Burton, L.R. v E.E. Emmett & Sons P/L

[1993] FCA 529

5x7 , 9 3

JUDGMENT NO. aaoonnoo.o..m.. eem.ooee..

IN THE FEDERAL COURT OF AUSTRALIA )

EANKRUPTCY DIVISION	)	NX 48	of 1993
EANKRUPTCY DISTRICT OF THE STATE ) OF NEW SOUTH WALES 1

Re: LESLIE ROSS BURTON

Debtor

Ex parte: E.E. EMMETT & SONS P/L

LAURENCE WILLIAM EMMETT

AIAN BERESFORD EMMETT

Creditor

And: HUGH JENNER WILY

Receiver

EINFELD J SYDNEY 8 JULY 1993

On 28 April 1993, E.E. Emmett & Sons Pty Limited and Laurence

William and Allan Beresford Emmett of Razorback (the creditor) applied for an order for the sequestration of the estate of Leslie Ross Burton (the debtor) pursuant to the provisions of section 221(l)(b) of the Bankruptcy Act. The facts said to found the application are that on 5 April 1993 a meeting of creditors called by the solicitor for the debtor pursuant to an authority under section 188 of the Act, having rejected a proposed composition put forward by the debtor, resolved that the debtor bring in a debtor's petition within seven days. It is not disputed that no such petition has been presented.

debtor's assets and he was so appointed on 25 May 1993 by the	order of Justice Whitlam pursuant to section 50 of the
Bankruptcy Act. In the carrying out of his duties as receiver, Mr Wily has done two things relevant for present purposes. One is that on 3 June 1993 he filed an application to the court for a number of orders. By consent the application was made returnable immediately by Justice Whitlam who, also by consent, made three of the orders sought in the application, namely:

Subsequently, an application was made by the creditor to appoint Hugh Jenner Wily (the receiver) as receiver of the

3. That the d e b t o r be r e s t r a i n e d u n t i l the h e a r i n g

o f the p e t i t i o n	or	such	f u r t h e r	and	o t h e r o r d e r
o f	the	Court	from	s e l l i n g ,	mortgaging,

charg ing , encumbering o r o t h e r w i s e d e a l i n g w i t h

a l l o r a n y p r o p e r t y o r o t h e r a s s e t s w i t hou t the

l e a v e o f the a p p l i c a n t o r l e a v e o f the Cour t .

4 . That the d e b t o r d e l i v e r f o r t h w i t h t o the

a p p l i c a n t a l l such r e c o r d s , documents, papers ,

w r i t i n g s , i n his pos se s s ion r e l a t i n g t o a n y and

a l l d e a l i n g s w i t h h is p r o p e r t y o r a f f a i r s .

5 . That the d e b t o r d e l i v e r f o r t h w i t h t o the

a p p l i c a n t s the 1989 Toyota Four-Wheel D r i v e

vehicle desc r ibed by the d e b t o r i n h i s

share certificates more fully set out in the	s t a t emen t o f a f f a i r s . . . . . . . . . . [and certain
application].

The statement of affairs referred to was one sworn on 9 March

vehicle and gave its value as $20,000. The total debts	1993 in which the debtor asserted the ownership of the Toyota
disclosed were $2.968 million and the total assets were $1.511 million. The overall offer was to make available to creditors amounts totalling $402,000 including the proceeds of the sale of the Toyota Four Wheel Drive.
The second presently relevant action of Mr Wily in the course of his receivership has been to prepare a report for the Court today. In the report he makes some observations concerning the major assets which Mr Burton had sworn to either in his own statement of affairs or in a joint statement of affairs with his wife. Mr Wily observes in the report, as is apparent from the minutes of the meeting of creditors, that some doubts exist about the accuracy of some of Mr Burton's assertions in the two statements of affairs. But proceeding upon the basis that the statements contained in the documents made available to the creditors were correct, Mr Wily notes concerning the Toyota four wheel drive vehicle that notwithstanding the order of Justice Whitlam made, I repeat, by consent:

. . . t h e v e h i c l e was n o t d e l i v e r e d t o me and a g e n t s

a p p o i n t e d by me t o p h y s i c a l l y c o l l e c t t h e v e h i c l e

from h i s home were u n s u c c e s s f u l .

He also notes that Mr Burton's solicitor produced to him correspondence suggesting that the vehicle belonged to a Mr and Mrs Fullagar:

. .. pursuant t o a p r e v i o u s arrangement i n r e l a t i o n

to a s a l a r y package f o r t h e son- in - law.

Today, counsel for Mr Burton, on instructions, states that the vehicle is in fact owned by Mr Burton's daughter who is apparently the Mrs Fullagar referred to. Mr Fullagar is thus the son-in-law re£ erred to. Counsel is quite unable to explain the direct conflict of these statements with the sworn statement of affairs to the creditors to which I have earlier referred asserting Mr Burton's own ownership of the vehicle. Of course they also conflict with the offer of the vehicle as part of the available fund for the composition which the creditors were then convened to consider.

Mr Wily also reports:

I h a v e r e c e i v e d no books and r e c o r d s from M r B u r t o n

i n	r e l a t i o n	t o	his	d e a l i n g s	w i t h	h is	p r o p e r t y	or
a f f a i r s ,	a g a i n	d e s p i t e	the	C o u r t	Order	on	3	J u n e

1993 and numerous requests on m y p a r t .

He says further that, as at the date of his report, he had not taken control of any of the property of the debtor:

. . . who h a s f a i l e d t o c o m p l y w i t h m y requests a s

receiver o f h is e s t a t e and f u r t h e r h a s f a i l e d to

c o m p l y w i t h o r d e r s made i n the F e d e r a l C o u r t

s p e c i f i c a l l y d i r e c t i n g h i m	t o d e l i v e r s u c h	a s s e t s	t o
m y control.

Counsel for the debtor also presented to the Court today a letter and certain attached documents. The letter is

registered trustee. Mr Thomas informs the Registrar that Mr	Division, and is signed by Gavin Frederick Creighton Thomas, a addressed to the Registrar of the Federal Court, Bankruptcy
Burton has provided him with a statement of affairs and a proposal for dealing with his affairs under part X of the Bankruptcy Act. Mr Burton has, according to Mr Thomas, executed an authority under section 188 requesting that he, Mr Thomas, take control of his property for the purpose of calling a meeting of creditors to consider the proposal. Mr Thomas informs the Registrar in the letter that he has not signed the consent because he has been informed that Mr Wily has been appointed receiver of Mr Burton's assets by the order of this Court on 25 May, but he indicates that if the Court considers it appropriate, he would consent to exercise the powers conferred on him by the section 188 authority.
The attached documents indicate that Mr Burton wishes to make an offer to his creditors of a composition which provides for the payment of $100,000 by his father immediately upon the acceptance of the composition, in full and final satisfaction of the claims of his creditors against him. The $100,000 would be subject to a deduction for the costs of entering into and administering the composition and any taxation outstanding
-- I am informed that there is no known tax debt -- with the
rest being distributed among the creditors. Creditors of some $6.796 million and assets of $6,000 are disclosed. There is absolutely no explanation given for the enormous discrepancy between this account of the debtor's financial situation and that of 9 March 1983 supplied to the creditors' meeting on 5
April.
The debtor applies today for the adjournment of the application of the creditor for a sequestration order so that the proposal disclosed in Mr Thomas' letter to the Registrar can be put to the creditors. Presumably the Court is asked to permit Mr Thomas to sign the section 188 authority and proceed with the meeting or approve his doing so.
There is a collection of authority concerning the circumstances of the repeated putting of resolutions for the acceptance of Part X proposals in a judgment I gave in
Turner ex Darte The Official Receiver for Western Australia on 24 December, 1992, which I will not now repeat. It will suffice for present purposes to say that this case is unlike Turner where the creditors resolved on an adjournment of the meeting for further consideration each time they rejected both a resolution to accept the proposed assignment and one to require the debtor to bring in a petition. Here it is proposed to call a quite separate meeting and put a much lower offer than on the previous occasion. Counsel for the debtor frankly puts that despite the previous rejection of $402,000, the otherwise apparently remote possibility that they might now accept $100,000 can only be contemplated because some creditors who resisted previously have now been dealt with by consent or by payment so that their previous opposition has been neutralised.
the obverse of what Part X is intended to permit in this This is, as the judgments considered in Turner indicate, quite regard. But perhaps more importantly than that, it would seem to me to be most unlikely and unusual that a Court would grant discretionary relief, which an adjournment application obviously is, in the presence of the obstruction by the debtor of a receiver appointed by the Court and his defiance of orders made by a Judge of the Court with his consent, without the slightest attempt to explain these actions. The appointment of a receiver with whom a debtor fails to co- operate is a waste of the time of everybody, including the Court, essentially at the expense of creditors. The concept of a debtor asking a Court to exercise a discretion in his favour when he has blatantly defied previous orders of the Court made in his presence and with his approval seems to me to be at least presumptuous. I can think of more appropriate tens to describe the debtor's actions in this case where obstruction and contempt for others have been given a wholly new meaning. The application for adjournment is refused.
I find that the debtor has been required by a special resolution of a meeting of creditors called in pursuance of an authority under section 188 of the Act to present a debtor's
petition. I find that notwithstanding that resolution the
debtor has failed without sufficient cause to present the
debtor's petition within the 7 days specified in and by the
special resolution. On the application of the creditor under
section 221(l)(b) of the Act, I make a sequestration order

against the estate of the debtor.	I appoint Hugh Jenner Wily
to be the trustee of that estate.