Real Estate Now Pty Ltd v Brookfield
[2018] FCCA 3072
•5 October 2018
FEDERAL CIRCUIT COURT OF AUSTRALIA
| REAL ESTATE NOW PTY LTD v BROOKFIELD | [2018] FCCA 3072 |
| Catchwords: BANKRUPTCY – Proceedings in connection with sequestration – petition and sequestration order – hearing of creditor’s petition and form of sequestration order – grounds for refusal of sequestration order – other sufficient cause – particular cases – debtor assignee of debt owed by petitioning creditor. |
| Legislation: Bankruptcy Act 1966, s.52 |
| Applicant: | REAL ESTATE NOW PTY LTD |
| Respondent: | IAN WALTER BROOKFIELD |
| File Number: | BRG 552 of 2018 |
| Judgment of: | Judge Jarrett |
| Hearing date: | 5 October 2018 |
| Date of Last Submission: | 5 October 2018 |
| Delivered at: | Brisbane |
| Delivered on: | 5 October 2018 |
REPRESENTATION
| Counsel for the Applicant: | Mr M. De Waard |
| Solicitors for the Applicant: | Mills Oakley Lawyers |
| The Respondent appeared in person |
ORDERS
The creditor’s petition filed on 7 June 2018 is dismissed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT BRISBANE |
BRG 552 of 2018
| REAL ESTATE NOW PTY LTD |
Applicant
And
| IAN WALTER BROOKFIELD |
Respondent
REASONS FOR JUDGMENT
On 7 June, 2018 the applicant presented a creditor’s petition for the sequestration of the respondent’s estate. The respondent opposes the petition and on 6 July, 2018 filed a notice setting out his grounds of opposition to the petition. A subsequent notice stating grounds of opposition to the petition was filed on 27 July, 2018. On that notice, there were eight grounds specified to oppose the creditor’s petition.
The first ground asserts that the applicant is and remains indebted to the respondent for an amount of $285,000. I will return to that ground. Ground 2 expands upon ground 1; so does ground 3.
Ground 4 asserts that the respondent has not committed an act of bankruptcy. That ground cannot succeed. The evidence satisfies me that a bankruptcy notice was properly served on the respondent to these proceedings. There is no dispute that he owes the petitioning creditor a sum in excess of $50,000. There is no dispute that sum has not been paid; there is no dispute that he was not properly served with a bankruptcy notice and there is no dispute that he did not comply with its terms. He did not apply to the Court within the time limited for compliance with the bankruptcy notice to apply to have it set aside or otherwise dealt with. In those circumstances, he has plainly committed an act of bankruptcy.
Ground 5 of the grounds of opposition suggest that the respondent has no indebtedness to the applicant. To the extent that that is an assertion that he does not owe the funds which are the subject of the costs orders attached to the bankruptcy notice, the ground must fail. To the extent that it represents an assertion that when one sets off against the amount said to be owed to the petitioning creditor, the amount the petitioning creditor is alleged to owe to the respondent, the ground has some merit.
As to paragraph 6, the ground is that the respondent is a secured creditor over the applicant’s assets via a deed of assignment and two current PPSR registered securities for the amount outstanding pursuant to the contract between the parties. That is an argument which is bound up with the first ground.
Grounds 7 and 8 are not proper grounds for opposition to the making of a sequestration order, and I disregard them.
I return to ground 1. Ground 1 relies upon the existence of a contract for the sale and purchase of a rent roll between the petitioning creditor and a company called Blue Prop Pty Ltd. That contract can be found exhibited to the affidavit of the respondent filed on 6 July, 2018 as part of annexure IBW3. For reasons that I do not understand, the annexures are not paginated, so it is impossible to pinpoint the document by reference to page numbers.
Nonetheless, the document records that it was made on 6 July, 2015. It is, on its face, between Blue Prop Pty Ltd and Real Estate Now Pty Ltd and Mark Mergard. The first party is described as the vendor; the second as the purchaser and; the third as the warrantor. The document records that the vendor has agreed to sell to the purchaser the rights to manage the letting of 61 properties at a rate of a $1.50 per $1,000, giving a total purchase price of $91,500, plus GST of $9,150, being a grand total of $100,650.
The contract of sale contains a number of terms and conditions, none of which are relevant for present purposes. As part of the same exhibit to the same affidavit, there is a deed of assignment of debt which purports to be made on 31 October, 2016. The deed is between Blue Prop Pty Ltd and the debtor in this case. It recites that the assignor is owed $220,972 by Real Estate Now Pty Ltd that company described as being subject to a deed of company arrangement. It asserts that the debt is immediately due and payable and that the assignor has agreed to assign the debt to the assignee absolutely in accordance with the terms in the deed. The deed goes on to effect the assignment.
On 31 October, 2016 there is a document signed by Blue Prop Pty Ltd or on its behalf, headed Notice In Writing of Assignment of Debt. It was addressed to the petitioning creditor in this case, then subject to a deed of company arrangement. The Notice recorded the assignment of the entitlements under the contract of sale to which I have earlier referred between Blue Prop Pty Ltd and the respondent debtor.
Thus, it seems, for the purposes of the Property Law Act 1975 (Qld), there has been a notice of the assignment given to the party liable under the contract of sale to make payments to Blue Prop Pty Ltd. In his affidavit, filed on 31 July, 2018 in these proceedings, Mr Brookfield sets out his case in respect of the contract of sale. After reciting that he does not dispute that he owes the sum the petitioning creditor claims from him, he goes on to give evidence about a debt which he alleges is owed to him by the petitioning creditor.
He explains in his affidavit, commencing at paragraph 5, that the debt arises from the applicant acquiring the asset rent roll in July, 2015 from Blue Prop Pty Ltd, “having a face value of over $100,000 plus ongoing income”. Those assertions by him in the affidavit are made out when one has regard to the contract of sale between the petitioning creditor and Blue Prop Pty Ltd.
There is a deposition by the debtor in paragraph 6 of the affidavit to this effect:
As of the affirming of this affidavit, the gross debt owed by the applicant pursuant to the sales and purchase agreement entered into by the parties is approaching $300,000.
He then gives evidence about the failure of the petitioning creditor or those in control of it to make any payments in respect of the contract of sale and he gives some evidence of his attempts to extract money from the purposes of a contract of sale. None of that evidence is answered in these proceedings. I was taken to no evidence that would suggest that the contract of sale is not a contract of sale which is otherwise enforceable as between the parties to it or that the assignment from Blue Prop Pty Ltd to the debtor in this case was not a good and effective assignment, notice of which has been given to the petitioning creditor.
In those circumstances, and notwithstanding that there is perhaps no legal proceedings to enforce those legal transactions in the way in which I have described them, it is tolerably clear and I am satisfied that the respondent establishes that he has a debt owed to him by the petitioning creditor which arises in the way in which I have explained. It is a matter which is the subject of specific grounds of opposition in his notice of grounds of opposition filed on 27 July, 2018.
The reference in the material to the proceedings that have been commenced in the Federal Court of Australia is, in my view, a red herring. It may be that the respondent debtor seeks to pursue the respondents in those proceedings for various causes of action but what is clear on the material and what is unanswered on the material, in my view, is that there is a contractual debt to Blue Prop Pty Ltd which has been effectively assigned to the respondent debtor in this case.
It is the case that there was no application made to set aside the bankruptcy notice or to satisfy the Court of the set-off cross-claim or a counterclaim or cross demand within time and thus there has been the commission of an act of bankruptcy. But that does not mean that a sequestration order must be made; it simply means that the Court has to take that into account. And whilst the petitioning creditor has a prima facie right to the making of a sequestration order in circumstances where all of the formal matters required by s.52 of the Bankruptcy Act1966 have been demonstrated by evidence, it is not an unqualified right. Here I am satisfied that the debtor has demonstrated that there is reason not to make a sequestration order in this case.
I am satisfied that there is a debt owed by the petitioning creditor which far exceeds the debt owed by the respondent debtor to the petitioning creditor and in those circumstances it is sufficient, in my view, to displace the petitioning creditor’s prima facie entitlement to a sequestration order.
One of the grounds of opposition perhaps not stated expressly in the notice of grounds of opposition is that the respondent debtor is nonetheless solvent but refusing to pay the relevant debt. The material does not establish that the respondent debtor is solvent. For the reasons expressed in the submissions – written and oral submissions of the applicant – there is no basis to find that the respondent is solvent.
But in my view, having regard to the matters to which I have already referred, it is inappropriate to make a sequestration order and, accordingly, the creditor’s petition filed on 7 June, 2018 is dismissed.
RECORDED: NOT TRANSCRIBED
This is an application for costs. The petitioning creditor seeks its costs up to and including the filing of the second notice stating grounds of opposition to the application which was filed on 27 July, 2018. The argument is that the grounds upon which the respondent debtor has succeeded were not raised until that notice. But that is just factually incorrect.
The ground upon which the debtor has succeeded also formed part of the notice stating grounds of opposition to the application filed on 9 July – in particular ground 3 and ground 4 – and, moreover, it was part of the affidavit that was filed by the respondent debtor on 6 July. It contained, as my principal reasons for judgment make clear, the relevant documents including a copy of the signed contract of sale.
In those circumstances there is no basis for an order that the respondent pay the petitioning creditors costs and the application is refused.
I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Judge Jarrett
Date: 29 October 2018
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