Perpetual Trustee Company Ltd v Dagher
[2010] FMCA 240
•4 May 2010
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| PERPETUAL TRUSTEE COMPANY LTD v DAGHER | [2010] FMCA 240 |
| BANKRUPTCY – Creditor’s petition – consideration of grounds of opposition – security held by petitioning creditor over property of the debtor – value of the security considered. |
| Bankruptcy Act 1966 (Cth), ss.44, 52 |
| Biron Capital Limited v Anstee [2005] FMCA 1100 Re Button; ex parte Voss [1905] 1 KB 602 Re Scott; ex parte Moore (1892) 2 BC (NSW) 55 Re Wiggins; ex parte Credit Assistance Pty Ltd (1979) 30 ALR 443 |
| Applicant: | PERPETUAL TRUSTEE COMPANY LTD |
| Respondent: | TONY DAGHER |
| File Number: | SYG 206 of 2010 |
| Judgment of: | Driver FM |
| Hearing date: | 6 April 2010 |
| Delivered at: | Sydney |
| Delivered on: | 4 May 2010 |
REPRESENTATION
| Solicitors for the Applicant: | Ms J Alford Gadens Lawyers |
| Counsel for the Respondent: | Mr Rowe |
| Solicitors for the Respondent: | Dib Lawyers |
ORDERS
A sequestration order is made against the estate of Tony Dagher.
The petitioning creditor’s costs (including reserved costs, if any) are to be taxed and paid in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that the date of the act of bankruptcy is 6 January 2010.
The Court notes that a consent to act as trustee has been signed by Scott Pascoe.
Pursuant to s.52(3) of the Bankruptcy Act 1966 (Cth), all proceedings under order 1 are stayed for a period of 21 days.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 206 of 2010
| PERPETUAL TRUSTEE COMPANY LTD |
Applicant
And
| TONY DAGHER |
Respondent
REASONS FOR JUDGMENT
Introduction and background
The matter before the Court is an opposed creditor’s petition. On 8 December 2009, the applicant creditor (Perpetual Trustee Company Ltd – “Perpetual”) issued bankruptcy notice NN5637 of 2009 against the respondent debtor, Tony Dagher. The bankruptcy notice was personally served on Mr Dagher on 16 December 2009. He did not comply by the due date on 6 January 2010. The creditor’s petition was presented on 4 February 2010.
Mr Dagher filed a Notice of Grounds of Opposition on 29 March 2010. The grounds of opposition in that notice are:
1. The creditor is a secured creditor and the security is in excess of the debt – s.44(2).
2. The creditor has no basis for the value of the security claimed in the petition and it is clearly an undervalue.
3. The security would have been sold at a value in excess of that claimed in the petition but for the actions of the creditor and it would be unconscionable and a breach of process to grant the petition.
4. The security is being auctioned by the secured creditor and is inappropriate that the petition be granted at this time.
5. Alternatively the Supreme Court process was not served on the debtor and he requires tome to set aside the judgment supporting the debt.
Perpetual holds a first registered mortgage over Mr Dagher’s property at 702 Warringah Road, Forrestville. The dispute between the parties centres on the value of the security and the actions of Perpetual in relation to the security having a bearing upon its value.
Evidence and submissions
The creditor’s petition is supported by the affidavit within it of Greg Van Leer verifying paragraphs 1,2 and 3 of it and the affidavit of Paul Anthony Liggins made on 4 February 2010 verifying paragraph 4. Perpetual also relies upon the affidavit of Joseph Khoury made on 21 December 2009 as to service of the bankruptcy notice, a second affidavit of Mr Khoury made on 10 February 2010 as to service of the creditor’s petition and other documents required to be served, an affidavit of search by Jennifer Alford made on 6 April 2010 and an affidavit of debt by Greg Van Leer made on 6 April 2010.
Mr Dagher relies upon his own affidavit made on 25 March 2010.
None of the deponents were required for cross-examination.
I received as exhibits from the parties two valuation reports relating to the property the subject of the dispute. Exhibit A1 is a valuation report by Nelson Partners dated 15 March 2010. Exhibit R1 is a valuation report by Chesterton International dated 19 January 2008.
Perpetual submits that it has satisfied the requirements for the making of a sequestration order and submits that the grounds of opposition should be rejected. Perpetual submits that the valuation relied upon by Mr Dagher is out of date and includes the value of an operating service station on the site, whereas the site is now vacant. Perpetual submits that its security is worth less than the debt and that it is entitled to petition in respect of the difference. Perpetual further submits that even if there was an issue in relation to service of process in Supreme Court proceedings between the parties (which is not admitted) it would not be a basis of opposition to the making of a sequestration order.
Mr Dagher submits that the Court should decline to make a sequestration order because the creditor’s security over the property was worth more than the debt, as is evidenced by his valuation, the price offered for the property at auction (the sale did not proceed) and a further offer to purchase at a higher price (again, the sale did not proceed). Mr Dagher submits that a secured creditor has an obligation to avoid a “fire sale” of the property the subject of the security and that the conduct of Perpetual in relation to prospective purchasers and the state of the property disentitles it to a sequestration order.
Reasoning
Section 44(2) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) provides that:
(2)Subject to subsection (3), a secured creditor shall, for the purposes of paragraph (1)(a), be deemed to be a creditor only to the extent, if any, by which the amount of the debt owing to him or her exceeds the value of his or her security.
Subsection (3) is not presently relevant.
Section 44(4) of the Bankruptcy Act provides that:
(4)Where a petitioning creditor is a secured creditor, he or she shall set out in the petition particulars of his or her security.
In the creditor’s petition in this case, Perpetual claims a debt of $2,374,440.31 and discloses security over the property of Mr Dagher with an estimated value of $2,050,000, leaving an unsecured debt of $324,444.31. I am satisfied that, prima facie, Perpetual is entitled to the making of a sequestration order in respect of that asserted unsecured debt. Perpetual’s valuation of the property the subject of its security is not arbitrary or capricious. Indeed, the estimated value of $2,050,000 appears generous when viewed against exhibit A1, which is a detailed valuation report providing an “as is” valuation of the property at $1,750,000. I note, in that regard, that the petitioning creditor’s estimate can be revised later for proof of debt purposes[1].
[1] See Re Wiggins; ex parte Credit Assistance Pty Ltd (1979) 30 ALR 443.
There is authority that if the estimate given by a petitioning creditor is a genuine one, the Court will not enquire into its correctness, although the result of the enquiry might be to show that the unsecured balance of the debt was not sufficient to support a petition: Re Button; ex parte Voss [1905] 1 KB 602; Re Scott; ex parte Moore (1892) 2 BC (NSW) 55. Nevertheless, if a creditor, by its actions or omissions, artificially depresses the value of its security or if it unreasonably refuses to accept offers to purchase a property at a higher price than its security, then those may be reasons for the Court to decline to make a sequestration order: s.52(2)(b) of the Bankruptcy Act.
In the present case, the valuation which is exhibit R1, relied upon by Mr Dagher, does not provide a proper basis to challenge the estimate of the value of the security given by Perpetual. That valuation is dated and is really just a guide price for the property and the associated business as a going concern at that time. In any event, I accept that it is not for the Court to determine whether the estimated value of the security given by Perpetual is more likely to be correct than the valuation proffered by Mr Dagher. I am satisfied that the estimated value of the security given by Perpetual is genuine and the Court will not enquire as to its correctness: see Biron Capital Limited v Anstee [2005] FMCA 1100.
Neither am I satisfied that Perpetual has, by its conduct, disentitled itself from the making of a sequestration order. I accept that Mr Dagher, during the latter part of 2009, made concerted efforts to sell the property in order to discharge the debt to Perpetual. His efforts were complicated by the need to obtain a contamination certificate for the property which was used as an operating fuel service station. In view of a lack of progress over the sale, Perpetual notified Mr Dagher that it intended to take possession of the property. Indeed, that occurred on 4 January 2010. Since then, the property has been vacant. It is quite likely that the value of the property has reduced given its current status as a vacant site but Perpetual has not acted unreasonably in that regard. Perpetual gave Mr Dagher a fair opportunity to discharge his liability through a sale of the property but no sale was completed. The property was passed in at auction in October 2009 with a reserve price of $2.7 million. The highest bidder at the auction offered $2.45 million. On 23 November 2009 Mr Dagher entered into a contract for the sale of the property to a company called National Personnel and Commercial Maintenance Services Pty Limited at a price of $3.3 million (which had been stipulated by the solicitors for Perpetual) but the purchaser offered a deposit of only $1,000 and the purchaser later refused to complete when it learned of these bankruptcy proceedings.
While both Perpetual and Mr Dagher may have been better off if the property had sold at auction or if the sale to National Personnel and Commercial Maintenance Services had been completed, the present circumstances have not come about because of any improper or unreasonable conduct by Perpetual. Perpetual gave Mr Dagher a reasonable opportunity to dispose of the property through his own efforts and when those efforts were not successful Perpetual took possession, as it was entitled to do. Perpetual remains in possession of the property. It is not necessary for this Court to rule on the obligation of Perpetual to avoid a “fire sale” of the property because there is no evidence that such is Perpetual’s intention. It is simply relying on a realistic estimate value of its security for the purposes of this present bankruptcy proceeding. During argument at the trial of this matter there was a question raised whether the sale to National Personnel and Commercial Maintenance Services could be enforced (as contracts had been exchanged) or damages obtained for non completion of the sale. Any right of action that Mr Dagher may have in that regard would vest in the trustee in bankruptcy on the making of the sequestration order and the possibility of there being such a right of action is not a reason for the Court to refrain from making a sequestration order.
Finally, Mr Dagher has not advanced any serious basis for the Court to look behind the judgment supporting the bankruptcy notice and the petition. There is simply a bare allegation of non service of process. Counsel for Mr Dagher informed me that although his client had not taken any steps to set aside that judgment he intended to institute proceedings in the Supreme Court within two weeks to do so. I said that I would take into account any proceedings instituted within that period. This morning, shortly before judgment was to be handed down my Associate received by email an electronic version of an affidavit by Mr Dagher’s solicitor explaining why no action had been taken in the Supreme Court and seeking further delay in delivering my judgment. I am not persuaded that any further delay in delivering judgment is warranted, but I will stay proceedings under the sequestration order for a period of 21 days to enable Mr Dagher to further consider his position and to take such further steps as he considers warranted.
I am satisfied that Mr Dagher committed the act of bankruptcy alleged in the petition. I am satisfied with the proof of the other matters of which s.52(1) of the Bankruptcy Act requires proof. I am not satisfied that any of the matters raised in the Notice of Grounds of Opposition provide a reason for the Court to refrain from making a sequestration order.
I will make the orders sought in the petition.
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Driver FM
Associate:
Date: 4 May 2010
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