Brooke, Re R.V. Ex Parte A.N.Z. Furniture Timbers Pty Ltd

[1986] FCA 456

C A T C H W O R D S

BANKRUPTCY - creditor's petition - little prospect of dividend - some

chance of trading out - insured petitioning creditor

(indifferent to prospects of dividend) - exercise of discretion.

Bankruptcv Act, 1966

Re: Rodnev Vincent Brooke

Ex parte: A.N.Z.	Furniture Timbers Pty. Ltd.
QLD P705 of 1986

Re: Kvle Svdnev Brooke

Ex parte: A.N.Z. Furniture Timbers Pty. Ltd.

QLD P706 of 1986

Re: Marlene Ann Hellvar

Ex parte: A.N.Z.	Furniture Timbers Pty. Ltd.
QLD P707 of 1986
PINCUS J. BRISBANE
6 OCTOBER 1986

IN TtiE CEDEREL (CCLTPT OF AUSTPALIA	1
GENERAL DIVISION	1
BANKRUPTCY DISTRICT OF THE SOUTHERN 1 DISTRICT OF THE STATE OF QUEENSLAND )

QLD P705 of 1986

RE: RODNEY VINCENT BROOKE

EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD.

QLD P706 of 1986

RE: KYLE SYDNEY BROOKE

EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD.

QLD P707 of 1986

RE: MARLENE ANN HELLYAR

EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD.

MINUTES OF ORDER

JUDGE MAKING ORDER:	PINCUS J.
DATE OF ORDER:	6 OCTOBER 1986
WHERE MADE:	BRISBANE
THE COURT:
In respect of P705 of 1986:

1. Finds the act of bankruptcy alleged in the petition.

2. Is satisfled of proof of the other matters of which the

A c t requires proof.

3 . Makes a sequestration order in respect of the estate of

the debtor.

4 . Orders that the costs of the petitioning creditor of and incidental to the proceedings be taxed and paid in

a;.cordance with the Act: such costs to Include the costs

of the two ad]ournments of 1 and 15 September, 1986.

In respect of F706 of 1986:

1. Finds the act of bankruptcy alleged in the petltlon.

2 . Is satisfied of proof of the other matters of which the

Act requires proof.

3. Makes a sequestration order In respect of the estate of the debtor.

4. Orders that the costs of the petitioning creditor of and incidental to the proceedings be taxed and paid in accordance with the Act only insofar as such costs

relate to work which it would have been necessary to do

in respect of this debtor if only one petition had been

issued; such costs to include the costs of the two

adjournments of 1 and 15 September, 1986.

In respect of P707 of 1986:

1. Finds the act of bankruptcy alleged in the petition.

2. Is satisfied of proof of the Other matters of which the Act requires proof.

3 . Makes a sequestration order in respect of the estate of the debtor.

4. Orders that the costs of the petitioning creditor of and incidental to the proceedings be taxed and paid in

accordance with the Act only insofar as such costs

relate to work which it would have been necessary to do

in respect of this debtor if only one petition had been

issued; such costs to include the costs f the two

adjournments of 1 and 15 September, 1986.

NOTE:	Settlement and entry of Orders is dealt with in
Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF THE SOUTHERN	)
DISTRICT OF THE STATE OF OUEENSLAND	)

QLD P705 of 1986

RE: RODNEY VINCENT BROOKE

EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD.

QLD P706 of 1986

RE: KYLE SYDNEY BROOKE

EX FARm: A.N.Z. FURNITURE TIMBERS PTY. LTD.

QLD P707 of 1986

RE: MARLENE ANN HELLYAR

EX PARTE: A.N.Z. FURNITURE TIMBERS PTY. LTD.

PINCUS J. 6 OCTOBER 1986

M TEMPORE REASONS FOR JUDGMENT

The matters before me are three creditor's petitions

based upon a single judgment given o 8 April 1986, in the sum of

$13,387.16. It seems that the fact that one petition only was

necessary should be noticed with respect to costs. The matter

f i r s t came before the Court on 1 September 1986, when one of the debtors appeared for himself and for the others, and the matter

was adjourned by me to	allow time to make some proposal for
payment.

2 .

The case came on agaln on 15 September, and was

adjourned again for the same reason: it comes on today, on 6

October, and Mr. Brooke appears and seeks a further adjournment.

Exhibit 1 sets out the debts owing by a business in

which the debtors are participants, and the conduct of which has

given rise to the debt in question, that is, the debt on which the

Petitioning creditor petitioned. The list in exhibit 1 totals a

little under $300,000, in addition to which it appears that a sum

of about $200,000 was due to one McKenzie, who is said by Mr.

Brooke to be, in substance, a partner, but appears to be legally a creditor.

Mr. Brooke has given evidence and made statements from

the bar table, and I may say that I find him a genuine and honest

person, and have every confidence that he is doing his best to

give me a reasonable account of the position of the business. In

substance, it is not doing particularly well, but has good

prospects in the future, or so it is hoped. One of the reasons it

is not doing well at the moment is that persons who are or have

been indebted to the debtors' business have not been meeting their

obligations, through various misfortunes of their own.

The petitioning creditor company, on the other hand,

says that it needs the money which has now been due to it for over

a year, for the purposes of	its own business. which is quite a
small one.

3 .

The matter whlch has induced me to adjourn the matter

twice to enable the debtors to try to raise some money is that the

assets of the business are not very considerable. They are

principally machinery, which is leased. and Mr. Brooke has the

opinion, which I respect, that the equity in the machinery,

particularly on a forced sale, would not prove to be very large.

It therefore appears to me that, if the debtors are made

bankrupt, the dividend will not be large, and that i may well be

that the best hope the creditors of the business have is to allow

it to attempt to trade out of its difficulties. That would seem

to me to be a fairly long process: nevertheless, people have

fought back in business from worse positions than this.

It may seem at first sight odd that, in view of the

position in which the debtors' business is placed, the petitioning

creditor presses for a sequestration order. Mr. Bayliss, who has

appeared on each occasion for the petitioning creditor, informs me

that the reason for the attitude of his client is that it is

insured and will receive most of the debt due if and when the

bankruptcy proceedings are concluded; that is, it does not depend

upon a dividend. Its purpose in bringing the bankruptcy

proceedings is to comply with the terms of the insurance policy,

and to enable it to recover from the insurance company.

I have no real confidence, from what Mr. Brooke has told

me, that a substantial loan such as has been sought will be

available in the foreseeable future. I think that a lender

prepared to put a substantial sum into a business in this

4.

condition would be difficult to find. I am far from saying,

however, that in the long-run the creditors would necessarlly

remain unpaid. What I am fairly sure of is that in the bankruptcy

they will not get much.

Generally, the Court's posltlon is, I think, that unless

the creditor can be seen to be likely to be able to be paid

reasonably soon, the petition will not be simply adjourned

indefinitely m the hope that the debtor will overcome his

drfficulties with time. I have been much troLbled as to whether I

should apply that policy in a case of this sort; it may be of an

increasingly common type, because Mr. Bayliss has been good enough

to tell me that he thinks that insurance of this kind is fairly

popular.

On the whole, and taking account fully what Mr. Brooke

has told me (in particular today, and less relevantly, on previous

occasions) I think that I should make a sequestration order in

respect of each of the debtors. It would be too great a departure

from the practice of the Court to allow the debt to remain due

indefinitely, as seems likely, and force the petitioning creditor

to simply take the risk that one day the debt will be able to be

paid.

I must say however, that those who have been responsible

for framing and administering the bankruptcy laws may not

necessarily have thought of the particular problem presented by

the Insured petitioning creditor, at least in cases where the

estate does not seem to be worth anything of substance. There is

5.

a dllemma: lt seems. as Mr. Brooke has accurately said, a little unfair to the general body of creditors to, perhaps, deprlve them

of any chance of setting paid. by puttinq an end to he debtor's

business. On the other hand, it would seem unfair to the

petitioning creditor to hold him out of his money indefinitely,

when he has a remedy available.

What has in the end mfluenced me in favour of the

petitioning creditor's argument, amongst other things, has been

the thought that the business community tends to expect a court to

not permlt a debtor to go on trading without let or hindrance when

he is heavily in debt, cannot pay, and there is a risk that new

debts may arise which also cannot be paid.

Perhaps a solution may have been able to have been found

under Part X of the Act if a meeting of creditors had been called.

None has been called. Mr. Brooke has attempted to engage a

solicitor, without success, presumably because, reasonably enough,

the solicitor is unenthusiastic about working for people who are

perhaps going to be unable to pay legal fees, and there seems to

be no public facility for people such as Mr. Brooke to enable Part

X proceedings to be instituted. Perhaps there should be such a

facility, because I cannot avoid an uncomfortable feeling that the

result which I feel forced to arrive at is not very satisfactory.

In P705 of 1986 I find the act of bankruptcy alleged in

the petition. I am satisfied of proof of the other matters of

which the Act requires proof. I make a sequestration order in

respect of the estate of the debtor. and order that the costs of

the getltioning c?-+dlt,zbr of and ln,:ld?ntal t,: the Froceedings b . ~ .

taxed and p a d m ac-ordance sit?, the Act.

In F706 of 19E6 I make a s m l l a r flndinq and order, n t h

the exception that the wder for : o p t s m11 be 3s follows: in

lieu of the order f x costs made in number 705. that in number 706

will be that the costs of the petitionlnq creditor of and

incidental to the proceedings be taxed and paid ln accordance with

the Act only insofar a5 such costs relate to work which it would

have been necessary to do in respect	of	this debtor if only one
petition had been issued.

In F707 of 1985 I make the same findings and order as in

P706. That is. 706 and 707 will have the same order. I should

explain,that I have in mind that in 706 and 707 it would have been

necessary, even if one petition only had been instituted, to serve

: ,’

the individual debtors separately, and there would have been costs

assocrated with that, and it may be that chere are similar costs	. <
- ... 5 . ,

in 7 0 6 - a n d - 7 0 7 , but basically it will be seen I am allowing only

, - % . , .

. , : certlfy that this and the S- preceding

pzges ar2 a true copy of the reasons for

judgment herem of His Honour

Mr. Justice Pincus +G ,,$& %saxate

D a t d G @-&&eh /qgG