CATCHWORDS BANKRUPTCY - creditor's petition - little prospect of dividend - some chance of trading out - insured petitioning creditor (indifferent to prospects of dividend) - exercise of discretion. Bankruptcy Act, 1966 Re: Rodney Vincent Brooke Ex parte: A.N.Z. Furniture Timbers Pty. Ltd. QLD P705 of 1986 Re: Kyle Sydney Brooke Ex parte: A.N.Z. Furniture Timbers Pty. Ltd. QLD P706 of 1986 Re: Marlene Ann Hellyar Ex parte: A.N.Z. Furniture Timbers Pty. Ltd. QLD P707 of 1986 PINCUS J. BRISBANE 6 OCTOBER 1986 I > i £2 OCTESS > BEDERAL court / ran AusTRALiA. OF / ' PRINCIPAL ca SON REGISTRY IN THE FEDERAL COURT OF AUSTPALIA GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND ~ QLD P705 of 1986 RE: RODNEY VINCENT BROOKE EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD. OLD P706 of 1986 RE: KYLE SYDNEY BROOKE EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD. QLD P707 of 1986 RE: MARLENE ANN HELLYAR EX PARTE: A.N.2. FURNITURE TIMBERS PTY. LTD. MINUTES OF ORDER JUDGE MAKING ORDER: PINCUS J. DATE OF ORDER: 6 OCTOBER 1986 WHERE MADE: BRISBANE THE COURT: In respect of P705 of 1986: 1. Finds the act of bankruptcy alleged in the petition. 2. Is satisfied of proof of the other matters of which the Act requires proof. 3. Makes a sequestration order in respect of the estate of the debtor. 4, Orders that the costs of the petitioning creditor of and incidental to the proceedings be taxed and paid in accordance with the Act: such costs to include the costs of the two adjournments of 1 and 15 September, 1986. In respect of P706 of 1986: 1. Finds the act of bankruptcy alleged in the petition. 2. Is satisfied of proof of the other matters of which the Act requires proof. 3. Makes a sequestration order in respect of the estate of the debtor. 4. Orders that the costs of the petitioning creditor of and incidental to the proceedings be taxed and paid in accordance with the Act only insofar as such costs relate to work which it would have been necessary to do in respect of this debtor if only one petition had been issued; such costs to include the costs of the two adjournments of 1 and 15 September, 1986. In respect of P707 of 1986: 1. Finds the act of bankruptcy alleged in the petition. 2. Is satisfied of proof of the other matters of which the Act requires proof. 3. Makes a sequestration order in respect of the estate of the debtor. 4. Orders that the costs of the petitioning creditor of and incidental to the proceedings be taxed and paid in accordance with the Act only insofar as such costs relate to work which it would have been necessary to do in respect of this debtor if only one petition had been issued: such costs to include the costs of the two adjournments of 1 and 15 September, 1986. NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND ~ ~ OLD P705 of 1986 RE: RODNEY VINCENT BROOKE EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD. OLD P706 of 1986 RE: KYLE SYDNEY BROOKE EX PARTE: A.N.2Z,. FURNITURE TIMBERS PTY. LTD. QLD P707 of 1986 RE: MARLENE ANN HELLYAR EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD. PINCUS J. 6 OCTOBER 1986 EX TEMPORE REASONS F'OR_ JUDGMENT: The matters before me are three creditor's petitions based upon a single judgment given on 8 April 1986, in the sum of $13,387.16. It seems that the fact that one petition only was necessary should be noticed with respect to costs. The matter first came before the Court on 1 September 1986, when one of the debtors appeared for himself and for the others, and the matter was adjourned by mé to allow time to make some proposal for payment. The case came on again on 15 September, and was adjourned again for the same reason: it comes on today, on 6 October. and Mr. Brooke appears and seeks a further adjournment. Exhibit 1 sets out the debts owing by a business in which the debtors are participants, and the conduct of which has given rise to the debt in question, that is, the debt on which the petitioning creditor petitioned. The list in exhibit 1 totals a little under $300,000, in addition to which it appears that a sum of about $200,000 was due to one McKenzie, who is said by Mr. Brooke to be, in substance, a partner, but appears to be legally a creditor. Mr. Brooke has given evidence and made statements from the bar table, and I may say that I find him a genuine and honest person, and have every confidence that he is doing his best to give me a reasonable account of the position of the business. In substance, it is not doing particularly well, but has good prospects in the future, or so it is hoped. One of the reasons it is not doing well at the moment is that persons who are or have been indebted to the debtors' business have not heen meeting their obligations, through various misfortunes of their own. The petitioning creditor company, on the other hand, says that it needs the money which has now been due to it for over a year, for the purposes of its own business, which is quite a small one. The matter which has induced me to adjourn the matter twice to enable the debtors to try to raise some money is that the assets of the business are not very considerable. They are principally machinery, which is leased, and Mr. Brooke has the opinion, which I respect, that the equity in the machinery, particularly on a forced sale, would not prove to be very large. It therefore appears to me that, if the debtors are made bankrupt, the dividend will not be large, and that it may well be that the best hope the creditors of the business have is to allow it to attempt to trade out of its difficulties. That would seem to me to be a fairly long process: nevertheless, people have fought back in business from worse positions than this. It may seem at first sight odd that, in view of the position in which the debtors' business is placed, the petitioning creditor presses for a sequestration order. Mr. Bayliss, who has appeared on each occasion for the petitioning creditor, informs me that the reason for the attitude of his client is that it is insured and will receive most of the debt due if and when the bankruptcy proceedings are concluded; that is, it does not depend upon a dividend. Its purpose in bringing the bankruptcy proceedings is to comply with the terms of the insurance policy, and to enable it to recover from the insurance company. I have no real confidence, from what Mr. Brooke has told me, that a substantial loan such as has been sought will be available in the foreseeable future. I think that a lender prepared to put a substantial sum into a business in this condition would be difficult to find. Tam far from saying, however, that in the long-run the creditors would necessarily remain unpaid. What I am fairly sure of is that in the bankruptcy they will not get much. Generally, the Court's position is, I think, that unless the creditor can be seen to be likely to be able to be paid reasonably soon, the petition will not be simply adjourned indefinitely in the hope that the debtor will overcome his difficulties with time. I have been much troubled as to whether I should apply that policy in a case of this sort; it may be of an increasingly common type, because Mr. Bayliss has been good enough to tell me that he thinks that insurance of this kind is fairly popular. On the whole, and taking account fully what Mr. Brooke has told me (in particular today, and less relevantly, on previous occasions) I think that I should make a sequestration order in respect of each of the debtors. It would be too great a departure from the practice of the Court to allow the debt to remain due indefinitely, as seems likely, and force the petitioning creditor to simply take the risk that one day the debt will be able to he paid. I must say however, that those who have been responsible for framing and administering the bankruptcy laws may not necessarily have thought of the particular problem presented by the insured petitioning creditor, at least in cases where the estate does not seem to be worth anything of substance. There is a dilemma; it seems, as Mr. Brooke has accurately said, a little unfair to the general body of creditors to, perhaps, deprive them of any chance of getting paid, by putting an end to the debtor's business, On the other hand, it would seem unfair to the petitioning creditor to hold him out of his money indefinitely, when he has a remedy available. What has in the end influenced me in favour of the petitioning creditor's argument, amongst other things, has been the thought that the business community tends to expect a court to not permit a debtor to go on trading without let or hindrance when he is heavily in debt, cannot pay, and there is a risk that new debts may arise which also cannot be paid. Perhaps a solution may have been able to have been found under Part X of the Act if a meeting of creditors had been called. None has been called. Mr. Brooke has attempted to engage a solicitor, without success, presumably because, reasonably enough, the solicitor is unenthusiastic about working for people who are perhaps going to be unable to pay legal fees, and there seems to be no public facility for people such as Mr. Brooke to enable Part X proceedings to be instituted. Perhaps there should be such a facility, because I cannot avoid an uncomfortable feeling that the result which I feel forced to arrive at is not very satisfactory. In P705 of 1986 I find the act of bankruptcy alleged in the petition. I am satisfied of proof of the other matters of which the Act requires proof. I make a sequestration order in respect of the estate of the debtor, and order that the costs of the petitioning creditor of and incidental te the groceedinas he taxed and paid in actordance with the Act. In P706 of 1986 I make a similar finding and order. with the exception that the order for -tosts will be as follows: in lieu of the order for casts made in number 705, that in number 706 will be that the costs of the petitioning creditor of and incidental to the proceedings be taxed and paid in accordance with the Act only insofar as such costs relate to work which it would have been necessary to do in respect of this debtor if only one petition had been issued. In P707 of 1986 I make the same findings and order as in P706. That is, 706 and 707 will have the same order. I should explain, that I have in mind that in 706 and 707 it would have been necessary, even if one petition only had been instituted, to serve the individual debtors separately, and there would have been costs associatéd with that, and it may be that there are similar costs in 706 and-707, but basically it will be seen I am allowing only the costs. of one petition. The costs of the petitioning creditor are to include the costs of the two adjournments to which I made reference.* i certify that this andthe S preceding pages are a true copy of the reasons for judgment herein of His Honour Mr. Justice Pincus og, Lat pro pe Associate Dated 6 @ctaber 19%