Betros, F.J. v American Express International Inc

[1993] FCA 973

JUDGMENT No. ., ..... 973 / 9 3 ...,,,,,,,, ,,,,,,.,.,,,

IN THE FEDERAL COURT OF AUSTRALIA	1	No. QX 97 of 1993
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF	1
THE STATE OF OUEENSLAND	1

RE:  FRANK JOSEPH BETROS

Bankrupt

EX PARTE: AMERICAN EXPRESS INTERNATIONAL INC.

Applicant

2 3 DEC 1993

MINUTES OF ORDER AUSTRALIA PRINCIPAL REGISTRY

JUDGE MAKING ORDER:	Drummond
DATE OF ORDER:	15 December, 1993
WHERE MADE:	Brisbane
THE COURT ORDERS THAT:

1. The composition accepted on 5 October, 1993 be set aside.

2. The respondent's estate be forthwith sequestrated.

the Bankru~tcv Act 1966 (Cthl.
NOTE :	Settlement and entry of orders is dealt with in Rule
124 of the Bankruptcy Rules.

1. The applicant's costs be taxed and paid from the debtor's assets in accordance with the provisions of

IN THE FEDERAL COURT OF AUSTRALIA	1	No. QX 97 of 1993
GENERAL DIVISION	1
BANKRUPTCY DISTRICT OF	1
THE STATE OF OUEENSLANQ	1

RE:  FRANK JOSEPH BETROS

Bankrupt

EX PARTE: AMERICAN EXPRESS INTERNATIONAL INC.

Applicant

CORAM.:	Drummond J
PLACE :	Brisbane
DATE:	15 December, 1993

EX TEmORE REASONS FOR JUDGMENT

This is a creditor's application under S. 239(2) the Bankru~tcv Act 1966 (Cth) to set aside a composition accepted by the respondent's creditors under S. 204 of the Act and for a sequestration order against the debtor's estate.

According to the report of 20 September, 1993

prepared pursuant to S. 189A of the Act by Mr. Worrell, a registered trustee, while the respondent has no assets that would be realisable in a bankruptcy, he has liabilities to unsecured creditors of nearly $832,000.00. The respondent's proposal, duly accepted by the requisite majority of his creditors, involved his family making $5,000.00 available for the purposes of the composition. Most of this will go in

payment of Mr. Worrell's fees.

This is another case in which a trivial return only will be available to the unsecured creditors if the composition stands. This is not by itself sufficient to justify the court setting aside the composition assuming, as I do, that what the respondent proposed can be regarded as a composition. But I regard it as an important factor in a case in which the respondent has a history, part only of which was revealed in his statement of affairs and in the S. 189A report, of involvement in a series of failed business ventures.

The matter came before Cooper J on 15 November, 1993 after which it was adjourned to yesterday, 13 December. Cooper J gave directions requiring the applicant to file any additional material on which it wished to rely by 29 November and requiring the respondent to file any material upon which he proposed to rely in reply by 6 December. This was done in	circumstances in which the applicant had filed an affidavit	sworn that day, 15 November, in which the solicitor for the
applicant deposed to being informed on 12 November by an employee of Mr. Worrell that Mr. Worrell had just received some information which revealed for the first time, so far as
Mr. Worrell was concerned, that the respondent was involved in
a Hong Kong company, Eastpac Star Holdings (HK) Ltd.. On 15

November, the applicant also read an affidavit by Mr. Worrell wherein he said:

"I have asked Mr Betros to provide all relevant information and documentation which he has or which he can gather in to enable me to verify the accuracy of his statement of affairs. To date he has not

done so. "

On 26 November, 1993, in compliance with Cooper 3's directions, the applicant filed an affidavit by its solicitor exhibiting information obtained by that solicitor on 22 November from its Hong Kong agent from the public records of corporations registered in Hong Kong. This revealed that not only was the respondent currently registered as a director of Eastpac Star Holdings (HK) Ltd., but he was also a director of nine other Hong Kong registered companies. By affidavit filed on 26 November, Mr. Worrell confirmed that the respondent had never disclosed to him his involvement with any of these other Hong Kong companies, notwithstanding his undisputed evidence about asking the respondent to provide him with the

respondent's statement of affairs, and notwithstanding the	information necessary to verify the accuracy of the
fact that the respondent had disclosed to Mr. Worrell his involvement with eight other companies which had all, according to the respondent, never traded or whose businesses had failed.
Notwithstanding Cooper J's direction, the respondent did not file any material in reply to explain his connection
with the Hong Kong companies with which the applicant's Hong I-

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Kong search revealed he was connected. However, at the	I
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commencement of the hearing yesterday, his counsel sought	. ,
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leave to read an affidavit which the respondent had sworn,
which leave I ultimately granted. Mr. Betros's affidavit is	I
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brief. He says he, with another gentleman, formed a group of companies in Hong Kong, all eight of which were wholly-owned	. .
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subsidiaries of Eastpac Star Holdings HK Ltd., none of which	k. ;
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had ever traded and from which he had not benefited
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financially. He said in his affidavit he did not disclose	;-
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them to Mr. Worrell in his statement of affairs or later because he thought they had been deregistered. Five of these eight companies he refers to are contained in the list of nine Hong Kong companies to which the search conducted by the applicant showed the respondent was connected.
~lthough the respondent was given opportunity by Cooper J to deal with this very matter, he has put no evidence at all before the court with respect to his connection with
connects him: Langdon Holdings (HK) Ltd and Betros Holdings	four of the companies with which the Hong Kong company search
(HK) Ltd., whose names suggests that they may well not be subsidiaries of Eastpac Star Holdings (HK) Ltd., and Redcurrant Ltd. and Costa Dorada Ltd.. It is not possible to say on the evidence before me whether the respondent has any interest in any of these four companies that may be of value to his creditors if he were to be bankrupted. But in the time that has passed since the applicant first learned of this connection, it has limited opportunities available to it to conduct an investigation with respect to the respondent's connection with these companies. The respondent, however, must know, or at least must have some idea, what the worth of his connection is likely to be to both himself and his creditors.
I think that when one has regard to the way his connection with these companies emerged firstly, by Mr. Worrell being told of the respondent's connection with Eastpac Star Holdings (HK) Ltd. well after the respondent's proposal for the composition was accepted and then by the applicant causing a search of corporate records in Hong Kong to be carried out, and when one has regard to the respondent's failure to deal with four of these Hong Kong companies in his very belated affidavit, a failure I infer to be deliberate in view of what occurred before Cooper J on 15 November, I think this is a very clear case in which the composition should be set aside. I do not think it matters that it was Mr. Betros
who revealed to Mr. Worrell, after the composition was	accepted, his link with Eastpac Star Holdings (HK) Ltd., in
view of what has happened subsequently.
The desirability of this respondent being subject to a bankruptcy administration, given the doubt raised as to whether he has been frank in disclosing in his proposal for the composition the full range of his assets, provides reason for the composition to be set aside, even though there is no
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evidence that enables me to determine whether the respondent's	I
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connection with these four companies has a real value which	i I
might be of benefit to creditors if he is bankrupted. The	r
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fact that the creditors will, at most, obtain a trivial	!
benefit only if the composition stands, after Mr. Worrell's fees have been paid from the $5,000.00 available in the composition, makes it easy to conclude that there is, in all the circumstances, good reason to set it aside. Setting aside this composition deprives the creditors of, at best 0.6 of a cent in the dollar return on their debts, i.e., they will not be in any significant respect better off if the composition stands than they will be if it is set aside and the sequestration order made.
Counsel for the respondent submitted that the respondent's omission to reveal his connection with companies in Hong Kong could only provide a reason for setting aside a composition if that non-disclosure, in the context of his statement of affairs, amounted to the provision of false
affairs within S. 2 2 2 ( 4 ) and then it would only be relevant if information or to a material omission from the statement of	application were made to set aside the composition under S.
222(1). I disagree. I think for the reason given, and irrespective of whether or not it turns out that the respondent's connection with the four Hong Kong companies he does not deal with in his affidavit is something of value to his creditors in a bankruptcy administration, the way the respondent has conducted himself in not revealing his

connection with these four companies is a factor relevant to take into account in disposing of the applicant's application under S. 239(4).

I will therefore make an order setting aside the composition and I will also make an order that the respondent's estate be forthwith sequestrated.

I certify that this and the preceding
6 pages are a true copy of the
reasons for judgment herein of the

Honourable Mr. Justice Drummond.

Associate: LL" C -

Date :  15 December, 1993