Poss, M. v Cyrens Holdings P/L

[1994] FCA 525

RE: MARTIN POSS
EX PARTE: CYRENS HOLDINGS PTY LIMITED, PETER ROBIN WILLIAM SMITH and WENDY
ABBOTT DANFORTH
No. P14 of 1994
FED No. 525/94
Number of pages - 5
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
DAVIES J

CATCHWORDS

Bankruptcy - whether one of several creditors settled the debt on behalf of all creditors - no significant points of law.

HEARING

SYDNEY, 8 July 1994
#DATE 5:8:1994

Solicitors for the debtor: A.D. Price

Price and Company

Counsel for the creditor: D.B. McGovern

Solicitor for the creditor: Peter D. Irving

ORDER

THE COURT ORDERS THAT:

1. The application dated 20 June 1994 brought on behalf of the Debtor be dismissed.

2. Costs be reserved.

NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

DAVIES J This matter arises out of a creditor's petition brought by Cyrens Holdings Pty Limited ("Cyrens"), Peter Robin William Smith and his wife Wendy Abbott Danforth seeking sequestration of the estate of Martin Poss. The debt alleged is a judgment debt for $310,490.42 plus interest.

1. A motion brought on behalf of Mr Poss seeks, inter alia, the following orders:-
   

"2. A DECLARATION that on the 31st May 1994 the Applicant and the Respondents entered into a binding agreement which included the following terms:-

(a) That the Applicant would pay to the Respondent the sum of THIRTY THOUSAND DOLLARS ($30,000.00) by way of two

(2) instalments, namely $15,000.00 forthwith with a further $15,000.00 to be paid on or before the 30th September 1994, in full and final satisfaction of the Respondents' claim in these proceedings against the Applicant;

(b) That in consideration of the said payments totalling THIRTY THOUSAND DOLLARS ($30,000.00) by the Applicant to the Respondents, the Respondents would execute Terms of Settlement releasing the Applicant from further liability as well as executing Short Minutes of Order resulting in the Creditors Petition herein being dismissed with each party herein paying their own costs of and incidental to these proceedings.

3. AN ORDER that the said agreement be specifically performed forthwith."

1. The petition first came on for hearing on 25 March 1994, when it was adjourned. It was adjourned again on 26 April 1994, on 10 May and on 17 May 1994, when it was adjourned for hearing to 31 May 1994.

2. Over this period, there were discussions between Mr Poss and Mr Smith and between their respective solicitors, Mr A.D. Price who acted for Mr Poss, and Mr D.D. Irving, who acted for the petitioning creditors.

3. On 30 May 1994, Mr Price sent to Mr Irving a letter which read:-
   

"RE: POSS, EX PARTE: CYRENS HOLDINGS PTY LIMITED AND ORS RE: BANKRUPTCY PROCEEDINGS NO. P14 OF 1994 We refer to the above matter.

We are instructed that our respective clients have been having fairly lengthy negotiations with a view to try and resolve this matter, over the last few days. We are furthermore instructed that your clients are willing to accept the proposed offer of $30,000.00 payable by way of instalments as previously advised in full and final satisfaction of our client's obligations to your client. We are instructed that your clients are willing to accept a third party personal guarantee for the balance sum of $15,000.00.

In this regard, we now enclose a copy of a letter from Mr Bob Minnaert, as received from our client, which we understand has already been sent to your client. Please note that our client is in a position to pay the first instalment of $15,000.00 by way of bank cheque tomorrow morning.

In this regard, we now enclose the following:-

1. Terms of Settlement.

2. Short Minutes of Order.

We would be pleased if you could peruse the enclosed documentation and, if approved, attend to execution of same. We confirm that we shall be attending the Federal Court tomorrow morning at 9.15 am whereupon we shall be seeking to have the said Petition dismissed in accordance with the Short Minutes of Order.

We would be pleased if Mr Irving could attend and execute the hard copies of the enclosed documentation at which time we shall hand to Mr Irving the bank cheque in favour of your clients for $15,000.00.

We thank you for your assistance in achieving settlement of this matter."

Accompanying that letter was a letter of guarantee signed by a Mr Bob Minnaert, a formal deed of settlement dated 31 May 1994, which provided for the execution by each of the petitioning creditors and by Mr Poss, and short minutes of order which provided by consent that the petition be dismissed and that each party pay their own costs.

1. On 31 May 1994, the matter was again adjourned so as to enable Mr Irving to obtain instructions from his clients. On 10 June 1994, Mr Irving wrote to Mr Price stating "I have today received instructions from all creditors to reject your client's offer of settlement". The case put on behalf of Mr Poss is that the matter had nevertheless been settled between Mr Poss and Mr Smith on the morning of 31 May 1994.

2. In an affidavit Mr Poss deposed inter alia:-
   

"22. On the 31st May 1994, at or around 8.00 am, I had a conversation with Mr Smith being words to the following effect:

I said: 'Robin, I have the Bank cheque for $15,000, and the guarantee you wanted for the balance. Although it was late yesterday afternoon, I am sure that Tony Price sent a copy of each to Peter Irving by fax.' He said: 'I have not spoken to him yet, but I'll speak to Peter Irving shortly. There appears to be only one problem, the cheque cannot be yours according to the accountant I spoke to yesterday, because, if someone else sends you bankrupt, we may have to pay it back.' I said: 'No. The money does not come from me, it was provided by others specifically to settle this matter.' He said: 'Well, that's all right then.' I said: 'Robin, what is your final answer then, because we'll be in Court by 9.15 am and I'll have to leave for the Court shortly.' He said: 'I'll take the money, and I'll ring Peter Irving very shortly because I have to leave soon too.'

23. At all material times I dealt with Mr Smith whom I relied upon as representing all the Creditors herein."

1. Mr Smith's evidence to the Court was that, on 31 May 1994, he did not agree with Mr Poss to settle the matter. Mr Smith gave evidence that, by 31 May, he himself was prepared to accept Mr Poss's offer but that his wife was not and that he had informed Mr Poss of this on several occasions. Mr Smith gave evidence that his solicitor, Mr Irving, and counsel had advised against a settlement with Mr Poss. Mr Smith gave evidence that, after 31 May, his wife, his solicitor and counsel formed the opinion that the settlement which was offered should not be accepted and that he, Mr Smith, concurred in that view, although he would himself have been happy to have accepted the money which was offered.

2. Evidence was given by Mr Poss of subsequent telephone conversations he had with Mr Smith in which Mr Smith conceded that he had been overruled. Mr Minnaert gave evidence that he recalled a telephone conversation between Mr Poss and Mr Smith in which Mr Smith said that he had been overruled by his wife and the legal people. In my opinion, the use of the word "overruled" is entirely consistent with Mr Smith's evidence that he himself wished to accept the settlement but that the view held by his wife, Mr Irving and counsel prevailed. The word "overruled" does not carry with it the implication that Mr Smith had come to a binding agreement with Mr Poss on 31 May but had later decided to renege on it.

3. It was submitted by Mr Price, who appeared for Mr Poss, that Mr Smith was not a credible witness, that he was neither candid nor honest. However, it seems to me that Mr Smith gave his evidence frankly and clearly. Thus, Mr Smith gave this evidence:-
   

"At least by accepting the settlement offer, you would recover something, would you not?---Correct. You would agree that something is and was at the time better than nothing?---My personal view was that is correct. Which is why you would be predisposed to say I will take the money, would you not?

---In my opinion, I would've liked the money, yes. ...

So it would be a jolly good thing if you could bankrupt him and finish him off, would it not, Mr Smith? I mean, really, being honest about it that is how you feel in your heart, do you not?---Yes."

1. There was some criticism made of Mr Smith's affidavit of 22 June 1994. However that affidavit was drafted as if it were a pleading. It therefore has all the problems of a document which does not express in the deponent's own words the events which the deponent verifies.

2. The case for Mr Poss fails first because it has not been shown that Mr Smith had authority to settle the matter on behalf of Cyrens and his wife. Indeed, the evidence shows that he did not. Nor does the evidence show that Mr Smith had ostensible authority to act on their behalf in settling the matter. In the litigation that led to the judgment for $310,000, which was litigation which proceeded over several days, Cyrens, Mr Smith and Ms Danforth were represented by their solicitor, Mr Irving, and by counsel. Mr Irving and counsel were again acting in the bankruptcy proceedings. They were the persons who had actual and ostensible authority to act in the proceedings on behalf of the three creditors. Their authority to do so was known to Mr Poss and to Mr Price. Mr Poss himself had forwarded details of his assets and income to counsel for the creditors.

3. Mr Poss may have thought that whatever Mr Smith decided would be adopted by Wendy Danforth and Cyrens. But if he was of that view, he was mistaken.

4. Furthermore, it does not seem to me that Mr Smith's statement to Mr Poss on the morning of 31 May amounted to a purported settlement by Mr Smith on behalf of the three creditors. Mr Poss has not suggested that Mr Smith said, "We will take the money." At its highest, the evidence is that Mr Smith said, "I will take the money." Such a statement or, as it may have been said, "I'll take the money" is perfectly consistent with Mr Smith's evidence that he himself was prepared to accept the offer. The conversation, as sworn to by Mr Poss, does not include any statement by Mr Smith that all creditors would accept the money or that he, Mr Smith, would instruct Mr Irving to seek the withdrawal of the petition.

5. Not too much weight should be placed upon the telephone conversation, which was initiated by Mr Poss and which occurred a short time before the parties were to be represented in Court by their legal advisers. It had been intended that, if there were to be a settlement, that settlement would be in writing and that it would be duly executed by each of the three creditors and by Mr Poss. In circumstances such as this, looking at the matter objectively, the parties should not have expected a settlement to have occurred until at least the settlement had been confirmed by the legal advisers of each of the parties and probably not until the deed of settlement itself had been executed, the cheque handed over and accepted and the form and substance of the guarantee approved. The ultimate issue, the dismissal of the petition for bankruptcy, was in the hands of the Court. Only the legal representatives could be expected to appear to move the Court for the dismissal of the petition.

6. When the parties arrived at Court, Mr Irving had not received any instructions that the matter had been settled. Mr Price said to Mr Irving that his client had spoken to Mr Smith that morning at around 8 a.m. and that Mr Smith had accepted the offer of settlement. Mr Irving replied that he had no instructions to that effect. Mr Irving said that, if Mr Smith wished to accept the offer, he Mr Irving would have to obtain instructions from Wendy Danforth. Mr Irving advised that Ms Danforth might instruct him not to settle the matter. Mr Price then raised the point as to whether Mr Irving should continue to act for all the creditors if their instructions differed. The proceedings were adjourned and, later in the day, Mr Price wrote to Mr Irving setting out the substance of the events at the Court as I have described them.

7. In my opinion, there was no completed agreement to settle. There was merely a misunderstanding between Mr Poss, who was desperately trying to prevent the sequestration of his estate, and Mr Smith. It was made clear at the Court, by a person who was duly authorised to speak on behalf of the creditors, namely Mr Irving, that no settlement had been reached.

8. In these circumstances, the motion seeking to enforce the alleged settlement must be dismissed. Costs will be reserved.