FEDERAL COURT OF AUSTRALIA St George Bank Ltd v Helfenbaum [2001] FCA 559 ST GEORGE BANK LIMITED (ACN 005 513 070) v JEFFREY LEON HELFENBAUM (also known as JEFFREY SIMON WOOD) V7259 of 2000 RYAN J MELBOURNE 14 MAY 2001 IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V7259 of 2000 IN THE MATTER of JEFFREY LEON HELFENBAUM BETWEEN: ST GEORGE BANK LIMITED (ACN 005 513 070) Applicant AND: JEFFREY LEON HELFENBAUM (also known as JEFFREY SIMON WOOD) Respondent JUDGE: RYAN J DATE OF ORDER: 14 MAY 2001 WHERE MADE: MELBOURNE THE COURT ORDERS: 1. THAT there be a sequestration order against the estate of the debtor, the date of the act of bankruptcy being noted as 31 March 2000. 2. THAT the costs of the petitioning creditor and the supporting creditors (including any reserved costs and the costs of the Motion on Notice dated 27 April 2001) be taxed and paid out of the estate of the bankrupt in accordance with the Act. 3. THAT there be a stay of execution of the sequestration order for twenty-one days from the date of this Order. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA VICTORIA DISTRICT REGISTRY V7259 of 2000 IN THE MATTER of JEFFREY LEON HELFENBAUM BETWEEN: ST GEORGE BANK LIMITED (ACN 005 513 070) Applicant AND: JEFFREY LEON HELFENBAUM (also known as JEFFREY SIMON WOOD) Respondent JUDGE: RYAN J DATE: 14 MAY 2001 PLACE: MELBOURNE REASONS FOR JUDGMENT 1 This is the return of a creditor's petition in which the creditor's petition relies on an act of bankruptcy of the kind specified in s 40(1()(d) of the Bankruptcy Act 1966 (Cth) ("the Act"). Section 40(1) provides, so far as is relevant: "A debtor commits an act of bankruptcy in each of the following cases: ..... (d) if: (i) execution has been issued against him or her under process of a court and any of his or her property has, in consequence, either been sold by the sheriff or held by the sheriff for 21 days; or (ii) execution has been issued against him or her under process of a court and has been returned unsatisfied;" 2 There is undisputed evidence that a warrant to seize property of the debtor to recover $23,907.45 was issued out of the Magistrates Court at Melbourne on 8 February 2000. The Deputy Sheriff returned it unsatisfied to that Court on 31 March 2000. Section 41(1)(d)(ii) requires a proper return. As Gibbs J said of the counterpart to s 41(1)(d) in Re Johnson Ex parte Greendale Engineering and Cables Pty Ltd (1967) 11 FLR 335, at 339; "In the context of s.52 (e) the word "returned" is not used simply in the sense of "sent back". The word "return" has of course a special and well-known sense in relation to a writ of execution. A return to a writ in the legal sense is the written report of the sheriff or his officer as to how far he has been able to carry out his instructions, and there have been a number of cases in which it has been recognized that "returned" in s.52(e) refers to the written return of the sheriff or his officer - King v. Commercial Bank of Australia Ltd (1921) 29 CLR 141, at p.153; Re Huntington; Ex parte Warringah Shire Council (1935) 8 A.B.C. 161, at p.165; Re Worsley; Ex parte Gill (1957) 19 A.B.C. 105, at p.107. In the present case the writ in effect directed the bailiff to seize and sell the goods and lands of the debtors, and the writ would have been returned unsatisfied if the bailiff had reported that there were no goods or lands of the debtors within the bailiwick the proceeds of which were available to satisfy the writ. It was not a proper return to say that the premises to which the bailiff went were shut and that the bailiff had no response, for that did not mean that there were no goods in those premises available for execution." 3 There is a conflict between the evidence of the debtor and that of the sheriff's officer, Mr Dobb, who attended Unit 1 of 19 Emma Street Caulfield South on 10 March 2000 to execute a warrant of execution issued out of the Magistrates' Court at Melbourne. Mr Dobb deposed that he identified himself to the debtor and was informed that the premises at 1/19 Emma Street belonged to his (the debtor's) parents and that the debtor was unable to pay the judgment debt and had no assets. The debtor, whom I shall call for the sake of convenience, Mr Helfenbaum, on the other hand, said that there had been a delay in his answering the doorbell and when he did so he saw the sheriff's officer on the point of re-entering his car. According to the debtor, the sheriff's officer then spoke to him saying, in effect "I suppose you have nothing to take" to which Mr Helfenbaum made no response. Also, on the debtor's version, the sheriff's officer then, at his request, provided him with a piece of paper on which was recorded "the case number" and then left. 4 The debtor recalls that the person who attended at Unit 1, 19 Emma Street South Caulfield was wearing a uniform. It is also significant that immediately after that attendance, Mr Helfenbaum claims, he telephoned his solicitor and advised him that Advance Bank had sent the Sheriff around to execute a warrant. That claim is inconsistent with his assertion that he had not known that the Sheriff was attending in relation to Advance Bank's judgment debt because the slip of paper given to him had borne only a "case number and an amount". 5 I prefer the account given by Mr Dobb. The registered proprietor of Unit 1, 19 Emma Street Caulfield South is the debtor's father, Chaim Helfenbaum. Although the debtor pointed out in evidence that his mother had died in 1991, he acknowledged that the premises were held on trust by or for his father and he was in dispute with his father's administrator in respect of them. I find it inherently probable that Mr Helfenbaum asserted to Mr Dobb that the premises were owned by his father or were "his parents" or "parents" and that assertion was the source of Mr Dobb's recollection reflected in his "field notes" that "entry [was] denied to W[arrant] A[ddress] (Parents)". 6 I also find that the debtor, at least impliedly, represented to Mr Dobb that he owned none of the assets in the premises. Mr Dobb observed no goods outside the premises and the debtor did not claim to possess any when he was handed the "tear-off" notice from the warrant which made it clear that the judgment creditor was seeking to levy execution in respect of a total debt of $26,162.17. 7 Common to each of the acts of bankruptcy specified in s 40(1) of the Act is that its commission gives rise to the inference that the debtor, at the date of the act, is unable to pay his or her debts in full as they fall due. Accordingly, I consider, the particular facts relied on as constituting one of the acts of bankruptcy catalogued in s 40(1) must be examined to see whether such of them as are proved on the balance of probabilities support that inference. That is consistent with the approach taken by the High Court in King v Commercial Bank of Australia Ltd (1921) 29 CLR 141 to s 49(8) of the Insolvency Act 1915 (Vic), which was similar in effect to s 40(1)(d) of the Act, although it differed in terms because of the presence of this proviso; "Provided that the debtor has been called upon to satisfy such judgment decree or order by the officer or other person charged with the execution of the writ." 8 Knox CJ, with whom Gavan Duffy and Starke JJ agreed, said, at 153, that the effect of the sub-section was; "The petitioner cannot rest on the return to the writ alone: he must prove, in addition to a return of the writ unsatisfied in whole or in part, a refusal or failure on the part of the judgment debtor to pay the debt when demanded by the person charged with the execution of the writ." 9 The facts which I have found surrounded the attempted execution of the judgment of the Magistrates Court in the present case, clearly imply a refusal or failure to pay the judgment debt. Accordingly, I am satisfied that the petitioning creditor has established the act of bankruptcy on which it relies. 10 An amended Notice of Intention to Oppose the petition filed on behalf of the debtor recites; "1. I am able to pay my debts as I have readily realisable assets exceeding the value of the debt. 2. These readily realisable assets are, in some cases, essential for my work and home, being chiefly manufacturing and computer equipment (tools of trade) and furniture and personal items. 3. I have a claim against the Applicant exceeding the amount of the Applicant's claim and am pursuing that claim by way of Proceeding No. V140 of 1999. 4. In the light of the above matters I am unwilling but not unable to pay the amount of the Applicant's claim. 5. I also dispute the debts claimed by the two supporting creditors in their Notices of Intention to Appeal and Support dated 18 August 2000, and am able but unwilling to pay them. 6. There was no serious attempt to enforce the Applicant's judgement by way of execution. Nor has there been any garnishee of debts owing by me attempted. Bankruptcy proceedings should not be used in lieu of execution or garnishee proceedings." 11 The evidence as to the assets and liabilities of the debtor discloses that his assets comprise cash at bank variously quantified as $1,400 and $3,400, trade debtors, to which Mr Helfenbaum has assigned a value of $39,665, a 1993 Nissan motor vehicle which he valued at $18,000, a judgment debt owed by one Barry Helfenbaum of $13,790, furniture and personal goods valued at $25,000 and "business assets" comprising manufacturing and computer equipment valued at $40,500. The debtor's admitted liabilities include the judgment debt of $21,947.48 asserted by the petitioning creditor, and $8,272.56 owing on a David Jones credit account. He also acknowledges debts claimed by Herbert Geer & Rundle, solicitors and BMW Finance, which appeared as supporting creditors on hearing of the petition. Those claims, which the debtor says are disputed, are for, respectively, $5,788.14 and $6,227.63. 12 In the course of cross-examination by Mr Nolan of Counsel for the petitioning and supporting creditors, Mr Helfenbaum acknowledged that a firm of architects, Moull Zemski had obtained judgment against him in the Magistrates Court at Melbourne on 17 July 1996 for $20,000, but he believed that debt to have been compromised or "written off", although he had no recollection of paying Moull Zemski any money since July 1996. He also conceded an unquantified liability for unpaid parking fines. As well, he accepted that one of the trade debtors to whom an invoice for about $35,000 had been rendered and from whom almost $15,000 was outstanding, had paid its debt on or about23 August 2000. In addition, a further $1,000 had been received as a part payment from another trade creditor, and yet another had paid Mr Helfenbaum "50 per cent" of the amount for which it had been invoiced. 13 The petitioning creditor also established that a cheque drawn for $272.40 by the debtor on a bank account which he had conducted in 1999 had been dishonoured. The evidence also revealed that the debtor had made application under the Judgment Debt Recovery Act 1984 (Vic) in 1999 for an order enabling him to pay by instalments the subject judgment debt due to the petitioning creditor. That application contained a statement of the debtor's assets and liabilities as at 5 March 1999, which disclosed a total weekly income of $1,385, total weekly expenses of $757 and property and assets valued at $54,500. The list of debts, liabilities and expenses did not record any liability, contingent or otherwise, for income tax. Although he claimed to have had a net income for the 1998 - 1999 financial year of between $100,000 and $108,000 and to have paid most of the disposable part of that income to solicitors and others in reduction of debts and to his ex-wife, apparently by way of support for his children, the debtor conceded under cross-examination that the last year for which he had lodged an income tax return was 1990 - 1991. 14 The debtor has the onus of proving solvency at the date of the hearing of the petition; see s 52(2) of the Act and e.g., Re Poulson Ex parte Hempenstall Bros Ltd (No 2) (1929) 1 ABC 54 at 60. In my view, Mr Helfenbaum has not discharged that onus. Not all of the assets to which he has pointed are readily realisable and the amounts for which they could be realised are speculative within a wide range. Some, like the judgment debt owed by Barry Helfenbaum, presumably a relative of the debtor, and the personal and household effects, may not be realisable at all. On the other side of the ledger, even the liabilities which he has admitted are probably increasing through the accrual of interest and similar charges and others like that presumably due to the Commissioner of Taxation for the last ten years, have not been quantified but may well be substantial. This case is far removed from Re Sarina Ex parte Wollondilly Shire Council (1980) 48 FLR 372, where the learned primary Judge had found [(1980) 43 FLR 163 at 165] that the excess of the debtor's realisable assets over his liabilities was close to $1 million. On the view I take of the present evidence, at its most favourable for him, Mr Helfenbaum's solvency is balanced on a knife edge. In these circumstances, I am not persuaded that he has discharged the onus to which I've referred as being imposed by s 52(2). 15 I was invited by Counsel for the debtor to adjourn the hearing of the petition to allow Mr Helfenbaum to pursue his action in this Court under the Trade Practices Act 1954. However, when a petition against the debtor by the present petitioning creditor based on the same judgment debt was before Sundberg J, his Honour, although dismissing the petition because he was satisfied that the debtor was then able to pay his debts, was not satisfied that the debtor had "a real case which is likely to succeed" by way of cross-claim against the petitioning creditor; see St George Bank Limited v Helfenbaum [1999] FCA 1337 (24 September 1999), par 18. The debtor's proceeding, V140 of 1999, had been issued before Sundberg J heard the earlier petition. The evidence does not suggest that it had been prosecuted with conspicuous expedition since then and I am not persuaded that it would be a proper exercise of the Court's discretion to adjourn the present petition to enable that application to proceed to judgment which, on present indications, is still a considerable time away. Of course, if the prospects of success of the pending action are sufficiently persuasive, the debtor's trustee in bankruptcy can continue to prosecute it in the interests of the estate as a whole. However, I am not prepared to allow the debtor's already exiguous assets to be further dissipated by allowing time for the action to proceed to trial in all likelihood against the wishes of at least some of his significant creditors. 16 There being no other circumstances which I consider should incline the Court to exercise its discretion to dismiss or adjourn the petition, there must be a sequestration order against the estate of the debtor. I shall note the date of the act of bankruptcy as 31 March 2000 and shall order that the costs of the petitioning creditor and the supporting creditors be taxed and paid out of the estate of the bankruptcy in accordance with the Act. I shall stay execution of the sequestration order for twenty-one days. I certify that the preceding sixteen (16) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan. Associate: Dated: 14 May 2001 Counsel for the Applicant: Mr J Nolan Solicitor for the Applicant: Rigby Cooke Counsel for the Respondent: Mr A McNab Solicitor for the Respondent: Zolis, Barristers and Solicitors Date of Hearing: 28 August 2000 Date of Judgment: 14 May 2001