CATCHWORDS BANKRUPTCY - application to annul sequestration order - whether sequestration order ought not to have been made - sequestration order grounded on non-compliance with bankruptcy notice - bankrupt requesting Federal Court to go behind Supreme Court judgment - writ served by substituted service - judgment obtained in default of appearance - whether tender of moneys owing prior to issue of writ - whether any other basis for annulment - applicant alleging conspiracy to which petitioning creditor's solicitors a party - no factual basis for application - application dismissed. Re Calderon, unreported, Federal Court of Bankruptcy, 31 May 1977 No. NSW 573 of 1976 Pollock v. Commissioner of Taxation (1994) 94 ATC 4148 Re Steele; Ex parte Official Trustee in Bankruptcy v. Clayton Utz (a firm) (1994) 119 ALR 716 Re Bond; Ex parte Ramsey (1994) 126 ALR 720 Bond v. Touhy (1995) 128 ALR 595 Bankruptcy Act 1966 (Cth), s.153B NANCY CLOONAN HALL v. JOSEPHINE MARY ANDERSON ANDERSON and JEFFREY LAURENCE HERBERT (AS TRUSTEE OF THE BANKRUPT) No. WB 244 of 1995 CARR J. PERTH 6 NOVEMBER 1995 IN THE FEDERAL COURT ) OF AUSTRALIA ) BANKRUPTCY DISTRICT ) No. WB 244 of 1995 OF THE STATE OF ) WESTERN AUSTRALIA ) B E T W E E N : NANCY CLOONAN HALL Applicant and JOSEPHINE MARY ANDERSON ANDERSON First Respondent and JEFFREY LAURENCE HERBERT (AS TRUSTEE OF THE BANKRUPT) Second Respondent CORAM: CARR J. PLACE: PERTH DATE: 6 NOVEMBER 1995 MINUTE OF ORDERS THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the respondents' costs. NOTE: Settlement and entry of Orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT ) OF AUSTRALIA ) BANKRUPTCY DISTRICT ) No. WB 244 of 1995 OF THE STATE OF ) WESTERN AUSTRALIA ) B E T W E E N : NANCY CLOONAN HALL Applicant and JOSEPHINE MARY ANDERSON ANDERSON First Respondent and JEFFREY LAURENCE HERBERT (AS TRUSTEE OF THE BANKRUPT) Second Respondent CORAM: CARR J. PLACE: PERTH DATE: 6 NOVEMBER 1995 REASONS FOR JUDGMENT Introduction This is an application, under s.153B of the Bankruptcy Act 1966 (Cth) ("the Act"), by Miss Nancy Cloonan Hall for an order annulling her bankruptcy. On 24 February 1995, District Registrar Jan made a sequestration order against Miss Hall's estate, on the petition of the first respondent, Mrs Josephine Mary Anderson Anderson. In those circumstances, although the application does not state the grounds upon which it is made (other than to state that it is made under s.153B of the Act) the only potentially relevant ground must be that the sequestration order "ought not to have been made". Factual Background In this somewhat unusual matter, I think it is appropriate for me to set out briefly its factual history. On 11 January 1990, Miss Hall executed a mortgage in favour of Mrs Anderson over a property known as "Queen's Church" in Boulder to secure repayment of the sum of $110,000 and interest thereon at the rate of 19% per annum. The date fixed by the terms of that mortgage for repayment of the principal sum was 22 January 1993 with interest payable monthly. On 22 October 1990 Miss Hall defaulted in making payment under that mortgage and thereafter made no further payments. Although there is evidence that a notice of demand for payment of the principal sum and interest was issued on 6 November 1992, there is no evidence about what steps (if any) were taken prior to 6 November 1992 to recover the moneys owing. On 30 November 1992 Mrs Anderson sued Miss Hall in the Supreme Court of Western Australia claiming the principal moneys of $110,000 and interest thereon at the rate of 19% per annum from 23 October 1990. After unsuccessful attempts to serve the writ in those proceedings Mrs Anderson's solicitors obtained an order for substituted service. Part of Exhibit 30 in the present application is a copy of the process server's affidavit in support of that application which describes the problems which he encountered in attempting to serve that writ and other writs on Miss Hall. Those problems included a locked gate and several large barking dogs. An annexure to that affidavit was a photograph of a large sign on the gate to Miss Hall's residence which read "STOP. SOUND HORN. DO NOT PUSH ME. ELECTRONIC GATE. IF YOU BREAK OR BEND ME YOU WILL BE LIABLE FOR MY REPAIRS. IF NO REPLY LEAVE MESSAGE IN LETTERBOX". Service of the writ was effected in accordance with the order for substituted service and on 11 March 1993 judgment in default of appearance was entered in those proceedings in favour of Mrs Anderson against Miss Hall in the sum of $159,873.46. Miss Hall claims that this judgment was irregular. In cross-examination Miss Hall admitted that as at 6 November 1992 she owed Mrs Anderson the principal sum of $110,000 and did not really dispute that she had paid no interest on that sum since 22 October 1992. Miss Hall does not claim to have made any payments to Mrs Anderson since 6 November 1992. On 30 March 1993 a writ of fi fa was issued in respect of that judgment, pursuant to which the sheriff of the Supreme Court of Western Australia conducted an auction of Queen's Church on 10 November 1993. By that time two further writs of fi fa had been registered against the title to that property. According to the report of the sheriff's officer, immediately before bidding started at that auction, a Ms Dawn O'Toole stepped to the front of the gathering and made an address to those present. Ms O'Toole said that she was speaking on behalf of the owner of the property. Miss Hall, in her evidence in this application, acknowledged that Ms O'Toole had been acting at her request on that occasion. Ms O'Toole's speech included statements to the effect that the auction was illegal and that if the property were sold, the purchaser would be faced with legal action from the owner. Only one bid was made. That bid ($30,000) was below the reserve price and the property was passed in. On 28 February 1994 Mrs Anderson, through her solicitors Messrs Mallesons Stephen Jaques ("Mallesons"), applied for and obtained a bankruptcy notice for service on Miss Hall claiming the sum of $171,892.18 as being the balance due under the Supreme Court judgment. That bankruptcy notice was served on Miss Hall on 11 March 1994. Eventually Queen's Church was sold by private treaty. Miss Hall attacks that sale as having been made between parties who were not at arm's length to purchasers one of whom is said to have advised the sheriff about the value of the property prior to the auction, and at a price which was less than market value. On 8 December 1993, Mrs Anderson, as mortgagee, entered into a contract to sell the property. Under that contract, the purchasers agreed to pay Mrs Anderson an amount of $80,000 and to assume liability for various monies owing in respect of the property, including arrears of rates. The evidence was that those further liabilities amounted to between $6000 and $7000. Before entering into that contract Mrs Anderson, through Mallesons, obtained a valuation of the property from Hooker Corporate. Settlement of that transaction was to take place on 6 February 1994. It did not take place because on 2 February 1994 Miss Hall lodged a caveat against the title to the property. Mrs Anderson commenced proceedings in the Supreme Court of Western Australia for removal of that caveat. On 14 March 1994, Murray J. ordered that unless Miss Hall paid the outstanding arrears owing under the mortgage into Court prior to 24 March 1994 and also prior to that date instituted proceedings to set aside the contract of sale then the caveat was to be removed. The moneys were not paid into Court. On 24 March 1994, Miss Hall issued proceedings in the Supreme Court of Western Australia against Mrs Anderson and the purchasers of Queen's Church, but not the Registrar of Titles. The documents by which those proceedings were commenced had been drawn up by Miss Hall's then solicitors. Those proceedings were eventually dismissed. In the meantime, settlement of the sale took place and the Registrar of Titles registered the transfer on 25 March 1994. There remained a balance of the judgment debt owing in the amount of $91,892.18 after giving credit for the sum of $80,000 referred to above. On 30 August 1994 Mrs Anderson presented a petition in this Court for a sequestration order against Miss Hall's estate. The debt referred to in the petition was in the sum of $91,892.18. The act of bankruptcy relied upon was Miss Hall's failure to comply with the terms of the bankruptcy notice or to satisfy the Court that she had a relevant counterclaim, set-off or cross-demand. On 18 November 1994, an application was made on Mrs Anderson's behalf for leave to serve the petition on Miss Hall by way of substituted service. The hearing of that application was fixed for 21 November 1994. Miss Hall attended that hearing with a Mr Paul Arns, solicitor, and she was thereupon served with the petition. Mr Arns gave an undertaking to file an appearance and the hearing of the petition itself was adjourned to 12 December 1994. On 12 December 1994, Mr Arns attended before the District Registrar with Miss Hall but apparently ceased to act for her thereafter. The District Registrar made an order that Miss Hall file and serve any affidavits in support of any further application for an adjournment and any affidavit of solvency by 9.30 am on 19 December 1994. The hearing of the petition was adjourned to 19 December 1994. On 19 December 1994 the hearing of the petition was again adjourned (to 22 December 1994). On 22 December 1994, Miss Hall filed an affidavit in which she swore that she was solvent. Miss Hall appeared on 22 December 1994 and requested a further adjournment of the petition. On Miss Hall's promise to repay Mrs Anderson in full by 31 January 1995, the petition was adjourned to 6 February 1995. The petition was re-listed for hearing on 23 January 1995, at Miss Hall's request, on which date she sought further time to repay Mrs Anderson. That request for further time was denied and the petition was adjourned again to 6 February 1995. On 6 February 1995, on Miss Hall's application, the hearing of the petition was adjourned to 22 February 1995 to provide further time for Miss Hall to raise the funds to discharge her indebtedness to Mrs Anderson. As a condition of the adjournment, Miss Hall agreed that she would not oppose the petition if Mrs Anderson wished to proceed on 22 February 1995. On 22 February 1995 the hearing of the petition was adjourned to 24 February 1995, again on the basis that Miss Hall would not oppose the petition if Mrs Anderson wished to proceed on that date. On 24 February 1995, District Registrar Jan made a sequestration order against Miss Hall's estate. On 1 March 1995, Miss Hall made this application to annul the bankruptcy. Between 1 March 1995 and 12 July 1995, Miss Hall filed ten affidavits in support of her application, eight of which were sworn by herself. The application was listed for hearing on 17 and 18 July 1995 with a directions hearing scheduled for 14 July 1995. On 12 July 1995, Miss Hall filed an affidavit in which she deposed to the fact that on the previous day she had telephoned a Mr George Hovan, a solicitor practising in Sydney, and that Mr Hovan had agreed to act for her in this matter. Miss Hall sought an adjournment of the hearing of the application so that Mr Hovan could prepare her case. On 17 July 1995, Mr Hovan appeared before Nicholson J. and sought an adjournment of the hearing. Upon Mr Hovan's undertaking to file a notice of intention to act as Miss Hall's solicitor, Nicholson J. adjourned the hearing and made a further order which was to the effect that Mr Hovan could not, without leave, withdraw from the proceedings. On 24 July 1995, Mr Hovan filed a Notice of Appearance. Subsequently, Mr Hovan filed an affidavit deposing to the fact that he had been unable to obtain instructions from Miss Hall and applied for leave to cease acting on her behalf. Leave was granted. At the hearing (which occupied 3˝ days) Miss Hall represented herself. The Legal Principles Applicable In the fairly recent case of Pollock v. Commissioner of Taxation (1994) 94 ATC 4148, I reviewed some of the relevant authorities on annulment of sequestration orders. In one of those, Re Calderon (unreported, Federal Court of Bankruptcy, 31 May 1977 No. NSW 573 of 1976) Riley J. set out a convenient summary of the relevant principles in the form of the following five propositions, which once again I respectfully adopt (I have re-worded them slightly for application to this matter): 1. It is the applicant for annulment who alleges, and it is therefore for her to bring herself within s.153B of the Act and satisfy the Court that the sequestration order ought not to have been made; 2. The Court to which the application is made seeks to ascertain the actual state of affairs at the time when the sequestration order was made; 3. In order to ascertain that actual state of affairs, the Court hearing the application for annulment looks at the facts that were before the Court which made the sequestration order and at any other facts that were not before the Court but are shown on the hearing of the application for annulment to have been in existence when the sequestration order was made; 4. Having considered all the facts so looked at, the Court determines whether on those facts the applicant has satisfied it that the sequestration order ought not to have been made; and 5. If it is so satisfied, the Court is not bound to annul the sequestration order but must consider, in all the circumstances of the case, whether that order ought to be annulled. The Evidence In her affidavit filed with her application on 1 March 1995, Miss Hall swore that, in respect of the mortgage to Mrs Anderson, on 10 November 1993 and thereafter, money was tendered to Mrs Anderson's solicitors in full settlement of the moneys owing to her. Miss Hall further swore that Mrs Anderson's solicitors (Mallesons) refused to attend a settlement at either the office of the solicitor tendering the money or at their own offices for the purpose of receiving those moneys in exchange for a discharge of Mrs Anderson's mortgage. In a subsequent affidavit, sworn on 21 April 1995, Miss Hall withdrew that allegation and said that the relevant part of her prior affidavit should have read that "money was ready, available and able to be tendered then to Mallesons Stephen Jaques...". The solicitor acting for Miss Hall at that time was Mr A.P. Granich. Mr Granich has sworn an affidavit which is in evidence in these proceedings. The Trustee of Miss Hall's estate contended that legal professional privilege did not exist in relation to its contents but that, if such privilege existed, it had vested in him and he waived it. Miss Hall made no objection, the matter was not argued, no authorities were cited and, on the respondents' tender, I admitted Mr Granich's affidavit into evidence. I admitted the affidavit into evidence because I was of the view that if the privilege existed, it had vested in Miss Hall's trustee who expressly waived it. I have since had severe reservations about the correctness of that view, see Re Steele; Ex parte Official Trustee in Bankruptcy v. Clayton Utz (a firm) (1994) 119 ALR 716 at p.725; Re Bond; Ex parte Ramsey (1994) 126 ALR 720 at p.725 and Bond v. Touhy (1995) 128 ALR 595 at p.602. As I have formed a very definite conclusion in respect of the proper outcome of this application on the basis of the other evidence before the Court and that conclusion would not be affected by the contents of Mr Granich's affidavit, I propose to disregard it. Ms Linda Key (the Mallesons partner then in charge of the matter of recovering from Miss Hall the moneys owing to Mrs Anderson and other clients of Mallesons) gave both affidavit and oral evidence. I accept her evidence as being the truth. Part of Ms Key's evidence concerned a last minute proposal to postpone the auction of Queen's Church. Mrs Anderson, for her part, was agreeable to this course provided that Miss Hall paid $50,000 in reduction of her indebtedness to her by 10 November 1993. Ms Key said that a person contacted her at the time of the sheriff's auction (on or about 10 November 1993) and told her that he was prepared to lend Miss Hall $50,000 but that he required the security of a first mortgage over Queen's Church for such a loan. Ms Key, in her oral evidence, said that she told the caller (whose name she was unable to recall) that "she couldn't say he would be in that position". Ms Key said that the $50,000 was never tendered to her and the auction was not postponed. In an earlier affidavit (a copy of which is annexed to Exhibit 23 in these proceedings) Ms Key identified that caller as a Mr Korner and swore that she had told Mr Korner that Mrs Anderson would not discharge the mortgage or withdraw the writ of fi fa on payment of $50,000 but that on payment of that amount the auction would be postponed for one month. Mr Korner had told her that as it was not possible to secure his proposed advance by first mortgage over Queen's Church, the $50,000 would not be advanced by him. It would appear that the affidavits filed by Miss Hall in support of this application were prepared by her. They are mostly long, convoluted and repetitive. They are also expressed in a style which does not make them easily understandable. However, I have examined those affidavits very closely to see whether they disclose evidence to justify her application to annul her bankruptcy. I have also considered Miss Hall's oral evidence. It emerges from Miss Hall's evidence (and for that matter the evidence adduced by the respondents), that Miss Hall also defaulted in making payments due under other mortgages to which she was a party either as mortgagor or guarantor. Those guarantees were in respect of mortgages granted by companies controlled by Miss Hall. Some of the other mortgagees were also clients of Mallesons. There is evidence that proceedings were instituted against Miss Hall in the Supreme Court of Western Australia by Mallesons on behalf of those clients and that in at least two of those proceedings, judgments were obtained. So far as the Supreme Court judgment in favour of Mrs Anderson is concerned, Miss Hall seems to raise four or, possibly, five matters. The matter which I put in the "possibly" category is a general allegation that in respect of the discharge of mortgages other than the mortgage granted to Mrs Anderson, Mallesons thwarted her attempts to effect such discharges and were part of a conspiracy. That conspiracy, so Miss Hall asserted, had the result that she could not raise replacement finance on the security of the properties involved and thus could not repay Mrs Anderson. In particular, Miss Hall referred to properties which were the subject of mortgages to a Mr Seeligson. I do not think that that matter is a proper basis upon which to attack the Supreme Court judgment and the bankruptcy notice upon which the petition was based and thereby obtain an order for annulment of the sequestration order. In case I am wrong in that view, I shall proceed to consider that matter and all the other matters put forward by Miss Hall in support of her submission that the sequestration order ought not to have been made. Alleged Tender by Miss Hall of Moneys Owing to Various Mortgagees (a) The Mortgage to Mrs Anderson The first such matter is the alleged tender of all the moneys owing to Mrs Anderson under the mortgage granted by Miss Hall to her. As I have mentioned above, Miss Hall (by her affidavit sworn 21 April 1995) has changed her evidence in that regard. Miss Hall gave oral evidence at the hearing of this application. Her evidence was not entirely clear on the point, but I gained the impression that she was saying that funds were marshalled by her from loans and from moneys of her own to discharge her indebtedness to Mrs Anderson on occasions other than and in addition to the alleged tender at or about the time of the auction of the property on 10 November 1993. Miss Hall's evidence on this was so vague and unparticularised that I would have rejected it on that basis alone. However, as I listened to Miss Hall's evidence, I came to the conclusion that unless it was clearly corroborated by documentary evidence or evidence from other witnesses, it would be unsafe for me to rely upon it. Initially I formed that view during Miss Hall's evidence-in-chief, on the basis that although Miss Hall possibly believed in the truth of what she was telling me, her thinking was clouded by an overpowering conviction. That overpowering conviction, which manifested itself on numerous occasions in the course of Miss Hall giving evidence and in addressing me, was to the effect that Mallesons were party to a conspiracy by various parties to deprive Miss Hall of her properties in Kalgoorlie and Boulder for their own commercial gain. The gain was to be derived by obtaining her properties and then developing them as part of a resort, possibly including a casino. There may well have been parties interested in acquiring the properties as cheaply as possible for such a development. That is not really the point. The point was that, on Miss Hall's case, Mallesons and various other people were party to such a conspiracy. Miss Hall did not produce any evidence upon which such a finding could even start to be based. Insofar as Miss Hall asserted that Mallesons deliberately or otherwise refused to allow her to discharge her indebtedness to Mrs Anderson I reject that evidence because, in the first place, I do not believe that Miss Hall had marshalled the funds to discharge the mortgage to Mrs Anderson and, secondly, I do not believe that Mallesons ever gave Miss Hall to understand that they would not accept her money to pay out Mrs Anderson. When I asked Miss Hall why Mallesons should take such a strange stance when their client would obviously want to be repaid the loan moneys, all Miss Hall could suggest was that Mallesons were part of "a conspiracy of corruption". When Miss Hall was cross-examined I formed an even more unfavourable opinion about her evidence. She was evasive and non-responsive in her answers. On occasion she claimed not to remember things which one could reasonably expect her to remember. For example, whether she had paid interest to Mrs Anderson between 23 October 1990 and 22 October 1992. The mortgage was an "interest only" mortgage. By contrast, there were many occasions when Miss Hall demonstrated a meticulous memory in respect of matters which took place several years ago. In her final address, Miss Hall conceded that she may well be eccentric but that she was not "a lunatic". I am not qualified to form an opinion on that point. However, I observed her carefully both in the witness box and throughout the proceedings. My assessment of Miss Hall is that she is intelligent and also very shrewd. I noted that Miss Hall was prepared to blame everyone other than herself for her misfortunes, she was prepared to make allegations of criminality against a wide range of persons without producing any evidence in support of those allegations, she was quick to seize on any point (such as the delay in obtaining probate of Mr Seeligson's will) that might conceivably be used to her advantage and was anxious to characterise almost anyone even remotely involved in all these matters in the worst possible light. By the end of the hearing, I decided that I could not rely on anything said by Miss Hall. I did not find her to be a credible witness. It is not necessary for me to decide whether that is a result of deliberate fault on her part or through circumstances beyond her control. Notwithstanding my reservations about Miss Hall, I decided that it was particularly important to scrutinise all of her evidence to see whether there was something irregular which may have worked an injustice upon her. The reason for this was that there was something unusual about the matter. The unusual thing was that for about two years Miss Hall had been in default under her mortgage to Mrs Anderson and for comparable periods under mortgages to other clients of Mallesons. It appeared that those clients' mortgage investments were administered by Mallesons who kept loan accounts in respect of them. The evidence on this point, short as it was, in this application, was that these defaults came to light when Ms Key, in August 1992, noticed that a Mallesons' probate clerk was very nervous on the eve of his departure on long service leave. My scrutiny of all the evidence adduced in this matter did not disclose any apparent injustice to Miss Hall, nor any circumstances which suggested that the sequestration order of 24 February 1995 ought not to have been made. Given the state of the evidence when Miss Hall closed her case, it would not have been surprising if the respondents had decided not to call any evidence at all. However, the respondents called a great deal of evidence including oral evidence from the Deputy Sheriff of the Supreme Court of Western Australia, Mr James Robert O'Reilly (Miss Hall having given evidence of a telephone conversation which she conducted under a false name with Mr O'Reilly at the time of the attempted auction), Ms Linda Key and Miss Anne Cunningham, a solicitor employed by Mallesons who was directly involved in the recovery proceedings against Miss Hall. Mr O'Reilly's evidence related to Miss Hall's allegation that the private sale of the property was not made at arm's length and was at a price less than market value. I return to Mr O'Reilly's evidence below. I have already said that I accept Ms Key's evidence. The same applies to Miss Cunningham's evidence. Miss Hall cross-examined Miss Cunningham fairly vigorously. Miss Cunningham responded calmly and quietly and on many occasions readily agreed with propositions which Miss Hall put to her. Miss Cunningham, in her affidavit sworn 9 December 1994, deposes to two separate occasions in 1994 when different solicitors communicated with her in connection with proposed discharges of mortgages granted by Miss Hall and her companies. On neither occasion was she supplied with confirmation that finance had been arranged and the moneys were not tendered. Part of Ms Key's evidence was to the effect that, on numerous occasions, Mallesons provided settlement statements to Miss Hall or persons asking for such statements on her behalf, but that there was never a firm proposal to pay out the monies owing under Mrs Anderson's mortgage or the mortgages which were the subject of the other Supreme Court proceedings. Both Ms Key and Miss Cunningham acknowledged that there was a period of several months following Mr Seeligson's death in August 1993 before probate was granted in respect of his estate. I reject totally Miss Hall's allegation that Mallesons were part of the conspiracy of which Miss Hall complained. I am not satisfied that funds were marshalled sufficient to discharge Mrs Anderson's mortgage either before the Supreme Court judgment or the attempted sale pursuant to the writ of fi fa based on that judgment. Nor am I satisfied, on the evidence adduced, that Miss Hall subsequently raised those funds and offered them to Mrs Anderson or her solicitors in order to discharge the moneys owing under the mortgage. In other words, I am not satisfied that at any time Miss Hall tendered moneys sufficient to require Mrs Anderson to discharge her mortgage. Nor am I satisfied that Mrs Anderson or anyone acting on her behalf so conducted themselves as to justify this Court going behind the judgment obtained by her against Miss Hall in the Supreme Court of Western Australia. (b) The Mortgages to Other Clients of Mallesons I do not accept Miss Hall's assertions that she tendered funds or otherwise attempted to pay out moneys owing to mortgagees other than Mrs Anderson and was prevented from so doing by Mallesons or anyone else. The allegations appear to relate to mortgages granted by Leeside Holdings Pty Ltd (with that company's obligations under such mortgages being guaranteed by Miss Hall), to Mr Seeligson, Mr Crane and Mrs Smith. Miss Hall gave evidence that in late 1992 or early 1993, on behalf of Leeside Holdings Pty Ltd, she had sought the release of one of the two pieces of land (Lot 11 on Diagram 60923) from the security over it granted pursuant to the relevant mortgage. That mortgage bore the dealing number D485597 and a copy of it was tendered in evidence. I accept the respondents' submission that, even if this matter were relevant to the present application, Mr Seeligson was not obliged to accede to Miss Hall's request to release one of the two parcels of land from the security of that mortgage without full payment of the moneys outstanding. There is evidence that at about the same time Miss Hall was able to discharge two other mortgages to Malleson's clients without any obstacles being placed in her path. As to the assertions concerning thwarted later attempts in 1993 and 1994 to discharge the indebtedness to Mr Seeligson's estate, Mr Crane's estate and Mrs Smith's estate, I simply do not accept Miss Hall's evidence and I prefer the evidence adduced by the respondents, some of which I have summarised above. Apart from the inherent improbability that solicitors who had been conducting recovery proceedings on behalf of the respective mortgagees would decline to co-operate in the steps which would see their clients paid out, I refer to my findings on credibility above. I find that there was no tender of the moneys owing to these creditors, nor was there credible evidence that the funds were actually available for that purpose. In coming to that conclusion, I have not overlooked various letters and faxes concerning finance proposals and alleged finance arrangements upon which the applicant sought to rely. In those circumstances, there is no need to consider the significance, if any, of the fact that some nine months expired before probate was granted of Mr Seeligson's will, he having died in August 1993. Nor is there any credible evidence that any mortgagee to whom Miss Hall or any of her companies had granted a mortgage had ever refused to accept moneys tendered to effect a complete discharge of that mortgage. All of this is on the basis that these matters have any relevance to the present application, on which I have expressed my opinion above. The Private Sale of Queen's Church The next matter about which Miss Hall complains is the private sale of Queen's Church, about one month after the auction, which yielded the sum of $80,000 referred to above. Miss Hall's evidence contains several assertions that the sale should be impeached because one of the purchasers is alleged to have given valuation advice to the sheriff's officer who conducted the auction of Queen's Church. In my view no factual basis has been laid for those assertions. Furthermore, considerable evidence was adduced by the respondents in rebuttal. The purchasers of Queen's Church were a Mr Glendinning and a company called Tanvier Pty Ltd of which Mr Colin Smout, a Kalgoorlie real estate agent, is a director. Miss Hall asserted that Mr Smout had advised the sheriff about the value of Queen's Church shortly prior to the auction conducted on 10 November 1993. In her evidence, Miss Hall swore that she had a telephone conversation with a man who had an office in West Perth whom she identified as Mr Smout's co-purchaser. She swore that this person told her that he had "just done a good deal in Kalgoorlie" and "... about this bargain that he and his friend had got, which was the Church ... two properties together in Boulder with a Church building on it." Exhibit 7E is a copy of an affidavit from Mr Glendinning filed in the Supreme Court proceedings instituted by Miss Hall on 24 March 1994 and referred to above. In that affidavit Mr Glendinning stated that it was not his practice to discuss his business dealings with a stranger such as Miss Hall and that he did not do so as Miss Hall alleged. Part of Exhibit 7C was a copy of an affidavit sworn by Mr Smout and filed in the proceedings brought by Mrs Anderson to remove Miss Hall's caveat, proceedings which I have also referred to above. Mr Smout swore that he had nothing to do with the auction prior to 10 November 1993 and had no contact with those responsible for conducting the auction until he spoke to the Kalgoorlie bailiff about the matter on 24 November 1993. No notice was served requiring either Mr Glendinning or Mr Smout to be made available for cross-examination. Mr O'Reilly gave evidence that his office never had any dealings with Mr Smout prior to the auction sale. I accept Mr O'Reilly's evidence. I am not satisfied that the sale by Mrs Anderson of Queen's Church, evidenced by the contract dated 8 December 1993, was anything other than an arm's length transaction for the best price reasonably obtainable in the circumstances. There was simply no credible evidence of any impropriety or association between Mrs Anderson and her representatives and the purchasers of Queen's Church. Mr Smout's affidavit refers to the fact that Miss Hall purchased the property in April 1987 for $30,000. Miss Hall did not dispute that. Exhibit 28A is a valuation by Hooker Corporate of Queen's Church as at 16 November 1992. That placed a value of $25,000 on the property. Exhibit 28B is Hooker Corporate's further assessment of the value of the property in December 1993 as being between $50,000 and $100,000. It will be recalled that to obtain the property, the purchasers had to pay between $86,000 and $87,000 of which $80,000 was payable to Mrs Anderson. In my view, I am entitled to take that extra expenditure into account in respect of the assertion that there was a private sale at less than market value. I reject Miss Hall's contention that the property was sold at less than market value. The respondents tendered the Hooker Corporate valuations not on the basis that they were evidence of market values but as evidence that valuations had been obtained. However, I have looked at them not just for that purpose, but to see whether there is any evidence of a sale at less than market value. The Judgment Obtained by Mrs Anderson in the Supreme Court of Western Australia During the course of the proceedings, it appeared that Miss Hall was challenging the legal process by which Mrs Anderson obtained judgment in the Supreme Court proceedings. Miss Hall acknowledged that in 1990 she had defaulted in making payment under the mortgage to Mrs Anderson. Miss Hall's address in that mortgage was shown as Lot 127A Hazelmere Circus, Hazelmere. Exhibits 29A and 29B are relevantly identical letters each dated 6 November 1992, each addressed to Miss Hall at that address, one of which is, on its face, stated to have been sent by "Security Post". Attached to each of those copy letters is a default notice. Exhibit 29C is a letter addressed to Mr R Gillon of Messrs Lawton Gillon (Miss Hall gave evidence that Messrs Lawton Gillon acted for her prior to the appointment of Mr Granich) also enclosing a copy of the notice of default. Each of those letters carries a time stamp indicating that it was posted between 3.00 and 4.00pm on 6 November 1992. Exhibit 5 in these proceedings is a copy of Ms Key's affidavit in the Supreme Court proceedings between Mrs Anderson and Miss Hall to recover the principal and interest owing under the mortgage granted by Miss Hall to Mrs Anderson. In paragraph 11 of that affidavit Ms Key affirms that the notice of default was forwarded to Miss Hall by security post. Miss Hall did not challenge that evidence. This evidence may not be entirely satisfactory as proof of service of the default notice on Miss Hall but I am prepared to infer (and I do infer) that default notices were sent to her by ordinary post and security post on 6 November 1992 and that on the same date a letter was posted to her solicitors enclosing a copy of the default notice. I find that the default notice was served in accordance with clause 3.1 of the mortgage to Mrs Anderson. I have examined the papers relating to the application for substituted service, the order for substituted service, the writ itself and the judgment. There is nothing in those documents which suggests that the judgment was irregularly obtained or entered. As Mr Evans pointed out in his closing address, the judgment was entered in March 1993 and there has been no application to set it aside. Furthermore, on her own evidence Miss Hall admits that she was in default and that she owes Mrs Anderson the principal moneys secured by that mortgage and interest on that sum. Whether Miss Hall was insolvent at the time when the sequestration order was made As mentioned above, the sequestration order was made on 24 February 1995. Miss Hall asserts that she was solvent on that date. Miss Hall has partially completely a statement of affairs in the prescribed form. That discloses an overdraft of $10,000 and furniture and effects of $2,000. There remain two other categories of assets. Under the heading "Debts owed to you" Miss Hall has inserted references to Supreme Court proceedings instituted against an insurance company. In her oral evidence she explained that this was an insurance claim in respect of fire damage to a hotel property owned by her. Miss Hall also lists as debtors the City of Kalgoorlie Boulder, the Shire of Boulder and "Engineering Facilities". No individual amount is shown beside any name in the list, but a total was shown under the heading "Amount likely to be received" of $20 million. The second respondent, Mr Jeffrey Laurence Herbert, is the trustee of Miss Hall's estate. In an affidavit sworn 19 May 1995, Mr Herbert says that Miss Hall has not provided him with any documents or evidence to assist him in relation to the claim brought against FAI General Insurances Ltd which is the subject matter of the Supreme Court action referred to above. In her evidence, Miss Hall suggested that the total amount for which she could sue was some $40 million rather than the $20 million shown in her statement of affairs. It appears from Mr Herbert's affidavit that the Supreme Court proceedings are defended. Such evidence as has been adduced by Miss Hall in respect of these claims (whether they be for $20 million or $40 million) does not satisfy me that she has valid claims in these amounts. It was for Miss Hall to prove that these very large claims should be taken into account in assessing whether, as at 24 February 1995, she was able to meet her debts as and when they fell due. She has not satisfied me that in making that assessment I should take into account these claims whether they are quantified at $20 million or $40 million. The final category of assets listed in Miss Hall's statement of affairs is real estate. Miss Hall shows this as being valued at $1,768,000. However, Mr Herbert has sworn that he has obtained written appraisals of the value of the various properties. Taking the upper level of those appraisals in each case, the result is a total sum of $960,000. On that basis Mr Herbert has calculated (in the Trustee's Report exhibited to his affidavit sworn 15 June 1995) that as at 24 February 1995 Miss Hall had an excess of liabilities over assets of $254,761. I have read Mr Herbert's three affidavits and their annexures and I accept his assessment of Miss Hall's financial position as at 24 February 1995. Then there is the question of cash flow. Miss Hall's evidence was that she has derived no income since 1987. There is no evidence that any of her properties is generating any income. In my opinion, not only has Miss Hall failed to adduce credible evidence that she was solvent on 24 February 1995 but all the evidence which has been put before the Court points in the opposite direction. I have come to the conclusion that when the sequestration order was made, Miss Hall had failed to comply with the bankruptcy notice and was insolvent. In those circumstances, it was appropriate that a sequestration order be made. In my opinion there is no basis for the contention that the sequestration order ought not to have been made. For the above reasons, the application will be dismissed with costs. I certify that this and the preceding twenty-two (22) pages are a true copy of the Reasons for Judgment of Justice Carr. Associate: Date: 6 November 1995 The applicant appeared in person. Counsel for the Respondents: Mr P.D. Evans Solicitors for the Respondents: Freehill Hollingdale & Page Date of Hearing: 24, 25, 26 & 27 October, 1995 Date of Judgment: 6 November 1995