Water Corporation v Duckworth
[2017] FCCA 2216
•29 September 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| WATER CORPORATION v DUCKWORTH | [2017] FCCA 2216 |
| Catchwords: BANKRUPTCY – Application for sequestration order of estate of respondent – whether there is “other sufficient cause” under s.52(2) of the Bankruptcy Act 1966 (Cth) to refuse application – whether the debt has been satisfied – whether creditor’s petition is an abuse of process – no “other sufficient cause” – sequestration order made. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.41(2), 43, 52, 60 Bankruptcy Regulations 1996 (Cth), sub-reg.4.01(1)(b) |
| Cases cited: Cain v Whyte (1933) 48 CLR 639; [1932] HCA 6 Duckworth v Water Corporation [2012] WASC 30 |
| Applicant: | WATER CORPORATION (ABN 26 003 434 917) |
| Respondent: | NEIL JAMES DUCKWORTH |
| File Number: | PEG 190 of 2017 |
| Judgment of: | Judge Smith |
| Hearing date: | 9 August 2017 |
| Date of Last Submission: | 9 August 2017 |
| Delivered at: | Sydney and Perth by video link |
| Delivered on: | 29 September 2017 |
REPRESENTATION
| Counsel for the Applicant: | Mr M C Goldblatt |
| Solicitors for the Applicant: | Lavan Lawyers |
| The respondent appeared in person. |
ORDERS
The estate of Neil James Duckworth be sequestrated under the Bankruptcy Act 1966 (Cth).
The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
THE COURT NOTES THAT
The date of the act of bankruptcy is 2 March 2017.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT PERTH |
PEG 190 of 2017
| WATER CORPORATION (ABN 26 003 434 917) |
Applicant
And
| NEIL JAMES DUCKWORTH |
Respondent
REASONS FOR JUDGMENT
This is an application for a sequestration order to be made against the estate of the respondent, Neil Duckworth. The creditor’s petition is based upon the failure by Mr Duckworth to comply with Bankruptcy Notice 211857 (Bankruptcy Notice). The Bankruptcy Notice was based upon an order of the Supreme Court of Western Australia that Mr Duckworth pay the applicant’s costs in the amount of $123,808.66.
Section 52(1) of the Bankruptcy Act 1966 (Cth) (Act) provides that the Court may make an order for the sequestration of a person’s estate if it is satisfied of the following:
(1)At the hearing of a creditor’s petition, the Court shall require proof of:
(a)the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
(b)service of the petition; and
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
Subject to one matter to which I will return, none of the matters required by s.52(1) of the Act is in dispute and I am satisfied on the evidence of those matters. For that reason, the applicant is prima facie entitled to the orders sought.
The Court may refuse to make a sequestration order if the respondent satisfies it, that he is solvent or for other sufficient cause: s.52(2) of the Act. Mr Duckworth says that there is other sufficient cause in this case. In brief, he says that the applicant wrongly claimed, and received, $3,000,000 pursuant to a Banker’s Undertaking given in connection with a property development being undertaken by Mr Duckworth as trustee for the Ocean Farms Trust. Mr Duckworth says that that money should be paid to him and that the applicant is entitled to, and ought to, take any money owing under the costs order from the $3,000,000.
For the reasons that follow, I do not accept Mr Duckworth’s arguments and find that there is no other sufficient cause within the meaning of s.52(2) of the Act. It follows that there will be an order for a sequestration order in respect of Mr Duckworth’s estate.
It is convenient to set out at first the relevant background, before descending into the arguments presented by the parties. In the course of setting out the relevant background, I will deal with the qualification referred to in [3] above which concerns an argument about the formal validity of the bankruptcy notice.
Background
Mr Duckworth is a property developer. In 2006, he was looking to develop land in Nilgen, Western Australia. The development was referred to as Ocean Farms 2 and consisted of rural lots that were to be subdivided and developed into residential lots. In order for this development to take place and to be approved, water had to be supplied to the property. That supply required the construction of water supply infrastructure and the connection of that infrastructure to the reticulation system built on the land. The Water Corporation had the responsibility for recommending to the relevant development Authority that the water condition in respect of the development had been satisfied.
By letter dated 1 December 2005, the Water Corporation informed Mr Duckworth that it had decided to recommend clearance of the water conditions on the land at Ocean Farms 2, subject to agreement to a number of conditions. One of those conditions was the handover of the reticulation works to the Water Corporation. Another condition was that Mr Duckworth arrange the construction of a connecting link from the Seaview Park Water Supply Scheme under a “Customer Constructed Works Agreement” (CCWA). Financial security for those works was to be given by way of an unconditional financial guarantee or cash deposit for $4,600,000.
On 5 December 2005, Mr Duckworth replied to this letter on the letterhead of Sunset West Developments Pty Ltd. In his letter, Mr Duckworth confirmed “our agreement and willingness” to enter into a Subdivision Agreement and to construct infrastructure. He also explained that the development was divided into 4 stages (2A, 2B, 2C and 2D) with a different number of lots in each stage.
On 3 March 2006, Mr Duckworth entered into a CCWA with the Water Corporation. The CCWA required Mr Duckworth to design and construct certain headworks: namely, two bores and a transfer pump station, supply main pipes as well as a 1.5 ML storage tank at Ocean Farms. The estimated cost of the works was $4,600,000. The works were scheduled for completion by 30 May 2007.
Consistently with the letter of 1 December 2005, it was a condition of the agreement, that Mr Duckworth provide a financial guarantee for a value agreed with the Water Corporation which “may be called upon by the Corporation for the construction of the works or any part thereof or in the event of any breach of the (CCWA).”
On 17 May 2006, Mr Duckworth wrote to the Water Corporation to request some amendments to the CCWA. Amongst his requests were:
a)the bank guarantee component of the bond required be reduced to $3,000,000; and
b)the balance of the guarantee of $1,600,000 be secured by way of caveat over the un-subdivided remaining “englobo land” [sic].
By letter dated 30 May 2006, the Water Corporation informed Mr Duckworth of various matters, including:
a)that it agreed to a reduction to $3,000,000 of the unconditional bank guarantee to meet the water supply needs of the Ocean Farms 2 development only; and
b)that there was no need for a caveat to be lodged over the remaining portion of land.
On 4 September 2006, Westpac Banking Corporation issued a Banker’s Undertaking in favour of the Water Corporation for $3,000,000. The undertaking relevantly provided:
And in consideration of the Favouree accepting this Undertaking in lieu of a cash security in accordance with the agreement (CCWA) entered into between the Principal and the Contractor dated 3 March 2006 for the provision of Water Supply Headworks Infrastructure required to serve the development under WAPC application No 125630 being lot 3913 Ocean Farm Drive, Nilgen WA 6044 (contract), WESTPAC BANKING CORPORATION (the “Bank”) unconditionally undertakes to pay on demand any amount or amounts which may from time to time be demanded in writing purporting to be signed by or on behalf of the Favouree, up to a maximum aggregate sum of $3,000,000 (the “Amount”).
The reference to Favouree in the undertaking was a reference to the Water Corporation.
On 20 September 2006, Mr Duckworth entered into three further agreements with the Water Corporation. The first of these was called a “Land Servicing Bond Agreement” (Bond Agreement). In the Bond Agreement, Mr Duckworth was referred to as the “Developer” and the Water Corporation as the “Corporation”. The other two agreements were described as “Water Corporation Land Development Agreements”. They were both also referred to as Agreement No. 0656853. Two further agreements were entered into on 29 September 2006. These four agreements each dealt with the different parts of the proposed subdivision (see [9] above). They are explained further at [22] below.
The Bond Agreement was divided into parts described by letters of the alphabet. Part B set out the Water Corporation’s obligations and Part C the obligations of Mr Duckworth. The relevant obligations of Mr Duckworth were:
C1To install and provide the Works at its cost according to the Corporation’s requirements and the Project Timetable.
…
C4To provide the Corporation with the Financial Security when executing this Agreement.
…
C10To indemnify the Corporation for any loss, cost, claims or liability suffered or incurred by the failure of the Developer to follow and perform any of its duties under this agreement including all costs the Corporation incurs in completing the Works.
C11Pay all the Corporation’s costs of this agreement and the cost of doing everything it must do under this agreement.
C12The Corporation may, without notice to the Developer, call on the Financial Security to recover any loss it suffers arising out of the failure by the Developer to follow and perform its duties under this agreement. This right does not affect the indemnity under C10.
C13The Corporation may if the Developer fails to follow and perform its duties under this agreement step in and complete the Works and call on the Financial Security to recover all costs incurred in completing the Works.
…
The “Works” referred to in cl.C1 were the Bonded Works described in cl.E1: cl. A9 of the Bond Agreement.
The “Project Timetable” referred to in cl.C1 was set out in Part G and was divided into milestones. Relevantly, “Startup” was to be completed by 1 June 2007. “Works Construction 50% complete” was to be achieved by 1 December 2007.
The “Financial Security” referred to was relevantly a Financial Guarantee to pay on demand an amount of $3,000,000.
There were four types of works described in cl.E1:
a)WAPC Number 125630;
b)Land Development Agreement No. 0656753;
c)Servicing Obligation Date 01-SEP-08; and
d)Other:
Water Supply Headworks Infrastructure.
(Emphasis in original)
WAPC was a reference to the Western Australian Planning Commission.
The Land Development Agreement No. 0656753 referred to in [21(b)] (LDA) involved 4 separate agreements between Mr Duckworth and the Water Corporation: one for each stage of the development (see [9] above). In those agreements, the Water Corporation agreed to issue a clearance to satisfy the WAPC when the terms of the agreement had been satisfied. Mr Duckworth relevantly agreed to engage a consulting engineer to arrange the design and construction of the water reticulation which would become the property of the Water Corporation. Mr Duckworth also agreed to pay all fees and contributions referred to in sch.2 to the Bond Agreement. Schedule 2 included a reference to a bank guarantee in the amount of $3,000,000.
The water reticulation the subject of the LDA was completed by Mr Duckworth and handed over to the Water Corporation between September 2006 and October 2006. Once that was done, the water supply headworks (the subject of the CCWA) had to be completed by Mr Duckworth so that water services could be brought to the development for distribution through the reticulation pipeline.
The “Water Supply Headworks Infrastructure” mentioned in cl.E1 of the Bond Agreement was the headworks the subject of the CCWA. Thus, the work required by the CCWA was included in the work that had to be completed in accordance with the Project Timetable found in the Bond Agreement. Those works were never in fact commenced by Mr Duckworth.
On 21 December 2007, the Water Corporation wrote to Mr Duckworth referring to the CCWA and the Bond Agreement stating:
…
You have missed 2 key milestones in the Project Timetable set out in the Bond Agreement, being Works commenced by 1 June 2007 and Works 50% complete by 1 December 2007. As a result you are in breach of the following obligations in the Bond Agreement:
…
Unless your breaches of the Bond Agreement are remedied within 14 days, the Corporation, without prejudice to any other rights it has under the CCWA will exercise its rights under the Bond Agreement without further notice, by calling on the Financial Security being the Banker’s Undertaking dated 4 September 2006.
On 15 January 2008, Water Corporation called on the Banker’s Undertaking and duly received a cheque in the amount of $3,000,000.
In 2010, Mr Duckworth commenced proceedings against the Water Corporation in the Supreme Court of Western Australia (proceedings 3066 of 2010). He purported to bring those proceedings as trustee pursuant to a declaration of trust in favour of his five children. Water Corporation disputed that Mr Duckworth was a trustee. Mr Duckworth sought the return of the $3,000,000 paid pursuant to the Banker’s Undertaking on various bases including unjust enrichment and unconscionable conduct.
On 27 September 2011, before proceedings 3066 of 2010 came to trial, Mr Duckworth became a bankrupt. In light of that, when the matter came on for hearing on 30 January 2012, Edelman J asked the parties whether the proceedings should be stayed pursuant to s.60 of the Act. On 2 February 2012, his Honour gave judgment ordering that the proceedings be stayed by operation of s.60(2) of the Act: Duckworth v Water Corporation [2012] WASC 30. The trustee of Mr Duckworth’s estate elected under that section to discontinue the proceedings and accordingly, on 22 March 2012 Edelman J ordered that the proceedings be discontinued.
That, however, was not the end of the matter. Mr Duckworth made an application to the Supreme Court of Western Australia for an order reinstating the proceedings. On 18 May 2012, Edelman J dismissed Mr Duckworth’s application and made an order that he pay the costs of the Water Corporation: Duckworth v Water Corporation (No.2) [2012] WASC 163 (Duckworth (No.2)). Those costs were taxed and on 6 September 2012, the taxing Master issued a certificate of taxation.
His Honour gave three reasons for refusing Mr Duckworth’s application: first, he had no standing as plaintiff to bring the action; secondly, Mr Duckworth had recently filed evidence which raised serious concerns that the Court may have been misled by him; and thirdly, there were outstanding costs owed as a result of the discontinuance. It is only necessary to refer to the first of these reasons in any detail.
Edelman J dealt with the issue of standing on two alternative scenarios: first, that Mr Duckworth held the cause of action on trust, and secondly, that he had not held the cause of action on trust.
In respect of the first scenario, his Honour noted at [19]:
… However, not only is this matter not possible to determine at this stage but there are two fundamental obstacles:
(1)there is real doubt whether the cause of action was held on trust by Mr Duckworth; and
(2)even if the cause of action were held on trust by Mr Duckworth, the affidavit evidence which he has now filed suggests that the cause of action is no longer held on trust by him.
The first of those obstacles was created by the appearance (for the first time) of a Deed purporting to remove Mr Duckworth as trustee on 11 September 2009, that is, before the commencement of the proceedings. Edelman J explained the difficulties with that document at [24] – [31] of his reasons. These included the fact that the document had not been discovered by Mr Duckworth during the discovery process and had been purportedly executed by an officer of the replacement trustee (being a Corporation) who, the evidence suggested, was not in fact an officer of the trustee company.
His Honour concluded that, even if it were possible to conclude that Mr Duckworth commenced the action as trustee, he was no longer a trustee having been replaced by his son, Karl James Duckworth. Therefore, the action could not be reinstated with Mr Duckworth as plaintiff.
In respect of the alternative scenario, his Honour explained, at [22], that the cause of action would have vested in Mr Duckworth’s trustee in bankruptcy. The trustee in bankruptcy had now assigned any cause of action against Water Corporation to four assignees none of whom was Mr Duckworth. For that reason, on the alternative scenario, the proceedings could not be reinstated with Mr Duckworth as plaintiff.
It is convenient at this point to deal with the qualification referred to at [3] above.
The Bankruptcy Notice relied on by the Water Corporation, was issued by an Official Receiver in respect of the certificate of taxed costs, issued by the taxing Master on 6 September 2012. A copy of that certificate was attached to the Bankruptcy Notice.
Mr Duckworth argues that the Bankruptcy Notice was invalid because there was no order attached to it in accordance with s.41(2) of the Act and sub-reg.4.01(1)(b) of the Bankruptcy Regulations 1966 (Cth) (Regulations). Mr Duckworth’s contention was that the relevant order was that made by Edelman J on 18 May 2012. That contention is misconceived.
The taxation of costs ordered by the Supreme Court of Western Australia is dealt with in O.66 of the Rules of the Supreme Court1971 (WA) (Rules). Order 66.57 of the Rules provides that the costs allowed by the taxing officer on a final certificate of taxation shall be deemed to be a judgment of the Court and shall be recoverable accordingly. The certificate attached to the Bankruptcy Notice was, pursuant to the Rules, the relevant judgment and because it was attached to the Bankruptcy Notice, the Bankruptcy Notice complied with the obligation under s.41(2) of the Act. For that reason the only technical argument raised by Mr Duckworth is rejected.
In 2013, four of Mr Duckworth’s children commenced proceedings in the Supreme Court of Western Australia (proceedings 1795 of 2013) against Water Corporation in respect of the $3,000,000 received by it pursuant to the Banker’s Undertaking. Those proceedings were commenced on the basis that Mr Duckworth’s rights under the agreements with the Water Corporation had been assigned to them by his trustee in bankruptcy. On 5 November 2015, Mitchell J (as his Honour then was) determined preliminary issues in the proceedings. His Honour found that Mr Duckworth had “entered into the agreements with the Water Corporation in his capacity as trustee” and that any rights held by him under the terms of those agreements did not vest in his trustee in bankruptcy: Duckworth (No.2). Those proceedings are still on foot.
On 9 February 2017, Bankruptcy Notice 211857 was issued by an Official Receiver in respect of the taxed costs in proceedings 3066 of 2010 and was served on Mr Duckworth on the same day. Mr Duckworth was in Australia at that time.
By letter dated 27 February 2017, expressed to be “As A Deed”, Karl James Duckworth wrote to the Chief Executive Officer of the Water Corporation in the following terms:
AS TRUSTEE OF THE OCEAN FARM TRUST AND BENEFICIARY OF THAT TRUST I KARL JAMES DUCKWORTH GIVE THE WATER CORPORATION W.A. AUTHORITY TO INDEMNIFY ITSELF AS TO THE TAXED COST ORDER IN THE TOTAL SUM OUTSTANDING IN THE MATTER CIV 3066 OF 2010 FROM THE $3,000,000 (PLUS INTEREST FOR 12 YEARS) BOND HELD BY THE WATER CORPORATION AS PER THE ORDER OF HIS HONOUR JUSTICE JAMES EDELMAN MADE ON THE 17 MAY 2012.
(Emphasis in original)
Mr Duckworth did not comply with the requirements of the Bankruptcy Notice within the time specified in it[1] and did not seek to have it set aside. In those circumstances, Mr Duckworth committed an act of bankruptcy. On 5 April 2017, the Water Corporation filed a creditor’s petition relying upon that act of bankruptcy, and the debt owed to it by Mr Duckworth pursuant to the judgment of the Supreme Court of Western Australia in proceedings 3066 of 2010.
[1] Namely, 2 March 2017.
Grounds of opposition
Mr Duckworth relied upon two grounds of opposition (without alteration):
1.The debt has been satisfied (or can be satisfied from the funds owing to the respondent by the applicant Water Corporation);
2.The petition is an abuse of process
Mr Duckworth represented himself in these proceedings. He is not a lawyer and for that reason, in spite of the fact that he has had some experience of litigation, his arguments were not, at all times, very clear. As I understand them, Mr Duckworth’s arguments come down to this:
·first, there was no breach of the Bond Agreement because he had performed all of the required works;
·secondly, for that reason, the Water Corporation was not entitled to call upon the Banker’s Undertaking or to keep the money obtained pursuant to it, and should give it back, or at the very least, deduct from it the amount of costs ordered in proceedings 3066 of 2010; and
·thirdly, and in any event, the Water Corporation had now had the money for over nine years and had not used it for the purpose for which it was meant: namely, completing the works required by the Bond Agreement.
Mr Duckworth further argued that the fact that he had entered into the Bond Agreement as trustee for the Ocean Farm Trust, was no longer trustee of that trust, and had incurred the costs order in his personal capacity, was no impediment to the second of these arguments. This was because the current trustee, his son, had given the Water Corporation the right to indemnify itself from the funds in respect of the judgment amount.
Before I turn to deal with these arguments, it is necessary to consider the relevant statutory basis upon which a sequestration order may be refused.
Section 43 of the Act empowers the Court, on a petition presented by a creditor, to make a sequestration order against the estate of a debtor who committed an act of bankruptcy at a time when the debtor was personally present or ordinarily resident in Australia. Section 52 of the Act relevantly provides:
(1)At the hearing of a creditor’s petition, the Court shall require proof of:
...
(c)the fact that the debt or debts on which the petitioning creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the debtor.
...
(2)If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:
...
(b)that for other sufficient cause a sequestration order ought not to be made;
it may dismiss the petition.
The onus is on the respondent to demonstrate that there is “sufficient cause” within the meaning of sub-s.52(2)(b): Cain v Whyte (1933) 48 CLR 639 at 645-646; [1932] HCA 6; Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at 24; [1997] 143 ALR 396 (Davies, Wilcox and Branson JJ).
In Totev v Sfar (2006) 230 ALR 236; [2006] FCA 470 Allsop J (as his Honour then was) observed at [37]:
… It is for the debtor to persuade the Court that the public interest in the dealing with the insolvent debtor and the rights of individual creditors are outweighed by other considerations…
Mr Duckworth’s arguments in opposition to the making of a sequestration order are significantly complicated by the varying claims about the capacity in which he says that he is entitled, at least, to have the cost judgment against him deducted from the amount of the Banker’s Undertaking retained by the Water Corporation. There is significant force in the remarks by Edelman J, that the Supreme Court may have been misled as to the identity of the trustee of the Ocean Farms Trust. On one view, it may be said that Mr Duckworth has asserted various capacities which appear to him, to suit his interests at a particular time. That said, Mitchell J has determined that Mr Duckworth was undertaking the development of Ocean Farms 2 as trustee of the Ocean Farms Trust. Further, and in any event, it is unnecessary for the purposes of these proceedings to take any concluded view on that issue. That is because Mr Duckworth’s underlying arguments are fundamentally misconceived.
The first argument has two parts: first, that Mr Duckworth completed the work required by the CCWA and, secondly, that he paid for them to be done by means other than the Banker’s Undertaking. The first of these is based on confusion between different types of work. The work that Mr Duckworth said he did was the reticulation work done pursuant to the LDA (see [22] above). That was different from the water supply headworks infrastructure which was the subject of the CCWA. That work was never commenced and it was that fact that led the Water Corporation to call on the Banker’s Undertaking.
The second part of the argument is also straightforward. The financial contributions to be made by Mr Duckworth were set out in sch.2 to the LDA and were calculated as $6,400 per proposed lot. The purpose of those contributions was to offset future losses that may be incurred by the Water Corporation by reason of the fact that the tariffs imposed by the State government for water may be less than the costs that would be incurred by the Water Corporation in maintaining the water supply system. The contributions had nothing to do with the construction of the head works infrastructure the subject of the CCWA.
For those reasons, Mr Duckworth has not satisfied me that he was not in breach of his obligations under the CCWA and the Bond Agreement, or that the Water Corporation was not entitled to call on the Banker’s Undertaking.
The second argument was that the Water Corporation could use the money obtained under the Banker’s Undertaking to satisfy the judgment debt. This argument relied on cl.C12 of the Bond Agreement. That clause is best understood in the context of the two preceding clauses:
The Developer agrees:
…
C10To indemnify the Corporation for any loss, cost, claims or liability suffered or incurred by the failure of the Developer to follow and perform any of its duties under this agreement including all costs the Corporation incurs in completing the Works.
C11Pay all the Corporation’s costs of this agreement and the cost of doing everything it must do under this agreement.
C12The Corporation may, without notice to the Developer, call on the Financial Security to recover any loss it suffers arising out of the failure by the Developer to follow and perform the duties under this agreement. This right does not affect the indemnity under C10.
…
Mr Duckworth relies, in particular, on a statement made by Master Sanderson in a judgment given by him on 24 October 2013, in proceedings 1795 of 2013: Duckworth v Water Corporation [2013] WASC 383. His Honour refused an application by the Water Corporation for a stay of those proceedings pending payment of the costs in proceedings 3066 of 2010. After finding that the plaintiffs (which did not include Mr Duckworth) had a strong prima facie case for their claim that the Water Corporation had to account for the money retained under the Banker’s Undertaking, his Honour set out cll.C10 to C12 and said, at [36]:
During the course of submissions I raised with counsel the prospect these clauses were wide enough to allow the defendant to claim the outstanding costs from the guarantee funds. …
His Honour allowed the parties the opportunity to address the issue in written submissions. His Honour continued:
[37]Predictably enough the parties differed as to whether or not it was open to the defendant to deduct the unpaid costs from the bond. The plaintiffs said it was probably not open to the defendant to make such a deduction but in the interests of moving the action forward it would consent to such a deduction being made. The defendant said it was not open on a proper construction of the CCWA or the Bond Agreement to deduct costs. Even if it were possible the defendant maintains the costs of the work estimated in sch 2 of the CCWA would be $4.6 million. Therefore the bond was not sufficient to meet all of the costs incurred by the defendant.
[38]So my attempt to resolve the matter by obtaining some agreement as to deduction of unpaid costs from the bond failed.
Contrary to Mr Duckworth’s submission, Master Sanderson did not come to any concluded view about the construction of cl.C12 which might allow the deduction of costs from the bond money. In my view, the submissions of the parties that it was not open to deduct the amount of costs payable in proceedings 3066 of 2010 from the bond money were correct. Those costs were incurred in respect of an application by Mr Duckworth to reinstate proceedings which have been discontinued by his trustee in bankruptcy. That had nothing to do with any failure of his to “follow and perform the duties” under the Bond Agreement or the CCWA.
The Water Corporation’s argument in respect of that issue also has some bearing in respect of Mr Duckworth’s third argument in these proceedings. The point of the requirement to provide financial security under the CCWA and Bond Agreement was to ensure that the Water Corporation was not left with the financial responsibility for completing work that was Mr Duckworth’s obligation. There was, however, no timeframe within which the Water Corporation had to complete that work.
Evidence given by John Todd, Manager Development Services of the Water Corporation, was that only a small number of dwellings are currently on Ocean Farms 2 which is being serviced by water infrastructure that was designed to support an adjacent development. Mr Todd explained that the water head works infrastructure in relation to Ocean Farms 2, the subject of the CCWA, would have to be commenced in the event that the number of developments on that development increased to more than 10. The estimate of the costs of that work was in 2006, $4,600,000.
In light of that, as submitted to Master Sanderson, there would be insufficient funds from the Banker’s Undertaking to both indemnify the Water Corporation in respect of its obligation to complete the works, and to satisfy the judgment debt in proceedings 3066 of 2010. The same reasoning applies in respect of Mr Duckworth’s reliance upon the letter from his son, purporting to give the Water Corporation the right to indemnify itself in respect of the judgment debt from the amount of the Banker’s Undertaking.
Mr Duckworth has not satisfied me that there is sufficient cause that a sequestration order ought not to be made.
Conclusion
For those reasons, a sequestration order will be made in respect of the estate of Mr Duckworth. I note that the date of the act of bankruptcy was 2 March 2017.
I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Judge Smith
Associate:
Date: 29 September 2017
9
4