the debt owing to the applicant
37 On any view, if the transaction of 31 January 2001 is not included, Mr Meinhardt's account with the applicant was in credit at the time he ceased to be a director of the applicant in November 2003, and would have remained in credit thereafter, notwithstanding other transactions that may have occurred. Accordingly, the nature of the transaction on 31 January 2001 is critical to the question arising under s 244(1) of the Bankruptcy Act. Mr Bigmore accepted that there was a transfer of funds from the applicant to Mr Meinhardt in January 2001 in the amount indicated in the ledger for Mr Meinhardt's account. He accepted also that the transfer was not by way of gift, and that it was proper for that amount to be debited to Mr Meinhardt. He submitted, however, that the applicant had failed to establish 'that the advance was a loan upon any particular terms'. It followed, he submitted, that I should not be satisfied that there was, at the date of Mr Meinhardt's death, or that there is now, a debt by way of a liquidated sum payable immediately, or at certain future time. He pointed to the note on the audited accounts for the year ended 30 April 2001 to the effect that loans to directors were in the nature of current accounts, and had no fixed repayment terms. Mr Bigmore submitted that the arrangement between the parties, properly understood, was that the applicant could never call for repayment of the whole sum; rather, repayment was to be effected by the periodical crediting to Mr Meinhardt's account of sums allocated by way of profit share bonus from time to time. That being the case, there was never a debt payable immediately or at a certain future time as required by s 244(6) of the Bankruptcy Act.
38 Mr Sifris QC, who appeared with Mr Fary for the applicant, submitted that, whatever label one attached to the transaction of 31 January 2001 (advance, loan, etc), manifestly the money was transferred other than by way of a gift. That meant that it had to be repaid at some stage, and the question then becomes - what were the agreed terms of repayment? Mr Sifris submitted that there could only be two possibilities: an implied agreement to repay in accordance with the draft agreement forwarded by Mr Smith to Mr McKenzie on 30 April 2001, or no agreement on the subject at all. If the former, the transfer was repayable, with interest, on 30 April 2004. There would then have been a debt within the terms of par (c) of s 244(1) of the Bankruptcy Act. If the latter, in accordance with common law principles, there would have been a debt repayable at every point in time since the money was advanced.
39 I am not satisfied that the applicant and Mr Meinhardt ever agreed upon the terms contained in the draft agreement forwarded by Mr Smith on 30 January 2001. There is no evidence of Mr Meinhardt's reaction to that draft; indeed, there is no evidence that the draft was ever brought to his attention. Although Mr Smith said that he mentioned the need for an agreement to Mr McKenzie on occasions, there is no evidence that Mr McKenzie had any authority from Mr Meinhardt which would be relevant to this transaction. Even if I had concluded that the letter of 30 January 2001 was brought to Mr Meinhardt's attention, I would not be prepared to infer that, by his silence, he implicitly accepted the terms thereof. Neither would any principle of estoppel or preclusion operate against Mr Meinhardt or his estate by reason of the fact that, knowing the terms desired by the applicant, he accepted the transfer of $2.2 million without reservation. The copy of the letter from Mr Smith to Mr McKenzie dated 30 January 2001 which is in evidence is a file copy produced from the records of the applicant. Save for the date shown on that copy, there is no evidence as to when, or by what means, the letter was transmitted to Mr McKenzie. Since the funds were transferred into Mr Meinhardt's bank account in Melbourne only one day after the date shown on the file copy of Mr Smith's letter, even if I were prepared to infer that the letter came to Mr Meinhardt's attention, I could not infer that it did so before the money was received by him. For all the court knows, if the letter did come to Mr Meinhardt's attention, by the time it did, he may well have used the transferred funds for the personal purposes which he had in mind.
40 Before turning to the alternative proposition advanced by Mr Sifris, I should consider Mr Bigmore's submission as to the terms under which the money transferred on 31 January 2001 would be repaid by Mr Meinhardt to the applicant. As I have stated above, Mr Bigmore said that this could occur only by way of off-setting credits to Mr Meinhardt's running account with the applicant when the board of the applicant allocated the appropriate share of a profit share bonus in favour of Mr Meinhardt. There is no evidence before the court that the parties agreed upon any such term, and I can think of no reason why it should be regarded as intrinsically more obvious than other possibilities. It is true that, on the evidence before the court, there was something in the nature of a running account which Mr Meinhardt held with the applicant, and that that account was credited and debited from time to time in accordance with transactions between the parties. This included some transactions which were set-off, to an extent, against the debit balance generated by the transaction of 31 January 2001. I can, however, think of no reason why I should treat these pragmatic arrangements as giving rise to terms which defined the parties' rights and obligations in relation to the transaction in question. In particular, it is not at all obvious that the applicant would have placed a fetter upon its own right to recover the sum in question by reference to what, on the evidence, might well have proved to be a most uncertain future flow of credits to Mr Meinhardt. Although the matter was not argued before me in this context, the essence of Mr Bigmore's submission is that there was a contract between Mr Meinhardt and the applicant which contained an implied term to the effect that repayment would be effected only by the crediting of profit share bonus allocations from time to time. The circumstances in evidence before the court are a very long way from satisfying the requirements for such a term to be implied.
41 I hold that, in January 2001, Mr Meinhardt requested the applicant to advance him a sum of $2.2 million, that the transaction was not a gift, and that there were no specific terms as to repayment. The evidence shows a practice employed as between the applicant and its directors by which there were loans made to directors by the applicant, and to the applicant by directors, from time to time. These were recorded in the accounts as 'amounts due from [or to] directors'. The transaction of 31 January 2001 gave rise to such an entry in the audited accounts. The note to that entry was that the accounts with directors were 'in the nature of current accounts … unsecured, interest free and [having] no fixed terms of repayment.' This language bespeaks a loan on current account such as would constitute a debt. It is true that these are the words of the applicant, not Mr Meinhardt, but they were to be found in the audited accounts of the applicant which, as Mr Sifris submitted and I accept, would have been perused by Mr Meinhardt: indeed, subject only to the possible onset of his infirmity, as representing the majority equity interest in the applicant, it is highly probable that Mr Meinhardt was conscious of the way in which the transaction of 31 January 2001 was represented in the applicant's accounts. I hold also, therefore, that that transaction was by way of a loan, and it gave rise to a debt in the amount of $HK9,451,700.00.
42 I turn then to Mr Sifris' alternative submission as to repayment, namely, that Mr Meinhardt's obligation with respect to repayment was of a kind identified by Fullagar J in Ogilvie v Adams [1981] VR 1041. His Honour held that, where there is a loan with no agreed terms of repayment, no demand was necessary to found a cause of action for repayment, the cause of action having commenced instanter upon the making of the loan. He continued ([1981] VR at 1043):
"Where there is a loan of money simpliciter (i.e. with nothing at all said as to repayment), the money is repayable instanter. Where there is a loan of money and the borrower contracts to repay on demand, again the money is repayable instanter. Where there is a loan of money which is recorded or acknowledged by the parties to be a loan repayable on demand, again the money is repayable instanter.
The common law has always regarded the fact of indebtedness as a continuing detention by the debtor of the creditor's money and this whether the creditor brought an action of debt or an action in indebitatis assumpsit. Therefore if A lends money to B, then instantly B is detaining A's money. In order to prevent a cause of action for recovery arising in A instantaneously on paying the money, the parties must expressly contract out of that situation by words clearly inconsistent with that situation. The courts have long since settled it that a mere statement or agreement that the money is repayable on demand (or request or at call) is not sufficient to contract out of that situation where all else that is known of the terms of the contract is that A has paid money to B by way of loan. The lender's cause of action still arises instanter on the receipt of the money by the borrower, so that the lender's cause of action becomes statute barred at the expiry of six years after the receipt of the money."
I consider that Fullagar J's judgment in Ogilvie v Adams is applicable to the circumstances of the present case. A debt was due and owing by Mr Meinhardt to the applicant at every point in time after the money was advanced on 31 January 2001. Subject to the possibility that the debt may have been repaid, in whole or in part (or, which is the same thing, that Mr Meinhardt's account with the applicant may have been credited sufficiently to extinguish all or part of the debt), the debt was payable immediately at all times since then, including the date of Mr Meinhardt's death, and every date since then. It remains outstanding and payable immediately.
43 The qualifications to which I referred parenthetically in the previous paragraph are, however, important ones in the present context. Mr Bigmore made two submissions about the other transactions which occurred as between Mr Meinhardt and the applicant, and about the prospect of yet further transactions having occurred between them that were not fully disclosed in the evidence. He said that, in the light of those transactions and those possibilities, the court could not be satisfied that, at the date of his death or at any time thereafter, a proper and thorough reckoning of Mr Meinhardt's account with the applicant would demonstrate that he owed the applicant not less than $2,000. There are two aspects of the account with the applicant that should be considered in this regard. The first is the 'amount due to directors' in 1996 in the sum of $HK12,100,000.00 to which I have referred in par 10 above. It is possible that a substantial part of that sum was due to Mr Meinhardt. It is equally possible that the unexplained reduction in this sum in the year ended 30 April 1998 was, to some extent at least, referrable to Mr Meinhardt's account, and should have been recorded in the ledger. To say anything about the probabilities in this regard, however, would be pure speculation. On the existing state of the evidence I am not satisfied that transactions prior to 31 January 2001 as between Mr Meinhardt and the applicant were not properly recorded in the account ledger. Although I allow for the possibility that the account ledger may not have been accurate in every respect, I can but act on the evidence before the court. On that evidence, immediately after the transaction of 31 January 2001, Mr Meinhardt's account was in debit in the sum of $HK9,325,164.00.
44 Turning to the period subsequent to the transaction of 31 January 2001, Mr Bigmore submitted that the circumstances in which the board of the applicant declared a profit share bonus for the year ended 30 April 2003, and later reversed it, were ambiguous at best and, at worst, amounted to a diversion of at least a portion of that bonus from Mr Meinhardt to the third respondent. Although Mr Bigmore made it clear that he was not suggesting fraud or bad faith on the part of any person, if the result of those transactions was such a diversion, it would have the result that the account ledger did not accurately the state of Mr Meinhardt's account with the applicant as at the date of his death. As to the reversal of the profit share bonus recorded in the ledger on 8 October 2003 ($HK312,771.80), I am satisfied on the evidence that this was a regular, and effective, transaction the result of a lawful resolution of the board. As to the transaction recorded at 30 April 2004 and marked 'TO VICKI, NOT WLM' ($HK34,218.20), I cannot make any finding that would assist the second respondent. I do accept that the position contended for by Mr Bigmore is within the range of possibilities. If that position is correct, however, because the amount involved is rather small, there would still be a very considerable sum owing by Mr Meinhardt's estate to the applicant.
45 Mr Bigmore also advanced an argument which, if correct, would mean that Mr Meinhardt ceased to be under any obligation to repay to the applicant the sum which was lent to him on 31 January 2001. He argued that, by giving Mr Smith the assurance to which she referred in her letter of 16 February 2004 (set out in par 35 above), the third respondent assumed liability for the repayment of the loan. I do not think there is any substance in is submission. The evidence is altogether too slender to justify a conclusion that the third respondent intended to assume the debt or, perhaps more importantly, that the applicant was content to surrender the rights which it had against Mr Meinhardt in favour of corresponding rights as against the third respondent. If this conversation did occur as suggested, the most probable construction to place on it was that the third respondent was doing no more than suggesting that Mr Smith not harass Mr Meinhardt for the repayment of the loan, but await the distribution of his estate.
46 Mr Bigmore accepted that it was not necessary, under subs (1) and subs (6) of s 244 of the Bankruptcy Act, for the court to be able to specify a particular sum which constituted the debt which was owing. In the present case, I am satisfied that, at the time of his death, Mr Meinhardt owed the applicant a debt of not less than $2,000, the amount of which was calculable as a liquidated sum, and that the debt was then immediately payable to the applicant. I am also satisfied that a debt in a liquidated sum has remained due, and immediately payable at every time, since Mr Meinhardt's death. Since it is common ground that Mr Meinhardt's circumstances, at the time of his death, satisfied at least one of the conditions set out in par (b) of s 244(6), it follows that the factual elements necessary to enliven the discretion of the court under s 244 exist. It is to the discretionary considerations that I shall next turn.