Parker and Anor. v Tosswell
[2001] FMCA 102
•18 Sep 2001
FEDERAL MAGISTRATES COURT OF AUSTRALIA
PARKER & ANOR. v TOSSWELL [2001] FMCA 102
BANKRUPTCY – Application for Sequestration Order – Cross-application for adjournment by Respondent on basis s188 authority signed by Respondent – Bankruptcy Act 1966 (Cth) Part X, s188.
Field v Commercial Banking Company of Sydney Limited (1978) 22 ALR 403
Rosenbeat v Cronhill (1956) 95 CLR 407.
Neil Graham Steggle ex parte Advance Bank of Australia Limited unreported decision of Olney J delivered 5 March 1992.
| Applicant: | MARK ASHLEY PARKER and BRUCE FRANCIS SIMMONDS Trading as PARKER SIMMONDS, Solicitors & Lawyers (a firm) |
| Respondent: | ANTHONY CHARLES TOSSWELL (aka TOSSWILL) |
| File No: | ZB 271 of 2001 |
| Delivered on: | 18 Sep 2001 |
| Delivered at: | Brisbane |
| Hearing Date: | 21 Aug 2001 |
| Judgment of: | Rimmer FM |
REPRESENTATION
| Solicitor acting as Advocate for the Applicant: | Mr Tucker |
| Solicitors for the Applicant: | Tucker & Cowen |
| Counsel for the Respondent: | Mr McQuade |
| Solicitors for the Respondent: | Deacons Solicitors |
ORDERS
That the RESPONDENT’s applications for adjournment made
21 August 2001 and 18 September 2001 be dismissed.That a sequestration order be made against the estate of the RESPONDENT.
That the RESPONDENT pay the APPLICANT’s costs of and incidental to these proceedings including any costs reserved in this Court or in the Federal Court of Australia.
That an advocacy certificate be granted pursuant to Rule 21.15 of the Federal Magistrates Court of Australia Rules.
That a copy of my reasons for judgment be taken out and provided to each party.
FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE
BZ 271 of 2001
MARK ASHLEY PARKER and BRUCE FRANCIS SIMMONDS Trading as PARKER SIMMONDS, Solicitors & Lawyers (a firm)
Applicant
And
ANTHONY CHARLES TOSSWELL (aka TOSSWILL)
Respondent
REASONS FOR JUDGMENT
Introduction
The applicant seeks a sequestration order against the debtor, ANTHONY CHARLES OSWALD TOSSWELL, also known as Anthony Charles Onslow Tosswill. The respondent, who was represented at the hearing on 21 August 2001, seeks an adjournment of the application on the basis that a Section 188 authority was signed by the respondent, and to enable a meeting of the creditors to be called pursuant to Part X of the Bankruptcy Act.
Such authority was signed by the debtor on 17 August 2001, three to four days before the application was listed for hearing. The creditors meeting was to be held within a month of that date, and the adjournment was sought for that period. The applicants, as petitioning creditors, oppose any adjournment and seek a sequestration order be made.
The respondent, quite properly in view of the evidence about his insolvency, has advised the Court through his solicitor, Mr Tucker, that if an adjournment is not granted he will not oppose the making of the sequestration order.
Background
The history of the matter shows that the debtor, Mr Toswell, has been indebted to the petitioning creditor, which was founded on a judgment made in the Magistrates Court at Southport on 5 June 2000 for professional services rendered. An application to that Court was made by the debtor to set aside the judgment, and that application was dismissed on 16 October 2000. The judgment debt is in the sum of $4975.
The creditor's petition was filed by the applicant on 19 December 2000 and served upon the debtor on 22 January 2001. A notice of opposition was filed by the debtor the day before the first directions hearing on 6 February 2001. At the first directions hearing held on
7 February 2001 the debtor was represented by counsel, and the debtor was directed to file material he relied upon prior to the second directions hearing. No such material was filed by the debtor and the matter proceeded to a second directions hearing on 6 March 2001. At that time the proceedings were in the Federal Court of Australia.
Further directions were made on 6 March 2001 by Registrar Carey. Such directions required the debtor to file his material by 4 April 2001. Again, no such material was filed by the debtor as directed. On
5 June 2001 an order was made by Drummond J of the Federal Court of Australia transferring the proceedings from that Court to the Federal Magistrates Court for determination pursuant to section 32AB of the Federal Court Act.
The matter was then remitted to this Court, and a directions hearing was held on 10 July 2001 by Registrar Baldwin. The parties were both advised by the Federal Court of the transfer, and the listing of the matter for directions and the listing of the matter for trial on 21 August, by letter of 27 June 2001.
On 10 July 2001 Registrar Baldwin made directions so that the matter could be prepared for the hearing. Those specific directions will be set out as follows:
a)That the respondent file and serve an amended notice of intention to oppose the petition clearly setting out the ground or grounds for opposing the petition by 27 July 2001.
b)That if the respondent is legally represented his legal representatives are to file a notice of address for service by
27 July 2001.c)That if the respondent is not legally represented he is to file an address for service that complies with the rules. The documents can be left during business hours on a telephone and fax number by 27 July 2001.
d)That the applicant file further material if any by 10 August 2001.
e)That the parties exchange lists of documents that they intend to rely upon by 10 August 2001.
f)That the parties notify each other of any deponent required for cross-examination by 16 August 2001.
g)Costs were reserved.
The respondent did not file any material nor comply with any of the above directions in the time stated. On 20 August 2001 he sought through his solicitors, Messrs Tucker and Cowen, to notify the Court and the other party that he would seek an adjournment at the hearing listed for the following day on the basis that he had appointed David Cranston of Messrs Cranston and Hussein as his controlling trustee pursuant to section 188 of the Bankruptcy Act.
There are other supporting creditors to this petition who are also represented and have indicated their support through the affidavits filed in the proceedings. Those supporting creditors are Culling Smit and Associates Proprietary Limited, Total Advertising and Communications Queensland, a firm, Apperfield Proprietary Limited and Merifin Proprietary Limited.
The evidence shows that it was not until 17 August 2001, just four days before this hearing, and after three directions hearings held both in the Federal Court of Australia and this Court, spanning a period of eight months from the date that the petition was filed to the date of hearing, that Mr Toswell executed the authority under section 188 of the Act to call the meeting of his creditors.
In an affidavit filed by leave by the respondent at the hearing, one of two he relied upon, he deposed to the following facts:
a)That on 17 August 2001 he appointed David John Cranston as his controlling trustee pursuant to the Act.
b)That he has not yet completed a statement of affairs, but intends to do so by 27 August 2001.
c)That he prepared a list of creditors or claims against him which is annexed as an exhibit to his affidavit marked ACT2, and he maintains in that that he has total debts of $981,220.
d)That he intends to make a proposal to his creditors to compromise his debts, or otherwise make an arrangement with them, and that at present he intends to propose an offer to his creditors that a sum of $25,000 be made by way of compromise of those debts. He says that the sum of $25,000 will be provided to his trustees by his sister, Alexandra Schaff.
e)That he has certain assets which are claims against certain persons or entities, being legal claims and actions, as follows:
i)a claim for $2 million approximately in relation to Rock Dilli Proprietary Limited venture;
ii)a claim for $40,000 in relation to the Apperfield joint venture;
iii)a claim against Gary Everingham for $148,000;
iv)a claim for $540,000 arising out of Pelican Moorings Proprietary Limited development;
v)a claim against Mr Gary Davis, solicitor, for approximately $2 million for negligence.
He deposes that each of those claims have been filed with the relevant courts and are proceedings which are under way and ongoing, except for Apperfield litigation which has been stayed. He accepts that it is difficult for his controlling trustees to make any proper decision about whether or not to adopt any of those legal proceedings and whether or not they will be worthwhile pursuing, but he will make all his books and records in relation to each action available to the controlling trustees.
He further deposes that if the controlling trustee does not adopt or pursue any of those claims he will agree to a term in any proposal he makes that he will continue to run those proceedings and a percentage of the recoveries from them will be paid to the controlling trustees and creditors.
He deposes in a second affidavit filed by leave at the hearing that he sent a letter to the majority of his creditors outlining his proposed intentions and appointing a controlling trustee, and questioning of them whether it was their desire to defend the petition or enter into a form of administration. This was a form letter sent to those creditors in terms of the annexed document to that document as annexure A. Such letter was dated 13 August 2001.
His further evidence is that 17 creditors responded and requested he appoint an administrator. In this evidence, he swears his total creditors are only estimated at a total of $850,000, which clearly contradicts exhibit ACT2 in his other affidavit sworn and filed on
21 August 2001, both affidavits having been filed by leave on the same date.
He swears that the 17 creditors who have requested he appoint an administrator are owed a total of in excess of $670,000.
Mr Tosswell, the debtor, applies for an adjournment of the hearing of the petition until his creditors have had an opportunity of considering his proposal for a Deed of Arrangement.
The law
The applicable law is set out in Field v Commercial Banking Company of Sydney Limited (1978) 22 ALR 403 where the Full Court of the Federal Court of Australia was concerned with the question of whether an application for a sequestration order ought to be adjourned by virtue of the fact that an authority pursuant to part X of the Bankruptcy Act 1966 had been signed. In that case the section 188 authority had been signed on the day before the hearing of the petition.
The Full Court by a majority consisting of C.A. Sweeney and Frankey JJ dismissed the appeal from the Trial Judge's decision not to grant an adjournment to enable a meeting of creditors to be held pursuant to the authority under Part 10. At page 410, Sweeney J with whom Frankey J agreed said, and I set out as follows:
“ It would, indeed, be a strange result if on the one hand where a meeting had passed a special resolution for a deed, the Court could, pursuant to Section 206, adjourn the hearing of petition only if it appeared to it. It would be for the advantage of the creditors that the debtors' affairs be administered under the deed and on the other hand it should be almost invariably, or generally, the practice of the Court when a petition comes on for hearing after the execution of an authority, and before any meeting of creditors has been held, that it will adjourn the hearing of the petition to enable the meeting to be held.”
He further said:
“In my experience, the Court has adopted no such practice. It has regarded the execution of an authority as one relevant circumstance amongst many, but it has not sought to give it any decisive effect or to regard it as casting any burden upon a petitioner to show cause why the hearing of its petition should not be adjourned.”
He further went on to say:
“It supports the opinion I have expressed that the Court has not adopted a practice and it would generally adjourn the hearing of petition upon the mere evidence that a debtor has executed an authority under Section 188.”
And at page 413:
“Putting the affidavits in support of the application for substituted service entirely on one side I would have unhesitatingly refused the application for an adjournment. The history of the litigation between the parties, the admittedly late execution of the authority and the eloquent silence of the applicant's affidavit in support of his application on any aspect of his case other than the execution of the authority will toll strongly against the granting of the application. If we were to adopt the contrary view our decision would be taken as conferring a right upon the debtor to obtain an adjournment by simply executing an authority on the eve of the hearing of the petition.”
In the judgment of Sweeney J, in Field's case, reference was made to Rosenbeat v Cronhill (1956) 95 CLR 407. His Honour said, at page 414 in that decision:
“ In Cain v White (1933) 48 CLR 639 this Court expressed agreement with the judgment of the Supreme Court of Queensland, Henchmen J, in which his Honour said, "Prima facie on the proof of the matters mentioned in Section 56(2) the Court will proceed to make an order for sequestration and it is for the debtor to show some cause overriding the interests of the public in the stopping of the unremunerative trading and the rights of the individual creditors who are unable to get their debts paid to them as they become due. Something has to be put before the Court to outweigh those considerations before it can be said that sufficient cause is shown against the making of a sequestration order."
C.A. Sweeney J, who presided in the Full Court in the hearing of Field’s case said at page 411 and 412:
“It would be unwise to attempt to draw up an exhaustive catalogue of the circumstances to which the Court should pay regard in considering an application for an adjournment of a creditor's petition. However, to illustrate the point that one circumstance of the execution of an authority should be looked at in the general context of each individual case one may youthfully refer to some other relevant circumstances in such a case as, for example, (1) the course of dealings between the parties from 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 the petitioning creditor as prima facie on the proof of the matters mentioned in Section 52(1) of the Act the Court will proceed to make the order of sequestration; (3) the general financial position of the debtor; (4) the relation between the debt of the petitioning creditor and the total liability for the debtor as it may be seen, for example, that the petitioning creditor's 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 would be for the advantage of the creditors that the debtor's affairs be administered under Part X of the Act; and (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 would once be obvious that many of those circumstances will be within the knowledge of the debtor rather than the petitioning creditor and it will be for the former to give evidence of them. Such evidence, where practical, should be in affidavit form. The question of an adjournment is a matter for the Court's discretion and clearly it is not a matter to be granted as of course or as of right. I'm not persuaded that the evidence relied upon by the respondent in this matter is sufficient to justify my granting the adjournment sought.”
The onus is on the debtor to show why an adjournment should be made. In this instance, seeking as he does, an adjournment to proceed with a creditors' meeting to enter into a deed of administration or arrangement, in effect, will displace the right of the petitioning creditor to a sequestration order.
Solicitors for Mr Tosswell submit that it is accepted by Mr Tosswell that he does not have the means to meet his outstanding creditors in full and if the application proceeds he is not opposing a sequestration order being made.
In the hearing before me I have had regard to the affidavits filed by Mr Tosswell and his supporting witnesses who are creditors. Those were filed by leave at the hearing.
I have had regard to the manner in which Mr Tosswell has conducted this litigation. He has on each and every occasion, when directions have been made either by the Federal Court of Australia or by this Court upon transfer, failed to comply with directions made. The intent of those directions were to put to the petitioning creditor and the Court the merits of his alleged case.
These proceedings have been on foot for a period of some 8 months and there have been three directions hearings during that time. As at the time of this hearing Mr Tosswell had still failed to properly outline the merits of his case or the manner upon which he was conducting his case. He simply sought, as late as at the very hearing, the eleventh hour so to speak, to seek an adjournment on the basis of signing the authority.
I have taken into account the belated execution of the Section 188 authority. It was executed by Mr Tosswell on 17 August 2001 after he had sent form letters to a majority of his creditors, he says, on 13 August. In that form letter he outlined his financial difficulties and put forward a proposal to enter into an arrangement under Part X of the Act. That was just a week prior to the hearing. On 17 August 2001, the Friday before the hearing and on the second working day, being Tuesday, 21 August 2001. I am satisfied the form letter to the majority of creditors discloses a very simplistic and general overview of Mr Tosswell's financial position in making his proposal.
His financial position and his proposal clearly involves him giving an outline of complex legal proceedings and partly brought by him both in the Supreme Court and the Districts Courts of Queensland. There is no detailed information about the precise nature of those claims. It is clear that the creditors have been given only Mr Tosswell's belief about the success of these actions and could not make any proper, or informed, decision which clearly must be the case if they are to be in a position of making an informed and reasoned decision about whether to accept any proposal he puts at a creditors' meeting.
Apart from his proposal with regard to any benefit under the legal claims, he merely offers that the sum of $25,000 be paid by his sister for the benefit of all creditors. His own evidence about his estimate of his total liabilities is contradictory as can be seen from the two affidavits that he relies upon, both of which were filed at the hearing of the matter. One was sworn on 19 August 2001 and one sworn on
21 August 2001. On either case it is clear that he has liabilities to creditors of between $850,000 and approximately a million. The offer of payment of $25,000 clearly must be as seen against the totality of amounts he owes to creditors.
There is no evidence before the Court in the matter as to whether Mr Tosswell has obtained any opinions of a legal nature from counsel or solicitors acting on his behalf as to the merits of the actions he has those proceedings in the Supreme and District Court, and if it does exist, whether such information has been given or would be available to creditors at any meeting. He merely gives evidence that he will make all his books and records available to the controlling trustee to enable them to make a decision about whether to continue or pursue these actions. These claims involve clearly complex issues both of law and fact.
I cannot see how creditors, at a meeting under Part X, could form any reasoned or informed view having regard to the lack of this specific relevant information and having regard to the uncertainties which are inherent in any such litigation generally.
There is no statement of affairs filed by Mr Tosswell in this matter. There are clear inconsistencies in his evidence before the Court to which I have already referred. In this regard, it was submitted by counsel for the petitioning creditor and I accept, that at the first court date it was contended clearly by Mr Tosswell that he was solvent and a brief affidavit was filed by him setting out his alleged assets and liabilities at that time.
It appears then from the affidavits now filed in these proceedings at the time of the hearing that he has no assets whatsoever except for the claims which he may have arising from the litigation. I find on the face of it that the proposal which has been put to the creditors has questionable merit. The only clear and concrete part of the proposal, as I have said, is the payment of $25,000. There is no evidence put to the Court by the debtor from the controlling trustee as to the likely cost and remuneration and other charges for administration that would need to be paid in any proposed Part X. It could well be the case that the majority of those funds were utilised in that regard.
I find, therefore, that there is no evidence to support a conclusion that the creditors are likely to be better off accepting a Part X proposal. Also I accept the submission of Counsel for the applicants that given the complex and unsatisfactory nature of the evidence of the debtor about his financial affairs, that this is a matter in which there is a need for proper investigation into his affairs and that it is in the public interest that this be undertaken by a Trustee in Bankruptcy.
There is no satisfactory evidence from the creditors who support his calling a meeting under Part X as to how much they are owed by way of their debt or how the debts arise in many instances. There is only affidavits filed by four of the creditors, being Joseph Stafswick on behalf of the creditor Global Trade Club Pty Limited, Neil Steven, a book maker for a creditor Pelletin Pty Limited, Joseph and Tony Oshaka, a solicitor and principal in a firm Australasian Lawyers and Consultants, a creditor, and a Gregory Frances runs Wilson, also a creditor.
None of those creditors who support Mr Tosswell's proposed arrangement have given evidence directly about the amount of their debt and therefore I am not satisfied that the Court can find, from independent evidence, the amount that they are owed by the debtor. While their evidence is that they would support a proposed arrangement so that the creditors would receive a payment, there is no evidence that they have been given sufficient information, as I have already referred to, upon which they could possibly make such a decision. It is not clear, in my view, from the evidence provided by Mr Tosswell or certain, that the proposed arrangement would result in any payment whatsoever to the creditors.
In my view, the evidence does not support a conclusion that therefore the creditors, even though they support at this very initial stage a calling of a meeting, could come to the view at such a meeting that it would be the advantage of them as creditors that the debtor's affairs be administered under Part X or that the creditors, even where they have indicated such support, have been provided with sufficient information to make a reasoned decision about it. The onus is clearly upon the debtor to show the grounds exist that justify the granting of an adjournment that would override the prima facie right of the petitioning creditor to a sequestration order.
There is insufficient evidence before me to justify my granting any adjournment to enable the meeting of creditors. I consider it appropriate to note the judgment of Olney J of the Federal Court of Australia in the matter of Neil Graham Steggle ex parte Advance Bank of Australia Limited being matter BP 92 of 1992, the judgment which was given on 5 March 1992, where an opinion is expressed by his Honour that in complex cases it is often better to enable the powers to be executed by the trustee in bankruptcy to investigate the affairs of the applicant, rather than the lax provisions under Part X arrangement or composition.
Due to the conflicting and contradictory nature of Mr Toswell’s evidence as to the amounts he owes as debts to his creditors, the conflicting information in his sworn evidence about his assets, the part of his proposal to his creditors under Part X which involves claims for substantial sums in leading proceedings instituted by Mr Toswell (which I have found involve complex considerations of fact and law), I find this is a matter where it is best for the affairs of Mr Toswell to be investigated by the Trustee in Bankruptcy rather than the more lax provisions under a Part X arrangement or composition.
In the circumstances, I refuse an adjournment of the application for the hearing of the petition.
The applicant now seeks further leave to orally make a further application seeking again an adjournment of the creditors petition as I informed by his solicitors that the creditors meeting is now to be held imminently. He further seeks to file by leave further evidence that he says now addresses many of those matters raised by me in the decision today. I decline to grant leave to the debtor to make that further oral application for adjournment. The debtor has put his case for an adjournment of the creditors petition and did so fully on the available evidence he filed in support of his case on the 21 August 2001. I have determined not to grant such adjournment and did so on the basis that if the adjournment was not granted he did not oppose the sequestration order. The issue has been now determined on that basis.
In those circumstances, the orders that I make today are:
(1)that the debtor's application for adjournment of the hearing made both on 21 August 2001 and as at today's date, is refused;
(2)that a sequestration order be made against the estate of the debtor, Anthony Charles Oswald Tosswell, also known as Anthony Charles Onslow Toswill;
(3)that the petitioning creditor's costs of and incidental to the petition be now considered.
In my view, this is a matter where costs follow the event and, therefore, I will order the petitioning creditor's costs of and incidental to the petition in this matter be paid, including any reserve costs in the proceedings. Because the proceedings were started in the Federal Court, I should include that specifically so that it's not caught between any legal complexities and transfers, so that will be any costs reserved either in the Federal Court of Australia or the Federal Magistrates Service. I will finally certify that this matter is an appropriate matter for the appearance of counsel. I'll order that my reasons be taken out.
I certify that the preceding forty-seven (47) paragraphs are a true copy of the reasons for judgment of Rimmer FM
Associate:
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