Reidy v Cleary Bros (Parramatta) Pty Ltd
[2013] FCCA 2110
•13 December 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| REIDY v CLEARY BROS (PARRAMATTA) PTY LTD | [2013] FCCA 2110 |
| Catchwords: BANKRUPTCY – Claim by respondent to be beneficial owner of property held in the name of the bankrupt – whether an express or implied trust existed – validity of a second mortgage granted by the bankrupt to the respondent – properly beneficially owned by the bankrupt – mortgage void as against the trustee. |
| Legislation: Bankruptcy Act 1966, ss.115(1), 116, 120, 121, 122 |
| Watson v Foxman (1995) 49 NSWLR 351 Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187 |
| Applicant: | GEOFFREY PHILIP REIDY |
| Respondent: | CLEARY BROS (PARRAMATTA) PTY LTD |
| File Number: | SYG 481 of 2012 |
| Judgment of: | Judge Altobelli |
| Hearing dates: | 29 & 30 August 2013 |
| Date of Last Submission: | 11 October 2013 |
| Delivered at: | Sydney |
| Delivered on: | 13 December 2013 |
REPRESENTATION
| Counsel for the Applicant: | Mr Raine |
| Solicitors for the Applicant: | Jeffrey Choy Legal |
| Counsel for the Respondent: | Mr Spencer |
| Solicitors for the Respondent: | Matthews Folbig Lawyers |
ORDERS
Declaration that the granting of the second mortgage by the bankrupt Michael Francis Buggy to Cleary Bros (Parramatta) Pty Ltd (ACN 105359957) is void against Geoffrey Phillips Reidy, trustee of the property of Michael Francis Buggy.
Within 14 days Cleary Bros (Parramatta) Pty Ltd to do all things and execute all such documents as may be required to give effect to a discharge of the said second mortgage.
Failing discharge of the second mortgage in accordance with these orders, the Registrar of the Court be and is hereby authorised to sign all such documents as may be required to give effect to a discharge of the second mortgage.
Cleary Bros (Parramatta) Pty Ltd to pay the costs of Geoffrey Phillip Reidy as agreed or as assessed.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 481 of 2012
| GEOFFREY PHILLIP REIDY |
Applicant
And
| CLEARY BROS (PARRAMATTA) PTY LTD |
Respondent
REASONS FOR JUDGMENT
Introduction
This case is about a dispute as to the ownership of land at 25 Plover Place, Tweed Heads (called in these reasons “the property”). Geoffrey Phillip Reidy, as trustee of the property of Michael Francis Buggy, is the cross-claimant in the proceedings. For all practical purposes he will be treated as the applicant for certain relief and will be described in these reasons as “the trustee”. Michael Francis Buggy (called in these reasons “the bankrupt”) is the sole director and secretary of Cleary Bros (Parramatta) Pty Ltd, the cross-respondent in the proceedings (called “Cleary Bros”). Whilst the property is held in the name of the bankrupt, and thus vested by operation of law in the trustee, Cleary Bros claims ownership of it on the basis that the bankrupt, at all relevant times including before his bankruptcy, held the property on trust for it. The trustee claims ownership of the property in its capacity as trustee of the bankrupt’s estate.
Background
Only relevant background will be set out in these reasons. This material is uncontentious, except where so indicated.
The bankrupt purchased the property in his own name on 13 November 2006 using funds that he provided as well as a loan from the Commonwealth Bank of Australia.
Between 11 July 2003 and 7 February 2011 the bankrupt was the sole director and secretary of Cleary Bros, and also appears to have been its sole shareholder until 16 December 2009.
On 26 October 2009 judgment was entered against the bankrupt in the sum of $8,541,214.16 in unrelated proceedings. A bankruptcy notice was, in due course, issued against him. On 14 October 2010 a creditors petition was presented based on his failure to comply with the bankruptcy notice. On 25 March 2011 a sequestration order was made, and the trustee was appointed.
On 20 December 2010 a mortgage dated 21 September 2010 in favour of Cleary Bros was registered on the title to the property. The mortgage was signed by the bankrupt. It is a second mortgage.
Contentions
It is convenient to set out the contentions made on behalf of Cleary Bros first. Cleary Bros asserts that the property never vested in the trustee because the bankrupt held it on trust for it. When the second mortgage in favour of Cleary Bros was registered all that did was to acknowledge the underlying equitable interest it had on the property. In counsel’s outline of case document, filed 26 August 2013, the trust was characterised as “a constructive or resulting trust” but on the written submissions forwarded 11 October 2013, counsel characterised any such trust as a resulting trust. The evidence raised the contention that an express trust also existed.
On behalf of the trustee the existence of any trust in favour of Cleary Bros is denied. When the bankrupt’s bankruptcy commenced on 21 September 2010 (a matter not disputed in the proceedings) the trustee contends that the property vested in the trustee on the making of the sequestration order. The date of the mortgage coincides with this. The trustee contends that in the end result the mortgage is void pursuant to sections 120, 121 and 122 of the Bankruptcy Act 1966.
Documents Relied On
The trustee relied on the following documents:
a)Cross-claim, filed 21 May 2012;
b)Affidavit of Geoffrey Reidy, sworn 24 October 2012; and
c)Affidavit of Thyge Trafford-Jones, sworn 28 August 2013.
Cleary Bros relied on the following documents:
a)Affidavit of Michael Francis Buggy, sworn 5 March 2012;
b)Statement of Claim, filed 29 March 2012;
c)Defence, filed 21 May 2012;
d)Cross-claim, filed 21 May 2012;
e)Defence to Cross-claim, filed 14 June 2012; and
f)Affidavit of Michael Francis Buggy, sworn 31 August 2012.
A number of documents were also tendered.
Evidence Led
In the trustees case both deponents of affidavits relied on gave oral evidence and were cross examined.
In Cleary Bros case, the bankrupt gave oral evidence and was extensively cross examined.
Applicable Law
Cleary Bros contends that the property did not vest in the trustee as it was not property divisible among creditors under s116(1) of the Act because of the operation of s116(2)(a).
(1) Subject to this Act:
(a)all property that belonged to, or was vested in, a bankrupt at the commencement of the bankruptcy, or has been acquired or is acquired by him or her, or has devolved or devolves on him or her, after the commencement of the bankruptcy and before his or her discharge; and
(b)the capacity to exercise, and to take proceedings for exercising all such powers in, over or in respect of property as might have been exercised by the bankrupt for his or her own benefit at the commencement of the bankruptcy or at any time after the commencement of the bankruptcy and before his or her discharge; and
(c)property that is vested in the trustee of the bankrupt's estate by or under an order under section 139D or 139DA; and
(d)money that is paid to the trustee of the bankrupt's estate under an order under section 139E or 139EA; and
(e)money that is paid to the trustee of the bankrupt's estate under an order under paragraph 128K(1)(b); and
(f)money that is paid to the trustee of the bankrupt's estate under a section 139ZQ notice that relates to a transaction that is void against the trustee under section 128C; and
(g)money that is paid to the trustee of the bankrupt's estate under an order under section 139ZU;
is property divisible amongst the creditors of the bankrupt.
(2) Subsection (1) does not extend to the following property:
(a)property held by the bankrupt in trust for another person;
The trustee contends that the bankruptcy commenced on 21 September 2010 by operation of s115(1) of the Act.
(1)If a person becomes a bankrupt on a creditor's petition and subsection (1A) does not apply, then the bankruptcy is taken to have relation back to, and to have commenced at, the time of the commission of the earliest act of bankruptcy committed by the person within the period of 6 months immediately before the date on which the creditor's petition was presented.
Moreover it contends that the second mortgage is void pursuant to ss120, 121 and 122 of the Act. The relevant provisions in this regard are:
Section 120(1):
A transfer of property by a person who later becomes a bankrupt (the transferor ) to another person (the transferee ) is void against the trustee in the transferor's bankruptcy if:
(a) the transfer took place in the period beginning 5 years before the commencement of the bankruptcy and ending on the date of the bankruptcy; and
(b) the transferee gave no consideration for the transfer or gave consideration of less value than the market value of the property.
Note: For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.
Section 121:
Transfers that are void
(1)A transfer of property by a person who later becomes a bankrupt (the transferor ) to another person (the transferee ) is void against the trustee in the transferor's bankruptcy if:
(a) the property would probably have become part of the transferor's estate or would probably have been available to creditors if the property had not been transferred; and
(b) the transferor's main purpose in making the transfer was:
(i)to prevent the transferred property from becoming divisible among the transferor's creditors; or
(ii)to hinder or delay the process of making property available for division among the transferor's creditors.
Note: For the application of this section where consideration is given to a third party rather than the transferor, see section 121A.
Showing the transferor's main purpose in making a transfer
(2)The transferor's main purpose in making the transfer is taken to be the purpose described in paragraph (1)(b) if it can reasonably be inferred from all the circumstances that, at the time of the transfer, the transferor was, or was about to become, insolvent.
Other ways of showing the transferor's main purpose in making a transfer
(3)Subsection (2) does not limit the ways of establishing the transferor's main purpose in making a transfer.
Section 122:
(1)A transfer of property by a person who is insolvent (the debtor ) in favour of a creditor is void against the trustee in the debtor's bankruptcy if the transfer:
(a) had the effect of giving the creditor a preference, priority or advantage over other creditors; and
(b) was made in the period that relates to the debtor, as indicated in the following table.
| Periods during which transfers of property may be void | ||
| Description of petition leading to debtor's bankruptcy | Period during which the transfer was made | |
| 1 | Creditor's petition | Period beginning 6 months before the presentation of the petition and ending immediately before the date of the bankruptcy of the debtor |
| 2 | Debtor's petition presented when at least one creditor's petition was pending against a petitioning debtor or a member of a partnership against which the debtor's petition was presented | Period beginning on the commencement of the debtor's bankruptcy and ending immediately before the date of the bankruptcy of the debtor |
| 3 | Debtor's petition presented in any other circumstances | Period beginning 6 months before the presentation of the petition and ending immediately before the date of the bankruptcy of the debtor |
(8)For the purposes of this section:
(a) transfer of property includes a payment of money;
Credit Findings
This is a case where credit findings are important. That means the Court needs to decide whether to accept the evidence of a witness, or witnesses, in whole or in part. Credit findings may be based on independent evidence, for example a business record, public record, or the evidence of an independent person. Independent evidence may lead to a finding that the evidence of a witness should not be accepted. Often witnesses give competing versions of events. Each version of the event must be considered carefully and compared to other evidence including independent evidence. In some cases a party needs to rely on evidence of spoken words as the foundation of a cause of action, or to establish an essential fact in issue. In Watson v Foxman (1995) 49 NSWLR 351 at 319 McLelland CJ in Equity said:
Furthermore, human memory of what was said in a conversation is fallible for a variety of reasons, and ordinarily the degree of fallibility increases with the passage of time, particularly where disputes or litigation intervene, and the processes of memory are overlaid, often subconsciously, by perceptions of self-interest as well as conscious consideration of what should have been said or could have been said. All too often what is actually remembered is little more than an impression from which plausible details are then, again often subconsciously, constructed. All this is a matter of ordinary human experience.
Each element of the cause of action must be proved to the reasonable satisfaction of the court, which means that the court “must feel an actual persuasion of its occurrence or existence”. Such satisfaction is “not…attained or established independently of the nature and consequence of the fact or facts to be proved” including the “seriousness of an allegation made, the inherent unlikelihood of an occurrence of a given description, or the gravity of the consequences flowing from a particular finding”: Helton v Allen (1940) 63 CLR 691 at 712.
Considerations of the above kinds can pose serious difficulties of proof for a party relying upon spoken words as the foundation of a causes of action based on s.52 of the Trade Practices Act 1974 (Cth) (or s.42 of the Fair Trading Act), in the absence of some reliable contemporaneous record or other satisfactory corroboration. That is the position in the present case. There is no contemporaneous document in evidence which supports the making of any such promise or representation as is relied on and no other satisfactory corroboration.Thus a Court must always be conscious of the fallibility of memory and the distorting impact of self-interest. How a witness gives evidence is an important consideration. Thus a witness who “gives evidence in a forthright way, unperturbed under cross-examination, the court may well be disposed to believe the evidence than would be the case with a halting and prevaricating witness”: Cross on Evidence at [1285]. Nonetheless the Court must be very careful if making findings based solely on demeanour and must provide adequate reasons for making such findings: Goodrich Aerospace Pty Ltd v Arsic [2006] NSWCA 187. Ipp JA in that case, with whom Mason J and Tobias JA agreed said at [29]:
Often important issues of credibility involve sub-issues. Often, objective facts, or facts that are probable, are capable of having significant bearing on the sub-issues. In cases of this kind, it is incumbent upon trial judges to resolve the sub-issues and to explain, by reference to the relevant facts, the conclusions to which they have come. This having been done, they should then turn to the ultimate facts in issue and explain how their decisions on the sub-issues have assisted them in forming a conclusion on the ultimate issue. It is only when adequate reasons of this kind are given that an unsuccessful party will be able to understand why the judge has believed his or her successful opponent.
Geoffrey Reidy, the trustee, and Thyge Trafford-James, an employee of the trustee, both gave evidence in a forthright manner, were both cooperative and courteous in cross-examination, and were quite unperturbed by their questioning. There were no relevant inconsistences in their evidence. The Court accepts their evidence. No credit issues were raised on behalf of Cleary Bros in relation to their evidence.
Michael Francis Buggy, the bankrupt, was the only witness in the Cleary Bros case. He gave evidence in a cavalier and sometimes flippant manner. He was frequently unresponsive and indeed argumentative in cross-examination. He was quiet evasive at times. As will be discussed below, the evidence that he gave was quite inconsistent with facts contained in other more reliable sources and documents. Some of the matters that he represented in evidence were highly implausible, quite illogical, advanced his own interests over that of the truth, and had a distinct air of unreality. Regrettably, this Court finds that the bankrupt’s distortion of the truth is of a magnitude that manifestly goes beyond fallibility of memory distorted by self-interest. The bankrupt’s evidence is plainly unreliable unless corroborated by unimpeachable sources.
The Acquisition of the Property
The bankrupt’s evidence was that at all relevant times and in all relevant actions relating to the property, he was acting on behalf of, and as trustee for Cleary Bros. His evidence was that the only reason the property was registered in his name was to secure prompt finance to allow the timely acquisition of it. He contends that he has never paid any monies in his own right relating to the property, and that Cleary Bros made all such payments in relation to the property.
The Cleary Bros case is purportedly based on documents which it asserts establish its beneficial ownership of the property, even though at all relevant times the bankrupt was the manifestation of the company in its dealings, undertook the transactions in question, gave the relevant instructions to third parties, and made all the decisions. Even in the Cleary Bros case it is conceded that the $460,000 loan advance from the Commonwealth Bank used to complete the purchase was a loan in the bankrupt’s name, and that the bank was unaware that it was not dealing with the bankrupt in anything other than a personal capacity.
Their case concedes that loan repayments came from the bankrupt’s personal account, but contends that Cleary Bros deposited the funds to enable these payments to be made. Indeed the evidence adduced does indicate that there was money transferred into the bankrupt’s account from entities including Cleary Bros that provided funds which may well have been used to make the mortgage repayments. What Cleary Bros has not established to the Court’s satisfaction, through the evidence of the bankrupt, is that the purpose of these deposits was referable to the alleged trust and not to some other purpose. Even if the Court did not have such grave doubts about the credibility of the bankrupt, a close scrutiny of the bank statements relied on shows no correlation whatsoever between deposits into the account and the mortgage repayments. There is no correlation as to dates, amounts and source of funds. An unacceptably generous inference would need to be drawn in favour of Cleary Bros to conclude that these payments were somehow referable to the asserted trust.
The circumstances of the payment of the cheque for the 5% deposit on the property are deposed to by the bankrupt at paragraph 5 of his affidavit sworn 31 August 2012. He was carefully cross-examined about this. His contention is, in effect, that he drew a cheque for $29,000 on 29 September 2006 on a Cleary Bros bank account drawn payable to the vendor’s real estate agent and sent it by mail. Strangely, the receipt from the agent asserts that it was electronically transferred into their trust account on 10 October 2006. There is no doubt that a company cheque was presented because it was debited to the account on 29 September 2006. How is the difference in dates explained away? The trustee submits, as he is well entitled to submit on the available evidence, that Cleary Bros has not established that a cheque drawn on its account was used to pay the deposit. Counsel for Cleary Bros attempts to explain away these concerns in his written submissions at paragraphs 6 to 10. With respect, in the context of this case where credit issues are so significant, he minimises if not trivialises the evidence. There is no scope for yet another generous inference to be drawn in his client’s favour. At any time Cleary Bros could have produced records corroborating its version of the events in question. At any time it could have produced the original copy of the cheque that was presented by the bank thus disclosing the account into which it was paid. The cheque butts could have been produced. Any other company financial records could have been produced, for example cash ledgers. The correspondence attaching the cheque could have been produced. Not only is there a stunning silence about these issues, but the bankrupt positively asserted in evidence that the company’s policy was not to prepare such records at all. Cleary Bros bore the relevant onus of proof in this regard. It has failed to discharge it to the Court’s satisfaction.
Cleary Bros contends that it paid the stamp duty on the purchase in the sum of $21,594 pursuant to a request to pay received from the solicitor acting on the purchase. The company bank statements show that a cheque for that amount was in fact presented. It is the only record that evidences payment. The bankrupt was cross-examined about the absence of any other records evidencing payment by Cleary Bros. There are no other records available. In reality, Cleary Bros asks the Court to draw an inference that the entry on the bank statements related to the payment of stamp duty on the purchase of the property. At one level, and as submitted, it is a logical inference to draw. Indeed, it would be a logical inference to draw if the only issue before the Court was about payment of stamp duty, and if there were no other evidence casting doubts on the company’s contentions, and the bankrupt’s evidence. When the evidence is viewed in totality, the Court accepts the trustee has reason to be sceptical, and is entitled to put the company to proof. Even if the Court were to accept that Cleary Bros did pay the stamp duty on the purchase of the property, as will become evident, there is nothing to satisfy the Court that this payment was pursuant to an alleged implied trust by which, despite so many indicia to the contrary, the bankrupt held the property on trust for it. The obvious fluidity of the financial arrangements between Cleary Bros and the bankrupt makes it impossible to perceive whether transactions were referable to a trust, or something else. The bankrupt’s own evidence at paragraph 13 of his affidavit sworn 31 August 2012 is an example of this. Deposits into his account totalling $1,049,401.82 are made between 29 January 2007 and 22 March 2010. The purported mortgage payments total a mere $131,977. His evidence is that he only acted as a trustee, and never in his own capacity, a practice initiated after his first bankruptcy. In cross-examination it is apparent that he continued to enjoy a very comfortable lifestyle notwithstanding his current bankruptcy. He also gave evidence that he believed the terms of the trust enabled him to use funds for his personal uses, a somewhat unusual, if not startling proposition, for a trustee pursuant to a bare trust. Even in relation to the stamp duty, Cleary Bros has failed to discharge the onus on it to establish that the payment was referable to the alleged trust, and not to some other arrangement between the company and the bankrupt.
As to the balance of the purchase price, $91,709.60, the only evidence that Cleary Bros relied on is the bankrupt’s evidence at paragraph 10 of his affidavit sworn 31 August 2012 that Cleary Bros paid it. There is no other corroborative evidence linking this payment to the company. Even in a case like this where, it would seem, the company purposefully did not keep records, the bankrupt knew that he could obtain from the company’s bankers a copy of a cheque, if it suited his purpose to do so. He did so in the context of the deposit. He could have done so in the context of the cheque for the balance of the purchase price. The Court can only infer that to do so would not have assisted the case. In all the circumstances of this case the Court is not prepared to accept the mere evidence of the bankrupt that the company provided the balance of the purchase price.
On balance, therefore, the totality of the evidence does not establish that Cleary Bros provided any part of the purchase price for the property. Indeed the evidence strongly indicates that the bankrupt consciously purchased the property in his name and marshalled the various resources available to him to enable that to occur. One of those resources may well have been Cleary Bros, a company that, for all practical purposes he controlled and treated as if it was his alter ego. This is quite consistent with the evidence that Cleary Bros, and the bankrupt, have represented to the trustee in documentation that Cleary Bros is an unsecured creditor in the bankrupt estate to the extent that it is not secured by the purported second mortgage to it.
Whilst the above findings make it less relevant, it is also important to consider the contention that there was an express trust in place. The bankrupt’s evidence about this is given at paragraphs 8 to 12 of his affidavit sworn 5 March 2012 but, curiously, there is no reference to it in his affidavit of 31 August 2012 despite this affidavit clearly expanding on the matters deposed to in the earlier affidavit. In short, Cleary Bros contends that the express trust is evidenced by handwritten company minutes dated 3 October 2006 prepared by the bankrupt. Curiously, the express trust argument did not present in counsel’s written submissions with any prominence, perhaps reflective of recognition of some of the difficulties inherent in the argument, especially the inconsistency with what was clearly Cleary Bros main argument about a resulting trust.
There are insurmountable arguments against the existence of an express trust. These matters permeate all of the bankrupt’s evidence, and not just on this issue. It is indeed curious, if not certainly convenient, that the company minute could be produced in circumstances where there was a dearth of other company records. What purports to be a minute recording a meeting at which an express trust was created is like an oasis in a vast, barren desert. The bankrupt’s clear and consistent evidence was that Cleary Bros did not keep accounts, did not prepare a balance sheet, did not complete tax returns, shredded rate notices for properties and destroyed it’s cheque butts. Despite clear statutory obligations to keep records, and despite the obvious significance and corroborative value of such records in the context of the resulting trust argument, no such records could be produced. Strangely this particular record emerges, in oasis like fashion. Notwithstanding the purported existence of this express trust, its existence is never revealed till these proceedings. Its existence is never disclosed or represented to third parties such as banks lending on properties. No attempt is made to adduce the evidence of other persons who might corroborate the existence of the trust.
The trustee directly attacked the genuineness of the document purporting to be the minute dated 3 October 2006. The bankrupt conceded that he prepared this record, and that it had originally been lost but was subsequently found again for the purposes of this litigation. He agreed that this is the only relevant minute ever generated by the company prior to that date. He explained that by saying that he only minuted property transactions but, curiously, not $3 million mortgages, or changes in office holders. The Court finds the bankrupt’s entire evidence about this issue to be glib and thoroughly unconvincing. In all likelihood, the minute of 3 October 2006 is a sham that was conveniently created at a later date to support the case being advanced against the trustee. The Court does not accept that there was any express trust relating to the property or otherwise.
In the end result, the Court finds that the property is owned by the bankrupt beneficially.
The Second Mortgage to Cleary Bros
The affidavits of the bankrupt relied on as the Cleary Bros case contained no evidence about the second mortgage. Their written submissions are also silent on this issue. The case outline contends that as Cleary Bros was at all material times the beneficial owner of the property, the granting of the second mortgage did no more than acknowledge the underlying equitable interest it held. The Court finds, of course, that there is no underlying equitable interest in the property, and that it is beneficially owned by the bankrupt. On this basis, therefore, and accepting the contentions that the mortgage secured Cleary Bros interest in the property, the mortgage must be null and void as it secures nothing. From this perspective, therefore, the mortgage is nothing more than a sham.
In case the Court is wrong, however, the trustee’s contentions will be considered. The uncontentious facts are that on 20 December 2010 a mortgage dated 21 September 2010 in favour of Cleary Bros was registered on the title. 21 September 2010 is the date that his bankruptcy commenced. In any event, the documentary evidence before the Court establishes the following chronology in relation to the mortgage. Sometime before 20 October 2010 the bankrupt approached his solicitor Mr Batterharm to prepare a mortgage to secure $250,000. On 20 October 2010 the mortgage was stamped for that amount. On 15 November 2010 the bankrupt advised the solicitor that the advance was to be secured had occurred on 2 November 2010. At some time before 16 November 2010 the bankrupt advised the solicitor that the mortgage was to secure $390,000, and the mortgage appears to have been upstamped on that day. Whilst Mr Batterharm had signed the mortgage on behalf of the mortgagee at some earlier time, the bankrupt did no sign it until after 16 November 2010. There is nothing in the evidence to indicate that the bankrupt told the solicitor about the existence of a trust. Indeed it is a glaring inconsistency in the Cleary Bros case that this mortgage purports to secure a loan advanced by it to the bankrupt when its main contention in this case is that it beneficially owned the property. Needless to say, there is a total absence of other documents to corroborate the asserted loan advances.
What was the extent of the bankrupt’s knowledge about his financial situation as at 20 October 2010? Relevantly, one year earlier on 26 October 2009 judgment had been entered against him for $8,541,214.16. A bankruptcy notice was issued against him on 24 November 2009, and served 20 April 2010. An application to set it aside was dismissed on 21 September 2010, the exact date of the mortgage. On 6 October 2010 Cleary Bros and the bankrupt sought to stay the judgment against the bankrupt, in the course of proceedings it commenced in the Australian Capital Territory against the judgment creditor. In his affidavit sworn 6 October 2010 in these proceedings he said, inter alia, “…if I am adjudicated bankrupt”, thus clearly acknowledging that this was a possibility. A creditors petition against the bankrupt is presented on 14 October 2010, and on 9 December 2010 orders are made for substituted service of the petition on the bankrupt.
Having regard to all of the above evidence the inescapable conclusion is that the mortgage is void either under ss120, 121 and 122 or under all of those sections.
Orders
Declaration that the granting of the second mortgage by the bankrupt Michael Francis Buggy to Cleary Bros (Parramatta) Pty Ltd (ACN 105359957) is void against Geoffrey Phillips Reidy, trustee of the property of Michael Francis Buggy.
Within 14 days Cleary Bros (Parramatta) Pty Ltd to do all things and execute all such documents as may be required to give effect to a discharge of the said second mortgage.
Failing discharge of the second mortgage in accordance with these orders, the Registrar of the Court be and is hereby authorised to sign all such documents as may be required to give effect to a discharge of the second mortgage.
Cleary Bros (Parramatta) Pty Ltd to pay the costs of Geoffrey Phillip Reidy as agreed or as assessed.
I certify that the preceding thirty-nine (39) paragraphs are a true copy of the reasons for judgment of Judge Altobelli
Associate:
Date: 9 December 2013
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