Rothmore Farms Pty Ltd v Turner - [2002] FMCA 313

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ROTHMORE FARMS PTY LTD v TURNER

[2002] FMCA 313

BANKRUPTCY – Application for sequestration order – notice of intention to oppose – lengthy history of litigation between parties – where respondent has secured a reconsideration of the calculation of the debt from the Supreme Court – whether the original judgment was wrongfully secured in the face of a condition precedent which was not complied with – whether court should exercise discretion not to grant order under s.52(2) of the Bankruptcy Act – whether application should be adjourned pending further hearing in Supreme Court.

Bankruptcy Act 1966 (Cth) s.52(2)
Federal Court (State Jurisdiction) Act 1999 (SA)

Re Wakim; ex parte McNally (1999) 198 CLR 511

Applicant:

ROTHMORE FARMS PTY LTD (IN LIQUIDATION)

Respondent:

TENNYSON TURNER

File No:

AZ 87 of 2002

Delivered on:

6 December 2002

Delivered at:

Sydney via telephone link to Adelaide

Hearing Date:

27 November 2002

Judgment of:

Raphael FM

REPRESENTATION

Counsel for the Applicant:

Mr Mills

Solicitors for the Applicant:

DMAW Lawyers

For the Respondent:

Mr Turner in person

ORDERS

Sequestration order made against the estate of Tennyson Turner.
Costs of the application including any reserved costs be paid from the estate of the debtor in accordance with the Bankruptcy Act pursuant to the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
ADELAIDE

AZ 87 of 2002

ROTHMORE FARMS PTY LTD (IN LIQUIDATION)

Applicant

And

TENNYSON TURNER

Respondent

REASONS FOR JUDGMENT

These proceedings involve an application for a sequestration order against the estate of Mr Tennyson Turner. The creditor’s petition, which is dated 18 April 2002, is based upon the debtor’s failure to comply with a bankruptcy notice issued by the Official Receiver for the bankruptcy district of the State of South Australia on 7 March 2002. That notice advised the debtor that Rothwell Farms Pty Ltd (In Liquidation) (The Creditor) claimed that the debtor owed it a debt of $1,149,489.00.
On 27 May 2002 the debtor filed a notice of appearance and notice of intention to oppose, together with an affidavit in support. Further affidavits were filed by the parties prior to the matter coming before me on 27 November 2002. At that hearing a supporting creditor, Michael and Angela Kostoglou appeared and was represented.
The history of litigation between the creditor and debtor is extensive and ongoing. In summary it is as follows.
Proceedings were commenced in the Federal Court of Australia in 1998 by the creditor against four respondents including the debtor.

On 15 October 1998 Mansfield J made interlocutory orders including orders restraining the respondents from selling, disposing of, encumbering or otherwise dealing with certain assets which included certain opals held in a safety deposit box in the name of one Andrew Charles Cooper (the second respondent). The matter proceeded to hearing before Mansfield J in 1999 by which time there were six respondents. His Honour delivered judgment on 4 June 1999. In his judgment Mansfield J found (amongst other things) that:
1all six respondents to the action had been instrumental in wrongfully transferring assets out of a family trust, of which the applicant, the creditor had been trustee, into the hands of Mr Turner and a company which he controlled, Agri-Steel Pty Ltd;
2the creditor was entitled to an equitable charge or a lien over the assets of the trust; and
3the creditor was entitled to enforce that charge or lien against such of the trust assets as were then held by the debtor or Agri-Steel, subject to an adjustment by reference to any sums expended by the debtor or Agri-Steel in the conduct of the “trust” business.
As an aid to the enforcement of the equitable charge or lien His Honour ordered that an enquiry and account be conducted by the Registrar of the Federal Court to identify:
a)The assets of the trust;
b)The moneys received by the debtor or Agri-Steel in the conduct of the business; and
c)All moneys paid by the debtor and Agri-Steel in the conduct of the business from a certain date.
Order 3 of His Honour’s orders is of particular relevance to these proceedings. It is in the following form:
“3. Rothmore Farms’ equitable charge or lien over the assets of the Jill Cooper Family Trust may be exercised against the assets presently held by Tennyson Turner or by Agri-Steel Pty Ltd subject to Rothmore Farms paying to Tennyson Turner or to Agri-Steel Pty Ltd the following amounts:
(i)The amounts expended by them, or either of them, directly on the cultivation, maintenance, harvesting and realisation of the 1998/99 crops.
(ii)The amounts expended by them or by either of them directly on the purchase of materials and the provision of labour to operate the engineering business and to produce for sale or repair items of machinery plant or equipment in the conduct of that business.
(iii)The amounts expended by them or either of them to lease payments made in respect of an R72 AGCO Gleaner Harvester 1997
and is further subject to Rothmore Farms returning to Tennyson Turner the black unpolished opal stones presently held in a safety deposit box in the State Bank of South Australia and being the opal stones transferred to Andrew Charles Cooper on 10 August 1998.”
A few weeks after this judgment was delivered in the Federal Court, the High Court delivered its decision in re Wakim; ex parte McNally (1999) 198 CLR 511. In consequence of that decision, and its impact on the jurisdiction of the Federal Court, in August 1999 the Federal Court (State Jurisdiction) Act 1999 (SA) came into operation. Pursuant to that Act, in August 1999, proceedings were instituted in the Supreme Court of South Australia the practical effect of which was to continue in that court the action which had been brought to trial in the Federal Court. The Supreme Court then ordered that the enquiry and account ordered by Mansfield J be undertaken by a Master of that court.
The hearing of the enquiry and account commenced on 21 September 2001 and orders giving effect to its outcome were pronounced by Judge Bowen Pain on 2 November 2001. Order 13 was in the following form:
“13 Within 7 days of service of a sealed copy of this order on them, the third and fourth defendants pay to the plaintiff the sum of $1,189,989.00.”
The debtor was the third defendant.
These orders of Judge Bowen Pain sitting as Master of the Supreme Court, and in particular Order 13, founded the debt upon which the bankruptcy notice was issued. It would not appear that the debtor made any application to set aside that bankruptcy notice, which had been served on 26 March 2002. As a result, an act of bankruptcy was committed by the debtor on 16 April 2002.
A day later the petition issued. It was originally set down for hearing at 2.00p.m. on 27 May 2002. On that day the matter was adjourned to allow the petitioning creditor to answer the claims made by the debtor in the notice of opposition and supporting affidavit. On 1 July 2002 the debtor made an application to the Supreme Court of South Australia seeking the following orders:
i)That paragraph 13 of the declaration and order made in this action by Judge Bowen Pain on 2 November 2001 be set aside;
ii)That the accounting taken and made to reach the sum set out in the said paragraph 13 of the order of 2 November 2001 be reviewed and a full accounting be made of the receipts and payments from the farming and machine shop business.
iii)That the execution of the order made be stayed until the accounting is re-examined.
iv)That an extension of time for me to appeal the judgment of Mansfield J in Action 3019 of 1999 [be granted].
These proceedings were heard by Perry J in the Supreme Court who delivered judgment on 4 September 2002. The bankruptcy petition had meanwhile been adjourned pending the decision. On 2 July 2002 an affidavit relating to a supporting creditor in the sum of $109,834.20 was filed based upon a default judgment in the District Court of South Australia for that sum obtained on 11 June 2002.
The decision of Perry J was unfavourable to the debtor and will be referred to later in these reasons. However, the debtor was able to take out a further application in the Supreme Court, which resulted, on 24 October 2002, in orders requiring the liquidator to furnish a report by affidavit to the court involving some further accounting on the matters which were the subject of Judge Bowen Pain’s Order 13. I was advised by the debtor (and it was agreed by the creditor) that these matters have now been referred back to Judge Bowen Pain by Perry J. It would appear that, to at least some extent, the debtor has secured by this manoeuvre a result that he was unable to obtain by reason of his failure to appeal the decision of the Master within time.
It is appropriate to deal here with the position of the supporting creditor. Judgment in this case was given by Master Rice of the District Court on 30 July 2002. The action was a claim for rent, disbursements and interest pursuant to a lease dated 1 September 1998 between the supporting creditor and the debtor. The debtor filed a cross claim. In a judgment of some seventeen pages the learned Master made orders as follows:
1On the plaintiff’s claim, summary judgment for the plaintiff:
(a)On the rent claimed in the sum $28,752.89;
(b)In respect of outgoings $4,421.02;
(c)I grant a stay as to enforcement of the judgment to the extent of $10,000.00 upon:
(i)the defendant producing an invoice describing the work done and the date thereof and evidence of payment and the date of payment within 21 days;
(ii)the defendant properly particularising his counter-claim within 21days;
(d)Costs of distraint in the sum of $1,955.25.
2…
3Action to be remitted to Adelaide Magistrates Court for determination of the balance of the plaintiff’s claim and any counter claim. I will stay this part of the order for 21 days.
4…
5…
6…
At the commencement of the hearing before me the applicant creditor filed an affidavit of debt and an affidavit of search and otherwise relied upon affidavits previously filed to establish the matters required under s.52 of the Bankruptcy Act.
The debtor appeared on behalf of himself. He acknowledged that he was formerly a legal practitioner of the State of South Australia. This is important because there was considerable debate between myself and the debtor concerning the production of evidence to establish assertions which he was making from the bar table. In particular he made assertions concerning the reasons for the orders of Perry J. I pointed out to him that there was no need for him to make assertions from the bar table when it would have been possible to have obtained and produced for me a transcript of the proceedings. In connection with this and other matters he offered to produce to the court the appropriate evidence. Whilst I can accept that there may well be circumstances in which an unrepresented litigant should be given an indulgence I do not believe that this is the case with this debtor who readily accepted that he was aware of the legal maxim that “he who asserts must prove”. For this reason I have not had regard to certain affidavits filed by the debtor after the hearing had been concluded and whilst these reasons were being prepared.
The debtor argues that I should strike out the petition on the basis that in the light of the latest orders of Perry J no sum has yet been determined to be owing by him to the petitioner. He argues that because the amount of the debt had not been determined the bankruptcy notice and the petition were precipitate. As a fall back position the debtor argues that I should stay (by which I believe he means, adjourn) these proceedings until after Judge Bowen Pain has reconsidered the calculation of the debt according to the latest orders of his Honour Perry J.
The second ground upon which the debtor argues I should set aside the petition is that the orders of Mansfield J and in particular Order 3 which has been set out at paragraph 6 of these reasons was not complied with insofar as he did not receive the sum of $57,000.00 which was the value of the lease payments expended in respect of the R72 AGCO Gleaner Harvester nor did he receive back the black unpolished opal stones. He now accepts that those stones have been returned to him, albeit belatedly.
It would appear (I have no evidence of this) that one of the grounds for referring the calculations back to Master Bowen Pain is a suggestion that the learned Master, when making his calculations, did not properly take into account the limitation on the indemnity to be provided by the judgment debtors that arose out of the trust structure of the plaintiff creditor. No evidence was led as to whether or not, or to what extent, that might change his Honour’s previous calculation. I am of the view that in the absence of such evidence I should not exercise my discretion under s.52(2) to refuse to make a sequestration order in the face of a decision which was not appealed against and which has already been the subject of a lengthy judgment from Mansfield J, a judgment of Judge Bowen Pain on the assessment of damages and a considered judgment of Perry J on the application to set aside. In this regard I note that in the judgment of Master Bowen Pain the difference between the amount due to the plaintiff gross and net after deductions is some $500,000.00 on a total net indebtedness of $1,100,000.00 odd. In the absence of any evidence whatsoever I am entitled, I believe, to express some serious doubts as to whether any revised orders of the Master will change the situation that significantly.
The second argument for me to strike out the application put by the debtor relates to the alleged non-compliance with the orders of Mansfield J. The two particular failures relied upon by the debtor were the failure to pay him $57,000.00 representing the lease payments on the vehicle and the failure to deliver the opals. Insofar as the $57,000.00 is concerned the applicant is wrong. In the orders of Master Bowen Pain (Order 5.2) credit is given for $57,000.00 before the net sum due by the debtor to the creditor is calculated for the purposes of Order 13.
In regard to the opals they were the subject of some considerable discussion by Mansfield J in his judgment between paragraphs [45] and [57]. At [56] his Honour says in relation to the evidence of a Mr Bruce:
“I accept his view that the opal would realise about $10,000.00 on the open market, although he did not think there was a real market for synthetic opal.”
This places the opal claim in context but it was dealt with again by Perry J in his judgment of 4 September 2002 where his Honour said at [16–18]:
“Furthermore, he contended that certain moneys were payable to him, and a parcel of opal stones was to be returned to him by Rothmore Farms, pursuant to the order of Mansfield J. Neither of these events, which he described as “conditions precedent” in Mansfield J’s order disposing of the proceedings, had eventuated.
In my opinion, in the affidavit and in his oral argument on the hearing of the application, Mr Turner failed to identify any ground upon which it would be proper to grant an extension of time to appeal from the judgment of Mansfield J.
There were no “conditions precedent” to Mansfield J’s judgment. It took effect immediately according to its terms. No part of the judgment was dependent upon the carrying out of any other part.”
I would respectfully agree with His Honour.
In view of my decision that there are no grounds upon which I should exercise my discretion under s.52(2) to set aside the application I turn to consider whether it should be adjourned until after the further investigations of the Master. I would not be inclined to do this. There is no indication of when the Master will be able to hear the matter, how long it will take or when a decision is likely to be made. There is no evidence that the Master's decision will reduce the amount claimed which is already a very substantial figure. In addition there is evidence of debts owed to two supporting creditors so that there is a clear balance of convenience and public interest in favour of a sequestration order being made as soon as possible.
Because I am satisfied that a sequestration order should be made on the basis of the current petition there is no need for me to deal with the application of the supporting creditor to be substituted. I should, however, indicate that I do not accept the submissions made by the debtor concerning this debt. It seems to me from reading the judgment of the District Court Master, which was provided to me by the solicitor for the supporting creditor, that any cross claim which the debtor could maintain would be limited to a figure of approximately $10,000.00 leaving a sum in excess of $25,000.00 still owing. Although the Master made orders concerning the filing of evidence in relation to the cross claim the debtor conceded that they had not been complied with and it may very well be that the hearing of the cross claim will not proceed whilst he is in default.
I am satisfied of the matters required under s.52 of the Bankruptcy Act. I order that sequestration order shall be made against the estate of Tennyson Turner and that the costs of the application including any reserved costs be paid from the estate of the debtor in accordance with the Bankruptcy Act 1966 pursuant to the Federal Court Rules.
The court notes that the date of the act of bankruptcy is 16 April 2002.

I certify that the preceding twenty-five (25) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate:

Date: