St Leonards Property Pty Limited v Stanley - [2004] FMCA 1077

FEDERAL MAGISTRATES COURT OF AUSTRALIA

ST LEONARDS PROPERTY PTY LIMITED v STANLEY

[2004] FMCA 1077

BANKRUPTCY – Substitution of petitioning creditor – consideration of whether the debt claimed by the creditor seeking to be substituted was owing at the time of service of the bankruptcy notice.

Bankruptcy Act 1966 (Cth), s.49

Applicant:

ST LEOANRDS PROPERTY PTY LIMITED

ACN 097 101 418

Respondent:

MARK ANDREW CYRIL STANLEY

File No:

SYG1263 of 2004

Delivered on:

14 December 2004

Delivered at:

Sydney

Hearing date:

14 December 2004

Judgment of:

Driver FM

REPRESENTATION

Counsel for the Applicant:

Mr J Johnson

Solicitors for the Applicant:

Watson Mangioni

Solicitors for the Respondent:

Mr G Falk
Gregory Falk & Associates

ORDERS

The hearing of the creditor’s petition is adjourned to 10.15am on 8 February 2005 before a registrar.
Pursuant to s.49 of the Bankruptcy Act 1966 (Cth), St Leonards Property Pty Limited, ACN 097 043 442, be permitted to be substituted as petitioner on the creditor’s petition in these proceedings, in place of Pitcher Partners NSW Pty Limited.
Any notice of opposition to the creditor’s petition and any supporting affidavit evidence in support is to be filed and served on or before 25 January 2005.
The costs of this notice of motion be St Leonards Property Pty Limited’s costs in the cause of the proceedings.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG1263 of 2004

ST LEONARDS PROPERTY PTY LIMITED

ACN 097 043 442

Applicant

And

MARK ANDREW CYRIL STANLEY

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me a motion of which notice was given on 20 September 2004 seeking a substitution order under s.49 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) substituting St Leonards Property Pty Limited ACN 097 043 442 in place of Pitcher Partners NSW Pty Limited, which was the petitioning creditor on a creditor's petition originally filed on 30 April 2004 by Otto Ristorante Italiano Pty Limited ACN 078 160 157. The motion further seeks orders for the hearing of the creditor’s petition and other orders that the Court thinks fit, plus costs.
The motion is supported by an affidavit of Christos Voukidis made on 15 September 2004 and an affidavit by Jeffrey Arthur Rose made on 2 November 2004. The applicant company also relies on an affidavit of service of the bankruptcy notice made on 8 March 2004 and, for the purpose of the creditor’s petition, also relies upon affidavits of search and debt. The creditor’s petition is otherwise supported by material filed by the petitioning creditor or substituted petitioner. None of the applicant’s witnesses have been required for cross-examination.
The motion is opposed by the debtor, Mr Stanley. The application has been before the Court several times and adjournments have been granted for various purposes, but notably because Mr Stanley has been ill. The matter came before me on 30 November 2004, at which time I gave leave for Mr Falk, on behalf of Mr Stanley, to file in court a solicitor's affidavit deposing as to the state of health of Mr Stanley. That affidavit satisfied me that Mr Falk had been unable to obtain instructions from Mr Stanley and that he was seriously ill in hospital.
On that occasion, I formed the view that Mr Stanley appeared to require a litigation guardian as he was unable to provide instructions to his solicitors. I ordered that the matter be adjourned until 2.15 today and made orders in relation to a possible appointment of a litigation guardian. I gave parties liberty to apply for further orders or directions on three days notice and directed that any further evidence relied upon by either party was to be filed and served no later than 13 December 2004.
Mr Stanley has prepared an affidavit which was filed in court by leave today. The affidavit is late in terms of order 3 made by me on 30 November 2004 and the applicant on the motion has been unable to have Mr Stanley attend for cross-examination on it. Nevertheless, I received the affidavit into evidence, subject to considerations of weight. In the affidavit Mr Stanley deposes as to the state of his health. Relevantly, Mr Stanley states that he was in hospital until 5 December 2004. I take it from that that he has since been discharged. He states in paragraph 4 that he had been unable to provide instructions to his solicitors. However, he states that his condition has now become manageable. Consequently, I have formed the view that since early December 2004, Mr Stanley has been able to provide instructions to his solicitors.
Mr Stanley denies that he is indebted to St Leonards Property Pty Limited as alleged or at all. He refers specifically to a statutory declaration that he acknowledges was signed by him on or about 11 June 2003. He denies that the statutory declaration is an admission by him that a company known as FBN Investments Pty Limited was indebted to St Leonards for $1.3 million or at all. The significance of that is that Mr Stanley was a guarantor for a loan. That is how the debt is said to arise. Mr Stanley acknowledges that he was a director of FBN between 18 November 1980 to 11 June 2003 and that he was reappointed on 2 August 2004 and remains a director. He acknowledges that on 31 January 2003 FBN Investments Pty Limited entered into a loan agreement with St Leonards Property Pty Limited under which the loan facility was granted in the amount of $1,330,000 and that that amount was to be made available in a single draw down.
Mr Stanley deposes that at no time whilst he was a director of FBN did St Leonards make the funds available to FBN. He also states that to the best of his knowledge, FBN has never received the loan amount. In paragraph 12, Mr Stanley deposes that on 11 June 2003 he resigned as a director of FBN. I note that this conflicts with his statement in paragraph 8 that he remains a director. In paragraph 13 of his affidavit Mr Stanley deposes that at no time did he represent to Mr Taylor that FBN Investments Pty Limited had drawn down the loan facility and he further deposes that neither he nor FBN gave any direction or authority to St Leonards to pay the funds to a third party.
Mr Stanley's evidence is in direct conflict with the evidence of Christos Voukidis in his affidavit. That affidavit has been available since 20 September 2004. Mr Stanley's affidavit only became available today. Mr Voukidis' affidavit is supported by the loan facility agreement annexed to it and the statutory declaration signed by Mr Stanley. I also note that letters of demand were also sent to Mr Stanley by the applicant company.
Mr Voukidis was not required for cross-examination and I note that Mr Stanley has, in my view, been in a sufficiently fit state of health for at least the last 9 days to give appropriate instructions to his solicitor. Mr Stanley is not available for cross-examination, his affidavit being faxed apparently from Melbourne earlier today. In the circumstances, I give limited weight to what Mr Stanley says in his affidavit, concerning the absence of any drawing down of the loan facility.
Section 49 of the Bankruptcy Act provides that:
Where a creditor's petition is not prosecuted with due diligence or where for any other reason the Court considers it proper to do so, the Court may permit to be substituted as petitioner or petitioners another creditor or other creditors to whom the debtor is indebted in the amount required by this Act in the case of a petitioning creditor, and the petition may be proceeded with as if the substituted creditor or creditors had been the petitioning creditor.
The making of an order under s.49 is dependent upon a debt being due and payable to the party seeking to be substituted at the relevant time. The relevant time is the time of the service of the bankruptcy notice.
Based upon the affidavit of Christos Voukidis and the documents annexed to it, I find that on the balance of probabilities on the material before me, the loan amount of $1,330,000 had been drawn down at the time the bankruptcy notice was served in this matter on 8 March 2004. The debt was at that time due and payable. Two earlier petitioning creditors had been satisfied by the debtor in respect of their debts, but the applicant seeks relief in respect of the further very substantial debt owed to it.
Having regard to the purpose of s.49 and the terms of it, I am satisfied that an order should be made as set out in the motion in paragraph 1. I will make the order sought in paragraph 1 of the notice of motion.
The applicant, on the motion, having been successful, it is open to me to award costs in favour of the applicant today. However, I note that the applicant on the motion merely seeks an order that costs of the motion be costs in the cause of the proceedings, being the creditor’s petition. In those circumstances, I will do no more than make that costs order as sought in paragraph 4 of the notice of motion.
I accept from Mr Stanley's affidavit filed in court today that he remains a sick man, although his health has improved since he was released from hospital. He should be able to deal with the continuing litigation satisfactorily from this point. While it is open to me to hear the creditor’s petition today, I consider that given that Mr Stanley is unwell and is not in attendance today, I should give him an opportunity to file a notice of opposition to the creditor’s petition should he continue to dispute the debt upon which the now substituted petitioning creditor relies.
The hearing of the creditor’s petition would ordinarily be dealt with by a Registrar and the parties have not indicated to me any reason why that course should not be followed in this case. I will direct that the creditor’s petition be listed for hearing before a Registrar in the bankruptcy list on 8 February 2005 at 10.15 am. I will direct that any notice of opposition to the creditor’s petition and any evidence in support of such notice of opposition be filed and served no later than 25 January 2005.

I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 16 February 2005