oh IN THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DIVISION, BANKRUPTCY DISTRICT) ) No. NSW 323 of 1977 ) ) ) OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY RE: FRANCIS PATRICK LUTON A Bankrupt ORDER JUDGE MAKING ORDER: Neaves J. DATE OF ORDER: 12 September 1983 WHERE MADE: Sydney THE COURT ORDERS THAT: 1. The applicant be discharged from bankruptcy. IN THE FEDERAL COURT OF AUSTRALIA ) ) GENERAL DLVISTON, BANKRUPTCY DISTRICT )} ) No. NSW 323 of 1977 OF THE STATE OF NEW SOUTH WALES AND ) ) ) THE AUSTRALIAN CAPITAL TERRITORY RE: FRANCIS PATRICK LUTON A Bankrupt CORAM: Neaves J. DATE: 12 September 1983 REASONS FOR JUDGMENT (Ex tempore) This is an application by Francis Patrick Luton, ("the bankrupt") pursuant to section 150 of the Bankruptcy Act 1966 for an order of discharge from his bankruptcy. A sequestration order was made against the estate of the bankrupt on 7 June 1977. On 16 July 1980 an objection to the discharge of the applicant from bankruptcy by force of section 149 of the Act was lodged by the Official Receiver on the ground that there was a deficiency in the estate in excess of $80,000. That objection has not been withdrawn. In his statement of affairs the bankrupt disclosed assets of $103,134. The assets so disclosed included cash deposited with an accountant ($11,084), moneys held by a firm of solicitors ($6,400), equity in four separate parcels of land at Russell Island, Queensland all of which were subject to mortgage, the bankrupt's equity as shown totalling $76,500, and book debts totalling $8,650. The bankrupt also disclosed a contingent asset of $15,000, being a claim arising out of a fire that destroyed a house property at Mount Tambourine in Queensland. All the land disclosed as an asset in the statement of affairs was subject to mortgage. In the case of three of those parcels the mortgagee has exercised power of sale. In each case a loss appears to have been sustained on the sale of the security. The National Australia Bank Limited, which was shown in the statement of affairs as having a mortgage over 15 blocks of land at Russell Island, Queensland, has not yet realised its security but is in the course of doing so. The bankrupt has expressed a desire to participate in the sale of this land so as to achieve higher prices for it than might otherwise be the case. On the evidence before me the only moneys that may come to the estate otherwise than by way of surplus on the sale of the land mortgaged to the National Australia Bank Limited are moneys which the bankrupt says are due to him from a company known as Incentive Programmes Pty. Limited, to which I will refer later in these reasons. The sum of $9,152.20 has been brought to the credit of the estate. Of that sum $5,500 was received by the trustee from the bankrupt who stated that it came from his earnings since becoming a bankrupt. In his statement of affairs the bankrupt disclosed certain secured creditors and seven unsecured creditors in amounts totalling $9,657. Twenty-three creditors proved in the estate for amounts totalling $90,333. The trustee reports that of that number 11 ereditors for amounts totalling $14,854 subsequently withdrew their claims in the estate following an approach made to them by the bankrupt. In evidence before me the bankrupt stated that he had approached all his creditors and had made payments to a number of them. The moneys used to make those payments were said to have come from his earnings since bankruptcy - he worked, he said, from~ time to time as a freelance salesman, floor cleaner and motor car salesman. The bankrupt said he had paid some $12,700 to creditors in this way. It appears that there are eight creditors remaining for a total of $75,479. O£ that some $38,000 is shown as being due to the National Australia Bank Limited and in respect of which Lhe bank, as I have pre- viously said, holds security. On 23 June 1981 the trustee paid a dividend to proved creditors of 4.512 cents in the dollar. The balance of the moneys in the estate are sufficient to pay a further dividend of 3.4 cents in the dollar. Since making his application for discharge the bankrupt has sent a notice to each of his creditors request~ ing the creditor to waive his claim against the estate, to withdraw the proof of debt lodged with the trustee and to raise no objection to his discharge. The bankrupt has stated on oath that some of his creditors have agreed to this request. There is no independent evidence of this from any other source but no creditor has appeared to oppose the application for discharge. The bankrupt has also stated on oath that he wishes to pay all his creditors in full as soon as he is in a position to do so, even if he is discharged from bankruptcy. The public examination of the bankrupt took place on 15 September 1980. Jt was on that date adjourned generally. The bankrupt is a married man aged 47 years, with his wife and one child aged 8 years dependent upon him for support. From 1971 to 1976 the bankrupt carried on through a company, Frank Luton Investments Pty Limited, a property development business. The company was wound up in July 1977 shortly after he became a bankrupt. From October 1973 to December 1974 when the company Ocean City Marine Pty Limited was wound up, the bankrupt was involved in the conduct of a business of selling boats, fishing tackle and marine equipment. -Although the bankrupt was a creditor of the company, no moneys were received by reason of a defalcation in the course of the winding up. In 1973-74 the bankrupt agreed to purchase 120 allotments of land at Russell Island, Queensland. In July 1975 he entered into contracts to purchase in excess of 116 acres of land at Mount Tambourine in Queensland. The bankrupt proposed to subdivide and redevelop the property. He took up residence in a partly completed dwelling on the land. The dwelling, which was not insured, was totally destroyed by fire in January 1976. The bankrupt claims that his solicitor had been negligent in not insuring the property, but the claim has not been pressed. The bankrupt has stated that the vendor took action to determine the contracts and all moneys paid thereunder were forfeited. The bankrupt is at present self-employed as a project consultant with his gross weekly income amounting to $350 out of which he is required to pay $70 for the rent of his residence at 41 Bolinda Street, Eight Mile Plains, Queensland, which is owned by his principal client, Incentive Programmes Pty Limited. That company became the registered proprietor of the property on 18 November 1980. Incentive Programmes Pty Limited was incorporated on 26 March 1975, its directors being the bankrupt and his wife. On 14 August 1980 the bankrupt resigned as a director and he was replaced by Francis James Luton. The present directors are the bankrupt's wife and Norman Granville Lewis. It appears that the bankrupt's shareholding in that company was taken over by his son for a consideration of $9. The bankrupt has stated that the company had not traded at all prior to his disposing of his shares. The trustee accepts that the estate has not been disadvantaged to any substantial extent by this irregular transaction. The bankrupt claims that Incentive Programmes Pty Limited will become indebted to him in the sum of $30,000 when a land development proposal of that company, in relation to which he is engaged as consultant, is registered following the obtaining of all necessary approvals. He has undertaken to the court to sign an irrevocable authority directing the company to pay the trustee the moneys that become payable to him in respect of his work as a consultant on that project. The bankrupt was charged in Queensland with 14 other persons, it being alleged that between 1 January 1968 and 1 October 1979 they conspired to defraud the public by deceitfully inducing persons to buy land on Russell Island. The charge arose from prospective buyers being shown advertisements and brochures depicting good quality land with views, whereas the land was a swamp. The trustee reports that the Crown entered a nolle prosequi in respect of the charge laid against the bankrupt. No books of account or records were produced by the bankrupt to the trustee. He stated, however, that he kept a full set of double entry books and that these were destroyed in the fire to which I have referred. The trustee has said that the administration of the estate was not hampered by the lack of records. ~ The bankrupt has attributed his bankruptcy to - "Vendor dishonesty in my purchase of the Tambourine property - house fire - solicitor's negligence". The trustee's opinion is that the prime cause of his bankruptcy was the lack of capital for the bankrupt's real estate dealings. The trustee does not report any matters pursuant " to sub-section 150(6) of the Act. The applicant has been bankrupt for more than six years. His conduct towards the trustee of his estate has not been entirely satisfactory but he has, albeit belatedly, supplied the trustee with such material as the trustee has requested. He has not provided a great deal of information to the court as to his earnings over the period of his bankruptcy but he was for a considerable period involved in the criminal proceedings in Queensland to which I have referred, and which he says - and I accept ~ sub- stantially restricted his earning capacity. He has made payments to the trustee for the benefit of creditors of $5,500, and has, although in an irregular manner, provided moneys totalling $12,700 directly to creditors. The present situation appears to be that there are outstanding claims by unsecured creditors of approximately $37,000 and the only asset in the estate is the bankrupt's equity in land at Russell Island over which the National Australia Bank has a mortgage. In the event of the sale of that Land at a price which results in a surplus after satisfying the bank's secured debt, that surplus will be available to the . creditors. The bankrupt has also undertaken, as I have said, to make available for the benefit of his creditors the sum of $30,000 by way of consultancy fees from Incentive Programmes Pty Limited. The bankrupt has the offer of a senior executive position with a company~in Brisbane engaged in the develop- ment and construction of industrial buildings and shopping centres. This offer of employment is conditional upon his receiving a discharge from his bankruptcy. Sub-section 150(9) of the Act provides that where none of the matters specified in sub-section 150(6) is established - and that is so in this case - the court may ~ (a) refuse to make an order of discharge; (b) make an order of discharge; or (c) make an order of discharge but suspend its. operation either unconditionally or subject to conditions. Sub-section 150(10), however, provides that the court shall not under sub-section 150(9) suspend the operation of an order of discharge beyond the period of three years commencing on the date of his bankruptcy. In this case that period has already expired. In considering whether a bankrupt should receive a discharge the court must have regard not only to the interests of the bankrupt and his creditor, but also to the interests of the public and of commercial morality. The court must also consider the conduct of the bankrupt relevant to his bankruptcy. Having given the matter careful consideration I have come to the conclusion that no useful purpose, so far as creditors are concerned, would be served by a continuarion of the applicant's status as a bankrupt. In my view, the period of over six years during which he has been a bankrupt is sufficient in all the circumstances. Further, the interests of the public and of commercial morality do not in this case require that the status of a bankrupt continue. I, therefore, order that the applicant be dis- charged from bankruptcy. = — Nm TO ay | vertify that this and the «2. (+) pre e71~g pages ere a trve copy of the ! Reasons for Judgment herein of his Honour Mr Justice Neaves i ,O 'C>_ ssociate Dated: 12 ~q ~-y%3 eee — 10.