Preece v Preece
[2014] FCCA 1647
•24 October 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PREECE v PREECE | [2014] FCCA 1647 |
| Catchwords: TAXATION – Stamp duties – Duties Act 1997 (NSW) (Duties Act) ss.211 and 304 – whether by seeking a sequestration order on the basis of a debt made under a loan agreement which contains a clause creating an equitable mortgage the applicant is seeking to enforce a mortgage – whether Court can have regard to a loan agreement not stamped as required by the Duties Act – whether order confirming admissibility can be made after unstamped instrument has been admitted into evidence before s.304(2) has been satisfied. BANKRUPTCY – Practice and procedure – application to amend notice of grounds of opposition – principles for determining whether to grant leave to amend – whether proposed amendments raise matters that are truly in issue between the parties – leave to amend not granted. BANKRUPTCY – Creditor’s petition – whether proceeding on a creditor’s petition constitutes an abuse of process – whether ill will held by creditor against debtor is sufficient grounds for finding abuse of process – whether one creditor’s suggesting to another creditor to join in proceedings renders creditor’s petition an abuse of process. BANKRUPTCY – Creditor’s petition – application for an adjournment – whether any utility in granting adjournment. BANKRUPTCY – Creditor’s petition – whether debtor can pay his debts. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.5(2), 33(1)(b), 44(3), 44(4), 49, 52(1), 52(2), 52(2)(a) Duties Act 1997 (NSW), s. 205, 207, 211, 304, 304(1), 304(2) Federal Circuit Court Rules 2001 (Cth), r. 1.06, 7.01, 7.01(1) |
| Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75 |
| Applicant: | KIM PREECE |
| Respondent: | GLENN PREECE |
| File Number: | SYG 692 of 2013 |
| Judgment of: | Judge Manousaridis |
| Hearing date: | 14 July and 15 August 2014 |
| Delivered at: | Sydney |
| Delivered on: | 24 October 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr O’ Sullivan on 14 July 2014; Ms Gaven on 15 August 2014 |
| Solicitors for the Applicant: | & Legal |
| Counsel for the Respondent: | Mr Mcconachie on 14 July 2014; Mr Johnson on 15 August 2014 |
| Solicitor for the Respondent: | Zeina Touma |
ORDERS
By 31 October 2014 the applicant:
(a)provide to the Chief Commissioner:
(i)the original of the Loan Agreement (Loan Agreement) made on or about 23 December 2009 between Kim Preece and Deep Blue Marine Australia Pty Ltd as trustee for the Preece Super Fund on the one hand, and Glenn Preece on the other hand or, if the applicant does not hold the original, a copy of the Loan Agreement; and
(ii)a letter containing a statement to the effect that the respondent is the person liable for the payment of duty, if any, under the Loan Agreement, and particulars of the name, address, and contact details of the respondent and his current legal representatives; and
(b)file and serve an affidavit confirming performance of the order referred to in (a).
The matter stand over to 9.30 am on 7 November 2014.
THE COURT NOTES
If the applicant complies with order 1, the Court will at 9.30 am on 7 November 2014:
(a)order that the Loan Agreement tendered into evidence during the hearing of 14 July 2014 and marked exhibit “D” be admitted into evidence;
(b)make a sequestration order against the estate of the respondent; and
(c)order that the respondent pay the applicant’s costs, and that those costs be paid from the estate of the respondent in accordance with the Bankruptcy Act 1966 (Cth).
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 692 of 2013
| KIM PREECE |
Applicant
And
| GLENN PREECE |
Respondent
REASONS FOR JUDGMENT
Introduction
On 14 July 2014 there was before me for hearing a creditor’s petition. At the hearing the respondent applied for leave to amend his grounds of opposition. He also applied for an adjournment to obtain further evidence in support of his existing and proposed amended grounds of opposition. The applicant opposed both applications.
On my invitation, the applicant read all affidavits on which he intended to rely for the making of a sequestration order against the estate of the respondent. I also heard argument about whether I should permit the respondent to amend his grounds of opposition, and whether I should grant an adjournment to allow the respondent an opportunity to obtain further evidence on solvency and abuse of process. I then reserved my judgment on the respondent’s applications for the amendment and adjournment, and indicated that, if I were not to grant the amendment and adjournment the respondent sought, I would consider, on the material that was before the Court, whether I should make the sequestration order sought against the estate of the respondent.
The matter was listed for the delivery of judgment at 9.30 am on 25 July 2014. At that time, I announced the orders of the Court, but immediately after I did so, the solicitor for the respondent informed the Court that the applicant was a secured creditor. I withdrew the orders I had pronounced and, after some discussion with the representatives of the parties, I directed the parties file written submissions on the significance to the proceedings of the applicant being a secured creditor of the respondent, and submissions in support of any application the respondent may wish to make for leave to re-open his case. I listed the matter for hearing on 15 August 2014. The parties filed written submissions, and the matter came before me again on 15 August 2014.
On that day, the following occurred. First, the applicant filed an affidavit in which he stated he relinquished the security he held over property owned by the respondent (the Security Property). Second, the respondent applied for orders:
a)that leave be granted to the respondent to re-open his case in opposition to the proceedings; and
b)extending the time for reviewing the decision of a Registrar of this Court made on 28 February 2014 substituting the current applicant as creditor, and reviewing that order.
There are two grounds the respondent wishes to advance in opposition to the making of a sequestration order if leave to re-open is granted. The first is that the applicant, who was substituted as a creditor by an order of the Registrar on 28 February 2014, is not entitled to participate as creditor by himself because the debt the applicant claims the respondent owes him is a debt jointly owed to the applicant and another creditor. The applicant, therefore, ought to have been, but was not, substituted as creditor jointly with the other joint creditor. The second ground is that the debt is based on an instrument that ought to have been, but was not stamped under the Duties Act 1997 (NSW) (Duties Act).
The applicant, through his counsel, opposed the respondent’s being granted leave to re-open his case. Counsel submitted the case the respondent wished to advance was inconsistent with the case the respondent had to date been advancing; the granting of leave would be futile because the grounds the respondent wishes to advance if leave to re-open is granted have no merit; and, in any event, the Court should not as a matter of discretion grant leave given the lengthy history of these proceedings, and the time that has elapsed after the Registrar ordered the applicant be substituted as a creditor. Counsel was not in a position to deal with the respondent’s ground based on the non-stamping of the instrument. I granted the applicant leave to address that ground by written submissions to be filed and served after the hearing.
The issues that arise for my consideration are as follows.
a)Is the applicant’s being a secured creditor of the respondent fatal to his entitlement to obtain a sequestration order?
b)Assuming (a) is answered in the negative, should the respondent be granted leave to re-open his case?
c)If (b) is answered in the affirmative, has the respondent made out any of the grounds the respondent seeks leave to argue and, if so, should any of those grounds lead the Court not to make a sequestration order?
d)If (c) is answered in the negative, should I grant the respondent leave to amend his notice of grounds of opposition to add the grounds the respondent identified at the hearing of 14 July 2014?
Before I consider these issues, it will be useful to describe the procedural background and the relevant parts of the affidavits on which the respondent relies.
Procedural background
The creditor’s petition by which these proceedings were commenced was filed on 5 April 2013. The petition was based on the respondent’s failure to comply with the requirements of a bankruptcy notice. The bankruptcy notice was served on the respondent on 14 November 2012.
The hearing of the creditor’s petition was adjourned a number of times, and was not determined because the respondent paid or settled the amount claimed by the creditor. On 14 August 2013, however, a second creditor was substituted as applicant in the proceedings. That led to the filing of an amended creditor’s petition on 21 August 2013.
The amended creditor’s petition was also adjourned a number of times, and the debt claimed by the second creditor, too, was paid or settled. And that resulted in the current applicant being substituted as a creditor. That occurred on 28 February 2014, and the second amended creditor’s petition that came before me for hearing on 14 July 2014 was filed on 6 March 2014.
The debt on which the applicant relies for the making of a sequestration order is described in paragraph 1 of the second amended creditor’s petition as follows:
The respondent debtor owes the applicant creditor the amount of $117,896.52 for money due and owing pursuant to a loan agreement made between them on the 23rd of December 2009 and repayable on the 22nd of December 2010 including interest up to the 5th of December 2012 together with further charges for interest since that time.
That debt is based on a loan made under a written loan agreement dated 23 December 2009 between, on the one hand, the applicant and Deep Blue Marine Australia Pty Ltd (DBMA) as trustee for the Preece Super Fund and, on the other, the respondent (Loan Agreement).[1] The Loan Agreement provides for the applicant and DBMA to each lend $100,000 to the respondent. Clause 2.1 required the respondent to repay the loan on the date being 12 months from the date of the agreement. Clause 3.1 provides for the payment of interest.
[1] Exhibit D
On 28 March 2014 directions were made requiring the respondent to serve an updated list of assets and liabilities held by the respondent, and a disclosure statement concerning the respondent’s de facto partner’s financial entitlements of the respondent.
The matter came before the Court again on 9 May and on 23 May 2014. On the latter day, the respondent was directed to file a notice of grounds of opposition. The respondent did so on 29 May 2014. The only ground of opposition stated in that document is that “the respondent is solvent”. On 2 June 2014 the matter was set down for hearing before me on 14 July 2014.
The respondent’s affidavits
In the meantime, the respondent filed a number of affidavits. One is an affidavit made by the respondent on 9 May 2014. The respondent deposed he had “a surplus of assets with respect to liabilities of my $1.5Million”, and that this assessment was based “on a valuation of my property at 265 Condamine Street and 1 Kenneth Road, Manly Vale of $3.9Million with a secured mortgage of about $2.4Million”;[2] that out of the proceeds of the sale of his home he could pay all his debts “except my debt to the Applicant Creditor”;[3] that the “only debt which I owe and cannot pay on the settlement of my . . . property is my debt to the Applicant Creditor”; and that was because the sale price for the applicant’s home fell short of the value assigned to the property.[4] The respondent also deposed that he has been meeting his other expenses.[5]
[2] G Preece affidavit, 09.05.14, [2]
[3] G Preece affidavit, 09.05.14, [3]
[4] G Preece affidavit, 09.05.14, [5]
[5] G Preece affidavit, 09.05.14, [7]
In the same affidavit, the respondent deposed to a discussion he had with his mother concerning money the respondent owes his siblings. One of his siblings is the applicant, Mr Kim Preece. The respondent referred to a “debt represented by Deep Blue Marine”.[6] He deposed that that debt “is a loan extended to me by my brother Mr Kim Preece and the debt represented by Mr Kim Preece is a loan extended to me by my sister Ms Anne Preece”.[7] The respondent then deposed to a conversation in which his mother offered “to repay my loans to Kim and Anne [sic] debt and adjust her will accordingly”.[8] The respondent asked his mother “to reserve her offer for the time being as I believed I could repay the debt from my own efforts”.[9]
[6] G Preece affidavit, 09.05.14, [8]
[7] G Preece affidavit, 09.05.14, [8]
[8] G Preece affidavit, 09.05.14, [9]
[9] G Preece affidavit, 09.05.14, [10]
Also in his affidavit of 9 May 2014, the respondent deposed to discussions he or his solicitors had or attempted to have since June 2013 with Mr McCabe, one of two attorneys the respondent’s mother had appointed under an enduring power of attorney.[10] In 2012 the respondent’s mother began to suffer from dementia, and by the middle of 2013 she ceased to be in a position to look after her own legal affairs. The respondent’s discussions or proposed discussions related to the respondent’s wishing to obtain a loan from his mother’s estate “in contemplation of my mother’s offer”.[11] Mr McCabe said he would like all of the respondent’s siblings to approve such a loan.
[10] G Preece affidavit, 09.05.14, [13]-[25]
[11] G Preece affidavit, 09.05.14, [13]
In April 2014 the respondent met with his three siblings to discuss the proposed loan, but all three siblings rejected the respondent’s proposal.[12] The respondent concludes this part of his affidavit as follows:[13]
I believe that Kim and Anne harbour personal resentment toward me and the fact that I have worked hard to re-build the Preece family business, T.D. Preece Pty Ltd which I bought from my mother in November 2005 and would like to bankrupt me with a view to taking control of my business as both Kim and Anne are voluntarily unemployed and are looking to generate a stable income for themselves.
[12] G Preece affidavit, 09.05.14, [22]
[13] G Preece affidavit, 09.05.14, [23]
In an affidavit made on 23 May 2014, the respondent deposes to conversations he says he had with Mr McCabe and with the applicant. He says that in June 2013, in a telephone conversation with Mr McCabe, the respondent asked whether his mother contacted Mr McCabe “regarding my debt with Anne”, to which Mr McCabe replied: “Yes, she contacted me about both debts to Kim & Anne”.[14] Mr McCabe also said that the respondent’s mother was going to attend Mr McCabe’s office to make arrangements, but she did not show up.[15] The respondent further says that in about June 2013 he had a conversation with the applicant in which the respondent asked whether the applicant would “agree to me exercising mum’s wishes and make a loan to me, so that I can re-pay you and Anne”.[16] In October 2013 the applicant informed the respondent that he did not agree that the respondent’s brother, Mark Preece, should make a loan to the respondent.[17] Mr Mark Preece is the other attorney appointed under the respondent’s mother’s power of attorney.
[14] G Preece affidavit, 23.05.14, [11]
[15] G Preece affidavit, 23.05.14, [11]
[16] G Preece affidavit, 23.05.14, [12]
[17] G Preece affidavit, 23.05.14, [13]
The respondent attached to his affidavit a letter dated 26 November 2013 that he says he sent to his siblings.[18] In that letter, the respondent explained why he was in financial difficulty, and requested financial assistance. The respondent stated that he had “defaulted in my plans to repay Kim and Anne for the loans they kindly extended to me” and that in “speaking with Kim, he has rightfully reminded me of the difficulties I have caused him due to my default although my debt is not necessarily the silver bullet he needs”.[19]
[18] G Preece affidavit, 23.05.14, [14]; annexure GPA3
[19] G Preece affidavit, 23.05.14, annexure GPA3
The applicant has filed two other affidavits. I will refer to the relevant parts of these affidavits later in these reasons.
Significance of applicant being a secured creditor
The applicant accepts he is a secured creditor of the respondent. The security arises under clause 7.1 of the Loan Agreement which provides:
As security for the due and punctual performance of the obligations of the Borrower [i.e., the respondent] to the Lender, the Borrower will grant a third ranking mortgage over the land comprised in [the Security Property] and for such purpose will on the date of this Agreement execute the Mortgage in the form of Exhibit 1 to this Agreement.
The respondent has not executed a mortgage required by this clause; but, being an agreement for consideration to grant a mortgage, the clause itself created an equitable mortgage in favour of the lenders over the Security Property.
Being a secured creditor, s.44(3) and s.44(4) of the Bankruptcy Act 1966 (Cth) (Act) applies to the applicant. Those subsections provide:
(3)A secured creditor may present, or join in presenting, a creditor’s petition as if he or she were an unsecured creditor if he or she includes in the petition a statement that he or she is willing to surrender his or her security for the benefit of creditors generally in the event of a sequestration order being made against the debtor.
(4)Where a petitioning creditor is a secured creditor, he or she shall set out in the petition particulars of his or her security.
The current form of the creditor’s petition does not contain the information required by s.44(3) and s.44(4) of the Act. The applicant, however, has read an affidavit in which he offers to “relinquish the security” created by clause 7 of the Loan Agreement “for the benefit of the creditors generally in the event of a sequestration order being made against the debtor”.[20] In addition, the applicant, in the same affidavit, refers to mortgages over the Security Property that have priority over the applicant’s mortgage, the indebtedness that is secured by those mortgages, and the value of the Security Property. The effect of those particulars is that the indebtedness secured by all mortgages that have priority over the applicant’s security exceed the value of the Security Property, or at least, the value of the Security Property as claimed by the respondent.
[20] K Preece affidavit, 15.08.14, [8]
In my opinion, the applicant has put before the Court the matters s.44(3) and s.44(4) of the Act require to be included in the creditor’s petition. In those circumstances, it is not necessary, and I do not propose to require the applicant to amend the creditor’s petition only to include in the body of such document information the applicant has already put before the Court in the form of an affidavit.
Given the applicant’s offer to relinquish his interest in the Security Property for the benefit of the creditors, and his having provided particulars of the security he holds, the applicant’s having been a secured creditor of the respondent does not disentitle him from obtaining a sequestration order, if he otherwise makes a case for the granting of such order.
Leave to re-open
The Court has power to grant a party leave to re-open a case if it is in the interests of justice to do so. The applicant, however, opposes the Court granting leave to the respondent to re-open his case because the proposed grounds on which the respondent proposes to rely are bound to fail, and because the respondent has delayed in raising the grounds on which he now wishes to rely.
Apart from the ground based on the non-payment of duty on the Loan Agreement, the applicant did not submit he was not in a position to deal with the proposed grounds. The applicant has dealt with the ground based on the non-payment of duty by filing and serving written submissions on that issue pursuant to the leave I granted on 15 August 2014. Thus, the respondent’s late raising of the proposed grounds of opposition will not by itself lead me to refuse to grant leave. Further, the applicant himself required leave to file evidence to deal with a potential deficiency in his application for a sequestration order based on his being a secured creditor of the respondent.
The only ground, therefore, that is left to consider in determining whether I should grant the respondent leave to re-open is whether, as the applicant submits, the granting of leave would be futile because both grounds on which the respondent proposes to rely if leave to re-open is granted are bound to fail. I will now consider each of those grounds.
Non-joinder of DBMA
The first of the proposed grounds on which the respondent wishes to rely if leave to re-open is granted is that the applicant cannot by himself apply for a sequestration order because the debt on which he relies for applying for the sequestration order is a debt jointly owed to the applicant and DBMA, and DBMA ought to have been joined as an applicant. The respondent relies on Australian Workers’ Union v Bowen.[21]
[21] (1946) 72 CLR 575
In Bowen, a number of persons were defendants in whose favour an order for costs was made in an equity suit brought in the Supreme Court of New South Wales. The solicitor whom the defendants in the equity suit retained issued in the names of all the defendants a bankruptcy notice against one of the plaintiffs, Mr Bowen, and, when Mr Bowen did not comply with the requirements of the bankruptcy notice, filed a creditor’s petition in the names of all the defendants. The solicitor, however, was not authorised by two of the defendants to issue the bankruptcy notice or the creditor’s petition. It was held by the Federal Court of Bankruptcy (Clyne J)[22] and, by a majority of the High Court on appeal, that the bankruptcy notice could not stand, and the creditor’s petition could not be supported. The result was that the creditor’s petition was dismissed.
[22] Re Bowen; Ex parte The Australian Workers’ Union (1945) 13 ABC 275
The decision in Bowen is not determinative of the case before me. There were two issues in Bowen. The first was whether the failure by all joint creditors to join in the issuing of a bankruptcy notice rendered the bankruptcy notice invalid. The second was whether it was fatal to the validity of the creditor’s petition that two of the named creditors did not lend their names to the petition. Neither question arises before me. Although the act of bankruptcy on which the applicant relies is the respondent’s failure to comply with a bankruptcy notice, the bankruptcy notice was not issued by the applicant, but by another creditor. And, unlike in Bowen, there is no allegation that the applicant has been named as an applicant without his authority.
Nevertheless, I must consider whether there is any principle accepted in Bowen that implies that a joint creditor who seeks to be substituted as a creditor under s.49 of the Act on the basis of a debt that is owed jointly to two or more creditors can only be joined as a creditor together with all joint creditors. And such statements of principle are to be found in judgments given in Bowen. First, there is the judgment of Rich J who agreed with Clyne J’s orders and reasons.[23] In that regard, Clyne J said:[24]
To support a commission of bankrupt[cy] where there is only one petitioning creditor there must be a debt due to him separately for which he could maintain an action at law in his own name, and therefore one of two joint obligees is not by himself a good petitioning creditor against the obligor.
[23] Australian Workers’ Union v Bowen (1946) 72 CLR 575 at page 584
[24] Re Bowen; Ex parte The Australian Workers’ Union (1945) 13 ABC 275 at pages 281-282
Second, Starke, Dixon, and William JJ considered that a joint creditor’s right to present a petition was to be governed by the same principles that govern the practice relating to a joint creditor’s seeking to recover a debt by action. Dixon J (as his Honour then was) stated the principle as follows:[25]
If one of two creditors or claimants desired to put a joint right in suit, he might, upon giving a proper indemnity, be permitted by the common law courts to sue in the name of the other creditor or claimant as well as his own.
[25] Australian Workers’ Union v Bowen (1946) 72 CLR 575 at page 589
And Williams J accepted what Atkin LJ said in Johnson v Stephens & Carter Ltd[26] as representing the correct principle regarding actions to recover joint debts:[27]
[A]t the present day as a general rule, in the absence of special circumstances, if one of two joint contractors refuses to join as plaintiff in an action for a breach of the contract, the party seeking to sue should offer the other an indemnity, and then if he still refuses is entitled to join him as a defendant.
[26] [1923] 2 KB 857 at pages 860-861
[27] Australian Workers’ Union v Bowen (1946) 72 CLR 575 at page 593
It follows, therefore, that if the applicant in these proceedings is a joint creditor with DBMA, he should have been substituted as a creditor together with DBMA or, if DBMA was not joined because it would not agree to being joined, DBMA should have been joined as a respondent. The next question I must consider, then, is whether the applicant and DBMA are joint creditors.
Two persons are joint creditors where “money is due on a covenant made with [the] two persons jointly by which it is to be paid to such two jointly”.[28] Whether or not the applicant is a joint creditor with DBMA, therefore, depends on whether, under the terms of the Loan Agreement, the respondent had agreed to pay the loan to the applicant and DBMA jointly.
[28] MacDonald v The Tacquah Gold Mines Company (1884) 13 Q.B.D 535 at 539 (Bowen LJ).
In my opinion, the respondent did not so agree. Under clause 2.1, the respondent agreed he “will repay half of the Principal Sum to K Preece [the applicant] and the other half of the Principal Sum to the Preece Super Fund [i.e. DBMA]”. Under clause 3.4, the respondent agreed he “will pay half of the interest due to K Preece and the other half of the interest due to the Preece Super Fund”.
Even if, however, the applicant and DBMA were joint creditors, and it was necessary at the time the applicant was substituted as a creditor that DBMA also be joined as an applicant, or a respondent, such failure would not render the Registrar’s orders a nullity. It would be open to the Court now to order that DBMA be joined as an applicant. In Bowen Starke J was of the opinion that the irregularity arising from two of the creditors not consenting to the creditor’s petition was capable of cure by two creditors signing the petition or, if they would not sign the creditor’s petition, by the remaining creditors offering an indemnity to the two creditors for their costs, and pursuing the petition in their name.[29] Dixon J appeared to be of the same opinion.[30]
[29] Australian Workers’ Union v Bowen (1946) 72 CLR 575 at page 587: “The irregularity can be cured if Dalton and Miller sign the petition and if they refuse the other joint-creditors may act in their names indemnifying them against costs if so required.”
[30] Australian Workers’ Union v Bowen (1946) 72 CLR 575 at page 589: “It is true that when the person beneficially entitled sued in the name of the nominal party, or one co-obligee sued in the name of all the co-obligees, the proceedings would not be struck out or stayed once a satisfactory indemnity was provided. But it does not appear to me to matter for the purpose in hand whether the condition of giving an indemnity is regarded as strictly precedent or not.”
But even if the Registrar’s decision was a nullity, there is nothing preventing the Court at this stage from making an order under s.49 of the Act that the applicant and DBMA be substituted as creditors.
In my opinion, therefore, if I were to grant the respondent leave to re-open his case to enable him to apply for an order to set aside the Registrar’s decision to substitute the applicant as creditor, the respondent is bound to fail on that application. Accordingly, I will not grant the respondent leave to re-open his case for that purpose because to grant such leave would be futile.
Stamping of the loan agreement
The respondent submits that the applicant cannot obtain a sequestration order because the debt on which the applicant has been substituted as a creditor is based on an instrument that ought to have been, but is not stamped under the provisions of the Duties Act. In particular, the respondent submits the applicant relies on the Loan Agreement, the Loan Agreement creates a mortgage, and the Loan Agreement, therefore, ought to have been stamped as a mortgage under Chapter 7 of the Duties Act.
The applicant does not dispute that clause 7 of the Loan Agreement creates a “mortgage” within the meaning of s.205 of the Duties Act. Nor do I understand there to be a dispute that the Loan Agreement is subject to duty under the Duties Act.
There are two provisions that the respondent’s submissions require me to consider: s.211 and s.304 of the Duties Act. Section 211 provides:
A mortgage on which duty is required by this Chapter to be paid is unenforceable to the extent of any amount secured by the mortgage on which duty has not been paid.
The applicant submits that s.211 is not engaged. He submits that he does not in fact rely on the Loan Agreement. At the very least, the applicant does not seek to enforce the mortgage or charge created by clause 7 of the Loan Agreement. Further, the applicant submits that the respondent, not the applicant, tendered the Loan Agreement.
I do not accept the applicant does not rely on the Loan Agreement. The Loan Agreement sets out the terms on which the applicant and DBMA advanced $100,000 each to the respondent. Further, the Loan Agreement was tendered into evidence by the applicant at the hearing of 14 July 2014.[31] I do accept, however, that the applicant is not seeking to enforce in these proceedings the mortgage created by cl.7 of the Loan Agreement. Section 211 of the Duties Act, therefore, does not apply to prevent the applicant from relying on the Loan Agreement to prove the debt the applicant asserts the respondent owes the applicant.
[31] Exhibit D
That leaves s.304 of the Duties Act which provides:
(1) An instrument that effects a dutiable transaction or is chargeable with duty under this Act is not available for use in law or equity for any purpose and may not be presented in evidence in a court or tribunal exercising civil jurisdiction unless:
(a)it is duly stamped, or
(b) it is stamped by the Chief Commissioner or in a manner approved by the Chief Commissioner.
(2) A court or tribunal may admit in evidence an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, and that does not comply with subsection (1):
(a) if the instrument is after its admission transmitted to the Chief Commissioner in accordance with arrangements approved by the court or tribunal, or
(b) if (where the person who produces the instrument is not the person liable to pay the duty) the name and address of the person so liable is forwarded, together with the instrument, to the Chief Commissioner in accordance with arrangements approved by the court or tribunal.
(3) A court or tribunal may admit in evidence an unexecuted copy of an instrument that effects a dutiable transaction, or is chargeable with duty in accordance with the provisions of this Act, if the court or tribunal is satisfied that:
(a) the instrument of which it is a copy is duly stamped, or is stamped in a manner approved by the Chief Commissioner, or
(b)the copy is duly stamped under section 299.
Under s.304(1), therefore, an instrument that effects a dutiable transaction or is chargeable with duty under the Duties Act is not available for use in any court. Subsection 304(2) provides exceptions which permit the court admitting into evidence such an instrument if the court is satisfied of one of two matters.
The Loan Agreement – or at least, cl.7 of the Loan Agreement –is an instrument that is chargeable with duty under the Duties Act. Thus, although the Loan Agreement has been admitted into evidence, s.304(1) prohibits this Court from using it unless s.304(2) applies. In my opinion, however, it is open to the Court to confirm the admission of the Loan Agreement into evidence on satisfaction of one of the two matters specified in s.304(2) of the Duties Act. Accordingly, if I am otherwise satisfied a sequestration order should be made against the estate of the respondent, I will direct the applicant to provide to the Chief Commissioner the name and address of the respondent, being the person liable to pay the duty,[32] together with the original of the Loan Agreement or, if the applicant does not hold the original, a copy. I will make a sequestration order after the applicant proves he complied with the directions I propose to make.
[32] Duties Act, s.207
The end result of this part of the respondent’s case is that I will give the respondent leave to re-open his case based on the Loan Agreement not having been stamped under the Duties Act. If, however, I am otherwise satisfied a sequestration order should be made, the Loan Agreement’s not having been stamped will not prevent my making a sequestration order provided the applicant provides to the Chief Commissioner the Loan Agreement and name and address of the respondent.
I now consider the matters that were argued at the hearing on 14 July 2014.
Application to amend grounds of opposition
At the hearing of 14 July 2014, the respondent applied to amend his grounds of opposition by adding the following three grounds:
2.The respondent disputes the debt
3.This Honourable Court is not the appropriate forum to resolve the issues regarding the debt
4.The petition is an abuse of process
Legal Principles
The document for which the respondent seeks leave to amend, namely, his “Notice stating grounds of opposition to . . . petition”, is a form prescribed by the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) (Bankruptcy Rules). It is a form that must be completed, filed and served by a person who intends to oppose a petition. One of the things it must contain is the “grounds of opposition”. The document, therefore, is intended to give notice to the applicant of the nature of the respondent’s case the applicant must meet at the hearing. It also defines the issues the Court is required to determine at the hearing of a creditor’s petition.
Like other documents filed in the course of a proceeding before this Court (and other courts), a notice of grounds of opposition may be amended. The power to amend is contained in r.7.01(1) of the Federal Circuit Court Rules 2001 (Cth) (FCCR) which provides:[33]
At any stage in a proceeding, the Court or a Registrar may allow or direct a party to amend a document (other than an affidavit) in the way and on the conditions the Court or the Registrar thinks fit.
[33] Section 33(1)(b) of the Act empowers the Court to “at any time allow the amendment of any written process, proceeding or notice under this Act”.
This rule applies to documents filed pursuant to the Bankruptcy Rules. That is so because r.1.03(2) of the Bankruptcy Rules provides that the “other rules of the Court apply, so far as they are not inconsistent with these Rules, to a proceeding to which the Bankruptcy Act applies”.
Rule 7.01 is similar to rules of court that are found in most jurisdictions in Australia. And when the power is invoked to amend a pleading, or some other document which serves the purposes of a pleading, it will only be exercised if the amendment is necessary for the purpose of deciding the real issue or controversy between the parties.[34] The power to amend will not be exercised, therefore, if the proposed amendment seeks to raise something that is not truly in issue or which cannot reasonably be regarded as truly being in issue.
[34] Aon Risk Services Australia Ltd v Australian National University (2009) 239 CLR 175 at pages 204-209 ([67]-[85])
The initial question I must consider, therefore, is whether the proposed amendments, if allowed, will raise issues about which there is a real issue or controversy between the parties.
Leave to contest debt
By grounds 2 and 3 of the proposed amended grounds of opposition the respondent wishes to put in issue the debt described in paragraph 1 of the second amended creditor’s petition. The ground on which the respondent says he denies the debt is set out in that part of his affidavit of 9 May 2014 that I have set out in paragraph 60 of these reasons, and which I repeat here:[35]
The debt represented by Deep Blue Marine is a loan extended to me by my brother Mr Kim Preece and the debt represented by Mr Kim Preece is a loan extended to me by my sister Ms Anne Preece.
[35] G Preece affidavit, 09.05.14, [8]
On 14 July 2014 counsel for the respondent submitted the debt the respondent acknowledges he owes is one that he owes to his sister, not to the applicant. Counsel further submitted that the affidavit the applicant has sworn verifying paragraph 1 of the second amended creditor’s petition which describes the debt is not sufficient proof of the debt.
I do not accept counsel’s submissions. First, the paragraph of the respondent’s affidavit on which counsel relied must be considered with the other evidence. I have set out in paragraphs 16 to 21 of these reasons portions of the respondent’s affidavit that, in my opinion, are unequivocal acknowledgements by the respondent that he is indebted to the applicant. The respondent also clearly acknowledged that he owes the applicant a debt in the letter dated 26 November 2013 to which I refer in paragraph 21 of these reasons.
Second, as I note above, the applicant tendered into evidence the Loan Agreement. The Loan Agreement provides for each of the applicant and DBMA to lend $100,000 to the respondent. Clause 2.1 required the respondent to repay the loan on the date being 12 months from the date of the agreement. Clause 3.1 provides for the payment of interest.
Third, the respondent did not in his grounds of opposition state he disputed the debt. He has not put on any evidence to explain why he did not raise that ground. And he has not put on any evidence that money was not advanced to him under the Loan Agreement or that he has paid all or any part of the loan advanced under the Loan Agreement.
There being no real controversy between the applicant and the respondent about whether the debt claimed in paragraph 1 of the second amended creditor’s petition is owing by the respondent to the applicant, there is no occasion for me to exercise the power under r.7.01 to amend the respondent’s notice of grounds of opposition to raise as an issue the existence of that debt. Accordingly, I refuse to permit the respondent to amend his grounds of opposition by adding proposed grounds 2 and 3 to that document.
Abuse of process
At the hearing of 14 July 2014 counsel for the respondent relied on two matters for submitting that the applicant’s pursuit of a sequestration order against the respondent is an abuse of process. First, counsel submitted there is “an incredibly acrimonious relationship” between the respondent, on the one hand, and his siblings, including the applicant, on the other; and that “these proceedings are more about prosecuting the dispute between the siblings than about any alleged debt”.[36] Second, counsel relied on evidence of a conversation between the respondent’s solicitor and the respondent’s former partner, Ms Sutton, in which Ms Sutton said that the respondent’s sister had telephoned her and suggested that Ms Sutton’s mother “join us in the legal proceedings against [the respondent] and then your mum wouldn’t have to pay for legal fees”.[37] In the same conversation, it is said that Ms Sutton also said that the applicant had called her to suggest Ms Sutton call the applicant’s solicitor to join the proceedings. Counsel submits that this is evidence of a petitioning creditor “rallying other potential supporting creditors” and that this constitutes material “upon which the court could base in part the inference that [the applicant’s] motives are otherwise than simply prosecuting the sequestration proceedings for their proper purpose being public interest in not having debtors continue to incur debts”.[38]
[36] T9.40
[37] Touma affidavit, 14.07.14, [2]
[38] T30.25
It is an abuse of the process of the court for a person to commence or maintain a proceeding “for some ulterior or improper purpose or in an improper way”.[39] What constitutes an abuse of process in the case of proceedings for a sequestration order was considered by the High Court in Rozenbes v Kronhill.[40] The Court accepted that the headnote to Ex parte Griffin; In re Adams[41] accurately stated the general rule of when a bankruptcy proceeding will be regarded as an abuse of process:[42]
When the court sees that a bankruptcy petition is presented, not with the bona fide view of obtaining an adjudication, but for a collateral purpose and with the view of putting pressure on the debtor, it will refuse to make an adjudication, even though there be a good petitioning creditor’s debt, and an act of bankruptcy has been committed.
[39] Jeffery & Katauskas Pty Ltd v SST Consulting Pty Ltd (2009) 239 CLR 75 at page 93 ([27])
[40] (1956) 95 CLR 407
[41] (1879) 12 Ch. D. 480
[42] Rozenbes v Kronhill (1956) 95 CLR 407 at page 418
The High Court referred with apparent approval to a passage from the judgment of Isaacs J in Dowling v Colonial Mutual Life Assurance Society Ltd,[43] noting his Honour’s distinction between motive and purpose for bringing bankruptcy proceedings:[44]
The question of what constitutes an abuse of the process was considered by Isaacs J in Dowling v Colonial Mutual Life Assurance Society Ltd. His Honour distinguished between purpose and motive, and said: “Where it can be shown in a case of insolvency that the creditor is making his application not intending to pursue it to a recognized lawful end – whatever his motive may be for attaining that lawful end – but for the real purpose of attaining some other and improper end, such as extorting money . . . there is an abuse of process”.
[43] (1915) 20 CLR 509 at pages 521 and 523
[44] Rozenbes v Kronhill (1956) 95 CLR 407 at page 417
In my opinion, even if the respondent is able to prove the applicant substituted himself as creditor because he holds ill feelings towards the respondent, that would not render the applicant’s seeking a sequestration order an abuse of process. It would only disclose the motive for which the applicant wishes to obtain a sequestration order against the respondent. It could not rationally ground an inference that the applicant is pursuing the proceedings for a purpose other than the legitimate purpose of the Court hearing and determining his claim for a sequestration order.
In any event, the evidence on which the respondent relies,[45] even if I accept it, does not raise a prima facie case that the applicant’s desire to obtain a sequestration order has been driven by ill will unrelated to the respondent’s being indebted to the applicant. The applicant lent the respondent $100,000 that was due to be repaid in December 2010. The loan has not been repaid. In his letter of 26 November 2013 to the applicant, the respondent recognised that his defaulting on the loan has caused the applicant “difficulties”. This evidence shows that the applicant’s applying for a sequestration order is conduct that any creditor in the applicant’s position would have pursued.
[45] In addition to the evidence I have set out earlier in my reasons, the evidence on which the respondent relies includes that contained in paragraphs 19-24 of his affidavit of 14 July 2014 (excluding paragraph 20, which was not read).
Further, even if the respondent proved that the applicant suggested to the respondent’s former partner’s mother to join as a supporting creditor, that too could not amount to or even be evidence of an abuse of process. The suggestion was for the mother to exercise rights she may have had as a creditor. It cannot reasonably be contended that the suggestion to join in the proceedings was made for a purpose other than for the mother to exercise her rights as a creditor.
For these reasons, I am of the opinion there is no real issue that the applicant applied to be substituted as a creditor for a purpose other than the legitimate purpose of obtaining an adjudication of the claims for relief he makes in the second amended creditor’s petition. Accordingly, I decline the respondent’s request to amend his grounds of opposition by including as an additional ground that the second amended creditor’s petition is an abuse of process.
Application for an adjournment
At the hearing of 14 July 2014, the respondent applied for an adjournment. The respondent sought the adjournment to enable the respondent time to provide further evidence, principally in relation to solvency but also in relation to abuse of process. Having found there is no arguable basis for alleging abuse of process, I do not need to consider the respondent’s application for an adjournment to obtain evidence on that issue.
Precisely what further evidence the respondent wished to tender on his solvency, if an adjournment is granted, was and is not clear. In his affidavit made on 14 July 2014, the respondent refers to a statement of his assets and liabilities that he says was prepared by his accountant. The respondent says that statement shows he has net assets of $1,738,417.[46] Counsel for the respondent said that “the respondent instructs me that he wishes to put on more voracious [sic: veracious] evidence as to his solvency”.[47]
[46] G Preece affidavit, 14.07.14, [5]
[47] T29.20
Given the respondent’s inability to identify with any precision the type of evidence in relation to solvency he wishes to put on, if an adjournment were granted, I am not satisfied the respondent would be able to put on any additional evidence of solvency, or any additional evidence of solvency that improves the evidence on solvency he has already filed. In any event, the respondent had the benefit of a de facto adjournment from 14 July 2014 to 15 August 2014, yet the respondent did not apply to adduce further evidence of solvency at that hearing. Accordingly, I refuse the respondent’s application for an adjournment.
Before I leave this part of my reasons, I should refer to my understanding that there are proceedings relating to the appointment of other attorneys in relation to the respondent’s mother. At the hearing of 14 July 2014, counsel for the respondent confirmed the respondent does not rely on those proceedings as a ground for seeking an adjournment of the hearing of the creditor’s petition.
Proof of matters specified in s.52(1) of the Bankruptcy Act
Having refused to grant the respondent an adjournment, I now turn to whether the applicant has satisfied the matters specified in s.52(1) of the Bankruptcy Act 1966 (Cth) (Act).
I am satisfied of the following matters: that a bankruptcy notice was served on the respondent on 14 November 2012 and that the respondent did not comply with its requirements; the respondent consequently committed an act of bankruptcy on 5 December 2012; the creditor’s petition that was filed on 5 April 2013 on the basis of the act of bankruptcy was verified in accordance with r.4.02(2) of the Bankruptcy Rules; the initial creditor filed with the creditor’s petition an affidavit of service as required by r.4.04(1)(b) of the Bankruptcy Rules, but did not file an affidavit as required by r.4.04(1)(a); that omission was sought to be cured by the creditor filing an affidavit on 2 May 2013 stating the matters prescribed by r.4.04(1)(b); the creditor’s petition as verified by the initial creditor, an affidavit of service of the bankruptcy notice, and trustee’s consent were served on the respondent on 23 April 2013; the debt referred to in paragraph 1 of the second amended creditor’s petition has been verified and the debt is still owing by the respondent to the applicant; and the applicant has filed an affidavit of search and an affidavit of debt as required by r.4.06(3) and r.4.06(4) of the Bankruptcy Rules.
Accordingly, I am satisfied that, with one exception, the requirements of the Act and the Bankruptcy Rules for the making of a sequestration order are satisfied. The exception, as I note in the previous paragraph, is that the first creditor did not file with the creditor’s petition, and did not serve the respondent with an affidavit of search as required by r.4.04(1) of the Bankruptcy Rules. The respondent has not raised this non-compliance as an issue. In my opinion, the failure to comply with the rule is but a minor irregularity which cannot have caused any prejudice to the respondent. Accordingly, pursuant to r.1.06 of the FCCR, I dispense compliance with r.4.04(1) of the Bankruptcy Rules.
Is the respondent solvent?
Even if the Court is satisfied the matters specified in s.52(1) of the Act are proved, s.52(2) of the Act provides that the Court may dismiss the petition if it “is satisfied by the debtor” that, among other things, the debtor “is able to pay his or her debts”. The respondent submits that he is able to pay his or her debts and that, for that reason, the Court should dismiss the second amended creditor’s petition.
Legal principles – relevance of a proven ability to pay debts
The words “able to pay his or her debts” do not mean “willing and able” to do so.[48] A debtor, therefore, who is able to pay his or her debts, but who is unwilling to pay the debt owed to the debtor’s petitioning creditor, remains a person who can pay his or her debts, and the Court may, in its discretion, dismiss a creditor’s petition against such debtor. This reflects the absence of “any policy underlying the Act that a debtor should be made bankrupt if he is able to pay his debts but is unwilling to do so”.[49] If a debtor is “able to pay his debts but is recalcitrant, his creditors may resort to the remedies otherwise afforded by the law such as execution against his property and garnishee proceedings”.[50]
[48] Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596 at 599 (Bowen CJ, C A Sweeney and Lockhart JJ)
[49] Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596 at 599
[50] Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596 at 599
The Court will not necessarily dismiss the creditor’s petition if it is satisfied the debtor is able to pay his or her debts. The Court’s satisfaction only enlivens a discretion to do so. In Re Sarina; Ex parte Wollondilly Shire Council the Court said:[51]
The power conferred upon the court by s 52(2) is permissive, not mandatory, although it seems that the occasions on which the discretion not to dismiss the petition might be exercised would not be frequent. It may, in a proper case, require the refusal of a sequestration order, yet permit the adjournment of the petition rather than its dismissal. The variety of circumstances that may arise in particular cases renders plain the undesirability of seeking to define parameters of the exercise of the power.
[51] Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596 at 600
The nature of the discretion conferred by s.52(2) of the Act was briefly examined by the Full Court of the Federal Court in Trojan v Corporation of Town of Hindmarsh.[52] In that case, the Full Court noted that the principle in Re Sarina would not apply to circumstances where the creditor faces enormous difficulties in enforcing its rights to recover its judgment by means other than bankruptcy:[53]
In those circumstances, as distinct from a case where ample assets were available upon which to levy execution, the principle laid down in the Sarina case would not necessarily be satisfied by a sterile demonstration of an ability to achieve a payment which was not in reality at all likely to be compelled. Section 52(2)(a) envisages a situation which will probably bear fruit in payment. It is not easy to see any other reason why the legislature saw fit to make a demonstration of ability to pay only a discretionary ground of dismissal of a petition, and not an absolute bar to its success.
[52] (1987) 82 ALR 255
[53] Trojan v Corporation of Town of Hindmarsh (1987) 82 ALR 255 at 268
Legal principles – meaning of “able to pay his or her debts”
Section 52(2)(a) of the Act does not use the word “solvent”;[54] nor does it use the words “as and when they become due and payable”.[55] It simply says “he or she is able to pay his or her debts”. In other words, s.52(2)(a) does not in terms require the debtor to be “solvent”. Notwithstanding the omission of these words from s.52(2)(a), the cases have construed s.52(2)(a) as requiring the Court to be satisfied the debtor is “solvent” in the sense of not being “insolvent” as that term was explained in Sandell v Porter:[56]
Insolvency is expressed in s. 95 [of the Bankruptcy Act 1924] as an inability to pay debts as they fall due out of the debtor’s own money. But the debtor’s own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time – relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor. The conclusion of insolvency ought to be clear from a consideration of the debtor’s financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor’s inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency. Whether that state of his affairs has arrived is a question for the Court and not one as to which expert evidence may be given in terms though no doubt experts may speak as to the likelihood of any of the debtor’s assets or capacities yielding ready cash in sufficient time to meet the debts as they fall due.
[54] Being a term which is defined in s.5(2) of the Act.
[55] Which is part of the definition of “solvent” in s.5(2) of the Act.
[56] (1966) 115 CLR 666 at 670-671. The cases which so construed s.52(2)(a) were identified by Cowdroy J in Rigg v Baker [2006] FCAFC 179 at [104]. His Honour referred to Lawman v Queensland Building Services Authority [1999] FCA 1781 (Full Court at [21]); Stankiewicz v Plata [2000] FCA 1185 (Full Court at [30]); St George Bank Ltd v Helfenbaum [1999] FCA 1337 at [22]; Re Eather; Ex parte Palada (unreported 30 May 1996 FCA, Cooper J); McVey, re Ex Parte Carswell & Company (unreported 22 May 1996 FCA, Cooper J) and International Alpaca Management Pty Ltd v Ensor [1999] FCA 72.
Some of the relevant principles for determining whether, on this approach, a debtor is able to pay his or her debts were usefully stated by Driver FM (as his Honour then was) in Deputy Commissioner Of Taxation v Caporale as follows:[57]
The inquiry emphasises that it involves a consideration of the ability to command cash resources through his or her own assets. The Court must also look at the level of the debtor’s recurrent expenses and earnings in addition to whether there are cash resources from assets.
A respondent debtor bears the onus of proving to the Court that their assets are sufficient to pay their liabilities as and when they become due and payable. It is not sufficient to simply show an excess of assets over liabilities. The respondent debtor must also establish that their assets are available to be realised and that they are capable of ready realisation.
[57] [2013] FMCA 5 at [23] and [24]
Is the respondent able to pay his debts?
The principal, if not only evidence, on which the respondent relies for his contention that he is able to pay his debts is the statement of his assets and liabilities (SAL) to which I refer above.
There are a number of matters which raise in my mind doubt about the accuracy of the SAL. Chief among them is whether all of the assets are assets that belong or are available to the respondent. I am here referring to the assets described as “plant and equipment” (valued at $260,000), “stock and WIP" (valued at $154,000), and “Business Goodwill at 3 times EBIT” (valued at $650,000). All these appear to be assets of a business which, from the passage I have set out in paragraph 19 above, appears to be conducted by T.D. Preece Pty Ltd, not by the respondent himself. I am not satisfied, therefore, that the SAL accurately represents the respondent’s financial position.
At any rate, even if the SAL is accurate, it does not satisfy me that the respondent can pay his debts. It “is not sufficient for the respondent simply to establish that he has assets which exceed his liabilities in value. It must also be established that the assets are available to be realised and that they are capable of ready realisation”.[58] And there is positive evidence the respondent cannot pay his debts. The principal evidence is the debt on which the applicant relies for the making of a sequestration order. The debt was due to be paid in December 2010, three and a half years ago, but has not been paid. There is in evidence a judgment for $88,932.92 entered by DBMA against the respondent.[59] That was entered on 11 January 2013. That judgment has not been satisfied, as it is recorded as a liability in the SAL.
[58] Australia & New Zealand Banking Group Pty Ltd v Foyster [2000] FCA 400 at [17] (Hely J)
[59] Exhibit B
At the hearing of 14 July 2014, counsel for the respondent submitted that the respondent’s failure to pay should be characterised as the act of a recalcitrant debtor; the respondent is able but not willing to pay the debt. I do not accept that submission. The respondent’s evidence of his attempts to obtain a loan from his mother’s estate by itself indicates that the respondent is willing, but not able, to pay the debts he owes the applicant and DBMA.
At the hearing of 14 July 2014, counsel for the respondent also submitted that the Court should not take into account what counsel for the applicant has claimed to be debts owed by supporting creditors, of which DBMA is one. I do not accept that submission to the extent it relates to DBMA. As I note above, DBMA has a judgment against the respondent in the amount of $88,932.92, that amount is recorded as a liability in the SAL, and the respondent has not adduced any evidence to indicate the judgment debt is not due and payable.
For these reasons, I am not satisfied the respondent is able to pay his debts.
Conclusions and disposition
My conclusions may be stated as follows:
a)The respondent has not demonstrated an arguable case that the debt on which the applicant relies for a sequestration order is a debt the respondent jointly owes to the applicant and DBMA. Even if the debt is jointly owed to the applicant and DBMA, it is within the power of the Court to make an order under s.49 of the Act to order DBMA be joined as an applicant or respondent to the creditor’s petition. It would therefore be futile to grant the respondent leave to re-open his case to apply for an order seeking to set aside the Registrar’s order that the applicant be substituted as creditor.
b)The applicant’s case for a sequestration order relies on the admission into evidence of a Loan Agreement that has not been stamped under the Duties Act. The Court cannot have regard to it unless, among other things, the applicant provides to the Chief Commissioner the Loan Agreement, and details of the person liable to pay duty on the Loan Agreement.
c)Apart from the matters referred to in (b), the applicant is entitled to a sequestration order, and the respondent has not demonstrated he is able to pay his debts, or that there is any other reason for the Court not making a sequestration order.
At this stage, the only orders I propose to make are that within seven days the applicant:
a)provide to the Chief Commissioner the original of the Loan Agreement or, if the applicant does not hold the original, a copy of the Loan Agreement, together with a letter providing a statement to the effect that the respondent is the person liable for the payment of duty, if any, under the Loan Agreement, together with the name, address, and contact details of the respondent and his current legal representatives; and
b)file and serve an affidavit confirming performance of the order referred to in (a).
I will stand the matter over to 9.30 am on 7 November 2014. If the applicant complies with the order to which I refer in paragraph 93, I propose on that day to make an order confirming the reception into evidence of the Loan Agreement, and then make a sequestration order. I also propose to make an order that the respondent pay the applicant’s costs, and that those costs be paid from the estate of the respondent in accordance with the Act.
I certify that the preceding ninety-four (94) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis
Associate:
Date: 24 October2014
Key Legal Topics
Areas of Law
-
Insolvency
-
Tax Law
-
Civil Procedure
Legal Concepts
-
Abuse of Process
-
Appeal
-
Jurisdiction
-
Procedural Fairness
-
Remedies
-
Statutory Construction
0
15
6