Williams v Leach
[2023] QDC 124
•1 June 2023 (ex tempore, revised from transcript)
DISTRICT COURT OF QUEENSLAND
CITATION:
Williams & Ors v Leach [2023] QDC 124
PARTIES:
IAN MALCOLM WILLIAMS
(First Plaintiff)AND
WHARF ROAD PTY LTD ABN 74 099 614 730
(Second Plaintiff)
AND
WALLABY664 PTY LTD CAN 068 957 684 ATF THE WILLIAMS FAMILY TRUST ABN 22 270 829 736
(Third Plaintiff)v
CHRISTOPHER LEACH
(Defendant/Applicant)FILE NO:
220/23
DIVISION:
Civil
PROCEEDING:
Application
ORIGINATING COURT:
District Court
DELIVERED ON:
1 June 2023 (ex tempore, revised from transcript)
DELIVERED AT:
Brisbane
HEARING DATE:
1 June 2023
JUDGE:
Andreatidis KC DCJ
ORDER:
1. Application dismissed.
2. The defendant pay the plaintiffs’ costs.
CATCHWORDS:
PROCEEDINGS – CIVIL PROCEDURE – PAYMENTS BY INSTALLMENTS – PREREQUISITES FOR INSTALMENT ORDER – where the defendant applies for an order making payments by instalments – where the plaintiff opposes the order – factors to which the court must have regard in deciding whether to make an instalment order – whether the enforcement debtor has means to satisfy the order – whether the order will be satisfied within a reasonable time – whether an order authorising payments by instalments ought to be made
LEGISLATION
Uniform Civil Procedure Rules 1999 (Qld) rr 868, 869
CASES
Big Country Developments Pty Ltd v Peter Griffiths (No 5) NSWSC 865
Bucknell v Robins [2008] QCA 214
C Tina Pty Ltd v Barham-Floreani [2019] VSC 819
Hellier Capital Pty Limited v Richard Albarran [2009] NSWSC 403
COUNSEL:
Mr T Jackson (Plaintiffs/Respondents)
Mr J Manner (Defendant/Applicant)
SOLICITORS:
Mills Oakley (Plaintiffs/Respondents)
Etienne Lawyers (Defendant/Applicant)
Background
This is an application pursuant to rule 868 of the Uniform Civil Procedure Rules 1999 (Qld) (UCPR) for an order for payment of a judgment debt by instalments. The background facts are largely uncontested. It is the detail of the financial circumstances of the defendant that appear to be questioned.
In short compass, proceedings were commenced on 1 February 2023 for a debt owed by the defendant to the plaintiffs. No defence filed or served, and judgment by default was entered on 28 March 2023.
The amount of the judgment debt is in the order of $565,000. A bankruptcy notice was served on 5 May 2023. Following the service of the bankruptcy notice, Mr Leach filed and served this application.
It is not contested that Mr Leach has not made any payments at all in relation to the debt. It is not contested that Mr Leach had previously, on a number of occasions, made promises to pay the debt and that he has paid nothing so far.
Rule 869 of the UCPR provides as follows:
869 Prerequisites for instalment order
(1) In deciding whether to make an instalment order, the court must have regard to the following—
(a) whether the enforcement debtor is employed;
(b) the enforcement debtor’s means of satisfying the order;
(c) whether the order debt, including any interest, will be satisfied within a reasonable time;
(d) the necessary living expenses of the enforcement debtor and the enforcement debtor’s dependants;
(e) other liabilities of the enforcement debtor;
(f) if the applicant is the enforcement debtor—whether, having regard to the availability of other enforcement means, making the order would be consistent with the public interest in enforcing money orders efficiently and expeditiously.
(2) In deciding the amount and timing of the instalments, the court must be satisfied that the instalment order will not impose unreasonable hardship on the enforcement debtor.
(3) However, an enforcement hearing is not necessary before the court makes the instalment order.
I will go through each of the mandatory requirements of rule 869 shortly. It will assist the parties to understand the outcome by reference to the evidence that has been filed and what I will describe as the gaps or the lacunas in the material. I say that because, as will become apparent, the aspect of rule 869 that I have particular concern about being satisfied is rule 869(1)(b). For completeness, I will, of course, deal with each of the mandatory requirements in turn.
The evidence
I will start with exhibit 1, which is an investment memorandum of understanding between Sanguine Holdings B.V. (SBV), which is a company incorporated in the Netherlands, and possibly a company called Transmatch Realty Advisors B.V., which is also incorporated in the Netherlands. I say “possibly”, because when one turns to the execution clause of the document, a different corporation is signing the document, being Transmatch Financial Advisors B.V.
The fundamental proposition in terms of proposed income by Mr Leach is that there will be a bond raising undertaken overseas involving €2 billion as a consequence of the transactions occurring between SBV and Transmatch Realty Advisors B.V.
For the reasons which follow, the memorandum of understanding (MOU), which is exhibit 1, does not instil confidence in me in relation to the raising of the funds or the prospect of it occurring at all.
At page 3 of 15, what is clause 4, there is an obligation on the part of Transmatch Realty Advisors B.V. to immediately subscribe €1.45 billion for something called “Sanguine’s green bonds funds and other investments”. The obligation to immediately subscribe should be understood in the context of the date of the MOU, which is 17 April 2023.
What is missing is any evidence of Transmatch Realty Advisors, or any other Transmatch entity, making the subscription at all. Whether it was paid or not paid is unknown. Further, it is not clear at all from the terms of this document how it is that SBV will ever earn the money to pay Mr Leach.
An additional feature of the memorandum to be noted is, on page 3, about two-thirds down the page, is the following:
It is hereby agreed and understood between the parties that the green bonds will be managed by the manager of the bond issue. The parties will establish a joint vehicle – a joint venture vehicle to jointly manage and fairly share the administration fees and capital transfer for future investment financed by Transmatch. The investments committee will consist of three members, being two from Transmatch and one from SBV. Each participant will have a third of the votes and the votes will be defined with a simple majority.
There is no evidence of the establishment of that special purpose vehicle for the joint venture. There are no details provided as to who the other two people will be from Transmatch. There is no evidence indicating any agreement from Transmatch as to the payment to SBV. And, again, it is not clear at all how SBV will be making any payments pursuant to the asserted employment contract, pursuant to these transactions.
There is no evidence about the value of Transmatch Realty Advisors B.V. or Transmatch Financial Advisors B.V. That is important because those entities are going to be the source of the funds for the transactions that SBV will apparently be paid from. There is, at page 12 of 15, a placeholder where proof of funds of Transmatch is to be inserted. There is no evidence of that, as in there is no record of funds of Transmatch.
While of less significance, also worth noting is Exhibit B of the MOU. It seems that page 8 to 15 is supposed to record the Sanguine bank account details. Other than identifying the company and the fact that the account signatory is Mr Leach, no details are provided.
Prior to the commencement of the proceedings, there were emails exchanged between the plaintiffs and Mr Leach, in which Mr Leach made various promises to pay. Those emails appear in the affidavit of Ms Sarac, which is eCourts document 12.
What those emails indicate is a series of promises made by Mr Leach in mid-to-late 2022 of money coming from various investments. None of those, I assume, succeeded or came to be, because no payment was made. Again, I say “I assume” because there is no actual evidence about it, beyond the fact that no payment was paid.
I think it is fair to summarise Mr Leach as giving evidence, in effect, that previous investments did not result in any money, and that is the explanation for non-payment. That, of course, raises a question as to why the proposed transaction, in light of the concerns I have raised in relation to the MOU – namely, the proposed deal with Transmatch – will be successful.
I have also, in the exchange with counsel, indicated that the amount of money that is described as being the subject matter of the memorandum of understanding as being a matter of some concern. It is a substantial amount of money, and the absence of any evidence supporting the ability of the investor to come up with those funds is a matter that I do consider to be material in this case in satisfying me about the elements of rule 869.
I also consider it relevant that promises were made prior to the commencement of proceedings for the repayment of the debt, and that those promises were made in the context of investments and deals, where those investments and deals had not resulted in any payments being made.
Mr Leach, in his first affidavit – which is eCourt document 11 – deposes to his employment with SBV. That is the source of the instalments that he proposes to make if this order is made.
SBV has been unable to pay Mr Leach anything. Having regard to the evidence, Mr Manner makes the submission that that is not surprising, given that the investment which is the subject of the MOU has yet to occur. I once again make the observation that:
(a)the MOU anticipates the subscription having occurred already; and
(b)there is no explanation as to why that has not occurred.
Accordingly, there is some tension between:
(a)what the document records;
(b)the absence of evidence about the payment one way or the other; and
(c)whether or not there is a proper explanation for the delay in the ability of SBV to be able to start paying Mr Leach, if ever.
It is also noted that none of the affidavits include any financial statements or reports for SBV. Also unknown is whether Mr Leach is the sole director of SBV and whether or not he is the sole shareholder of SBV. Mr Manner, again, very properly, accepts that the evidence falls short in explaining those things.
There are a number of curiosities about the employment contract which I will now discuss. Like the MOU, they raise a number of questions and concerns about the proposed mechanism by which Mr Leach says he will be able to pay the debt by instalments.
The nature of the work to be performed is recorded at a level of such high generality and superficiality that it is really difficult to ascertain what it is Mr Leach will be doing. In that regard, Mr Jackson noted the broad definitions and unhelpful definitions of the word “Business” and “Employment” in clause 1.1 of the employment contract.
Clause 2 identifies that Mr Leach is going to be appointed as Chief Executive Officer. So that gives us some idea as to what it is Mr Leach is going to be employed as, but clause 5, which sets out the duties, both general and specific, is devoid of any detail. And the language of the employment agreement is in terms of Mr Leach being an executive, not a director.
That factor – to some extent – matters, because Mr Leach asserts that if he becomes bankrupt, he will be unable to continue in his role as a director of SBV and that that will, in turn, impact on his ability to everyone the money under this employment contract. I find that assertion difficult to accept because of the difference between, in Australian terms, a director and someone who is employed as a CEO.
It is also noted that whilst the contract of employment refers to Australian legislation, such as the Fair Work Act 2009 (Cth) suggesting that the Australian law is the relevant law to be applied, w hen one goes to clause 27 of the agreement, the governing law is that of the Netherlands. There is just no evidence at all about what the law of the Netherlands says about the status of a director who becomes bankrupt, the status of a CEO who becomes bankrupt, or the status of an employee who becomes bankrupt.
Mr Manner helpfully identified some provisions where it might be the case that SBV could terminate the contract of employment. The provisions he referred me to were the definition of “gross misconduct” in clause 1.1, the obligation to travel in clause 6.5, and the express power to terminate for gross misconduct in clause 14.1(b)(iii).
I accept that, arguably, those provisions might form a basis for SBV to terminate the employment contract. A difficulty I have, however, is I do not know whether Mr Leach is the only director and shareholder of SBV. I am therefore in no position to make any determination or assess the actual risk of SBV, which is not an Australian company, actually terminating someone who might, in fact, be the sole director and shareholder of it if he becomes a bankrupt.
I also was not taken to anything in exhibit 1 which suggested that the bankruptcy of Mr Leach would have an impact on the operation of the MOU.
Each of those matters that I have identified in relation to the employment contract, raise a series of questions and, do not give me confidence about the likelihood of the employment resulting in Mr Leach being paid the significant sum of money recorded in the employment agreement, which is, of course, linked to the transactions which are to occur pursuant to the MOU, which is exhibit 1.
In terms of the gaps in information provided by Mr Leach, I also note the submission made by Mr Jackson that Mr Leach does not include any tax liability that he would have on his salary. Whether or not he be taxed here in Australia is unknown, of course, but the employment contract does contemplate work being done here in Australia and overseas. What that work is here in Australia or overseas beyond the bare description of him being a CEO is not identified.
Turning to the second affidavit of Mr Leach, which is eCourts document 15. Paragraph 7 of that affidavit is to be noted. It is where he describes certain transactions involving one of the Sanguine Holdings’ companies in Singapore. It deals with loans being made to the Singaporean entity,.
Mr Leach deposed to being a director of Sanguine Holdings (SG). The company was incorporated in Singapore. He deposes to not receiving any director’s fees, income or dividends from that company and never receiving any remuneration or payment from that company. He then describes how loan funds were advanced for the purpose of extending transaction timetable in Singapore during the first quarter of 2021. Due to the heavy impacts of COVID-19 and the inability to travel and meet investors, the funds did not arrive via Sanguine Luxembourg Fund, the transaction failed and the liability to Mr Williams remained outstanding.
Mr Williams was apparently acting as Mr Leach’s legal representative and insisted the funds be linked to Mr Leach, not Sanguine Holdings (SG) and that the funds are reflected as lines in the accounts of Sanguine Holdings (SG). I have to say I found the evidence reflected in paragraph 7 very confusing. I do not understand what the funds were used for, nor what the Singaporean entity did with the funds. None of those things are disclosed.
Paragraph 14 is where Mr Leach gives his evidence about what will happen if he is made bankrupt, and he asserts that, if that happens, he will not be able to fulfil his duties as a director of SBV. As I have already indicated, the language of the employment agreement does not sit well with that assertion by Mr Leach. Even if I was to accept that it was just looseness of language and that when Mr Leach was, in paragraph 14, referring to his director’s duties, he meant his obligations as a CEO, that does not deal with the other matters I raised about the real risk of that actually occurring, because it is unknown whether he is the sole shareholder and director of SBV.
As I have already identified, what is also unknown is the state of the law in the Netherlands with respect to those issues I have discussed. Accordingly, while Mr Leach is entitled to make that assertion, it is not one to which I give much weight.
Paragraph 14, as with some of the other documents before me, is somewhat confusing. It seems to indicate that another Sanguine company, Sanguine Securities Sàrl, which is said to be a subsidiary of SBV, is somehow involved in the bond raising which is the subject matter of the MOU. I will describe that company as Sanguine Sàrl. How it is that SBV is entitled to money in relation to the transactions is not clear. The relevant extract is as follows:
Fee income arises from its subsidiary, Sanguine Sàrl, a Luxembourg-registered company who has a listed program on the Luxembourg Stock Exchange for €2 billion.
Again, just how that hangs together, namely:
(a)the contractual relationship between the different entities; and
(b)why it is that SBV will generate its fees from the Sanguine Sàrl
is just not made clear at all and it is not explained.
Still in paragraph 14, Mr Leach deposes that:
The bond program is approved and launching 1 June 2023.
And that:
Annexed and marked C is a copy of an advice of the date of the launch.
And that:
There is a signed investment mandate for the €2 billion from a verified European corporate investor.
That is the memorandum of understanding. But Annexure C, as with other documents, raises more questions than answers. The information, such as it is, in Annexure C is not explained. Turning to page 13 of 38, it would appear in relation to one of the Sanguine entities that there is a security prefix of 6.75 per cent asset-backed notes.
The use of the expression “asset-backed notes” suggests that there are assets which support the debt and that they exceed the debt, at least to some extent, but – and I think this relates to Sanguine Sàrl – no assets of Sanguine Sàrl have been disclosed.
Furthermore, still on the same page, it would seem to indicate that anyone who purchases the bonds will get a return of 6.75 per cent which is fixed, and that the payment frequency is every year. Again, it is difficult to understand what this form actually means, but it would seem to be suggesting that Sanguine Sàrl would need to generate sufficient income to pay the investors, and there is no evidence to indicate whether or not that takes precedence over any payments to be made to SBV or whether that would, in fact, be capable of occurring.
On page 16 of 38, still in the same Annexure C, about two-thirds of the page down, there is reference to “a guaranteed covenant”. It is Sanguine asset-backed. What those assets are is not disclosed. Whether it is or is not a company within the control of Mr Leach is unknown.
Mr Manner makes the submission that these other Sanguine companies are irrelevant because they are separate legal entities and the question really is Mr Leach’s capacity to pay or not to pay. Whilst as a proposition of generality that is, of course, correct, the difficulty with that proposition is that it would seem that Mr Leach is the controlling mind of a group of companies incorporated all over the world using the name Sanguine. He has cherry-picked, in my view, some of those companies when it suits him to indicate that they are worthless or heavily indebted, but says nothing about others.
But it seems to go even further, because these undisclosed entities are all somehow involved in the transactions, being the bonds and the investments, that are subject of the MOU, which is the investment(s) which Mr Leach says will ultimately result in him being paid half a million dollars a year. So I do not accept that it is irrelevant to have regard to the absence of any evidence by Mr Leach about those other companies in the Sanguine group.
While we do not even know whether they are part of the Sanguine group, Mr Manner properly conceded it is open for me to infer that they are part of Mr Leach’s Sanguine group and, in light of the evidence that I have referred to and the constant reference by Mr Leach to the Sanguine group and the use of that name in these other companies, in the context of business transactions involving Mr Leach and his entities, I do make that inference.
The investment framework, according to paragraph 14 of Mr Leach’s second affidavit, has been verified by Sustainalytics, a division of Morningstar, and Mr Leach says that he annexes that opinion as Annexure D to his affidavit. This is not a verification of the framework; it is a discussion of it, based on information provided to the authors by Sanguine, and that is made very clear in the text of the document, for example, at page 2, at the bottom of the page of the opinion, and still on that page, the last paragraph before the heading “Scope of Work”.
I also note that there are more Sanguine companies that are referred to in footnote 1, namely, Global Assets and Sanguine Asian Pacific, in respect of which Mr Leach has given no evidence of their financial circumstances, his interest in them, and whether he does or does not earn any income from them.
Ms Sarac, in her affidavit – being eCourt document 12 – deals with various ASIC searches that have been done in relation to Mr Leach’s corporate interests. In paragraph 2, there are a number of companies listed. Other than that in subparagraph (f), they are all entities in respect of which Mr Leach is either the director or shareholder of, and Mr Leach has said nothing about those entities in his evidence in relation to their businesses, their income, whether he has earned any income from them, or otherwise.
There is also reference in paragraph 16 of Mr Leach’s second affidavit to the creation of a trust by him in September of 2022. I note that the evidence does not include the trust deed, no financials of the trust, and the identity of the beneficiaries is not disclosed.
I indicated earlier that my principal concern was in relation to the mandatory requirement in rule 869(1)(b). I also note, in particular, rule 869(1)(a). The factual matters I have traversed all go, in my view, to the question of Mr Leach’s means of satisfying the instalment order, if it were made.
The evidence does not satisfy me that Mr Leach will have the means to satisfy the order if it was made:
(a)there are too many questions raised by the documents that I have indicated;
(b)there are too many inconsistencies; and
(c)too much vagueness.
(d)there is an absence of any evidence to support the financial capacity of the investor;
(e)the fact that the payment of the subscription should have been made by now; and
(f)the remaining matters that I have identified
As I understand it, it is not in dispute that Mr Leach is not presently employed. Pursuant to rule 869(1)(a), that is a factor that also weighs against the exercise of the discretion. So I have taken into account rules 869(1)(a) and (b).
I turn now to rule 869(1)(c). I have been taken to a number of authorities and some submissions have been made about other cases in which there were similar periods of time for the payment of instalments. As always, each case turns on its own facts. And whilst those authorities are useful, they do not bind me in any way in terms of being satisfied about the question of whether or not the debt would be satisfied within a reasonable time.
I accept Mr Jackson’s submission that I am entitled to have regard to:
(a)the period of time from which the debt became due and payable;
(b)the fact that no payment at all has been made towards reducing the debt;
(c)the absence of any action by Mr Leach in relation to the judgment occurring only after the bankruptcy notice was filed;
(d)that no payment has been made; and
(e)the amount of time for the payment of the debt.
In all the circumstances, I am not satisfied that the payment would be made within a reasonable time. That is influenced by the matters I have identified.
Rule 869(1)(d) is a matter in favour of the granting of the order. While there is some vagueness, in the evidence about that, I accept that Mr Leach has other liabilities. Significantly, in this regard, there is less than $1.50 in his savings account, and approximately $10,400 in an existing line of credit, where his monthly expenses are in the order of $13,000.
On that basis, there seems to be a shortfall for the next month, whatever that monthly cycle happens to be, and there is no evidence indicating how Mr Leach and his family will support themselves between now, and the 1st of October, which is when the payments under the employment contract are supposed to start. The absence of any evidence explaining how that is going to occur is something I also take into account.
Noting the complainant members’ corporate structures and the absence of detail in relation to the various companies and entities and the trust, there is doubt as to whether or not other enforcement action could be taken to satisfy the debt. I accept the submission that I understand Mr Jackson to have made to the effect that, via the bankruptcy process, the trustee in bankruptcy would have the power to take steps to interrogate the various corporate entities, and other things that are controlled by Mr Leach, to explore the ability to pay those.
It is hard to see, on the evidence, how a garnishee order could be, for example, taken to effect. The home is owned by Mr Leach’s wife, so no action could be taken as against that asset. And the evidence indicates that Mr Leach has no other assets that could be sold readily to satisfy the debt in whole or in part. So I am not satisfied that the order would be consistent with the public interest in enforcing money orders efficiently and expeditiously.
If I was satisfied in relation to Mr Leach’s means of satisfying the order, if I made it, I would be satisfied that the amount and timing of the instalments would not impose unreasonable hardship.
I understand the parties to agree that whilst rule 869 sets out the mandatory factors that I must take into account – I can have regard to other matters. They are really captured by the discussion I had about the absence of information and the absence of detail.
I was taken to some cases, which I will deal with quickly. Again, whilst they are useful to give some guidance, they are not binding as to the result. The principles they set out I do not think are really contentious.
In Hellier Capital Pty Limited v Richard Albarran [2009] NSWSC 403, unlike the matter I am presently dealing with, it is apparent from the reasons that the evidence about income and financial situation in the Hellier decision were both comprehensive and unchallenged.
Whilst it is true that there is no evidence challenging what Mr Leach says, I think it can be understood from the matters I have raised that I do not accept that the evidence was comprehensive and, whilst not challenged by evidence, it was challenged by submissions, and the challenge that Mr Jackson took was by an analysis of the evidence adduced by Mr Leach to indicate the various things that I identified as having caused me trouble in relation to rule 869(1)(d).
Another distinguishing feature of the Hellier decision is a history of earning by the debtor in that case, which was the same earnings that were to be used to make the instalment payments. Also, in that case, there was an insolvency practitioner who was going to continue practising as an insolvency practitioner, so the comments made by the court in Hellier at [20] about the public interest in having trained people does not particularly assist Mr Leach.
I of course accept the general proposition that keeping commerce going is important and that it has the consequence of generating employment and other things. However, for the reasons I have identified, I am not satisfied about the means of earning the money.
I was also taken to Big Country Developments Pty Ltd v Peter Griffiths (No 5) NSWSC 865. I note that in that case, the debtor had paid a considerable portion of the judgment – almost half – and that there were delays by the judgment creditor in commencing enforcement proceedings. They are, in my view, important distinguishing features of that case that distinguish the result.
I also note what the Court of Appeal said in Bucknell v Robins [2008] QCA 214 at [19], and I point to that in support to my regard to matters that happened prior to the litigation as relevant factors to consider.
A judgment creditor is entitled to the fruits of the judgment. I accept, however, the submission made by Mr Manner that the instalment regime is another mechanism by which that can be satisfied, perhaps not the way a judgment creditor would like it to be satisfied.
I was also taken to C Tina Pty Ltd v Barham-Floreani [2019] VSC 819, and the statements by Reardon J about an application of this kind, at least in Victoria, usually being granted. I do accept the submission that the position in Victoria is different because the rules are different. There is nothing in the Rules that indicate that an order to pay by instalments will usually be granted, unless certain things are present. That is not the effect of that rule.
Accordingly, whilst I acknowledge that, as a general proposition, what Reardon J said in practice might be correct, in Queensland, the rule identifies what I must have regard to, and the general propositions of Reardon J are no more than that.
For those reasons, I refuse the application for an instalment order. I dismiss the application.
I order costs be paid by the defendant.
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