Westpac Banking Corporation v Wakim - [2011] FMCA 443

FEDERAL MAGISTRATES COURT OF AUSTRALIA

WESTPAC BANKING CORPORATION & ANOR v WAKIM

[2011] FMCA 443

BANKRUPTCY – Creditor’s petition – liability of business guarantor under bank guarantees – default judgment of Supreme Court and refusal to set aside – no grounds of opposition with prospects of success – no grounds for going behind judgment debt – adjournment applications refused – sequestration order made.

Bankruptcy Act 1966 (Cth), ss.52, 52(3)
Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), r.4.06
Uniform Civil Procedure Rules 2005 (NSW), rr.51.9, 51.9(3)

Adamopoulos v Olympic Airways SA & Anor (1990) 95 ALR 525
Ahern v Deputy Commissioner of Taxation (Qld) (1987) 76 ALR 137
Equuscorp Pty Ltd v Glengallan Investments Pty Ltd; HGT Investments Pty Ltd (2004) 218 CLR 471
Rozenbes v Kronhill (1956) 95 CLR 407
Toll (FGCT) Pty Ltd v Alphapharm Pty Ltd (2004) 219 CLR 165
Westpac Banking Corporation & Anor v Simon Wakim [2011] NSWSC 414
Wren v Mahony (1972) 126 CLR 212

First Applicant:

WESTPAC BANKING CORPORATION

ABN 33 007 457 141

Second Applicant:

ST GEORGE FINANCE LIMITED
ABN 99 001 094 471

Respondent:

SIMON WAKIM

File Number:

SYG 2530 of 2010

Judgment of:

Smith FM

Hearing date:

7 June 2011

Delivered at:

Sydney

Delivered on:

7 June 2011

REPRESENTATION

Counsel for the Applicants:

Mr D Robertson

Solicitors for the Applicants:

Henry Davis York

Counsel for the Respondent:

Ms B Nolan

Solicitors for the Respondent:

Deutsch Partners

ORDERS

A sequestration order be made against the estate of Simon Wakim.
All proceedings under the sequestration order are stayed under s.52(3) of the Bankruptcy Act 1966 (Cth) for 21 days, on the following conditions:
(a)that Mr Wakim shall deliver all his current passports to his trustee before 4 pm on 9 June 2011, and shall not leave Australia without the permission of his trustee, and
(b)that Mr Wakim, by his counsel, continues during that period the undertaking to the Court given on 17 May 2011 that he will not dispose of his assets other than in the ordinary course of business.
The applicant creditors’ costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
Note that the date of the act of bankruptcy is 16 October 2010.
Note that a consent to act as trustee has been signed by David John Kerr.
The applicant must give a copy of this order to the Official Receiver within 2 working days.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 2530 of 2010

WESTPAC BANKING CORPORATION

ABN 33 007 457 141

First Applicant

ST GEORGE FINANCE LIMITED
ABN 99 001 094 471

Second Applicant

And

SIMON WAKIM

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

Westpac Banking Corporation and St George Finance Limited petition the Court for a sequestration order against Mr Wakim, in relation to an indebtedness of $3,177,170.90 owing under a default judgment made in their favour on 30 April 2010 in proceedings in the commercial list of the Supreme Court of…

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: [2011] FMCA 443
Decision Date: 7 June 2011

CaseChat Overview and Summary

In the case of Westpac Banking Corporation v Wakim, the court was asked to consider an application for a sequestration order against Simon Wakim. The bank sought to have Mr Wakim declared bankrupt due to his failure to pay a debt. The primary issue before the court was whether Mr Wakim had provided a reasonable or arguable defence to the claim, given his significant delay in seeking to set aside a default judgment. Additionally, the court needed to decide whether Mr Wakim had acted in good faith and whether he had a legitimate explanation for his delay.

The court found that Mr Wakim's explanation for the delay was insufficient and concluded that he had neither a legitimate explanation for his default nor a good defence to the merits of the proceedings. The judge noted that Mr Wakim had filed a notice of intention to appeal the judgment but had not yet filed any draft grounds of appeal or supporting affidavits. The court rejected Mr Wakim's application to adjourn the hearing, finding that his affidavit did not dispute the existence of the debt or assert an ability to pay. The court accepted that Mr Wakim was insolvent, leading to the conclusion that a sequestration order was appropriate.

ORDERS:
A sequestration order was made against the estate of Simon Wakim. The order mandated that all proceedings under the sequestration order be stayed for 21 days under section 52(3) of the Bankruptcy Act 1966 (Cth), subject to certain conditions, including Mr Wakim delivering his passports to his trustee and refraining from disposing of assets other than in the ordinary course of business. The applicant creditors' costs were to be taxed and paid from Mr Wakim's estate. The date of the act of bankruptcy was noted as 16 October 2010, and a consent to act as trustee was signed by David John Kerr. The applicant was required to provide a copy of the order to the Official Receiver within two working days.

Orders

Orders of the court

A sequestration order be made against the estate of Simon Wakim.

All proceedings under the sequestration order are stayed under s.52(3) of the Bankruptcy Act 1966 (Cth) for 21 days, on the following conditions:

(a) that Mr Wakim shall deliver all his current passports to his trustee before 4 pm on 9 June 2011, and shall not leave Australia without the permission of his trustee, and

(b) that Mr Wakim, by his counsel, continues during that period the undertaking to the Court given on 17 May 2011 that he will not dispose of his assets other than in the ordinary course of business.

The applicant creditors’ costs, including all reserved costs, be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

Note that the date of the act of bankruptcy is 16 October 2010.

Note that a consent to act as trustee has been signed by David John Kerr.

The applicant must give a copy of this order to the Official Receiver within 2 working days.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

His Honour addressed Mr Wakim’s explanations for a long delay in seeking to set aside the default judgment, in effect, until the eve of a hearing on a creditor’s petition. His Honour drew adverse conclusions on Mr Wakim’s credit in relation to his evidence about this, and concluded that the explanation for Mr Wakim’s delay was “insufficient”. His Honour’s judgment concluded: 31The critical question is whether or not the defendant has put forward a reasonable or arguable defence. In my view the defence put forward by the defendant is simply not arguable on any assessment. Decision 32The defendant has neither a legitimate explanation for his default and delay in seeking to set aside the default judgement [nor] does he have a good defence to the merits of the proceedings. The further evidence filed in this Court shows that Mr Wakim has exercised a right under the Uniform Civil Procedure Rules 2005 (NSW) to serve Westpac Bank with a notice of intention “to commence appeal proceedings within 3 months after the material date, that is on or before 10 August 2011”. His notice is not accompanied by any draft grounds of appeal nor affidavits which will be relied upon in relation to the obtaining of leave to appeal. Under Uniform Civil Procedure Rule 51.9(3): “the filing and service of a notice of intention to appeal does not operate to commence proceedings in the Court”. Proceedings in the Court of Appeal in relation to an appeal will only be commenced, if an application for leave were filed and was accompanied by the necessary documentation. That has not occurred before today, and no draft documentation in relation to an appeal or grounds of appeal has been shown to this Court in support of today’s application for adjournment. Following Einstein J’s dismissal of the application to set aside the default judgment, the present petition was listed before the Registrar on 17 May 2011. On that occasion there was a further contested adjournment application. There is disagreement about what happened on that occasion, but I accept, as appears on the court file, that the Registrar made orders in the following terms which were passed up in the handwriting of one of the representatives and amended by her: THE COURT ORDERS THAT: 1.The Respondent file and serve any affidavit in support of any further adjournment application on or before 23 May 2011. 2.Adjourn the petition to 9.45 am on 24 May 2011. 3.By consent, the Respondent to pay the Applicants’ costs of today. THE COURT NOTES THAT: 4.The undertaking of the Respondent to serve on or before 23 May 2011 an affidavit fully setting out his assets and liabilities. 5.The undertaking of the Respondent that pending determination of the petition he will not dispose of assets other than in the ordinary course of business. There was subsequently filed by Mr Wakim an affidavit purporting to set out his assets and liabilities. However, it is unnecessary for me to examine that material. Contrary to the submission of Mr Wakim’s counsel, I do not understand the affidavit to dispute the existence of the indebtedness under the default judgment, except on the grounds raised in the notice of opposition. It also plainly does not assert an ability to pay his debts, if they include the indebtedness relied upon in the petition. Plainly, if I accept the affidavit of debt, Mr Wakim is very much insolvent.

Ratio Decidendi

Legal Principle Established

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