FEDERAL COURT OF AUSTRALIA
Yang v L & H Group (a limited partnership) [2015] FCA 932
Citation: Yang v L & H Group (a limited partnership) [2015] FCA 932 Parties: HAN KUN YANG v L & H GROUP (A LIMITED PARTNERSHIP) (ABN 19 730 781 473), ZHENFA TRADING COMPANY PTY LTD (ACN 141 334 483) and DAVID CHARLES QUIN AND CLYDE PETER WHITE (AS TRUSTEES OF THE BANKRUPT ESTATE OF HAN KUN YANG) File number: VID 87 of 2015 Judge: BEACH J Date of judgment: 26 August 2015 Catchwords: BANKRUPTCY AND INSOLVENCY – annulment of bankruptcy – s 153B of Bankruptcy Act 1966 (Cth) – whether bankrupt was solvent at time of sequestration order – whether sequestration order ought to have been made – discretion – annulment on conditions – application granted Legislation: Bankruptcy Act 1966 (Cth) ss 52(2), 153A, 153B, 188, Pt X Cases cited: Boles v Official Trustee in Bankruptcy (2001) 183 ALR 239
Bulic v Commonwealth Bank of Australia Ltd (2007) 5 ABC(NS) 122
Eykamp v Deputy Commissioner of Taxation [2010] FCA 797
Francis v Eggleston Mitchell Lawyers Pty Ltd (2014) 12 ABC(NS) 25
Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315
Hudson v Whalan [1999] FCA 189
Re Frank; Ex parte Piliszky (1987) 16 FCR 396
Re Raymond; Ex parte Raymond (1992) 36 FCR 424
Rigg v Baker (2006) 155 FCR 531
Sandell v Porter (1966) 115 CLR 666Date of hearing: 13 May 2015 Date of last submissions: 22 May 2015 Place: Melbourne (delivered in Sydney) Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 49 Counsel for the Applicant: Mr D McAloon Solicitors for the Applicant: Strongman & Crouch Counsel for the First Respondent: Mr D McDonald Solicitors for the First Respondent: Michael Sandor & Associates Counsel for the Second Respondent: Mr M Gronow Solicitors for the Second Respondent: Lynch Meyer Lawyers Counsel for the Third and Fourth Respondents: The Third Respondent appeared in person on behalf of himself and the Fourth Respondent
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 87 of 2015
BETWEEN: HAN KUN YANG
ApplicantAND: L & H GROUP (A LIMITED PARTNERSHIP)
(ABN 19 730 781 473)
First RespondentZHENFA TRADING COMPANY PTY LTD (ACN 141 334 483)
Second RespondentDAVID CHARLES QUIN AND CLYDE PETER WHITE
(AS TRUSTEES OF THE BANKRUPT ESTATE OF HAN KUN YANG)
Third and Fourth Respondents
JUDGE:
BEACH J
DATE OF ORDER:
26 AUGUST 2015
WHERE MADE:
MELBOURNE (DELIVERED IN SYDNEY)
THE COURT ORDERS THAT:
1.Upon the third and fourth respondents filing with the Court a notice in the form annexed by no later than 45 days from the date of this order by way of confirming that the following events have occurred:
(a)BRI Ferrier (SA) Pty Ltd has received payment of the amount of $23,393.56 in satisfaction of its claim against the estate of the applicant;
(b)CNW Pty Ltd has received payment of the amount of $18,117.06 in satisfaction of its claim against the estate of the applicant;
(c)the…
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- Case
- [2015] FCA 932
- Decision Date
CaseChat Overview and Summary
The court had to determine whether the sequestration order was properly issued, whether the applicant was solvent at the time of the order, and whether the order should be annulled. The applicant's claim was based on the assertion that he had the means to pay his debts, specifically through a proposed gift from his father. However, the court noted that the applicant's statements of affairs and the trustees' investigations indicated insolvency. Despite the applicant's argument, the court found that the sequestration order was appropriate because it satisfied the requirements of section 52(2)(a) of the Bankruptcy Act 1966 (Cth). Nevertheless, given the specific circumstances and the applicant's solvency at the time, the court decided to annul the bankruptcy on conditions.
The court granted the application for annulment but only on conditions, primarily the settlement of certain debts and payment of trustees' fees. The sequestration order was deemed improper due to the applicant's solvency at the relevant time, but the court rejected the argument that the order should not have been made under section 52(2)(a). The applicant's bankruptcy was annulled upon the satisfaction of specific financial conditions, including the payment of various debts and fees. The trustees were excused from certain obligations, and the applicant was ordered to pay the respondents' costs, subject to certain exceptions.
Orders
Orders of the court
1. Upon the third and fourth respondents filing with the Court a notice in the form annexed by no later than 45 days from the date of this order by way of confirming that the following events have occurred:
(a) BRI Ferrier (SA) Pty Ltd has received payment of the amount of $23,393.56 in satisfaction of its claim against the estate of the applicant;
(b) CNW Pty Ltd has received payment of the amount of $18,117.06 in satisfaction of its claim against the estate of the applicant;
(c) the Deputy Commissioner of Taxation has received payment of the amount of $180,989.72 in satisfaction of his claim against the estate of the applicant;
(d) an amount of $859,790.76 has been paid into the Suitor’s Fund of the District Court of South Australia in respect of Action No. DCCIV 1832 of 2014 to be held on trust in the Fund pending further order of that court in that proceeding or subject to further order of this Court; and
(e) $45,812.89 has been paid to the third and fourth respondents by way of meeting the reasonable remuneration and expenses incurred by the third and fourth respondents in their capacity as trustees of the applicant’s estate,
the bankruptcy of Han Kun Yang is annulled pursuant to s 153B of the Bankruptcy Act 1966 (Cth).
2. The third and fourth respondents are excused from any obligation otherwise arising under regulation 8.12C of the Bankruptcy Regulations 1996 (Cth) to give a remuneration claim notice.
3. The applicant pay the respondents’ costs of and incidental to this application, save for any costs otherwise embraced within order 1(e).
4. If the condition for annulment referred to in order 1 is not triggered, then the costs of the respondents referred to in order 3 shall be treated as part of the costs and expenses of the administration of the applicant’s estate.
5. There be liberty to apply.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
In summary, I have decided to grant the applicant’s application but only on terms, the form of which I will discuss later. On the facts now known, the sequestration order ought not to have been made; instead, the creditor’s petition should have been adjourned. But I reject the applicant’s assertion that the sequestration order should not have been made because on the facts now known, s 52(2)(a) of the Act would have been satisfied.THE SEQUESTRATION ORDER The relevant facts may be shortly stated. On 18 September 2014, the first respondent presented a creditor’s petition relying upon a judgment debt of $103,575.76. The relevant act of bankruptcy relied upon was non-compliance with a bankruptcy notice on or before 2 July 2014 that the petitioning creditor had served on the applicant. On 21 October 2014, the applicant executed an authority under s 188 of the Act authorising Mr Maris Rudaks of BRI Ferrier (Adelaide) to take control of his estate and to call a meeting of his creditors so as to make a proposal to his creditors for a personal insolvency agreement under Part X. On 25 November 2014 and 16 December 2014 meetings of the applicant’s creditors were held to consider the Part X proposal. The proposal was rejected. On 22 January 2015, Registrar Burns made a sequestration order against the applicant’s estate and appointed the Trustees as trustees of the estate. An application by the applicant to adjourn the creditor’s petition was refused. Subsequently, the applicant filed the present application to annul.SOLVENCY The applicant has asserted that he was solvent at the time of the making of the sequestration order. It is difficult to see how such a submission could be maintained given:(a)the sequence of events that I have just described concerning the Part X proposal;(b)the fact that the disclosures made in his various statements of affairs indicate a substantial excess of liabilities over assets at the time of the making of the sequestration order (see for example his statement of affairs dated 2 February 2015 disclosing assets of $26,400 and liabilities of $930,000 although the applicant now says that this provided an “incomplete overview”), indeed now;(c)the Trustees’ investigations and reports to date, which demonstrate that he was at the time of the making of the sequestration order and is now insolvent. Nevertheless, the applicant asserts that he was solvent at the time of the making of the sequestration order. To support that position, he relies upon an arrangement he had with his father by way of gift. He also relies upon this arrangement to say that he is now or can become solvent. His father has deposed to the following at [9] to [18] of his affidavit:9.In or around December 2014, I became aware of my son’s financial difficulties in paying his creditors.10.On or around 22 December 2014, during a telephone conversation with my son, I indicated to him that, upon his request, and so long as it was within my financial capacity, I would be prepared to gift to him any sum of money he required to pay his debts.11.I also indicated to my son that, before I made any gift of money to him, he would need to visit me in Hong Kong. This was so that I could better understand his financial difficulties, and the logistics of effecting a gift of money to him.12.On or around 6 January 2015, I met my son in Hong Kong to discuss his financial difficulties and the logistics of my proposed gift. We agreed at that meeting that, upon my son’s request and subject to my financial capacity:(a)I would gift to him any amount of money he required to pay his debts; and(b)this gift would be effected through an immediate bank transfer from my bank account with Hang Seng Bank Limited to my son’s Australian bank account.13.In accordance with this agreement, as at 22 January 2015, had my son requested, I would have gifted him the amount of money he required to pay his debts then due and payable.14.Annexed and marked “WSY-1” is a true copy of a bank statement issued by Hang Seng Bank Limited on 27 March 2015 setting out the balance of the deposits held in my name with the bank as at the close of business on 22 January 2015.15.As noted on page 3 of this bank statement, the total value of the deposits noted in the statement is equivalent to HKD 23,533,384.81 applying the exchange rate offered by Hang Seng Bank Limited on 22 January 2015.16.As at 22 January 2015, using the Reserve Bank of Australia HKD/AUD exchange rate for that day as noted on the spreadsheet “Exchange Rates-Daily-2014 to Current” downloadable from the Reserve Bank of Australia website (namely, HKD 6.2574 = AUD 1), HKD 23,533,384.81 equated to AUD 3,760,888.68. Annexed and marked “WSY-2” is a copy of an extract of the spreadsheet downloaded from the Reserve Bank of Australia website.17.The deposits held in my name with Hang Seng Bank Limited on 22 January 2015 were readily available to be transferred to my son to allow him to pay his debts then due and payable.18.If the Court does order my son’s bankruptcy to be annulled, and should my son require it to remain solvent, I will gift him sufficient money for him to pay his creditors to the extent that the claims of his creditors relate to debts which are due and payable.