FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Savage v Soloman [2021] FedCFamC2G 278
File number(s): CAG 62 of 2018 Judgment of: JUDGE RILEY Date of judgment: 18 November 2021 Catchwords: BANKRUPTCY – Application to review a sequestration order made by a registrar – hearing de novo – going behind the judgment on which the bankruptcy notice was based – whether there is in truth and reality a debt. Legislation: Bankruptcy Act 1966, s.52 Cases cited: Briginshaw v Briginshaw (1938) 60 CLR 336; [1938] ALR 334; (1938) 12 ALJR 100; [1938] HCA 34
Browne v Dunn (1893) 6 R 67
Gawne v Gawne [1979] 2 NSWLR 449
New South Wales Police Force v Winter[2011] NSWCA 330, (2011) 10 DDCR 69
Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132; (2017) 345 ALR 534; (2017) 91 ALJR 803; (2017) 122 ACSR 115; [2017] HCA 28
Re Application of Sutherland and Arnautovic [2014] NSWSC 821
Savage v Soloman [2019] NSWDC 223
Soloman v Savage [2018] NSWCA 249Division Division 2 General Federal Law Number of paragraphs: 114 Date of hearing: 5 October 2021 Place: Melbourne Counsel for the applicant: Brodie Buckland Solicitor for the applicant: Kennedy & Cooke Lawyers Counsel for the respondent: Damien Allen Solicitor for the respondent: Morgan Ardino & Co Solicitors ORDERS
CAG 62 of 2018 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: ROBIN BARRY SAVAGE
ApplicantAND: PHILLIP AZIZ SOLOMAN
Respondent
ORDER MADE BY:
JUDGE RILEY
DATE OF ORDER:
18 November 2021
THE COURT DECLARES THAT:
1.By a written agreement dated 9 August 2012, the respondent borrowed $60,000 from the applicant for three months at an interest rate of 3% per month.
2.The $60,000 plus interest remains due and owing.
Note: The form of the order is subject to the entry in the court’s records.
Note:This copy of the court’s reasons for judgment may be subject to review to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)
REASONS FOR JUDGMENT
JUDGE RILEY:
INTRODUCTION
This is an application to review a sequestration order made by a registrar on 26 March 2020. The matter was filed in Canberra, but, due to pressure of work in that registry, was eventually referred to me for hearing on 5 October 2021 in Melbourne. The hearing was conducted by Microsoft Teams.
The hearing before me was a hearing de novo of the creditor’s petition. All of the usual requirements for the granting of a creditor’s petition needed to be satisfied. Most particularly, the creditor needed to satisfy the court that there was in truth and reality a debt due to the petitioner: Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132.
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- AGLC
- Savage v Soloman [2021] FedCFamC2G 278
- Case
- [2021] FedCFamC2G 278
- Decision Date
CaseChat Overview and Summary
In the matter of Savage v Soloman, the primary issue before the court was whether there existed a debt in truth and reality that Mr Soloman owed to Mr Savage. This question arose from a complex series of financial dealings and legal proceedings between the two parties. The court had to determine if the debt, as claimed by Mr Savage, was genuine and if Mr Soloman had indeed failed to repay it as agreed. The dispute was rooted in a loan agreement dated 9 August 2012, which Mr Savage claimed was a binding agreement for a $60,000 loan. However, Mr Soloman contested the validity and terms of this agreement, arguing that the money was never lent as a loan but was instead an investment that was never realised.
The court considered the evidence provided by both parties and the various submissions and affidavits. It was noted that Mr Soloman had not consistently maintained his defence throughout the proceedings, which raised questions about the credibility and genuineness of his claims. The court found Mr Savage to be a more credible witness, and the formal and clear nature of the written loan agreement was given significant weight. The court concluded that the loan agreement was intended to be a straightforward loan rather than a temporary arrangement pending an investment agreement.
The court ultimately decided that there was indeed a debt in truth and reality owed by Mr Soloman to Mr Savage. This conclusion was based on the credible evidence supporting the existence of the loan agreement and Mr Soloman's failure to repay the amount as agreed. The court found that Mr Soloman had not provided a satisfactory explanation for the absence of a repayment, and the defence that the debt had been repaid was not supported by any evidence. Consequently, the court upheld the bankruptcy notice and the sequestration order against Mr Soloman.
The court considered the evidence provided by both parties and the various submissions and affidavits. It was noted that Mr Soloman had not consistently maintained his defence throughout the proceedings, which raised questions about the credibility and genuineness of his claims. The court found Mr Savage to be a more credible witness, and the formal and clear nature of the written loan agreement was given significant weight. The court concluded that the loan agreement was intended to be a straightforward loan rather than a temporary arrangement pending an investment agreement.
The court ultimately decided that there was indeed a debt in truth and reality owed by Mr Soloman to Mr Savage. This conclusion was based on the credible evidence supporting the existence of the loan agreement and Mr Soloman's failure to repay the amount as agreed. The court found that Mr Soloman had not provided a satisfactory explanation for the absence of a repayment, and the defence that the debt had been repaid was not supported by any evidence. Consequently, the court upheld the bankruptcy notice and the sequestration order against Mr Soloman.
Orders
Orders of the court
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Background
Background to the litigation
The petitioning creditor, Mr Savage, is an elderly, retired man. He previously had a plant nursery and worked in the communications industry. The debtor, Mr Soloman, has been a mortgage broker and is now a licenced real estate agent. Before he obtained his real estate agent’s licence, he worked under the supervision of a real estate agent. Prior to and around the time of the financial dealing that is the subject of this proceeding, Mr Savage had obtained a number of financial products through Mr Soloman.BACKGROUND The matter has a long and complicated background. The creditor’s petition was filed on 15 August 2018. On 26 July 2019, a registrar extended the creditor’s petition with the result that it was due to expire on 14 August 2020. The hearing of the creditor’s petition was adjourned by the registrar seven times. The creditor’s petition was based on Mr Soloman’s non-compliance with a bankruptcy notice issued on 22 May 2018. The bankruptcy notice was based on a judgment of the District Court of New South Wales at Bega made on 27 November 2017 for $173,400, consisting of a debt of $60,000 and interest of $113,400. Mr Savage lives in Bega. He commenced his District Court proceeding on 3 May 2016. Mr Savage said that the debt arose from a written loan agreement, whereby the petitioning creditor lent the debtor $60,000 on 9 August 2012 for a period of three months at an interest rate of 3%, or $1,800, per month. That works out to be an interest rate of 36% per annum. Mr Soloman filed an amended defence in which he said that the $60,000 had not been lent, interest was not $1,800 per month, the term was not three months, and the agreement was not binding. Mr Soloman also said in his defence that he had a cross-claim of $300,000, which is the amount he would have received if the “deal” had been completed. However, the defence said that the cross claim had been struck out, because it was out of time, but Mr Soloman intended to file another proceeding in relation to it. There is no evidence that such a proceeding has been filed. The matter was listed in the District Court at Bega for final hearing on Monday 27 November 2017. Mr Soloman maintained that he had retained a solicitor and a barrister for the three day hearing. On Sunday 26 November 2017, Mr Soloman, by his solicitor, filed and served a notice of motion and affidavit in support seeking that the final hearing be vacated and that the proceedings be transferred to Sydney. The affidavit said that Mr Soloman, in the afternoon of Friday 24 November 2017, received a threatening and anonymous text message, warning him not to come to Bega. It was expressed in racist terms. The matter was called on at 10am on 27 November 2017, but there was no appearance for Mr Soloman. It was stood down until 11am, but, again, there was no appearance for Mr Soloman. It was stood down again until 12.30pm, after the plane from Sydney was expected to arrive. Again, there was no appearance for Mr Soloman At that time, the judge dismissed Mr Soloman’s notice of motion for want of prosecution. The judge said he had read the affidavits of Mr Savage in support of his claim, and, on the basis of them, gave judgment for Mr Savage in the sum of $60,000 plus interest.
Evidence
Evidence Before The Court
Notwithstanding that evidence, Mr Savage also agreed in cross-examination that Mr Soloman lent out the $60,000 on Mr Savage’s behalf. However, that answer seems to me to have been the result of confusion on Mr Savage’s part. I do not believe that it was what he meant.MR SOLOMAN’S ORAL EVIDENCE ABOUT THE LOAN AGREEMENT Mr Soloman said in cross-examination that:(a)he did not have a written agency agreement whereby he agreed that to be Mr Savage’s agent for the investment of the $60,000; (b)he did not have a written agreement that he would only have to repay Mr Savage the $60,000 if an investment came good; and(c)the “deed of agreement short term loan” agreement was a temporary arrangement which he and Mr Savage did not rely upon.FINDINGS ON THE LOAN AGREEMENT I found Mr Savage to be a much more credible witness than Mr Soloman. For example, as discussed below, Mr Soloman changed his evidence during the course of cross-examination about whether he had paid $14,500 on behalf of Mr Savage by weekly instalments or in a lump sum. Also, over the years, Mr Soloman has substantially changed his defence to Mr Savage’s claim for the $60,000. Earlier, Mr Soloman said that the judgment Mr Savage relied upon was vitiated by fraud. However, in his submissions filed on 11 December 2020, Mr Soloman formally abandoned that argument. Mr Soloman, through his counsel, said at the commencement of the hearing before me that there was never any loan agreement as such, but he voluntarily agreed to repay $60,000 to Mr Savage. However, in earlier affidavits, Mr Soloman appears to have acknowledged that there was a loan. Indeed, in paragraph 11 of his written submissions dated 10 December 2020, which were signed by Mr Golledge SC and Mr Parrish, Soloman argued that there was no debt because the loan had been repaid. It was not argued in those submissions that the loan agreement was temporary, or was really an investment agreement, or was anything other than a straightforward loan agreement. While it is common for litigants to amend their defences, substantial reversals and the late raising of entirely new points do invite some doubt about the genuineness of the defence overall. It is very difficult to accept that the written loan agreement dated 9 August 2012 was not intended to be exactly what it said it said it was. It is a formal and very clear loan agreement. There is nothing in it to suggest that it was intended to be a temporary agreement pending the execution of an entirely different investment agreement. Moreover, and very significantly, Mr Soloman did not claim that the entirely different investment agreement he postulated was ever drafted or signed. Despite there being many emails in evidence, there is no email from Mr Soloman to Mr Savage saying anything like:Please find attached a draft of our investment agreement. If you are happy with it, please sign it and return it to me as soon as possible. If not, please contact me to discuss. If Mr Soloman had indeed wanted to merely provide a written acknowledgement of his receipt of $60,000 from Mr Savage for the purposes of an investment by Mr Savage, Mr Soloman could easily have just provided a receipt saying:6 August 2012Received by me today from Robin Savage the sum of $60,000 to be invested by me on Mr Savage’s behalf on terms to be agreed.Phillip Soloman
Decision
Reasons for decision
On 2 September 2019, Mr Soloman applied for leave to appeal against the District Court’s order made on 4 June 2019. The parties agreed for the matter to be dealt with on the papers. Mr Soloman appeared in person. The Court of Appeal dismissed the application, saying that the District Court had not made any error of principle in its exercise of its discretion. The Court of Appeal touched upon the merits of the underlying matter, and was somewhat critical of changes in Mr Soloman’s proposed defence. However, the Court of Appeal did not consider whether there was in truth and reality a debt.GOING BEHIND THE JUDGMENT Mr Soloman accepted that he had not complied with the bankruptcy notice. However, he asked this court to go behind the judgment. When the matter came before me for hearing, it was quickly determined, with little resistance from Mr Savage, that it was appropriate in this case to go behind the judgment. That was notwithstanding that the judgment was regular and had been subject to judicial consideration on three occasions. It was appropriate to go behind the judgment because no judge had ever determined the matter on its merits, and because the debtor raised a triable issue. Consequently, the hearing before me on 5 October 2021 concerned the question of whether there was in truth and reality a debt owing by Mr Soloman to Mr Savage.MATERIAL RELIED UPON There was a vast amount of material filed in this proceeding. However, at the hearing before me on 5 October 2021, the parties helpfully identified the documents that they actually relied upon and they became exhibits as follows:(a)exhibit 1: Mr Savage’s statement of claim dated 3 May 2016 and filed in the District Court;(b)exhibit 2: Mr Savage’s affidavit sworn or affirmed on 19 October 2020 and filed in this proceeding;(c)exhibit 3: Mr Savage’s affidavit sworn on 29 December 2020 and filed in this proceeding;(d)exhibit 4: Mr Savage’s case outline dated 30 September 2021 and filed in this proceeding;(e)exhibit 5: Mr Soloman’s affidavit sworn on 10 December 2020 and filed in this proceeding;(f)exhibit 6: Mr Soloman’s affidavit sworn on 5 March 2019 and filed in the District Court;(g)exhibit 7: Mr Soloman’s affidavit sworn on 20 March 2019 and filed in the District Court; and(h)exhibit 8: Mr Soloman’s affidavit sworn on 25 February 2020 and filed in this proceeding. In addition, Mr Soloman relied on his written submissions filed in this court and dated:(a)10 December 2020;(b)7 January 2021;(c)20 April 2021; and(d)29 September 2021. Mr Savage also relied on affidavits of search and debt. THE STATEMENT OF CLAIM In his statement of claim filed in the District Court and dated 3 May 2016, Mr Savage said:1.The Plaintiff and Defendant are both natural persons able to sue and be sued in their own names. 2.By agreement in writing dated 9 August 2012 (“The loan agreement”) the Plaintiff agreed to loan the sum of $60,000 (“the principal sum”) to the Defendant for a period of 3 months from 9 August 2012.3.It was an expressed term of the loan agreement that the Defendant would pay to the plaintiff interest payments of $1,800 each month commencing 9 August 2012.4.It was an expressed term of the loan agreement that the Defendant would pay to the plaintiff the principal sum on 9 November 2012.5.On 9 August 2012 the Plaintiff advanced to the Defendant the sum of $60,000 by way of personal cheque in accordance with the loan agreement;6.In breach of the loan agreement the Defendant has failed to pay to the Plaintiff interest of $1800 on the 9th of each month;7.In breach of the loan agreement the Defendant failed to pay to the Plaintiff the principal sum on 9 November 2012;8.The plaintiff claims damages for breach of the loan agreement:a) $60,000;b) $79,200 (Interest as of 9 April 2016)THE DEFENCE
Ratio Decidendi
Legal Principle Established
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