Bae aig TIG@ NOT FOR GENERAL DISTRIBUTION CATCHWORDS Bankruptcy - Application for discharge - Duty of trustee - Adequacy of trustee's report - Principles governing exercise of discretion Bankruptcy Act 1966 (Cth), s.1i50 Re: CYRUS JALAJER TARAPOREWALLA, A ,Bankrupt Ex parte: CYRUS JALAJER TARAPOREWALLA No. W379 of 1984 Re: SILLOO CYRUS TARAPOREWALLA, A Bankrupt Ex parte: SILLOO CYRUS TARAPOREWALLA No. W 902 of 1984 Neaves J. 22 April 1986 Sydney Serato trae 7 7s IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY ) ) ) ) No. W 379 of 1984 ) ) ) Re: CYRUS JALAJER TARAPOREWALLA A Bankrupt Ex parte: CYRUS JALAJER TARAPOREWALLA MINUTE OF ORDER JUDGE MAKING ORDER : Neaves J. DATE OF ORDER : 22 April 1986 WHERE MADE : Sydney THE COURT ORDERS THAT: The application for an order of discharge from bankruptcy be refused. Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules. mest ee ee _ Pr eg pee ere a Oe : sat qn eens et . . goof IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISTON BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY ) ) ) ) No. W 902 of 1984 ) ) ) Re: SILLOO CYRUS TARAPOREWALLA A Bankrupt Ex parte: SILLOO CYRUS _TARAPOREWALLA MINUTE OF ORDER JUDGE MAKING ORDER : Neaves J. DATE OF ORDER : 22 April 1986 WHERE MADE : Sydney THE COURT ORDERS THAT: The application for an order of discharge from bankruptcy be refused. Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules. aie, ol hen eee eee aha es weg IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY ) ) ) ) No. W 379 of 1984 ) ) ) Re: CYRUS JALAJER TARAPOREWALLA A Bankrupt Ex parte: CYRUS JALAJER TARAPOREWALLA IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY ) ) ) >) No. W 902 of 1984 ) ) ) Re: SILLOO CYRUS TARAPOREWALLA A Bankrupt Ex parte: SILLOO CYRUS TARAPOREWALLA CORAM: Neaves J. DATE: 22 April 1986 REASONS FOR JUDGMENT I have before me two applications each of which seeks an order under s.150 of the Bankruptcy Act 1966 (Cth) ("the Act") discharging the applicant from bankruptcy. One application is that of Cyrus Jalajer Taraporewalla whose estate was sequestrated on 7 May 1984 on the petition of Sterland Bros. Pty. Limited. The trustee of his estate is Mr Maxwell e wp ae ee pt rene: a a om ee 2. William Prentice, a registered trustee. The other application is that of Silloo Cyrus Taraporewalla (also known as Sillco Cyrus Mahernosh) who became a bankrupt on 25 September 1984 by force of sub-s.55(3) of the Act following the presentation of her own petition. Silloo Cyrus Taraporewalla is the wife of Cyrus Jalajer Taraporewalla. The Official Trustee in Bankruptcy is the trustee of her estate. On the hearing of the applications Mr and Mrs Taraporewalla appeared in person. They were not legally represented. In each application there was before the Court a report in writing by the trustee of the estate. There was no appearance by or on behalf of the trustee of the'estate of Mr Taraporewalla. Mr D.J.N. Bluett, Official Receiver for the Bankruptcy District of the State of New South Wales and the Australian Capital Territory, appeared on behalf of the Official Trustee in Bankruptcy in the application by Mrs Taraporewalla. Mr Schaffer, Solicitor, appeared in each matter on behalf of General Credits Limited to oppose the granting of an order of discharge. Neither applicant proferred to the Court any evidence on affidavit in support of his or her application and neither sought to adduce any oral evidence. Mrs Taraporewalla, however, was sworn and answered questions put to her by Mr Bluett and Mr Schaffer. a a ee weg erp pe erie ore wy OF 2 wets Ay saat 3. In his statement of affairs sworn on 5 June 1984 Mr Taraporewalla disclosed assets of $352 (being cash in hand $52 and household furniture and effects $300), liabilities of $56,729 owing to eight unsecured creditors and a deficiency of $56,377. There is no information before the Court concerning proofs of debt lodged or admitted in the estate of Mr Taraporewalla. Mr Prentice, however, certified to the Registrar in Bankruptcy that there.were twelve creditors of the estate who were to be notified of .the application for an order of discharge. The amount of the bankrupt's indebtedness to those creditors is not shown. In her statement of affairs sworn on 25 September 1984 Mrs Taraporewalla disclosed assets of $720 (being cash in hand $320 and household furniture and effects $400), liabilities of $9,459 owing to two unsecured creditors anda deficiency of $8,739. In her estate, two proofs of debt have been admitted to rank for dividend in sums totalling $9,187. The Official Trustee has certified that there are two other creditors of the estate, the amount claimed to he due to them by the bankrupt not, however, being stated. Amounts of $40 and $220 have been brought to the credit of the estates of Mr and Mrs Taraporewalla respectively, being contributions made by the bankrupt in each case. No dividend has been paid in either estate and none is likely to be paid. eee eee Sail eallah BOY Ei oa elas In the case of neither estate has a public examination of the bankrupt been held. It appears that Mr and Mrs Taraporewalla migrated to Australia from India in 1971. Mr Taraporewalla was a civil engineer. Mrs Taraporewalla qualified as a nedical practitioner in India. After her arrival in Australia she was employed until 1975 as a registrar in public hospitals in New South Wales. She went to India for about three months in 1975 and on her return to Australia joined a group medical practice at Newcastle comprising three doctors. She received a salary for the first year and then became a partner on a one-quarter share basis. The partnership was apparently not successful. In August 1977 Mrs Taraporewalla commenced her own medical practice at Mayfield, purchasing the goodwill of an existing practice for $7,000. The necessary funds were borrowed and were later repaid in full. The practice was gradually built up with financial assistance from her husband who operated a business as a consultant engineer and builder. Mrs Taraporewalla has stated that by 1979 both she and her husband were operating successful business ventures. She estimated that their combined assets were in excess of $100,000. Pe. oe re wre gr pre rope tierce cme ee cos ¥ roger nm ~f Srp ee at wenn yor gee te acne 5. On 15 June 1978 Mr and Mrs Taraporewalla purchased a shelf company, Coratex Pty. Limited. The company had a paid up capital of $2. Mr and Mrs Taraporewalla were the only shareholders and directors. Mrs Taraporewalla said in her oral evidence that she took no active part in the running of the company's business which consisted primarily in the construction of home units in the Newcastle area. According to Mrs Taraporewalla, the entire savings of herself and her husband of $85,000 were lodged with the State Bank, Mayfield to secure overdraft accommodation for Coratex Pty. Limited. Mr and Mrs Taraporewalla received a combined salary averaging between $400 and $500 per week from the company plus entertainment expenses. Mrs Taraporewalla travelled to India in September 1982 when her mother died and again in August 1983 after her father's death. All expenses were paid by the company. Mrs Taraporewalla then assumed responsibility for her brother, who is a paraplegic and is said to be fully dependent upon her for support. A condition of his being allowed to enter Australia was that she would guarantee his maintenance. In 1977 Mr and Mrs 'Tardporewalla purchased a house Property known as 64 Scenic Drive, Merewether and took up residence there. The purchase price is not known. There was a mortgage on the property in favour of the Newcastle Building Society Limited. The property was sold by the mortgagee in 1984 for $114,000, a deficiency resulting. rt In 1982 Mr and Mrs Taraporewalla purchased two parcels of land known as 20 Brown Street, Wallsend and Lot 2 Campbell Street, Warners Bay for $98,000 and $92,000 respectively. Deposits of 20% were paid from their savings and the balance was obtained by way of loan from General Credits Limited and secured by first mortgages on the land. As collateral security, second and third mortgages were given over the property at Scenic Drive, Merewether. The land was purchased to enable Coratex Pty. Limited to construct a total of 24 home units on the land, 7 on the Wallsend property and 17 on the Warners Bay site. 'The project, which was initially costed at $900,000, was financed by General Credits Limited and was expected to be completed within 12 months. Advances from General Credits Limited were made direct to Mr and Mrs Taraporewalla, they in turn lending the moneys to Coratex Pty. Limited to enable the company to finance the building of the units. The loan agreement required periodical payment of interest only, the principal amount being repayable upon completion of the project. The company's operations were affected by a down turn in the real estate market in 1982-83 and continuing industrial disputation in relation to the building work. The project fell behind schedule by nearly three months. The company encountered a serious cash flow problem and defaulted in the wa fe , To ote; — Y eed are ele rs ve wn; a 7. payment of interest to General Credits Limited. It ceased operations in August 1983 and went into liquidation on 10 November 1983, Mr J.E. Walker being appointed liquidator. In addition to their obligations to General Credits Limited, the bankrupts were personally liable under certain guarantees given in respect of debts of the company. General Credits Limited entered into possession of the sites in question and is completing the building work. A number of units have been sold but a deficiency in the sum of $1,000,000 is said to be the likely result after all the units are sold. The trustee of neither estate has received a report from the liquidator of the company. Most of the company's books and records are said to have been lost in transit when being delivered from the company's accountants, J. Rosen and Associates, to the liquidators. Mr Prentice has reported that he has ascertained from the only cash book held by the liquidator that some records of payments were kept in pencil and that Mr Taraporewalla was drawing a wage of $450 per month from the company although he had advised the liquidator that he did not draw a wage. The liquidator has informed Mr Prentice that the company has no assets and, at the date of liquidation, had an estimated deficiency of $130,271. ae sea alse ~o vr Wee ow ~% frome pian ose Ty Der wag ws ree ts mee Sg pr tor rep Lot erat ay — em rr—rye a ee oF . wet : 8. In relation to the books and records of the company Mr Taraporewalla produced to the Court an undated note from J. Rosen and Associates reading as follows - "This office was the Accountants for Coratex Pty. Limited, prior to liquidation. A Cash Payments and Receipts Journal was kept by Mr Taraporewalla, and a Hank Reconcellation Csic] thereon prepared by this firm. A list of Accounts Receivable and Accounts Payable was also provided to us. In our opinion proper Books of Account were kept. We are not aware of any matters in which the Directors of the Company, Coratex Pty. Limited did not act in the interests of the Company." After the making of the sequestration order against his estate, Mr Taraporewalla undertook a course of study ata College of Advanced Education in Sydney to qualify himself as a teacher in mathematics and computers. While doing so, he was supported by his wife. He is now employed in Sydney asa teacher by the Department of Education of New South Wales at a salary of $300 per week. Mrs Taraporewalla stated that, after the company ceased operations, she lost interest in her medical practice. However, in approximately June 1984 she commenced employment as a@ medical practitioner with a company, Morsfill Pty. Limited and is still so employed. That company changed its name to Silloo Mahernosh Pty. Limited on 4 October 1984. The sole Sanaa 'ose es a a yom aS eee rt mar . 4 sy Te, 9. shareholders of that company are Mrs Taraporewalla's brother in law, Dr 'Taraporewalla, and Mr J. Rosen, Accountant. Dr Taraporewalla does not, however, work in the practice: he is employed at a hospital in Brisbane but makes periodic visits to Mayfield where the company's business is being conducted by Mrs Taraporewalla as the sole medical practitioner in attendance. The business is conducted from the same premises from which Mrs Taraporewalla previously conducted her own medical practice. The Official Trustee in Bankruptcy has reported that Mrs Taraporewalla stated her income during the years ended 30 June 1982 to 1985 inclusive to be - Year ended $ 30 June 1982 14,984 30 June 1983 1,075 30 June 1984 nil 30 June 1985 20,000 In her oral evidence Mrs Taraporewalla said that her present net income after tax is $1,255 per month. She has the use of a motor vehicle owned by the company which meets all maintenance and operating expenses. She is at present living in premises rented from her father-in-law. The source of much of the information set out above is | the report made by the Official Trustee in Bankruptcy concerning- Mrs Taraporewalla; her conduct, trade dealings, property and affairs. I cannot forbear from commenting that sic ety, roof ee at / —n- yO Tous, . oar a nn © me UY ares pox oerearge 10. the report made by the trustee of the estate of Mr Taraporewalla is most unsatisfactory as it contains scant information concerning Mr Taraporewalla's conduct, trade dealings and affairs. In particular, no information is given concerning Mr Taraporewalla's involvement in the conduct of the business of Coratex Pty. Limited or the circumstances surrounding the financing of the building projects in which that company was engaged. No doubt the trustee would say that the loss of the company's books and the absence of a full report from the liquidator made his task in this regard more a@ifficuit. But no indication is given whether the trustee has taken any steps to obtain information in regard to those matters, either from the bankrupt or his creditors, and, if he has done so, with what result. As Woodward J. said in Re Maher (1985) 61 A.L.R. 592 at p.595 "the trustee is under a duty to ensure that the court has before it all material that will assist it in considering the application for discharge, and is not bound by the ordinary rules of evidence". Further, as has already been mentioned, the trustee of Mr Taraporewalla's estate was not represented at the hearing of the application. General Credits Limited opposed each application on similar grounds which may be summarised as follows - (a) The magnitude of the deficiency in the estate; Vee = em aye Tes At (b) (c) (d) (e) In the case report allege the existence of any of the matters specified in sub~s.150(6) il. The smail amount contributed to the estate by the bankrupt; The circumstance that the bankrupt is capable of contributing significantly more to the estate; Sufficient particulars of the bankrupt's liability to General Credits Limited were not included in the bankrupt's statement of affairs; and The bankrupt has not shown cogent grounds for the making of an order of discharge. of the Act nor is it alleged that any offence against the Act has been committed. In Re Maher (supra) Woodward J. at pp.601-2 said: "Although I have stated that I amof the opinion that there is no presumption that a bankrupt should be discharged by effluxion of time under 5.149, it does not follow that every applicant under s.150 is entitled toa discharge simply by reason of the fact that there is nothing to be said against the granting of that order. The court still must be persuaded to exercise its discretion in favour of the granting of a discharge order. It is for the applicants to persuade it. Whilst I agree with Toohey J. in Re Benda that an applicant need not show 'special circumstances' to succeed, he or she must, in my opinion, show some cogent ground or grounds for the exercise of that discretion in his or her favour. A mere dislike of being bankrupt - a consciousness of the stigma of bankruptcy, attaching to all bankrupts but felt more by some than others - cannot of itself be enough." of neither application does the trustee's wrens errs ape vey ri te e mete " ee eee creer pres ee qo on a reey i. il a ed sree, 12. Adopting that approach, I am not persuaded that the Court should exercise its discretion in favour of the granting of an order of discharge in the case of either bankrupt. I am not so persuaded because neither bankrupt has advanced any cogent ground or grounds for the exercise of the discretion in his or her favour. Mr Taraporewalla stated as the only ground on which he gought an order of discharge that he would like to be discharged from bankruptcy because he is in a profession where he is dealing with the public; that he would like to have his name cleared so that he can start again and live a normal life. Mrs Taraporewalla said simply that, as a medical practitioner, she would like to have her name cleared; that the bankruptcy had had a tremendous effect on her psychologically. In both cases it can be said that nothing positive has been shown against the granting of orders of discharge - although that state of affairs reflects to some extent at least the absence of material relating to the affairs of Coratex Pty. Limited and the manner in which the business of that company was conducted by the bankrupts. In any event that circumstance is not enough to warrant the exercise of the Court's discretion in the bankrupts' favour. I note, too, Mrs Taraporewalla's evidence that she took no active part in the rumning of the business yet she appears to have been paid a salary by the company Which also paid her entertainment expenses and met the cost of her travel to India in September 1982 and again in es Fectataats "ener tiaied caieneneaamaacaenatiememateane Te pret eet, rn on es Pars TID TTT ee ET Sey ee cy ay mere oe 13. August 1983. I also note that no real effort appears to have been made to make any substantial contribution to their respective estates for the benefit of creditors. Having considered the available material I am of opinion that both applications should be refused andI_ so order. I certify that this and the preceding 12 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Zhalel or Associate Dated: 22 April 1986 doer coer. moe ere re he —- meee ee meee en, . we pee pees cer alain wre. a