10) } soy iid EG oe. ere veu earned Cosceureone® CATCHWORDS Jub iniens os Bankruptcy - creditor's petition ~- act of bankruptcy relied upon being notice to petitioning creditor that the debtor had suspended or that he was about to suspend, payments of his debts - casual conversation in hotel bar between petitioning creditor's manager and debtor - whether intention to suspned payment of debts as they became due and whether such intention was communicated to the petitioning creditor. Bankruptcy Act 1966 (Cth.) s. 40 (1) (h) RE: KEITH RICHARD MULLEY EX PARTE: AUSTRALIAN GUARANTEE CORPORATION LIMITED - NO. P. 302 OF 1979 LOCKHART J. 13 NOVEMBER 1979 AT SYDNEY IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF No. P 302 of 1979 NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY IN THE MATTER OF THE BANKRUPTCY ACT 1966 AND IN THE MATTER OF CREDITOR'S PETITION RE KEITH RICHARD MULLEY ex parte Australian Guarantee Corporation Limited ORDER JUDGE MAKING ORDER: LOCKHART J. DATE OF ORDER: 13 November 1979 WHERE MADE: SYDNEY THE COURT ORDERS _ THAT: 1. <A sequestration order be made against the estate of the debtor. 2. Costs, including reserved costs and costs of all proceedings in this matter before any judge of the court, be taxed and paid according to the Act. 3. <A draft of this order be delivered to the registrar within seven (7) days in accordance with rule 124 (2). — IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF No. P. 302 of 1979 NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY IN THE MATTER OF THE BANKRUPTCY ACT 1966 AND IN THE MATTER OF CREDITOR'S PETITION RE KEITH RICHARD MULLEY Ex parte Australian Guarantee Corporation Limited REASONS FOR JUDGMENT 13 NOVEMBER_1979 LOCKHART J. This is the hearing of a petition for sequestration of the estate of Keith Richard Mulley. The act of bankruptcy relied on by the petitioning creditor is that the debtor on 19 October 1978 gave notice to the petitioning creditor that the debtor had suspended, or that he was about to suspend, payment of his debts: section 4o (1) (nh) of the Bankruptcy Act 1966 ("the Act"). To constitute the act of bankruptcy there are. two basic requirements. First, the debtor must have the intention of suspending payment of his debts as they become due. Proof that he intends to refuse to pay his debts as they become due generally is sufficient evidence of the requisite intent. Second, that intention must be communicated to at ~-/2 least one of the debtor's creditors. As to both requirements, see Cropley's Limited v. Vickery (1919-1920) 27 C.L.R. 321 per Knox C.J. at p. 3253 InreA Debtor (1929) 1 Ch.D. 362. It is sufficient that the debtor intends not to pay his debts as they fall due and gives requisite notice of that intention notwithstanding that the reasons for his decision is that any other course would be futile: see Re Hewson; Ex parte Sydney Stock Exchange Limited (1967) 10 F.L.R. 479. It is not necessary that the notice of the debtor's intention to suspend payment of his debts be communicated to a formal meeting of creditors, but generally it must not be given merely as a haphazard or casual com- munication: see In re Lamb, Ex parte Gibson & Bolland 4 Mor. Rep. 25, per Bowen L. J. at p.32 and Re Hewson; Ex parte Sydney Stock Exchange Limited (supra). The notice of intention to suspend need not be in writing. An oral notice will be sufficient: see Ex parte Nickoll. In re Walker (1884) 13 Q.B.D. 469. The act of bankruptcy contemplates the case of a debtor dealing with his creditors as a body and not merely with one or more individual creditor: see In re Scott. Ex parte Scott (1896) 1 Q.B.D. 619; In re Kidd, Fx parte The Official Assignee (1903) 3 S. R. (N.S.W.) 363, and Cropley's Limited v. Vickery (supra). The act of bankruptcy is available whether the creditors of the debtor are trade creditors or not: see In re Scott. Ex parte Scott (supra). Whether the statement of the debtor constitutes a notice of suspension of payment depends on whether the ---/3 -3- statement would naturally induce the creditor who received it to believe that the debtor intended to suspend payment of his debts: see Crook v. Morley (1891) A.C. 316; In re Kidd. Ex parte The Official Assignee (supra); In re A Debtor (supra). A mere admission of insolvency is not enough to establish notice of the requisite intent. It must be accompanied by words establishing the debtor's intention to suspend payment: see Re Pike, Ex parte The Official Assignee (1896) 17 L.R. (N.S.W.) B. & P. 34 per Manning J. at p. 38; Re Brady; Ex parte The Official Assignee (1898) 19 L.R. (N.S.W.) B. & P. 6; Re Kidd (supra);Inr A Debtor (supra). Where the debtor's words are capable of two reasonable constructions, the court must find in favour of the innocent one, as the consequences are penal, or quasi penal: see Re Kidd (supra). A statement to a single creditor by the debtor is not so readily construed as a notice of suspension as it would be if made to creditors generally: see Trustee of the property of Lord Hill v. Rowlands (1896) 2 Q.B.Di24 and Cropley's Limite v. Vickery (supra) per Rich J. at pp. 326 and 327. Whether the act of bankruptcy is established depends on the facts of each case. I turn to the facts. The petitioning creditor alleges that the debtor is indebted to it in the sum of $40,953.50. There is in evidence a copy of an agreement made on 17 July 1978 between the petitioning creditor and the debtor wherein the debtor acknowledged that he was indebted to the petitioning creditor in an amount in excess of $27,135.90. He agreed to pay the petitioning creditor the sum of $500.00 per month in reduction of his indebtedness, commencing on 14 August 1978. The debtor defaulted in certain of those payments. 26/4 -4- On 19 October 1978 a Mr. G. R. Matthews, the Canberra district manager of the petitioning creditor, went to the Knights Inn Tavern at Wanniassa in the A.C.T. to speak to the debtor. When he walked into the tavern the debtor was at the bar and Mr. Matthews asked him to join him for a drink. As drinks were being poured, Mr. Matthews said, "Can we have a chat?" To which the debtor said, "Yes". Mr. Matthews moved over to a table close by. As the debtor came from behind the bar he motioned Mr. Matthews to a table in the corner a slight distance away from the bar where they both sat down. Mr. Matthews said to the debtor, "How is the business going?". The debtor said: "Quite well." Mr. Matthews then said: "I am here to demand that you bring the present arrangement of $500.00 per month in reduction of your debt up to date. You now owe us $900.00." The debtor said: "I just do not have the money." Mr. Matthews said: "You are mad if you do not try and bring it up to date. If you keep the arrangement up to date we are unable to take any further action against you." The debtor said: "I cannot afford to pay $500.00 per month, I am only working here and I do not have any moneys to pay you. I simply do not have $900.00." Mr. Matthews mid: "Can you borrow it from someone to which the debtor replied, "No, I cannot." Mr. Matthews said: "Are you not a partner of the business?",. The debtor said, "No, I only work here. My mother and Geoff Cotterill own the business between them." Mr. Matthews said, "Well how can you afford to run a new Torana TR7 on lease?", 0/5 The debtor said, "I do not own the car. The business owns the car and I just drive it." Mr. Matthews mid, "Well, you leave us with no choice but to proceed to bankrupt you. Have you thought of the effect that would have on your wife and children?" The debtor said, "I cannot do anything about it. If I am made bankrupt it will only be for five years and then I will be out." Mr. Matthews said, "That is a fine attitude for aman in your position to take?" The debtor said, "I simply do not have any other choice." Mr. Matthews then left. Mr. Matthews has also given evidence of a conversation between himself and the debtor on 15 August 1979 at certain premises at Liverpool, New South Wales which I need not refer to in any detail except to say that Mr. Matthews asked him: "In October 1978 did you have any major debts apart from the bank" (this was a reference to Bank of New South Wales), to which the debtor replied: "I had a lot of smaller debts.' There is other evidence that on 19 October 1978 the debtor owed money to a number of creditors in addition to the petitioning creditor. This is the principal evidence relied on by the petitioning creditor to establish the act of bankruptcy. None of the decisions to which I was referred by Mr. Bennett, who appeared for the petitioning creditor, are based on facts similar to those in the present case. In my opinion the evidence establishes that the ~-./6 debtor intended on 19 October 1978 to suspend payment of his debts as they became due, and that such intention was communicated to the petitioning creditor. I reach this conclusion notwithstanding that the conversation between Mr. Matthews and the debtor was rather casual - in a bar of a tavern over drinks - as it was intended by both that the discussion relate to the financial position of the debtor including his ability to pay his debts. I am satisfied that the debtor committed the act of bankruptcy alleged in the petition, as amended. I am satisfied with the proof of the other matters of which section 52 (1) of the Act requires proof. I make a sequestration order against the estate of the debtor. I order that costs, including reserved costs and costs of all proceedings in this matter before any judge of the court, be taxed and paid according to the Act. I direct that a draft of this order be delivered to the registrar within seven (7) days in accordance with rule 124 (2). | certify that this and the preceding pages are a true copy ci the Reasons for Judgment herein of his Honour Mr. Justice Lockhart. Vien to Datea: / 3 Novewber 147 f ,