; Aldi at [45]. It is necessary for an appellate court to demonstrate error in the primary judge’s findings or conclusion: Branir at [21]. Error is demonstrated where it is shown that some aspect of the trial judge’s reasoning is wrong: Aldi, [45].

Ratio Decidendi

Legal Principle Established

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