Darcey, P.m. v Pre-term Foundation, The

[1988] FCA 280

3UDGMENT KO. -T....EX.,

BANKRUPTCY - creditor's petition - discretion to dismiss on grounds of futility - debtor member of religious order - 12 years' standing - sworn vows of poverty - no assets - debt incurred on

court order for costs.

Bankruptcy Rules r . 20

Lewis' Australian Bankruptcy Laws 8th Ed. pp.77-78

In Re Leonard.Ex parte Leonard. [l8961 1 QB 473

In Re Bette. Ex parte Betts. [l8971 1 QB 50

Bayne V Blake (1909) 9 CLR 360

Re Hay (1914) 110 LT 47

In Re Field (A Debtor) [l9781 Ch. 371

PATRICK AICHAEL DARCEY and THE PRE-TERM FOUNDATION

23 May 1988

=ea1 No. Q520 of 1986

Fox, Wilcox and French JJ.

Sydney

IN THE FEDERAL COURT	1
OF AUSTRALIA	1
NEW SOUTH WALES	1
DISTRICT REGISTRY	1
GENERAL DIVISION	1 Appeal NO. G520 of 1986

B E T W E E N :  DARCEY MICHAEL PATRICK

Appellant

and

THE PRE-TERM FOUNDATION

Respondent

MINUTE OF ORDER

JUDGES MAKING ORDER:	FOX, WILCOX AND FRENCH	JJ.
DATE OF ORDER:	23 MAY 1988
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1. The appeal be dismissed.

Note: Settlement and entry of orders is set out in Order

36 of the Federal Court Rules.

IN THE FEDERAL COURT )

OF AUSTRALIA	)
NEW SOUTH WALES	)
DISTRICT REGISTRY	1

GENERAL DIVISION ) Appeal NO. G520 of 1986

B E T W E E N :  DARCEY MICHAEL PATRICK

Appellant

and

THE PRE-TERM FOUNDATION

Respondent

CORAM: FOX, WILCOX, FRENCH JJ.

23 MAY 1988

REASONS FOR JUDGMENT

FOX J. :

The Court will deliver judgment in this matter now. I

will ask Mr Justice French to deliver the first judgment.

FRENCH J. :

This is an appeal from an order of a judge of this Court

sequestrating the estate of the appellant on the petition of the

respondent. The	respondent's petition relied upon non-compliance
with a bankruptcy notice wherein demand was made for payment	of
$4,076.96, being moneys due under a judgment obtained in	the Local
Court of New South Wales on	6 December 1985.

Upon the hearing of the petition there was before the

Court a notice of opposition filed by the appellant together with a supporting affidavit sworn by him. These had been filed on the

day before the hearing and therefore two days outside the minimum

time required by r.20 of the Bankruptcy Rules. However no point

was taken on this account.

i

.

L .

In so much of his affidavit as was admitted into

evidence, the appellant told the Court that on 1 January 1986 he

had entered an order of Catholic religious known as the Mother of

God Brothers. As appears from its rules, this is a voluntary

association of Roman Catholic Laymen living in community. ~ t s

expressed objects are as follows:-

"...the glory of God; the sanctification of its Members,

embracing freely the Gospel counsels of chastity,

poverty, obedience; evangelisation; the charitable care

of handicapped men and other wounded persons."

The Order has received official recognition according to

the Canon Law of the Roman Catholic Church as a "Private

Association of Christ's Faithful in Accordance with Canon 322" ,

such recognition having been bestowed	by the Bishop of Wagga Wagga
on 31 December 1984.

Upon his joining the Order as a novice on 1 January 1976

the appellant took temporary vows of poverty, chastity, and

obedience. On 7 August 1982 he made what he described as "Final and Perpetual Vows of Poverty, Chastity and Obedience" and became a fully professed member of the Order. The vow of poverty

requires that the member have, and continue to have, no personal

income or assets. According to the appellant he does not have and

has not had any real or personal property or personal income of

any kind whatsoever since he took his final and perpetual vow of

poverty in 1982. His only occupation, he says, is that of the

religious life and he is	currently studying theology at a Catholic
seminary in Sydney.

The judgment debt arose by reason of a costs order made

against the appellant following his attempt to have subpoenaed	the
records of the respondent in proceedings in which	he was involved
in the Court of Petty Sessions.

Certain paragraphs of the appellant's affidavit relating

to his belief that	the respondent carries out illegal abortions
and as to its bona fides in these proceedings were excluded	by his

Honour. the In circumstances the evidence was rightly

disregarded. It was in substance evidence only of the appellant's

beliefs and not of the fact.

The appellant was not cross-examined on his affidavit.

The transcript reveals that counsel for the respondent declined to cross-examine as he was, he said, taken by surprise by the late filing of the affidavit. His Honour invited him to apply for an adjournment so that he might get instructions, but counsel declined saying as he did so:-

"I am	just saying the evidence before you has not been
properly tested as would - if I could draw the example	-

as would if he were	subject to an examination	by	the
registrar,	or	something	along those lines. That would

enable the testing of that, your Honour.	His affidavit,
alone, that he has taken vows, in my submission, is not enough. "

The judge raised the question in the course of the

hearing that there was no evidence that the respondent was a

juristic person. No such point had been taken by the appellant

but he indicated then that he wished to rely upon it. The judge however was informed by counsel for the respondent that his client

was at all material times an association registered as such in the

Australian Capital Territory. It is not clear from the terms of

the judgment that he actually based his conclusions on the

statements from the bar table as contended by the appellant for

his Honour concluded that "The Court is satisfied on the documents before it that the Pre-Term Foundation, being registered under the appropriate Ordinance, is a juristic person and has standing in the matter." And the documents lend support to that conclusion. The Foundation is referred to in the affidavit of continuing debt

as a company and	is so described by its executive officer. Its
common seal appears affixed to the petition in the presence	of two
directors and a secretary. In	my opinion his Honour was entitled
to draw the inference	that he did.

It appears also that his Honour accepted the contents of the appellant's affidavit so far as they went. upon the

submission that the bankruptcy would be a futile exercise, his

Honour referred to authorities cited to him by the appellant and

in particular the following passage from the 8th	Ed.	of	Lewis'
Australian Bankruptcy Law:-

"A petition may be dismissed if the Court is satisfied

the bankruptcy would not bring any benefit to creditors

as for example, where it is positively satisfied that

there are not and cannot be any assets in the estate	or
any assets available to a	trustee." (pp.77-78)

He concluded that "even though the admitted evidence ... as to the

past and present positions is accepted, it is too early for the

Court to be positively 60 satisfied especially as to the future".

He concluded that it might well be that examination under 66 .69

and 81 of the Act may "unearth some lead whereby assets may be

revealed, assets of which Mr Darcey is presently unaware".

The matters of the legal personality of the respondent

and the rejection of some parts of the affidavit evidence have

already been dealt with. His Honour, rightly in my opinion, held

that there was no evidence to support the allegation that the

respondent was not acting	bona fide.	The highest form in which
the appellant sought to maintain that contention	in	this court

turned out to be speculative, that is to say, he adverted to

possible misuse that the .respondent might make of the machinery of

inquiry and control available under the Bankruptcy	Act.	But	as
was pointed out	to him in the course	of	the argument, any such

abuses are amenable to the supervision and control of the court

which will not allow its processes to	be	used	for	collateral
purposes.

The real issue in this case was whether or not his

Honour erred in refusing to exercise	his discretion to dismiss the
petition on the basis that bankruptcy would	be a futile exercise
given the continuing poverty of the appellant who	by choice has

dedicated himself to that condition. In this regard it is

important to note just how far the evidence went.	The core of it
was the appellant's uncontested	statement in para.12 of his
affidavit that:-

"There is no reasonable probability (and, in fact, no

possibility at all) of my having any assets, real or

personal property or personal income of any kind

whatsoever in the future as this would be in complete

violation of my said Final and Perpetual Vows."

Reliance was also placed upon the affidavit of Denis John Devcich,

the Brother General	of the Order who	deposed to his belief	that
"in the terms of such Vows"	the appellant	had had no	individual
income or assets since his Final	Vows on 7 August 1982.	He	also

deposed that it is consistent with these vows that he will

continue to have no individual income or assets. That belief of

course may spring, as it most probably does, from a well founded confidence in the appellant's integrity. It does not follow that it is evidence of the fact following upon any investigation or inquiry into his affairs.

The principles governing the discretion to dismiss a

petition on the basis that a sequestration would be futile have

been agitated in a number of cases - In Re Leonard. Ex parte

Leonard. 118961 1 QB 473, 475; In Re Betts. Ex parte Betts. [l8971

1 QB 50, 52, 53 and 54; Bayne v Blake (1909) 9 CLR 360, 364; - Re

(1914) 110 LT 47, 48; and In Re Field (A Debtor) [l9781 Ch.

371, 375.

It is perhaps sufficient to refer to two of these

authorities. In Bayne v Blake (supra) at 364, Griffiths CJ, with

whom Barton and O'Connor JJ. agreed, said:-

"We have been asked now to allow a further ground of

appeal to be taken, viz., that there is no reason to think that there are any assets in the estate of either

of the appellants. First of all, there is no evidence

before us that that is the true state of the facts.

But, if it were, that that is a ground for not making an order for sequestration is conclusively negatived by In

Re Leonard; Ex parte Leonard ([l8961 1 QB.473). As

pointed out in that case, when a petition is presented

it is impossible to say whether there will prove to	be
any assets or not.	"All the petitioning creditor" said

Lord Esher, MR [at 4751 "then knows or need know is that

l .

a debt is owing to him, and that, after taking the

necessary steps to procure payment of that debt, he cannot get payment of it; and therefore he asks that the debtor may be made bankrupt.

"The Court cannot at that stage tell whether the

proceedings in bankrupty will have no result. If the

debtor is made bankrupt, there will be a public

examination of him, and then it may be ascertained

whether he has any assets. At the time of the petition

and adjudication the Court has not the proper materials

for judging whether there are assets	or not."
So that the objection is really no objection	at all."

And in In Re Field (A Debtor) (supra) at 375, Hegarry

V.C. said:-

"I turn, then, to the first of the propositions that I

mentioned, on which M e Kirsten's main submissions

rested. Put shortly, he contended that where it was

established that the debtor had no assets and no prospects of acquiring any, the court should dismiss the petition; for to make a receiving order in such

circumstances would merely increase the costs, and would

do no good.	In the present case,	he said, the debtor
fell within this doctrine,	and	so the receiving order
should be set aside.

Now it is plain that there	is considerable support for
some doctrine of this sort;	but it is equally plain that
the doctrine is	hedged about by important precautions.

After all, if it were open to a debtor to avoid having a

receiving order	made against him simply by alleging
utter destitution, both present	and future, such pleas

of destitution might become popular; and prospective

bankrupts might hasten to	rid themselves of any assets
or prospects which might hamper them	in making such a

plea. A man may indeed be too poor to be made bankrupt:

but the burden of proof is heavy."

The acceptance that the appellant did not have any

"personal assets" in	this case does	not dispose of the question
whether there might be property available	for disposition to	his
creditors. The	fact that assets which have or might yet come	his
way have been or would be disclaimed	or assigned pursuant to	his

vows, does not provide a complete answer.

I suspect that in the end this sequestration will prove

to be a fruitless, time wasting and unmeritorious exercise which

has little to do with the public interest. However on the

principles established in the cases, I am unable to say that his

Honour erred in the exercise of his discretion and I would

therefore dismiss the appeal.

FOX J. I agree.

WILCOX J. I also agree.

FOX J.	The order of the Court is that the appeal be dismissed.
I certify that this and the preceding
seven (7) pages are a true copy of the Reasons for Judgment of their Honours Justice Fox, Justice Wilcox and
Justice French.

Mr P.M. Darcey appeared on his own behalf

Counsel for the Respondent: M e B.W.	Rayment Q.C. and
Ms. H.A. Coonan

Solicitors f o r the Respondent: Michael Roser & Co.

Date of Hearing:	23 May 1988
Date of Judgment:	23 May 1988