NOT FOR GENERAL DISTRIBUTION |A4 IN THE FEDERAL COURT OF AUSTRALIA ! + ) ) GENERAL DIVISION ) ig! . No. FP. 537 of 1986 ) ) J BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND * THE AUSTRALIAN CAPITAL TERRITORY Res ERNEST ARTHUR WILSON A Debtor Ex parte: AUSTEN WIGGINS, RENE WIGGIUS, DONALD WIGGINS and KEVIN ROBINSON Petitionina Creditors a ce MINUTE OF! ORDER \ a ' rupee MAKING ORDER : WNeaves J. 'hh. DATE OF ORDER : 23 April 1986 ERE MADE MADE : Sydnev rey crs wo oot i i THE COURT ORDERS THAT: ' 1. The petitioning creditors have leave ro amend the ' petition herein by inserting at the end of paragraph 4 thereof "being a counter-claim, set-cft or cross demand that he could not have set up in i the action or proceeding in which the jiudament referred to in the bankruptcy notice was obtainen" 2. The need to re-verify the petition is dispensed with. 3. The petitioning creditors are. pursuant to rule 195 of the Bankruptcy Rules, relieved of the consequences of non-compliance with the Pankruptcy Rules as to service of the petition. 4} tee ae P re ay aed) way Ya tae RUE . 2. 4. A sequestration order is made against Ernest Arthur Wilson ("the debtor"). 5. The costs of the petitioning creditor be taxed and paid in accordance with the Rankruptcy Act 19A6 (Cth), 6. The costs of the petitioning creditors in defending the proceedings by the debtor for the extensiar of the time within which to comply with the bankruptcy notice herein be treated as part of the costs of the petitioning creditors for the purposes of rule= 40(e) of the Bankruptcy Rules. Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules. oar an ~ Tote ap ht " eg i loaf "1h mt rs { | Hy) ' et uy . ° n, eta, a, ' biotin. yd, t ree sal ri Mpg Ge IN_THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND ) ) ) ) No. P. 537 of 1986 ) ) THE AUSTRALIAN CAPITAL TERRITORY ) Re: ERNEST ARTHUR WILSON A Debtor Ex parte: AUSTEN WIGGINS, RENE WIGGINS, DONALD WIGGINS and KEVIN ROBINSON Petitioning Creditors CORAM: Neaves J. DATE: 23 April 1986 REASONS FOR JUDGMENT. Before the Court is a petition presented on 9 April 1986 by Austen Wiggins, Rene Wiggins, Donald Wiggins and Kevin Robinson ("the petitioning creditors") for the sequestration of the estate of Ernest Arthur Wilson ("the debtor"). The petition is based on an act of bankruptcy consisting in the failure of the debtor on or before 14 March 1986 to comply with the requirements of a bankruptcv notice served on him on 21 February 1986 or to satisfv the Court that he had a counter-claim, set-off or cross demand equal to or exceeding the amount of the jiudament debt specified in the bankruptcy notice, being a counter-claim., set-off or cross demand that he could not have set up in the action or proceedina in which the judament was obtained. It may be noted that the statement of the act of bankruptcy set out in the petition is defective in that it omits anv reference to the counter-claim, set-off or cross demand being one that the debtor could not have set up in the action or proceeding in which the jiudament was obtained. No issue was raised as to the sufficiency of the petition by reason of this omission but it is, I think, desirable that the petition be amended so that the act of bankruptcy is fully stated therein. I, therefore, grant leave to the petitioning creditors to amend the petition in that reaard. I dispense with the need to re-verify the petition. The petition alleges that the debtor is indebted to the petitioning creditors "in the sum of $58,475.50 together with interest thereon at the rate of 13.5% p.a. from 25 March 1985 to 14 March 1986 which amounts to $7,675.10 makina a total of $66,132.60 for monies advanced under Bill of Sale". The bankruptcv notice, which was addressed to the debtor and one Patricia Lorraine Williams. was issued on 29 July 1985. It was a 21 dav notice and was based on a judament obtained by the petitioning creditors against the debtor and Patricia Lorraine Williams in the District Court of New South Wales holden at Penrith on 25 March 1985. On 28 January 1986 a Deputy Registrar in Bankruptcy, pursuant to rule 9 of the Bankruptcv Rules, extended the time within which service of the bankruptcy notice midqht be effected up to and including 29 July 1986. This followed a number of unsuccessful attempts to serve the bankruptcv notice upon the debtor. The bankruptcy notice was served personally on the debtor on 21 February 1986. Consequentiy, the time fixed in the bankruptcy notice for compliance with its requirements expired on 14 March 1986. On 10 March 1986 an application was filed in the Court on behalf of the debtor pursuant to sub-s.41(6A) of the Bankruptcy Act 1966 (Cth) seeking an order that the time for compliance with the bankruptcy notice be extended on the qround that proceedings to set aside the judgment on which the bankruptcy notice was founded had been instituted bv the debtor. No application was made to set aside the bankruptcy notice. It was common around between the parties that there is pending in the District Court of New South Wales at Penrith an application by the debtor that the iudqment on which the bankruptcy notice was founded be set aside and that the debtor be allowed in to defend the proceedings. An issue arose, however, whether the proceedings to set aside the judament had been instituted by the debtor before the expiration of the time fixed for compliance with the requirements of the bankruptcv notice. After hearina evidence, including evidence from the debtor, and the submissions of counsel for the parties upon that issue. I concluded that the debtor had not shown that the proceedings had been so instituted. The condition precedent upon which the jurisdiction of the Court to extend the time for compliance with the bankruptcy notice depended had, therefore, not been established and I refused the application. I also refused an application by the debtor that the proceedinas upon the petition be adjourned and the hearind proceeded. I am satisfied that the debtor on 14 March 1986 committed the act of bankruptcy alleged in the petition as amended. It cannot affect that situation that the debtor now asserts that the amount of the iudament is in excess of the amount which he owed to the petitioning creditors at the date the judament was entered or that there is at present an unresolved application pending in the District Court of New South Wales to set aside the judament: see Re Bedford; Ex arte H.C. Sleigh (Queensland) Pty. Ltd. (1967) 9 F.L.R. 497: Re Hanby; Ex parte Flemington Central Spares Pty. Ltd. (1967) 10 F.L.R. 378: Re Vella; Ex parte Seymour (1983) 48 A.L.R. 420. SS I have already set out what the petition alleaes in relation to the indebtedness of the debtor to the petitioning creditors. The relevant paragraph of the petition. paragraph 2, is verified by the affidavit of Austen Wiaqins sworn 9 April 1986. Mr Wiggins also swore an affidavit of debt on 18 April 1986 stating that he was authorized to swear the affidavit on behalf of the petitioning creditors, that no payments had been received bv the petitionina creditors since the date of the presentation of the petition and that the debtor was still justlv and trulv indebted to the petitioning creditors in the sum of $66,132.60 referred to in the petition. Mr Wiagins was not cross-examined upon his affidavits. The debtor, however, filed an affidavit. sworn 6 March 1986, to which was annexed an affidavit sworn bv him on 27 Februarv 1986 for the purpose of the application to the District Court of New South Wales to set aside the judament on which the bankruptcy notice is based. In that affidavit the debtor refers to a memorandum of aqreement dated 6 April 1979 under which he and Patricia Lorraine Williams purchased from the petitioning creditors the qoodwill of Gardners Inn situated at Blackheath for the sum of $65,000 and to a Bill of Sale whereby part of the purchase moneys ($35,000) was secured. The affidavit further states that the debtor had made a number of payments "in reduction of principal and interest" to the petitioning creditors. The payments are said to have been made between 13 Auaust 1979 and 3 January 1984, the date and the amount of each payment being set out. The amounts said to have been paid total $36,448.16. The debtor was cross-examined on his affidavit. He said that the schedule of payments set out in his affidavit was derived from records which he had handed to his solicitors. Those records were not produced and the makina of the pavments was not evidenced bv any documentation. It is clear from the evidence that the debtor may well be mistaken, at least as toa payment of $16,748.16 shown as having been made on 13 Auaust 1979, in asserting that all the payments were in reduction of the principal and interest under the Bill of Sale. While asserting that the amount for which judament was entered in the District Court of New South Wales is in excess of the amount that was at the time due and payable, the suqaestion being that no allowance was made for the payments to which the debtor deposed in his affidavit. the debtor did not assert that he was not indebted to the petitioning creditors in a substantial sun. Far from showing that he was under no liability to the petitionina creditors. he aqreed that that indebtedness was in excess of $20,000. It follows that the most that the debtor can achieve in his application to the District Court of New South Wales, even if he be totally successful, is a reduction in the amount of the jiudqment debt. 7. In these circumstances it is umnecessarv to express a view on the question whether the amount of the indebtedness stated in the petition is correct for it is beyond question that there is, in realitv. a debt due by the debtor to the petitioning creditors areatly in excess of the amount prescribed in sub-s.44(1) of the Bankruptcy Act 1966 as necessary to found the petition. Pursuant to rule 21 of the Bankruptcy Rules there was filed on behalf of the petitioning creditors an affidavit sworn by Robyn Simpson on 18 April 1986 which deposed to a search having been made on that date in the records of the District Court of New South Wales at Penrith and to that search having disclosed no payments having been made to the Court under the relevant judament. It emeraed in the course of Mrs Simpson's oral evidence that the search had been carried out bv making enquiries by telephone of the appropriate officer of the Court and not by direct search. Objection was taken by counsel for the debtor to the use of the affidavit to prove the matters deposed to. However, the debtor himself aqave oral evidence that no payments had been made under the judament and, in the liaht of that evidence, I am satisfied that no such payments have been made. The debtor also obiected that the petition had not been served personallv as required by rule 15(b) of the Bankruptcy Rules. This objection is well founded as the 8. affidavit of service of the petition, an affidavit sworn by Susan Padman on 15 April 1986, discloses that the appropriate documents were on 10 April 1986 delivered personally to a female person over the aqae of 16 and apparently in the employment of Peter R. Murphv & Co., the debtor's solicitors. In the application to extend the time for compliance with the bankruptcy notice, the debtor had nominated the address of Peter R. Murphy & Co. at Bondi Junction as his address for service. Counsel for the petitioning creditors conceded that personal service on the debtor had not been effected but sought an order pursuant to rule 195 of the Bankruptcv Rules, relieving the petitionina creditors of the consequences of the non-compliance with rule 15(b). It is not disputed that the petition came to the notice of the debtor. He appeared in the proceedinas and was represented by counsel. It has not been shown that any prejudice or injustice was suffered by the debtor by reason of the defective service. In my opinion, this is an appropriate case, particularly having reaard to the history of the matter as deposed to in the affidavits filed on behalf of the petitioning creditors, to exercise the power conferred on the Court by rule 195 of the Bankruptcy Rules and so relieve the petitioning creditors from the consequences of non-compliance with the rules as to service of the petition. For the debtor it was submitted that, in the exercise of its discretion, the Court should not make a sequestration order but should allow the debtor an opportunitv to pursue to finality the pendina application in the District Court of New South Wales and to seek to make arrangements for payment of the amount which he admits is owing to the petitioning creditors. In the liaht of the debtor's oral evidence as to the admitted indebtedness and as to the absence of available assets or funds from which that indebtedness could be satisfied and in the absence of any positive proposal for pavment, I am not prepared to accede to the debtor's request. It seems to me. in the licht of the historv of the matter and the evidence of the debtor, that to adiourn the petition would have no practical result other than the incurrina of additional expense. I am also satisfied, for the purposes of sub-s.52/1A) of the Act. that the petitionina creditors have been unable to obtain from registered trustees a consent under sub-s.156A(1). I, therefore, make a sequestration order aqainst the estate of the debtor. I order that the costs of the petitioning creditors be taxed and paid according to the Act. IT vacate the order made on 21 April 1986 that the debtor pay the petitioning creditor's costs of the application to extend the time for compliance with the bankruptcy notice and, in lieu thereof, I order that the costs of the petitioning creditors in defending those proceedings be the petitioning creditors for Bankruptcy Rules. 10. treated as part of the costs of the purposes of rule 40(e) of the I certifv that this and the preceding 9 pages are a true copv of the Reasons for Judament herein of the Honourable Mr Justice Neaves. heft Vor Associate Dated: 23 April 1986