Puels v Exelerate Funding Pty Limited [2005] FCAFC 38 | Case summary

29 The appellant said that in July 2003 he resolved to sell the Bondi Beach property. 30 The appellant deposed, in an affidavit sworn 24 May 2004, that he determined to sell the Bondi Beach property as a result of the then state of the property market. He received an offer to purchase the property in late 2003 for $720,000. The appellant rejected this offer. 31 When the appellant first advised his mother of his intention to sell and during the course of negotiations with the prospective buyer, the appellant's mother advised the appellant that, in the event he was unable to sell the property, she and her husband would like to be given an opportunity to purchase it. In an affidavit sworn 1 June 2004, Mrs Puels deposed that she and her husband had made substantial contributions to the refurbishment of the property and they wanted to keep it in the family. 32 On 28 November 2003, the appellant sent to his parents a facsimile proposing to sell the Bondi Beach property to them. The return address for any subsequent correspondence to the appellant was listed as PO Box 7502, Bondi Beach, NSW 2026. On 12 December 2003, the appellant's parents wrote to the appellant at that Post Office address accepting the appellant's offer. On 7 January 2004 the appellant transferred the Bondi Beach property to his parents for $725,000. 33 The transaction was apparently completed without the assistance of a solicitor. There was no contract between the parties other than that evidenced in the exchange of letters to which I have referred. The transaction was not at arms length. There was no adjustment of outgoings at the date of settlement. 34 The purchase price was not paid in full but was apparently set off in part against amounts outstanding by the appellant to various parties. 35 The manner in which the purchase price was apparently disbursed was recorded in a handwritten note by the appellant's mother dated 7 March 2004. She wrote: 'To Rupert Final adjustments and disbursements re Lamrock Ave Bondi Beach sale/purchase. Previous drafts contained an accounting error in the balance figure of the disbursements. Purchase Price $725000.00 Less Disbursements R. & D.F. Puels loan 9 Nov 2000 79219.49 R. & D.F. Puels loan 5 Jun 2003 30433.28 R. & D.F. Puels loan 20 Jan 1966 65000.00 Payout ANZ Bank Mortgage 275009.01 A.T.O. (re R.P. Trading) 22576.90 Waverly Council Rates to 14.1.04 638.34 Clisdells Strata Levy to 14.1.04 638.35 Daniele Cardillo loan 100000.00

573515.37 Balance to you in cash 151484.63

725000.00' 36 The loans to his parents totalled nearly $175,000. A further $100,000 of the purchase price was apparently paid to Daniele Cardillo, an acquaintance of the appellant, it was said, to discharge an outstanding loan to her. The sum of $151,484.63 was paid to the appellant in cash. 37 The ANZ Bank mortgage was apparently repaid. I say 'apparently' because the appellant's mother does not depose in her affidavit, which was sworn on 1 June 2004, to having paid any amount to the parties referred to in that note. Her failure to give that evidence is significant. 38 Apart from the loans to herself and her husband she knew whether she made the payments contained in that note. Particularly, she knew if she had paid Daniele Cardillo $100,000 and her son $151,484.63. Because the appellant did not lead that evidence from her, the Court should not infer, from her evidence, that the payments had been made. In Commercial Union Assurance Co of Australia Ltd v Ferrcom Pty Ltd (1991) 22 NSWLR 389 at 418, Handley JA said: 'There appears to be no Australian authority which extends the principles of Jones v Dunkel to a case where a party fails to ask questions of a witness in chief. However I can see no reason why those principles should not apply when a party by failing to examine a witness in chief on some topic, indicates "as the most natural inference that the party fears to do so". This fear is then "some evidence" that such examination in chief "would have exposed facts unfavourable to the party": see Jones v Dunkel (at 320-321) per Windeyer J. Moreover in Ex parte Harper; Re Rosenfield [1964-5] NSWR 58 at 62, Asprey J, citing Marks v Thompson 1 NYS 2d 215 (1937) at 218, held that inferences could not be drawn in favour of a party that called a witness who could have given direct evidence when that party refrained from asking the crucial questions.' See also R v GEC (2001) 3 VR 334 at 344. 39 The appellant asserted that he did receive a significant cash payment from his parents. 40 If these loans to the parents were made on the dates indicated on the handwritten note then, clearly, the appellant's statutory declaration made on 20 March 2003 was not accurate. The loan of $65,000 was said to have been made by the appellant's parents to the appellant on 20 January 1966. The appellant was not born at that date. He was born on 31 July 2001. Moreover, if the loan to Daniele Cardillo existed at 20 March 2003 then the appellant had failed to disclose that loan in that statutory declaration. 41 Indeed, the appellant admitted that the statement that he had personal loans of $71,000 was not correct. He described that statement as 'on the lighter side of where in reality - all reality was'. 42 The appellant said in cross-examination that he could not remember when he received $100,000 from Ms Cardillo; but that sum formed the loan to SCA listed in his assets. If that were true then the loan to Ms Cardillo existed as at 20 March 2003 and should have been listed as a liability. 43 The sum of $22,576.90 was paid to the Australian Taxation Office on behalf of RP Trading Pty Ltd, a company engaged in futures transactions. The appellant is the sole director and shareholder of that company. 44 The appellant denied in cross-examination that he knew at the time of sale of the Bondi Beach property to his parents that SCA was insolvent. He said that he did not consider SCA to have financial problems until on or about 12 January 2004, although he was aware in December 2003 that if the Australian dollar continued to remain strong, SCA would lose a substantial amount of money. 45 In 2003, SCA began to trade in its own account in currency futures. In December 2003 the Australian dollar then stood at approximately 72.4c. However, the dollar appreciated against the United States dollar and was 75c by 31 December 2003 and 76c by 5 January 2004. SCA incurred significant currency losses. The appellant maintained in his evidence that he was not aware that SCA was insolvent when he transferred the Bondi Beach property to his parents on 7 January 2004. He did agree that he knew of the currency fluctuations to which I have referred. 46 The appellant agreed that he did not notify the respondent that SCA took currency positions. He maintained, in cross-examination, however that he did not inform the respondent that SCA would not take currency positions. 47 SCA paid its December 2003 account with the respondent. The next payment was due on 29 January 2004 and was in the amount of $777,149.47. A further payment was due on 27 February 2004 in the amount of $643,486.30. 48 On 19 January 2004, Mr Philip Carden, who was Chairman of the Board of Directors of the respondent, received a telephone call from QBE, the respondent's insurer of purchase contracts. Mr Carden was informed by a QBE employee that another creditor of SCA had advised QBE that SCA had written to the creditor indicating severe financial difficulties and explaining that for this reason it was unable to accept delivery of stock from suppliers. 49 Later that day, Mr Carden spoke with the appellant. The appellant advised Mr Carden that he had lost a significant amount of money 'being short the Aussie dollar on the currency exchanges'. He said SCA was short around $10m and they had been short since '70 cents'. The appellant agreed in cross-examination that this was a reference to the Australian dollar as against the United States dollar 'on or before December 2003'. That was prior to the transfer by the appellant of his interest in the Bondi Beach property to his parents. 50 The appellant said that the situation had evolved as a consequence of several factors. First, SCA sustained some losses as a result of the drought towards the end of 2002. Secondly, there was several large contamination claims made against SCA by some offshore customers. Thirdly, currency fluctuations effected SCA's finances because of the currency transactions in which it was involved. The appellant acknowledged in cross-examination that these transactions exposed SCA to potentially severe losses in the event of rapid currency changes. 51 The appellant's mother deposed in her affidavit that on 19 January 2004 she requested the appellant to vacate the Bondi Beach property. 52 The appellant said that he moved out of his premises at Bondi Beach on 20 January 2004. He said he took up residence with friends at another property at 5/10 Lamrock Avenue. I will deal with the evidence of his movements after 20 January 2004 later in these reasons. 53 As a result of the conversation between Mr Carden and the appellant, the respondent sought the consent of Mr Anthony Sims and Mr Neil Singleton to be appointed as receivers and managers of SCA. 54 Between 21 January 2004 and 23 January 2004, a series of emails passed between the appellant and Mr Carden explaining the financial position of SCA. 55 On 21 January 2004, the appellant wrote to Mr Carden explaining that: 'Further to our telephone call today Select Commodities Australia has advised it's [sic] clients that we may be facing some financial difficulty and will not be receiving or delivering any further contracts until this position is clarified. This position has arisen due to a significant currency position which has gone against the company. At present we have the following amounts in our cash accounts: ANZ USD Account: USD193,167.43 ANZ A$ Account: A$43,487.25 Tricom Futures: A$98,000.00 (apprx) Tricom FX: A$240,000.00 (apprx) I will have a clear picture of any asset liabilities, debtors and creditors tomorrow afternoon. As mentioned we are endeavouring to maximise potential profit on any open positions and meet our debt to Exelerate. Upon confirmation we will advise you accordingly of the company's position. At this stage I am preparing the above amounts to be directly deposited to your account tomorrow …' 56 On 22 January 2004, SCA notified the respondent by facsimile and email that it was insolvent for the purposes of the Corporations Act 2001 (Cth). SCA requested the appointment of Mr Singleton as 'Administrator / Receiver manager', pursuant to the charge granted by SCA in the respondent's favour. 57 The appellant said in an email of 22 January 2004 to Mr Carden: 'Regrettably I believe that the appointment of an administrator is necessary despite my efforts to provide you with assistance in recovering the debt to Exelerate and I will be lodging this amount today from my personal account. I have tried to make available my services to recover further monies from the sale of the companies [sic] assets however as several of the companies [sic] expenses are being incurred personally by me I must seek to protect my position in relation to the Directors [sic] Guarantee's [sic] which may not cover the shortfall due to Select. … If you wish to contact me regarding this I will be available on the mobile phone 0414 646 777.' 58 A Notice of Appointment of Messrs Sims and Singleton as Receivers and Managers was signed by Mr Carden on 22 January 2004. 59 A meeting took place between Mr Carden, the appellant, an SCA employee and a representative of Mr Sims' office on 22 January 2004. At that meeting, the appellant said that SCA's precarious position was a consequence of failing to hedge its currency exposure by selling US dollars and buying Australian dollars. 60 Mr Carden deposed that the appellant said: 'Well yes. We have intentionally failed to hedge currency positions in the past and these unhedged positions have been responsible for those big profits. The cottonseed business has been very difficult since the drought set in.' 61 The appellant denied in his affidavit of 24 May 2004 that he used those words. Rather, he said that the cottonseed business had been difficult since the drought set in and that, as a result, SCA looked to other markets, including the currency and futures markets, to cover overheads. The appellant also denied that Mr Carden said to him that he had been gambling with SCA's financial security and denied Mr Carden's assertion that he had agreed with that suggestion. 62 The meeting was told by the appellant that SCA was not in a position to meet its liabilities to the respondent, or any unsecured creditors. The meeting's attention was directed to some figures on a whiteboard which the appellant said represented 'the big picture'. Those figures suggested that SCA's assets were in the order of $750,000 whilst its liabilities were approximately $2,950,000. The respondent was then owed about $1,400,000. 63 Mr Carden told the appellant that the respondent would be calling on the guarantee executed by the appellant. 64 The appellant's personal financial circumstances were discussed and the appellant revealed that he had sold the Bondi Beach property. The funds from the sale of the property had been used in the manner described in pars [28]-[30]. 65 Mr Carden said that the conversation continued: 'I said: "Well Rupert, looking at that there is no way you can repay all my money to me let alone get anything paid to your unsecured creditors." Puels said: "No." I said: "Well Rupert, then I will be calling on your personal guarantee. What is the situation with the assets you disclosed to us in your statutory declaration of assets and liabilities nine months ago?" Puels said: "I don't have any assets anymore." I said: "What happened to your house at 3/22 Lamrock St, Bondi?" Puels said: "I have sold it." I said: "When?" Puels said: "I don't know when. It's hard for me to remember. Things have been so hectic. I'm a bad manager." I said: "What happened to the money?" Puels said: "I don't know where anything is at the moment. I'm waiting to get a full picture from my accountant." I said: "Look here Rupert, you have disclosed certain personal assets to Exelerate in consideration of Exelerate providing finance and now those assets don't exist any more and you are insolvent, let me tell you that Exelerate will examine every single financial transaction undertaken by Select and you personally pursuant to your personal guarantee and we will find everything that you have done with your assets, so you may as well try and see if you can remember." Puels said: "I sold the house in December 2003." I said: "When did you settle and when did you actually sell it?" Puels said: "I don't know. What do you mean by settle and sell it?" I said: "Tell me the dates you signed a contract and the date you were given money by the purchaser." Puels said: "I signed the contract of sale in mid December and I was paid last week." I said: "So where is the $750,000 that you claim in your asset statement the house was worth?" Puels said: "I paid $40,000 to the department of taxation, $225,000 to my mother in repayment of a loan, and the rest was paid to ANZ for the mortgage. And I have $100,000 in my bank account." I said: "Well then ring up your mother and ask her to give the money back to your insolvent personal estate so it can be distributed evenly amongst creditors and return the $100,000." Puels said: "I can't do that."' 66 The respondent argued that the appellant's claim that he had forgotten when the sale took place was false. It argued that by making a false statement of that kind the appellant clearly appreciated that the respondent, which held his guarantee, might want to attack the circumstances of the sale of the Bondi Beach property. 67 It argued that there were other false statements made by the appellant. First, that he sold the house in December 2003. Secondly, he signed the contract of sale in mid December. Thirdly, as to how the money was dispersed. Fourthly, a failure to advise of the repayment to Ms Cardillo of a loan of $100,000. Fifthly, his claim that he had $100,000 in his bank account. 68 The appellant claimed that at the time the receivers and managers were appointed, no moneys were owing by SCA to the respondent. The Notice of Appointment of Receiver and Manager suggests as much. The Schedule to the Notice points out that the appointment followed default by SCA, not under the Buyer Agreement, but under the Charge executed in the respondent's favour. 69 On 23 January 2004, the appellant wrote to Mr Carden again: 'You have said that you will work with the company and I to recover the debt due amicably. As I see it there is at least A$350,000 of receivables due to Select. A receiver / manager has been appointed however we also require Sims to act as the "administrator" per our fax yesterday. Can you also advise me full contact details for further correspondence with the receiver to include them in our dialogue. Can you advise me [sic] the course of action you intend to take to recover this amount to secure your debt. My involvement is required I assume however again it is difficult for me to take action without the appropriate advice. I hope that this action you have taken so far is not to the detriment of securing your funds. I am also prepared to work with you regarding the personal liabilities covered under the Directors [sic] Guarantees. I believe that this will enable everyone to obtain the best result from this difficult situation. Finally please forward all future correspondence in hard copy via mail to P O Box 7502 Bondi Beach NSW 2026.' 70 On 28 January 2004, the appellant said that he spoke to Mr Carden and informed him that he was 'staying with friends at unit 5, 10 Lamrock Avenue'. 71 Mr Carden did not deny that conversation took place. Indeed, he did not address that assertion in his evidence at all. The Federal Magistrate found that the appellant made that statement. In the absence of any evidence to the contrary, that finding was inevitable. It follows that the respondent was on notice as at 28 January 2004 that the appellant was then living at Unit 5, 10 Lamrock Avenue. That unit was, of course, in the same street as the Bondi Beach property. The respondent was also on notice that the appellant was staying with friends. 72 The appellant contended that the emails sent by the appellant to the respondent and to Mr Carden during the period 21 to 23 January 2004 refer to a PO Box address for SCA, a fax and phone number. The second email, sent on 22 January 2004 and referred to above, also provided a mobile phone number for the appellant. The email of 23 January 2004 requested all correspondence to be forwarded to a PO Box at Bondi Beach. None of the emails disclosed where the appellant was then living. 73 It is true that the emails give a mobile telephone number (0414 646 777), a landline telephone number (9363 0555), a facsimile number (9363 4666), an email address () and a Post Office address (PO Box 7502, Bondi Beach NSW 2026). With the possible exception of the mobile telephone number, the respondent knew all of that information. It was contained in the original application for a trade finance facility. The electronic and telegraphic addresses, and the Post Office address, were SCA's addresses. The mobile phone number was also on the letterhead of SCA. 74 On 4 February 2004, the respondent served a demand on the appellant pursuant to cl 3.2 of the Guarantee, for the payment of $1,480,801.83 owing by SCA under the Buyer Agreement. The demand was in the following terms: 'Under a deed of guarantee and indemnity in writing dated 20 March 2003 ("Guarantee"), you guaranteed the obligations of Select Commodities Australia Pty Ltd under a buyer agreement dated 20 March 2003 ("Buyer Agreement"). As at 4 February 2004, an amount of $1,480,801.83 is owing pursuant to the Buyer Agreement ("Amount Owing"). Pursuant to clause 3.2 of the Guarantee, we require you to immediately pay or caused to be paid to the Amount Owing by close of business on Wednesday 11 February 2004. If you do not pay the Amount Owing prior to or at the above mentioned time, we will instruct our lawyers to commence enforcement proceedings against you. Payment may be made into the following account: Bank: WBC Branch: Cnr King & Castlereagh Streets, Sydney BSB: 032 007 Account No. 24 4717 We now enclose the following for your attention: Certificate pursuant to clause 28.1 of the Guarantee; Copy certificate under clause 21.7 of the Buyer Agreement served on the Company.' 75 Two certificates, dated 4 February 2004, accompanied that demand. Both certificates were signed by Mr Carden. One certified that the amount payable by SCA as at 4 February 2004 was $1,480,801.83. The other certified that the amount payable by the appellant under the Guarantee was in the same amount. 76 Notwithstanding that the demand required payment by Wednesday, 11 February 2004, the appellant accepted, both before the Federal Magistrate and on this appeal, that the debt arose on 4 February 2004. 77 According to an affidavit of Mr Carden sworn on 21 June 2004, the amount owing under the Guarantee as at that day was $830,590.22. The reduction in the amount owing followed two payments by SCA of $200,000 and $300,000 on 5 and 9 February 2004 respectively. A further amount of $1500 was applied to the debt following sale of office furniture. 78 On 5 February 2004, Mr Carden attended the premises of SCA at 15 Cross Street Double Bay for the purposes of serving the demand under the Guarantee on the appellant. A representative from the offices of the receivers of SCA was present. Up until this time, the appellant had attended at SCA's premises and rendered assistance to the receivers. 79 An exchange occurred between Mr Carden and the appellant, during which Mr Carden expressed his disappointment with the course of events and, in particular, the appellant's 'punting on futures with money that was supposed to be paid directly to Exelerate.' 80 Mr Carden deposed to the following conversation: 'I said: "… Before Exelerate made its recent offer of funding to you, you supplied Exelerate with information about your business and you represented that the only price risk in this business was cottonseed price risk. You further represented that any other risks such as currency risks were hedged out and we told you we would not support a business that did not hedge its currency risks. You misled me. You obtained a financial advantage from me by deceiving me. You misled me and then tried to get rich quick on the markets. I'm not happy about that but you can still do the right thing. You can work to repay us. So what are you going to do with your creditors if you are legitimate about this? What about the money you gave to your mother?" Puels said: "I owed her the money. I didn't know about anything to do with other creditors and my obligations." I said: "Well how much have you got now?" Puels said: "About $3,000." I said: "What happened to the $100,000 you told me you had last week. Where is it?" Puels said: "I don't know. I've got seven bank accounts. I don't know what is in them. How can I help you?" I said: "Well write me out a cheque. Get your mother to write out a cheque too. You have got a problem on your hands. I will never leave you alone until you repay Exelerate's money." Puels said: "I'm going overseas next week. I need a holiday." I said: "Rupert, where do you live? I need to know where you live because I need to serve you with a notice of bankruptcy." Puels said: "I don't know where I live. I live with friends." I said: "What is your address Rupert? Stop avoiding me and your financial responsibilities." Puels said: "I don't know where the friends live. I stay with friends. If you need me you can call my mobile." 81 He said the appellant then looked at his mobile telephone and said, 'I have a call'. The appellant then quickly left the room. Mr Carden did not see him again before the issue of the bankruptcy petition. 82 Prior to leaving SCA's premises on 5 February, the appellant handed over his keys to those premises to the receivers. The locks were changed that day. 83 In his affidavit sworn on 24 May 2004, in opposition to the respondent's petition the appellant denied that Mr Carden said: 'You further represented that any other risks such as currency risks were hedged out and we told you we would not support a business that did not hedge its currency risks. You misled me. You obtained a financial advantage from me by deceiving me. You misled me and then tried to get rich quick on the markets.' 84 He said that he told Mr Carden he had 'several' bank accounts not 'seven'. More importantly, he said: 'I deny having a conversation to the effect set out in the last three sub-paragraphs. I gave Philip Carden the address of where I was staying in late January 2004.' 85 He then referred to paragraph 12 of his affidavit. That does not appear to be relevant. It was probably intended to be a reference to paragraph 16 in which he deposed to having told Mr Carden on 28 January that he 'was staying with friends at Unit 5, 10 Lamrock Avenue'. However, notwithstanding his affidavit evidence in which he denied any conversation of the kind deposed to by Mr Carden in those last three sub-paragraphs, in the course of cross-examination, the appellant substantially admitted the accuracy of Mr Carden's recital. 86 The appellant said in cross-examination that at the time he had the conversation with Mr Carden, he still had a significantly larger amount of cash funds. He said that he did not understand Mr Carden to be asking him how much cash he could access, but rather, what was immediately available to him. 87 Whilst he maintained his denial that Mr Carden said, 'You further represented that any other risks such as currency risks were hedged out and we told you we would not support a business that did not hedge its currency risks', he did not deny that Mr Carden said, 'You misled me. You obtained a financial advantage from me by deceiving me'. 88 He repeated that he told Mr Carden he had 'several bank accounts', not 'seven'. He denied mentioning anything about an overseas holiday. 89 Because of the importance of this part of the conversation, it would be appropriate to set out the more important aspects of his cross-examination: 'MR ROBB: During this discussion on the 5th when you said to Mr Carden that you owed your mother money he said to you, "Well, how much have you got now?". He asked you that, didn't he? MR PUELS: Yes. MR ROBB: You said, "About $3000"? MR PUELS: Yes. MR ROBB: Then he said, "What happened to the hundred thousand dollars you told me you had last week, where is it"? He said that. MR PUELS: Yes. MR ROBB: By this time, 5 February, you still had a lot of the $155,000 odd cash that you were given, didn't you? MR PUELS: Yes. MR ROBB: So when you told him about $3000 that wasn't the truth, was it? MR PUELS: I only had $3000 available at that point right there and then. MR ROBB: What do you mean, in your trouser pocket? MR PUELS: Well, not in my trouser pocket but readily available. The money was actually in Melbourne. MR ROBB: You knew full well, however, that he was asking you how much cash you had access to? MR PUELS: I didn't know at that time. I made that clear to him previously. MR ROBB: Anyway, he asked you, "What happened to the hundred thousand dollars you told me you had last week, where is it", and you said, "I don't know, I've got seven bank accounts, I don't know what is in them, how can I help you"? MR PUELS: I said several bank accounts. MR ROBB: So you didn't say seven bank accounts, you say you said, "I've got several bank accounts"? MR PUELS: Yes. MR ROBB: But you did tell him you didn't know where the money was? MR PUELS: Yes. MR ROBB: He said, "Well, write me out a cheque, get your mother to write out a cheque too, you have got a problem on your hands, I will never leave you alone until you repay Exelerate's money". He said that to you? MR PUELS: He may have said that, yes. MR ROBB: When he said that you realised he was deadly serious? MR PUELS: It seemed that way, yes. MR ROBB: He was taking the position that you having caused the value of your home to be substantially repaid on debts supposedly owed to your mother, Mr Carden was taking the position that that was money that should be available to your creditors generally? MR PUELS: I don't know if that's what he was doing. He may have been, yes. MR ROBB: You knew at that point that he expected you to assist him to obtain that money for your creditors and it was obvious, I put it to you? MR PUELS: It wasn't obvious what he wanted me to do to obtain that money. He would've liked my assistance, yes, of course. MR ROBB: You said, "I'm going overseas next week, I need a holiday"? MR PUELS: No, I didn't say that. MR ROBB: He said, "Rupert, where do you live, I need to know where you live because I need to serve you with a notice of bankruptcy". He said that, didn't he? MR PUELS: He may have said that. MR ROBB: And you said, "I don't know where I live, I live with friends"? MR PUELS: Well, I wasn't living anywhere permanently at that stage. MR ROBB: But you did have a place to go home to albeit it with friends? MR PUELS: Words to that effect, yes, and I did have a place to go to, yes. MR ROBB: He asked, "What is your address, Rupert, stop avoiding me and your financial responsibilities"? MR PUELS: He said that. MR ROBB: You said, "I don't know where the friends live, I stay with friends, if you need me you can call my mobile"? MR PUELS: Yes. MR ROBB: At that point you looked at your mobile and said, "I have a call"? MR PUELS: The phone rang, yes. MR ROBB: Who was it who called you? MR PUELS: Benjamin Kirkpatrick. MR ROBB: He's a fellow who's sworn an affidavit in this matter and he's a friend of yours? MR PUELS: Yes. MR ROBB: You left the room quickly? MR PUELS: To take the call, yes. MR ROBB: You didn't return? MR PUELS: I was standing at the doorway when I took the call. MR ROBB: You didn't leave through the front door, did you? MR PUELS: There's only one door to the office. MR ROBB: You went out a back door into a lane to where you [sic] car was parked, didn't you? MR PUELS: There's only one door to the office. I left the office through the office door and the building's got several exits. I left through the exit most directly to the car park. MR ROBB: You left, didn't you, because you didn't want to continue to be in the position where Mr Carden was expecting you to assist him in relation to getting in your assets in order to repay the debts that you owed to your creditors? MR PUELS: No, that's incorrect. MR ROBB: There was no other reason, was there? MR PUELS: There was [sic] other reasons. MR ROBB: It was right in the middle of a conversation you were having with Mr Carden, wasn't it? MR PUELS: No, I don't believe so. MR ROBB: What were the other reasons? MR PUELS: The circumstances surrounding the visit to the office were that I was to arrange for the furniture to be removed and Mr Carden was there during that time. There was an issue with payment of the money for the furniture, which had been paid, and I was speaking to Benjamin Kirkpatrick who bought the furniture to ask him to re-send the fax to the office next door. He then said - I told him that the furniture removalists were there and that they were going to take the furniture out once the fax had gone through and that I needed to get a key off Ben to go to his house where the furniture removalists would go to unload the furniture for him, on his behalf. MR ROBB: You knew when you walked out that Mr Carden hadn't finished asking you in relation to the assistance you might give him in relation to making available money for your creditors? MR PUELS: No, that's not correct. It's not correct. MR ROBB: You left peremptorily, didn't you? MR PUELS: Sorry, I didn't understand the word. MR ROBB: Well, you left immediately because the going was getting hot? MR PUELS: He was abusive, yes.' 90 Importantly, contrary to his affidavit evidence, he agreed that he said words to the effect that he did not know where he was living and he was living with friends. He also said 'if you need me you can call my mobile'. There was no attempt to reconcile those contradictions with his affidavit evidence by any re-examination. 91 The appellant's case before the Federal Magistrate and on appeal was that on 5 February he was living with friends at 5/10 Lamrock Avenue. There are factual difficulties with that case which I shall address shortly. 92 However, if it is assumed that he was living at that address it is difficult to understand why he gave the answer that he did not know where he was living unless it was to mislead Mr Carden. 93 Curiously, he was not questioned about his knowledge of the falsity of this statement. However, it can be inferred that what he said was not only false but also deliberately so. If he was living at 5/10 Lamrock Avenue, as he argues on this appeal, there can be no question that he knew where he was living. He was living in the same place as he advised Mr Carden on 28 January. It was in the same street as the Bondi Beach property. 94 The question in this case is whether what he said and what he did, coupled with his further actions between 5 February and 10 February, allow it to be said that he otherwise absented himself within the meaning of the Act. 95 Mr Carden deposed to attempting to contact the appellant by calling his mobile phone once on 5 February 2004 and on numerous occasions thereafter. He said he left several messages on the appellant's voice mail. In an affidavit sworn on 2 April 2004, Mr Carden further deposed that since 5 February 2004, he had attempted to contact the appellant on his mobile phone and had left approximately three voice mail messages per week. Mr Carden described using words to the effect of: 'Rupert you are avoiding Exelerate's attempts to contact you, you are avoiding your obligations, your obligations are not going to go away, so I suggest you make an effort to deal with your creditors, please call me back.' 96 As at 4 March 2004, Mr Carden said that he had not received any return calls from the appellant. 97 The appellant's evidence was that, in the period of 5 February 2004 to 15 February 2004, he received only two telephone messages from Mr Carden and that they were both 'extremely abusive'. 98 The appellant did not deny that the messages which Mr Carden left were in the form deposed to by Mr Carden. 99 In those circumstances, his evidence that the messages from Mr Carden were extremely abusive could not be accepted. 100 On 10 February 2004, the bankruptcy petition set out in par [3] issued. 101 William Smythe, a process server, deposed that he attempted to serve the appellant with the creditor's petition at unit 3/22 Lamrock Avenue on several occasions. On the first occasion, he spoke with the occupant of unit 2 before knocking on the door at unit 3. No one at unit 3 responded to his knocking. 102 On 24 February 2004, at approximately 8:15pm, Mr Smythe again attempted to serve the appellant. His evidence was that a male voice responded to his knocks but the door was not opened. 103 Mr Smythe did not depose to any attempt to serve the appellant at 5/10 Lamrock Avenue. 104 On 8 March 2004, Mr Carden was told that the appellant had called and left a message for Mr Carden to return his call. Mr Carden returned the call immediately. The call went through to the appellant's voice mail and Mr Carden left another message. 105 On 9 March 2004, the appellant contacted Mr Carden. They had a conversation of approximately 40 minutes duration. Mr Carden claimed that the appellant notified him during the course of that conversation that he was in Queensland. The appellant had in fact been in Queensland since 3 March and remained there until 11 March 2004. 106 Mr Carden asked the appellant whether he intended to honour his obligations to the respondent, to which the appellant replied that he would be unable to repay the $1.4m. Mr Carden deposed to the following exchange with the appellant: 'I said: "You told me you could not remember when you had sold your house. Then when I told you that we could search the records and find out when the house was sold you told me you sold the house last week. Then you told me you did not know where the money from the house had gone and then you told me you had given the proceeds of the house sale to your mother and kept $100,000.00 for yourself. Then a week later you told me that you had only $3,000.00. Do you know who you sold the house to Rupert?" Puels said: "I don't know who I sold my house to." I said: "Well Rupert, I know who you sold your house to because we have searched the land titles office and found out that you sold your house to a trust controlled by your mother and father." Puels said: "All I know is my mother was involved in buying my house but I don't know who the actual buyer is. Is it a trust? I don't know what vehicle my mother used to buy the house so I can say I don't know who bought the house so I am not a liar. My parents are not very happy with me at the moment." I said: "Rupert, it is plainly obvious that you have taken deliberate, premeditated action to move assets into trusts controlled by your mother so you can defeat creditors. If you don't come to Exelerate and resolve this situation Exelerate will take every and all action under the law to ensure that those transactions are voided and the money is returned to creditors." Puels said: "You're just hell bent on bankrupting me. I have no money. I can't do anything. I want to come to an arrangement with you but I don't have $1.4 million so I can't do anything."' 107 Later in the conversation, Mr Carden said that he asked the appellant whether he still lived at 3/22 Lamrock Avenue. The appellant replied that he did not and that he lived with friends. The conversation continued: 'I said: "Well then, Rupert, tell me where the friends live so I can serve documents on you at your friends' address." Puels said: "Frenchs Forest and Lamrock Street." I said: "What is the actual address of your friends where you are living?" Puels said: "I don't know the streets or the street numbers, I only know how to get there. I don't need to tell you where I live. You tell me where you live?"' 108 The appellant agreed that a conversation took place and that this topic was addressed. The appellant deposed that he said to Mr Carden 'I only know the name of the street off hand, not the numbers. I told you ages ago anyway. I don't know where I sleep from night to night …' 109 Mr Carden said that the following further exchange occurred: 'Puels said: "… I have to find somewhere to sleep. I don't know where I'm going to sleep from night to night." I said: "Where are you right now Rupert, tell me where you are right now and I'll get somebody to meet you in the next half hour and serve the documents on you at your current location. You just tell me where you are now." Puels said: "I don't know. I'm in Queensland somewhere. I'm coming back to Sydney in the next few days and I'll call you." I said: "This is the sort of thing that shows you have no respect for your creditors, Rupert. There you are up there sitting on the beach sunning yourself when you should be down here working hard to repay your creditors. But no, what are you doing, sunning yourself on our money. How can you afford to go on holidays, how did you get there?" Puels said: "I'm working as a pizza delivery boy in Sydney at Danny's La Bussola and I drove up here and I'm driving back in a few days. I'm under a lot of stress."' 110 Whilst the inquiry in this case is whether the appellant absented himself between 5 February and 10 February, Mr Carden's evidence of the conversation with the appellant on 9 March is relevant for the purpose of that inquiry. 111 It can be seen that the appellant again refused to state where he was living. Again, he said that he did not know the street or the street numbers. 112 That statement was false and made deliberately. 113 The appellant returned to Sydney on 11 March 2004 and, on or about 13 March 2004, commenced living at 14A Ashley Street, Bondi on an informal basis. On 19 March 2004, the appellant agreed with the principal tenant of those premises to rent an apartment at the rear of the property. 114 On 16 March 2004, the appellant received via his post office box, a letter from the respondent's solicitors dated 10 March 2004 enclosing a copy of the creditor's petition filed on 10 February 2004. Sometime between 22 January 2004 and 5 February 2004, the appellant had organised for his mail to be redirected to his post office box. 115 On 17 March 2004, Mr Carden had a further conversation with the appellant during which the appellant indicated that he had received documents from the respondent's lawyers. Mr Carden said that the appellant said: 'Look mate, if I want to sell my house to mum and then give the proceeds to mum then that's my business. I run my own business affairs and there is nothing wrong with what I have done in relation to my assets. They are my assets and I sold them to my mum and that's fine.' 116 The appellant denied saying 'then give the proceeds to mum', but agreed generally with the substance of that conversation. 117 The appellant's case was that his mother asked him to leave the Bondi Beach property on 20 January 2004. In her affidavit, the appellant's mother said that she had a telephone conversation with the appellant on 19 January and said words to the following effect: 'Dawn: What's happening now? I don't think that you've kept us informed about how serious this is. Rupert: The books don't look good and we are going to be selling up everything. Dawn: I'm very upset and distressed, and so is your father. We want you to move out of the unit right away. Rupert: I'm moving down the road.' 118 That evidence corroborates the appellant. The appellant's mother was not cross-examined on her affidavit. 119 The appellant read an affidavit of Charmian Orr, who was in a relationship with the appellant at the relevant time. She said that she and the appellant moved out of the Bondi Beach property in mid to late January 2004 and the appellant went to stay with friends at 5/10 Lamrock Avenue, Bondi. She went to stay with other friends. 120 She said that in mid February 2004 she moved back into the Bondi Beach property after coming to an arrangement with the appellant's mother to stay at the unit for a short time. She remained for about two weeks. 121 Ms Orr went to Queensland with the appellant in early March 2004. She said that when they returned from Queensland, the appellant stayed at 5/10 Lamrock Avenue for a short period of time until he moved into 14A Ashley Street in mid to late March 2004. 122 The appellant read an affidavit of his solicitor to which were exhibited a number of statements from acquaintances of the appellant. No objection was taken to that course. 123 In a statement exhibited to the appellant's solicitor's affidavit, Dale Cosgrove said that he occupied the premises at 3/22 Lamrock Avenue, Tamarama (which I presume to be the Bondi Beach property) between 23 January and 28 January, and the appellant was not in occupation at that time. Miho Tanaka also provided a letter which was also exhibited to the solicitor's affidavit. In that letter she said that she occupied the Bondi Beach property between 2 March and 16 March. She wrote that the only other occupant was the appellant's mother. 124 A letter dated 25 May 2004 from a Mr Adrian Banks to the appellant's solicitor was exhibited to the appellant's solicitor's affidavit. In that letter, Mr Banks wrote: 'Rupert has been a close personal friend of mine for the last 2 years having lived just a few doors up the street from me. In January of 2004 Rupert and I had a conversation regarding his problems with his company Select Commodities Australia Pty Ltd and his living arrangements. Rupert said, "Things have gone pretty bad against me at work Ado and now mums [sic] asked me to leave Lamrock Ave. Is there any chance I can crash at your place for a while until I can get things sorted out?" It was clear from this and various other conversations we had later that Rupert was very distressed at this time. I agreed for him to stay indefinitely and gladly gave him a set of keys to the apartment located at 5/10 Lamrock Avenue, Bondi Beach NSW 2026. I confirm that from the end of January until early March 2004 Rupert stayed several nights per week and spent most days in the apartment. From my observations whilst at the apartment Rupert always answered the phone and door unless one of the other occupants did so first.' 125 It was, as I have said, the appellant's case that he was living at 5/10 Lamrock Avenue, Bondi Beach during the period between 5 February and 10 February and was, in those circumstances, not absenting himself. 126 Whilst that was his case, he gave no evidence to that effect. He did not say in his affidavit or in cross-examination that he lived at those premises during that time. 127 He said in his affidavit that on or about 20 January , soon after the transfer of the Bondi Beach property, he moved to 5/10 Lamrock Avenue, Bondi to stay with friends whilst looking for more permanent accommodation. 128 He said that he worked weeknights delivering pizzas. On some nights he slept in his car because he did not want to disturb the other people in the unit in which he was staying. 129 He said that during the day he usually stayed in the Bondi area, often in a coffee shop directly below 5/10 Lamrock Avenue. He said that between 20 January 2004 and 19 March 2004 he also sometimes stayed at 14A Ashley Street. 130 The appellant read an affidavit of Ben Kirkpatrick, who is a friend of the appellant's and resides at 14A Ashley Street. He said that the appellant stayed overnight at 14A Ashley Street perhaps a dozen times between 20 January 2004 and mid March 2004. In mid March 2004 the respondent moved to 14A Ashley Street permanently. 131 The appellant has deposed that he was staying at 5/10 Lamrock Avenue between 11 and 15 February 2004. He said that he was not residing at the Bondi Beach property over the period 24 to 28 February 2004. 132 However, nowhere does he say where he was living between 5 February 2004 and 10 February 2004. In my opinion, the failure by the appellant to give that evidence is critical. 133 In the absence of any evidence to that effect from the appellant or his witnesses, it is not possible to make a finding that he resided at that address during that period. 134 The appellant could not have misunderstood the importance of that evidence. In par [4] of these reasons, I have referred to his Notice of Intention to Oppose Petition. In that Notice, he pleaded that in mid January 2004 he moved from the Bondi Beach property to 5/10 Lamrock Avenue, Bondi. 135 That was his defence. He simply did not lead evidence to make out that fact. 136 He also said in that Notice of Intention to Oppose Petition that he gave notice to the respondent that he had moved to that address on 26 January 2004 in a telephone conversation with Mr Carden. 137 I think it can be understood that the date pleaded is an error and the conversation, as I have referred, took place on 28 January 2004. 138 There is another omission in the evidence. 139 As I have already observed, Mr Carden did not deny that the appellant told him on 28 January that the appellant was living at 5/10 Lamrock Avenue. 140 The respondent's case was that the appellant's statement on 5 February 2004 was designed to and did mislead Mr Carden in relation to the appellant's then address. It was the appellant's case that because he told Mr Carden that he did not know where he was living, Mr Carden should have assumed that the appellant was still residing at 5/10 Lamrock Avenue because nothing had been said to alter the fact that the last communicated address was 5/10 Lamrock Avenue. 141 It might be inferred from what was said in the conversation on 5 February 2004 that Mr Carden could not have thought that the appellant was still living at 5/10 Lamrock Avenue. However, Mr Carden was never asked by his counsel, or in cross-examination, whether what he was told on 5 February 2004 led him to believe that the appellant was not residing at 5/10 Lamrock Avenue. 142 It was conceded by the respondent on appeal, that it would have been better if Mr Carden had been asked to give direct evidence of those matters. 143 However, the respondent argued that, notwithstanding the absence of that evidence, the Court should proceed upon the basis that the appellant's words on 5 February were designed to and did mislead Mr Carden. 144 Raphael FM made the following findings concerning the events of 28 January and 5 February 2004: '8. After the conversation deposed to above had taken place (but before Mr Carden felt that it had ended) the debtor took a call on his mobile telephone. He walked out of the room in which the conversation was being held and then out of the backdoor of the premises. Mr Carden deposes to the fact that he has not seen the debtor since but that he attempted to get hold of him on his mobile phone on a number of occasions thereafter without success. The debtor agrees that he left the office out of a back door and that he got in his car and drove away. He agreed that he had not been of any assistance after that to the receivers and had not provided a Return of Affairs to them. He claimed that he did not know Mr Carden wished to talk to him and that he didn't do anything to avoid a situation which might result in him being requested to ask his parents and Ms Cardillo to repay the moneys given to them on the sale of property. The debtor claimed that he left the meeting because he felt that Mr Carden was being abusive. Mr Carden said that he had rung the debtor on four or five occasions, sometimes he left messages, sometimes the phone just rang out. On 28 February [sic] 2004 the debtor informed Mr Carden in a telephone conversation that he was living at 5/10 Lamrock Avenue Bondi. This statement was contained in his affidavit and was not challenged under cross examination. Mr Carden did not speak to Mr Puels again until 9 March.' 145 The conversation at [70] is the conversation to which the Federal Magistrate is there referring. The Federal Magistrate has incorrectly referred to a conversation on 28 February. That is simply a mistake and nothing turns on it. Later he refers to that conversation as occurring in late January. He said: '15. But it seems to me that there are differences between these cases. Firstly, the "absenting" consisted not of the debtor leaving his home but of walking out of the meeting with Mr Carden and then not making himself further available until March after the issue of a petition. I accept that the debtor made known to the creditor that he had moved out of his former home at Unit 3/22 Lamrock Avenue and into 5/10 Lamrock Avenue in late January but given the answers made by the debtor to the creditor on 5 February 2004 about his whereabouts, the creditor could not be sure that he was still there and available. To tell someone who you know has a considerable interest in wanting to know where you can be found that you are unable to remember the address of a unit only a few houses down the road from one you have occupied for many years and expect them to believe you can readily be considered disingenuous. I do not think that the debtor has put himself into the Re Walshe position; rather he falls within that of Alice Alderson in that he told the creditor that he could not remember his address "lest a messenger should be sent who might see him and serve him with process." Re Alderson at [188].' 146 The Federal Magistrate has made four important findings. First, that between 22 January and 28 January the appellant did not disclose to the respondent where he was then living. He provided the respondent with electronic and telephone addresses but no physical address. Secondly, the appellant did tell Mr Carden on 28 January that he was living at 5/10 Lamrock Avenue and that he no longer lived at 3/22 Lamrock Avenue. That finding is not challenged. Thirdly, because he accepted the conversation occurred in the terms deposed to by Mr Carden, that on 5 February the appellant told Mr Carden that he did not know where he lived; that he lived with friends; that he did not know where his friends lived; and that he could be contacted on his mobile. That finding is also not challenged. Fourthly, the appellant had made known to the respondent in late January that he had moved into rented premises at 5/10 Lamrock Avenue but that, subsequent to the conversation on 5 February 2004, Mr Carden, and therefore the respondent, could not be sure that the appellant was still residing at that location. 147 The Federal Magistrate made no findings about the conversations which occurred after the issue of the bankruptcy petition and to which I have referred. 148 The effect of the Federal Magistrate's findings is that the appellant's statements on 5 February would have led anyone to believe that he was no longer at the address given on 28 January. 149 The Federal Magistrate made the following further findings in relation to the appellant's conduct after 5 February: '16. The failure to advise the creditor of the debtor's address was compounded by him not responding to calls on the mobile telephone, which was the only source of contact then available to the creditor. True it is that the debtor had sent e mails giving a post office box, a telephone and a fax number but these were clearly associated with SCA and the creditor knew that the receivers had closed the business down. The creditor was not to know that the applicant had made efforts to have mail transferred from the business address to that post office box or that he was, between 5 February and the time the petition was filed, likely to attend and remove items from the post office box. In that situation the failure of the debtor to respond to calls upon his mobile telephone is sufficient to satisfy me that I can find, consistent with the authorities, that the applicant absented himself. I am also satisfied that whilst the debtor may have decided to become incommunicado because of the pressure being placed upon him by the creditor he was well aware that in doing this he was delaying the creditor in its attempt to seek recovery. I am entitled to draw this inference from the facts and in particular from the fact that the debtor did not make an honest declaration of his financial situation to the creditor when asked in that he hid the existence of cash moneys paid to him by his mother. This, to my mind, would tend to indicate that in him going incommunicado he sought [sic] delay the creditor and that was his purpose.' 150 In the result, the Federal Magistrate found that the appellant absented himself. First, by telling Mr Carden contrary to what he had told Mr Carden on 28 January that he did not know now where he lived; secondly, by abruptly leaving the meeting on 5 February; and thirdly, by failing to respond to telephone calls between 5 February and 10 February. 151 On this appeal, the appellant argues that the Federal Magistrate erred in finding that the appellant had walked out of the meeting with Mr Carden on 5 February and, thereafter, did not make himself available until March, after the issue of the petition. The appellant argued that he was under no obligation to remain at the premises at all. Mr Carden had become abusive and the appellant believed the meeting had come to an end. He received a telephone call and he was entitled to leave. 152 It is not to the point, in my opinion, that the appellant was not under an obligation to remain at the meeting. That can be accepted. 153 In my opinion, there was ample evidence, to which I have referred, which allowed for the finding made by the Federal Magistrate that the appellant walked out of the meeting with Mr Carden. The evidence is that he left abruptly. He gave as an excuse that he had received a telephone call. The appellant asserted in answers to cross-examination before the Federal Magistrate that his telephone rang but, even if he did receive a telephone call, the Federal Magistrate was still entitled to find that he walked out of the meeting. 154 In my opinion, the Federal Magistrate was also entitled to find that thereafter he did not make himself available to Mr Carden. 155 The appellant did not give evidence, as I have already noted, that he lived at 5/10 Lamrock Avenue between 5 February and 10 February. His evidence was that on many occasions he slept in his car; he stayed in a coffee lounge; and, on 10 or 12 occasions, he stayed at 14A Ashley Avenue. 156 In my opinion, the Federal Magistrate was quite entitled to make the finding that he did. 157 The appellant argued that the uncontroverted evidence was that he had told Mr Carden on 28 January that he was living at 5/10 Lamrock Avenue. The Federal Magistrate accepted that evidence and made that finding. 158 The appellant argued, therefore, that Mr Carden knew that he was living at that address at all times between 5 February and 10 February 2004. 159 For the reasons I have already said, there is no evidence that he was living at that address during that time. 160 Moreover, the appellant's statement on 5 February to Mr Carden that he did not know where he was living contradicted his earlier statement to Mr Carden that he was living at 5/10 Lamrock Avenue. 161 It would have been better, as the appellant's counsel frankly conceded, if Mr Carden had addressed this matter in his evidence. 162 However, the Federal Magistrate was still entitled to find, on the evidence, that what was said on 5 February 2004 would have led any person who was acquainted with the previous information to believe that the appellant no longer lived at that address. 163 In my opinion, the appellant has not demonstrated any error in the findings made by the Federal Magistrate. There was evidence to support all of the findings. In my opinion, not only has no error been demonstrated but the evidence clearly supports the findings made. 164 However, the appellant argued that, even if those findings stood, the Federal Magistrate had fallen into error in concluding that the appellant had absented himself within the meaning of the Act.

Puels v Exelerate Funding Pty Limited

At a glance

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Before

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Judgment (11 paragraphs)

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Legislation Cited (2)

Cases Cited (5)

Cited By (2)