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Ricketts v Willoughby [2015] FCCA 2999 (9 November 2015)

Last Updated: 12 November 2015

FEDERAL CIRCUIT COURT OF AUSTRALIA

RICKETTS v WILLOUGHBY


Catchwords:
BANKRUPTCY – Creditor’s Petition – whether debtor able to pay his debts – whether other sufficient cause within s.52(2) of the Bankruptcy Act 1996 (Cth) – sequestration order.


Legislation:
Bankruptcy Act 1966, ss.44, 52, 153B, 306
Federal Circuit Court (Bankruptcy) Rules 2006 (Cth), rr.4.04, 4.06


Dowling v Colonial Mutual Life Assurance Society Ltd [1978] FCA 35; (1915) 20 CLR 509; [1915] 21 ALR 425
Hacker v Weston (No.2) [2015] FCA 521
Kekeff v Papatriantafillou [2011] FMCA 114
McIntosh v Shashoua (1931) 46 CLR 494
Napiat Pty Ltd v Salfinger; In the Matter of Salfinger (No.7) (2011) 202 FCR 264; [2011] FCA 1322
Re Sarina; Ex Parte Wollondilly Shire Council (1980) 43 FLR 163; [1980] FCA 66
Sarina v Council of the Shire of Wollondilly (1980) 48 FLR 372; [1980] FCA 138
William v Spautz (1992) 174 CLR 509; [1992] HCA 34


Applicant:
JEANETTE GWENITH JOAN RICKETTS

Respondent:
THOMAS ALLAN JAMES WILLOUGHBY

File Number:
SYG 3170 of 2014

Judgment of:
Judge Barnes

Hearing date:
24 June 2015

Delivered at:
Sydney

Delivered on:
9 November 2015

REPRESENTATION

Counsel for the Applicant:
Mr P Jammy

Solicitors for the Applicant:
L. Rundle & Co Solicitors

Counsel for the Respondent:
Mr J Johnson

Solicitors for the Respondent:
Beazley Singleton Lawyers


ORDERS

(1) A sequestration order be made against the estate of Thomas Allan James Willoughby.
(2) The Applicant Creditor’s costs, including reserved costs, be taxed and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966 (Cth).
(3) Pursuant to s.52(3) of the Bankruptcy Act 1966 (Cth) all proceedings under the sequestration order be stayed for a period of 21 days.
(4) The Court notes that the date of the act of bankruptcy is 4 September 2014.
FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 3170 of 2014

JEANETTE GWENITH JOAN RICKETTS

Applicant

And

THOMAS ALLAN JAMES WILLOUGHBY

Respondent


REASONS FOR JUDGMENT

  1. On 14 November 2014 the Applicant, Jeanette Gwenith Joan Ricketts, presented and filed a creditor’s petition against the Respondent debtor Thomas Allan James Willoughby. The petition relies on a debt in the amount of $54,219.52 consisting of a judgment debt of $50,000 (under a judgment of the Supreme Court of New South Wales of 15 November 2013) together with interest thereon and an act of bankruptcy said to consist of the failure by the debtor to comply on or before 4 September 2014 with the requirements of a bankruptcy notice served on him on 13 August 2014.
  2. The petition is supported by an affidavit of service of the bankruptcy notice (attesting to personal service on the debtor on 13 August 2014); an affidavit of service of the creditor’s petition; an affidavit verifying the creditor’s petition and affidavits of search sworn on 12 December 2014 and 24 June 2015. The Applicant also relied on affidavits of two solicitors, Benjamin John Dornan and Barbara Campbell, each sworn on 2 February 2015 and of Margaret Pringle (a barrister) sworn on 5 February 2015. A consent by Max Christopher Donnelly to act as Trustee was also filed.
  3. The Respondent relied on a notice stating grounds of opposition filed on 9 December 2014; a notice of appearance filed on 9 December 2014 and an affidavit of his solicitor, Philip James Beazley, sworn on 12 December 2014.
  4. In the notice stating grounds of opposition the Respondent opposed the petition on three grounds:
  5. As explained in submissions, these grounds are raised under s.52(2) of the Bankruptcy Act 1966 (Cth) (the Act).
  6. Under s.52(1) of the Act the court is to be satisfied of the matters listed in s.52(1)(a)-(c). The Respondent did not dispute that the Applicant had proved the matters stated in the petition and service of the petition. While he raised an issue in relation to whether payment of the debt owed to the Applicant was “due”, this was in the context of a contention that for other sufficient cause a sequestration order ought not be made.
  7. While there were some issues about the adequacy of the affidavit evidence relied on by the Applicant, counsel for the Respondent conceded that the matters listed in s.52(1) had been established on the evidence before the court. Thus, as counsel for the Respondent pointed out, the affidavit verifying the creditor’s petition attached to the creditor’s petition and sworn by Benjamin John Dornan, solicitor for the Applicant, did not comply with the requirements of r.4.04 of the Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) insofar as there was no evidence of a search of the records of this Court, but only of a search of the records of the Federal Court. However, counsel for the debtor volunteered the concession that to the extent that this raised an issue it could be cured under s.306 of the Act given that the debtor was not aware of and had not commenced any proceedings in this court in relation to the bankruptcy notice (see r.4.04(1)(a)). The court was not invited to deal with the failure of this affidavit to satisfy the requirements of the Rules in an adverse fashion in these circumstances. Similarly, to the extent that the fact that this affidavit was sworn by a solicitor was an issue, counsel for the Respondent conceded that, having regard to the oral evidence of Mrs Ricketts, the court could be satisfied as to the other matters required to verify the creditor’s petition. Critically, in the absence of an affidavit of final debt, Mrs Ricketts gave oral evidence that the debt relied on was still owing and counsel for the Respondent accepted that this sufficed to establish that the debt was still owing.
  8. Counsel for the debtor conceded that, prima facie, having regard to the requirements of s.52(1) of the Act the creditor would be entitled to a sequestration order (subject to the matters raised under s.52(2) of the Act in the notice stating grounds of opposition).
  9. The court is to require proof of and to be satisfied of the matters specified in s.52(1) of the Act before it is empowered to make a sequestration order. I have had regard to the concessions made by counsel for the Respondent in relation to the evidence relied on by the Applicant in this respect, the acknowledgement that the Respondent had not commenced any proceedings in this court in relation to the bankruptcy notice and Mrs Ricketts’ oral evidence as to the matters in the creditor’s petition and the fact that the debt relied on was still owing to her.
  10. Insofar as any of these issues amount to defects or irregularities in the creditor’s petition, as counsel for the Respondent conceded, these are formal defects which cause no substantial injustice and do not invalidate the proceedings (see s.306 of the Act).
  11. The absence of affidavits of final debt and search in the records of this court means that the formal requirements of Part 4 of the Bankruptcy Rules were not met. However in the particular and unusual circumstances of this case, having regard to the oral evidence from the petitioning creditor and the concessions made by counsel for the debtor, strict compliance with rr.4.04(1) and 4.06(4) of the Bankruptcy Rules should be dispensed with (see Napiat Pty Ltd v Salfinger; In the Matter of Salfinger (No.7) (2011) 202 FCR 264; [2011] FCA 1322 at [93]- [99] per Foster J).
  12. I am satisfied with proof of the matters specified in s.52(1) of the Act.
  13. The Respondent submitted, however, that the court should be satisfied that he was able to pay his debts within s.52(2)(a) or that for other sufficient cause a sequestration order ought not to be made within s.52(2)(b) of the Bankruptcy Act such as to warrant dismissing the petition.
  14. The notice of opposition stated that the Respondent was “solvent”. It is apparent that this was intended to be a submission that the court should be satisfied by the debtor that he was “able to pay” his debts within s.52(2)(a) of the Act.
  15. It is not in dispute that a debtor who is in a position to pay all the debts he or she owes within a reasonable time ought not to be subject to a sequestration order (see Re Sarina; Ex Parte Wollondilly Shire Council (1980) 43 FLR 163; [1980] FCA 66 and Sarina v Council of the Shire of Wollondilly [1980] FCA 138; (1980) 48 FLR 372 at 376; [1980] FCA 138). However the difficulty that faces the debtor in this regard is that there is simply insufficient evidence before the court to enable me to be so satisfied. The Respondent has not put before the court evidence of his complete financial position such as to enable me to draw any conclusion in relation to his ability to pay his debts. There is no affidavit evidence from the Mr Willoughby in relation to his solvency. The only evidence relied upon in this respect was the fact that $50,000 (the amount of the underlying judgment debt, not including interest which the parties agreed was now in the order of some $8,000) had been paid into court and limited evidence of the Respondent’s interest in real property. The money paid into court was said to have been from funds provided by a third party. It is not for the full amount of the debt presently owing. It is not proof of the debtor’s ability to pay his (unidentified) debts. A copy of a title search in relation to real property in Victoria (which was subject to a mortgage for an undisclosed amount) of which the Respondent and his wife are joint proprietors was tendered. There is no evidence as to the availability of this property for realisation, its value or the extent of indebtedness under the mortgage. More critically, there is no evidence as to whether Mr Willoughby has any other assets or liabilities. Insofar as counsel for Mr Willoughby sought to rely on the fact that no supporting creditor had appeared in these proceedings, the absence of a supporting creditor is not of itself such as to satisfy me that it should be inferred that the debtor’s indebtedness was limited to the debt that was the basis for the creditor’s petition. The evidence is not such as to establish that Mr Willoughby has money and/or assets that can be realised in a relatively short time to enable him to pay his debts within s.52(2)(a) of the Act.
  16. The onus of proving his ability to pay his debts as they fall due lies on the debtor. Mr Willoughby had the opportunity to file affidavit evidence in that respect. He did not do so. I am not satisfied that the debtor is able to pay his debts within s.52(2)(a) of the Act.
  17. Counsel for the Respondent indicated that Grounds 2 and 3 in the notice of opposition to the petition should be considered together. However for the sake of completeness I note that the fact that the amount of the judgment debt of $50,000 was paid into court (Ground 3 in the notice of opposition) is not of itself such as to satisfy me that for other sufficient cause a sequestration order ought not to be made. Not only is the payment into court not a tender of the amount due (which, in any event, the creditor would not be obliged to accept: McIntosh v Shashoua (1931) 46 CLR 494), but also it is not for the full amount owing to the creditor and, as indicated, is not such as to establish or lead to an inference that the debtor is able to pay all the debts he owes within a reasonable time.
  18. The Respondent did not dispute that the amount relied on as the basis for the bankruptcy notice and the creditor’s petition was a debt due to the petitioning creditor that met the requirements of s.44 of the Bankruptcy Act (notwithstanding the language of ground 2 of the notice of opposition). Rather, as explained in submissions, it was contended that the alleged failure of the Applicant to provide the Respondent with a Deed of Release in the form that the Respondent contended had been agreed between the legal representatives for the parties was such that in all the circumstances (including the fact of the debtor’s payment of $50,000 into court) the court should be satisfied that for other sufficient cause a sequestration order ought not be made.
  19. In order to consider this argument is it necessary to outline the circumstances which gave rise to the debt, as well as the evidence of the legal representatives for the parties in relation to what agreement, if any, there was between the petitioning creditor and the debtor.
  20. The debt that formed the basis for the bankruptcy notice and the creditor’s petition was based on a judgment debt in the sum of $50,000 together with post-judgment interest. The judgment was made and entered in the Supreme Court of New South Wales in proceedings number 2012/00161340 on 15 November 2013 (the Supreme Court proceedings). The orders in question were made by consent by Lindsay J in proceedings between Mrs Ricketts as plaintiff and Peter John Willoughby, Thomas Allan James Willoughby (the debtor) and Shirley Anne Willoughby (who, I am told, is the wife of the debtor) as defendants.
  21. The Supreme Court proceedings were commenced in 2012 by Mrs Ricketts in her personal capacity (and subsequently maintained in her capacity as administratrix of the estate of her late mother Olive Mary Willoughby who died on 8 July 2011), against her brothers, Peter and Thomas Willoughby.
  22. Relevantly, by notice of motion filed on 4 October 2013, Mrs Ricketts sought to join Shirley Willoughby as the third defendant and also to join as the fourth and fifth defendants Thomas Rodney John Willoughby and Peter David Willoughby, the sons of the debtor and Shirley Willoughby.
  23. In a proposed statement of claim (a copy of which was sent to Mr Beazley, attached to a letter dated 10 October 2013) issue was taken by Mrs Ricketts with what were said to be transactions entered into by the first, second and third defendants as attorneys for the late Mrs Willoughby prior to her death. Mrs Ricketts alleged breach of fiduciary duty and sought orders setting aside certain loan contracts, indemnification of the deceased’s estate and an account to her as the administratrix of the estate for funds said to have been advanced or applied for the benefit of the proposed fourth or fifth defendants. She made such claims in circumstances where it was asserted that the deceased had by her last will and testament given the whole of her net estate to Mrs Ricketts and her two brothers (the first and second defendants) as tenants in common in equal shares.
  24. On 11 November 2013 Shirley Willoughby was joined as a third defendant in the Supreme Court proceedings. The application to join two further defendants was adjourned until 15 November 2013. However that application was not determined. The proceedings were settled by consent on 15 November 2013.
  25. What occurred on that day is disputed. The Respondent contended that an agreement was reached between Mr Beazley, as solicitor for the defendants, and Ms Pringle, as counsel for the plaintiff, that the plaintiff would provide a deed of release on an agreed basis and that payment of the judgment debt was to be conditional on provision of such deed. However, as discussed further below, Mr Beazley has given varying explanations as to the terms he claimed were agreed and as to the persons said to have been agreed to be parties to the deed of release.
  26. The Applicant acknowledged that a deed of release was contemplated, but disputed that it was agreed that payment of the judgment debt was conditional on provision of a deed of release on a basis that had been agreed (while also pointing to the fact that the debtor’s solicitor had in fact been provided with a deed of release signed by Mrs Ricketts which released the debtor from any claims by Mrs Ricketts in her own right or as administratrix of her mother’s will).
  27. A transcript of the proceedings of 15 November 2013 is in evidence. When the matter first came before Lindsay J there was no agreement for resolution (albeit that this had been urged upon the parties on an earlier occasion). The matter was stood over in the morning list and ultimately adjourned until 3pm. Mr Beazley and Ms Pringle had settlement discussions (initiated by Ms Pringle who indicated that orders and a deed of release would be needed and gave Mr Beazley a draft deed and draft consent orders), probably while the matter was stood down during the morning listing. Ms Pringle’s recollection was that during the morning Mr Beazley was unable to obtain instructions from each of his clients to consent to the offer. After a further adjournment at 3pm in the absence of Mr Beazley when Mr Beazley appeared the court was informed that an agreement had been reached that in addition to $40,000 that had been already been paid to Mrs Ricketts, a further $50,000 would be handed over and each party would pay his or her own costs.
  28. There is conflicting evidence from Mr Beazley and Ms Pringle as to what occurred and what was agreed between them on 15 November 2013. Mr Beazley’s affidavit evidence was that the draft deed provided to him “only dealt with the respondent releasing the estate from monies owed to him and his brother under the will which the Applicant wanted to receive personally” and that he told Ms Pringle the release needed to be “a mutual release of all parties from all claims” before he could consent to the orders and that Ms Pringle offered to get the deed redrafted and to send it to him.
  29. Ms Pringle’s evidence is to the effect that the draft deed did release the debtor and his brother from any liability to Mrs Ricketts and while she had indicated to Mr Beazley that he should let her know if he thought the draft deed needed amendment and she believed he had foreshadowed a possible amendment, she had not agreed to redraft and send an amended deed to Mr Beazley and had not subsequently been informed of what amendment was sought.
  30. On 15 November 2015, by consent and by way of final determination of the proceedings, Lindsay J ordered judgment for the plaintiff Mrs Ricketts in her personal capacity, in the sum of $90,000 against the first and second defendants and that “interest not be payable on the judgment debt of $90,000 if it is paid within 28 days of today’s date but, if not paid, it should bear interest from today’s date”. A further amended summons filed on 29 July 2013 was otherwise dismissed with no order made as to costs. The court noted that “it is agreed between the first, second and third defendants (as between themselves) that the second defendant [the debtor] will be primarily liable for payment of the judgment debt due under these orders to the plaintiff”.
  31. The Supreme Court also noted an agreement between all parties to the proceedings that the sum of $40,000 held by Mrs Ricketts in her capacity as personal legal representative of the will could be applied by way of appropriation to herself in her personal capacity in reduction of the judgment debt of $90,000. An order to that effect was made in effect leaving the balance due as a debt of $50,000 that formed the basis for the petition.
  32. It is apparent from the transcript of proceedings of that day that Lindsay J was handed up a copy of the proposed draft deed of release, but observed that if the matter was settled and there was nothing required of him he did not need a copy of the deed and pointed out that the copy handed up was a draft and had not been executed. His Honour also obtained confirmation (to be “doubly sure”) that this was the end of the litigation against all of the defendants and also against the prospective defendants.
  33. Notably, in the course of making the orders Lindsay J asked if anything further was required. Ms Pringle indicated that in terms of the timing of the payment the plaintiff was prepared to rely on the rules of court and the requirement for payment within 28 days. Mr Beazley (as solicitor for the three defendants) clarified that what was sought was that as between the defendants the second defendant (the debtor) would pay the outstanding sum. He also stated: “I’m happy for the money to be paid within 28 days. That will allow us to fix the Deed of Release”. He did not explain to the Supreme Court what he saw as necessary to “fix” the deed of release.
  34. As indicated, in oral evidence in chief in these proceedings Mrs Ricketts confirmed that the balance of the judgment debt ($50,000 after allowance for the $40,000 already paid) had not been paid to her. Nor had any interest thereon been paid. She agreed with Counsel’s suggestion that her primary object in starting these proceedings was to receive payment of the money that was owing to her. She also stated that she had not required a release as part of the resolution of the Supreme Court proceedings, but understood that the release she signed was to release her brothers from any further action on her part.
  35. A copy of the document handed to Lindsay J headed “Deed of Release and Indemnity” was signed by Mrs Ricketts and sent to Mr Beazley on 4 December 2013 by Mrs Ricketts’ solicitors. That deed was expressed to be between the first and second defendants (that is the debtor’s brother and the debtor) who were described as the “Releasors”, and Mrs Ricketts, the plaintiff in the Supreme Court proceedings, (the “Releasee”). It recorded that the parties had settled Mrs Ricketts’ claims against the first and second defendants on terms favourable to her without proceeding to a hearing on the basis that, as stated in cl.1 of the deed, in addition to the orders to be filed by consent, Mrs Ricketts had accepted the offer of the first and second defendants to relinquish their entitlements under their deceased mother’s will to receive shares in her estate and to release Mrs Ricketts from any further obligation to administer the will, with the intention that Mrs Ricketts should receive 100% of her mother’s net distributable estate and that an amount equivalent to 100% of the estate may be offset by the brothers against the amount of $90,000 ordered by consent to be paid by them to Mrs Ricketts.
  36. Clause 3 of the deed provided that:
  37. Clause 4 provided that:
  38. Relevantly, given Mr Beazley’s affidavit evidence that the draft deed only dealt with the debtor releasing the estate from monies owed to him and his brother under their mother’s will, cl.6 provided that:
  39. It is notable that this clause refers both to claims of Mrs Ricketts as administratrix and in her own right.
  40. In support of the contention that the parties had reached agreement on the necessary terms of a deed of release, Mr Beazley gave affidavit evidence that between 11 November and 15 November 2013 there were settlement negotiations between himself and Ms Campbell (the solicitor for Mrs Ricketts) in which he indicated that a “mutual release” was required between the parties. By letter of 14 November 2013 (after Shirley Willoughby had been joined to the proceedings) he advised the solicitor for Mrs Ricketts that the debtor and Shirley Willoughby were prepared to settle the Supreme Court proceedings on the basis of paying $7,500 to Mrs Ricketts provided the proceedings were dismissed as against them and their sons who were described as “defendants”, that each party pay his or her own costs and that there be “mutual releases between these parties”. However a similar letter written on behalf of the first defendant did not seek a release.
  41. According to Mr Beazley, on 15 November 2013 Ms Pringle provided him with a copy of a draft deed of release (in the terms of the deed later signed by Mrs Ricketts). As indicated, his view was that such deed dealt only with the debtor releasing the estate from monies owed to him and his brother under the will which Mrs Ricketts wanted to receive personally. He claimed he said to Ms Pringle words to the effect: “The release needs to be a mutual release of all parties from all claims before I can consent to the orders.” His evidence is that Ms Pringle said to him words to the effect: “I will get the deed redrafted and send it over to you. I have one on my computer”. Mr Beazley claimed that he consented to the orders of Lindsay J on this basis, but that Mrs Ricketts had not provided “the agreed mutual release” and that the document signed by her was “not what was agreed.”
  42. However Mr Beazley acknowledged in cross-examination that Ms Pringle had asked him to let her know if he required any amendments to the draft and that in response he had indicated that he would need to take instructions from the defendants. Mr Beazley also acknowledged that the orders of Lindsay J were not conditional on the execution of a deed of release, although he suggested that there was such an agreement between himself and Ms Pringle.
  43. Mr Beazley also acknowledged that he received the copy of the deed of release executed by Mrs Ricketts in December 2013 under cover of a letter of 4 December 2013 which noted that payment was due by 13 December 2013 and that Campbell & Co, solicitors for Mrs Ricketts, were authorised to receive payment. He did not respond to that letter and at no time did he raise any issue with Ms Campbell (the solicitor for Mrs Ricketts) as to the content of the deed.
  44. In this respect the Applicant relied on an affidavit sworn by Ms Campbell, the solicitor with carriage and control of the Supreme Court proceedings on behalf of Mrs Ricketts. Ms Campbell was not required for cross-examination. Her unchallenged affidavit evidence is that after sending Mr Beazley a copy of the deed of release signed by Mrs Ricketts on 4 December 2013 she did not receive a reply. On 16 December 2013 she sent a further email to Mr Beazley reminding him that the money was due and owing and that interest was payable. She did not receive a reply. She instructed a paralegal to telephone Mr Beazley and later herself telephoned his office on 5 occasions between 18 and 20 December 2013. She left messages which Mr Beazley did not return. I accept her evidence.
  45. On 20 December 2013 Ms Campbell caused a further letter to be emailed to Mr Beazley, noting that, as per the orders of Lindsay J, the sum of $50,000 was due, that the 28 day period for compliance had expired and that interest was payable and demanding payment of the judgment debt plus interest. She did not receive a reply at any time.
  46. In January 2014, on instructions from Mrs Ricketts, Ms Campbell instructed L. Rundle & Co, Solicitors, to advise on the recovery of the judgment debt.
  47. Mr Beazley claimed that, despite Ms Campbell’s evidence as to attempts to contact him, he did not recall receiving any messages to call Ms Campbell between 18 and 20 December 2013 or having any conversation with her at that time. Nor did he recall receiving a letter from Ms Campbell dated 20 December 2013 seeking payment of the amount of the judgment and interest.
  48. Mr Beazley claimed that he had a discussion with the debtor about the deed of release and the fact that (in his view) Mrs Ricketts and her lawyers had not complied with the agreement. He conceded that the first correspondence from him about this issue to Mrs Ricketts’ legal representatives appeared to be a letter of 29 August 2014 (which I note was after the bankruptcy notice was served). That letter relevantly stated:
  49. In cross-examination Mr Beazley agreed that he became aware of this suggested defect at the time the deed was sent to him in December 2013. He sought to explain the fact he had taken no steps to address such a perceived defect until 29 August 2014 on the basis that the Supreme Court proceedings had a long history, that he had grown very frustrated with the solicitor for Mrs Ricketts and the way she was conducting the proceedings, that he was very angry, that he had reached a settlement with counsel and that to get a deed in the form that he did made him “very very angry” and that he allowed this to affect his judgment. He was of the view that because the agreement to provide a release to all the parties had not been honoured the $50,000 was not presently due and payable. His view was that it had been agreed between himself and Ms Pringle that within 28 days he would be provided with a “proper” deed of release. He claimed that his correspondence of 14 November 2013 made it clear that he required a release of all parties.
  50. Initially Mr Beazley claimed that Lindsay J had been informed in the course of the proceedings on 15 November 2013 that the defendants’ consent to settlement was conditional on a deed releasing all parties. Ultimately he conceded, consistent with the transcript, that this had not occurred. He then indicated that while this had not been said to Lindsay J, it was his understanding of what he and Ms Pringle had agreed. He claimed that this was what he meant when he told Lindsay J that 28 days would allow them to “fix” the deed of release.
  51. Mr Beazley’s assertion of 29 August 2014 that the agreement to pay the amount of $50,000 was conditional upon a release being given to his clients in relation to the subject matter of Mrs Ricketts’ claims, was disputed by L. Rundle & Co in a response of 1 September 2014. That letter also referred to the provision of the signed deed of release and to Mr Beazley’s failure to respond to correspondence or calls from Campbell & Co and L. Rundle & Co.
  52. In a response of 1 September 2014 Mr Beazley reiterated that “the orders were subject to a release of our clients from claims made by your client”. He stated that there had been an agreement that the orders were subject to a release of “all of the defendants”. Mr Beazley initially maintained that the deed of release signed by Mrs Ricketts did not release the first and second defendants from claims against them. When cl.6 of the deed was put to him in cross-examination, he suggested that the problem was that despite cl. 6 the release did not extend to any claim in respect of claimed breaches of powers of attorney by the defendants, as well as the fact that the draft deed of release did not include Shirley Willoughby as a party.
  53. Mr Beazley was taken to correspondence of 23 February 2015 from L. Rundle & Co referring to the ground of opposition in these proceedings which made the point that at no time had he proposed amendments to the deed or elucidated precisely what changes were required by his client. That letter asked Mr Beazley to set out what he said was inadequate about the deed and the proposed amendments sought by his client (the debtor).
  54. Somewhat confusingly, in response Mr Beazley had stated in a letter dated 24 February 2015:
  55. When asked in cross-examination about his claim in this letter that there were five defendants (given that the proposed fourth and fifth defendants had not in fact been joined to the Supreme Court proceedings) Mr Beazley suggested that this was a matter of “semantics” as there had been five people named in the (proposed) statement of claim and there was a motion on foot to join all five. He claimed that the agreement he had reached with Ms Pringle was that there would be a release of all five Willoughbys, all of whom he regarded as “parties” to the Supreme Court proceedings.
  56. The variation in Mr Beazley’s claims about contents of the deed of release does not support the contention that an agreement had been reached on 15 November 2013 as to the parties or scope of the deed of release.
  57. Mr Beazley acknowledged that in correspondence with Mrs Ricketts’ solicitors he had not spelt out his claim that the compass of the claims captured by the release was too narrow. He suggested, however that his claim that the deed did not provide a full mutual release made his concerns about the scope of the deed clear.
  58. Ms Pringle was counsel for Mrs Ricketts in the Supreme Court proceedings, including on 15 November 2013. Her evidence is that during the course of the morning she communicated a settlement offer to Mr Beazley, who was acting on instructions from the first, second and third defendants, and that when Mr Beazley asked whether they would need orders or a deed she indicated that both would be necessary. She handed draft consent orders and a document entitled deed of release and indemnity watermarked “draft” to Mr Beazley. She asked Mr Beazely if he thought it needed any amendment and indicated that she had it on her computer.
  59. In her evidence, Ms Pringle suggested that the draft deed not only protected Mrs Ricketts in her capacity as administratrix from any claim by either of the first or second defendants as beneficiaries in their mother’s estate, but also that cl.6 of the draft deed expressed the settlement to be in full satisfaction of any claim Mrs Ricketts had or may have at any time against the first or second defendents, either in her personal capacity or in her capacity as administratrix of the deceased’s estate.
  60. Nonetheless, Ms Pringle conceded, and I accept, that she believed that Mr Beazley had foreshadowed a possible amendment to the draft deed during settlement discussions on 15 November 2013. However her understanding, based on the events of that day, was that this exchange occurred before Mr Beazley obtained instructions from each of his clients.
  61. Ms Pringle denied that she said words to the effect that she would get the deed redrafted and send it over to Mr Beazley and stated that it was not her practice to redraft documents on the basis of ad hoc remarks by an opposing legal representative or to draft possible amendments contemplated by another party at her client’s expense in the absence of instructions.
  62. Mr Beazley acknowledged in cross-examination that Ms Pringle had asked him to let her know if he required any amendments and that he had indicated that he would need to take instructions from his clients. I accept Ms Pringle’s evidence that Mr Beazley did not make any oral or written requests to her to amend the draft deed or to provide him with an electronic copy of the draft deed at any time after the making of the final orders on 15 November 2013.
  63. Ms Pringle also conceded that the draft of the deed of release she had prepared dealt only with the first and second defendants and that as Shirley Willoughby had also been joined as a defendant in the Supreme Court proceedings it may have been appropriate to include her as a party to the deed, albeit, as she pointed out, the judgment of 15 November 2013 was only against the first and second defendants so that Shirley Willoughby had no obligation under the orders. Ms Pringle also suggested that Shirley Willoughy had no claim against Mrs Ricketts as administratrix, as she was not a beneficiary named in the will.
  64. While Ms Pringle acknowledged that it may have been appropriate for Shirley Willoughby to be a party to any deed of release because she and her husband (the debtor) had been attorneys for the deceased, had managed her finances prior to her death and were persons into whose hands the estate would have traced assets, her evidence was that Mr Beazley had not raised with her any issue that Shirley Willoughby would want a release of any claim in relation to any breach of the power of attorney she had held. Ms Pringle could not recall Mr Beazley having said that the release had to be “a mutual release of all parties from all claims” before he could consent to the orders, although she agreed that it was contemplated that all parties to the Supreme Court proceedings would release each other. I accept that she did not tell Mr Beazley that she would redraft the deed and send it to him, consistent with her evidence that she would not have considered this appropriate unless she knew precisely what was being sought and had received further instructions.
  65. Mr Dornan, the solicitor from L. Rundle & Co with day-to-day carriage of the present proceedings on behalf of Mrs Ricketts, was asked about the draft deed of release and his understanding of the law. His instructions in relation to the Supreme Court proceedings were limited to attending court on three occasion (including 15 November 2013). His understanding was that the final orders made by Lindsay J had not required any deed to be entered into and nor was there any notation to that effect. He had not heard what was said between Ms Pringle and Mr Beazley on 15 November 2013. He confirmed that, as advised to Mr Beazley in the letter of 1 September 2014 from L. Rundle & Co, it was his understanding that the payment of monies pursuant to the orders of Lindsay J was not conditional on a release being given by Mrs Ricketts and that insofar as there was any issue as to whether or not the first and second defendants were relinquishing any interest in the estate as part of the settlement, that issue had been dealt with by the orders made by Lindsay J on 15 November 2013.
  66. In the face of this conflicting evidence, counsel for the debtor nonetheless submitted that the evidence was that both “sides” in the Supreme Court proceedings contemplated a deed of release being entered into and that, at the very least, it would have all three defendants as parties, whereas the deed that was subsequently signed by Mrs Ricketts and sent to Mr Beazley did not include Shirley Willoughby.
  67. It was pointed out that Ms Pringle had confirmed in cross-examination that she was aware that Shirley Willoughby was a party to the Supreme Court proceedings as at 15 November 2013 and had acknowledged that it was desirable that Shirley be a party to the deed of release.
  68. Counsel for the Respondent submitted that it had been entirely within the control of the Applicant to include Shirley Willoughby as a party to the deed, that Ms Pringle had acknowledged that this was appropriate and that a genuine person who knew that there was a “problem” with the deed of release would have taken steps to sort out the deed where it was part of the agreement for settlement.
  69. It was submitted that while Mr Beazley’s failure to respond to telephone calls or correspondence may be a matter of concern, it did not necessarily attach to the Respondent. It was said to be clear that at all times Mr Beazley’s understanding was that a “proper” deed, as discussed between himself and Ms Pringle on 15 November 2013, would be provided by the Applicant and entered into, preferably within the 28 days before which interest would accrue on the unpaid amount of the judgment debt.
  70. In support of Mr Beazley’s claim that it had been agreed that the deed would cover the five Willoughbys, including the proposed (but not joined) fourth and fifth defendants, it was submitted that cl.6 in the draft deed was insufficient in that it did not relate to allegations in the proposed Statement of Claim which sought to join fourth and fifth defendants. There was said to have been a clear telegraphed intention by Mrs Ricketts to bring claims against the proposed fourth and fifth defendants and hence a clear need for those prospective defendants to be released as part of the settlement.
  71. The Respondent submitted that there had been an express indication to the Supreme Court that there was a period of 28 days to enable the deed of release to be “fixed”, that this had not eventuated and that at the time of the issue of the bankruptcy notice there was no debt presently due and owing by Mr Willoughby to Mrs Ricketts. These circumstances were said to amount to sufficient cause not to make the sequestration order.
  72. In addition, the Respondent submitted that the $50,000 paid into court was “available” (notwithstanding that it was said to have come from one of his sons). It was also said to be relevant that the interest on the judgment debt was only in the order of some $8,000 and that the debtor was the co-owner of a parcel of land with Shirley Willoughby (albeit it was subject to a mortgage).
  73. Counsel for the Respondent conceded that the circumstances of the present case could not be categorised as an abuse of process, but suggested that Mrs Ricketts’ motivation, as admitted in cross-examination, was relevant to the issue of whether there was other sufficient cause. It was submitted that regard should be had to the purpose of bankruptcy proceedings and that it was inappropriate to bankrupt a debtor when he was merely refusing to pay because of certain circumstances, in this case because he sought the provision of a “proper” deed of release.
  74. Reference was also made to the decision of Flick J in Hacker v Weston (No 2) [2015] FCA 521 on the basis that the approach to the issue of whether there was a proper basis on which a sequestration order ought not to have been made for the purposes of s.153B of the Act was relevant to a consideration of whether there was other sufficient cause within s.52(2)(b) of the Act. In particular, it was submitted that all the circumstances had to be taken into account and that in this case, as in Hacker, it could be said that the debtor was completely solvent. It was also said to be relevant that most of the debt had been paid into court and the petitioning creditor simply wanted to be paid.
  75. The Respondent submitted that the party receiving the real benefit of the deed (who was said to be Mrs Ricketts) had never prepared a “proper” deed of release and that the deed of release she signed did not effect what was intended, in the sense of providing for full mutual releases. On this basis it was suggested that it could only be taken that the Applicant did not wish to proceed with the release which had been an essential part of the settlement of the Supreme Court proceedings. It was submitted that in all the circumstances the court should exercise its discretion not to make a sequestration order.
  76. I am not satisfied that the circumstances are such as to amount to other sufficient cause in s.52(2)(a) of the Act. As counsel for the petitioning creditor submitted, prima facie the final judgment of Lindsay J gave rise to the debt that was the basis for the bankruptcy notice and creditor’s petition. The debtor’s failure to comply with the bankruptcy notice based on that judgment was an act of bankruptcy. The debtor did not attack the Supreme Court judgment in the sense of asking the court to go behind it.
  77. Moreover the existence of the “agreement” as claimed by Mr Beazley is in dispute. While it was not disputed that the parties to the Supreme Court proceedings (through Mr Beazley and Ms Pringle) contemplated a deed of release that was to deal in some way with the discharge of the obligations of the parties to those proceedings consequent upon payment of the judgment debt, what is not clear is the precise scope of the contemplated deed or whether execution of such a deed was a condition precedent to payment of the judgment debt. On the evidence before the court I am not satisfied that the parties had reached an agreement as to the persons to be covered or the scope of the deed or that it has been established that it was agreed that execution of a deed addressing particular matters or covering particular persons was a condition precedent to payment of the debt.
  78. As pointed out by the Applicant, Mr Beazley’s evidence as to his understanding of what was agreed was not consistent. He has given varying accounts of the compass of the agreement that he asserted existed, both in relation to the parties to be covered and the interests to be addressed. The mere fact of his reference to “mutual releases” of “all parties” is not such as to establish that the intended scope of the deed was clear. Ms Pringle’s evidence did not support his claims. Her concession in cross-examination that it may have been appropriate to include Shirley Willoughby as a party to any deed of release does not mean that this was in fact agreed on 15 November 2013 (particularly given Mr Beazley’s varying claims about whether the deed was to cover the three defendants or five people).
  79. It is notable that, after having received a signed deed he supposedly considered deficient on 4 December 2013, Mr Beazley’s first response was not until 29 August 2014 (notwithstanding Ms Campbell’s attempts to communicate with him in December 2013). In a letter of that date he indicated that the “parties” (in relation to whom he said it had been agreed that there should be a release) were the three defendants. He made no mention of the proposed fourth and fifth defendants. This was contrary to his subsequent written suggestion that it had been agreed that the deed was to extend to the five Willoughbys. Mr Beazley’s first answer under cross-examination (as to whom he understood the deed was to apply to) referred to the three defendants. Later, he abandoned the term “defendants” and used the term “parties”, asserting that this was a broader term and encompassed the intended fourth and fifth defendants in the Supreme Court proceedings. He then asserted that it was the intention that the deed would provide for a release in respect of all five of those “parties”.
  80. This suggestion is not only contrary to Mr Beazley’s letter of 29 August 2014 (the first occasion he articulated in writing his complaints about the form of the deed of release) but is also contrary to the fact that the only “parties” to the Supreme Court proceedings were Mrs Ricketts and the three defendants. I do not find it persuasive that a solicitor would be of the view that the concept of “parties” to proceedings would include proposed parties who had not been joined to the proceedings. In any event, this lack of clarity is contrary to the claim that there was an agreement about the scope of the deed reached on 15 November 2015 and that payment of the judgment debt was conditional on provision of a deed in a form that had been agreed.
  81. Further, Mr Beazley acknowledged in cross-examination that while he had foreshadowed in September 2014 that he may take steps to have the Supreme Court judgment varied or set aside in the absence of a satisfactory deed of release, he did not in fact take any such steps.
  82. Insofar as counsel for the debtor submitted that it was in some way unreasonable on Mrs Ricketts’ part to have “refused” to provide a deed in accordance with the terms said to have been required by the debtor (and that this was relevant to the issue of whether there was “other sufficient cause” in s.52(2)(b) of the Bankruptcy Act) it is notable that there is no evidence that the debtor or Mr Beazley ever clarified with any precision the claimed deficiencies in the signed deed that was provided in December 2013 (which in any event did include a release of the debtor). By letter of 23 February 2015 from L. Rundle & Co, Mr Beazley was expressly asked what amendments or changes to the deed of release he required and to set out what he said was inadequate in relation to the document. In his response of 24 February 2015 he merely indicated that he had advised Mrs Ricketts’ counsel in court that he required “the release to be a mutual release of all parties”. He then suggested that the deed should cover the so-called “five defendants”. Mr Beazley did not, however, specify proposed amendments to the deed of release on behalf of the debtor or make any claim about there having been an agreement relating to allegations in the proposed Statement of Claim (whether in relation to the acts of the holders of powers of attorney for the deceased or otherwise).
  83. I observe, in passing, that it is very difficult to accept that a solicitor, receiving a signed deed on 4 December 2013 and knowing that payment was due on a judgment debt within 28 days of the date of the orders, would simply read the deed and, despite being of the view that it did not reflect an agreement that had been entered into with counsel for the plaintiff, simply do nothing.
  84. The Applicant obtained a final judgment. There is nothing in the judgment or orders of Lindsay J to suggest that it was conditional in any way on the execution of a deed of release. There was no notation and there is no evidence that any notation had been requested in respect of a deed of release (as may have been expected if this was a condition agreed to by the parties).
  85. On the evidence before the court I am not satisfied that there was any clear agreement between the parties on 15 November 2013 (or thereafter) as to the terms of the deed of release or that it had been agreed that payment of the judgment debt was conditional on the provision of such an agreed deed of release. While the debtor has alleged that there was such an agreement, there has been no consistent articulation of what the terms of such agreement were or of the persons the deed was intended to cover, despite the claim that such an agreement was concluded between Mr Beazley and Ms Pringle.
  86. Ms Pringle disagreed with Mr Beazley’s evidence as to the nature and scope of the claimed agreement, albeit she acknowledged that it was agreed there should be a deed of release (as she had proposed to Mr Beazley). In cross-examination she conceded that, on the basis that Shirley Willoughby was a party to the Supreme Court proceedings, it was appropriate that she be a party to the deed. However had this been a matter agreed to by the legal representatives on 15 November 2013, it would have been a simple matter for Mr Beazley (who acted for all three defendants in the Supreme Court proceedings) to seek an amendment to that effect when he received the signed deed in December 2013. He did not do so. Subsequently he made conflicting claims as to the “agreed” parties to the deed of release. The fact that it may have been appropriate to include Mrs Willoughby as a party to the deed does not, in all the circumstances, satisfy me that there was such an agreement or that payment of the judgment debt was conditional on Mrs Ricketts providing a deed in that form.
  87. Further, while one of the issues raised by Mr Beazley (when he did finally communicate in writing with the solicitors for Mrs Ricketts) was a claim that there was no release of any of his clients in the deed, as put to him in cross-examination, cl.6 did provide such a release (at least in relation to two of the defendants, including the debtor).
  88. In these circumstances and where there is such conflicting evidence from two officers of the court, the Respondent has not established that an agreement was concluded in the terms that Mr Beazley alleged (that there would be a deed of release of either three or five parties and that there would be no obligation to pay in accordance with the judgment debt until that deed of release had been provided and executed).
  89. Moreover, even if it were to be accepted that Mr Beazley had simply looked at the signed deed and concluded that it did not comply with the agreement he understood had been reached on 15 November 2013 and decided that he was not going to tell his client to pay the debt, the circumstances are not such as to amount to other sufficient cause such as to lead the court not to make a sequestration order. It appeared to be asserted that it would in some way be unfair to make a sequestration order because the circumstances arose out of allegedly unreasonable conduct of the Applicant. This has not been established. The Applicant, as plaintiff in the Supreme Court proceedings, provided a signed draft deed after Mr Beazley had failed to advise her solicitor of any suggested deficiencies or amendments. Insofar as the failure to execute a deed was attributable to the conduct of the parties, one would have expected some response from the solicitor for the defendants in the Supreme Court proceedings in the face of the executed draft deed and the unanswered correspondence and telephone messages, or, at the least, a clear response and proposed amendments to the deed when specifically invited to provide such information in February 2015.
  90. Insofar as the debtor relied on the payment into court of $50,000, this was not a tender. It was not for the full amount of the debt. It was not paid in satisfaction of any part of the debt. It is not available to the Applicant in satisfaction of any part of the debt. Indeed it was not paid by the Respondent. It is not evidence of his personal solvency. As stated in Kekeff v Papatriantafillou [2011] FMCA 114 a payment into court does not discharge a debt and is not a bar to an application for a sequestration order.
  91. I have considered the submission to the effect that the fact that Mrs Ricketts wanted the money that she was owed was relevant to the issue of whether there is other sufficient cause not to make a sequestration order. I am not persuaded that her conduct or evidence in cross-examination establishes an improper motivation or abuse of process (see Dowling v Colonial Mutual Life Assurance Society Ltd ([1978] FCA 35; 1915) 20 CLR 509; [1915] 21 ALR 425 and William v Spautz [1992] HCA 34; (1992) 174 CLR 509 at 526-527; [1992] HCA 34). The fact that, as a creditor, Mrs Ricketts was owed a debt and wanted to be paid is common to all creditors seeking sequestration orders. It is not of itself, or in combination with the other matters relied on, such as to satisfy me that for other sufficient cause a sequestration order ought not to be made.
  92. I am satisfied that Mr Willoughby committed the act of bankruptcy alleged in the petition and with proof of the other matters in s.52(1) of the Act. I am not satisfied that he is able to pay his debts within s.52(2)(a) or that for other sufficient cause a sequestration order ought not to be made.
  93. Mr Johnson proposed that if, notwithstanding his submissions, the court was minded to make a sequestration order, he would ask that I stand over any such proposed order for seven days in order to enable a payment or release of the monies in their entirety by the debtor. I indicated that while I was prepared to give the parties at least seven days’ notice prior to delivery of judgment, I would not be prepared to stand over any proposed sequestration order on such a basis. However Mr Willoughby has made very limited disclosure of his financial position to the court. Having regard to the submissions of counsel who appeared for Mr Willoughby at the hearing, I do not rule out the possibility that while Mr Willoughby did not put on proper evidence in that respect before the hearing, he may be able to obtain funds to pay any debts. In all the circumstances I consider it appropriate to stay all proceedings under the sequestration order for a period of 21 days.

I certify that the preceding ninety-three (93) paragraphs are a true copy of the reasons for judgment of Judge Barnes

Associate:

Date: 9 November 2015

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