Rigby v Beames
[2002] FMCA 101
•30 May 2002
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RIGBY v BEAMES | [2002] FMCA 101 |
| BANKRUPTCY – Contested creditors petition – whether Act of Bankruptcy was committed – whether discretion not to sequestrate for “other sufficient cause” should be exercised – sequestration ordered – Bankruptcy Act – s40(1)(g); s41(6)(a); s41(7); s44(1)(b); s44(3); s47(1)(a); s47(1)(c); s52(2). Beames v Rigby (2001) FMCA 29 |
| Applicant: | GEOFFREY IAN RIGBY |
| Respondent: | DOUGLAS MACLEOD BEAMES |
| File No: | BZ 311 of 2001 |
| Delivered on: | 30 May 2002 |
| Delivered at: | Brisbane |
| Hearing Date: | 20 December 2001 |
| Judgment of: | Baumann FM |
REPRESENTATION
| Counsel for the Applicant: | Mr Fraser QC with him Mr Looney |
| Solicitors for the Applicant: | Cartwright Richardson & Stringer |
| Counsel for the Respondent: | Mr Hack SC |
| Solicitors for the Respondent: | Flower & Hart |
ORDERS
The estate of the Respondent DOUGLAS MCLEOD BEAMES be sequestrated.
The Applicants costs, including reserved costs, be taxed and paid from the estate of the Respondent in accordance with the Bankruptcy Act 1966.
I note the date of the Act of Bankruptcy is 5 January 2001.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BZ 311 of 2001
| GEOFFREY IAN RIGBY |
Applicant
And
| DOUGLAS MACLEOD BEAMES |
Respondent
REASONS FOR JUDGMENT
INTRODUCTION
This matter involves a contested petition filed under the Bankruptcy Act 1966 (“the Act”), the Petitioning Creditor being GEOFFREY IAN RIGBY (“the Applicant”) and the opposing Debtor being DOUGLAS MACLEOD BEAMES (“the Respondent”).
The procedural History of this matter was briefly set out at paragraphs 4 to 10 of my Reasons for Judgment published 24 May 2001 in respect of the Application to set aside the Bankruptcy Notice (see BEAMES v RIGBY (2001) FMCA 29). An appeal against that decision was filed by Mr Beames, but subsequently discontinued.
The creditor’s petition was filed by the Applicant on 3 July 2001 and served on 26 July 2001.
The Respondent, by notice of Intention to Oppose Creditors Petition filed 8 August 2001, opposed the petition.
Grounds of opposition
The petition was opposed on the following grounds:-
a)The Respondent did not commit the Act of Bankruptcy alleged in paragraph 4 of the Petition;
b)The Respondent is not indebted to the Applicant;
c)The Applicant is a “secured creditor” and by reason of s44(3) of the Act, is not entitled to present on petition;
d)The pendency of proceedings between the Respondent and the State of Queensland constitutes sufficient “other reason” why a sequestration order ought not be made against the Respondent.
The Respondent, at the hearing, no longer relied on ground 8 of the served Notice.
Evidence
Both parties had filed supporting Affidavits and the only witness required for cross-examination was the Respondent. I dealt with a number of objections to parts of the Affidavits. Both parties were ably represented by Senior Counsel, Mr Fraser QC for the Applicant and Mr Hack SC for the Respondent. Detailed written submissions were filed and were the subject of further oral expansion. I was greatly assisted by the quality of these submissions.
Did the respondent commit an act of bankruptcy?
Paragraph 4 of the Petition claims the Respondent/Debtor failed to comply with a Bankruptcy notice issued on 23 November 2000 and served on 15 December 2000. It is common ground that an application seeking to set aside the notice was filed on 4 January 2001, shortly prior to the date by which it ought to have been complied with, namely 5 January 2001. The Application sought that the Bankruptcy Notice be set aside and further asserted that a counterclaim, set off or cross demand of the kind referred to in s40(1)(g) of the Act existed.
The Respondent asserts that time for compliance was extended either by:-
a)a direct order of Registrar Ramsay allegedly made on 9 February 2001 with words to the effect:-
“By the way Mr Beames, the time for compliance with the notice is extended to that hearing date” (see paragraph 4 of Respondent’s Affidavit filed 24.08.01); or
b)by the operation of s41(7) of the Act.
It is clear that the Application did not seek an order for extension of time under s41(6A) of the Act. Even though the evidence of Mr Beames was not challenged – it was contradicted, namely by the express terms of the order of Registrar Ramsay which makes not mention of extending time for compliance.
The Respondent submitted that the mere filing of the Application was, ipso facto, sufficient to extend time until the determination of the merits of the Application. I disagree. The power to extend time under s41(6A) is discretionary. (see Re: De Vere ex parte De Vere v Deputy Commissioner of Taxation – Spendor J – 15.12.95 unreported). I am not satisfied that the Court was asked to exercise that discretion.
It seems that the Court may not have been asked to exercise the discretion under s41(6A), because s41(7) of the Act was relied upon. In that regard I previously found that I was not satisfied, on the evidence at that time before me, the Respondent had established a Counter-claim, set off or cross demand existed within the meaning of s40(1)(g). As a result, the automatic operation of s41(7) to extend the time for compliance, would normally come to an end on and including the day on “which the Court determines whether it is so satisfied.” That date was 24 May 2001. It follows therefore that the Respondent had until and including 24 May 2001 to comply with the Bankruptcy Notice (see Guss v Johnstone (2000) HCA 26), unless s41(7) was not invoked properly. I am still of the view that the Debtor did not get the benefit of s41(7) as referred to at paragraphs 11 and 12 of my earlier Reasons. Such a view was consistent with authority, including Crimmins v Glenview Home Units (1999) FCA 515 and Elkateb vLawindi (2000) FCA 1624, cases I was referred to in these proceedings.
It follows that, in my view compliance with the Bankruptcy Notice was required by 5 January 2001. Any tender thereafter, as asserted, was out of time. The failure to make the requisite payment by the 5 January 2001, constituted an Act of Bankruptcy.
It is not necessary therefore to deal with the issue of whether the third party cheque tendered on or about the 12 April 2001, not presented by the Applicant, and which was the subject of a “stop payment” direction by the payer, constituted satisfaction of the Bankruptcy Notice.
Is the applicant a creditor?
Having established to my satisfaction that an Act of Bankruptcy was committed, namely non-compliance with the Bankruptcy Notice, s47(1)(c) has been complied with as required under the Act.
The next issue is whether, under s47(1)(a):-
“there is owing by the Debtor to the petitioning creditor a debt that amounts to $2000…”
And further whether, under s44(1)(b):-
“that debt, or each of those debts, as the case may be:-
(i)is a liquidated sum due at law or in equity or partly at law and partly in equity; and
(ii)is payable either immediately or at a certain future time;”
The petition alleges the Respondent is indebted to the Applicant in the sum of $619,703.20 calculated as follows:-
“The Respondent debtor owes the Applicant creditor the amount of $704,179.81 for debt interest and costs as set below-
a)Principal advance pursuant to two instruments of
Mortgage dated 29 August 1995 No 700904044
(Lot 28 RP 12574) and No 700904049 (Lot 29 RP 12574) $384,000.00
b)Interest on principal of $384,000.00 calculated at default
interest rate of 17% per annum amounting to $5,440.00
per month from 1 November 1995 to 1 June 2001 67 months
@ $5,440.00 continuing $364,480.00
c)Costs ordered on 19 June 2001 by Muir J in Supreme
Court action number 1591 of 1997 as assessed on
4 September 2000 by Registrar Figg $7,863.81
$756,343.81
d)Amounts received in diminution of debt
i)Instalments paid by Beames
19 October 1998
$5,440.00
ii)Instalment paid by Beames
20 November 1998
$500.00
Total $5,940.00 $5,940.00 $5,940.00
e)Nett proceeds of realisation
of sale of Lot 28 to
Fragiacomo & Christianson
(excluding Petitioning Creditor’s
solicitor’s costs of sale
Sale price $145,000.00
Commission $4,075.00
Advertising $1,250.00
Rates to
Brisbane City
Council unpaid $8,974.39
Balance $130,700.61
$145,000.00 $145,000.00
Received on 14 July 2001 $130,700.61
$136,640.61 $136,640.61
Balance owing $619,703.20”
Included in that sum is the costs order of Muir J which founded the Bankruptcy Notice, in the sum of $7,863.81.
The facts in respect of the costs debt of $7,863.81 emerged on the evidence as follows:-
a)On 12 April 2001, the Respondent caused a cheque drawn by a third party Jabidda Pty Ltd (and payable to the Trust Account of the Applicant’s Solicitors, Cartwight Richardson & Stringer), for the amount set out in the Bankruptcy Notice (see paragraph 5 and Exhibit MR3 to the Affidavit of Mr Richardson sworn 6 September 2001);
b)The cheque was not presented for payment and by e-mail set at 12.33pm on 26 April 2001, from the Respondent to the solicitors for the Applicant, the Respondent demanded advice as to whether –
“you have presented the cheque for payment. If I do not receive this advice by 3.00pm today, I will endeavour to stop payment on the cheque forthwith. If the Court decides that the Bankruptcy notice is not set aside and has not expired and you maintain your objection to a third parties cheque, I will draw and deliver my own cheque (not a third party cheque) in full payment and in accordance with paragraph 8(b) of the Bankruptcy Notice”;
c)At 3.40pm on that day, the Respondent sent a further e-mail in the following terms:-
“As you have not responded to my last e-mail, I have instructed our staff to place a stop payment on the third party cheque drawn on Jabidda Pty Ltd on 12.04.01…”;
d)The response on behalf of the Applicant/Creditor is contained in a letter from his Solicitors dated 27 April 2001 which says, inter alia:-
“The Plaintiff takes the view the pending decision of Mr Baumann J due this week that he reserves his rights in relation to the cheque and will no doubt be assisted by the decision to be handed drawn. We will, of course, hold JABIDDA PTY LTD’s cheque and consider it to be the right of the Plaintiff to decide upon when he chooses to cash it and would consider it to be a serious problem if the cheque was to be dishonoured as the company would still be liable. We do not believe that the debtor DOUGLAS BEAMES has the right to insist on a course of action by the Plaintiff having made the decision to tender the cheque in question”.
e)Exhibit 5 is an e-mail sent on the 30 April 2001 by the Respondent in reply to the letter from the solicitors for the Applicant and says, inter alia:-
“However, the purpose of this e-mail is to do nothing more than inform you …. I effected a “stop payment” on the cheque”.
As a result, as at the date of presentation of the petition, the Petitioning Creditor alleges the debt of $7,863.81 remains owing.
The Respondent does not suggest payment has again been made, but says that whilst the Applicant, through his solicitors, holds the cheque, there is no evidence of dishonourment on presentation and, as a result the Applicant cannot assert he is a creditor for that sum. Mr Hack SC relied on the authority of in Re: A Debtor; ex parte The Debtor (1908) IKB 344.
The critical times for determining whether the Creditor was, in fact a creditor, was initially the date of presentation of the petition and then the date of hearing. The Affidavit of Debt of the Applicant sworn
20 December 2001 confirms the monies were still owing at the date of the hearing.
Mr Fraser QC for the Applicant says and concedes that if the Applicant had accepted the cheque under a new agreement for payment, then that would extinguish the original debt founding the costs order. He says however the evidence does not go that far and at best the actions of the Applicant solicitors amount to a “reservation of rights”.
I am satisfied on the evidence that:-
a)the actions of the solicitors holding the cheque offered by the Respondent, did not amount to the creation by the Applicant of either a new arrangement for payment or an acceptance of payment;
b)the Respondent’s assertion that the cheque had been “stopped” could be relied upon without actually testing the assertion by presenting the cheque;
c)such actions, as asserted by the Respondent, reduced the cheque to a instrument incapable of satisfying the debt due and/or if a new agreement had been formed (which I find was not the case), then an assertion that it would not be honoured on presentation was a fundamental breach of the agreement;
d)the Judgment Debt has not been satisfied as at the date of the hearing.
It follows that in my view the Applicant is entitled to at least rely on the debt of $7,863.81, to found the petition and that would satisfy s44(1)(a) & (b) of the Act.
As a result of my finding, I am not strictly required to consider the second limb of the Respondent’s argument, namely that the Applicant could not rely upon the alleged outstanding debt (recalculated to be $591,471.87) under the two instruments of Mortgage dated 29 August 1995. Although, under cross examination, the Respondent admitted that the 2 advances had been made totalling $384,000 and that little interest had been paid since 1 November 1995, the eloquent Counsel for the Respondent submitted that:-
a)The Applicant does not have a judgment for the alleged debt and has not taken any action to recover the debt;
b)The Court, in its bankruptcy jurisdiction is not an appropriate forum to decide a claim as asserted by the Applicant.
c)On the material before the Court the Lender shown in the loan deed and the mortgagee shown in the Mortgages is Law Mortgage (Noosa) Pty Ltd and as such there is no evidence to claim that the Applicant is a “creditor”;
d)That as a result of a finding made by Lee J in the Supreme Court of Queensland in interlocutory proceedings brought by the Applicants predecessor in title [Law Mortgages (Noosa) Pty Ltd], namely that there is:-
“a triable issue as to whether or not the plaintiff should be permanently restrained from exercising its power of sale and whether equitable estoppel has been made out by the defendant”
it follows that, by the same logic, the Applicant could not demonstrate he was a creditor.
I was not persuaded by any of the arguments advanced on behalf of the Respondent, as set out above, to find that the Applicant was not a creditor for the purposes of s44(1)(a) of the Act in respect of the funds advanced originally by Law Mortgages (Noosa) Pty Ltd under the loan agreements. I prefer the submissions of the Applicant in response that:-
a)It is not necessary for the Applicant to have commenced proceedings in debt for the monies owing under the loan agreement and Mortgage, to enable it to satisfy the condition imposed by s44(1)(a). I am satisfied that more than $2,000 is owing under the mortgage and the Respondent admits as much (subject to claims of damages etc later referred to) in these reasons) (see also Young v Queensland Trustees 99 CLR 560);
b)In respect of the establishment of the Applicant as a creditor, I am satisfied that the facts not in contest, including the acknowledgment by the Respondent that no payments of interest under the Mortgage Law been made since November 1998, are sufficient to show that a valid claim under the loan agreement exists;
c)Much was said by the Respondent about the manner in which the Applicant purports to stand in the position of the originally named Lender, Law Mortgages (Noosa) Pty Ltd. I am satisfied that the Respondent received a Notice of Assignment dated 2 December 1997, and being Exhibit “MR22” to the Affidavit of Mr Richardson filed 30 November 2001. The assignment is stated to have been made
“consequent upon the retirement of the Assignor as Trustee and the appointment of the Assignee as substitute Trustee by deed and pursuant to the provisions of section 12 of the Trusts Act 1973-79, such deed being dated the 31 October 1997”.
It is clear from the ex parte order made by Muir J on 10 February 1998 that the Respondent had brought to the attention of the Supreme Court, the assignment of the mortgages. The assignment was registered on 13 January 1998 (see Exhibit 2, being the Certified copies of Certificates of Title for Lost 28 and 29) and as a consequence the power to sue under the Mortgages rests in the Applicant by operation of s62 of the Land Title Act 1994. As far as I am concerned that is the end of the argument on this point, and a suggestion that the wrong date in the Assignment Notice for the loan is shown is in my view of no consequence.
d)The finding of Lee J, set out in his ex tempere reasons delivered 21 March 1997 (Exhibit “DMB3” to the Affidavit of the Respondent) arise from the Applicant’s action (in the name of his predecessor), for a declaration of his rights of possession to Lots 28 and 29 under the Mortgage and an injunction to restrain interference with the sale of the property. The finding of a possible triable issue was overtaken by events, in that on 19 June 2000, Muir J ordered that the Caveat on Lot 28 be removed (allowing its subsequent sale by the Applicant) and that the Respondent be restrained from lodging further caveats without leave of the Court. As a result, I can see no basis for the remarks of Lee J, amounting to a support of the Respondent’s case now against the alleged Debt.
The Respondent also argued that, if the Applicant is a creditor, then he is a secured creditor and that being the case the Applicant has not complied with s44(3) of the Act. In response the Applicant says that as a secured creditor (to the extent of the Mortgage debt), he has a choice under s44(3) of either valuing his security and petitioning on the basis of the Value of his debt less the value of his security, or electing to surrender his security and proving for the whole of the debt. (see Re: Wiggins; ex parte Credit Assistance Pty Ltd (1979) 30 ALR 443; Re: Florence; ex parte Turimetta Proprties Pty Ltd (No.2) (1980) 39 FLR 400; Re: Finn; ex parte Finn v Amoco Australia Ltd (1982) 41 ALR 487).
The Applicant, as petitioning creditor, elected to petition on the basis of the value of the debt less the value of the security remaining. Even though, as I have found, the Applicant does not need to rely upon this debt for the petition to survive, if that were not the case I would have been satisfied that the Applicant had complied with s44(3) and the requirements of Form 150.
Should the general discretion under s.52 (2) to sequestrate be exercised?
As a final submission, the Respondent says that if I was to find (as I have) that the matters set out in s44(1) of the Act have been complied with, then in the exercise of my discretion under s52, I should not make a sequestration order, because I should be satisfied that “other sufficient cause” exists.
Generally the Respondent refers to the history of complex litigation on foot in the Supreme Court of Queensland (No: 1591/97) relating to exercise of the Applicant’s powers of sale and attempts to restrain the Respondent from interfering with sale of the property (including lodgement of caveats). He further refers to even more complex litigation in the Supreme Court of Queensland (No: 7742/99) between the Respondent and the State of Queensland relating to declarations as to the true and correct boundaries of Lots 28, 29 and 30.
Anticipated claims are asserted against both the Applicant for breach of stationary duty and “gross negligence” and also against the State of Queensland for damages.
Mr Beames at Paragraph 33 of his Affidavit says he cannot quantify this damages against the Applicant for loss of “commercial opportunity” caused by the conduct of the Applicant, but assessed as a realistic formulation of a claim, a figure of not less than $31,426,000.00.
These issues are detailed at some length by the Respondent in his Affidavit filed 23 November 2001, and responded to at some length by the Affidavit in reply by Mr Richardson filed 30 November 2001.
I am not satisfied, on the material presented that the Respondent has a real claim to litigate in respect of the alleged loss commercial opportunity. The source of the opportunity appears to be a “Memorandum of Understanding”, unstamped and dated 1 December 1995 between a Malaysian Company – General Lumber Fabrications & Builders BHD, and a company apparently associated with the Respondent – Walcon Pty Ltd. It relates to a Joint Venture for a project described as the “manufacturing, promoting, marketing and selling the Walcon building components in the ASEAN Countries”. His apportionment of the total claim of US $300,000,000.00 to the Mortgage of A $30,000,000.00 is too vague and without proper foundation and on the evidence, being established. The Respondent says (at paragraph 33) that his Counterclaim on this basis against the State of Queensland was sought to be struck out for lack of particulars and that such application was unsuccessful. Nothing, but this bland assertion (although unchallenged) was made. It is unconvincing and not supported by any evidence before me.
The Respondent has asserted a claim against the Applicant (and his predecessors in title) alleging:
a)
Failure to make funds available under a loan offer accepted
4 August 1995;
b)Any sale of the property amounted to gross negligence (see letter dated 8 November 1996);
c)The transfer of part of Lot 28 on 27 July 2000 (as Mortgagee)
i)destroyed the value of Lot 29 and the balance of Lot 28,
ii)destroyed the overall display building development,
iii)destroyed the existing commercial relationships and any prospect of resurrecting those relationships;
d)the sale of part of Lot 28 was under its true and proper market valuation (see paragraph 29);
e)the sale of part of Lot 28 “deprived to the owner” the value of the use of a slipway to Norman Creek.
Further the Respondent, who I note is a practising solicitor, contends the Applicant is precluded from seeking relief because he refused to consent to registration of a plan of resurvey (SP 110352) in circumstances where the Respondent says he had a viable finance offer.
I note that although the Respondent, by letter from his then solicitors Messers Stephens & Tozer gave notice of a potential claim for breach of statutory duty and breaches of the Trade Practices Act, no claim has been either quantified or particulared in a way which would assist me in understanding the likely result of any successful action.
The Respondent, must in accordance with long standing authority, establish that he not only has a probable claim against the petitioning creditor which is likely to succeed but that it will exceed the debt. (see Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111; Ling v Commonwealth (1996) 139 ALR 159).
I am satisfied that by the time of the sale of Lot 28 in July 2001 the loan had been in default for some time. The consistent attempts by the Respondent, who was engaged in the complex litigation with the State of Queensland about the boundary corrections and Norman Creek accretions to prevent a sale of the Mortgaged land (using a combination of successive caveats) came to end with the order of Muir J, earlier referred to in these reasons.
Thereafter as set out by Mr Richardson in his Affidavit a process of sale of part of Lot 28 was undertaken. I am not satisfied that the evidence before me establishes either the sale of the land at $145,000.00 was less than its market value at the time or that the actions of the Applicant is achieving that sale, at that price, demonstrates a breach of the Mortgage’s duty.
It also seems clear that, at present, despite litigation now into its seventh year against the State of Queensland, the Respondent has been unable to establish by order of a Court, his disputed right to the riverfront land. He has appeared to be vigilant in his prosecution of that claim – something which cannot be said about his asserted claim against the petitioning creditor.
It may be that the failure of the Applicant to launch a claim in debt (for the reasons suggested by the Applicant as it being futile) means the catalyst for a particularised Counterclaim never arose.
Whilst I accept that the Court exercising bankruptcy jurisdiction, is not the appropriate forum to decide a claim as asserted by the Respondent (see Koztezky ex parte Milder Elfman Szmerling Krycer Pty Ltd (1996) 67 FCR 101), the failure by the Respondent to seek that relief (especially in view of the prolonged history of litigation) is a factor which also must be taken into account in the exercise of my discretion.
Ultimately I have concluded that the Respondent has not satisfied the onus which rests on him to establish “other sufficient cause” why sequestration should not be ordered.
As a result, I will order that:
a)the estate of the Respondent DOUGLAS MCLEOD BEAMES be sequestrated;
b)the Applicants costs, including reserved costs, be taxed and paid from the estate of the Respondent in accordance with the Bankruptcy Act 1966;
c)I note the date of the Act of Bankruptcy is 5 January 2001.
I certify that the preceding forty-six (46) paragraphs are a true copy of the reasons for judgment of Baumann FM
Associate:
Date:
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