JIDEMENT No, FS 7 3S, CATCHWORDS BANKRUPTCY - Application to annul bankruptcy by virtue of the presentation of a debtor's petition - Principles governing cases where the presentation of a debtor's petition is an abuse of process - Proof of a purpose foreign to the nature of the process - Relevance of evidence showing or suggesting that prior transactions had occurred which would be liable to be set aside if an order were made upon a creditor's petition but would not be so liable if the bankruptcy upon the debtor's petition stood - Observations concerning the scope of s.154({1) - Application of Jones v. Dunkel - Suggestion of reform of s.55. Bankruptcy Act 1966, ss.55, 115, 118, 122, 154 DEPUTY COMMISSIONER OF TAXATION -V- EDELSTEN & ORS. $Q.1136 of 1987 Burchett J. Sydney 10 March 1988 IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE STATE ) No. S01136 of 1987 ) ) OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY BETWEEN DEPUTY COMMISSIONER OF TAXATION Applicant AND: GEOFFREY WALTER EDELSTEN First Respondent AND: DESMOND WILLIAM KNIGHT Second Respondent AND: CHARLES ROBERT WILCOX Third Respondent MINUTE OF ORDER OF THE COURT Judge Making Order: Burchett J. Where Made: Sydney Date of Order: 10 March 1988 THE COURT ORDERS THAT: (1) The bankruptcy of the respondent Geoffrey Walter Edelsten by virtue of the presentation of the debtor's petition referred to in the application be annulled. (2) The first respondent pay the costs of the applicant of this application. 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 STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY No. SQ1136 of 1987 BETWEEN: DEPUTY COMMISSIONER OF TAXATION Applicant AND: GEOFFREY WALTER EDELSTEN First Respondent DESMOND WILLIAM KNIGHT Second Respondent CHARLES ROBERT WILCOX Third Respondent REASONS FOR JUDGMENT BURCHETT J. Dr. Edelsten (the bankrupt) became bankrupt, pursuant to the provisions of s.55 of the Bankruptcy Act 1966, by virtue of the presentation of his own petition, which was filed on 21 September 1987 and accepted by the Registrar. On 8 July 1987, a creditor's petition had been presented against the bankrupt on behalf of Full Point Pty Limited, being set down for hearing on 23 September 1987. That creditor's petition, which was served on 22 August 1987, was based on a bankruptcy notice in respect of a debt of $17,431-78, the act of bankruptcy having been committed, 2. so it was alleged, by failure to comply with the requirements of the bankruptcy notice on or before 22 May 1987. The evidence shows that an amount of $500-00 was paid after the presentation of the petition, but that otherwise the amount of the petitioning creditor's debt remains unsatisfied. The applicant seeks an order annulling the bankruptcy of the debtor pursuant to the debtor's petition, so that an order may be made upon the creditor's petition. It is accepted that, by virtue of s.115(2) of the Bankruptcy Act, if the present bankruptcy 1s not annulled, it will relate back to 22 May 1987, assuming the creditor's petition can be proved. On the same assumption, the same date, being alleged as the date of commission of an act of bankruptcy in the creditor's petition, would prima facie be the date to which any order made upon that petition would by virtue of s.115(1) relate back. However, there is in this case a potential area of operation for s.115(1), depending on proof of an earlier act of bankruptcy, which reaches back further than the potential area of operation of s.115(2), because the period of six months referred to in each of those provisions must be measured, in the one case, back from 8 July 1987, and in the other, from 21 September 1987. The same consideration applies in respect of the avoidance of preferences, pursuant to s.122, which reaches back six months from the presentation of a petition. It is pointed out that a transaction falling within s.122, which occurred after 8 January 1987 but before 21 March 1987, would escape the net of the bankruptcy laws if the present bankruptcy is not annulled, but would not escape in the event of an annulment followed by a sequestration order pursuant to the creditor's petition. An argument was advanced that the debtor's petition should have been rejected by the Registrar because of the alleged defectiveness, and particularly the failure to disclose insolvency, of the statement of affairs which accompanied it. It is unnecessary to pursue that matter in detail; I am clearly of opinion that the statement of affairs was not so defective as to require rejection of the petition, and that upon a fair reading of it insolvency was disclosed. What s.55 actually required in respect of the statement of affairs (the amendments made by the Bankruptcy Amendment Act 1987 were not of course in effect) was that it should "be in accordance with the prescribed form". This statement of affairs complied with that requirement. The substantial argument was that the presentation of the debtor's petition was, within the doctrine established by the authorities, an abuse of process, so as to entitle the applicant to ask the court to annul the bankruptcy under s.154 of the Bankruptcy Act. Section 154(1)(a) refers to the ground that "the petition ought not to have been presented" as applicable to the case of a debtor's petition. If the petition was presented in such circumstances that it was an abuse of the statutory procedure to present it, then the resulting bankruptcy may be annulled by an order of the court pursuant to s.154. The leading authority in this area of bankruptcy law 1s Clyne _v. Deputy Commissioner of Taxation (1984) 154 C.L.R. 589. In their joint judgment, Gibbs C.J., Murphy, Brennan and Dawson JJ. at 599-600 stated: "In the present case the debtor submitted that he had not been guilty of any abuse of process, and that he was entitled to present his own petition for the purpose, which he frankly admitted, of preventing the making of a sequestration order and thereby preventing his bankruptcy relating back to a time since when he has disposed of moneys to which the trustee's title may relate back. He relied on a dictum of Lord Evershed M.R. in In re Dunn [1949] Ch., at p.647: 'The circumstance that the debtor has filed his petition in order to protect himself from evils which he might otherwise suffer, and not with any benevolent intention of benefiting his creditors by securing a fair distribution of assets among them, 1S no reason why an order should not be made.' In _ re Dunn was the case of a gaming debt, which was possibly unenforceable, and it is not entirely clear from the report what were the 'evils' to which Lord Evershed referred, unless it was the possibility of having to fight a doubtful claim. That decision, and others like Ex parte Painter; In re Painter and In re Hancock, where the object of the petition was to avoid the pressure of a committal order, and In re Mottee, where the debtor wished to avoid a possible claim by his wife under the Matrimonial Causes Act 1959 (Cth), may be explained as cases in which 'the debtor was entitled to use the machinery of the Bankruptcy Act for his own purpose so as to shield himself from further liability to committal or other harassment': see In re a Debtor [1967] Ch., at p.596. In none of those cases, however, was the debtor seeking to avoid a liability or harassment of a kind that resulted from the operation of the bankruptcy laws. In our opinion, a distinction must be drawn between the pursuit of 'tan ulterior private purpose' ~- which may not necessarily amount to an abuse of process - and a purpose foreign to the nature of the process in question: see the discussion in Dowling v. Colonial Mutual Life Assurance Society Ltd. (1915) 20 C.L.R. 509, at pp.521-523. It is a purpose foreign to the bankruptcy laws, and an abuse of process, for 5. a debtor to present a petition for the purpose of making it impossible for a creditor to obtain a sequestration order ona pending petition and with the further purpose of shortening the period of relation back, possibly placing beyond the reach of the trustee property which would otherwise vest in him." Two things may be immediately noted. The first is that the High Court, in this case, applied to the statutory procedure under s.55 of the Bankruptcy Act the principle, of much wider application, relating to abuse of the process of a court. The second is that the court adopted a distinction, between a permissible ulterior private purpose and a purpose foreign to the nature of the process in question, which was elaborated by Isaacs J. in Dowling v. Colonial Mutual Life Assurance Society Limited, a case the court cited. The breadth of the principle may be illustrated by two relatively recent decisions of the House of Lords: Castanho v. Brown & Root (U.K.) Ltd. [1981] A.C. 557 and Hunter v. Chief Constable of the West Midlands Police [1982] A.C. 529. In the former case, which concerned the filing of a notice of discontinuance with a view to the accrual of certain advantages to the plaintiff, Lord Scarman at 571 said: "The Court has inherent power to prevent a party from obtaining by the use of its process a collateral advantage which it would be unjust for him to retain: and termination of process can, like any other step in the process, be so used. I agree, therefore, with Parker J. and Lord Denning M.R. that service of a notice of discontinuance without leave, though it complies with the rules, can be an abuse of the process of the Court." In the other case, at 536, Lord Diplock said: "The circumstances in which abuse of process can arise are very varied; those which give rise to the instant appeal must surely be unique. It would, in my view, be most unwise if this House were to use this occasion to say anything that might be taken as limiting to fixed categories the kinds of circumstances in which the court has a duty (I disavow the word discretion) to exercise this salutary power." At 541 his Lordship said: "The abuse of process which the instant case exemplifies is the initiation of proceedings in a court of justice for the purpose of mounting a collateral attack upon a final decision against the intending plaintiff which has been made by another court of competent jurisdiction in previous proceedings in which the intending plaintiff had a full opportunity of contesting the decision in the court by which it was made." Lord Diplock, at the same page, referred to this as "the dominant purpose of this action". But the principle seems to have had fairly limited application in England in respect of debtors' petitions, a situation no doubt contributed to by the absence of automatic bankruptcies upon debtors' petitions: see Halsbury 4th ed. Vol. 3 paras. 324 and 325. In Dowling v. The Colonial Mutual Life Assurance Society Limited (supra) at 521 et seq. Isaacs J., when considering an allegation that a creditor's petition was an abuse of process, accepted the following propositions as having been authoritatively decided by an earlier Privy Council decision: "(1) that the creditor has an absolute right to found a petition for a sequestration order on a statutory act of bankruptcy; (2) that an ulterior private purpose 1s not necessarily a fraud on the Court; (3) that a by-motive unless there be fraud is not a bar; (4) that an abuse of process does not exist unless the remedy is unsuitable and would enable the person obtaining 1t fraudulently to defeat the rights of others, whether legal or equitable." Isaacs J. went on to discuss the nature of abuse of process by reference to "the object sought to be effected by the process", and whether that object is "within the lawful scope of the process". He referred to an old case in which a writ of capias had issued, not really for the purpose of arrest but for the purpose of intimidation, and said: "That was held to be an abuse of process, because the law did not provide it for that purpose. The purpose is foreign to the nature of the process," which he thought was therefore "unsuitable" in the sense intended by his fourth proposition quoted above. Isaacs J. continued: "Where 1t can be shown in a case of insolvency that the creditor is making his application not intending to pursue it to a recognized Lawful end - whatever his motive may be for attaining that lawful end - but for the real purpose of attaining some other and improper end, such as extorting money ..., there is an abuse of process." These principles have been applied in a number of subsequent decisions: Clyne v. Deputy Commissioner of Taxation (1984) 6 F.C.R. 418; Re Cornish; Ex parte English (1984) 6 F.C.R. 257; Re Hankey; Ex parte Kratzmann (1986) 11 F.C.R. 512; Re Moncada; Ex parte Moncada and Official Trustee in Bankruptcy 8. (1986) 11 F.C.R. 205; Ex parte Sterling Industries Limited (Receivers and Managers appointed) Re Jackson (unreported, Burchett J., 5 September 1986); Re Crowl; Ex parte Kleinwort Benson Australia Ltd (unreported, Beaumont J., 29 February 1988). When Castanho's case (supra) was before the Court of Appeal (see [1980] 1 W.L.R. 833 at 855), Lord Denning referred to his own judgment in the earlier case Goldsmith v. Sperrings Ltd [1977] 1 W.L.R. 478 at 489, where he had said: "On the face of it, in any particular case, the legal process may appear to be entirely proper and correct. What may make it wrongful is the purpose for which it 1s used." Lord Denning in Castanho's case added: - "If it is used for the purpose of the party obtaining some collateral advantage for himself, and not for the purpose for which such proceedings are properly designed and exist, he will be held guilty of abuse of the process of the court." (See also Packer v. Meagher (1984) 3 N.S.W.L.R. 486 at 491-3.) In Goldsmith's case at 498-9, Scarman L.J. (as he then was) said: "In the instant proceedings the defendants have to show that the plaintiff has an ulterior motive, seeks a collateral advantage for himself beyond what the law offers, is reaching out 'to effect an object not within the scope of the process': Grainger v. Hill (1838) 4 Bing.(N.C.) 212, 221 per Tindal C.J. In a phrase, the plaintiff's purpose has to be shown to be not that which the law by granting a remedy offers to fulfil, but one which the law does not recognise as a legitimate use of the remedy sought: see In re Majory [1955] Ch. 600, 623." 9. These authorities unite in seeing as crucial the purpose for which the process is used. It is the illegitimacy of the purpose that makes the abuse. There was much debate before me as to whether the evidence showed or suggested that a transaction vulnerable to attack by the trustee had occurred during the period between 8 January 1987 and 21 March 1987. Clearly, if such a transaction is established or strongly suggested, that is important from an evidentiary viewpoint. It provides a plank in the edifice of inference as to purpose which the applicant seeks to erect. But I do not think the applicant has to demonstrate in this application the occurrence of any such transaction. Tt 1s neither necessary to prove that, nor, if it were proved, would it be sufficient in itself. What is necessary to bring the case within the principle of Clyne's case is proof of the pursuit by the debtor of a purpose foreign to the nature of the process. At the same time, if there were no reason to think that any transaction during the relevant period could be impugned, that would shake the foundation of the assertion that the bankrupt had a purpose of improperly protecting such a transaction, and would also affect the court's discretion should any case otherwise be made out. Of course, the ground in s.154(1), "that the petition ought not to have been presented", is not expressed in terms limited to cases of abuse of process, and it may be that the courts have not yet fully explored their powers, pursuant to s.154, to rectify the situation which may arise by the 10. presentation of a debtor's petition. The argument in this case concentrated upon abuse of process. But it 1S easy to imagine a case where the presentation of a debtor's petition, at the end of lengthy proceedings upon a creditor's petition, might radically alter the rights of a number of persons, and yet the debtor might in truth have been actuated by no motive other than a weariness of litigation, and have had no purpose beyond the immediate application to his situation of the remedies offered by the Bankruptcy Act. Until the amendment of the Act, for which Deane J. called in Clyne's case (supra, at 605, and see also his remarks at 603-4), is belatedly made, and unless s.154 is given a very wide scope, in such a case as I have postulated the Act might operate arbitrarily to impose a solution in accordance with the debtor's petition, whatever the consequences. For the applicant, it was submitted that a purpose foreign to the nature of the process in question could be proved, not merely by the ordinary methods of proof of subjective purpose (including of course inference from circumstances), but also simply by showing that the effect of presentation of the debtor's petition was to achieve something foreign to the nature of the procedure. There are several answers to this contention. In the first place, if considerations which were present in Clyne's case and the cases which have followed it are stripped away, the matter being looked at solely from the point of view of the effect of the presentation of the debtor's petition, then the consequences for this bankrupt and his creditors can truly be described as just brought about by the operation of the Act itself. (Cf. the remarks already cited of Deane J. in the Clyne ll. case, and those of Scarman L.J. in Goldsmith's case (supra) at 501.) It is not as if there had been a long delay after the presentation of the creditor's petition, as in Clyne''s case, so as to remove the very act of bankruptcy alleged in it from the period of relation back in respect of the bankruptcy pursuant to the debtor's petition. There is a certain arbitrariness about the fixing of periods within which transactions may be disturbed. No particular logic insists that one starting date is in itself more appropriate than another. While the Act continues to allow the filing of a debtor's petition during the currency of a creditor's petition, it is difficult to be very concerned merely by a small variation of periods of that kind; the legislature may simply have intended to let the cards lie where they fall. And the court should not overlook the fact that orders bringing with them variations of times may not only affect civil claims, but also criminal liabilities. There is a great difference, of course, where deliberate manipulation to achieve an improper end is actually proved. In the second place, a purpose of the kind discussed in the Clyne case, and in the other cases concerned with abuse of process, is an actual purpose, and not a mere emanation of the terms or circumstances of documents or actions. An argument was mounted by senior counsel for the applicant on the basis of the well known passage in the judgment of the Privy Council in Newton v. Federal Commissioner of Taxation (1958) 98 C.L.R. 1 at 8, where the view of Williams J. was adopted that the purpose of an arrangement caught by s.260 of the Income Tax Assessment Act 1936 must be what it effects. A similar view was taken of the meaning 12. of "purpose", as used in a similar context, in the joint judgment of Gibbs and Mason JJ. in The Commissioner of Taxation of the Commonwealth of Australia ov. Lutovi Investments Proprietary Limited (1978) 140 C.L.R. 434 at 445, who referred to "the objective purpose of the agreement". But the construction adopted in those cases depended on the context. In other provisions of the same Act, purpose meant the subjective intention of an individual (see The Commissioner of Taxation of the Commonwealth of Australia v. Students World (Australia) Proprietary Limited (1978) 138 C.L.R. 251 at 266, 274; Federal Commissioner of Taxation v. Cooper Brookes (Wollongong) Pty Ltd (1979) 25 A.L.R. 511 at 535-6). The notion of objective purpose 1s 1 think guite irrelevant to the doctrine expounded in Clyne's case. Between 8 January 1987 and 21 March 1987, agreements were entered into, and moneys received and disbursed, by the bankrupt. The amounts involved were substantial. On 20 February 1987, the bankrupt executed an agreement involving the transfer of all his interests in certain medical practices conducted in what were called the "existing Cenrin Centres". The agreement provided for the payment of a consideration of $275,000-00 to one of the bankrupt's companies, Davule Pty Limited. Pursuant to the agreement, $250,000-00 was in fact paid to Davule Pty Limited on 23 February 1987. This company was described by the bankrupt in evidence as his "alter ego". He used 1t as a corporate vehicle for the conduct of his own affairs. On the same day that the $250,000-00 was credited to its account, a cheque was drawn on the account in the sum of $40,000-00 in favour of another 13. company. That company, the bankrupt said, had manufactured examination tables and other items used in the medical centres with which he was associated. The basis on which Davule Pty Limited was the paymaster in respect of these items is not entirely clear. The chegue butt describes the cheque as in repayment of a loan involving another of the bankrupt's companies, Highaim Pty Limited; but he, in evidence, suggested that, on the contrary, the payment may have been by way of the making of a loan to the other company. A further payment of $15,000, made on 13 March 1987, was involved in a similar ambiguity as to whether it constituted a loan or a repayment of a loan. The entire sum of $250,000-00 was disbursed by various payments within a short period, and importantly, prior to 21 March 1987. On 2 March 1987, the bankrupt executed another agreement by which he agreed to "cease and yield up all right title and interest he may have in any medical practices carried on by him at Medical Centres conducted by Superclinics (a company Superclinics Australia Pty Limited) and to assign and transfer all such right title and interest to Superclinics or its nominee." In consideration, the company agreed to pay to the bankrupt or his nominees $100,000-00. On the same day, the company was directed to make the payment in favour of Davule Pty Limited, the bank statements of which show that a cheque for $100,000-00 was deposited on 3 March 1987 and wholly withdrawn in various amounts by 6 March 1987. By then, the whole of the previously mentioned sum of $250,000-00 had also been withdrawn. 14. It thus appears from the evidence that at least $350,000-00 was received, during the period between 8 January 1987 and 21 March 1987, as the proceeds of agreements made within the same period by which the bankrupt turned to account his interests in various medical practices, and that the whole of those moneys were disbursed before the end of the period, to the extent of at least $55,000-00 in what were shown by records controlled by the bankrupt as loan repayments. In addition, there 1s evidence that in January 1987 the bankrupt arranged for the sale to his wife of furniture having a substantial value. The price then paid by her was $100,000-00. Although it appears there may have been some question as to whether the furniture was owned by a company, the bankrupt acknowledged that it had been owned by him prior to the sale to his wife. In March or April 1987, the bankrupt consulted the late Mr. Peter Clyne. He told Mr. Clyne that he was "looking down the barrel of bankruptcy". The consultation with Mr. Clyne should be seen against the background that on 8 October 1986 amended assessments had issued in respect of income tax assessed as due by the bankrupt totalling well above one million dollars. The bankrupt had objected to the assessments, and 1t was accepted that there was what was described as a "non-scheme genuine dispute". However, the Commissioner issued a notice, dated 8 December 1986, under s.218 of the Income Tax Assessment Act, requiring the Heaith Insurance Commission to pay to. the Commissioner the whole of any money due by it to the applicant as 15. a medical practitioner, until satisfaction of an amount of over one million dollars. As a result of negotiations between the bankrupt and the Commissioner, the notice was revoked on 23 December 1986, but fresh notices were then issued requiring payment to be made by the Health Insurance Commission of an amount of forty-five cents in every dollar of each payment due to the bankrupt until the tax should be satisfied. At the time of the discussion with Mr. Clyne, these notices were still current. Lengthy negotiations had been pursued in an endeavour to compose the bankrupt's taxation affairs, but settlement proved ultimately elusive. On 7 July 1987, the s.218 notices of 23 December 1986 were revoked, and fresh notices issued requiring the Health Insurance Commission to pay one hundred cents in every dollar of each payment due to the bankrupt, who was described in those notices as "a taxpayer by whom the amount of $692,832-20 is due in respect of tax", until satisfaction of that amount. On 29 July 1987, the bankrupt commenced proceedings under the Administrative Decisions (Judicial Review) Act 1977 for judicial review of the decisions of 7 July 1987. In those proceedings, as a result of an application to Morling J. for interlocutory relief, an arrangement was made pending' the determination of the application, under which the bankrupt was permitted to receive a proportion of the fees due to him by the Health Insurance Commission. The bankrupt attributed his bankruptcy to the actions of the Commissioner of Taxation. He felt strongly that the taxation law was unjust which permitted the attachment of gross proceeds 16. of his medical practices, leaving, as he claimed, either nothing or insufficient amounts for him to meet expenses of carrying on the practices, at a time when he had not been permitted to test in any court the correctness of the amended assessments, and notwithstanding the genuineness of the dispute as to whether any tax was due. The effect of his evidence was that he had found it impossible to continue in the situation created by the s.218 notices, and that he had decided that the filing of his own petition in bankruptcy would be less damaging to his professional reputation than the making of a sequestration order upon the creditor's petition. He thought he would have an opportunity, following his bankruptcy, of stating publicly that he had been driven to it by the actions of the Taxation Department. He denied that the possibility of altering the period of relation back in respect of his bankruptcy was a factor in his mind, asserting that he thought there was a preference period dating back from the time of becoming a bankrupt, and not from the presentation of any petition. The bankrupt acknowledged that he had obtained professional advice from an accountant who is a registered trustee, a Mr. Star. He also had access to advice from a solicitor who looked after a range of his professional and corporate problems, and was involved with discussions that led to his petition being filed. This solicitor was present at the hearing, but was not called to give evidence. The bankrupt acknowledged that in the discussions with Mr. Star the question of preferences was raised, at any rate in respect of the moneys paid to the Commissioner of Taxation pursuant to the s.218 17. notices and 1n respect of certain other particular payments. He understood that there were some circumstances in which a trustee in bankruptcy could seek to recover moneys that had been paid to creditors. While such an understanding in respect of the payments pursuant to the s.218 notices would most probably have related to the terms of s.118 of the Bankruptcy Act, it must, so far as other payments were concerned, have related to the general principles governing preferences. He acknowledged that his legal advisers had also told him something about preferences, and that he understood that certain payments might be recovered as preferential payments on the basis that they were paid within the six months prior to his bankruptcy and should have been distributed equally across all his creditors. He also knew that not all payments could be impugned in that way, and he said that his knowledge was "pretty hazy". It is easy to accept the tenor of the bankrupt's evidence that he did not have any clear understanding of the ground on which transactions prior to bankruptcy might be attacked by a trustee. But, given the nature of the large transactions in February and March, that he discussed the prospect of bankruptcy perhaps as early as March with Mr. Clyne and thereafter with accountancy and legal advisers, and that he arranged to file his own petition after service upon him of the creditor's petition, in fact having it filed only two days before that petition was due to come before the court, an inference can be drawn that he had a general understanding that the further the initiation of his bankruptcy could be distanced from the transactions in February and March the less likely it was that 18. they or some of them might be defeated. He had, as TI have said, received some advice specifically related to the subject of preferences, as well as advice concerning the possible impact of s.118 of the Bankruptcy Act upon the payments extracted by the Commissioner of Taxation under s.218 of the Income Tax Assessment Act. I think the principle of Jones v. Dunkel (1959) 101 C.L.R. 298 applies, in respect of the failure of the bankrupt to call evidence from his solicitor, to enable me more readily to draw the inference referred to. Not without considerable hesitation, I have come to the conclusion that the preponderance of probabilities favours a finding that when the bankrupt caused his own petition to be filed, he did so with the purpose (albeit he had other purposes also) of reducing the prospect that earlier transactions entered into by him could be set aside. To that extent, I do not accept the bankrupt's denial, but I make it clear that, though I have not failed to have regard to the seriousness of the issue involved, I have no great confidence about the matter, deciding it on no more than a persuasion according to the civil onus. There is, after all, nothing inherently improbable about the bankrupt's explanation of his motives, and as Scarman L.J. said in Goldsmith's case (supra, at 498): "Tt is never easy to determine a man's purpose." I have considered, without deriving assistance from it, evidence tendered by the applicant of manipulations by the bankrupt to evade the operation of the s.218 notices: that evidence has, of course, a bearing on credit, but 19. the case cannot be proved by an inference of some kind of transferred propensity. What has weighed heavily with me is a consideration of the character and circumstances of the transactions in February and March 1987, and the likelihood that they involved matters of real concern to the bankrupt. For these reasons, I make an order under s.154(1) annulling the bankruptcy wrought by the debtor's petition. That brings me to consider the creditor's petition which, by consent, was heard at the same time as the application. I shall deal with it separately, but I note that a sequestration order will be made upon that petition. Before parting with the matter, I draw attention, once again, to the hope expressed by Deane J. in Clyne's case (supra, at 605) that consideration might be given to the desirability of legislative action in respect of the situation out of which such cases as Clyne's case and the present case arise. As Deane J. said (at 603): "There is plainly much to be said for the view that it would not have been the legislative intent to override and possibly frustrate judicial proceedings instituted by a petitioning creditor by an administrative procedure which enabled a debtor to shorten the 'relation back' period by becoming bankrupt on his own petition." But except where a case for annulment is made out, judicial proceedings may be frustrated under s. 55. I can see no reason why that should not be prevented by an amendment along the lines of the second of the possible solutions suggested by Deane J. at - 20. 603-4, namely, by a provision that any debtor's petition filed while a creditor's petition is pending against the debtor "must also be presented to the court and subsequently be dealt with by judicial proceedings which would, in an appropriate case, enable consolidation of the pending creditor's petition and the debtor's petition." The Bankruptcy Amendment Act 1987 does not deal with this problem. I certify that this and the preceding nineteen (19) pages are a true copy of the Reasons for Judgment herein of his Honour Mr. Justice Burchett. t Ay 4iabot Associate Dated: 10 March, 1988. Counsel for the Applicant: G.K. Downes OC, R.F. Sutherland, D. McGovern Solicitors for the Applicant: Australian Government Solicitor Counsel for the lst Respondent: C. Curtis Solicitors for the lst Respondent: Shenker & Associates Counsel for the 2nd Respondent: S. Finch, J. Fernon Solicitors for the 2nd Respondent: Isenberg, Spedding & Player Counsel for the 3rd Respondent: P. Donohoe Solicitors for the 3rd Respondent: Minter Ellison Dates of hearing: 9, 16, 23, 27 October 1987 5, 12, 13, 27 November 1987 3 December 1987 11 January 1988