CATCHWORDS BANKRUPTCY - whether an act of bankruptcy within s.40(1)(h) of the Bankruptcy Act - no intention to suspend payment to trade creditors generally ~ debtors continued to trade and to pay creditors in the course of their business. Bankruptcy Act 1966, s.40(1)(h) RE: EX PARTE: BERNARD DENNIS CARNEY and LYNETTE ROSE CARNEY AMPOL PETROLEUM (QUEENSLAND) PTY LIMITED NO. P.692 OF 1983 . FITZGERALD J. BRISBANE 14 DECEMBER 1983 RECEIVED | 22DEC O83 sak IN THE FEDERAL COURT OF AUSTRALIA ) GENBRAL DIVISION ) ) NO. P692 OF 1983 BANKRUPTCY DISTRICT OF THE SOUTHERN )} DISTRICT OF THE STATE OF QUEENSLAND ) Re: BERNARD DENNIS CARNEY and LYNETTE ROSE CARNEY Ex parte: AMPOL PETROLEUM (QUEENSLAND) PTY LIMITED ORDER JUDGE MAKING ORDER: FITZGERALD J. DATE OF ORDER: 14 DECEMBER 1983 WHERE MADE: BRISBANE THE COURT ORDERS THAT: 1. The petition is dismissed. 2. The debtors pay to the petitioning creditor its costs of and incidental to the adjournment of these proceedings on 5 December 1983; otherwise the petitioning creditor pay to the debtors their costs of and incidental to these proceedings, in each case the costs to be taxed and set-off. IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) ) NO. P692 OF 1983 BANKRUPTCY DISTRICT OF THE SQUTHERN } DISTRICT OF THE STATE OF QUEENSLAND ) Re: BERNARD DENNIS CARNEY and LYNETTE ROSE CARNEY Ex parte: AMPOL PETROLEUM (QUEENSLAND) PTY LIMITED FITZGERALD J. 14 DECEMBER 1983 EXTEMPORE REASONS FOR JUDGMENT Ampol Petroleum (Queensland) Pty Limited, a petitioning creditor, has petitioned the court for a sequestration order against the estate of Bernard Dennis Carney and Lynette Rose Carney, the debtors, who reside at Newell Highway, Boggabilla in the State of New South Wales and whose occupations are service station proprietors. The debtors are indebted to the petitioning creditors in the sum of $94,306.45 for the petroleum products supplied by the petitioning creditor to the debtors in the period from 7 to 11 April 1983. The only act of bankruptcy relied upon in the petition is set out in paragraph 4 of the petition in the following terms: "The Debtors, within six months before the presentation of this Petition, committed the following act of bankruptcy, namely, that on the 15th day of July, 1983, the Debtors orally gave notice to the Petitioning Creditor that they had suspended payment of their debts." Paragraph 40(1)(h) of the Bankruptcy Act 1966 ("the Act") provides that - "A Debtor commits an act of bankruptcy in each of the following cases - (h) if he gives notice to any of his creditors that he has suspended, or that he is about to suspend, payment of his debts, The evidence relevant to the issue before the Court is to be found in paragraphs 3 to 7, apart from the first sentence of paragraph 5 which has been conceded to be inadmissible, of an affidavit by the credit manager of the petitioning creditor verifying the petition, and paragraph 3 of the affidavit of the male debtor filed on 12 December 1983 which respectively provide: 3. On the 15th day of July, 1983 I met the Debtors at their Service Station business at Newell Highway, Boggabilla in the State of New South Wales. I discussed the payment of their outstanding debt of NINETY FOUR THOUSAND THREE HUNDRED AND SIX DOLLARS FORTY FIVE CENTS ($94306.45) for sales of petroleum products by the Petitioner to them between 7th and 11th April, 1983. 4. The Debtors refused to pay the amount outstanding. 5. eee Mrs Carney stated that Caltex had claimed they (the Carneys) owed Caltex $200,000.00, but that they (the Carneys) had a claim against Caitex. 6. Mrs Carney later in the conversation stated to her husband 'We owe them the money, and can't pay', or words to that effect. She later stated to me, 'When our Accountants have been through the books, we may be able to make an offer to pay off the debts.'. 7. Mr Carney stated that he and his wife had another business, a Cafe, and that 'If we are allowed to stay in the Service Station, we would be able to pay the debts off out of the profit; it might take a few years but we would pay it off.', or words to that effect." "3. I say that since July, 1983 I have paid the following business and personal liabilities: (a) I have purchased fuel from Caltex Australia at the rate of approximately $35,000.00 per week making a total since July of approximately $700,000.00 worth of fuel. Each account from Caltex has been paid by me through the business which I run with my wife, Lynette Rose Carney and known as the Boggabilla All-Niter. (b) Part of this business consists of the running of a cafe and since July, 1983 the business has ordered and paid for food supplies for the cafe at an average of approximately $4,000.00 per week, that is, a total of approximately $80,000.00. My suppliers include Edgells Limited at Armidale, F. & E. Thomas at Inverell, Tenterfield Frozen Foods, G. Melosi & Sons at Inverell, Joan Schultz Distributors at Toowoomba and Riverside Meatworks at Inverell. All of these accounts have been paid. (c) From Repco, Moree, the business has purchased motor accessories at the rate of approximately $2,000.00 per month and each monthly account has been paid when 1t fell due; 4. (d) The site of the service station is owned by Golden Fleece Australia and rent has been paid to them at the rate of $1,900.00 per month. This' rent is paid up to date. (e) The business has paid wages to staff at an average rate of $2,500.00 per week. No wages are owing. (f£) Myself and my wife have two personal loans at the National Australia Bank at Goondiwindi and these repayments total $460.00 per month. These repayments are up to date. (g) Myself and my wife have a Ford LTD Sedan on lease from Mercantile Credits at Toowoomba. The monthly repayment is $237.00 and these repayments are up to date." On the date on which the conversations took place, 15 July 1983, the debtors were served with a Supreme Court writ in respect of the debt, and judgment in default was entered against the debtors in the Supreme Court of Queensland in the amount in question on 16 September 1983. There is nothing to indicate that any bankruptcy notice has yet been served upon the debtors in respect of the judgment debt. The petitioning creditors' petition for a sequestration order was presented on 13 October 1983. As the argument has developed, there 1s no suggestion that the particular points taken by the debtors could be met by further evidence. As the evidence stands, the debtors indicated that they were unable to pay in full the petitioning creditor or another oil company to which they were indebted, each for a very large sum, and that they did not intend to pay either in full immediately. As the debtors' intentions appear from the statements which were made, the debtors intended to continue to trade and to pay creditors in the course of their business as they could, and they said nothing, in fact. to the contrary. They did continue to trade and to pay creditors. They did not indicate an intention to suspend payment to their trade creditors generally. They did not have that intention, and they did not do so. Accordingly, the petition based solely upon para. 40(1)(h) of the Act must be dismissed. It is, of course, open to the petitioning creditor to give a bankruptcy notice based on the Supreme Court judgment which it obtained prior to the presentation of the present petition. The order of the court is that petition number 692 of 1983 is dismissed. In relation to the question of costs, the debtors must pay to the petitioning creditor its costs of and incidental to the adjournment of these proceedings when they were last before me on Monday 5 December 1983; otherwise the petitioning creditor must pay to the debtors their costs of and incidental to these proceedings, in each case the costs to be taxed and set off. I certify that this and the ' preceding pages are a true copy of the reasons for judgment herein of His Honcur Mr. Justice Fitzgerald beret th. &-Darer Associate Dated 20° pecan ver, 17FP 3