Quinlivan v QBM Lawyers
[2010] FMCA 977
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| QUINLIVAN v QBM LAWYERS | [2010] FMCA 977 |
| BANKRUPTCY – Application to set aside bankruptcy notice – application to extend time for compliance with bankruptcy notice – notice of appeal against judgment filed before expiration of due date for compliance with bankruptcy notice – no exceptional circumstances – appeal has poor prospects and not bone fide. |
| Bankruptcy Act 1966 |
| Bhagat v Global Custodians Ltd [2002] FCAFC 51 Byron v Southern Star Group Pty Ltd (1997) 73 FCR 284 Conway v Jackson (2001) 107 FCR 201 Re Briggs: Ex-parte Briggs v Deputy Commissioner of Taxation (1986) 12 FCR 310 Re James & Anor: Ex-parte Carter Holt Harvey Roofing (Australia) Pty Ltd (1993) 46 FCR 183 |
| Applicant: | DUDLEY JAMES QUINLIVAN |
| Respondent: | QBM LAWYERS (A FIRM) |
| File Number: | BRG 1120 of 2010 |
| Judgment of: | Burnett FM |
| Hearing date: | 11 November 2010 |
| Date of Last Submission: | 11 November 2010 |
| Delivered at: | Brisbane |
| Delivered on: | 12 November 2010 |
REPRESENTATION
| Solicitors for the Applicant: | Radcliff Taylor Lawyers |
| Counsel for the Respondent: | Mr Bland |
| Solicitors for the Respondent: | QBM Lawyers |
ORDERS
That the application filed 4 November 2010 be dismissed.
Subject to any further application being made within seven days from today’s date, the applicant pay the respondent’s costs of and incidental to the application to be assessed on a standard basis.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 1120 of 2010
| DUDLEY JAMES QUINLIVAN |
Applicant
And
| QBM LAWYERS (A FIRM) |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
On 3 September 2010, summary judgment was entered against the applicant debtor Dudley James Quinlivan in the Supreme Court of Queensland for a sum of $189,154.72 plus interest. A bankruptcy notice issued on 4 October 2010, and the respondent creditor QBM Lawyers (A Firm) caused it to be served upon the debtor on 10 October 2010. On 4 November 2010, the debtor made application to the Court for orders including interim orders in these terms:
(1)The bankruptcy notice number 4381 of 2010 which was served on the applicant on the 14th day of October 2010 be set aside. A copy of that bankruptcy notice accompanies this application.
(2)Pursuant to section 41(6A) of the Bankruptcy Act 1966 that the time for compliance with the bankruptcy notice be extended pending the outcome of the appeal (CA 11374 of 2010) against the whole of the order of the Supreme Court on which the bankruptcy notice number 4381 of 2010 is based.
(3)Costs.
In addition the applicant seeks the following interim orders:
(1)Pursuant to section 41(6A) of the Bankruptcy Act 1966, the time for compliance with the bankruptcy notice be extended pending the outcome of the appeal (CA 11374 of 2010) against the whole of the order of the Supreme Court on which the bankruptcy notice number 4381 of 2010 is based.
(2)Alternatively, that the time for compliance with the bankruptcy notice be extended to a date fixed by this Honourable Court.
The creditor opposes the application.
In support of the application, the applicant filed affidavits addressing the matters required by Bankruptcy rule 3.02 and 3.03 and stated as grounds in support of the application that the debtor is appealing against the summary judgment decision of the Supreme Court. In essence, the debtor challenges the existence of the debt upon which the judgment and in turn the debt is founded; Re Briggs: Ex-parte Briggs v Deputy Commissioner of Taxation (1986) 12 FCR 310. No other ground is advanced. Accordingly while the debtor may supplement his affidavit material addressing this ground raised within time, no other ground can be raised out of time; Re James & Anor: Ex-parte Carter Holt Harvey Roofing (Australia) Pty Ltd (1993) 46 FCR 183.
Section 41(6A) of the Bankruptcy Act relatively provides:
“Where before the expiration of the time fixed for compliance with the requirements of a bankruptcy notice:
(a) Proceedings to set aside a judgment or order in respect of which the bankruptcy notice was issued have been instituted by the debtor, or
(b) An application has been made to the court to set aside the bankruptcy notice. The Court may, subject to subsection 6C, extend the time for compliance with the bankruptcy notice. Relevantly, 6C provides that when a debtor applies to the Court for an extension of time for complying with a bankruptcy notice on the ground that the proceedings to set aside a judgment or in respect to which the bankruptcy notice was issued have been instituted by the debtor and (b) the cause of the opinion that the proceedings to set aside the judgment or order:
(i) have not been instituted bona fide, or
(ii) are not being prosecuted with due diligence,
the Court shall not extend the time for compliance with the Bankruptcy notice.”
The conventional approach to determination of these applications involves:
(a)determining whether there are on foot proceedings to set aside the judgment, and if so
(b)whether in the exercise of the Court’s discretion in light of s.41(6C), the time for compliance should be extended; Conway v Jackson (2001) 107 FCR 201.
It should be noted that although in this case relief is sought under each of sections 41(6A) sub-para (a) and sub-para (b), the basis for relief remains common, that is, that there is in fact no debt upon which the judgment is founded. It was also accepted by each of the debtor and creditor that the debtor has filed a notice of appeal against the judgment entered against him. That appeal was filed on 19 October 2010, that is after service of the bankruptcy notice but before the application made pursuant to section 41(6A).
It is accepted that filing a notice of appeal does constitute a proceeding to set aside a judgment. Conway v Jackson supra. It follows that in the context of this application, the debtor has satisfied the requirements of s.41(6A)(a) enlivening the discretion to extend time for compliance and time may be extended provided the terms of s.41(6C) are satisfied.
The debtor says s.41(6C) is satisfied because he contends that the appeal is bona fide and will be prosecuted diligently. Counsel for the creditor challenges those assertions. His submission requires some consideration of the judgment sought to be impugned. The creditor contends that the judgment is soundly based and that the prospects on appeal are poor and success on appeal remote.
Judgment was regularly entered against the debtor in the Supreme Court. It followed an application for summary judgment. The debtor was represented at the hearing and the application proceeded following the debtor having filed a defence. Judgment was sought to recover money due by the debtor to the creditor in respect of legal costs. As can be seen from the transcript of reasons in the Supreme Court, the creditor was not entirely successful and part of its claim was sent off for trial. After judgment was entered, the debtor then filed a notice of appeal. The notice of appeal is contained as an annexure to the affidavit Mr Alexander filed in this application. The grounds identified in the notice of appeal are as follows:
“(1)The learned chamber judge erred in finding that the appellant/defendant had no real prospect of successfully defending the respondent/plaintiff’s claim or part thereof.
(2)The learned chamber judge erred in granting judgment at an early stage in the proceedings at a time when the appellant defendant had not been afforded the opportunity to properly investigate the defences which were or were likely to be available to him.
(3)The learned chamber judge erred in failing to adjourn the application for a reasonable period of time so as to afford the appellant defendant a reasonable opportunity to seek leave to have the bills the subject of the proceedings assessed and –subsequently to be assessed so as to afford the appellant a reasonable opportunity to defend the proceedings.
(4)The learned chamber judge erred in finding that bills which were rendered and which were the subject of the proceedings were itemised bills, when he should have found that they were lump sum bills and, as such, they should have been the subject of further investigation before giving judgment in favour of the respondent/plaintiff.”
In some respects, the poor prospects of success on at least two grounds are apparent because they go directly to the exercise of discretion. However, dealing with each of the matters in turn the creditor submitted that none of the grounds enjoyed any real prospects of success.
Ground One: No prospect of successfully defending the plaintiff’s claim.
At the time of the application before his Honour a defence had been filed. It did no more than put the creditor to proof in respect of its claim. It did no more than traverse the allegations and did not put any substantive matters into issue. (See the affidavit of Alexander, annexure A page 48).
Furthermore, that was the position open to be adopted by the creditor’s counsel at the hearing as noted in his submissions. To that point there had been no substantive defence or bona fide dispute; none had been raised in the affidavit material or in correspondence between the parties or in correspondence between the solicitors and, as counsel noted, Mr Quinlivan did not to that point swear to any defence. Finally, there is the matter of the admissions. Admissions were contained in the original correspondence annexed to the affidavit of Mr Muller in this application. They are best summarised in an annexure to the creditor’s counsel’s submissions before the Supreme Court at pages 50 to 57 of annexure A.
Additionally it is worth noting that most of the debtor’s submissions before the Court were directed to the issue of withdrawal of admissions that had been made but nothing was directed to the defence itself. That is further apparent from a review of the transcript of the hearing particularly at transcript pages 7 and 8, and annexure A pages 24 and 25, where, in an exchange between Lyons J and the lawyer appearing for the debtor it was apparent that no defence had been formulated and indeed the debtor’s lawyers had, at that time, no real idea what the defence might be. From the transcript, the debtor’s submissions appeared to constitute little more than filibustering
When the debtor’s lawyer was finally cornered and compelled to answer the Court as to what defence might be forthcoming, the best that could be found in the exchange between his Honour and the debtor’s lawyer was a reference to a potential issue of overcharging. (See transcript 12 at line 20, annexure A page 29.) Having regard to the admissions made on the pleadings: the absence of any defence; the admissions in respect of debt; and, of course, the admissions as to indebtedness – which could be inferred by the offers to pay with a little more time – it would seem ground one has poor, if any, prospects.
Ground Two: Error by granting judgment at an early stage.
The complaint was that his Honour proceeded to entertain the application when the creditor hadn’t been afforded sufficient opportunity to investigate and prepare its defence. Submissions were made to that effect at transcript page 12. It was noted, however, by his Honour that the debt at that time was about two years old and had not ever been the subject of early complaint – transcript page 8. It follows that in terms of any issue concerning the exercise of his Honour’s discretion it is unlikely that the Court of Appeal will entertain that matter with any great enthusiasm. I consider its prospects to be poor.
Ground Three: The chamber judge erred in failing to adjourn the application.
This ground seems to be a restatement of ground two but if it is directed solely to the question of adjournment generally then the Court noted that the counsel for the debtor appeared on that occasion fully prepared having written submissions for the Court and to prosecute a cross application. It was also noted that a defence had earlier been filed and that despite two years having passed no inquiries in respect of any other matters had been raised. There was no basis at that time demonstrated for further inquiry and as I have earlier noted the debtor’s lawyers, on that occasion, simply appeared to engage in filibustering. Again, it seems to me unlikely that the Court of Appeal will entertain that ground with any great enthusiasm and its prospects are poor.
Ground Four: The court erred in finding that the bills which were rendered were itemised bills when they should have been lump sum bills.
The error complained of here in relation to itemised bills as opposed to lump sum bills appears to be a question of fact. The point was not taken in the earlier proceeding and being one which was left to be resolved as a question of fact was a matter properly concluded by his Honour. His Honour had regard to the facts and, in particular, the form of the agreement which was placed before him in the material on the summary judgment application. This question of fact is in my view now unlikely to enjoy any prospects on appeal.
It follows that in my view the prospects of success on appeal by the debtor in this instance against the judgement of his Honour are poor. In saying that I am cognisant of the principle that in these sorts of applications the Court ought to be wary of second guessing the outcomes of appeal: Byron v Southern Star Group Pty Ltd (1997) 73 FCR 284. In that case, dealing with that matter generally, the Court also noted that a court should only in an exceptional case extend time for compliance of a bankruptcy notice on the ground of the existence of an appeal in an instance where no stay has been sought. I note in passing that in this case no stay has been sought in respect of the judgment.
It follows then that the only basis upon which the Court might exercise its discretion is if it can be demonstrated that this is an exceptional case. Of course, the debtor himself bears the onus of demonstrating these matters in an application of this kind: Bhagat v Global Custodians Ltd [2002] FCAFC 51.
A further ground raised by the debtor which could be said to give rise to an exceptional case is the prospect of funding to permit a discharge of the debt. Those matters were addressed by the debtor in affidavits by a solicitor Mr Faulks and Mr Burns, who is a general manager for companies associated with the applicant. I note the applicant himself swears an affidavit that the contents of the affidavits sworn by Mr Burns and Mr Faulks are true and correct.
Mr Burns swears in his affidavit that he is the general manager and project manager for a number of companies associated with the applicant. He says that approximately eight months ago, he introduced the applicant to an entity known as Australian Securitised Property Fund and its representative Mr Michael Steele. He says that he is aware that the applicant has entered into a loan arrangement whereby Australian Securities Property Fund will advance to entities associated with the applicant a sum of in excess of 36 million dollars and he attaches a copy of the proposed loan facility. He swore that on Wednesday, 27 October 2010, he was in attendance at a meeting between the applicant and Mr Michael Steele at Broadbeach, and that he sighted an ANZ bank statement containing a balance of approximately 42 million dollars. He says that at the meeting an agreement was reached between Mr Steele and the applicant concerning an advance of in excess of 36 million dollars to entities associated with the applicant. He swore at paragraph 6 in these terms:
“The funds when received are to be utilised for the following purposes:
(a)In satisfaction of existing indebtednesss by companies in the group owed to the Westpac Bank.
(b)Payment of land tax, rates and statutory debts to the group.
(c)Payment of moneys owed to creditors including QBM lawyers.”
He continued to say that while he wasn’t privy to the precise details of the loan agreement, he understood that the loan transaction was planned for completion within 14 days after the date of the meeting on 27 October 2010 and that he was aware that the applicant was required to make payment of $12,000 to solicitors for the lender which payment he said had been made. In a later affidavit sworn by Mr Faulks, he deposed to being a solicitor in the employ of solicitors who act in respect of the loan facility granted to the Croftworth Group of Companies, which is one of the groups involved in this transaction, and says that he was informed by the solicitors for the lender that the lender’s intention was to advance the funds pursuant to the agreement on or before 12 November 2010. He stated he was not aware of any reason why the advance should not be made when intended.
More recently on the hearing of the application, that is yesterday, Mr Faulks swore an affidavit attaching correspondence between the solicitors for the borrower and the lender which noted that at this time outstanding requirements in respect of the loans included matters of valuations and a guarantee being finalised. Particulars of those matters were not addressed but I note in passing that Mr Quinlivan is presently in Europe, and one would expect that he is going to be one of the guarantors. The evidence concerning the loan transaction is, to say the least, murky. There is nothing more than a number of bald statements and little correspondence. It certainly does not descend into any particularity.
Counsel for the creditor contends that I ought treat the submissions in respect of the loan transaction with some degree of caution. First, he says that there is nothing to actually say that the funds are indeed to be directed to the debtor. He notes that from the affidavit material and the correspondence, it seems that the funds are in fact to be directed to companies that are related to the debtor and to that end there is no guarantee that the funds will in fact find their way to the satisfaction of the debtor’s liability to the creditor.
For instance, he notes that while Mr Burns in his affidavit at paragraph 6(c) referred to funds, it only stated that one of the purposes of the funds would be to permit payment of moneys owing to creditors including QBM Lawyers. It did not state that the payment would be to discharge the debtor’s indebtedness to QBM Lawyers. He noted, for instance, that in the proceedings before the Supreme Court it sent off for trial a matter concerning indebtedness in respect of legal fees by an associated company called Scottsdale Homes Pty Ltd. The creditor contended funds may be applied to the discharge of that debtor’s liability.
It follows that there is nothing in the material which directly indicates that these funds will be applied to the discharge of this debt. Further, it’s noted in paragraph 2 of Mr Faulks’ affidavit that the solicitors for the lender indicated that it’s the lender’s intention to advance the funds pursuant to the agreement on or before 12 November 2012. However, as can be seen by reference to correspondence between the solicitors, as is annexed to the affidavit of Mr Muller, that position does not appear to be at all likely.
In a letter addressed by QBM Lawyers to Mr Faulks acting for one of the debtor’s related entities and dated 5 November, he requested particulars of the loan. That letter was subsequently responded to by a letter of 9 November which enclosed a letter dated 29 October. The letter of 29 October purports to set out in broad terms the requirements in respect of the proposed advance. Whilst it notes various properties which are provided as security for the amount of a loan of 36.75 million dollars, it then proceeds to identify a number of matters which are to be attended to before the loan can be finalised. Before identifying those matters, it is noteworthy that the original loan offer was extended on 3 April 2010. It is now mid-November 2010.
The solicitors noted they had received a sum of $13,200 in respect of initial fees for the preparation of documents but then noted that a number of matters had to be attended to, in particular personal guarantees had to be arranged in favour of the lender. Valuations relating to the abovementioned properties have to be transferred and/or reissued have to be transferred or reissued in the name of Australia Securities Property Fund Pty Ltd. By that I understand it to be that valuations were clearly prepared for other parties and the lender wants the valuer’s potential liability, transferred to its favour. All outstanding land tax and rates were to be paid and the writer was instructed to commence the preparation of documentation in order to enable the matter to settle, they hope, within some 14 days.
It is apparent that the guarantee issue may not appear to be resolved and certainly there is difficulty in relation to the issue of the valuations, those matters not having been attended to at this stage. Overall, in my view it all seems quite unsatisfactory having regard to the general circumstances, particularly having regard to the absence of any background detail in respect of the proposed loans.
In his submissions, the debtor’s counsel advanced this particular proposed loan as one of the bases in support of his application for extending the time for compliance with the bankruptcy notice based upon the observations of the Full Court in Bhagat (supra) and in particular its observations at paragraph 2. However, the Full Court was merely identifying that matter as a discretionary ground that can be considered in any case. I do not think the Full Court was identifying it as a discreet ground by use of the definite article “the” when discussing it. It seems plain from the earlier sentence in paragraph 2 of the judgment that the Full Court was merely noting it as a discretionary consideration, not a sole consideration. Once the discretion is enlivened under s.41(6A) it is well settled that it is at large and should be considered in that light. It follows that while I have regard to the matter generally, I do not consider the matter alone as one which would warrant the exercise of discretion.
Having regard then to the matters that I have addressed above, first, the appeal in my view is not one which is bona fide it being in my view merely a step taken by the debtor to delay the creditor in the enforcement of its rights; and the appeal is one which I consider has little if any merit particularly in face of the creditor’s admissions. On this basis the application must fail.
In any event, if I am wrong in my assessment of that matter and the matter turned to be resolved by reference to discretionary matters, I note first that no stay has been sought in respect of the judgment of the Supreme Court.
No exceptional circumstances have been demonstrated. The only circumstance which has been contended is the matter of the prospect of finance forthcoming. However for reasons that I have earlier addressed, I consider that matter is attended with so much uncertainty as to be almost illusory. On that basis, having regard to the absence of any stay, and in the absence of any exceptional circumstance, I am not prepared to exercise a discretion in favour of extending the time.
So far as the second limb of the application is concerned, that is, the second of the applications under s.41(6A), that application also invites a consideration of the appeal which, for reasons that I have earlier identified, would fail by reference to s.41(6C) or if I am wrong on that point on discretionary grounds and it follows that the application is dismissed.
Orders
That the application filed 4 November 2010 be dismissed, subject to any further application being made within seven days from today’s date.
That the applicant pay the respondent’s costs of and incidental to the application to be assessed on a standard basis.
I certify that the preceding thirty-six (36) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 13 December 2010
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