TATCHWOFRDS Bankruptcy - application to avoid deed of and material particular in statement of drecretion, Fanvruptey Art LIGA, Ss. Dat RE: ROGRTC TAN HAMILTON, EM P&FTE: compositien affairs - Wo. W187 of 1985 (Fart xX) No. PS71 of 1985 - wnesrrecr of exercise BANKPUETCY ACT 1944 IN_THE FEDERAL COUFT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE ETATE OF NEW SOUTH WALES AND THE ANSTPALIZN CAPITAL TEPPITORY No. WU8S7 of 1985 (Fart ©) No. PS71 of 1385 ) ) GENERAL DIVISTON ) ] ,] ' ER: PODPTC TaN HAMILTON EX PARTE: ANDFES FICMUEFOA OPAM: Sheppard J. DATE : 4 December 1985 HIS HONOUR: In the list are two matters. The first, W187/85x, is an application in which one Andres Fiqueroa, makes application to have set aside a deed of composition entered into by the debtor, Rodric Tan Hamilton. The application is made pursuant to sub-sec, 222(4) of the Bankruptevy Act 1966, The seconae us a4 petition presented hy Mr. Fiqueroa pursuant to s, 43 -f the Act for the sequestration of the debtor's estate, The principal grounds upon which the application inder Fub-sec, 2022/4) 1s made are thase provided for in para. (4:(b) of Fhe subsection which empowers the Court to declare a composition fa he vo1d where a debtor has amitted a materral particular fram hie sratement of affairs under -,. 195 or included an tncerrect and material particular in that statement. The wav in whith that provision should be conetrned is referred to in Beard +. Frasticre Bakiny Industries Pty Limited (1981) 76 A.L.R. B07 at pp, ~49-? Se RTT OE RR CT FI FOR TE CR GE TAT A EE LI EE CP METI ETE? and Ido net repeat what is there said, suftice it to sav chat the rest 25 an ohiective one. It matters not whether the debtor was aware when he siaqned his statement of affairs that he was omitting a material particular therefrom or including therein an incorrect and matérial particular. The principal matter which was relied upon by counsel for the applicant was that in item 12 of Fart V of his) statement of affazrs ain which he was obliged to give particulars of real property not shown in Part III of the statement, he had said, "Half interest in land at Walton. subiect of possible airport resumption." The estimated value was said to be "Nil." Part ITI of the statement of affairs deals with secured creditors and is not relevant for present purposes. m Evidence has heen qiven hy two comperent valuers of the value of the land. According to one, that walue is of the order of $150,000. According to the other. the value is of the order of 3120,000. It 15 not suaqested that the value of the land is anv eK less than that figure. Subject to what f ows, the valu f the o a v ws ni) rt debtor's interest ain the land is, th ere, not less than a La The debrer has no lewal ritie ta the iand and there anpears To be no instrument in writing evidencing that iurtereast+. but one ef Che drrectors of the company, which 15 said to he the -wner if the ether half interest. was called. It apraars thar the land ey 3a has been owned since 1972 and that, althoudh it is in the name of the company - that is to say, the title to ut is in the name of the company - the company has not at anv stage suadadested otherwise than that the debtor does have a half interest in the land. The debtor himself. in the course oaf his evidence, acknowledaed that he had atlwavs understood that he had a half interest and that he had alwavs been winder the clear impression that 1f he soudht to assert the half interest. the company would raise no opposition to his doing so. He said he was not aware that there were procedures provided in the law, namely in s. F6G of the Convevancina Act 1919 (N.S.W.), which would enable him, in those circumstances, to compel the sale of the property. He said, in his avidence - and I do not find it necessary to make a finding one way or the other as to whether fhat evidence should be accepted - that he had no idea that the Land was worth so much. But T should mention that in affidavits sworn by him in the District Court of New South Wates for the purprse rt obtaining time to pay the iudament debt which rhe applicant has. he stated the value of his interest in the land on two orrasinns co be of the order of $11,200. An attempt to explain how 1t was that the debtor came te sav that his anterest was valueiess is to be found in his 2 7113ence and also ain the evidence of Mr. G.R. James who was his te Oe eT c The debtor in his affidavit confirmed that Mr. James had ~cli the meeting in substance what Mr. James said 1n the above paragraphs. The cross-examination of Mr. James revealed that the only anvestigations he had made were inquiries made of the Asbtor. UWeicther the debtor nor Mr. James made anv inquiry of the company which has the legal title to the land. Tf thev had done 30, it is plain that thev would have been told that the interest did 2xist and that there was no question but that the comnany would acknowledae it. Thus, the matters raised in Mr. James' starement to the meeting casting doubt on whether the debtor had anv interest in the land at all. and suagesting that at best he might be no more than a creditor for monevs that he had paid in respect of the land, were baseless and irrelevant in the sense that there was in fact no dispute about the fact that the debtor had a half interest in the land, nor has there been at anv time. On that basis 1t is difficult indeed to understand, even if the debtor was not aware that the land had appreciated in value to the extent that it has, whv he did not state what he had stated in his affidavits in the District Court. namelv. that his unteresr in the land, had a value of the order cf $11,500, A further matter to be observed is that the onlv reason a1-=n un the starement of aifairs for waluinag the land at nothira wae that it was possible fhat wt would be resumed for the new international airport. That is not how the matter was put ts tne meeting by Mr. James. He said that the Land was in the vicinitr 3) of the airport, leaving the impression, nat thar wr would he likely to be resumed, but. rather. that it would have lirtle value because of the presence of the nearbv airport ani tne adverse effect that that would cause. More aimportantl~, it 1s clear that the matter he amphasired was not the vrcwctimity af rhe land tc anv proposed airport, but the uncertainty -f *"hetner the debtor had anv enforceable interest tn the land ar ali. That was oO not a matter mentioned in the statement of affairs, no doubt for the reason that the debtor was confident, as ne said tin his evidence, that there would be no difficulty presented bv the company un whose name the title of the land was reaistered to the recognition of his interest. The statement which Mr. James made to the meeting is not directly relevant to the question of whether or not the applicant has made out a aground under para. 222(4)(b). The around is made eut 1f there exists an inccarrect and marerial particular in the statement. Plainly thers was an inenrrecr and material particular ain the statement, namelv, that the interest ain tna land was valueless. The circumstances, thouch, need to be looked at in order to determine how the Court should exercise tts discretion, particularly bearing ain mind that the immediate parties fo Fhis application are not the onlv parties concerned. Tne creditors, on the face of the evidence, have decided that there should be a composition. No creditor has taken part in rhese praceedints aa except the applicant. What emerges from the evidence of Mr. James, confirmed as it is by the evidence of the debtor, plainly shows that the statement made in the statement of affairs that the debtor's interest ain the land was valueless was perpetuated at the meetina, Furthermore, there is evidence that a document circulated to creditors before the meeting contained the same information. In the range of figures which are at plav in this case on the debit and credit sides of the Jedaer, the omission of an asset which i m™ worth between $60,000 and 375,000 was. in my opinion, a serious matter. In those circumstances. not only has the applicant made out the qround upon which he relies; he has persuaded me that it is a proper case in which T should exercise my discretion to set aside the deed. The matt D r a gf the value of the land was not the only matter om [ary which was rel1 upon. Ther? were questions concerningd wages said to be owina toa Mrs. Hiagson, amounting to a sum cf the oeder of $10,000; the omission of a contindent liability owina to a company, Jahula Ptv Limited, and the omission of anv menrion of J a =I D n ares owned bv the debtor ina company, N & K Tecknoloav Limited. In the light of -xplanatians aiven br Mr. concerning rhe contingent lishiiite and ain the livhr cf Ss D D w »fe) the few shares which the debtor owns in kh & VY Technolear Limited, IT do not think that I would have taken a serious view if thev had been the only matters relied upon, but since they are nor, thev g. add weight to the around which has already been established, and IT regret to sav, create an atmosphere which would suagest to me that the affairs of the debtor need to be investiaated somewnat closely. I am strenathened in that view by a cansideration of ind he wages said to be due to Mrs. Hrason, who 1s said te wark on ww v h preperty as an emplovee of the debtor. The wages bonk i= in 'y v evidence and I think one has to sav that, whilst it maiaht quite correct that waqes of the order recorded therein have be 1D ot) ie] earned, a careful investigation of the claim, if it he made, would need to be embarked upon before one could be satisfied that the wages were, in fact, due. The matter 15 serious because, if the wages are due, they will have priority over other debts. Mrs. Hiagson would be paid first before other creditors. A further matter which has concerned me. but which has nothina tao do with the contents of the statement of affairs, 15 the fact that there 15 prima facie. but by no means concluzir= evidence, that a preference has been aiven to the debtor's father in the sum of 323,000, Tf a composition were enterei inte, 7] creditors would not be able to pursue a claim against Mr. Hamilton senior for the repavment of the sum of $22,000 because m » Lae t 13) £ the Bankruptcv Act would not apply; it would only appiv if 7i ib re were a bankruptcy. Seeing the force of these various matters. the solicitor for rhe debtor did not ultimately offer substantial opposition to the making of the order which the applicant seeks. What he did do was to resist the making now of anr sequestration order, I undicated to the parties during the course of the arqument that I thought that the debtor, on certain terms and conditions, should be aiven the opportunity of seeing if it were not possible, notwithstanding the past, to induce his creditors once again ta aqree tao a composition. After discussion and the indication bv me that I would only adjourn the petition if certain undertakinas were given to the Court, it was aqreed by the parties that the matter would be adiourned until February on those undertakinas. I shall refer to the detail of them when I come to make orders in matter P 571 of 1985. Before I conclude I should sav this. Tt is of the utmosr importance that, if there be any further meeting of creditors. the debtor make a full, true and frank disclosure of his affairs both in his statement cf affairs and in what he savs to any meeting. It is important also that if anvone, particularly his trustee, makes any statement which he considers to be incorrect that he correct that statement; otherwise a similar position ta the one that has already arisen may arise aaain. The other matter I wish to mention 15 chat the applicant in wr = nis matter 1s the father of the debtor's farmer wife and that, althouth the debtor and his wife have been divorced. procesiinas are still current in the Family Court concerning there financial affairs. The ceason which has moved m= co aqree fre rhe adjournment of the petiticn 18 principally because cf fhe 10. relationship or to say, father-in-law and what T might describe as a more inclination would have been to former relationship of the son-in-law. two parties, that 15 If the applicant had been arm's lenath creditor I think mv erder that the petition proceed rodav. Tt remains to deal with the question of costs. Tt tems to me that the applicant has made out an unanswerable case for an erder for the costs of the proceedings incurred up to tonav. This morning the debtor's solicitor announced that his client was prepared to put aside the opportunity of existing seeing whether he could composition but wanted an not induce his creditors ta agree to another one. The day proceeded with the completion of the cross-examination of Mrs. Higson, who had been partly cross-examined when the Matter was aditourned on the last oecasion. with evidence from the debtor as to his) current financial situation, and why it would be beneficial for the applicant and other rather than to make him bankrupt, as well as creditors toa accept a further composition with submissions by counsel, The debtor's solicitor has pressed upon me that T should nor in those circumstances include in the order for costs whnicrtn IT propose to make anv order as o the costs of today But the Tourse wraposed on behalf of the debtor this morning was not previously notified to the applicant or h2s leqal advisers and it seems to me to have been reasonable for the applicant to proceed AS ll. he did inorder to test what it was that the 'lebhtar was proposing, particularly bearing in mind the wav in which ne has conducted himself in the past. In those circumstances I propose to make an order that the debtor pay the entirety of the applicant's costs of the application. ol The orders I make then in matter number W 187/852 are:- I make an order declarina the deed of composition referred to in the application to be void. I order the respondent to the applicatzon to pay the applicant's costs thereof, In matter P 571 of 1985, upon the debtor giving the following undertakings to the Court:- fa) that he will not, without the leave of the Court. during the period of the adyournment of the petition. sell, transfer or otherwise deal with any property or any interest in property otherwise than in the ordinary course of tne business cf Mount Fleasant Piagerr13s canducted py the debtor at 12. administered pursuant to the provisions of Part X of the Bankruptcy Act 1966:- (i) he sian an authority pursuant to s. 188 on or before 16 December 1985; f11) in the event of such authoritv being signed he provilis fo his controlling trustee copies of the affidavits, transcript, reasons for tudament and order in matter number W 187/85X: (i111) he send to each of his creditors on or before 2 December 1985 a copy of the reasons for iudament and a copy of the order tn matter number W 187/85xX; petition is stood over to 7 February 1986 at 9.30 a.m. There will be liberty to restore it to the list on threes davs' notice. Costs are reserved. ] certty that this and the // preceding pages are a true copy of the reasons for judgment herein of The Honourable Mr Justice Sheppard. , yy an Assoctate pee 4 DECE7IGER /78S~