NOT FOR DISTRIBUTION IN THE FEDERAL COURT OF AUSTRALIA ) ) EXERCISING FEDERAL JURISDICTION ) No. P 1185 of 1986 ) ) IN BANKRUPTCY BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA RE: ANDREAS ZAVROS and MARIA ZAVROS Judgment Debtors EX PARTE: DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF AUSTRALIA Petitioning Creditor a OUR IH ¢ NORTHROP J. - DATE: 29 APRIL 1987 ar PLACE: MELBOURNE " / r FED! COURT gy! \, ACSIA vw \r ok ft mG EX TEMPORE REASONS FOR JUDGMENT NZ eh role This is the return of a petition in which the petitioning creditor, Deputy Commissioner of Taxation of the Commonwealth of Australia, is seeking a sequestration order against Andreas Zavros and Maria Zavros who carry on business making and selling trailers under the name of Europe Trailers. The petition is based upon a judgment debt which was obtained in 1984 in the order of $11,000 being sales tax. In the petition there are other debts claimed showing a total amount owing of some $98,000 including the judgment debt. The original return date of the petition was on 10 February 1987 and on that occasion, by agreement, the hearing of the petition was adjourned until 23 March 1987. On that occasion the matter was adjourned until yesterday and then yesterday to today. The male debtor has filed substantial affidavits in support of the application for a further adjournment. The petitioning creditor has opposed the adjournment. Counsel for the debtors has sought an adjournment to 14 July 1987. From a consideration of all the evidence, and I should note that the male debtor was cross-examined at length, certain facts can be found. I should indicate that the debtor, Andreas Zavros, has some difficulty with the English language. To some extent, it appears he has been getting advice which has not always been as good as it ought to have been and I exclude from that his present solicitors and counsel, but refer specifically to a partnership called Commercial Advocates R.D. Foley and Company. In addition, they appear to have had problems with their accountants, but recently they have engaged new accountants. The substance of the case put is that the debtors, who are husband and wife, live with their four children, all dependent upon them, the youngest of whom 15 an invalid and requires more attention than a normally healthy child requires. They had been experiencing financial problems with their business and had attempted to reorganise their financial position by borrowing from the State Bank of Victoria a sum of $90,000 on security of their house, so as to enable them to try to place their business on a firmer basis. The current assets of the debtors are said to be as follows: cash in a savings account of $200; a residence at 5 Finch Street, Thomastown valued at $190,000, but there is conflicting evidence on this anda realistic valuation is closer to $140,000 to $150,000, but I am prepared to accept for this purpose that the value is $175,000; furniture and fittings valued at $30,000; an estimated value of the business of $150,000, but that is basically the value of equipment and machinery in the business and nothing for goodwill. It is noted that the business is conducted from premises which are rented by the debtors, who have personal effects of just under §6000. Then there are separate assets which are motor cars but are shown as assets of the business in a balance sheet which is before the Court for the year ending June 1986, a Fairmont motor car and a Commodore motor car each valued at about $20,000, showing total assets of about §416,000 which will be reduced by $15,000, say $400,000. The liabilities of the debtors which are said to be owing to the Commissioner of Taxation are estimated at $89,000, but there is some dispute here and I think a more realistic figure should be around the $92,500 mark at the very least; overdraft of about $8,000; an advance from the bank of about $89,000 and accrued charges of $400, showing a total liability of about $190,000. There is not included in those figures any trade debts and from the evidence in the affidavit and from cross-examination 1t would appear that there should be added to that quite substantial amounts; for instance, for the purchase of steel, there seems to be a current indebtedness of at least $20,000 and I would infer from the evidence that there are other debts owing as well and so the figure should be increased to at least, in my opinion, $220,000 being the total liabilities of the debtors. Added to that material, there is before the Court the profit and loss statement of the business for the year ended June 1986 which shows that there was a net profit from the business of just over $30,000. But in addition, it was put to the witness that the balance sheet for the same year disclosed that there was a deficiency in the assets over liabilities, but I do not place much reliance upon that, if for no other reason than the fixed assets are probably on the basis of cost value and not on current value, but they also show that at June 1986 the other liabilities were much higher than apparently those expressed now. But of more importance, the balance sheet shows that for the year the net profit of just over §30,000 in reality was a deficiency because there were drawings by the partners of just over $19,000 which were not shown in the profit and loss statement. So on those figures, for that financial year there was a loss. In deciding whether to grant the adjournment or not, I treat the matter as one where the application is being made on the ground that given some time the debtors would be ww able to realise some of their assets, in particular, the house and the motor vehicles, although there would be need to repurchase or purchase another motor vehicle to enable the invalid child to be transported; once that was done the loan from the bank, at present some $88,000, could be paid off. The moneys owing to the Deputy Commissioner could be paid off. The debtors could then rent premises and carry on the business and eventually trade out of their current financial difficulties. One can understand the desire of the debtors, and particularly Andreas Zavros, who gave evidence today, to avoid, if he can, the stigma attached to the concept of being a bankrupt. But at the same time it must be realised that bankruptcy, in addition to having that stigma, which these days is not as had as it used to be, has benefits since 1t releases a debtor from his debts and thus enables him to commence again any business or activity desired to be undertaken. One has certain feelings for the debtors in this case but I find on the evidence that there is no real prospect that the debtors would be able to pay off their debts and to continue to conduct their business in a profitable way and that any adjournment would merely defer the final decision being made to hear and determine the petition for the sequestration order. On the figures I have given it would appear that in fact if sales were made of the house and one of the cars, the amount available for paying off the debts would not be much more than $100,000 and by the time costs and everything else were paid there would be almost none of that money, if any, left for use by the debtors. The debtors would then need toa find a house to rent to accommodate them and their children. They are still faced with the debts owing in their trade. They have got the asset of the business and the equipment and machinery used 1n that business, but having regard to the profit and loss account for last financial year one cannot be very confident that they would be able to conduct the business at a profit. It is urged upon me that over the period since the end of June there has been a reduction in the amount of the overdraft to the State Bank. That is true, but the overall impression I have got from the whole of the evidence is that this is a rather nebulous improvement and that in reality, even if an adjournment were granted to July of this year, the debtors would be in no better position to be able to pay off the debts then than they are at the present time. In all the circumstances, therefore, I exercise my discretion against the debtors and refuse the application for the adjournment. vi tes and the five (8) sscodies pages are a true copy o the #4 om, for Judgment herein of the wongu .ble Mr. Justice Kain tus ihiop (Manu PF Coded . Associate Dated: 21 upure 118F ' EE SO 8 i, be ee cere -