Backhaus, J.E. v Adella Pty Limited

[1993] FCA 111

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JUDGMENT No. .....,.,....,.,... .,,,,,,,- i

I N THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION	)
STATE OF OUEENSLAND	1 QP 2247 of 1992

BETWEEN:  JORG ERIC BACKHAUS

AND :  ADELLA PTP LIMITED

10 MAR 1993

FEDERAL COURT OF

PRINCIPAL EX TEMPORE JUDGMENT

BRISBANE 22 FEBRUARY 1993

Adella Proprietary Limited (the creditor) seeks sequestration against the debtor Jorg Eric Backhaus on the basis of a judgment obtained in the District Court of Queensland on 22 July 1992 for some $22,605.39, which would now be a little higher due to interest.

The debtor seeks to have the bankruptcy notice set aside and

has appeared in person on the application. The basis of the

application is that there was an agreement which he entered

into with the petitioning creditor in August 1991, to pay off

the debt over a period of time. There seems to be no doubt

monthly purchases as they accrued, and something additional	off the arrears each month. As it happens, it is not
necessary for me to decide which of these two accounts of the agreement are correct, because it is now undisputed that throughout the period of the agreement - that is, in the months which followed August 1991 up to the time when the last payments were made by the debtor in February or March 1992 - he only on one occasion paid more than the amount of monthly purchases.
In other words, the debtor himself admits to being in breach even of his own account of the agreement. This admission was made both in the witness box and from the bar table. Accordingly, even if I am to conclude that the agreement was as the debtor alleges, I must also conclude on his own evidence, that he was himself in breach of the agreement. In this event, the agreement of the creditor to postpone action or not to press the debt in its entirety, was thereby repudiated by the debtor thus releasing the creditor from the agreement as alleged.
In these circumstances, the basis upon which the debtor seeks
to set aside the bankruptcy notice falls to the ground. The
debtor says that from April 1992 he changed his arrangements with his own customers, so that instead of giving them credit of 30 days, he required cash payments. He says that he explained to a representative of the creditor that in the light of that change of arrangement, he would be able to pay off the debt if he was given time. In fact, nine months have since passed, and it seems from what the debtor says that he is actually in no better position to pay off the debt than he
was before he changed his own credit arrangements, except that he has paid off some of his other accrued debts. Thus his overall net liabilities, he says, are less than they were a year ago, although his liability to the creditor has not decreased.
Even if I accept that given more time he could pay off the creditor's debt - and his confidence of an ability to pay it in the near or foreseeable future does not seem to be borne out by recent history of the debtor's business - this set of facts does not represent a basis upon which the bankruptcy notice can be set aside. This is because the whole of the debt is still owing and the debtor, on his own account, is insolvent. This is not an application for an adjournment, an opportunity which I offered to the debtor at the beginning of the hearing. Even if it were, I think that too much time has now passed to warrant further delay on the basis that trading activities could permit the debtor to trade out of his debts. Nothing has been presented to the Court to suggest that his
profitable business, except that to some extent a conclusion trading position is good or improving, or even that he has a
can be drawn that if he has paid off the debts that he claims to have paid off in the last year or so, he presumably must have been making some money. But it is much too vague to permit the formation of a conclusion that he is trading so successfully that despite the excess of his liabilities over his assets, and his debts over his income, he would be likely to be able to trade out of the creditor's debt in a reasonable period of time.
The debtor appears to be concerned that if he is made bankrupt he will not be able to trade at all. As any lawyer would be able to inform him, that is not the fact at all. TO the extent to which at the moment he trades through a company, and I am not entirely sure whether it is a company, there are some restrictions on his capacity to participate in the company's activities, but not in the earning of income for the company. That is a matter which he will be in a position to take up with his trustee, but there is no reason to believe that if his business is trading at a profit, a trustee would so interfere with that trading as to remove its profitability.
The application to set aside the bankruptcy notice is dismissed, and I shall proceed with the petition.
RECORDED NOT TRANSCRIBED
bankruptcy alleged, and with the other matters of which I am satisfied that the debtor has committed the act of
section 52(1) requires proof. I make a sequestration order against the estate of the debtor, and note the consent of Ross Andrew Duus to act as trustee. The debtor will pay the petitioner's costs, including any reserved costs, and I direct that a draft of this order be provided to the Registrar within seven days in accordance with the rules.

that there was some agreement, but there is a dispute as to

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what this agreement was. The dispute is between the petitioning creditor's position that the debtor had to pay $1000 per month off the arrears, and cover the ongoing monthly purchases, and the debtor's viewpoint that there was no fixed monthly amount for the arrears, but that he had to pay the

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- preced~ng pages are a true copy of the	I certify that this and the -fSuJ
Reasons for Judgment herein of hls Honour

Just~ce Einfeld

Associat

Dated:  8 (31 qj