St George Bank v Wright
[2011] FMCA 351
•20 April 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ST GEORGE BANK v WRIGHT | [2011] FMCA 351 |
| BANKRUPTCY – Bankruptcy notice – adjournment of sequestration application – notice of appeal – sequestration order. |
| Bankruptcy Act 1966 (Cth), s.52 |
| Re Bryant; Ex parte Bryant v Commonwealth Bank of Australia [1994] FCA 1062 Commissioner of Taxation v Cumins [2008] FCA 353 Sandell v Porter (1966) 115 CLR 666 Wright & Ors v Westpac Banking Corporation [2010] QCA 190 |
| Applicant: | ST GEORGE BANK – A DIVISION OF WESTPAC BANKING CORPORATION |
| Respondent: | KYLE JONATHAN WRIGHT |
| File Number: | BRG 152 of 2011 |
| Judgment of: | Burnett FM |
| Hearing date: | 20 April 2011 |
| Date of Last Submission: | 20 April 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 20 April 2011 |
REPRESENTATION
| Counsel for the Applicant: | Mr D. Savage of Senior Counsel |
| Solicitors for the Applicant: | Gadens Lawyers |
| The Respondent appeared on his own behalf |
ORDERS
A sequestration order be made against the estate of KYLE JONATHAN WRIGHT.
The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966.
A consent to act as trustee has been signed by Ann Fordyce.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 152 of 2011
| ST GEORGE BANK – A DIVISION OF WESTPAC BANKING CORPORATION |
Applicant
And
| KYLE JONATHAN WRIGHT |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
An application has been filed seeking an adjournment of the sequestration application by each of the three respondents, they being: Ronald John Wright, Kyle Jonathan Wright, and Sandra Louise Pepi. Dealing first with Mr Ronald John Wright. Mr Wright makes his application on the basis that he has lodged a notice of appeal in respect of an order made by me on 24 January 2011, which order was to dismiss an application by him to set aside the bankruptcy notice, which had been served upon him. A notice of appeal was filed on
14 February, which was within the time allowed for appeal but before the settled reasons in my decision, which were given on 24 January, were then provided to him.
The settled reasons appear to have been provided to him on or about
17 March. First I note the solicitors for the applicant creditor wrote to Mr Wright in respect of their notice of appeal on 22 March 2011, observing in the first ground of appeal, that the debtor had stated that ground of appeal was to be determined by the appellant upon the receipt of the transcript of the judgment, being reference to my judgment of 24 January. They enclosed in their letter of 22 March, a copy of the reasons for decision.
The debtor has been in possession of my reasons for nearly a month but notwithstanding that matter, no particulars of the notice of appeal have been forthcoming. When I inquired of him as to what could be expected in the notice of appeal, he informed me that he sought a right to prosecute a counter-claim for $100 million dollars premised upon a perceived right of action.
The circumstances of the appeal appear to me to be similar to and give rise to similar events, which occurred before the Court of Appeal Queensland where from a review of the Court of Appeal’s decision[1] in the matter involving the creditor and respondents, the debtors’ arguments on the appeal departed significantly from the grounds that had been advanced in its notice of appeal. Then they sought to pursue matters which they considered relevant but which, understandably, the court, having regard to the questions it believed were before it considered irrelevant being based upon false premises or a misapprehension of the reasons provided by the trial judge, McMurdo J.
[1] (2010) QCA 190
It seems to me that in this instance, the Full Court will be subject to the same sorts of submissions, wherein the appellant will seek to agitate matters which are strictly not relevant to any appeal. Certainly, the appeal will not be confined to matters which are sought to be contended in the notice of appeal, either as it is presently expressed or as it will be expressed at some later time. It seems to me that the prospects of appeal, although it is a matter which I am clearly not going to rule upon, is a matter which ought to be regarded as relevant in the overall scheme of matters to be considered in the context of the exercise of this court’s discretion.
The other matter which is relevant to the matter of the appeal is the statement in the grounds of appeal that the applicant seeks a stay of the bankruptcy notice until judgment in the cross-claim. The registrar of the court wrote to the debtor, after receiving the notice of appeal and expressly raised that matter with him. That occurred on 5 April 2011, when the registrar wrote that the notice of appeal in each matter makes reference to the appellant seeking a stay of the bankruptcy notice until judgment in the cross-claim. The registrar noted that in the ordinary course, appeals will be listed for sittings in August, and the purpose of the registrar’s correspondence was to ascertain if the appellant’s wished to have the stay application listed for hearing prior to the appeal hearing, and informing the appellants that the filing of a notice of appeal did not of itself, act as a stay in respect of the orders.
No application has been filed, notwithstanding the registrar’s helpful correspondence addressed to the debtors. It seems to me that in any event, having regard to the matters which would be considered by a court in the exercise of its discretion on the hearing of a stay application, that the prospects of a stay being granted are poor in any event. All up, it seems to me that there are no real reasons advanced as to why the application ought to be adjourned, even allowing for the matters which I will address in a moment, which are raised by the other two debtors, Mr Kyle Jonathan Wright and Ms Sandra Louise Pepi.
Moving then to Kyle Jonathan Wright and Sandra Louise Pepi, who I will deal with discretely because they have not appealed. There was no application brought by them to set aside the bankruptcy notices by appeal. The notices are not the subject of any discrete order. The notices having been served and the time for compliance having passed without compliance, they have committed acts of bankruptcy. But they too seek to have their applications adjourned pending the outcome of the appeal brought by Mr Wright Senior and Mrs Wright Senior. They made joint submissions, although submissions were only made by
Mr Wright Junior himself.
They make joint submissions that there are other actions in respect of which they ought to be permitted, a right to pursue, and the hearing of a sequestration application would frustrate their capacity to bring those matters and prosecute them, particularly if they were to be subject to sequestration orders. It was contended sequestration would impact on their capacity to act as officers of various corporations, which corporations have rights, which those two particular debtors, wish to have the corporations pursue with the view to pursuing alleged misfeasance by others, such as the receiver managers, and other entities.
As I have earlier noted, the very complex set of facts which surround the debts have been set out in very clear terms by her Honour Holmes JA in her judgment in the Court of Appeal.
The relevant passages have been incorporated into my judgment in the earlier application involving
Mr Wright Senior and his wife. Other matters, which have been sought to be prosecuted by those particular debtors, have also been the subject of other proceedings in the Supreme Court. For instance, more recently an application was brought in the Supreme Court to prosecute a cross-claim for $36 million. That cross-claim is against the respondent in that proceeding but the creditor applicant in this proceeding, that is, the St George Bank.
I note from correspondence, the contents of which are unchallenged, that the cross-claim for $36.3 million, which is brought against the bank, was dismissed by his Honour Justice Applegarth on 17 February 2011. By his Honour dismissing the claim against the bank and entering judgment in the proceedings for the bank, it seems that these other matters, which have been raised by Mr Wright would enliven no right to a set-off in respect of any claim made by the bank. Further, it certainly does not seem from the submissions made that even if moneys were to be recovered, they would seriously impact upon the capital sum which is due to the bank, albeit submissions were made that there might be some bearing upon the accruing interest.
The bottom line remains that nothing appears to be advanced orally this morning which suggests that there would be any utility in allowing
Mr Wright time to go away and prepare material to place before the court to demonstrate that he is otherwise solvent, in the sense that he would be able to raise, by reason of all these other actions, sufficient funds to discharge the debt due to this creditor and others if time were allowed.It seems to me, having regard to those matters and having regard to the prospects of the appeal, that the applications for adjournments brought by each of the three respondent debtors this morning ought be dismissed. I will dismiss the application for an adjournment by each of those parties.
I have already made an order in relation to Mrs Wright Senior, which was made by consent. I will review that matter in three months time.
Dealing first with Application BRG 45 of 2011, St George Bank v Ronald John Wright. On 3 July 2009, judgment was handed down in the Supreme Court of Queensland by McMurdo J in favour of the creditor against the debtor for a sum of $47,763,997.46. His Honour’s judgment was subject to appeal, which was dismissed. On 23 November 2010, a bankruptcy notice issued in respect of a sum of $19,128,798.86, which sum represented the judgment ordered by his Honour Justice McMurdo less credit for approximately $28.6 million dollars in respect of payments received in the interim. The bankruptcy notice was served on
1 December 2010, and was subject to an application to be set aside, which application was made on 22 December 2010.The application was heard and determined on 24 January 2011 when the application was dismissed. The debtor had not complied with the requirements of the notice, and accordingly had committed from that point, an act of bankruptcy. On 31 January 2011, a creditor’s petition issued and that petition was served upon the debtor on 11 February 2011. All matters relevant to the making of a sequestration order as required by s.52 of the Bankruptcy Act 1966 (Cth) have been satisfied, which leaves me only to consider whether or not the debtor is insolvent or can demonstrate other sufficient cause as to why the order ought not be made.
He advanced two grounds: first he says that an appeal against my order of 24 January 2011 has been launched, and accordingly the appeal should be permitted to be resolved before I proceed to determine the creditor’s petition. The appeal itself is bereft of grounds, and when I invited the debtor today to inform me of the grounds that would constitute the appeal, I was broadly informed that the debtor wished to prosecute a counter-claim for $100 million. It seems from my exchanges with the debtor, that he was not able to articulate any particular grounds against the reasons for my decision of 24 January 2011, which suggest that there may be some difficulty with the prosecution of the appeal on a point of law.
I note also, that notwithstanding advice to him by the registrar of the court concerning a stay, he has not sought to prosecute a stay in respect of the orders made, and which are the subject of appeal. Finally, while an appeal itself is not a ground to refuse a sequestration order, nor is the fact that an appeal is pending sufficient ground for staying the proceedings upon a petition; see generally the observations of the Full Court in Re Bryant; Ex parte Bryant v Commonwealth Bank of Australia,[2] and Commissioner of Taxation v Cummins.[3] Perhaps more significantly, in this case, the conduct of the debtor does not invest the court with any great confidence that he would prosecute any appeal with all due diligence.
[2] [1994] FCA 1062
[3] [2008] FCA 353
By that I do not mean necessarily attending at court and appearing on the day set for appeal, which, I am reliably informed, will be in August this year, but rather by informing the other parties to the appeal of meaningful grounds of appeal, or otherwise attending to those matters, which ought put the respondents to the appeal on notice as to the matters to be prosecuted on appeal. I am confirmed of that view by reason of the conduct of the debtor between the date where he received the written reasons for judgment and today’s date. That is to say nothing has occurred to advance the appeal if not for any other reason but because the debtor has no real grounds to prosecute.
The other matter of other sufficient cause as to why an order ought not be made, is principally advanced on the basis that Ronbar Pty Ltd, the principal debtor has filed a claim against the creditor in the Supreme Court, claiming for $36.3 million. But that action was summarily dismissed by the Supreme Court on 17 February 2011. It is not entirely plain, but it seems to be partly addressed in an affidavit filed by the applicant in his application. He broadly asserts, in addition to that claim, that he has other remedies and rights that he could prosecute against the bank if he was able to forestall sequestration.
For instance, he contends that he has a claim for a significant damages, in respect of representations made to him by a financier and a finance broker, and says that if he is successful in prosecuting those claims, the award would be more than sufficient to discharge the debts, which are found to be owing by him to the creditor. Putting aside questions of uncertainty as to whom might be the appropriate plaintiffs in those proceedings; and the capacity of the debtor to receive from those plaintiffs’ funds, which he contends would be the fruit to that litigation; how that litigation might be funded; and questions of the prospects of success of that litigation, the fact remains that any right, if there be one, is merely a chose in action.
I have grave doubts about the capacity of the debtor to realise the value of that chose in action, if such exists, in such time as to enable him to demonstrate his solvency. In Sandell v Porter,[4] the Chief Justice of the High Court said this:
“The conclusion of insolvency ought to be clear from a consideration of the debtor's financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor's inability, utilising such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency. Whether that state of his affairs has arrived is a question for the Court as a question of fact.”
[4] (1966) 115 CLR 666
In this instance even if I accept the debtors’ claims at their highest, I am not satisfied that the chose in action, which is contended as an asset to be relied upon, is one that can be readily realised in such a manner as to enable him to meet his debts as they fall due and accordingly he is in my view, as a matter of fact, insolvent. There is no reason why a sequestration order would not be made, and I make an order against Ronald John Wright for sequestration in the usual terms.
Considering application BRG 152 of 2011, that is St George Bank v Kyle Jonathan Wright. As with Mr Ronald Wright, the debtor in this application, was also subject to a judgment of 26 October 2009, granted by his Honour Justice McMurdo for the sum of $47,763,997.46. He too appealed his Honour’s judgment, and his appeal was unsuccessful. On 23 November 2010, a bankruptcy notice issued in respect of Mr Kyle Jonathan Wright, claiming $19,128,798.88. Again, a sum which represented the judgment ordered by his Honour McMurdo J, less credit for an interim payment of $28.6 million. The bankruptcy notice was served upon Mr Wright on 11 February 2011, and he committed an act of bankruptcy by failing to comply with the terms of the notice on
4 March 2011.
A creditor’s petition was issued on 8 March 2011, and was served upon him on 11 April 2011. The debt remains due and owing, and all other matters required to be demonstrated under the Act have been satisfied. Mr Kyle Wright maintains that there is other sufficient cause why the order ought not be made, and relies wholly upon the grounds advanced by Mr Ronald Wright. I am not proposing to restate those matters here but simply to observe that for the reasons that I have earlier noted I do not consider there is indeed other sufficient cause demonstrated, by reason of the matters raised by Mr Wright. In this instance, there is no evidence of solvency on the part of Mr Kyle Wright, and accordingly it is appropriate that a sequestration order be made, and I’ll make an order in the usual terms.
In respect of application BRG 153 of 2011, an application by St George Bank v Sandra Louise Pepi. That application arises following a judgment entered by his Honour Justice McMurdo on 26 October 2009, for a sum of $47,763,997.46. She too appealed his Honour’s judgment, and that appeal was unsuccessful. On 23 November 2010, a bankruptcy notice issued claiming a sum of $19,128,798.68. That sum represented his Honour’s judgment less credit for $28.6 million. The notice was served on the debtor on 2 February 2011. She too failed to comply with the requirements of the notice and committed an act of bankruptcy on 4 March 2011.
A creditor’s petition issued on the 8 March 2011, and was served personally upon her on 14 March 2011. In all respects, the matters required to be established pursuant to s.52 for a sequestration order have been proven. She too raises a ground alleging other sufficient cause, again relying upon the same matters raised by Mr Ronald Wright in his application. For reasons that I have earlier expressed, I do not accept there is other sufficient cause why an order ought not be made. There is no evidence of solvency on her part, and accordingly it is appropriate a sequestration order be made, and I make an order in the usual terms.
I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 16 May 2011
3
1