CATCHWORDS Bankruptcy — Creditor's petition - whether debtor is "able to pay his debts" Bankruptcy Act, 1966 - s.52(2)(a) Ronald Grafton Sarina Ex parte The Council of the Shire of Wollondilly No. P. 1900 of 1979 Coram: Deane J. Sydney 6 June, 1980. IN THE FEDERAL COURT OF BANKRUPTCY ) BANKRUPTCY DISTRICT OF THE STATE OF ) ) ) NEW SOUTH WALES AND THE AUSTRALIAN No. P. 1900 of 1979 CAPITAL TERRITORY RE: RONALD GRAFTON SARINA EX PARTE: THE COUNCIL OF THE SHIRE OF WOLLONDILLY oO R DE RS JUDGE MAKING ORDER: Deane J. DATE OF ORDER. 6 June, 1980 WHERE MADE: Sydney THE COURT ORDERS THAT: 1. The Petition be dismissed. 2. That the debtor pay to the petitioning creditor its costs of the proceedings up to and including the proceedings before the Court on 28 April, 1980. 3. That the amount of $2790 paid into Court by the debtor remain in Court for the period of twenty eight days from the date hereof. In the event that no appeal from the judgment and orders herein 1S instituted within that period, I DIRECT that that amount be paid out to the debtor Ronald Grafton Sarina. In the event such an appeal is instituted within that period, I_ DIRECT that the amount remain in Court and abide the order made by the Court disposing of that appeal or, in the event of no order in that regard being made by that Court, the further order of this Court. 4. That the exhibits be retained for the period of twenty eight days. In the event that no appeal is lodged within that period I ORDER that the exhibits be handed out to the parties tendering the same. IN THE FEDERAL COURT OF BANKRUPTCY BANKRUPTCY DISTRICT OF THE STATE OF ) ) No. P. 1900 of 1979 NEW SOUTH WALES AND THE AUSTRALIAN ) ) CAPITAL TERRITORY RE: RONALD GRAFTON SARINA EX PARTE: THE COUNCIL OF THE SHIRE OF WOLLONDILLY CORAM: Deane J. Friday 6 June, 1980. REASONS FOR JUDGMENT The Council of the Shire of Wollondilly ("the petitioning creditor") petitions the Court for a sequestration order against the estate of Ronald Grafton Sarina ("the debtor"). The act of bankruptcy upon which the petitioning creditor relies is the debtor's failure to comply with the requirements of a twenty one day bankruptcy -notice served on him on 18 October, 1979 and requiring the payment of the amount of $2289.88 due to the petitioning creditor under a final order of the Supreme Court of New South Wales. The amount in question represented taxed costs of an action between the petitioning ereditor and the debtor in that Court. It emerged upon the hearing that the debtor 1s also indebted to the petitioning creditor, in addition to the amount mentioned, in a total amount of $3728.85 representing the taxed costs of other proceedings between the parties. - The evidence led on behalf of the petitioning creditor satisfies me that the debtor committed the act of bankruptcy alleged and that, subject to matters raised by the debtor by way of opposition, a sequestration order in respect of the debtor's estate should be made at the suit of the petitioning creditor. The matters of opposition raised by the debtor, who appeared in person, can be conveniently summarized under three headings. These are (i) that he 1s "able to pay his debts" within the meaning of those words as used in s.52(2)(a) of the Bankruptcy Act, 1966 ("the Act'') and that, for that reason, a sequestration order should not be made, (i1) that he has cross actions or counter claims against the petitioning creditor in excess of the amount claimed; (211) that a sequestration order ought not be made "for other sufficient cause" (s.52(2)(b) of the Act). In support of these grounds of opposition, two affidavits of the debtor were filed. The first of these affidavits con~ tained a large body of material relating to disputes and litigat-— ion between the petitioning creditor and the debtor. Its contents were relied upon by the debtor to show the existence of the alleged cross actions and counter claims against the petitioning creditor and is the basis of his claim that "other sufficient cause" has been shown to warrant the Court 1n refusing to make a sequestration order pursuant to the provisions of s.52(2)(b) of the Act. It can be said at once that the evidence before me fails completely to satisfy me that the debtor has a cross action or counter claim against the petitioning creditor either exceeding or equalling the debts owing by him to the petitioning creditor. Indeed, I am not satisfied by the evidence that the debtor has any basis for any claim against the petition- ing creditor at all. The evidence also fails completely to satisfy me of the ground of opposition referred to in (111) above, that 1s to say, that there is "other sufficient cause" for refusing to make a sequestration order in accordance with the provisions of s.52(2)(b) of the Act. There remains for con- sideration the question whether I should refuse to make a sequestration order on the ground that the debtor is "able to pay his debts" within the meaning of those words as used in s.52(2)(a) of the Act. . Section 52(2) of the Act provides. "If the Court ts not satisfied wtth the proof of any of those matters, or is sattsfied by the debtor -- (a) that he ts able to pay his debts; or (b) that for other suffictent cause a sequestration order ought not to he made, tt may dismiss the petition". The "matters" referred to in the introductory words of the sub-section are those matters of the proof of which the Court is required to be satisfied by the provisions of s.52(1) before it may make a sequestration order. "It 1s not suggested on behalf of the petitioning creditor that, if I be satisfied that the debtor is "able to pay his debts" within the meaning of the words used in s.52(2), I should nonetheless make a sequestration order. Indeed, the petitioning creditor did not dispute that the word "may" used in the sub-section is, in the context of the introductory words and the provisions of clause (b), mandatory. The issue between the parties is whether the debtor 1s "able to pay his debts" 1n the relevant sense. The undisputed evidence plainly establishes that the debtor 1S solvent. He has more than $9000 either on hand or on bank deposit. He owns land estimated to have a total value of $800,000. With his wife, he jointly owns land of an estimated value of $200,000. Evidence was given that two blocks of land had recently been sold which would yield a net return to the debtor in excess of $17,000. In addition, as a condition of a previous adjournment, an amount of $2790 (representing the amount of the debt alleged to be owing in the petition and some $500 on account of costs) has been paid into this Court and 1s held awaiting the further order of the Court. Apart from moneys owing to the petitioning creditor, the debtor's only liabilities are in respect of land tax and council rates and total approximately $10,000. In the words of Lord Hanworth M.R. in In re Dyson (unreported, quoted in 3 Halsbury Laws of England, 4th Edition, paragraph 355) it is plain that the debtor is in a position to "pay immediately in the sense of a reasonable time" all the debts which he owes. Indeed, 1t is fair to say that it was common ground between the parties that the debtor was both solvent and capable of paying his debts. The debtor's default 1n payment of the debt owing to the petitioning creditor is not the result of any deficiency in means. It is because, notwithstanding that he has the necessary funds, the debtor simply refuses to pay the relevant amounts to the petitioning creditor. It was submitted on behalf of the petitioning creditor that, even though the debtor had the capacity to pay his debts, his continuing refusal and unwillingness to pay them precluded the Court from being "satisfied by the debtor" that he was "able to pay his debts" for the purposes of s.52(2)(a) of the Act. The word "able" in s.52(2)(a) should, 1t was argued, be read as meaning "willing and able". In support of this contention, reference was made to a decision, of McKercher J. 1n In re Freeholders Oil Company Limited ([1953] 9 West. W. Rep. (NS) 241) where the view was undicated that the word "able" should be so read. The policy of the Act, it was said, supported this construction of s.52(2)(a) in that it was scarcely to be contemplated that a creditor was entitled to lose the benefit of the procedures available to him under the Act 1f, on the hearing of the petition, his debtor could prove that he was able to pay his debts while refusing so to do. While I can see considerable force in the arguments advanced on behalf of the petitioning creditor, they have, in the end, failed to persuade me that the word "able" in s.52(2)(a) should be given other than its ordinary meaning. It does not appear to me that 1t 1s possible to divine any policy underlying the provisions of the Act to the effect that a creditor should be entitled to make a recalcitrant debtor bankrupt even though the debtor satisfies the Court that he 1s plainly solvent and able to pay his debts. It seems to me that it may well be that the legislative intent was to leave a creditor, in those circumstances, to the ordinary remedies by way of execution and garnishee. In the result, I find that the debtor has, for the purposes of s.52(2)(a), satisfied me that he "1s able to pay his debts". The petitioning creditor has not suggested that, in the event of such a finding, I should do other than dismiss the petition. There remain for consideration the question of costs and the question of the appropriate order to be made in respect of the moneys paid into Court. I have found both of these questions of more than usual difficulty. I shall deal first with the question of costs. Notwithstanding a submission by the debtor to the contrary, there 1s nothing at all an the material before me to suggest that the petitioning creditor acted other than with complete propriety in presenting its petition. The debt upon which the petition was based was plainly owing to 1t. The debtor had committed the act of bankruptcy alleged in the petition The petitioning creditor can scarcely be critized for failing to anticipate a defence that the debtor was solvent and had the means available to enable him to pay all his debts including that owing to the petitioning creditor which he had failed to pay. The Notice of Opposition filed on behalf of the debtor contained no mention of the defence that the debtor was able to pay his debts upon which he has ultimately succeeded. That defence only emerged when an affidavit of solvency was filed on 3 June, 1980. The fact that the debtor claimed that he was able, if he so wished, to pay the debt owing to the petitioning creditor had, however, appeared in the course of the proceedings before the Court on 28 April, 1980 when the debtor volunteered to pay the amount of the debt alleged in the petition into Court. The conclusion which I have reached is that the appropriate order as to costs is that the debtor pay the petitioning creditor's costs up to and including the proceedings before the Court on that day. In all the circum- stances, including the fact that the debtor has failed completely on the issues to which the pulk of the material before me was directed, I propose to make no order as to the costs subsequent thereto. As regards the moneys paid into Court, 1t has been submitted on behalf of the petitioning creditor that I should order that they be paid out to the petitioning creditor to be applied towards satisfying the debt owing to 1t by the debtor. While I am conscious of the essential common sense which under- lies this approach, I am of the view that I should not adopt it. Examination of the transcript of the proceedings of 28 April, 1980 indicates that the money was not paid anto Court to await determination of the simple question whether the debtor actually owed to the petitioning creditor the amount alleged in the petition. It was, as I read that transcript, lodged essentially as a pledge of the genuineness of the debtor's case in opposition to the petition. The debtor has succeeded in that opposition. In my view, subject to the protection of the petitioning creditor's position in the event of an appeal, the appropriate order is that the moneys be paid out to the debtor. Finally, I should mention that the debtor, in the course of his submissions, sought an award of $100,000 damages against the petitioning creditor for the wrongful presentation of the petition. Quite apart from the fact that I have no - jurisdiction to make such an award of damages, there 1s no conceivable basis in the evidence before me upon which such an award could be made. The orders that I make are: 1. I dismiss the petition. 2. I ORDER that the debtor pay to the petitioning creditor 1ts costs of the proceedings up to and including the proceedings before the Court on 28 April, 1980. zs 3. I DIRECT that the amount of $2790 paid into Court by the debtor remain in Court for the period of twenty eight days from the date hereof. In the event that no appeal from the judgment and orders made by me 1s instituted within that period, I DIRECT that that amount be paid out to the debtor Ronald Grafton Sarina. In the event ES an appeal from-thet judgment—and_orders is instituted within that period, I DIRECT that the amount remain in Court and abide the order made by the Court disposing of that appeal or, in the event of no order in that regard being made by that Court, the further order of this Court. 4. I ORDER that the exhibits be retained for the period of twenty eight days.In the event that no appeal is lodged within that period I ORDER that the exhibits be handed out to the parties tendering the same. rea ty tha and the preceding poGes a | eer ta a oe for Judgment herein of true copy of the reasons K Wostany "* ASSOCIATE ; His Honour Mr Justice Deane