Re Papageorgiou, Nikolas Ex Parte Papageorgiou, Nikolas & Anor [1995] FCA 1072

IN THE FEDERAL COURT OF AUSTRALIA) BANKRUPTCY DISTRICT IN THE ) VN 984 of 1995 STATE OF VICTORIA ) Re: NICKOLAS PAPAGEORGIOU (Debtor) EX PARTE:NICKOLAS PAPAGEORGIOU (Applicant) ESANDA FINANCE CORPORATION LIMITED (Respondent) CORAM: RYAN J PLACE: MELBOURNE DATE: 16 OCTOBER 1995 MINUTES OF ORDER THE COURT ORDERS: 1. That the application to set aside the bankruptcy notice be refused. 2. That the time for compliance with the bankruptcy notice be further extended to 13 November 1995. 3. That the debtor pay the judgment creditor's costs of this application including any reserved costs, such costs to be taxed in default of agreement.

IN THE FEDERAL COURT OF AUSTRALIA) BANKRUPTCY DISTRICT IN THE ) VN 984 of 1995 STATE OF VICTORIA ) Re: NICKOLAS PAPAGEORGIOU (Debtor) EX PARTE:NICKOLAS PAPAGEORGIOU (Applicant) ESANDA FINANCE CORPORATION LIMITED (Respondent) CORAM: RYAN J PLACE: MELBOURNE DATE: 16 OCTOBER 1995 REASONS FOR JUDGMENT Ryan J: This is an application to set aside a bankruptcy notice dated 8 May 1995 and served on the debtor, Nickolas Papageorgiou on behalf of the respondent, Esanda Finance Corporation Limited ("Esanda"). Esanda was a judgment creditor of the debtor in the sum of $25,639.82 pursuant to a judgment entered in the Magistrate's Court at Melbourne on 23 March 1991. Early in 1994 the debtor proposed a composition with his creditors who totalled in value $162,866.14. Under that composition each creditor was to be paid 25 cents in the dollar. Esanda, amongst others, accepted that proposal and advised that the current balance of its debt was $33,667.64, so that it would be entitled under the composition to $8,416.91. Accordingly, on 21 July 1994 Esanda and the debtor executed a deed of release in the following terms: "WHEREAS:- (a) Papageorgiou is indebted to Esanda Finance in the sum of $33,667.64 with respect to contract number 310632185. (b) Papageorgiou has offered to pay Esanda Finance the sum of $8,416.91 in full and final settlement of all the above indebtedness and Esanda Finance has agreed to accept the sum of $8,416.91 in full and final satisfaction of all the above indebtedness on the terms and conditions below. NOW THIS DEED WITNESETH AS FOLLOWS:- 1. Papageorgiou offers to pay Esanda Finance the sum of $8,416.91 in full and final settlement of his indebtedness to Esanda Finance with respect to contract numbered 310632185 within fourteen (14) days of the date hereof being 25 percentum of the total amount owing to Esanda Finance. 2. Esanda Finance agrees to notify the Credit Reference Association of Australia Limited in writing within twenty eight (28) days of the date hereof that the indebtedness in respect of the contract referred to in paragraph (A) of the preamble herein has been fully satisfied. 3. Upon receipt of the payment in the sum of $8,416.91 Esanda Finance forever releases Papageorgiou with respect to the above indebtedness and shall make no further claim on them whatsoever." Because other creditors did not accept the proposal as quickly as Esanda there was a delay by the debtor in paying the amount due to Esanda. That was acquiesced in by Esanda in the sense that in August 1994 one Dale Buckley, on its behalf, agreed to wait on the other creditors. However, on 28 September 1994 Mr Buckley, on behalf of Esanda, wrote to the debtor's solicitors in these terms: "NICKOLAS PAPAGEORGIOU We refer to the abovementioned and advise the following: As discussed, your client has not adhered to the Deed of Release, therefore Esanda Finance Corporation Ltd will withdraw our acceptance of the Deed if the payment of $8,416.91 is not in our office, 85 Spring Street, Melbourne, by 3 o'clock today. Further, Esanda Finance Corporation Ltd will enforce judgement to recover the full debt and Interest from your client." Subsequently, on 4 October 1994 solicitors on behalf of Esanda wrote a letter of demand to the debtor demanding the full amount of the debt claimed to be due to Esanda at that time, namely, $35,341.40. That demand was not complied with but, after further discussion, advice was given to the debtor's solicitors that Esanda would be prepared to wait until 1 March 1995 after which it would reconsider its position. Although by March 1995 all creditors had executed deeds of release in substantially similar terms to those executed by Esanda in June 1994, the debtor had difficulty in obtaining the money necessary to make payments to each debtor in accordance with the composition. On 21 April 1995 a facsimile transmission was sent to the debtor's solicitors by Mr MacNee, the recoveries officer for Esanda, which was, omitting formal parts, in these terms: "Please be advised, due to non-compliance of the Deed of Settlement, Esanda has withdrawn its offer. In light of information to hand, we request Mr Papageorgiou attend a meeting with our Manager, Mr Norm Stickland, and the writer urgently. Should Mr Papageorgiou not respond to our request by 28 April, 1995 our Solicitors will be instructed to continue legal action to recover our debt in full." In response to that invitation, on 27 April 1995 the debtor, together with his solicitor, Mr Desiderio, attended at the office of Esanda's solicitors and at that meeting a cheque in the sum of $8,460.91 was tendered together with an executed deed of release. That, it was contended, had the effect of procuringthe release of the debtor's indebtedness to Esanda. However after discussion, in the course of which it was indicated that Esanda would only accept the cheque in part satisfaction of the debt claimed to be due to it, the cheque was subsequently returned and it was intimated that bankruptcy proceedings would be initiated against the debtor. It was pursuant to that intimation the bankruptcy notice, the subject of these proceedings, was issued. As I have already indicated, the debtor seeks to set aside that notice and contends, essentially, that upon execution of the deed of release the underlying judgment debt was extinguished and all that remained for Esanda was to sue on the new cause of action afforded by the deed. However, in my view, the deed, on its proper construction, did not have that effect. It was not a deed which compromised an existing cause of action like the agreement discussed in Green v Rosen and Others (1955) 2 AER 797 to which I was referred by Mr Wilson of counsel for the debtor. The present deed I regard as typical of those embodying a composition with creditors and, as recited in clause 3 of the deed, it was not effective to extinguish the underlying debt until payment of the sum of $8,416.91 had been received. Under the deed as originally framed that payment had to be made within 14 days of the date of the deed, which was 21 July 1994. Even if the parties be regarded as having informally extended the time for compliance with clause 1 of that deed it was clear by, at the latest, April 1995, that Esanda was no longer prepared to accept payment out of time and regarded the condition of its release of the deed as being no longer capable of fulfilment. In those circumstances, I consider that Esanda was entitled to reject the tender of the amount stipulated in the deed when it was made in April 1995. Accordingly, the debtor has not succeeded in making out the ground for setting aside the bankruptcy notice. I am prepared to hear counsel on the question of a limited further extension of time for compliance with the bankruptcy notice, if that is appropriate. I certify that this and the preceding four (4) pages are a true copy of the Reasons for Judgment of his Honour Justice Ryan. Associate: Date: Counsel for the applicant : Mr J D Wilson Solicitors for the applicant : Masons Solicitors Counsel for the respondent : Mr D P Gilbertson Solicitors for the respondent : Corrs Chambers Westgarth Date of Hearing : 16 October 1995 Date of Judgment : 16 October 1995