; NOT FOR DISTRIBUTION , JUDGMENT No, 248733 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION No. P165 of 1988 BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA Re: DAVID LAKE BREMER A Debtor Ex parte: LAWSON & LAUGHLIN PTY LTD Petitioning Creditor MINUTES OF ORDER COURT: Woodward J DATE: 30 June 1988 PLACE: Melbourne THE COURT ORDERS THAT: 1. A Sequestration Order be made against the estate of rns the Debtor. ? - a (Sy oN Ofte . F : ef Sy, } i 2. Costs, including reserved costs, be in accordance a ' ean ee ie ' / bu with the statute. Date of Commission of Act of Bankruptcy : 23 March 1988. NOTE: This order is to be settled and filed in accordance with rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION No. P165 of 1988 BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA Re: DAVID LAKE BREMER A Debtor Ex parte: LAWSON & LAUGHLIN PTY LTD Petitioning Creditor COURT: Woodward J DATE: 30 June 1988 PLACE: Melbourne EXTEMPORE REASONS FOR JUDGMENT This is a petition for sequestration of the debtor's estate where the notice of intention to oppose the petition, called "Notice of Grounds of Opposition", raised two issues. First, the debtor disputed the creditor's alleged debt on the grounds set out in the debtor's affidavit, sworn 7 June 1988. That argument has been, in my view, properly abandoned by counsel for the debtor. I should also say in passing that there are no points taken about any of the formal matters that are required to be proved under the Bankruptcy Act 1966 (''the Act') before a sequestration order can be made. This leaves one ground set out in the notice of opposition, and perhaps a second which has been raised and dealt with in argument, which the court has to consider. The first of these is stated in the notice of opposition in the following terms: "Even if the creditor proves its alleged debt, the creditor says that his assets exceed his liabilities, and in all the circumstances he ought not to be adjudged bankrupt." This takes me to sub-s.52(2) of the Act, which says, so far as is presently relevant, "If the court .... 1S satisfied by the debtor - (a) that he is able to pay his debts; or (b) that for other sufficient cause a sequestration order ought not to be made, ,it may dismiss the petition." It is clear, on the material before me, that there are very large amounts said to be owing by the debtor. This appears on the face of the affidavit of the trustee who has been placed in charge of the debtor's property pursuant to s.50 of the Act. That affidavit by Mr Lamb is strong evidence that the debtor 1s insolvent; one might be tempted to say, * hopelessly insolvent. As against that, 1t has been argued by Mr Kaufman for the debtor that there is a substantial action pending in the Supreme Court, brought by the debtor against the Australia and New Zealand Banking Group Limited ('ANZ'). That action, if successful, would largely, if not entirely, cancel out the very large sum of money which 1s shown by the debtor's statement of affairs, and the affidavit of his trustee, as owing by him to that bank. I have studied the statement of claim in that action. It shows that the matters sued for are very closely related to the alleged debt of the debtor. Indeed, at the risk of over-simplifying the matter, I would say that the claim recognises the substantial indebtedness of the debtor to ANZ, but at the same time says that the bank was in breach of contract and in breach of a duty which it owed to the debtor in calling up the debt, and realising upon a number of mortgages and other securities which it held. There is, aS I see the material before me, no real dispute that the debtor owed ANZ some very large sums of money running into millions of dollars. The only dispute is whether, as I have said, the bank was entitled to call up that debt and realise assets at the time and in the way that 1t did. I do not think it 1s appropriate that I should say too much about that statement of claim, which was apparently only filed today in the Supreme Court. There is no doubt that, under sub~s.52(2), the onus 1s on the debtor to satisfy me that he is able to pay his debts. And, in the light of all the material before me, I have no doubt that, within the meaning explained in authorities such as re Noye (1956) 18 ABC 77, and re Twidle, [1916] NZLR 748, the bankrupt is not able presently to meet his debts as they fall due. Nor am I satisfied that the prospects of his succeeding in his action against the bank are such that the court should hold its hand, or in some way delay the matter for what will obviously be a long period before that complex claim can be determined. I am therefore satisfied that the debtor has not made out his submissions that he is able to pay his debts or that his Supreme Court action represents a sufficient cause for dismissing or adjourning the petition. The other submission which has been argued, although without notice, is that these proceedings are in some way tainted by the fact that the petitioning creditor has had some discussions with ANZ, through their respective solicitors, and that the bank has, apparently, up to this point paid the petitioning creditor's costs in bringing this bankruptcy petition, and may well meet costs that have been recently incurred, including today's. I can find nothing untoward or suspicious in those circumstances. It seems to me to be no more than a sensible arrangement that, where two petitions are waiting to be heard, the one which is simpler and more straightforward should proceed, and that the costs of that petitioner should be borne, or contributed to, by a supporting creditor having a very much greater interest in the outcome of the proceedings. I can see nothing 1n this which amounts to an abuse of the process of the Court, and indeed I think that, in his reply, Mr Kaufman said that he did not put the matter so high. He rather suggested that the bank's intervention had prevented the petitioning creditor from properly considering an arrangement which had been suggested to it by the debtor, or that because of the arrangement entered into between the two petitioning creditors, the bank was in some way able to obtain its wishes by holding on to the coat-tails of the present petitioning creditor. I do not accept that the intervention of the bank has in any way prevented the petitioning creditor from making up its own mind that the arrangement suggested to it by the debtor was unsatisfactory - which I would have thought was clear beyond doubt - or that it was appropriate that the petition should proceed. I accept the evidence of Mr Lawson, for the petitioning creditor, that those were decisions which he came to by himself in consultation with his own solicitor and were not the subject in any way of pressure, improper or otherwise, from the bank. Nor, as I have said, do I believe that there is anything significant in the circumstance that the bank has allowed and encouraged this particular petition to proceed ahead of its own, or that this amounts to sufficient cause for a sequestration order not to be made. I find that both the acts of bankruptcy alleged in this matter, namely, the failure to comply with a bankruptcy notice and the calling of a meeting of creditors on 6 May this year, have been made out; but I think it is appropriate that I should make the sequestration order simply upon the failure of the debtor to comply with the bankruptcy notice. For the reasons that I have given, I am satisfied that an act of bankruptcy has been committed and I am satisfied with the proof of the matters set out in sub-s.52(1) of the Act. I note that Mr Kenneth Wayne Lamb has consented to act as trustee in this matter. There will be an order of sequestration against the estate of the debtor, the act of bankruptcy being the failure of the debtor to comply with the provisions of a bankruptcy notice on or before 23 March 1988. Costs, including reserved costs, will be in accordance with the statute. I order that the costs of Kenneth Wayne Lamb, in this matter, be paid out of the estate. With regard to Mr Kaufman's application for a stay, I think that I must exercise my discretion having regard to all the material that has been put before me, and taking into account as best I can the possibility of an appeal being instituted and being successful. I am not sure that I have to be satisfied, as counsel for the petitioning creditor has urged, that there are 'special circumstances' pointing to the grant of a stay. I would merely say that there needs to be something about the case that causes the Court to be satisfied that it is appropriate that a stay be granted. Whether that is the same thing as saying that there need to be special circumstances, I am not sure, but the state of mind in which I find myself 1s that, having regard to all the circumstances, I am not satisfied that it would be appropriate to grant a stay and I do not grant one. I certify that this and the six (6) preceding pages are a true and accurate copy of the Reasons for Judgment herein of The Hon Mr Justice Woodward Associate Dated: 12 July 1988 Counsel for the Debtor: Mr T. Kaufman Solicitors for the Debtor: Weigall & Crowther Counsel for the Creditor: Mr J Fajgenbaum QC with Mr P Jopling Solicitors for the Creditor: Freehill Hollingdale & Page