eat ee ware te ahaa meee ata ae ea ete de en ee Waa oe ee oe wie ae JUDGMENT No. sume 3 Peal ada CATCHWORDS Bankruptcy - whether debtor able to pay his debts - principles involved. Bankruptcy Act 1966 s.52 BORTS BELJAJEV_v. DINERS CLUB LIM{TED No. PLO71 of 1983 SDERAL 15 August 1984 AUSTS ALIA Melbourne fee ln nade eet nw Nae hte Mek dine ek Oe Cees inde Reni ahen lise ee Ie ee me et TN_THE PEDEPRAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA we SS GENFRAI, DIVISTON BETWEEN : EX PARTE: NO. P1071 OF 1983 BORIS BELJAIEV The Debtor DINERS CLUB LIMTTED Judge Making Order: Smithers J, Date of Order: 15 August 1984 Where Made: Melbourne. ORDER THE COURT ORDERS THAT: 1. The petition be dismissed. 2. The petitioning creditor pay the The Creditor costs of the proceedings up to but not including 30 May 1984. Ww TELL ere ne mentee er ee ne RORY eM ee Otherwise each party shall bear its own costs. en Oe iaere as vette See ed et aed ee ee ee te fe dee ee ete te ne ee eer bed INTHE FEDEPAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF VICTORTA NO. P1lO7L OF 1983 GENERAL DIVISION BETNEEN: BORIS BELIATEV The Debtor Ex PARTE: DINERS CLUB LIMITED The Creditor Coram: Smithers Jd. AS August 1984 ' This matter relates to a petition by Diners Club Limitea for sequestration of the estate of Boris Beljajev. The petition is based on a bankruptcy notice, 1ssued and served, in respect of the sum of $4,197.08 due under a judgment of the County Court given at Melbourne cn 24 January 1983. The petition was opposed by the debtor ona number of grounds. First, it was contended that the bankruptcy notice referred to an amount stated in the notice to be payable by the debtor in excess of the amount due in fact. Secondly, that the debtor had aA cross-claim against the petitioner for an amount in excess of the debt due by him to the petitioner which he could ee wee 2 tat oe - wee we . ~ ~t Panter oo we Wee oe te we eee en te Le tee ie Pent etree tonite, Creme et eee eee 8 eb te eee tS i) not bring in the proccedings in which judgment was given. Thirdly, that pursuant to s.52(2) of the Rankruptcy Act 1966 {the Act) the Court should disniss the petition on the ground that it is satisfied by the debtor that he is able to pay his debts. The first qdround was not sustained. It was based ona misinterpretation of the judgment actually given in the County Court. fhe second ground was not sustainad. The debtor hy order of his Honour Judge McNab in December 1982 actually obtained leave to file his cross claim in the County Court proceedings against him. He took no steps in respact thereof until danuary 19384 when he issued a writ in the Supreme Court of Victoria. The debtor arqued that becauve ris crass cleri was on2 for defamation he vas unable to raise that issue an the County Court. lf, however, because of the nature or quantum of the cross claim (he same was bevend the yurisdiction of the County Court, the debtor could have successfully sought and obtained a transfer of the County Court proceedings into the Supreme Court and had his counter claim or cross claim together with the claim against him dealt with in the proceedings 1n the Supreme Court. Also the delay involved in instituting his proceedings throws doubt over the bona fide of his contention. The third ground of opposition raises matters of significance. The onus of proving that Beljajev is able to pay his debts within the meaning of §.52(2) of the Act is upon teh gin Paar the ee ene rere. Me eh ee he Pere, « A ee ee ee tee ee ee he ne OTR ne et ee him. What is involved its his ability to pay immediately, in the sense of a reasonable time, his debts as they become due: Re Dyson (unceported No. 140 of 1926, Court of Appeal). As will be seen I regard the evidence called for the debtor as, in somé ways, unsatisfactory as proof of his ability to pay. Nevertheless I am unable to escape a conclusion that he does have that ability. Cc rh ra Co The evidence shows that there are three debts debtor which are outstanding: (1) moneys secured by a mortgage or mortgages over his house for an amount, not including a debt toa his solicitor, of approximately $140,000; (2) adebt of about $10,006 to his solicitor fot services rendered an respect of which security over the nouse, subject to the prior mortgage or mortgages, has been given to the solicitor; (3) the debt to the petitioning creditor for $4,197.08; There 18 no evidence as to when the mortgage debt or debts are payable. No suggestion was made in the cross examination of the debtor that they might already be payable. The inference to be drawn is that so long as monthly interest payments are made there is no likelihood of the moneys (ro te arena mens Sn eee ee en wo en en . eon eee ee ee ee ee ' becoming payable in the immediate future. And chere 15 no reason to think that the month]y) remittances hitherto received by the debtor from his parents to pay the interest on these mortgages will cease to be received and applied accordingly. Counsel for the petitioning creditor suggested during final addresses that the evidence did show.that the moneys secured by mortgage or mortgages were already due and payable, but examination cf the transcript reveals that this was an error. The situation appears to me to be that the stable condition of the mortgages is on going and, there being no effective challenge to this, J should be satisfied that the L mortaaue moneys ace not at present payable or Jilely sa ta tre ary in the near futue. The $10,000 due to the sojicitors is a debt incurred which was payable when incurred. There is nothing to sucqest the contrary save that the debtor has given the solicitors a security over his house in respect of that debt. To my mind this does not give rise to an inference that the solicitors have agreed to give credit to the debtor for some definite period. Rather it indicates that the solicitors have dealt with the debtor as a person unable or unwilling to pav the debt to them when it was due, and that they have been willing to walt for payment for some unspecified period on the hasis that they were given security for their protection. There is no evidence that the solicitors have made a demand for present ee ee ae nee MEN Te Ue RRL onan le tate Sentient elt eee er ener to ete ee Ne 5. . payment. However, I conslder the situation on the basis that the $10,000 due to the solicitors and the $4,197.08 are the debts relevant to the current issue as debts due and payable. To pay these amounts the debtor had, so 1t is claimed, access to various assets. First, his house at 16 Helenslea Road, Caulfield; second, shares in various public companies; third, clothing; fourth, fishing and camping equipment; fifth, jewellery; sixth, a claim against a company, Antique Jewellery and Gem Traders of Melbourne Pty. Ltd. (the company)for $68,000 for money lent and seventh, one of the two shares issued 1n the company. Keeping in mind that ait is not sufficzrent for the debtor to establish that he has assets exceeding in value the amount of his liabilities but not presently available or realizable, it is difficult to decide the accessibility to, or the value of, the debtor's interests in these assets. I cannot be satisfied that the house is of value in excess of the amount of the mortgage or mortgages not including the $10,000 due to the solicitors. The evidence of the debtor in this respect was often contradictory and generally unsatisfactory. His demeanour was quite unsatisfactory. His seeming ignorance and lack of understanding of matters of which one would expect him to have some knowledge was quite puzzling. I can only rely on his evidence when the general surrounding circumstances, including the kind of man I anfer that he 1s, provide adore eaten ate Deda heen as na tad hee ee ne ew Saat te aint assucance in some way. In the end the conclusion must be that although it is nat shown by the debtor that there is sufficient value in the house to meet the amount of the mortgage or mortgages, it is shown that the mortgage debts are not yet due and payable. There is produced br the debtor's accountant, 'hose evidence JI accept, share certificates in well known public companies of a market value of $9,552.00 as at 5 dune 1984. These shares are in the name of the debtor. His address stated on the certificates 1s c/- Mrs. Kimia, his aunt. The debtor and Mrs. Kimia are the directors and the only directors oy the cowrany referred to above. Mrs. himla holds one of the only two issued shares. When the dehtor first mentioned that he had an interest in shares he stated that his aunt was r helding a parcel of shares for him and herself as equal cc-owners. He said that some time ago he paid to her the sum of $5,000 to invest in shares in co~ownership between him and her. There is obviously'a close association between the debtor and his aunt. The accountant said that the shares were owned by the debtor and that Mrs. Kimla had informed him that she has no interest therein. One inference I draw is that however successful the debtor may be as a dealer in jewellery he is incapable of uriderstanding legal relationships. It is highly likely that his aunt, knowing his characteristics, exercises ae ee ee ee a e- - eee - -- 8 . ~ Coc a wee eee ' a bowen Le tat ae eee nee AUD earl end einlvenntenecnmin hee Gene oe eo ee 8 gome supervision of his affairs. Of course, Mrs. Kimla's statement is not on oath but it 1s an admission which could be used against her in other proceedings. The debtor''s sole ownership of the shares is also confirmed by the fact that the debtor's accountant has included the dividents from the shares in the debtor's fax returns as part of his income. I think therefore that the shares being in the debtor's name and in his possession free from any claim from the only other person who might have had a claim ta an interest therein I should infer that he is the sole o swmier of those shares. When J say the shares are in the debtor's passession I refer to the circumstances that the accountant is the accountant of the debtor and that he produced the shares from a source frec frou any adverse claim on the part of anybody. The debtor therefore a5 demonstrated that he has a sum of $9,500 or thereabouts readily available to him. The remaining question therefore is whether recourse to the other assets said to be available are readily convertible into cash to the extent of at least, say, $4,700. I am unable to place reliance on the suggestion that clothing would be readily convertible into any substantial amount. But I do accept that, in all probability, fishing and camping gear could be readily converted into some thousands of dollars. Io am -unmable to accept that any jewellery of his are available for realization in any amount. I believe, however, that there is a debt of well in excess of $10,000 which could be enforced against the company of which he is a director. Whether there are really assets in the wot ee he re te ee tne ert we b Um tet 8. company other than a BMW car I am unable to conclude. Hut I do believe that there 185 an equity of more than $10,000 in that car which could be realized. I think for current purposes his position as creditor and co-director of the company would suffice to enable him to obtain from the company some $10,000 ina relatively short time, Even if he nad to sue, the procedure should be short and productive. The probability is that, as well as the car, there is stock in the company which is readily realisable. J ignore the value of his one share jn the company as I would reqard the realization of that item as very difficult, slow ana perhags impossible. The evidence as to the liabilities of the conpany 18 that given by the accountant who takes the responsibility therefor in the sense that he states his professional opinion heving prepared the accounts of the company, for purposes other than this case, according to professional procedures that the liabilities appearing in those accounts, excluding the liability to the debtor and the liability to a Finance company on the car, amount to $1,000. On this basis there is good cover for nore than the 54,700 mentioned above. I am therefore satisfied that the debtor is able to pay his debts but that he is unwilling to pay the relevant amounts Lo the petitioning creditor. And unwillingness to pay does not constitute a mode of overcoming an ability to pay one's ATR ee Semin Remi weiee Ney yee Te AR eH ee =o: o> -- . ~ . we heed te ek keer ons 9. debts as they become due: Sarina v. Council of the Shire of. Wollondiily (1980-81) 48 FLR 372. Accordingly I must dismiss the petition. IT have considered whether the debtor should be deprived of his costs. The debtor has certainly indicated by the affidavit to the petitioning creditor that he claimed to have the ability to pay his debts. The contents of the affidavits did not accurately set forth his true position. But I think that the petitioner proceeded with the petition at his ow risk as to the costs should the defence be made out. Nevertheless the debtor failed in respect of two grounds of alleged defence, He succeeded on the third only after an adjournment ané a further hearing which took place sver tem days, which adjounrnwenc would not in my opinion have been necessary had the debtor's case been frankly put and covered the reality of the situation at the hearing on 30 May 1984. Accordingly, I dismiss the —petition with costs of the proceedings up to 30 May 1984 but do not award any costs in respect of the hearing after that date. I ceru:fy that this and uno oF preeedinz pesos arz @ treo ene cl Reasons for dudguenkl herers of plage .- he. Justice Sanita St. art ar ee Assoc:1ate Dad? isleley ee EEE ARNOT Fe remem e+ ler