oe . 6/7 Niort FoR DISTRIBUTION) | PAB 1G: IN THE FEDERAL COURT OF AUSTRALIA ) ) ) ) No. W 145 of 1984 ) ) ) GENERAL DIVISTON BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY RE: DAVID JOHN BROAD A debtor EX PARTE: JOHN WILLIAM 0' BRIEN Applicant DAVID JOHN BROAD Respondent CORAM: WNeaves J. DATE: 24 December 1986 REASONS FOR JUDGMENT On 16 December 1986, at the conclusion of the hearing of an application by John William O'Brien, I made the following declarations and orders - *% ' 1. An order that the adjournment sought by the respondent David John Broad of the application by John William O'Brien be refused. 2. A declaration, pursuant to sub~-s.222(2) of the Bankruptcy Act 1966 ("the Act"), that the deeds made between David John Broad and John William O'Brien and respectively dated the 5th day of September 1984 and the 14th day of December 1984 are void on the ground that those deeds were not entered into in accordance with Part X of the Act in that they do not, nor does either of a them, accord with the special resolutio ia '\ passed on 16 August 1984 at a meeting of Y"* ey the creditors of David John Broad asf ROO \ such resolution is recorded in th ' 2ADECI86 =\ EEOERAL COURT OF. AUSTRALIA l RRINCIPAL REGISTRY + wrt. ceo dee ea eee - . sere ee oe . - - "1 L 2. minutes of that meeting or in the certificate of its passing signed by the chairman of that meeting and filed in the office of the Registrar in Bankruptcy pursuant to sub-s.204(7) of the Act. 3. A sequestration order against the estate of David John Broad. 4. An order that the costs of John William O'Brien of the application be taxed and paid in the administration of the bankrupt estate as if they were the costs of a petitioning creditor. 5. Liberty to apply. 6. An order that the application by David John Broad that the above orders be stayed be refused. I then said that I would give reasons in writing for my decision. What follows are those reasons. To appreciate the issues that arose upon the hearing of the application, it is necessary to set out something of the history of the matter. "s On 26 July 1984 , David John Broad ("the respondent"), pursuant to s.188 of the Act, signed an authority authorising John William O'Brien ("the applicant"), a registercd trustee, to call a meeting of his creditors for the purposes of Part X of the Act and to take over control of his property. The applicant consented in writing to exercise the powers conferred by the authority. The signature of the respondent to the authority and the signature of the applicant to the consent were each attested by a witness (see sub-s.188(2)). Yue tar oem i or a topmost e Soe wg m=) A meeting of the respondent's creditors was held on 16 August 1984. Mr John Star was elected chairman of the meeting. Mr Star was then a partner with the applicant and Mr Martin Green in the firm O'Brien Star Green, Chartered Accountants. That partnership had been formed on 1 December 1983. It was dissolved on 31 December 1984. A statement of the respondent's affairs, verified by statutory declaration declared by him on 16 August 1984, was presented to the meeting. It disclosed an amount of $472,566 owing to unsecured creditors and showed the value of his assets as nil. This latter statement should be qualified by noting that the statement of affairs disclosed that the respondent had an interest in his father's estate in New Zealand the estimated value of which was shown as "Unknown". According to the statement of affairs the unsecured creditors and the amounts of their respective debts were as follows - . $ EMI (Australia) Limited 89,037 Polygram Record Services Pty. Ltd. 38,942 Festival Records Pty. Limited 406 TDK (Australia) Pty. Limited 11,121 Sound Advice Pty. Ltd. (In Liquidation) 288,544 P. Marcus Clark 44,518 $472,566 This total is understated by $2 if the amounts of the individual debts are correctly stated. However, it seems that the debt said to be due to Sound Advice Pty. Limited (In Liquidation) was overstated by that amount. t a Sound Advice Limited was a company which had been incorporated in 1971. Prior to 1974 the shareholders were the respondent and Phillip Marcus Clark. In 1974 the respondent acquired Mr Clark's shares and became the major shareholder, his mother, Myee Constance Broad, becoming the holder of a very small number of shares. Thereafter, the company's business consisted in operating a number of shops retailing records, tapes and sound accessories. On 15 March 1983 it went into voluntary liquidation and Messrs John Star and Martin Green were appointed joint liquidators. As at 15 March 1983 it had, according to a report prepared by the liguidators, an estimated deficiency of $288,542. Amongst the creditors of the company were E.M.I. (Australia) Limited, Polygram Record Services Pty. Limited, Festival Records Pty. Limited and TDK (Australia) Pty. Limited. The debts owing to these companies by Sound Advice Pty. Limited were the subject of personal guarantees. The debts of each of the companies was guaranteed by the respondent. In the case of Polygram Record Services Pty. Limited, Festival Records Pty. Limited and TDK (Australia) Pty. Limited, the guarantee was given by the respondent and his mother jointly. Phillip Marcus Clark had also guaranteed the debts owing to E.M.I. (Australia) Limited and that guarantee had not been terminated when he ceased to be associated with Sound Advice Pty. Limited in 1974. It would appear that at the time the relevant guarantee was given Polygram Record Services Pty. Limited was known as Phonogram Recordings Pty. Limited. ' ty toe ety te ote Ute ae TS 1s ase The debts shown in the respondent's statement of affairs as being due to the companies other than Sound Advice Pty. Limited were due under the guarantees given by the respondent to which I have referred. The debt due to Phillip Marcus Clark represented one half of the debt due by Sound Advice Pty. Limited to E.M.I. (Australia) Limited and was apparently included on the basis that, if Mr Clark paid the whole of the debt due to that company, he would he entitled to claim against the respondent for one half of the amount so paid. It may also be noted that the debts the subject of the guarantees had been taken into account in arriving at the deficiency in Sound Advice Pty. Limited of $288,542. The respondent's statement of affairs also disclosed Westpac Banking Corporation Limited as a secured creditor for $40,000. It appears that the security was a mortgage over a home unit known as 2/38 New Beach Road, Darling Point. That unit was not shown as an asset. It was, however, stated that the value of the property over which the security was held, based on a valuation made in March 1983, was $130,000. A document purporting to be the minutes of the meeting of creditors, signed by Mr Star as chairman of the meeting and filed in the office of the Registrar in Bankruptcy as required by sub-s.203(4) of the Act, records that a special resolution was passed in the following terms - "atm en fata JA a TTT ere ae -? 2m wee - ws Ne "All creditors voted in favour of and therefore IT WAS RESOLVED: 'That David John Broad be required to enter into a Composition with his creditors and the Composition shall consist of:- Mr David Broad irrevocably assigning all his interest in the property at 2/38 New Beach Road, Darling Point to the Trustee. The Trustee will sell the property forthwith and the net proceeds from same will be distributed pro rata to the following creditors whose claims are estimated as follows:- EMI (Aust) Pty . Limited $ 89,037 Polygram Record Services Pty. Ltd. $ 38,942 Festival Records Pty. Ltd. $ 406 TDK $ 11,121 Sound Advice Pty. Limited (In $288,542 Liquidation) Co-guarantor of EMI's debt $ 44,518" The document also records that an ordinary resolution was passed nominating the applicant as "Trustee of the Composition". Sub-section 225(4) of the Act provides that the minutes of a meeting held under Part X of the Act signed in accordance with s.203 are prima facie evidence of the proceedings at the meeting. % ' Sub-section 204(7) of the Act requires the chairman of a meeting of creditors, forthwith after the passing of a special resolution or a resolution under s.204, to signa certificate as to the resolutions passed at the meeting and to cause the certificate to be filed in the office of the Registrar in Bankruptcy. A certificate of the passing of a special resolution is prima facie evidence that the meeting was duly convened and held and that the special resolution specified in the certificate was duly passed at the meeting (sub-s.225(2)). A certificate of the passing of a oe tien denn BOWE ate wee Uo te GEL a mee were es . mo a newton wep ee 7. resolution (not being a special resolution) is prima facie evidence that the resolution specified in the certificate was duly passed at the meeting (sub-s.225(3)). A document purporting to be a certificate of the resolutions passed at the meeting was signed by Mr Star and filed. It certifies that at the meeting held on 16 August 1984 "the following ordinary resolution was passed". Immediately thereafter appear the words "SEE ATTACHED SHEET". That sheet, however, sets out a number of special resolutions as well as a number of ordinary resolutions. Under the heading "SPECIAL RESOLUTIONS" the following appears: "IT WAS RESOLVED THAT CREDITORS ACCEPT A COMPOSITION WITH THE DEBTOR PROVIDING FOR THE FOLLOWING: - 1. 'The Debtor covenants that he will forthwith arrange for the said home unit premises to be sold at' public auction, such auction to take place within two (2) calendar months of the date hereof and with a reserve price of no less than One hundred and thirty thousand dollars ($130,000)'. 2. 'The Debtor covenants to pay the whole of the nett proceeds of sale (after deduction only of agents commission and legal costs incurred on sale) to the Trustee for payment amongst the creditors who shall include Sound Advice Pty. Ltd. (In Liquidation) and Phillip Marcus Clarke in the sums of $288,542 and $44,518 respectively.' 3. 'In the event that the Debtor pays to the Trustee the sum of One hundred and thirty thousand dollars ($130,000.00) to be dealt with in accordance with Clause 2 hereof, within fourteen (14) days of the date hereof, the Debtor will thereafter be absolved from further compliance with the terms of this Agreement. ' iia Ma oe 8. 4. 'Upon payment to each creditor pursuant to Clause 2 hereof the Debtor shall be released from all debts and obligations owed by him to such creditors.'" One of the ordinary resolutions set out on the sheet is in the following terms: "Mr John William O'Brien be nominated as Trustee of the Composition." The reference in the first of the above special resolutions to "the said home unit premises" may be taken to be a reference to the home unit known as 2/38 New Beach Road, Darling Point. It may also be noted, in passing, that the affidavit of the applicant sworn herein on 7 October 1986 annexes as Annexure Da copy of a document purporting to be a copy of the certificate of the resolutions passed at . the meeting of creditors held on 16 August 1984. That document differs in some respects from the document set out above. . Ny A deed expressed to be made pursuant to Part X of the Act and bearing date 5 September 1984 was subsequently executed by the applicant and the respondent. Notwithstanding what was said in the respondent's affidavit sworn on 12 December 1986 in relation to this document, I was satisfied that it was executed by him on or about the date it bears. The deed recites that the respondent had executed an authority under s.188 of the Act, that ata meeting of creditors held on 16 August 1984 the creditors by ee et "4 eg P irr am SO ay att es Ltn Socs, afta Sat Fa ae errata rome ae en EER PET PETE EEE EY LATO MY LENE TRUS AS OT INITIEER, Shae DL oneness, ata aee ne py Ee CUR IE 9. special resolution required the respondent "to execute a Deed of Arrangement in accordance with Part X of the Bankruptcy Act" and that the respondent was the registered proprietor of the property known as 2/38 New Beach Road (wrongly stated to be Newbridge Road), Darling Point. The operative clauses of the decd were as follows ~- "1. The Debtor convenants that he will forthwith arrange for the said home unit premises to be sold at public auction, such auction to take place within two (2) calendar months of the date hereof and with a reserve price of no less than One hundred and thirty thousand dollars ($130,000). 2. The Debtor covenants to pay the whole of the nett proceeds of sale (after deduction only of agents commission and legal costs incurred on sale) to the Trustee for payment amongst the creditors who shall include Sound Advice Pty. Ltd. (In Liquidation) and Phillip Marcus Clarke in the sums of $288,542 and $44,518 respectively. 3. In the event that the Debtor pays to the Trustee the sum of One hundred and thirty thousand dollars ($130,000.00) to be dealt with in accordance with Clause 2 hereof, within fourteen (14) days of the date hereof, the Debtor will thereafter be absolved from further compliance with the terms,of this Agreement. 4. Upon payment to each creditor pursuant to Clause 2 hereof the Debtor shall be released from all debts and obligations owed by him to such creditor." The reference to "the said home unit premises" in clause 1 is a reference to the property known as 2/38 New Beach Road, Darling Point. The references to "the Trustee" are references to the applicant. A mere reading of the documents to which reference has been made demonstrates the lack of consistency between ale Nhe Belin . PATS TE BTR! | ° ster Le om. . © eeu ol (lair REE Ste 10. the minutes of the meeting of 16 August 1984 and the certificate signed by the chairman as to the resolutions passed at that meeting and between each of those documents and the deed dated 5 September 1984. On or about 18 October 1984 the respondent purported to sell by private treaty the property known as 2/38 New Beach Road, Darling Point to one Claude Edward Ross who was described as being of 1674 North Beverley Glen Boulevarde, Bel-Air, California, U.S.A. The respondent instructed his solicitors, Messrs Currie & Currie, to prepare a contract between himself and Mr Ross providing for the sale of the property for $130,000. The solicitors advised the respondent that it was doubtful whether an accounting to the applicant for the net proceeds of sale arising from the proposed transaction would release him from the debts owing to his creditors as the deed dated 5 September 1984 provided for a sale by auction. The respondent instructed his « solicitors to proceed notwithstanding this advice. The contract was subsequently signed by the respondent: it was not signed by Mr Ross. On or about 6 November 1984 Messrs Currie & Currie received a bank cheque in their favour drawn on the National Australia Bank Limited in the sum of $130,000, being an amount equal to the amount shown in the contract as the purchase price of the property. The evidence before me established that the respondent arranged for the issue of that cheque on 18 October 1984, the source of the funds to eo 8 'ae te 7 ~ ll. purchase the cheque being, as to $94,040.25, an account with the National Australia Savings Bank Limited in the name of Tony Ryan and, as to the balance, a term deposit of $64,000 with the National Australia Bank Limited in the name of the respondent. The name Tony Ryan was simply a pseudonym of the respondent who used the account, as he admitted, to hide from the creditors of Sound Advice Pty. Limited moneys belonging to that company. In re-examination he sought to explain the account as "an insurance fund" which was to be used to satisfy his own and his mother's liability under the guarantees to which reference has already been made in the event that Sound Advice Pty. Limited should default. To carry out such a purpose would, of course, operate asa fraud upon those creditors of Sound Advice Pty. Limited who did not have the benefit of personal guarantees given by the respondent or his mother. The respondent also claimed that he had deposited in the Ryan aécount some of his own money which he used in carrying on share trading activities. Those activities, he said, were "marginally successful". In cross~examination, he said that, of the balance standing to the credit of the account before the withdrawal of the amount used as part payment for the bank cheque, some $20,000 to $30,000 was his money. In re-examination he said that at least $80,000 of the $130,000 paid to Messrs Currie & Currie was money that belonged to Sound Advice Pty. Limited. On either version, there was a very substantial sum in the account in the name of Tony Ryan to which the respondent had no beneficial entitlement. At 16 August 1984, the date of the respondent's statement of affairs, the Sotog is SR Ayn g see ve oe : oe Rie el eas Wet Mea eee er aa - atone tot RS ener 12. amount standing to the credit of the account was $92,193.98. No part of that sum was shown in the statement of affairs although, if one accepts his evidence, a significant part belonged to him. He admitted that he had kept no records as to the source of the funds credited to the account or the use to which they had been put. The amount of $64,000 referred to above was deposited with the National Australia Bank Limited on 9 October 1984 for a term of 30 days. It would seem that that amount was the residue of an amount of $65,000 placed on deposit with that bank on 8 June 1984 for a term of 4 months. That amount was also not disclosed as an asset in the respondent's statement of affairs dated 16 August 1984. Arrangements were made between Messrs Currie & Currie and the applicant for ta further deed between the \ applicant and the respondent to be prepared. It was executed on 14 December 1984. Its text should be set out in full. Excluding formal parts, it provided - "WHEREAS : A. The Debtor has executed an authority under Section 188(1) of the Bankruptcy Act, 1966 authorising the Trustee to call a meeting of the Debtor's creditors (hereinafter referred to as 'the creditors'). B. At a meeting of the creditors held on 16 August, 1984, the creditors by Special Resolution required the Debtor to execute a Deed of Arrangement in accordance with Part x of the Bankruptcy Act, 1966. > Nh 13. C. The Debtor is the registered proprietor of the whole of the land contained in Certificate of Title Volume 12047 Folio 175, being Lot 4 in Strata Plan 6969 and known as 2/38 Newbridge Road, Darling Point (hereinafter referred to as 'the property'). D. The Debtor has sold the property for the consideration of one hundred and thirty thousand dollars ($130,000.00) and acknowledges that the sum of the net proceeds of sale being the sum of one hundred and thirty thousand dollars ($130,000.00) less moneys owing pursuant to the mortgage of the property and less rate adjustments is available for payment to the trustee as hereinafter provided. E. The Debtor and the Trustee executed a Deed of Arrangement on 5 September, 1984, F. The said Deed was ineffective to enable the arrangements proposed by the Creditor's Special Resolution to be put into effect. G. The Debtor and the Trustee desire to substitute this Deed for the Deed of Arrangement executed on 5 September, 1984. . % NOW THIS DEED WITNESSES as follows: 1. The Debtor covenants to pay the net Proceeds of sale to the Trustee for payment amongst the creditors who shall include Sound Advice Pty. Limited (in Liquidation) and Phillip Marcus Clarke in the sums of two hundred and eighty-eight thousand five hundred and forty-two dollars ($288,542.00) and forty four thousand five hundred and eighteen dollars ($44,518.00) respectively. 2. %In the event that the Debtor pays to the Trustee the said proceeds of sale to be dealt with in accordance with Clause l within fourteen (14) days of the date hereof, the Debtor shall thereupon be released from all debts and obligations owed by him to the creditors." eee wee Te a ae s «yt mae manera et yeterit hs Rae aa Ae ha pee oof : 14, It will be noted that the home unit premises are again referred to as being situate in Newbridge Road instead of New Beach Road, Darling Point. A memorandum of transfer of the property under the Real Property Act, 1900 (N.S.W.) was subsequently prepared, lodged and registered. It bore the respondent's signature and a signature purporting to be that of Mr Ross. By cheque dated 24 December 1984 Messrs Currie & Currie paid to the applicant the sum of $94,829.76 after having accounted to Westpac Banking Corporation Limited for the sum of $35,170.24 in discharge of its mortgage over the home unit premises. The applicant's statement of receipts and payments for the period 16 August 1984 to 8 December 1986 shows that at the latter date he was holding the sum of $112,882.65. The respondent admitted that he had given a false account concerning the purported sale of the home unit premises when interviewed by Mr Bruce Raymond Woolford on 21 and 24 January 1986. Mr Woolford was at that time, pursuant to an appointment in that behalf made by a Deputy Registrar in Bankruptcy pursuant to sub-s.175(4) of the Act, assisting in the carrying out of an audit of the accounts and records of the applicant as trustee under the deeds of 5 September 1984 and 14 December 1984. The respondent said that he intended to deceive Mr Woolford who, to his knowledge, held an official position. PPR PRN SSRN SET a Soar ee wot' . aa rnd 15. The application to declare void the deeds dated 5 September 1984 and 14 December 1984 was based on two grounds - (a) that the respondent had omitted a Material particular from the statement of his affairs presented to the meeting of his creditors held on 16 August 1984 in that the respondent did not declare therein that he had on deposit with the National Australia Bank Limited the sum of $65,000; and (b) that the deeds were not entered into in accordance with Part X of the Act in that they did not accord with the special resolution passed at the meeting of creditors held on 16 August 1984. After counsel for the applicant had tendered the evidence on which the applicant relied in support of the declarations sought and counsel for the respondent had read the affidavit sworn by the respondent on 12 December 1984 and had tendered certain documentary evidence, the Court was informed that counsel were agreed that ground (b) above had been made out and that the respondent, while making no concession in relation to ground (a) above, no longer opposed the making of the declarations sought on the basis of ground (b). In those circumstances, and being myself satisfied that neither of the deeds accorded with the special resolution passed on 16 August 1984 whether one regarded that resolution as being accurately recorded in the minutes of the meeting signed by Mr Star or in the certificate 16. signed by Mr Star and filed in accordance with sub-s.204(7) of the Act, I indicated that I was prepared to make the declarations sought. In reaching that conclusion I. was satisfied that it could not be said that there had been substantial compliance with the requirements of Part X of the Act (see sub-s.222(3)). Counsel for the applicant then sought the making forthwith of a sequestration order against the respondent's estate pursuant to sub-s.222(7) of the Act. In opposing the making of a sequestration order, counsel for the respondent relied upon a further affidavit of the respondent, being an affidavit sworn on 16 December 1986. In that affidavit the respondent stated that he was prepared to sell his property at 2/38 New Beach Road, Darling Point which, he said, was currently let on a fortnightly tenancy at a rental of $300 per week and to account to his creditors for the net proceeds of such sale. The respondent further said that the property could he listed for sale by auction t*but not earlier than late February or early March 1987. A letter dated 15 December 1986 from Richardson & Wrench Double Bay, Real Estate Agents and Auctioneers, to the respondent's solicitors was annexed to the affidavit. That letter stated that home unit premises known as 1/38 New Beach Road, Darling Point were sold by auction on 12 December 1986 for $225,000 and that, under then existing market conditions, the respondent's unit "should achieve approximately the same amount". a 8 MO tes et welteteb len SERVE TSS 055 we ee ee Oe ee ee . ~ +e De tees bee ee ne 17. Paragraph 8 of the affidavit set out the respondent's assets as being: Home unit premises - estimated value $225,000 Furniture and personal effects - estimated value 20,000 Cheque account with National Australia Bank - estimated balance 2,900 Investment Account with Advance Bank - estimated balance 1,500 $248,500 An amount of $11,000, described as representing savings made from his income, was said to have been deposited with his solicitors on account of their costs and disbursements (par.9). The affidavit also disclosed that the respondent was employed by USP Needham Pty. Limited, an advertising agency, aS a copywriter with an annual salary of $70,000. In oral evidence he said he had been so employed since April 1986 and that, prior to being'so employed, he had worked as a free lance copywriter for about 12 months. Paragraph 3 of the affidavit was in the following terms: "I am the proprietor of a firm known as Ozmosis. The business run by my mother as a hobby for her, does not generate any income in excess of outgoings." In cross-examination, the respondent admitted that he had started the business about a year previously as a business ane ' ne '7 ' sa * a Mi - Sorento ees orleans i Gee cyte - - — 7 ot eres ge ee i 18. for himself and that he had carried on the business until he accepted the position with USP Needham Pty. Limited. As he did not then have time to run the business, his mother began to operate it. The only reference in the respondent's affidavit to his liabilities, the reference in par.7, was as follows: "T currently reside in rented premises known as 2/8 Aston Gardens, Bellevue Hill. I pay the sum of $280.00 per week rent for those premises and have no other fixed commitments or outgoings." Asked in cross-examination whether he owed money to the Commissioner of Taxation, the respondent estimated that he owed an amount of $1,500 for income tax in respect of the year ended 30 June 1985 although he had not yet received a notice of assessment in respect of that year. He also said that his return for the year ended 30 June 1986 had not yet been lodged, an extension of time to do so until 31 December 1986 having been obtained by his accountant. Counsel for the respondent contended that the amount of the respondent's indebtedness to his creditors as at 16 August 1984 as set out in his statement of affairs of that date was overstated. He accepted, however, that the respondent's indebtedness to those creditors was at least $288,542. For the purposes of considering whether a sequestration order should be made, counsel for the applicant was content to accept that figure. nose tedt ee . = . a eta gle Riestergley * 19. On that material, counsel for the respondent submitted that a sequestration order should not be made and that the application should be adjourned until a date in March 1987 or later to enable the respondent to sell by auction the home unit at 2/38 New Beach Road, Darling Point and to account to his creditors for the net proceeds. It was submitted that the net proceeds of that sale, when added to the amount of $112,882.65 held by the applicant, would be more than sufficient to pay the respondent's creditors in full. No mechanism was proposed, however, by which, in the event of any dispute, the identity of the creditors and the amounts of their respective debts could be determined although those were matters likely to be the subject of disputation. The only suggestion was that, in the event, an arrangement under Part X of the Act could be put in place. It was also submitted that the adjournment would give the liquidators of Sound Advice Pty. Limited an opportunity to consider whether they wished *to claim on behalf of the company any beneficial interest in the home unit premises. An undertaking by the respondent not to dispose of any of his assets other than the home unit premises during the period of the adjournment was offered. Counsel for the applicant opposed the adjournment sought and pressed for the making of a sequestration order. Central to his submission was the proposition that this was a case which called for a detailed investigation of the respondent''s past conduct and that this could best be done by the use of the powers conferred by the Act upon a trustee in bankruptcy. Emphasis was placed on the respondent's woes Ta ye . . oes - = -- 20. deceptive conduct in relation to his own creditors and to those of Sound Advice Pty. Limited exemplified by the respondent's failure to disclose the whole of his assets in his statement of affairs presented to the meeting of his creditors on 16 August 1984, the purported sale of the home unit premises to Mr Ross and the diversion of moneys of Sound Advice Pty. Limited to the bank account operated by him in the name of Tony Ryan. A further consideration was that the respondent had been less than forthright with the Court in par.3 of his affidavit sworn on 16 December 1986 which conveyed the impression that the business carried on under the name "Ozmosis" was that of his mother. Reference was also made to the failure of the respondent to put before the Court a current statement of his assets and liabilities, no information at all being offered as to liabilities incurred since 16 August 1984. The evidence was, it was submitted, insufficient to establish that the proposal put forward by the respondent would be likely to result in the creditors receiving payment of their debts in full and that the appropriate steps should be taken to ensure that the whole of the respondent's assets were made available for the benefit of his creditors. On the evidence before the Court, I could reach no other conclusion than that the respondent had engaged ina course of conduct for the purpose of deceiving his personal creditors as well as those who were creditors of Sound Advice Pty. Limited. There were, of course, a number of those creditors who had claims against both the company and the respondent. "4 nth wee Fane 21. I was left ain no doubt that the respondent's creditors were not given a complete and accurate account of the respondent's affairs at or prior to the meeting held on 16 August 1984. The respondent's statement of affairs was deficient in that it omitted to include as assets so much of the balance standing to the credit of the account of Tony Ryan as belonged ta the respondent and the amount of the term deposit held on the respondent's behalf by the National Australia Bank Limited. Information as to those matters would have been relevant to, and might well have affected, the decisions made by the creditors at the meeting held on 16 August 1984. Clearly, also, information as to the account in the name of Tony Ryan, containing as it did moneys that had been diverted from the company, would have been of great concern to those creditors who were also creditors of the company. % . The respondent's conduct concerning the purported sale of the home unit premises to Mr Ross was reprehensible. That transaction was a sham from start to finish and could have been designed only to protect the respondent's own interests and those of his mother at the expense of the interests of his creditors. Added to this is the respondent's persistence with the deception during his interview with Mr Woolford. It was not until he was examined before the Court on 29 September 1986 pursuant to sub-s.179(3), as applied by sub-s.231(4), and 212B(3) of the Act that the true position emerged. Further, I regarded the Pee ae eed wrinemn any New e fellytanglen we tae ele . : 22. respondent as having been less than forthright in his reference in par.3 of his affidavit sworn on 16 December 1986 to the business carried on under the name Ozmosis. It was for the respondent to show sufficient cause to displace the prima facie position that, having declared the deeds void, a sequestration should be made: Re Morris; Ex parte Adams (1980) 48 F.L.R. 341 at p.352. In my opinion, no sufficient cause was shown. In particular, the evidence put before the Court on the respondent's behalf did not establish to my satisfaction that he had the financial capacity to pay his debts in full. In this regard the absence of a current statement of his assets and liabilities was significant. Further, I was not satisfied that the respondent had given to the Court a full and frank account of his affairs. Having regard to the history of the matter, I considered that a full investigation of his affairs was essential and that that investigation could best be carried out by a trustee exercising the powers available to him under the Act in the course of an administration in bankruptcy. Such an administration would also have the advantage that the trustee could take control of the whole of the respondent's property and realize the same if that were necessary to satisfy in full the amounts owing to creditors. we pie het ae OEP TOIL ERTL IE MP MR ite we gene ee te rem Against this background, the proposal that the application be adjourned so that the respondent might sell the home unit premises by auction was not an attractive one and I was not prepared to accede to it. In my view, the public interest and the interests of the creditors asa whole required that a sequestration order be made and I so ordered. I certify that this and the preceding 22 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Neaves. Vuleu Bourn Associate Dated: 24 December 1986 Counsel for the applicant : Mr P. Urquhart Q.C. and Mr P. Gray Solicitors for the applicant : Kemp Strang & Chippindall Mr A. Duff Hanley Cameron & Goold Counsel for the respondent Solicitors for the respondent oe oe Dates of hearing 15, 16 December 1986 ory