Case: Maxwell-Smith v S &amp; E Hall, in the matter of Maxwell-Smith [2004] FCA 840
Outcome: referred to
On 15 September 2003, a Registrar of the Federal Court made sequestration orders against Mr and Mrs Maxwell-Smith. The debt which gave rise to the orders was the certificate of assessment of the costs order made by the Supreme Court of New South Wales on 8 December 1999. However, on 2 July 2004 Moore J annulled the bankruptcies of Mr and Mrs Maxwell-Smith under s 153B of the Act ; see Maxwell-Smith v S &amp; E Hall, in the matter of Maxwell-Smith [2004] FCA 840. His Honour was satisfied that the sequestration orders ought not to have been made, on the basis of an "unwitting" denial of procedural fairness before the Registrar; see [20]. 20 Moore J observed at [24] that the annulment application was not made upon the basis that Mr and Mrs Maxwell-Smith were solvent when the orders were made. Nevertheless, his Honour recorded an acknowledgment of counsel for the Trustee that "probably" Mr and Mrs Maxwell-Smith were solvent when the sequestration orders were made. His Honour also noted that counsel for S &amp; E Hall did not dispute this proposition. 21 Moore J went on to say that there was insufficient evidence before him to make a positive finding that Mr and Mrs Maxwell-Smith were solvent. But he said that they may well be solvent, and may well have been when the sequestration orders were made; see at [24]. He took this into account in the exercise of his discretion to make the annulment order. 22 In evidence before me is a letter dated 27 August 2004 from solicitors for S &amp; E Hall to the solicitors then acting for Mr and Mrs Maxwell-Smith setting out an offer to settle various disputes between the parties. The letter was written "without prejudice". However, counsel for S &amp; E Hall objected to the document only upon the grounds of relevance and hearsay. He did not object to it on the ground that it was not to be adduced under s 131 of the Evidence Act 1995 (Cth). I admitted the letter, along with a number of other exhibits to Mrs Maxwell-Smith's Affidavit filed on 14 June 2006, into evidence but not as proof of the facts. 23 The letter contained the following statement:- "We note that apparently your clients have instructed their counsel that they have no financial capacity to meet any verdict. This is clearly nonsense. As you are doubtless aware, your clients own an unencumbered property in Tura Beach NSW valued at conservatively $700,000.00. They also own a 50% interest in the property at Jindabyne." 35 The asserted claim for $100,000 for damages caused by the creditor's "misuse" of the Act since September 2003, is apparently a claim in respect of the sequestration order made on 15 September 2003 which was subsequently annulled by Moore J. 38 What was required in order to establish that the claim had substance was some evidence to suggest that the 2003 bankruptcy was obtained for a purpose or object beyond that which was offered by the legal process. The observations of Moore J on the annulment of the bankruptcy do not support such a claim. Nor is there any evidence which would give rise to that suggestion. 39 The same may be said of the second claim which is asserted, namely the administration costs of the "unlawful" bankruptcy arising from the sequestration order of September 2003. 40 There is no evidence whatsoever to suggest that the third claim, namely the "unlawful" execution of the garnishee order has any substance. 47 Second, the observations made by Moore J in July 2004 make it plain that S &amp; E Hall was aware at that time of the probability that Mrs Maxwell-Smith was solvent. 48 Third, the letter from S &amp; E Hall's solicitors states in unequivocal terms that Mr and Mrs Maxwell-Smith owned assets the value of which greatly exceeded their debts. In my view it is clear from this letter that S &amp; E Hall was aware of Mrs Maxwell-Smith's ability to meet her liabilities in August 2004. 49 It seems to me that what was required of S &amp; E Hall was some evidence to dispel the natural inference arising from lengthy delay and knowledge of solvency, that the bankruptcy notice was issued for a purpose collateral to that of pursuit of insolvency proceedings. Instead, there was no evidence from S &amp; E Hall explaining the delay or demonstrating that Mrs Maxwell-Smith's financial position had deteriorated since 2004.