Tomasetti v Andrew John Scott as trustee of the Property of Peter Charles Tomasetti
[2013] FCCA 1693
•28 October 2013
FEDERAL CIRCUIT COURT OF AUSTRALIA
| TOMASETTI v ANDREW JOHN SCOTT AS TRUSTEE OF THE PROPERTY OF PETER CHARLES TOMASETTI & ANOR | [2013] FCCA 1693 |
| Catchwords: Interim Application – where creditors seek review of decision to admit and value of proof for purposes of voting – where application made later than 60 days after the meeting and decision of Trustee – whether court may extend time. |
| Legislation: Federal Circuit Court (Bankruptcy) Rules 2006 |
| Gray v Clout [1990] 27 FCR 141 Frost v Sheehan [2009] 6 ABC (NS) 786 Heshmati v Paul Burness and Morgan Lane [2012] FMCA 884 David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43 Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCA 9 Samootin v Official Trustee in Bankruptcy [2012] FCA 64 Liprini v Pascoe [2012] FCA 886 Staples v Milner (1998) 83 FCR 203 On Call Interpreters & Translators Agency Pty Ltd (ACN 006 272 760) v Commissioner of Taxation (No 3) (2011) 279 ALR 341 FloMin Inc & Anor v Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Limited (Voluntary Administrators Appointed) [2011] NSWSC 585 Pethybridge v Stedikas Holdings Pty Ltd (2007) NSWCA 154 |
| Applicant: | PETER CHARLES TOMASETTI |
| First Respondent: | ANDREW JOHN SCOTT AS TRUSTEE OF THE PROPERTY OF PETER CHARLES TOMASETTI, A DEBTOR |
| Second Respondent: | HARLAND KOOPS |
| File Number: INTERIM APPLICATION: Applicant: First Respondent: Second Respondent: File Number: | SYG 1837 of 2013 PETER CHARLES TOMASETTI ANDREW JOHN SCOTT AS TRUSTEE OF THE PROPERTY OF PETER CHARLES TOMASETTI, A DEBTOR HARLAND SEBASTIAN KOOPS SYG 1837 of 2013 |
| Judgment of: | Judge Raphael |
| Hearing dates: | 17 & 18 October 2013 |
| Date of Last Submission: | 18 October 2013 |
| Delivered at: | Sydney |
| Delivered on: | 28 October 2013 |
REPRESENTATION
| Counsel for the Applicant to the Substantive Application: | Mr J Johnson |
| Solicitors for the Applicant to the Substantive Application: Solicitors for the First Respondent to the Substantive Application: | Bridges Lawyers Sally Nash & Co |
| Counsel for the Second Respondent to the Substantive Application: | Mr S C Ipp |
| Solicitors for the Second Respondent to the Substantive Application: Counsel for the Applicants to the Interim Application: Solicitors for the Applicants to the Interim Application: Solicitors for the Respondent Trustee to the Interim Application: | Hoffmann & Koops Lawyers Mr C Carroll Holman Webb Lawyers Sally Nash & Co |
ORDERS
Substantive application dismissed.
Applicant to pay the costs of the Second Respondent and of the Trustee, to be taxed if not agreed, in accordance with the Federal Circuit Court (Bankruptcy) Rules 2001.
Interim application dismissed.
Interim applicant to pay the costs of the Respondent Trustee, to be taxed if not agreed, in accordance with the Federal Circuit Court (Bankruptcy) Rules 2001.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 1837 of 2013
| PETER CHARLES TOMASETTI |
Applicant
And
| ANDREW JOHN SCOTT AS TRUSTEE OF THE PROPERTY OF PETER CHARLES TOMASETTI |
First Respondent
| HARLAND KOOPS |
Second Respondent
REASONS FOR JUDGMENT
There comes before the Court two applications in this matter. The first is a substantive application brought by the applicant against his trustee and Mr Koops who claims he is a creditor. The second is an interim application brought by some other creditors seeking to be joined in the proceedings and for certain orders relating to the actions of the trustee at a meeting of creditors held on 12 July 2013. The actions of the trustee at that meeting are also the subject of the substantive application. Before setting out the terms of each application it is well to explain the surrounding circumstances.
The debtor, Mr Peter Charles Tomasetti SC, made some very substantial investments in a company known as Timbercorp which was the promoter of forestry schemes in many states of Australia. Timbercorp became insolvent and the investors have lost almost all of their money. It is notorious that many of the investors borrowed money in order to go into the schemes. It is not clear whether Mr Tomasetti did this but that is not relevant for these proceedings. Mr Tomasetti had been advised to go into the Timbercorp schemes by his financial advisors who are the parties to the interim application and shall be known in these reasons as “the Braileys”. Mr Tomasetti decided that he should sue the Braileys for negligent advice. He went to see some forensic accountants, Lumina BPO Pty Ltd. He had been recommended to this firm by Mr Nicholas Brunton of Henry Davis York. Mr Brunton also recommended to Mr Tomasetti that he engage as a solicitor Mr Harland Koops who had recently retired from the Henry Davis York partnership. Mr Williams of Lumina arranged a meeting between Mr Koops and Mr Tomasetti and himself on 25 May 2009. In an affidavit sworn on 10 October 2013 Mr Williams deposes in respect of that meeting that:
“[7]During the course of the meeting, Mr Tomasetti explained his financial problems and why he believed that his former financial advisors were responsible for those problems. Mr Koops and Mr Tomasetti also discussed how a claim against Mr Tomasetti’s former financial advisors might be run and the fact that it would be a large and complex matter. During Mr Koops’ discussion with Mr Tomasetti I remember words to the following effect being spoken:
Mr Tomasetti: “Harland, as you have heard, I am in a horrible situation here and am potentially facing financial ruin. You have been recommended by John and Henry Davis York.”
Mr Koops:“If I take your matter on I expect it to be complex and time consuming. As you know, I have just left Henry Davis York where I had significant resources at my disposal. I have just started to practice as a sole practitioner. I don’t have the resources of a large firm. I share space with Graeme Heckenberg.” [emphasis added]
Mr Tomasetti: “I need someone with your experience and background.”
Mr Koops: “I will consider the matter further.””
Mr Koops in his affidavit of 9 October 2013 says of that meeting:
“[18]In about May 2009 I was invited by Mr John Williams (an accountant0 to attend a meeting with him, and Mr Peter Tomasetti SC in relation to matters concerning Mr Tomasetti’s investments in Timbercorp and a possible claim that Mr Tomasetti SC was considering against his former financial advisors. The meeting took place at the offices of Mr Williams’ firm Lumina.”
[19]In the course of the meeting I had a conversation with Mr Tomasetti in which words to the following effect were said:
Mr Tomasetti: “I am facing a catastrophe with these investments. My advisor, Ted Brailey, told me these were prudent investments. I have invested millions into them. Harland, you have been highly recommended to me by Nick Brunton at Henry Davis York and I would like you to act for me.”
I said:“I understand the terrible situation you find yourself in. You may have a claim against your financial advisors. It needs to be explored fully. This would be a complex case. I have left Henry Davis York and practice on my own. Graeme Heckenberg and I share the costs of running the office, but we are not partners and we don’t have the resources of a large firm.” [emphasis added]
Mr Tomasetti: “Harland, I would be very grateful if you would act for me. I am desperate and need someone with your background in this case.”
I said:“I will consider it Peter and we can discuss it again in the next few days.””
On 27 May 2009 Mr Koops wrote to Mr Tomasetti:
“Peter Tomasetti SC
Martin Place Chambers
6/65 Martin Place
Sydney NSW 2000Dear Peter,
Brailey Fenton Lane
I refer to our recent conference with John Williams regarding investments that you made upon the recommendation of Ted Brailey in the collapsed Timbercorp Investment Scheme.
As discussed, I am pleased to be able to act for you.
I enclose my Cost Agreement documents for your consideration.
Yours faithfully,
Heckenberg & Koops
Harland Koops
[email protected]Level 9, 185 Elizabeth Street Sydney NSW 2000 Telephone (02) 9283 6477 Facsimile (02) 9283 6544 DX 644 Sydney
Heckenberg & Koops is the business name of Heckenberg Associates Solicitors Pty Ltd ABN 96 082 005 374 & Harland Koops
Liability limited by a scheme approved under Professional Standards Legislation”
He also sent him a costs agreement and a costs disclosure statement. These were also sent on letterhead of Heckenberg & Koops Lawyers, the footer of those documents was not the same as the footer in the letter written by Mr Koops but was in the following form:
“Heckenberg & Koops Lawyers, Level 9, 185 Elizabeth Street, Sydney NSW 2000 Tel (02) 9283 6477 Facsimile (02) 9283 6544 DX 644 Sydney Mobile 0417 208 331”
The relevant parts of the costs agreement were contained in the first two paragraphs:
“This document is an offer by Heckenberg & Koops Lawyers to enter into a Costs Agreement with you in accordance with the Legal Profession Act 2004 (NSW) (Act).
1. The scope of the Services
a.The Services we have been instructed to perform for you are set out in the Costs Disclosure Statement.
b. The Costs Disclosure Statement forms part of the Costs Agreement.
2. Acceptance of Offer
You may accept this offer by:
a.Signing and returning a copy of the Costs Agreement.
b.Confirming your acceptance of our offer by separate letter, email or telephone; or
c.Continuing to ask us to do work for you.”
and the relevant parts of the costs disclosure statement were similarly paragraphs 1 and 2:
“1. The Services
The services (Services) we have been requested to perform are:
Representing Peter Tomasetti, Sandra Cordony and Tomasetti Superfund regarding various investments made upon the advice and recommendation of Ted Brailey and advising generally and considering, and undertaking proceedings in respect of those matters.
2. Persons responsible for the Services
Harland Koops”
Mr Koops proceeded to commence acting on behalf of Mr Tomasetti. Mr Tomasetti made arrangements to be represented as Counsel by an old friend Mr Ian David Faulkner SC and as junior Adrian Eric Maroya. Both of those counsel entered into costs agreements addressed to Mr Koops at Heckenberg & Koops and all invoices relating to their legal services were sent to Mr Koops there. The responsibility for payment of their fees thereby shifted to the solicitor, although in actual fact those fees that were paid were paid directly by Mr Tomasetti.
The proceedings against the Braileys were unsuccessful. The hearing of the case was lengthy. A costs order was made against Mr Tomasetti. Mr Tomasetti determined to appeal the decision and there was originally some question as to whether or not Mr Faulkner had agreed to undertake his representation of Mr Tomasetti on a contingency basis and whether the contingency had crystallised. At the end of the proceedings before me Mr Johnson advised that he did not press the contingency argument. The appeal was only successful in part and another substantial costs order was made in favour of the Braileys.
In June 2013 Mr Tomasetti came to the realisation that with claims being made against him by Timbercorp, the Braileys and Mr Koops he was insolvent. He approached Mr Andrew Scott of PPB Advisory and determined to execute an authority pursuant to s.188 of the Bankruptcy Act 1966 (Cth)[1] to appoint him controlling trustee of his estate and requiring him to call a meeting of creditors to consider a proposal to deal with his affairs under Part X of the Act. Mr Scott wrote to the creditors on 18 June 2013 giving them notice of the Personal Insolvency Agreement[2] proposed by Mr Tomasetti, a report pursuant to s.189A of the Act was circulated and a meeting was held. What occurred at that meeting is the subject matter of both the substantive and interim applications. The substantive application is in the following form:
[1] “Act”
[2] “PIA”
“A. Final Orders Sought by Applicant
This application, is made pursuant to the provisions of s.30, s.178 and Part X of the Bankruptcy Act 1966.
On the grounds stated in the supporting affidavit or statement of claim, the applicant seeks the following orders:
1.An order that the decision of the First Respondent to admit the Proof of Debt dated 12 July 2013 by the Second Respondent for the purposes of voting at the meeting of creditors convened by the First Respondent in respect of the affairs of the Applicant held on 15 July 2013, be reviewed.
2.A declaration that upon a review of the Proof of Debt of the Second Respondent dated 12 July 2013, that the Second Respondent ought to have not been admitted to participate as a creditor of the Applicant at the meeting of creditors convened by the First Respondent and held on 15 July 2013.
3.An order that the determination of the President of the meeting of creditors of the Applicant convened by the First Respondent in respect of the affairs of the Applicant upon the question of approval of the proposal by the Applicant that he enter into a Personal Insolvency Agreement in accordance with that the Provisions of Part X of the Bankruptcy Act 1966, be rectified so that on a proper calculation of the number of creditors attending and voting in person or by proxy such resolution was approved as a Special Resolution in accordance with the requirements of the Bankruptcy Act 1966.
4.An order pursuant to the provisions of s.33 extending the time within which the Applicant and the First Respondents are required to execute a Personal Insolvency Agreement in accordance with the resolution referred to in paragraph 3 above be extended up to and including a date 7 days after the date of the determination of these proceedings, or other order of the court.
5.The second respondent pay the costs of the proceedings.
6.Such further or other Order(s) as to the court seems fit.”
The interim application is in the following form:
“1.The Braileys have leave to be joined to these proceedings.
2.That should this Court be minded to make the order sought in prayer 2 of the Final Orders Sought by the Applicant then the Braileys seek orders pursuant to the provisions of sections 30 and 178 of the Bankruptcy Act 1966 (Cth) that:
(a)The determination of the First Respondent to admit the Brailey’s proof of debt in the amount of $1,256, 811.50 at the meeting of creditors on 15 July 2013 be reviewed; and
(b)The determination of the First Respondent be rectified so as to approve the debt owed to the Braileys by the Applicant in accordance with the proposed amended proof of debt referred to in paragraph 22 of the affidavit of Alexander John Wakefield sworn 10 October 2013.
3.To the extent the application in prayer 2 above is made pursuant to section 178 of the Bankruptcy Act 1966 (Cth), the Braileys seek leave to extend the time for making that application under section 178(2) to the date of the filing of this Application in a Case.
4.The Applicant pay the Braileys’ costs.
5.Such further or other orders as the Court deems fit.”
I propose to deal first with the interim application. The gravamen of that application is that at the time of the meeting the amount of costs for which the Braileys could prove and vote had been substantially underestimated as a result of a “computer error”. If the Braileys had been allowed to vote the amount that they consider to be a proper estimate of costs, less 30% which they accept is a reasonable discount because the costs have not been formally assessed, they argue that it would not matter what the result of my determination in the substantive case would be because the PIA would still have been rejected.
I am of the view that the application is not maintainable for two reasons. The first is that there is no basis for challenging the decision of the controlling trustee in the circumstances of the meeting. The controlling trustee admitted the Braileys to vote on the basis of their proof as it was before him at the meeting. At that time neither the trustee nor the Braileys were aware that there was any error in it. He made a determination that for the purposes of voting the amount of the claim should be reduced by 30% and that was accepted by the Braileys. It seems to me that there is, in those circumstances, nothing to review because there is nothing in respect of the trustee’s decision to impugn. However, if, by extension of the principle expressed in Gray v Clout [1990] 27 FCR 141 and Frost v Sheehan [2009] 6 ABC (NS) 786 that the court can review a decision even though it was correct on the material that was before the trustee at the time, the interim applicants have another problem and that is that the application was not made within the sixty days required under s.178(2) of the Act. The ability of the court to extend this time was considered by Driver FM (as his Honour then was) in Heshmati v Paul Burness and Morgan Lane [2012] FMCA 884. His Honour considered the relevant authorities including the decision of the High Court in David Grant & Co Pty Ltd v Westpac Banking Corporation [1995] HCA 43; Aussie Vic Plant Hire Pty Ltd v Esanda Finance Corporation Limited [2008] HCA 9; Samootin v Official Trustee in Bankruptcy [2012] FCA 64 and Liprini v Pascoe [2012] FCA 886. His Honour said at [48]:
“[48]In my view, s.178(2) on its face discloses a parliamentary intention that the 60 day time limit is an absolute one which cannot be extended by the Court. I note first the imperative language of the section in the use of the word “must”. I note secondly that the limitation period is a long one. Federal statutory limitation periods generally range from a few days to a period of 35 days, as in the Migration Act 1958 (Cth). I note further that the administration of bankrupt estates could be significantly disrupted if there were no certainty in decisions made by trustees in that administration. The opportunity to bring proceedings outside the limitation period of 60 days could create significant uncertainty, including after the bankrupt administration had been completed. In that regard, I note that the limitation period does not commence to run until the person becomes aware of the trustee’s act, omission, or decision.”
His Honour then went on to consider the powers given to the court under s.33(1)(c) but also stated:
“[51]I have doubt that the section was intended to permit the Court to confer on itself jurisdiction that it would not otherwise have because of the expiration of a limitation period for the bringing of proceedings.
[52]There is also an awkward distinction in s.33(1)(c) between the extension of a time period before its expiration and the extension of time after its expiration. The limitation on the power to extend time where there is an express provision to the contrary only applies if the time period has expired. In my view, if the Court lacks the power to extend time for the bringing of proceedings, it would make no difference whether the time period had already expired or not. It would also be surprising if Parliament intended that the Court could shorten (abridge) the limitation period in s.178(2).
[53]It is not necessary, however, for me to express a concluded view, and it is probably not appropriate that I do so in this interlocutory judgment, because, in my view, s.178(2) expresses a clear parliamentary intention that the time fixed for the bringing of proceedings cannot be extended. To that extent, s.178(2) may be taken to have expressly provided to the contrary, for the purposes of s.33(1)(c).”
His Honour’s decision was well reasoned and I am unable to say that it is clearly wrong. Comity requires me to follow it and I have no hesitation in doing so. In these circumstances the application made here must be dismissed and the applicants shall pay the costs of the trustee to be taxed if not agreed pursuant to the Federal Circuit Court (Bankruptcy) Rules 2006.
The ability of the court to review the decision of the trustee at a meeting of creditors was expressed clearly and concisely by Cooper J in Staples v Milner (1998) 83 FCR 203 at 205.
“A Statutory context and right to review
A bankrupt may desire to make a proposal to his or her creditors for a composition in satisfaction of his or her debts or for a scheme of arrangement for his or her affairs. In that circumstance the provisions of s 73 of the Act are applicable. The proposal is lodged with the bankrupt's trustee (s 73(1)). The trustee then proceeds to call a meeting of creditors and sends to each creditor a copy of the proposal and the trustee's report on the proposal (s 73(2)). The creditors may by special resolution accept the proposal (s 73(4)).
A special resolution is defined in s 5 of the Act as a resolution passed by a majority in number and at least three-fourths in value of the creditors present personally, by telephone, by attorney or by proxy, at a meeting of creditors and voting on the resolution.
Section 73(5) makes special provision for a creditor who has proved his or her debt. In that case the creditor may assent to, or dissent from, the proposal by written notice to that effect delivered to the trustee before a meeting of creditors. In that event the creditor will be deemed to have been present at the meeting and to have voted according to his or her assent or dissent.
Meetings of creditors called to consider a proposal under s 73 are conducted in accordance with Div 5 of Pt IV of the Act, so far as it is capable of applying, with such modifications, if any, as prescribed by the regulations to meetings of creditors under Div 6 of Pt IV of the Act (s 76A).
Section 64ZA of the Act is within Div 5 Pt IV. The section deals with entitlement to vote at a meeting of creditors. As there are no relevant regulations modifying the application of that Division to meetings of creditors convened pursuant to s 73, s 64ZA applies to the meetings of creditors in issue. Section 64ZA, so far as is relevant, provides:
(1) This section applies to voting:
(a)at an election under section 64P of a person to preside at a meeting; and
(b)on any motion proposed at a meeting or an amendment proposed to such a motion.
(2) In this section:
"creditor" means a creditor a creditor who, or whose proxy or attorney, participates in the meeting in person or by telephone.
(3) A person other than a creditor is not entitled to vote.
(4)Subject to subsections (5) and (6), each creditor is entitled to vote and has one vote.
...
(8)The trustee may determine any question that arises as to the entitlement of a person to vote.
(9)If the trustee needs a period in which to determine a question referred to in subsection (8), the meeting is to be adjourned to such time, date and place as the meeting resolves, being a date not later than 14 days after the date of the original meeting, for the purpose of enabling the trustee to determine the question.
Where any question arises as to whether a particular person is entitled to vote, that question is to be decided by the trustee (s 64ZA(8)). The decision of the trustee is not a final ruling on a debt alleged by the person who claims to be a creditor and entitled to vote: Re Dingle; Westpac Banking Corp v Worrell (1993) 47 FCR 478 at 483[PDF]; Re Levy; Ex parte Scholefield Goodman & Sons Ltd (1980) 50 FLR 99 at 112. Rather, the trustee's decision only determines the person's right to vote at the meeting: Re Levy; Ex parte Scholefield Goodman & Sons Ltd.
Notwithstanding that s 64ZA provides no mechanism for review of a trustee's decision about a person's entitlement to vote, the court has a jurisdiction to review the trustee's decision. The jurisdiction is discretionary, is sourced in s 27 of the Act and given effect to by the exercise of the power conferred in ss 30 and 178 of the Act: Re Dingle; Westpac Banking Corp v Worrell at 485.
The court will be reluctant to intervene in cases unless persuaded that the determination of the question of entitlement to vote did affect, or, depending on the view taken, would have affected, the fate of the proposal by producing a different result: Re Dingle; Westpac Banking Corp v Worrell at 485-486.
The bankrupts, to succeed on the present application, must establish, on the civil standard of proof, that the creditor respondents, or some of them, were not creditors, and that if excluded from the vote the remaining votes cast were sufficient to satisfy the requirements for a special resolution: Re McLean; Ex parte Friends Provident Life Office (1992) 36 FCR 502 at 512.”
I set his Honour’s reasons out in extenso because the parties to these proceedings have conceded that they constitute an appropriate expression of the court’s jurisdiction and that there was, in the upshot of the proceedings, no argument that the court could not review the decision of the trustee to admit Mr Koops for voting in the amount for which he had proved in his amended proof of debt. The amendment had been necessary because originally Mr Faulkner and Mr Maroya had filed their own proofs of debt but it was acknowledged that the responsibility for payment of those parties’ accounts was the solicitor, a term which is used neutrally here because it is the identification of “the solicitor” that is the nub of the case.
It is Mr Tomasetti’s case that the party he contracted with to provide legal services, the party which provided him with a costs agreement and a costs disclosure statement was Heckenberg & Koops. This entity was registered under the Business Names Act 2002 (NSW)[3] by Heckenberg & Associates Pty Ltd and Harland Koops. He says that is the name Heckenberg & Koops which appears on the letterhead. However, the certificate of registration of the business name found as Exhibit 1 to Mr Koops’ affidavit shows that the business name that was actually registered was Heckenberg Koops without any ampersand. Mr Tomasetti relies upon s.4 of the BN Act which states in s.1:
“A person must not carry on business in New South Wales under any business name unless the business name is registered in the name of that person and of each other person (if any) with whom that person is carrying on that business.”
He argues that this means that as the two entities carried on business under the registered business name they are the contracting parties, not Mr Koops alone.
[3] “BN Act”
Mr Tomasetti says that the tone of the letters written by Mr Koops to him refer to the costs as being the costs of Heckenberg & Koops.[4] He notes that all the barrister’s costs were sent to Heckenberg & Koops. He did, however, concede that each and every account rendered, whilst being rendered under the name Heckenberg & Koops contained a note of the ABN which is the ABN of Mr Koops himself and not of any other entity.
[4] “See in particular letter of 2 February 2012 pg5 of Ex 2 which states “In relation to the appeal I estimate Heckenberg & Koops’ costs will be $55,000.00”
Mr Koops has sworn an affidavit to the effect that Heckenberg & Koops did not at any time have an ABN, a bank account, employ any employees or lodge a tax return. He did not obtain jointly with Graham Heckenberg or Heckenberg & Associates an ABN. He did not share in any gross returns with Graham Heckenberg or Heckenberg & Associates. He engaged his own staff members and never assumed any responsibility for renumerating those of Heckenberg & Associates. He did not use the practice management software used by Mr Heckenberg. He says at paragraph 5 of his affidavit:
“[5]I established a chambers practice with Mr Graeme Heckenberg, a solicitor in sole practice specialising in estate matters. We shared office space at Level 9, 185 Elizabeth Street, Sydney. Mr Heckenberg and I had an agreement with respect to the payment of costs associated without shared office space. Mr Heckenberg was the director of Heckenberg Associates Solicitors Pty Ltd ABN 96 082 005 374.”
Mr Tomasetti relies on the contra proferentum rule. He notes that the contract was prepared by Mr Koops not Mr Tomasetti and says that the court cannot ignore the fact that it was on the letterhead of Heckenberg & Koops. He relies on what fell from Bromberg J in On Call Interpreters & Translators Agency Pty Ltd (ACN 006 272 760) v Commissioner of Taxation (No 3) (2011) 279 ALR 341 where his Honour in reviewing the cases considered the definition of an employee said at [191 – 192]:
“[191] In Damevski v Giudice (2003) 133 FCR 438 ; 202 ALR 494; [2003] FCAFC 252, Merkel J relied upon Isaacs J in Curtis and the majority judgment in Hollis to apply the “real substance” or “reality” approach: see at [144]and [172]. In that case Marshall J applied a similar approach asserting the need to look “beyond and beneath the documents”: see at [77]and [78]. Wilcox J agreed with the reasons for judgment of each of Marshall and Merkel JJ.
[192]To the same effect but in more colourful language, Gray J adopted the language of a former Chief Justice of this court when he said in Re Porter; Re Transport Workers Union of Australia (1989) 34 IR 179 at 184 (Re Porter; Re Transport Workers Union) that “the parties cannot create something which has every feature of a rooster, but call it a duck and insist that everybody else recognise it as a duck”. As his Honour stated in relation to the use to be made of evidence of what occurred in practice in the relationship in question (at 184):
… there is no particular reason why a court should ignore the practical circumstances, and cling to the theoretical niceties.”
Mr Tomasetti particularly relied upon which his Honour said at [205]:
“[205] Lord Wedderburn referred to the use by courts of the multi-factorial test of looking at the whole picture as the “elephant-test” — an animal too difficult to define but easy to recognise when you see it: The Worker and the Law, 3rd ed, Penguin Books Ltd, 1986, p 116. As Mummery J said in Hall (Inspector of Taxes) v Lorimer [1992] 1 WLR 939 at 944.
The object of the exercise is to paint a picture from the accumulation of detail. The overall effect can only be appreciated by standing back from the detailed picture which has been painted, by viewing it from a distance and by making an informed, considered, qualitative appreciation of the whole. It is a matter of evaluation of the overall effect of the detail, which is not necessarily the same as the sum total of the individual details. Not all details are of equal weight or importance in any given situation. The details may also vary in importance from one situation to another.”
I have no difficulty with applying this dicta to the task in front of me.
Mr Koops argues that it is for Mr Tomasetti to prove that the vote of the creditors was void because the statutory requirements of the Act were not complied with, namely the trustee was incorrect to allow Mr Koops to vote because he was not in fact a creditor. And it is for Mr Tomasetti to prove that he entered into an agreement with Heckenberg & Koops and not with Mr Koops personally. Mr Tomasetti is handicapped in making out his assertions by his failure to go on affidavit and provide the court with some evidence of the facts surrounding the making of the contract from his point of view. The court accepts that the principles governing the approach to be taken in identifying the parties to a contract are conveniently summarised by Einstein J in FloMin Inc & Anor v Australian Raw Materials Corporation Pty Ltd (formerly named Tennant Limited (Voluntary Administrators Appointed) [2011] NSWSC 585 at 20 – 23:
“[20]Identification of the parties to Contract 2453 must be made in accordance with the objective theory of contract [Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263, [2007] NSWCA 154 at [54]; Ryledar Pty Ltd v Euphoric Pty Ltd (2007) 69 NSWLR 603, [2007] NSWCA 65 at [262]- [266]].
[21]What matters is "what each party by words and conduct would have led a reasonable person in the position of the other party to believe" [Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]]. The terms of the contractual arrangement are to be determined objectively, by reference to the text of any documents passing between the parties, the surrounding circumstances known to the parties and the purpose and object of the transaction and its genesis, and the background, context and markets in which the parties were operating [Pacific Carriers Ltd v BNP Paribas [2004] HCA 35; (2004) 218 CLR 451 at [22]; Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd [2004] HCA 52; (2004) 219 CLR 165 at [40]].
[22]The Court determines the parties to the contract by asking what a reasonable observer would conclude from the objective evidence of the communications that led to the entry into the contract, together with the background facts known to the parties [Pethybridge v Stedikas Holdings Pty Ltd (2007) Aust Contract R 90-263, [2007] NSWCA 154 at [54] (Campbell JA)].
[23]There is a class of contracts where the offer and acceptance analysis is not applicable. In that class of case, the question is whether, viewed as a whole and objectively from the point of view of reasonable persons on both side, the dealings show a concluded bargain [Brambles Holdings Ltd v Bathurst City Council [2001] NSWCA 61; (2001) 53 NSWLR 153 at [74]- [81] (Heydon JA)].”
Reference is also made to the New South Wales Court of Appeal decision in Pethybridge v Stedikas Holdings Pty Ltd (2007) NSWCA 154 per Campbell JA with Beazley and Basten JJA agreeing. It is clear from the decision in Pethybridge that the contracting party is the party who carries on business under the business name and not necessarily the owner of that business name; see Campbell JA at [39] and at [55] to [57].
The objective evidence upon which Mr Koops relies is his revelation to Mr Tomasetti that he was not in partnership with Mr Heckenberg and that they were merely sharing premises. He relies on the fact that all letters were signed by him, although I do not find that particularly weighty as letters are usually signed by the solicitor who has the conduct of the matter whether he is in partnership with others or not.
Mr Koops relies on the fact that he was recommended to Mr Tomasetti and Mr Tomasetti told him at the meeting that he wished Mr Koops to represent him. This was done at the same time that he was being made aware that Mr Koops was working through Heckenberg & Koops which was no more than a business operated by the two firms of solicitors to share premises. Importantly, to the court’s mind, is the fact that all the invoices that were issued were issued under the ABN of Mr Koops himself and that there are no ABNs, tax returns or other documents that would identify a profit sharing arrangement between the two parties to what I believe is properly called a “joint venture”. The joint venture being to share premises and expenses of those premises and to carry on separate practices. This method of carrying on business in the legal profession is not new. It has being going on for some years now. Mr Tomasetti is an experienced legal practitioner. He would not be unaware of this type of arrangement, if he had not understood it, he could have asked Mr Koops what it meant. The effect of Mr Tomasetti’s argument is really that he was contracting with a non entity. There is the additional fact that the business name with which Mr Tomasetti claimed he conducted business is not registered, it is a different name that is registered and small that the difference may be, it is Mr Tomasetti who has ex post facto raised the contractual issue. I say ex post facto because the evidence is that at the meeting, prior to the vote, Mr Tomasetti accepted Mr Koops’ right to be a creditor. This much is deposed to by witnesses whose cross examination did not move them from their recollections.[5]
[5] “Affidavit of Melanie Anne Tully dated 8 October 2013 at [2]
It is the court’s view that Mr Tomasetti has not satisfied it to the required standard and he contracted for legal services other than with Mr Harland Koops. Thus the actions of the trustee in accepting Mr Koops as a creditor and allowing him to vote cannot be impugned or reviewed. The effect of this finding is that the decision to reject Mr Tomasetti’s PIA by the creditors was properly made and stands. The court notes that after the special resolution to require the debtor to execute a PIA was defeated no resolution was put to the meeting that the debtor present a debtor’s petition for bankruptcy within seven days. At this stage the meeting was closed. Under s.221 of the Act it is provided:
“Sequestration order where debtor fails to attend meeting, execute personal insolvency agreement etc.
(1) Where:
(a) a debtor has failed, without sufficient cause, to attend a meeting of creditors called under an authority signed by him or her under section 188;
(aa) a debtor has contravened subsection 189(2);
(b) a debtor, having been required by a special resolution of a meeting of creditors called in pursuance of such an authority to execute a personal insolvency agreement, has failed without sufficient cause to execute the agreement within the time prescribed by this Act; or
(c) a meeting of creditors called in pursuance of such an authority has not, within 4 months from the date for which the meeting was called, passed one of the special resolutions referred to in subsection 204(1);
the Court may, if it thinks fit, on the application of the Inspector-General, a creditor or the controlling trustee, forthwith make a sequestration order against the estate of the debtor.
(2) The Court may, if it thinks fit, dispense with service on the debtor of notice of an application under this section, either unconditionally or subject to conditions.
(3) Subject to subsection (4), the making of an application under this section in respect of a debtor shall, for the purposes of this Act, be deemed to be equivalent to the presentation of a creditor's petition against the debtor.
(4) The provisions of subsection 43(1), sections 44 and 47, subsections 52(1) and (2) and Part XIA do not apply in relation to an application under this section, but, on the hearing of such an application, the Court shall require proof (which may be given by affidavit) of the matters stated in the application and, unless service has been dispensed with by the Court, of service of the application on the debtor.”
The period of four months has not yet expired.
The application is dismissed. The applicant, Mr Tomasetti, must pay the costs of the second respondent and of the trustee (who entered a submitting appearance) to be taxed if not agreed in accordance with the Federal Circuit Court (Bankruptcy) Rules 2006.
I certify that the preceding twenty four (24) paragraphs are a true copy of the reasons for judgment of Judge Raphael
Date: 28 October 2013
Affidavit of Harland Sebastian Koops dated 9 October 2013 at [40]
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