JUDGMENT No. AS LSS. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUTPCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA NO. P115 of 1988 Re: KRZYSTOF WOJTCZUK (Male) Debtor EX Parte: AREK ZOLTOWSKI Creditor MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 12 MAY 1988 WHERE MADE: PERTH THE COURT ORDERS THAT: 1. The debtor's estate be sequestrated. 2. The costs of the petition be taxed and paid according to the Act. Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. 4 SPAY i733 TEDERAL COURT QF AUSTRALIA PRINCIPAL, REGISTRY IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA LIMITED DISTRIBUTION No. P115 of 1988 Re: KRZYSTOF WOJTCZUK (Male) Debtor Ex Parte: AREK ZOLTOWSKI Creditor CORAM: FRENCH J. 12 May 1988 REASONS FOR JUDGMENT On 4 February 1987 Arek Zoltowski obtained judgment in the Local Court of Western Australia against Krzystof Wojtczuk for a sum of $7,368.94. The judgment was not satisfied and on 16 November 1987 Zoltowski procured the issue of a bankruptcy notice against Wojtczuk which was served on 25 November. On 4 December Wojtczuk filed an application to set aside the notice, but this was dismissed by the Registrar in Bankruptcy on 8 February 1988. The notice was not complied with and on 8 February 1988, a creditor's petition issued. The petition was served on 24 February, endorsed with notice of hearing for 22 March. On that day both creditor and debtor appeared before the Registrar by counsel and the petition was adjourned with an order tnat the debtor file and serve any notice of opposition and supporting affidavit by 29 March. Affidavits in reply were to be filed by 6 April. When the matter came on again on 11 April it was' adjourned by the Acting Registrar to 19 April. At that time the debtor had still not complied with the directions of 22 March and the 2. petition was further adjourned to 26 April with orders that the debtor file and serve notice of opposition and supporting affidavit by 22 April. The notice and affidavit were filed on 26 April. The matter came on before me on that day but was adjourned to 4 May to enable the creditor to file an affidavit in reply. This was done on 29 April and on 4 May, despite a last ditch attempt by the debtor to obtain yet another adjournment, the matter went on for hearing. The notice of intention to oppose the petition discloses that the debtor's opposition is based upon an attack on the judgment which he says was obtained without a hearing of the dispute on its merits. The affidavits were received in evidence at the hearing and some oral testimony taken. According to Zoltowski, the -judgment debt grounding the bankruptcy notice originated in a loan of $5,208 made by him to Wojtczuk on 31 January 1986. By a written acknowledgement of debt bearing that date Wojtczuk agreed to repay the loan in four equal monthly instalments of $1,302, the first of which was due on 15 March. At that time, according to Zoltowski, Wojtczuk gave him two postdated cheques drawn on his business account in the name of West End Smash Repairs for $2,600 and $2,608 respectively. The plan was that he would return the first cheque after the second instalment was paid and the second cheque after the final instalment. 3. In the event no payments were received and the cheques were dishonoured. On 16 July 1986, Zoltowski commenced his proceedings in the Local Court. Wojtezuk filed notice of intention to defend and on 5 August 1986 Zoltowski applied for summary judgment. In an affidavit in opposition to that application, Wojtczuk admitted that he gave two cheques to Zoltowski as security for repayment of the loan. He claimed however to have repaid it by several instalments of cash, the last of which was on 15 June 1986, The affidavit raised a triable issue and Wojtczuk was given leave to defend. The action was subsequently listed for trial on 14 November 1986. Wojtczuk however filed a motion for an adjournment returnable on 13 November, supported by an affidavit complaining of lack of discovery and particulars of claim and the unavailability of a witness. Discovery and formal particulars were given on 13 November. The trial date was adjourned to 4 February 1987. On that date Wojtczuk did not appear and the Magistrate, without hearing any evidence, gave judgment in favour of Zoltowski. On 20 February 1987, Wojtczuk moved to set aside the judgment, saying that he had been involved in a traffic accident on 20 January and had been in hospital for some time and "later on under doctor suspension (sic)". He was unable to attend on 4 February, he said, and had sent a letter to the Local Court asking that the trial be adjourned. On 17 March the court ordered that, 4. subject to the payment by Wojtczuk of $7,400 into court by 4 p.m. on 31 March, a new trial would be granted. No payment was made and the judgment remained in force. Wojtczuk filed a further summons to vary the order by deletion of the condition. In his supporting affidavit, sworn 31 March 1987 and exhibited to his affidavit in these proceedings, he gave a different story from that set out in the earlier affidavit opposing summary judgment. According to the later affidavit, Wojtczuk and an associate, Bogucki, wanted to borrow $5,000 in April 1985. They did this, he said, through an arrangement between Wojtczuk and Zoltowski, whereby Wojtczuk entered into a sham transaction for the sale of a Honda motor vehicle to Zoltowski for $5,000. Zoltowski applied to Natwest to borrow that amount on the understanding with Wojtczuk and Bogucki, that they would receive the money less a fee of $500 to Zoltowski and that they would meet all repayments. According to Wojtczuk, he did meet the repayments. He also says he attended at Natwest on two occasions, between 31 January 1986 and 15 June 1986, to pay out the amount owing in two payments totalling $5,208. At the date of the second of these payments, he claims his liability to Zoltowski ceased. However on 16 June, Zoltowski attempted to present two cheques given to him by Wojtczuk as security "for the January 1986 agreement". This agreement was not further explained in the affidavit. Wojtczuk says he was contacted by the Bank and that he stopped the two cheques. 5. In a statement of claim signed by him personally in proceedings in the District Court, Wojtczuk told yet another story. According to this pleading, he agreed orally with Zoltowski on or about 15 March 1985 that he would effect repairs to the Honda motor vehicle which Zoltowski would buy for the cost of the repairs. According to Wojtczuk he repaired the Honda and delivered it to Zoltowski, but the latter could not pay. In respect of that transaction Wojtczuk claimed $3,776.13. Zoltowski's account, as given in his affidavit filed in these proceedings, is radically different from that given by Wojtczuk. It is his evidence that the sale of the Honda was not a sham, that he wished to buy it and that Wojtczuk agreed to sell it to him. Wojtczuk arranged with a motor vehicle dealer to organise the finance for the purchase. This was done through Natwest. As the details of the transaction emerge out of the evidence, it appears that Wojtczuk with the connivance of a motor vehicle dealer, effected a pretence that the dealer was selling the car to Zoltowski and thereby obtained a loan of $5,000 to Zoltowski by Natwest secured by a chattel mortgage. The dealer evidently pocketed a commission of $500 for his trouble. Having made the arrangement for finance, Zoltowski says that he asked to take delivery of the vehicle but that Wojtczuk delayed saying it was unroadworthy and that he would have to do some repairs on it. He agreed however to meet Natwest repayments until the vehicle was delivered. In the event, it was never delivered. 6. In late December 1985, Zoltowski received a notice from Natwest that a payment under the loan was overdue. He approached Wojtczuk and demanded that the car be delivered or the loan paid out. A few days later Wojtczuk told him the loan had been paid out. Zoltowski believed therefore that the car agreement was at an end and the loan repaid. His loan of $5,208 to Wojtczuk on 31 January 1986 was, so far as he knew, independént of the car purchase transaction. However, in September 1986 he received a demand for payment from Natwest and found that there was an amount of $2,432.39 remaining outstanding. He paid this out on 23 September. Documentary evidence before the court shows that a Loan Contract and Goods Mortgage was entered into on 11 April 1985 between Zoltowski and Natwest for the purported purchase of a Honda Accord from a motor vehicle dealer, Barron Nissan, for a purchase price of $5,098. A statement of the loan account prepared by Natwest Finance and tendered through its Senior Realisations Officer, Mr Stephen Allen, showed that the loan was not paid out until 23 September 1986 when a final payment of $2,432.39 was received. A bank. statement for Zoltowski's savings account with the Warwick Branch of the Rural and Industries Bank of Western Australia, shows a withdrawal of $2,700 on 23 September. It is \ 7. also to be noted that an earlier statement for the same account, shows a withdrawal of $5,208 on 31 January. A copy of the withdrawal slip stub bearing the stamp of the Bank was also exhibited to Zoltowski's affidavit. Notwithstanding the contract which he entered into with Natwest, the vehicle does not appear to have been in his ownership at any time. Successive disposal notices from police records show that at 10 January 1985 the vehicle was sold by one Bogucki to Wojtczuk and then on or about 10 June 1985 by Wojtczuk to a Sally Brown. Sally Brown then sold the vehicle to a James Koe on 6 January 1986. Between April 1985 and September 1986, it will be remembered, the vehicle was subject to a chattel mortgage in favour of Natwest. Both Zoltowski and Wojtczuk gave oral evidence. In relation to the loan for $5,208 Zoltowski said that Wojtczuk had told him that he had some financial problems and had to pay some bills. He gave no explanation of the precise amount of $5,208 beyond saying that that was what Wojtczuk needed to pay his bills. The rather odd arrangement with the postdated security cheques and their rather odd amounts, was not explained satisfactorily beyond Zoltowski's evidence that:- "He gave me the cheques to make me feel secure - there is the cheques - do not cash them just yet. I will tell you when there will be money in the bank and you can cash them - because I always wanted the cash back; I did not want the cheques." 8. This evidence is difficult to reconcile with the written memorandum providing for instalment repayments of the loan. Zoltowski could not recall whether he had ever gone to Natwest with Wojtczuk. Wojtczuk in his evidence, told the court that he is presently unemployed, although he had carried on business as an automotive engineer. He said that he and Zoltowski had been involved in a number of transactions relating to damaged motor vehicles, although their nature did not emerge with any clarity. In connection with the Honda Accord, he reiterated his earlier affidavit evidence that he and Bogucki had explained to Zoltowski that if he could raise money for their use on the sham purchase of the vehicle, they would pay him a fee and take responsibility for paying off the loan within a short time. Wojtczuk would take responsibility for organising the finance though a contact at Barron Nissan. Zoltowski, he said, agreed to this and the transaction went ahead. As to the sum of $5,208, the subject of the written memorandum of 31 January 1986, that, he said, was the payout figure for Natwest on that day. According to Wojtczuk he signed the memorandum and on the same day paid $3,500 to reduce the liability to Natwest. Natwest records do not support him, for although they show a payment of $3,500 made on that day, the payout figure prior to receipt of that 9. amount was $5,815.75. Wojtczuk was unable to explain why he signed a memorandum agreeing to repay $5,208 by four monthly instalments when on his own story, the remaining liability to Natwest after payment of $3,500, was less than that. He denied receiving any loan from Zoltowski. As to the payment of $3,500-which he made on 31. January 1986, Wojtczuk said he did not pay it by cheque but could not explain where the money came from. Nor could he explain why he signed an agreement to pay $5,208 to Zoltowski at a time when, according to his claim in the District Court, Zoltowski owed him a sum in excess of $3,000. I found Wojtczuk's evidence to be incredible. He seems to be prepared to give different accounts on different occasions, according to his purpose. Zoltowski generally gave his evidence in a straightforward manner. His involvement in the purchase of the Honda and the use of Barron Nissan as a front to obtain finance does not reflect credit on him, but IE am satisfied that this was an arrangement whose significance he did not fully appreciate and in which Wojtczuk was the prime mover. There are other aspects of the evidence which leave some questions unanswered. I am satisfied however, on the balance of probability that he did make the advance he says he did, and that Wojtczuk agreed to repay it by instalments and has failed to do SO. 10. I am satisfied that the matters set out in the petition have been proved as required by s.52 of the Bankruptcy Act. I am not satisfied that the debtor is able to pay his debts or that there is any other cause for not making a sequestration order, Wojtczuk has filed a motion in the District Court seeking to extend the time to appeal the payment condition imposed on his right to a retrial in the Local Court. That notice was only filed the day before the substantive hearing and is returnable on 16 May. Ordinarily, dependency of an appeal against a judgment is a ground for adjourning a petition founded on failure to pay the judgment debt. In this case the judgment was given 15 months ago, and the order appealed against was made just under 14 months ago. I am not satisfied that the. appeal is bona fide or on the face of it meritorious, although the merits of it are ultimately a matter for the District Court. In the circumstances I decline to adjourn the petition on that basis. Being satisfied that: the debtor has committed an act of bankruptcy and being satisfied of the other matters set out in sub-s.52(1) I will make the following orders:- l. The debtor's estate be sequestrated. 2. The costs of the petition be taxed and paid according to the Act. ll. I certify that the preceding ten (10) pages are a true copy of the Reasons for Judgment of his Honour Justice French. Associate: DeVerco WTAR AS Date: ja Mary ee Counsel for the Debtor: Mr G. Wells Solicitors for the Debtor: Messrs. John Trewin & Co. Counsel for the Creditor: Mr R.L. Hyman Solicitors for the Creditor: Messrs. Kennedy & Hyman Date of Hearing: 4 May 1988 Date of Judgment: 12 May 1988