Rogers v Dale and Meyers Timber Trade Centre Pty Ltd - [2005] FMCA 722

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ROGERS v DALE & MEYERS TIMBER TRADE CENTRE PTY LTD

[2005] FMCA 722

BANKRUPTCY – Application to review decision of Registrar to sequestrate estate of debtor.

Applicant:

GREGORY ROGERS T/AS LIVINGSPACE BUILDING

Respondent:

DALE & MEYERS TIMBER TRADE CENTRE PTY LTD

File No:

BRG 376 of 2004

Delivered on:

19 May 2005

Delivered at:

Brisbane

Hearing date:

6 & 18 May 2005

Judgment of:

Baumann FM

REPRESENTATION

Applicant appearing on his own behalf
Counsel for the Respondent:	Mr Coulsen
Solicitors for the Respondent:	S.J. Gurnsey & Company

ORDERS

The application for review of the Registrar's decision is dismissed.
The stay granted 15 March 2005 of the sequestration order made 15 February 2004 be discharged.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 376 of 2004

GREGORY ROGERS T/AS LIVINGSPACE BUILDING

Applicant

And

DALE & MEYERS TIMBER TRADE CENTRE PTY LTD

Respondent

REASONS FOR JUDGMENT

(Settled from the ex-tempore reasons).

Introduction

The application before me is an application for review of a Registrar's decision (made by Registrar Baldwin) to sequestrate the estate of the debtor, Gregory Rogers. The Registrar found that an act of bankruptcy had been established by the debtor failing to comply with the bankruptcy notice dated 7 November 2004, which had been served on him on
22 June 2004. The Bankruptcy Notice was founded on a default judgment made in the Magistrates Court of Hervey Bay on 17 October 2003, for $31,796.64 in favour of the Petitioning Creditor.
One of the issues dealt with by the learned Registrar was a refusal to adjourn the hearing before her. It is not necessary for me to consider such matters as the hearing before me is a hearing de novo (see Rule 20.03a).
I gave, in effect, leave to the respondent debtor, Mr Rogers, to file further evidence (pursuant to Rule 20.03). My direction pronounced
22 March 2005 gave him leave to file by 6 April 2005 any further affidavits he sought to rely upon. I had earlier stayed the operation and effect of the sequestration order of 23 February 2005 by my order of
15 March 2005.
The debtor has now, since the application for review was filed on
25 February 2005, filed the following additional documents, namely:-
a)four affidavits on 28 February 2005;
b)an affidavit on 6 April 2005 in support of an application for contempt filed on that day; and
c)two affidavits on 11 April 2005 and 29 April 2005 for which leave was required if he was to rely upon them. That leave was given at the trial before me.
Allegations in the material made by the debtor can be summarised as :-
(a)in July 2004, "I was the victim of criminal conduct by Paul Hare"
(b)on 17 July 2004, "Hare burgled my home, removed files relating to these matters - Hare has control of my $400,000 in property in the name of his wife - Hare and the solicitors for the complaint (sic), Dale and Meyers, are conspiring to prevent me from attending to these matters before they bankrupt me by stealing files, taking my property fraudulently, not making the payment to Dale and Meyers and then exploiting the situation"
(c)he intends to file a counter-claim against Dale and Meyers "in an amount greater than the judgment debt" (I note here that no particulars are given of the alleged counter-claim)
(d)that Hare breached an undertaking given to Spender J in proceedings QUD224/04, being proceedings in which the debtor says he was "seeking leave which will make me even more solvent"
(e)allegations of harassment causing him to commence proceedings Q136/04
(f)in QUD224/04, he had filed motions seeking orders to compel return of the Dale and Meyers files
(g)he has given to the police "evidence in transcripts and on tape record of Hare's bankruptcy petition, offers and threats".
Mr Rogers also asserts that, under cross-examination before Spender J, Hare "had lied". Finally, he says that his chances of having the default judgment set aside are dependent on how the Court interprets a letter written by the General Manager of Dale and Meyers stating he was not the person who purchased the timber. He also says that, "Hare wants the bankruptcy to avoid sharing $3.5 million in development sites and property we jointly own in Hervey Bay".
Mr Rogers, before the hearing commenced, brought a number of oral applications, including:
(a) an application for contempt;
(b) a further application for adjournment;
(c) an application that I disqualify myself.
All these applications, for the reasons delivered extempore on 3 May 2005 (and reflected in the transcript) were dismissed.
Mr Rogers was the subject of cross-examination when some of the broad allegations were tested by the cross-examination of Mr Coulsen, counsel for the respondent to the application and for the petitioning creditor.
It is apparent that no application to set aside the founding judgment is pending before any court. Certainly in respect of the alleged insolvency of the debtor, he placed before me some evidence although such evidence was generally uncorroborated (see paragraphs 49 to 55 of the debtor's affidavit filed 25 February 2005), as to his solvency.
It emerged from cross-examination that the debtor is the registered proprietor of a property at Hervey Bay described at Lot 5 on Registered Plan 137240, County of Marsh, Parish of Vernon, and had been so registered since July 2003 (see exhibit 2). No probative evidence of value was available to the court. The title search, on its face, revealed that:
(i)There is a first registered mortgage to Equity Trust Limited;
(ii)There is a second registered mortgage now held by Asset Loan Co Pty Ltd;
(iii)Three writs, one the petitioning creditor, one to Scott Peterson and the other to Gashley Pty Ltd, are registered;
(iv)A caveat supported by a notice of action was filed by Asset Loan Co Pty Ltd.
At the conclusion of the evidence, I indicated that the only basis upon which I could be persuaded that a sequestration order should not be made was if the debtor was able to negotiate an arrangement satisfactory to the petitioning creditor to extinguish the debt and that of the other two interested creditors. That would have been compelling (but not rebuttable) evidence of his capacity to pay his debts as and when they fell due.
In making that statement, I was in effect indicating, as I now formally record, that I was not satisfied on the evidence offered to this Court, that the judgment regularly entered by default would be set aside, and, in any event, the debtor had ample opportunity to make and prosecute such an application on any counter-claim and has failed to do so. I also indicated that I was not satisfied on the evidence that the actions of the petitioning creditor are an abuse of the process.
Because the pending Federal Court proceedings, which have now been adjourned until these proceedings are dealt with by this court, involve a dispute between the debtor and Mr Hare and entities associated with him, it is not remarkable that the debtor may perceive some connection between those third parties and the petitioning creditor and interested creditors. The fact that Mr Hare was retained by the solicitors for the petitioning creditor to serve the debtor with the creditors petition, I sense, further fuelled his contention that he is "the victim of a conspiracy or agreement between the solicitors for the applicant and third parties to have the respondent declared bankrupt with a view to preventing him from continuing files in the Federal Court of Australia".
Mr Rogers acknowledged under cross-examination that the debts owed by him under the judgment to the petitioning creditor and the two other interested creditors are unrelated to any contracts, arrangements or dealings with Mr Hare and/or his entities. I can accept that a party engaged in no doubt expensive litigation in the Federal Court would be interested to know if their opponent is likely to be sequestrated.
Of course, as Mr Coulsen conceded, if the action which is before the Federal Court has merit, the trustee in bankruptcy would have to seriously consider maintaining such action for the benefit of creditors. That is, in the absence of material before me, highly speculative.
The debtor did not provide to this court any material, including even statements of claim, from which even a tentative view of whether such actions could add to the solvency of the debtor or otherwise. Mr Rogers says he is likely to be "more solvent" after those successful actions. For the reasons I have given relating to lack of evidence, I ignore either the possible positive effects or possible negative effect of that litigation on my consideration of solvency.

Solvency

I accept the submission of the creditor as set out at paragraph 7 of the submissions which were relied upon yesterday that the observations of Barrett J at first instance in Expile Proprietary Limited v Jabbs Excavations Proprietary Limited (approved by the New South Wales Court of Appeal on appeal) whilst considering Section 95A of the Corporation Act in the definition of "insolvency" (in similar terms to the Bankruptcy Act), are a useful guide in this matter. This is particularly so where (as in this case), the debtor asserts his solvency relies upon his assets and his capacity to realise upon them.
In this respect, the Registrar really had no evidence before her, and her finding that the debtor failed to support his contention "that he is solvent" was clearly open to her. I am not, of course, bound by that finding in a hearing de novo, but in circumstances where the creditor has demonstrated that the debtor has failed to comply with the duly served bankruptcy notice and as such has committed an act of bankruptcy, he is presumed to be insolvent and bears the onus of proving solvency.
Despite the uncorroborated evidence set out at paragraphs 49 to 55 of his affidavit earlier referred to and his evidence under cross-examination, I gave, in effect, the debtor, an unrepresented person, until yesterday to provide the "fullest and best" evidence of his financial position.
An affidavit prepared by him and sworn shortly before the hearing was relied upon by him and not objected to by counsel for the creditor, who in every respect, in my view, has acted very even-handedly in this matter.
In that affidavit, the debtor deposed to:
(a)The police further investigating his complaints but having not made any decision to prosecute;
(b)Equity Trust Merchant Bank confirming that "the loan associated with the security property mentioned was repaid on 24 September 2004";
(c)He is prepared to give security to the creditor over his property;
(d)He is willing to immediately sign a Notice of Discontinuance in the Federal Court in respect of those proceedings, thus giving up the action in the Federal Court "so as to avoid bankruptcy".
Demands made for payment by the petitioning creditor cannot be met because of undertaking given and the inability to effect a quick sale.
I still have no corroborative evidence of the value of the property registered in the debtor's name. I have the uncertainties of a taxation liability (arising from the debtor's property transactions where he says he made over $400,000 profit in a few months), because he has not filed returns for some years. Even if he is able to discontinue his proceedings in the Federal Court, it could have cost consequences from his opponent. The petitioning creditor says an offer of security at some time in the future (remembering the current caveat at least may prevent registration being effected) and uncertainties about when payment would be made all are unacceptable to the petitioning creditor.
The debtor, who said from the bar table on 6 May 2005 that he had got "a wake-up call" about his position, might say he should be given further time. The judgment was secured on 17 October 2003; the bankruptcy notice was served on 22 June 2004; and the creditors petition was served on 12 January 2005. He has, in my view, had plenty of time to satisfy these creditors. He discharged the mortgage on his property, it seems, in September 2004, when these proceedings were on foot, and he clearly chose to use moneys available to him at that time to satisfy his secured creditor rather than meet his unsecured creditors.
The debtor has not satisfied me to the requisite standard of proof that he is solvent. I am bound in such circumstances, being otherwise satisfied as to the matters set out in Section 52(1) of the Act, to make the orders set out at the commencement of these reasons.

I certify that the preceding twenty-two (22) paragraphs are a true copy of the reasons for judgment of Baumann FM

Associate:

Date: