Bowin Designs Pty Ltd v Leslie, in the matter of Leslie [1999] FCA 1837

FEDERAL COURT OF AUSTRALIA

Bowin Designs Pty Ltd v Leslie, in the matter of Leslie

[1999] FCA 1837

BOWIN DESIGNS PTY LTD (ACN 000 803 4040) v FREDERICK JOHN LESLIE (also known as JOHN LESLIE), IN THE MATTER OF FREDERICK JOHN LESLIE (also known as JOHN LESLIE)

N 8024 OF 1999

GYLES J

SYDNEY

30 NOVEMBER 1999

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 8024 OF 1999

BETWEEN: BOWIN DESIGNS PTY LTD (ACN 000 803 404)

APPLICANT

AND: FREDERICK JOHN LESLIE (also known as JOHN LESLIE),

IN THE MATTER OF FREDERICK JOHN LESLIE (also known as JOHN LESLIE)

RESPONDENT

JUDGE: GYLES J

DATE OF ORDER: 30 NOVEMBER 1999

WHERE MADE: SYDNEY

THE COURT ORDERS THAT: 1. The matter be returned to the Registrar for further hearing. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY N 8024 OF 1999

BETWEEN: BOWIN DESIGNS PTY LTD (ACN 000 803 404)

APPLICANT

AND: FREDERICK JOHN LESLIE (also known as JOHN LESLIE),

IN THE MATTER OF FREDERICK JOHN LESLIE (also known as JOHN LESLIE)

RESPONDENT

JUDGE: GYLES J

DATE: 30 NOVEMBER 1999

PLACE: SYDNEY

EX TEMPORE REASONS FOR JUDGMENT 1 This matter was commenced by a creditor's petition dated 31 August 1999 based upon a failure to comply with a bankruptcy notice, time for compliance with which expired on 12 April 1999. Prior to that, an application had been made to set aside the bankruptcy notice. That application was decided adversely to the applicant by Burchett J on 22 March 1999 (see Leslie v Bowin Designs Pty Ltd [1999] FCA 333). The substance of that application was that the respondent creditor desired to go behind the judgment upon which the bankruptcy notice was based to raise a set-off. His Honour refused that application on its merits and extended the time for compliance with the notice up to and including 12 April 1999. 2 The transactions upon which the judgment founding the bankruptcy notice was based occurred in about April or May of 1992 and the judgment was itself delivered in September of 1997. 3 The amount claimed by the petitioning creditor is $26,242.78 plus interest. The respondent debtor filed a notice of intention to oppose the petition on 19 October 1999 and filed with that a supporting affidavit. It is apparent from the affidavit, and indeed from the application before Burchett J, that the debtor was a guarantor of a company known as Fishers Ghost Plumbing Pty Limited. The judgment creditor was a supplier of gas heaters to that company, which at the relevant time was involved as a subcontractor in building work. There is, in evidence, a guarantee and indemnity to the National Australia Bank Limited in favour of the company in which the debtor and a number of other individuals and three companies are co-guarantors. Those companies are Leslie Monaro Group Industries Pty Limited, Fishers Ghost Electrical Pty Limited and Fishers Ghost Services Pty Limited. The evidence indicates that the National Australia Bank Limited appointed a receiver and manager to at least certain of these entities, although not, so far as the evidence shows, to the assets of the respondent debtor. 4 The respondent says in his supporting affidavit that in or about July 1996 he was retrenched and that he received unemployment benefits until November 1997, when he was accepted as a full-time student receiving the government student's allowance, known as Austudy. He says he is still a full-time student receiving Austudy as his sole income. He is married with nine children, eight of whom are still dependent upon him and seven of whom will be still dependent upon him, he says, until 2003. 5 Paragraph 11 of the respondent's supporting affidavit is the following terms: "I have no interest or any assets in land, securities, stocks, bonds, or any form of divisible property. I have no interest or assets in any inheritance." Attached to the respondent's supporting affidavit are his personal tax returns for several years and a search of the Land Titles Office of New South Wales which reveals that his wife is the owner of some real estate. He refers to the proceedings which founded the bankruptcy notice and claims that he was poorly represented in that he was not advised to, and did not, raise an available counter-claim or set-off. That, of course, is a matter which was investigated before his Honour. 6 No evidence has been read by the petitioning creditor on this hearing. I should explain that the matter came on for hearing today before the Registrar. I am informed that the respondent debtor sought an adjournment of the proceedings in order to file further evidence in support of his claim that the making of an order would be both futile and oppressive. An adjournment for that purpose was refused and the matter referred to me for determination as to what were called the defences of futility and oppression. 7 I have not, myself, considered the question of an adjournment. That has been dealt with and, having in mind the time which has elapsed since the failure to comply with the bankruptcy notice and the directions which have previously been made, it is not surprising that an adjournment for the purpose of obtaining evidence would be refused. This is particularly so bearing in mind that the evidence which is material to the matter is all within the knowledge of the respondent debtor, or at least, substantially within the knowledge of the respondent debtor. 8 What have been called the defences of futility and oppression are, of course, merely grounds which it is appropriate that the Court look at in considering whether or not to dismiss a petition because it is satisfied by the debtor "that for other sufficient cause, a sequestration order ought not to be made" (s 52(2)(b) of the Bankruptcy Act 1966 (Cth) ("the Act")). 9 I have been referred to several authorities bearing upon the place that these factors have in the discretion. I will not attempt to paraphrase or summarise those authorities. They depend, it seems to me, upon a conclusion that there is no real purpose to be served by making the order. 10 It seems to me that there is some substance in the respondent debtor's argument. The amount involved in the bankruptcy notice itself is relatively small. The transactions are quite old and there is nothing before me to indicate any doubt about the debtor's evidence that he has no divisible assets, although it is true, as submitted by counsel for the applicant, that the statement falls well short of being a statement of affairs or a statement of assets and liabilities. It certainly also seems that there is no immediate prospect of any substantial improvement in the position of the debtor. 11 Counsel for the applicant puts, however, that the facts before me reveal that the debtor had an association, sufficient at least to guarantee debts, with a company which was active in the building industry and, further, that there were a number of other co-guarantors, at least in relation to the obligation to the bank. He puts that his client, being a supplier, was not privy to the dealings between the bank and its receiver, on the one hand, and this debtor and the other co-guarantors, on the other. He puts that, from the point of view of his client, there are matters concerning these relationships which bear examination. 12 In my opinion, the submissions of counsel for the applicant are sound, and I could not be satisfied, as I need to be pursuant to s 52(2)(b) of the Act, that there is matter which would make any administration in bankruptcy futile or a waste of time, or that it is an unnecessary oppression of the debtor. Indeed, in his submissions to me, the debtor, without making any concessions about the point, did come close to agreeing that the material before the Court was not sufficient to satisfy it that there was sufficient cause why a sequestration order should not be made and referred to his application to adjourn the matter on more than one occasion. It seems to me, however, that so far as the petitioning creditor and the Court is concerned, no amount of evidence would be likely to impinge upon the necessity for an examination of the affairs of the respondent debtor, in particular in association with an investigation as to what did happen in relation to the business or businesses that were being conducted by the companies. The hearing of a petition is not the occasion for a minute examination of the history of the entities involved. The place for that is the proper administration of the bankrupt estate. 13 The respondent debtor has not satisfied me that the futility of which he complains is present and I am further not satisfied that there could be any cure of that if he were afforded more time. I am therefore not satisfied under s 52(2)(b) of the Act that there is any sufficient cause why a sequestration order ought not to be made, and so hold. Under those circumstances, I believe the proper course for me to take according to the practice of the Court is for me to return the matter to the Registrar for further hearing this morning. I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Gyles.