- Ol 6K \AE* }2]0-B3 IN THE FEDEPAL COURT OF AUSTRALIA EXERCISING FODERAL JURISDICTION IN BANKRUPTCY BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA BETWEEN: CORAM: DATE OF OPDER: RE: WALTER HAFCLD ) ) ) ) No. 103 of 1983 ) ) ) The Trustee cf WALTER HAROLD Bz a bankrupt and HENRY ZANDEERG Norenrcrp J. 12 Octcber 1985 the proverry of TTERIDGE Applicant Respondent WHERE MALE: Melbourne ORDER THE CCUPT ORZTERS THAT: 1. The application is sismssed. 2. The costs ci the responderz of anc inezGental te the apolication ce tazed and 2aie@ in accoréance with che cu 19 rany 6. 1! an wed -n Le ' ub nl ¢ ' nb " fut rt rd J "y cl e . dd da wu (7) . wi a is} wt ue Pop DQ a D G a Oo ia) Hoy at as a on ay as ia) Ki wv is) t4 Dogs o oy fe ws on Sey aq U eo ovook ns © a ve oO Qa 3 > - yo tT ea? 9 far wu ' 4) nN et el ve A ) o,$ 44 i) ro) 6, fea 0 Ud 4 a} avs Le) Q fond (a) iv) mG In "Ty ay com a try fa NY 4c Ny og fa an a) te tr i) Sa w wa fs u y, Y i a ag 5 7 ay fey 1 ot Sa el a el eee ae fr }) m Oo a Fd ad c a i? My rey QO a . ' r 1 a) is} mi 4 Roo ct a! re ie) [o) is) a : oO u if Mi Fe Cu ist rd a o c! uy m6, al, QO fan ey nS fr ' c a co Myre Ex im Pat ry) ° w M4 to n oy uw ' Soy vib a be on 9 ao vl fi By ful fd ran ur a ) a) sa Ee reat n fe) Dy 2m Vv a4 4 w oy, a . 4 4 fu) Pra 3b) ny pow we Oy ta Tt end br €4 % e rn o M4 >t oO ed a an?) tu uy E ry gq vb is ie) ran ka we Ot u} ye Ww ay 2] iS) 8} G ry ow oy .e) fan Hi ~ fi a © OV 1 @ U a, '4 yp ae) 4 1~ o fel Cs in 4 BE C2 iva) | a! ef Blfay ort eS 8 ~ 3 mM Ir} ui oS] eL| ink i ta ry . & ~ un b+ a CC ay bey pe Q Ps hy vant) ala, ta 19) ly Hilt ELO " ue) 4) mays Ole >, -d o bi) al Delo ai won wo leg R)H Bl Yv 4 & SIO) wl = Pos | Bl! Ea aS pa ra eG [fa fy w vu La) yA] jo foal oa mI In addition, the applicant seeks consequential orders that the respondent pay to him the sum of $5,057.88 and the costs of and incidental to the application. transactions are rendered void as against a trustee Under s.122 of the Bankruptcy Act, certain types of bankruptcy. For the purposes of the present application, relevant parts of sub-section 122(1) are set out: "122.(1) ... a payment made ... by a person who 1s unable to pay his debts as they become due from his own money (... 'the debtor'), in favour of a creditor, having the effect of giving that creditor a preference, priority or advantage over other creditors, being a . payment ... made ..-. (a) within 6 months pefore the presentaticn of a petition on which cr by virtte of the presentation of which, the debtor becomes a Dankrupt; eee is void as acainst the trustee in the bankruptcy." in she che of ai... payee ... 2n geed faith and for valviabie consideration in the ordinary ccurse of basiness", cLt the burden of proving the matters referred to in thet paragrarr lies ugon te fperson cléeiming to rave tre bereriz of that pareg~aph; see sub-section 122(3). 122(4)(c), for the purcoses of s.122 a creliteor is deered not to be a payee in goca faith if 'VES mede In addition, the applicant seeks consequential orders that the respondent pay to him the sum of $5,057.88 and the costs of and incidental to the application. Under s.122 of the Bankruptcy Act, certain types of transactions are rendered void as against a trustee in bankruptcy. For the purposes of the present application, the relevant parts of sub-section 122(1) are set out: "122.{1) ... a payment made ... by a person who is unable to pay his debts as they become due from his own money (... 'the debtor'), in favour of a creditor, having the effect of giving that creditor a preference, priority or advantage over other creditors, being a ... payment ... made ... (a) within 6 months before the presentation of a petition cn which or by virtue of the presentation of which, 'the debtor becomes @ bankrupt; eee is void as acainst the trustee in the bankruptcy." By paragraph 122(2)(a) nothing in s.122 affects "the rights of ai... payee «.. an gocd faith and for veluabisz ecrsideration and in the ordinary course cf rusiress", 2% the burden of proving the matters referred to ain that of that paragraph: see sub-sectior 122(3). By paraagran> 122(4)(c}, for the parscses of s. to be a payee in geod Faitrz 15 whe payment vas mede- In addition, the applicant seeks consequential orders that the respondent pay to him the sum of $5,057.88 and the costs of and incidental to the application. Under s.122 of the Bankruptcy Act, certain types of transactions are rendered void as against a trustee in if bankruptcy. For the purposes of the present application, the relevant parts of sub-section 122(1) are set out: "122.(1) ... a payment mede ... by a person who is unable to pay his debts as they become due from his own money {... 'the debtor'), in favour of a creditor, having the effect of giving that creditor a preference, priority or advantage over other creditors, beirg a ... payment ... made ... (a) within 6 months before the presertation of a petition cn which or by virtue of the presentation of which, the debtcr becomes a Dankrurt; wee 1S void as against the trustee in the bankruptcy." By paragravth 122(2)(a) nothing in s.122 affects "the rights of ai... payee ... in geod faith and for valvabie consideration and in the ordirary ccurs2 of basiness", cit the barden cf proving the matters referred to in that para re wy rh lies uron the person claiming to eve ire benefit of that paragraph: see sub-secticr 122(3). By paragrar> 122(4)(c), for the parposes of s.122 a creditor is deene to pe a vayes in good «re. under such the inference tha reason tc suspect —- (i) a oD m Ke ry iy a gl if ca c y tt Lal [e]3 ty e +1 co er tre ... peyren os would be to give hi e@ pre 2 Uv K QO @ it J ct vas i) RK ~ ou ra) w Y ang @ Rory priority Or acvantace creditors." Urpder st o-seztron 122(5), snere a payment is recoversc in consequence ci the cperation of s.122, the creditor ir w> favour the payrent was mace may prove in the barirupts 27 the payvrent cave ncvtice that re ipterdceas to corcss the aézpiicaticoe cn ic. grcune: "Theat the Risccn¢aeru, et tne x tives <i rece1rrin 3 allece:, ,e2 orci oe Crediter reraunc" At the bearine cl tre exvlicaiic+, w2 reetondari era 5s? leave to cores® tPl appivsasccr cn the wriact: The only issue raised on the first ground is whether, at the relevant tire, the respondent was a creditor within the meaning of sub-section 122(1) Bankruptcy Act. On the evidence before the Court, the applicant has proved that on 14 April 1977, Walter Harold Betteridge becare bankrupt upon his cwn petition and that the Official Trustee in Bankruptcy is the trustee of the bankrupt's estate. The bankrupt died on 27 March 1979 before the administration of his estate was finalized. At all times from 14 Cctober 19765 (being the date six months prior to the date cf bankruptcy), the bankrupt was unable to pay his debts as they became ¢uc from his oyvn money. In or about March 1977, being within si: months btefcre the presentaticn of his petition, the bankrurrt made payment of varicus surs of woney for a group of persers which group included tre respondent, and on a distributicn c= tm those sums, the respondent rece1rved paymencs arcunting tc $5,057.88. If that payrent was made to he respencent in the (Dp rs] qi capacity of a creditor of the barkrupt, tren the payrent "é Oo, the effect cf giving tre respondent a preference, priority or advartace over cther craditors. The Facts caving rise to the payrent cf tho sun $5,057.88 to the respencert can best be descrited as o The benkrurt was empls yed by Collins Becx Der: Storeman, then as a salesran. Tarun? conéuct an enterprise wvereby he aareed to sell colosr ) n television s2ts at @ price abcut palf that which ve paid For them. To firarce che etterprise he received fren a croup cf persons, including a Nr. Prince and a Mr. Feldrar, tte purchase price for a numoer cf sets ind from ine ronics sc received he beugnt and Gelivered a thar the nunber he heG@ promsed to sell and fer which he eC received pzyte is) t. As news of the cheap television sets is) spreac, rere r yore pr Ww 'S oO is t Ie iD ry a <! BD Kn uw cheap televi o Lop sets and paid the vburcnase erice, thus creating a furd fron which the terkra telesision sets which he delivered and from wiich he «icc. meney Zor campling purpcses. At a Jater stace art in er. 2O Keen the ence at hich +rates ci checked with the distributor of the television sets and found that they were not stolen sets. Towards the end of 1976, the respondent began to deal directly with the bankrupt. Unfortunately, neither in his affidavit nor in his oral evidence before the Court has the respondent civen evidence of the conversations between himself and the bankrupt which formed the kasis for the new arrangements entered into between them. Tne respondent states conclusions only, and in the aksence of evidence of what was said, the Court is p aced in a difficult position in determining what the actual arrangement was. The respondent claims that the arrangerent was that of principal and agent whereby the respcndent was tc act as agent for the bankrupt in the sale of television sets and was to receive commissicn on sales, the commission kein 1Q paid by the berkrupt. He describes the arrancerents. Th oO respondent was to collect the full murchese orice fr P = & prospective vurchasere cn the basis that the televisicn sets would be delivered at some time 1n the future. He paid the whole cf the monies so recéived to the bankrupt who immediately handed back to the respendent an arount representing commission eared by the resscnéent. The arcunt is) ef the cormissicn varied from as ruch as S140 per set dawn 4 $30 per set. AS a Sign cE coed faith, the bankrupt wes to give a receipt te the respondent for the amount of the rene, actually retained by the banxrap ct fu rei is) o ct w a o cr 0) y n fu fu Q @ fag 'ys bankrupt was tc issue receipts ir the names cf the rnerscrs who he¢ pai¢ soney to the respcidenc acxroavleéaire receipt cf o the tctai arcuat actuzily is given cf a receipt issued cy the bankrupt in the nare of the perscr wre pale toney to the respen¢ert: "Received Pron Mr 1 Linéa St. Sour The Sum cz $500. Payment for cne 26 in. Colour T celivered cn ocr before Ist March W. Ber 67 Ra Bal vel ion earliest being uréated but propisz en cr bpefcra i= Jaruas 1977, era ina at Peorery 19°° srocvisirs C2lt cer cf aires DE" sits rut - Gate belry steciltiec. Le tern "G ti ta a7 ce ee te " 13-1~-77 Received From Mr. Henry Zandberg the Sum of $4000.00 Being full Payment for 10 26 in. Sanyo Colcur T.V. Sets to be delivered on or before the l4tn Day February 1977. Names and Addresses to be Supplied. W. Betteridce 67 Rochester Rd. 83-5893 Ba lwyn." The vrespenden claia thal in toral and unaer the twos = different arrangements the bankrupt hed agreed to supply some ixty television sets. In addition to receiving finance from prospective purchasers of television sets and in an atterpe to keep the treadmili moving the barkrupt borrowed large sums of ronsy from different persons, incluéing some of those wre haa dealings with hii relating to the sale of television sets. The bankrupt did not borrow money from the responcert. In his staterent of affairs, the bankrupt disclcesed liabilities consisting of monies borrowed by him. Fe cid not disclese any llabilities reiating to the gale of televisicn seats. He lasted the respcndent ayceng his ursecured creditors tat dia poncen zt nes the tesis th of that liacility. Ip créer te succeed ir has arnlrcation, ws appolicert must prove that the banvrirt, ion pcyirge the sur cf 5 4 a — naid as 1 2 + tae $5,037.88 us tre said nre sum to the raseortert as a "cred wictein the wearing oF that sorgoir Bankructcov fe Bankrusicy person who voalé hare breen entitied to wrove ini ic c bankraupee, wrdéear 6.52 an2 the relaned s a uw phan mw onan - 10 - namely that upen the respondent paying the kankrupt the agreed price for televisicn sets, the bankrupt agreed to sell and in the future to deliver television sets, presumably, to the respondent. This submission will be considered later. The responéent submitted that at the time of the payment of the sum of $5,057.88 the respcendent was not a creditor of the bankrupt. It was submitted that the true arrangement between the respondent and the barkrupt was that of agent and principal, namely that the respondent was engaged by the bankrupt as an agent to find buyers for television sets, that the respondent was to collect the purchase price from the buyers, but was to retain part of the money so collected as his commissicn and pay the balance tc the bankrupt, whereupon the bankrupt agreed to sell, and %~ the future to deliver, the television sets to these buyers. It was submitted that the respondent was a mere cenduit acting as agent between the bankrupt as seller and the persons aquiring the television sets as buyers, and that he acouvuired no titls to or interest in the televisicn secs soa sold. As has keen said, the resoluticn of <his issue is maGe wore difficult by the arsence ct evidence of what ves said by the respondent and the bankrupt leading to the making oF the arrangevert eratrveen cher. There is no written agreerent. The bkanktrayi is cead. Tre enterprise bkeinrs conductei sy wre vresporaert @iF rot corstiivie & nor7s_ cormercial Dusiness and 1t is ivpossicle to dra' anferercas from what would heave occurred in a nornal equrercis th enterprise. There 1s no or2l evicence cf 4s |a-wrass 4H ow o rs oO rn is]= Q iDct Pe pryo m < rm Fa os (9) wD A 0] , a) eross-ec'anvivea at lenath. He prasentead 28S a rather oatietic fooure. Nec ieppeeced to nave Little C1 leteicei arii_ty. we appeared to te actine ocucside his srnere cf co-peterc: Zr the vernacaler, he was cut ct 41s danth. Ti2 cave ts appearance cf a jrttle man creecy to rake woney cut of «tT acquisitiveness of his ""fFrienés, ecxz.aintances avd rusire- asscciates". ALC ine sar2 tive re sae7ecd to bre 27 rllustrate a television : glvire fis a matters, rac gY, = - Ls "2 € - Fis: FT eenen- eg sti caren este eet ee He OU oe + StTES oI ALS B71 1Se7 le Tal. rys ~> TCS 2 bye 5 at a a2 -aentt zee = nacere cr cite ~ S-LIME CL coe Ft 2UFBlLD Tt -- - 12 + The case for the applicant was based almost entirely on events that occurred after the payment of the sum of $5,057.88. On Friday, 25 February 1977, the bankrupt was discovered purchasing television sets from a disccunt store at the normal discount price. This caused constermaticn among the persons who were in Girect contact with him in relation to the sale of televisicn sets. An urgencly arranged meeting was held on Saturday, 26 February 1977. The respondent and the bankrupt attended that meeting. A number of those attending the meeting had lent money to the bankrupt. Apparently the bankrupt was able to convince these at the weeting that he was genuine and able to meet tis commercial an@ financial obligations. He promisec to maxe some payment to these to whom he oved money, particalarl: money which had been lent to him. At the meeting, threets were mace that legal proceedings would be instituted against the bankrupt. The bankrupt transferred his car to the wi: of the respondent, but the transfer was valueless. Subsequentiy, he gave cheques to Mr. Prince who apporticred the preceeds ameng these who attended the meeting. This was the scurce of the $2,057.88 received py the respondent. On 10 March 1977, [e}ct a a b ry a tt r a [e} (F B O°w ie} Fi re vs Q resporncent, a Suprere Court writ w#s issue@ namirg tine bankrupt as defendant. Trere 'vere six piaintiffs rare? in the writ. The plaintiffs, ancleding the resrenéent, were those who fad attenlted the raecing om 25 February endorsevent on the writ, stané¢.nz as a statear was as follicws: "1, 1e i the sum of EIGHTY EIGHT TROU (§s8,000.0 Defensanz t received by the Defendant Plairtizfs. In or @€beul Ure aon of No cer Plaintiffs paid to the Defendant th $82,000.06 to 1 £ re) nd supply televisicn 2. ™n the leemat from the Defends noney raid to tre Derencant rFor cons which has wholi, = to tre persons from wshom re ha@ reserves television secs. Te as lear the. sur ct S$E3,90° in tre writ relates to "cr. es lent to tne barren us 13 an On 23 Way 1ls"7, te yresperlers lsfcet Cert in tra This "es gonmtoste?t afficavit clanmi:rca uri ire rt Fe TL Bate et ty ovo mrp Hh wy 1977. ert cl cl Plaintilis claim 1s fer payrent cf TORS LILI Ls rs E45 LILbe! OS} berne roeney payecle cry che o wre Plaincwifis fer reney "ac 245 for the use of the remey Ft Clo claz. ad se "vot = - ~ moslet7_- B xrrrot . @ eg 75 ~14- indebted to the respondent in the sum of $12,080 Particulars of the claim show that the amcunts claimed were for the purchase of television sets. The claim was suppcrted by the six receipts already referred to which, in total showed an amount of $12,080 received by the bankrupt from the responéeent. The force of those receipts is lessened ky the fact that the bankrupt had issued receipts to the persons who had paid the money to the respondent, indicating receipt of the full amount so paid by each person and irdicatine delivery of the television sets to each person. Further, if the subnissicn of the applicant as correct, the arrangeirent between the respondent and the bankrupt being for the sale of goods, one weuld expect the respondent's proof of debt to claim damages for breach of contract based upon the provisions of the Goods Act 1958, and in particular bas. upon s.&7 c= that Act. A number of persons who had paid money to the respondent sued pim for tse recovery of the money so paid. The respcnéent cefenced one ciain on the kesis that he was acting @s agent only. Ee di@ nct succee@ in his defence. He paid the other claims. He has aiso paid all the ctroer persons from whom he rece1ved meney fcr tele. " B fh Pp Q4) © fag a F accept thet sore sixty televisicn sets in ali were involved and that the vrespendent has pal tus iuw ne be fF ft)ie)Q ) i" received. The clair by the respondent thet he was acant onl is not a recent inaventior. -~m a statetent he mace to the police on 8 March 1977 and ralatire to the the responcent sald: "I bought a numper of Trorn TVs for mrs family which were delivered after a cericd eight weeks as specit fos crecxed tne serial with Thorn Austra were net stolen and sccr after I friendés whe, ene. Mer + - trest 4 fen ip] a a tg tw i ay fa ce] io) ' cr wu so t ip Ww be ad Pi ib t ") "fan 7) cr al ita "te) yt an tp tm i a delivery 1s crucial to this finding. Accordingly, the application mist fail. On the evidence, I am unable to say in what capacity the respondent received that money, but this does not detract from the finding already mde. It follovs, that on this finding, the respondent is not a creditor of the bankrupt able to prove in the bankruptcy, and his proof cf debt should te rejected. ~ In view of the finding already made, it is rot necessary for the Court to express an opinion on the other defence raised by the respondent. It is sufficient to say that having regard to the extraordinary nature of the business being conducted by the krankrupt, there would hase been serious difficulties facing the respondent .. establishirg his @Cefence, particularly since the onus wou" have been upon him so to do. Accordingly, the application is Gisrissed, costs ci the respondent of and incidertal to the application shou yo su ty om taxed and aid in accordance wit the provisiecns cf the ue] red Bankrustcy Oe. f y re) nN c Pa : Pan w waea