Westpac Banking Corporation v Hingston (No 2) - [2010] FCA 1116

FEDERAL COURT OF AUSTRALIA
Westpac Banking Corporation v Hingston (No. 2) [2010] FCA 1116

Citation: Westpac Banking Corporation v Hingston (No. 2) [2010] FCA 1116

Parties: WESTPAC BANKING CORPORATION v GUY RICHARD HINGSTON and ANDREW WILY

File number: NSD 245 of 2010

Judge: COWDROY J

Date of judgment: 15 October 2010

Corrigendum: 17 November 2010

Catchwords: BANKRUPTCY AND INSOLVENCY – Application to set aside composition – Whether the Court should set aside composition on grounds of unreasonableness – Whether the Court should set aside composition on grounds that material particulars were omitted from debtor’s petition – Held – composition set aside and sequestration order made.

Legislation: Bankruptcy Act 1966 (Cth) ss 19(1), 55, 74(5), 222(1), 222(5), 222(7), 222(10), 222(11), 232
Bankruptcy Legislation Amendment Act 2004
Bankruptcy Regulations 1996 (Cth) Regs 4.14, 4.18
Corporations Act 2001 (Cth) s 436A

Cases cited: Beard v Prestige Baking Industries Pty Ltd and Another (1981) 52 FLR 385
Re Brennan: Ex parte Stokes (Australasia) Ltd (unreported FCA 31 May 1988)
Re Codrington: Ex parte Don McKay Tourist and Charter Pty Ltd [1989] FCA 349
Re Emmett Ex parte: Beneficial Finance Corporation Ltd v Emmett [1991] FCA 632
Hingston Surgical Limited and Another v Minster for Infrastructure, Transport, Regional Development and Local Government [2008] AATA 455
Lancaster v NZI Capital Corporation Limited [1991] FCA 471
Re Lockett: Ex parte Northern Equity Ltd and Others [1992] FCA 142
NZI Capital Corporation Limited v Lancaster (1991) 30 FCR 441
Palazzolo v Ex parte Discusso [1991] FCA 317
Re Richards: Ex parte Beneficial Finance Corporation Ltd [1986] FCA 74
Re Watkinson: Ex parte Registrar in Bankruptcy (unreported, Gray J, FCA 3 March 1986)
Re Williams and Another: Ex parte Official Trustee in Bankruptcy (1990) 26 FCR 191

Date of hearing: 6 & 7 September 2010

Place: Sydney

Division: GENERAL DIVISION

Category: Catchwords

Number of paragraphs: 118

Counsel for the Applicant: Mr D. McLure

Solicitor for the Applicant: Henry Davis York

Counsel for the Respondent: The Respondent appeared in person

FEDERAL COURT OF AUSTRALIA
Westpac Banking Corporation v Hingston (No. 2) [2010] FCA 1116
CORRIGENDUM
1.In the first sentence of paragraph 68 replace the words ‘Section 222(1)(a) enables the Court to set aside a composition if a court’ with the words ‘Section 222(1)(d) enables the Court to set aside a composition if the Court’.

I certify that the preceding one (1) numbered paragraph is a true copy of the Corrigendum to the Reasons for Judgment herein of the Honourable Justice Cowdroy.

Associate:
Dated: 17 November 2010

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 245 of 2010

BETWEEN:
WESTPAC BANKING CORPORATION
Applicant

AND:
GUY RICHARD HINGSTON
First Respondent

ANDREW WILY
Second Respondent

JUDGE:

COWDROY J

DATE OF ORDER:

15 OCTOBER 2010

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:
1.Pursuant to s 222(1) and s 222(5) of the Bankruptcy Act 1966 (Cth), the composition made in respect of the First Respondent’s debts on 2 October 2009 be set aside.
2.Pursuant to s 222(10) of the

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2010] FCA 1116
Decision Date

CaseChat Overview and Summary

The case of Westpac Banking Corporation v Hingston (No 2) involved Dr Hingston, who was the debtor, and Westpac Banking Corporation, the creditor. The dispute centred on the validity of a composition entered into by Dr Hingston with his creditors, including Westpac, under section 222 of the Bankruptcy Act 1966 (Cth). The primary issue was whether the Court had the jurisdiction to make an order under section 222(5) of the Act, particularly in light of the provisions of section 232 of the same Act. Dr Hingston argued that the Court could not make the order because all obligations under the composition had been discharged, supported by a certificate from the Trustee. Westpac, on the other hand, contended that the obligations were not fully discharged as the Trustee had not made payments to the creditors, and hence, the Court had the jurisdiction to proceed with the application.

The Court had to determine whether the prohibition in section 222(7) of the Act applied to prevent the Court from making an order under section 222(5) even after the composition's obligations had ostensibly been discharged. The Court considered the legal framework surrounding the composition, the obligations of the Trustee, and the rights of creditors. The Court noted that the prohibition in section 222(7) was specific to applications made under section 222(5) and did not extend to applications made under section 222(1). Additionally, the Court relied on prior decisions under the unamended Bankruptcy Act, which provided some guidance on the interpretation of similar provisions.

After examining the arguments and the relevant statutory provisions, the Court concluded that Dr Hingston's reliance on section 232 was misplaced in this context. The Court held that the obligations under the composition had not been fully discharged because the Trustee had not made the necessary payments to the creditors. Therefore, the Court retained its jurisdiction to make an order under section 222(5) of the Act. The Court found in favour of Westpac, allowing their application to proceed.

Orders

Orders of the court

Full text does not contain this section.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

The evidence also establishes that Anne Johnston (‘Mrs Johnston’), a putative creditor, objected to the composition and has raised various issues concerning the creditors meeting of 2 October 2009. Such matters were considered by a Delegate-General of the Inspector General in Bankruptcy, and are not relevant for this application.Operation of s 232 of the Bankruptcy Act As a threshold question, Dr Hingston submits that the Court has no power to determine this application in respect of the s 222(5) claim in view of the provisions of s 232 of the Bankruptcy Act. Section 232 provides:Certificate relating to discharge of obligations (1)If the Trustee of a personal insolvency agreement is satisfied that all the obligations that the agreement created have been discharged, the Trustee must, on written request by the debtor, give the debtor a certificate signed by the Trustee to that effect. (2)A certificate signed by a trustee under this section is prima facie evidence of the facts stated in it. Dr Hingston relies upon the fact that the two payments required by the composition have been made to the Trustee. Further, Dr Hingston provided to the Court a letter dated 24 August 2010 which is addressed to him from the Trustee and stated to be issued under ss 232(1) and (2) of the Bankruptcy Act which provides:I, Andrew Hugh Jenner Wily of Armstrong Wily, Trustee of Composition accepted on 2 October 2009 by the creditors of Guy Richard Hingston hereby certify that I am satisfied that all the obligations that the agreement created have been discharged on 30 November 2009. Dr Hingston then relies upon s 222(7) of the Bankruptcy Act which provides:(7) the Court must not make an order under subsection (5) unless the application for the order is made before all the obligations that the personal insolvency agreement created have been discharged. Westpac’s submissions Westpac submits (as conceded by Dr Hingston) that the prohibition in s 222(7) has application only with regard to the ground raised by Westpac under s 222(5) and does not extend to applications made under s 222(1). It submits that s 222(7) applies where ‘all the obligations that the personal insolvency agreement created have been discharged’. Westpac states (and this fact is not challenged) that whilst payments had been made pursuant to the composition to the Trustee, the Trustee has not made any payments to the creditors. Accordingly Westpac submits that the obligations remain unfulfilled under the composition.Finding Guidance is provided by decisions of the Court made under the equivalent provisions of the Bankruptcy Act which prevailed prior to amendments which were introduced by the Bankruptcy Legislation Amendment Act 2004 (‘the amending Act’) and which came into effect on 1 December 2004. In Re Watkinson: Ex parte Registrar in Bankruptcy (unreported, Gray J, FCA, 3 March 1986) the Court considered the provisions of s 222(6) of the unamended Bankruptcy Act which relevantly provided:The court shall not make an order under subsection (2) or (4) unless the application for the order is made… (c) in relation to a composition – before the final payment has been made under the composition.

Citation:		Westpac Banking Corporation v Hingston (No. 2) [2010] FCA 1116
Parties:		WESTPAC BANKING CORPORATION v GUY RICHARD HINGSTON and ANDREW WILY
File number:		NSD 245 of 2010
Judge:		COWDROY J
Date of judgment:		15 October 2010
Corrigendum:		17 November 2010
Catchwords:		BANKRUPTCY AND INSOLVENCY – Application to set aside composition – Whether the Court should set aside composition on grounds of unreasonableness – Whether the Court should set aside composition on grounds that material particulars were omitted from debtor’s petition – Held – composition set aside and sequestration order made.
Legislation:		Bankruptcy Act 1966 (Cth) ss 19(1), 55, 74(5), 222(1), 222(5), 222(7), 222(10), 222(11), 232 Bankruptcy Legislation Amendment Act 2004 Bankruptcy Regulations 1996 (Cth) Regs 4.14, 4.18 Corporations Act 2001 (Cth) s 436A
Cases cited:		Beard v Prestige Baking Industries Pty Ltd and Another (1981) 52 FLR 385 Re Brennan: Ex parte Stokes (Australasia) Ltd (unreported FCA 31 May 1988) Re Codrington: Ex parte Don McKay Tourist and Charter Pty Ltd [1989] FCA 349 Re Emmett Ex parte: Beneficial Finance Corporation Ltd v Emmett [1991] FCA 632 Hingston Surgical Limited and Another v Minster for Infrastructure, Transport, Regional Development and Local Government [2008] AATA 455 Lancaster v NZI Capital Corporation Limited [1991] FCA 471 Re Lockett: Ex parte Northern Equity Ltd and Others [1992] FCA 142 NZI Capital Corporation Limited v Lancaster (1991) 30 FCR 441 Palazzolo v Ex parte Discusso [1991] FCA 317 Re Richards: Ex parte Beneficial Finance Corporation Ltd [1986] FCA 74 Re Watkinson: Ex parte Registrar in Bankruptcy (unreported, Gray J, FCA 3 March 1986) Re Williams and Another: Ex parte Official Trustee in Bankruptcy (1990) 26 FCR 191
Date of hearing:	6 & 7 September 2010
Place:	Sydney
Division:	GENERAL DIVISION
Category:	Catchwords
Number of paragraphs:	118
Counsel for the Applicant:	Mr D. McLure
Solicitor for the Applicant:	Henry Davis York
Counsel for the Respondent:	The Respondent appeared in person

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 245 of 2010

JUDGE:	COWDROY J
DATE OF ORDER:	15 OCTOBER 2010
WHERE MADE:	SYDNEY