The conflicting accounts of Steven's wealth and bankruptcy
59 It is convenient to make findings at this point concerning the evidence about two inter-related topics which reflected poorly on the credit of both Dr Hamilton and Steven, but more so on Steven. That is the evidence about what Steven is said to have told Dr Hamilton about his wealth and his bankruptcy.
60 In the affidavit containing his evidence in chief, Dr Hamilton deposed that, at or about the time of their first meeting, Steven had told him that he was "a property developer and had developed a significant portfolio leading up to the [GFC] but that as a result of the [GFC] he [had been] forced to sell off his property portfolio". He also deposed:
[6] Steven did not tell me that he was bankrupt at any stage prior to us meeting, and when I asked him whether he had become a bankrupt as a result of the GFC, he told me that he did not.
61 In the affidavit which he filed in reply to the affidavit containing Steven's evidence in chief, Dr Hamilton gave a much enlarged account, namely, that Steven had told him at one of their early meetings that:
[13.2.1] he had been very successful in the apartment space in Brisbane, where he still controlled over 100 apartments;
[13.2.2] he had moved to Adelaide with his family to live on a large property that he had purchased that was worth $4.5M in order to start living the "River Cottage life";
[13.2.3] he was the under bidder for the Crafers hotel - where he had placed a bid for $2.5M;
[13.2.4] he continued to have Gold Coast Apartment assets that he looked after and which were cash flow positive;
[13.2.5] he had recently purchased a JD tractor for $130k for which he paid cash;
[13.2.6] he had made a lot of money buying properties in Chinchilla that had coal seam gas wells on them, and that as a result, he collected disturbance payments from the gas companies; and
[13.2.7] he had been so successful he no longer had to worry about working.
62 In cross-examination, Dr Hamilton said that Steven had portrayed himself as financially successful and independently wealthy; that Steven had said that he had a "120 million dollar property portfolio"; that because of the GFC he had to sell some of the property portfolio; that Steven had said that he had to sell some of the apartments which he controlled but still had control over 100 apartments; that the assets which Steven was continuing to hold were those which survived the GFC; and that Steven had said that when the banks "turned off the taps" after the GFC, he had to sell off some of his property portfolio and had done a deal with Westpac using the Financial Ombudsman. Dr Hamilton disagreed that he had been prompted to ask Steven whether he had gone bankrupt because of the difficulties following the GFC about which Steven had told him.
63 As counsel for the respondents submitted, there is an incongruity between Dr Hamilton's evidence that Steven had told him that, even after the GFC, he still controlled over 100 apartments in Queensland, on the one hand, and his evidence that he had been prompted to ask Steven whether he had gone bankrupt in consequence of the GFC, on the other. There is also an incongruity in Dr Hamilton's evidence that Steven had told him in their initial meeting that he was wealthy enough that he did not need to work again, while saying, at or about the same time, that he needed the consultancy payment of $15,000 per month for "cashflow".
64 Dr Hamilton's evidence about these matters was marked by inconsistency. I am, however, willing to accept that part of the inconsistency may be attributable to Steven imparting the information recounted by Dr Hamilton over a series of meetings and to Dr Hamilton's dupability having the effect that he did not recognise the inconsistencies at the time. I note in this respect Dr Hamilton's evidence that he had regarded Steven as "very engaging, interesting and charismatic". It was also very evident that Dr Hamilton had been captivated by the money making opportunity which Steven portrayed in telling him about CSG disturbance payments. My impression is that Dr Hamilton's greed and gullibility meant that he did not bring any sense of incredulity to bear when listening to Steven's tales of his wealth and success in Queensland and thereby overlooked the inconsistencies in Steven's accounts.
65 To my mind, it seems doubtful that Dr Hamilton would have been prompted to ask Steven whether he had gone into bankruptcy given the impression of wealth and success which Steven was conveying. However, it was not suggested that the Court should disbelieve Dr Hamilton's evidence that he had made such an enquiry. Accordingly, I will accept that, in the context of Steven telling Dr Hamilton of his financial success before the GFC and the effect which it had had, Dr Hamilton did ask Steven whether he had gone bankrupt. For the reasons to be given shortly, I consider it likely, and so find, that Steven gave a negative answer to that question.
66 Steven's evidence concerning his bankruptcy raised serious matters concerning his credit worthiness. In four passages in the affidavit containing his evidence in chief, Steven deposed on his oath to having entered into a composition with his creditors pursuant to s 73 of the Bankruptcy Act 1966 (Cth). Section 73 is in Div 6 in Pt 4 of the Bankruptcy Act which provides a means by which a bankrupt may enter into a composition or scheme of arrangement with his or her creditors and achieve an annulment of the bankruptcy.
67 Steven claimed to have made a s 73 composition, as he deposed:
[24] In June 2014, my wife and I presented debtors' petitions. We subsequently entered into compositions with our creditors pursuant to s. 73 of the Bankruptcy Act. Westpac was able to realise sufficient funds from the sale of secured properties to be repaid in full.
…
[67] … During the course of these discussions [with Dr Hamilton in December 2014]:
…
[67.5] In discussing why I did not want to deal with banks and raise funds, I said to Andrew that my debt levels had been too high following the Global Financial Crisis and that I had done a section 73 arrangement with my creditors under the Bankruptcy Act and that I was on the bankruptcy list. Andrew said that he did not care, and as long as I could bring in properties to purchase, he could raise the funds. Andrew also said that I might have to show him how to do a section 73 arrangement some day, as he could see it coming, because if not for his parents, he would have gone under due to PODS during the global financial crisis himself.
[68] By late January 2015, Andrew and I had agreed in our discussions that:
…
[68.4] Andrew would be the director of the company. I said to Andrew that, as he was a doctor and had the capacity to raise and borrow funds, and I was of no use not being a doctor and having done a section 73, he would need to be the director of the company. He agreed with this.
[74] Andrew was the sole director of both Fairfield and Fairfield No 1. I could not be a director because I had done the section 73 at the time, which Andrew knew, and I did not want to take on an administrative role as it was not my strength.·
(Emphasis added)
68 Steven acknowledged that he had sworn that the contents of his affidavit were true and correct.
69 In an earlier affidavit sworn on 18 January 2019, Steven had deposed:
[16] In June 2014 I presented a debtor's petition and made an arrangement with my creditors pursuant to section 73 of the Bankruptcy Act. During the course of my bankruptcy, several of my properties were sold which realised sufficient funds to pay off all of my debts. My bankruptcy was discharged on 27 June 2017.
(Emphasis added)
70 At the commencement of his oral evidence in chief, Steven said that he wished to correct [24] and [74] in the affidavit containing his evidence in chief. His "correction" of [24] comprised:
We did not follow through with the composition, which is - but we - because of the way in which the section 73 was done, we were on the bankruptcy list, and that discharged in 2017.
71 In respect of [74], Steven gave the following "correction":
Andrew knew that it was about the fact that I was on the bankruptcy list due to thinking that I was going to do the annulment under section 73.
72 As is apparent, the "correction" of [24] is internally inconsistent. In relation to the correction" of [74], there is no evidence to support the view that a s 73 composition was in prospect at the time of Steven's discussions with Dr Hamilton and Steven did not otherwise make a claim to that effect.
73 Steven did not seek to correct the assertions in his affidavit that he had told Dr Hamilton that he and his wife had made an arrangement pursuant to s 73. Nor did the respondents apply to amend the plea in [9(a)] of the Amended Defence that Steven had told Dr Hamilton that he had "made an arrangement with his creditors pursuant to s 73 of the Bankruptcy Act 1966".
74 Steven was not asked what he meant by saying that he was "on the bankruptcy list". It seemed to be no more than a statement that he had been bankrupt.
75 In cross-examination, Steven gave conflicting answers concerning his evidence with respect to an arrangement under s 73. At one stage, he said that he had entered into a s 73 arrangement; at another stage that he and his wife had "never followed through with doing the annulment" and that they had been discharged from bankruptcy after the expiration of three years; at another stage that he and his wife had started the process towards a s 73 composition but had never finished it; at another stage that a proposal to his creditors had been put together and "sent out"; at another stage that he had had an accounting firm in Nerang acting for him in propounding the composition; and at another stage that he had not needed to proceed with the proposed composition "because everyone was happy … Westpac got what they wanted … and everyone else - at the end of the day there wasn't - didn't feel that anything was outstanding" so that a s 73 arrangement "wasn't needed". At one stage, Steven said that all his creditors had been paid in full (he had made the same claim in his affidavit of 18 January 2019) but later agreed that none of his unsecured creditors had received any payment.
76 Despite it being obvious that Steven's credit was being seriously impugned by reference to his evidence concerning a s 73 composition, the respondents did not adduce any evidence from an "accounting firm in Nerang" to support the claim that Steven had been assisted in preparing a s 73 proposal. They had had the opportunity to do so if they wished, had such evidence been available. Nor did the respondents adduce other evidence to support Steven's various claims concerning a s 73 composition.
77 The falsity of Steven's claim concerning a s 73 composition and of his claim that all his creditors had been paid in full was made apparent by a letter dated 23 January 2019 from Steven's trustee in bankruptcy, Mr Leroy, who said:
1. A proposal pursuant to Section 73 of the Bankruptcy Act 1966 has not been proposed nor accepted by the creditors of Mr Steven Van Niekerk and Mrs Gillian Van Niekerk by way of passing a special resolution which would have the effect of annulling the bankruptcy; and
2. A dividend to creditors has not been paid in the abovementioned estate.
78 Despite acknowledging that he had not made a s 73 arrangement, Steven maintained in cross-examination that he had told Dr Hamilton that he was bankrupt and that he had made such an arrangement. Dr Hamilton denied that that was so. As already indicated, this is a matter on which I accept Dr Hamilton's evidence, given the improbability on my assessment that Steven would have been willing to disclose his bankruptcy. He appears to have been intent on conveying the impression that he was a successful property dealer/developer. Disclosing his bankruptcy would have been inconsistent with such an impression. The reasons for Steven moving to South Australia in late 2013-early 2014 were not explored in his cross-examination (Dr Hamilton said that Steven had told him that he wished to start living the "river-cottage life"). It may well have been because Steven wished to make a fresh start given his looming bankruptcy in Queensland. Accordingly, I considered Dr Hamilton's denials that Steven had told him that he was bankrupt and that he had "done a s 73" to be plausible and accept them.
79 In the final submissions, counsel for the respondents raised the possibility that Steven had genuinely, but mistakenly, believed that he had entered into, or at least proposed, a s 73 composition. I do not accept that as a realistic possibility. Steven did not proffer this as an explanation and there are limits to the extent to which the bounds of credibility may be stretched. The more obvious explanation is that Steven invented the claim of a s 73 composition with a view to giving a veneer of respectability to his bankruptcy.
80 I am satisfied that Steven's evidence was false in the following respects:
(a) he and his wife did not make, let alone propose, an arrangement with their creditors pursuant to s 73 of the Bankruptcy Act;
(b) Westpac did not receive a sufficient amount from the enforcement of its securities to discharge Steven's indebtedness to it;
(c) Steven did not tell Dr Hamilton that he had made a s 73 arrangement with his creditors. He did not even tell Dr Hamilton that he had been bankrupt, let alone that he was an undischarged bankrupt;
(d) Dr Hamilton did not say that he did not care about Steven having made a s 73 composition;
(e) Dr Hamilton did not say that Steven may have to show him how to do a s 73 arrangement some day; and
(f) Steven did not tell Dr Hamilton that he would not be a director of FPH because he had "done a section 73". That is to say, Steven had not given Dr Hamilton the explanation he claimed for not wishing to be appointed a director of FPH and FPH No 1.
81 I am satisfied, keeping in mind the gravity of the finding, that Steven's accounts of having told Dr Hamilton that he had made a s 73 composition, together with the conversations which he said followed that disclosure, were fabrications. They cannot be passed off as a "misunderstanding", as Steven claimed at one stage. The fact of the matter is that Steven was discharged from his bankruptcy after three years by operation of law - see s 149(3) of the Bankruptcy Act.
82 I am also satisfied that Steven's claim that his creditors had been paid in full is preposterous. Mr Leroy's report to creditors of 21 July 2014 indicated that, in his statement of affairs, Steven had disclosed debts to unsecured creditors totalling $18,987,695.37 and Mr Leroy's letter (quoted earlier) stated that there had been no dividend to creditors.
83 I note that the discussions with Dr Hamilton in which Steven says that he told Dr Hamilton of having made a s 73 composition occurred within 6-7 months of the sequestration order being made, and probably earlier. Steven knew at the time of those discussions that he had not made a s 73 composition, or even a proposal for such a composition. It follows that, if I had found that Steven had told Dr Hamilton at the times he claims that he had "done a section 73", a finding that he had lied to Dr Hamilton in that respect would have been inevitable. However, I consider that the lie is in his evidence to this Court that he had told Dr Hamilton that he had made a s 73 composition, and in the statements which he attributes to Dr Hamilton by way of response.
84 Steven's willingness to fabricate the claims of a s 73 composition is one of the several matters which has caused me to doubt his credibility more generally.