Re McCabe, C.J.T v Ex parte Valassis, D. v Official Trustee in Bankruptcy

[1993] FCA 676

676  , 93

JUDGMENT No. ........ ........ .. ........ ....

THE FEDERAL COURT OF AUSTRALIA )

NEW SOUTH WALES DISTRICT REGISTRY )	No. NB 1814 of 1992
GENERAL DIVISION	1

Re:  COLIN JAMES THOMAS McCABE

Bankrupt

Ex parte: DENNIS VALASSIS

Applicant

And: THE OFFICIAL TRUSTEE IN

RECEIVED BANKRUPTCY

Respondent

FEDERAL COURT OF

AUSTRALIA PRINCIPAL

EINFELD J SYDNEY 7 SEPTEMBER 1993

In the fiscal years 1984/5 and 1985/6 the applicant Dennis Valassis took out various types of insurance on a number of properties which he then owned. The insurance was arranged through a broker, the bankrupt Colin James Thomas McCabe, who was then a director and proprietor of McCabe Insurances Pty Limited (the company) and a related company which together carried on business as insurance brokers. Mr McCabe's wife was also involved in the running of these companies.

the secretary of the company, that he was licensed to be an	insurance broker, and that if Mr Valassis was to deal with the
company he would be dealing with Mr McCabe personally. Mr McCabe promised him personal attention and what was described as "my personal guarantee". Mr Valassis was told that he was a valuable customer and that Mr McCabe would be happy to do business with him.
This appears to have been the background to the commencement by M r Valassis of his business association with Mr McCabe and his company. In due course the company invoiced Mr Valassis for the various policies and the premiums were paid. The receipt was signed by the bankrupt for his company and the invoice and the receipt both appear on letterheads of the company.
Mr Valassis claims that at no time was he ever supplied with
the insurance policies for which he paid the premiums. Apparently believing that the policies were thus never taken out, and that his premiums were expropriated by Mr McCabe or his company, M r Valassis sued Mr McCabe and his two companies
premiums totalling $7364.83. In addition Mr Valassis sued for in the Manly Local Court on 28 August 1989 for the recovery of
an amount of $759 which it was said he had had to pay to Ken Dunn Glazing in 1985 to replace some broken glass supposedly covered by a particular glass policy which was among those he had requested to be taken out.
The Manly Court proceedings were not defended and in due course a judgment was obtained on 23 August 1990 in the sum of $14,146.25. The balance over and above the amounts originally claimed was apparently calculated by the Local Court as being interest due from the time the original premiums were paid. Although the Local Court pleading does not make it entirely clear, the nature of the claim appears to have been that Mr Valassis paid for policies which the company did not in fact take out on his behalf and, therefore, that the premiums and the cost of the broken glass were repayable. It is not clear to me why undefended proceedings took a year to be completed but a subsequent application to have the judgment set aside was refused.
Mr McCabe was personally made bankrupt on 2 July 1992. In the bankrupt estate Mr Valassis has sought to prove for a debt of $17,892.89, representing the amount obtained in the Manly Local Court plus interest between the date of judgment and the date of proof of debt. The debt has been rejected by the Official Receiver on behalf of the respondent Official Trustee in Bankruptcy on the grounds that there was insufficient
Valassis to take out the relevant insurance policies and then evidence to prove that Mr McCabe personally agreed with Mr
failed to do so; and, in the case of the Ken Dunn payment, that there was no evidence that Mr McCabe was liable to pay Ken Dunn Glazing for the claim concerned. Mr Valassis, appearing in person, applies to the Court today to revoke or overturn the rejection of his proof of debt and for an order that the proof of debt be accepted.
A significant quantity of evidence for what otherwise might
appear to be a relatively small matter has been placed before the Court. Despite Mr Valassis' claim -- and there ie no contrary evidence -- that he has never seen the insurance policies concerned, the evidence discloses that the relevant insurance cover was taken out by the company as a broker with various insurance companies. The evidence also makes it not open to doubt that a number of insurance companies or underwriters received the premiums paid by Mr Valassis to the company and that the appropriate insurance policies were brought into existence. Thus the company must have paid these premiums to the insurers or underwriters concerned. Hence, although I accept the evidence that Mr Valassis has never actually seen the policies, I am satisfied that the policies did in fact exist and that the relevant insurance coverages in fact pertained in the periods for which payments were made. In fact nothing in the conduct of these proceedings suggested that this was seriously disputed, except by oral submission made by Mr Valassis from the bar table in the teeth of and
why the glass claim was not paid or even that there was a despite the available evidence. There was no evidence as to
claim made under a policy covering broken glass at all. Hence the primary question raised in this application, namely, as to whether Mr McCabe assumed personal responsibility for the insurances, does not really need to be decided because the basis upon which the judgment was obtained in the Manly Court was never the fact. The assertion that either Mr McCabe or his company failed to take out the insurance policies for which Mr Valassis had paid is simply contradicted by all the insurance material that has been produced.
However, because of the way the matter has been raised, it is appropriate that I pass comment and judgment upon whether if a debt did exist, it could be proved in the bankruptcy. There is no doubt that a trustee in bankruptcy has the power to go behind a judgment or other proof of debt to examine whether a debt truly existed. In this case the trustee considered that there was no personal liability in Mr McCabe to meet the judgment. Mr McCabe, in his affidavit, says that he never agreed with Mr Valassis that he would be personally liable to pay for the services concerned. What that statement presumably means is that he did not agree to be personally liable to take out the insurance or for any claims which might arise under the insurance policies if claims were made but not paid.
The statement relied upon by Mr Valassis that Mr McCabe was
providing him with his personal guarantee was, in my assessment, not intended to be and was not in fact a personal
guarantee of the obligations of the company but an undertaking that he would give Mr Valassis personal attention and proper and adequate professional treatment. The documentary evidence in the case shows that the premiums were paid to the company, not to Mr McCabe personally. This applied both in 1984 and in 1985 in respect of a considerable number of separate and distinct policies. Yet it was not until 1989 that action was taken in the Local Court. No explanation for this long delay was proffered. In the circumstances I can see no basis at all for concluding, from any and all of the documentary material placed before this Court, that any relevant actions were undertaken or not undertaken by m McCabe in a personal capacity as distinct from in his role as a director and the principal operator of McCabe Insurances Pty Limited. In other words, there seems to me to be no basis at all for finding that the personal liability of Mr McCabe adjudged by the Manly Court in his absence is in fact supported by the factual, contemporaneous, independent documentary material.
For those reasons there is no basis for overturning the decision of the Official Receiver, not only on the ground which was given, namely, of inadequacy of evidence to prove a personal guarantee by Mr McCabe, but also because the suggestion that the policies were not taken out is not supported by the facts as now presented to this Court. Accordingly the application for orders to overturn the
be accepted is refused. decision of the trustee and to require that the proof of debt [Discussion re costs]
I order that the applicant pay the respondent's costs including reserved costs.

At the time the insurance policies were taken out, Mr McCabe is said by Mr Valassis to have told him that he and his wife were the only two directors and shareholders of the company, that he was the principal business officer and his wife was

I certlfy that t h ~ s snd the f ive

I	R e z x n s for Judgment hereln of h ~ s
p r c c c d ~ i y p-ges are a true copy of the
Honour !	i

[ Dated 3% SeptembW 1943

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