Diethelm Manufacturing Pty Ltd v Commissioner of Taxation
[1993] FCA 437
•2 Jul 1993
4-37 ,1433 1 '
JUDGMENT Nu. .... .DOLOo,OIo.le ........ ....
IN T_HE FEDERAL COURT OF AUSTRALIA ) 1 GENERAL DIVISION 1
) No. W 1638 of 1988 BANKRUPTCY DISTRICT OF THE 1 ) STATE OF NEW SOUTH WALES 1
Re: BARRY STEPHEN LIPSCOMBE
A Bankrupt
Ex parte: JIU4ES RITCHIE ROBERTSON Applicant
THOtlAS WILLIAM FREDERICK DIXON
Respondent
i
I '
MINUTE OF ORDER
JUDGE MAKING ORDER : Neaves J. DATE OF ORDER
2 July 1993 0 2 1uL 1993
FEDEML COURT OF
AUSTRALIA
WHERE MADE Canberra PRINCIPAL REGISTRY THE COURT -
l -
1. Orders that the decision of the respondent trustee 1 . I _ . made on or about 24 April 1991 rejecting the proof r of debt lodged by the applicant be set aside. 2. Declares that, at the date of the making of the I sequestration order against the estate of Barry . . Stephen Lipscombe, a debt was owing by the bankrupt to the applicant and that such debt was provable in , . the bankruptcy. I P . 3.
Reserves liberty to the parties to apply as they may be advised.
[ 4. Orders that the costs of the applicant and the respondent trustee of and incidental to the application, when taxed, be paid out of the estate 1 - of the bankrupt. l
I
Note: Settlement and entry of orders is dealt with in rule - 124 of the Bankruptcy Rules. l -
IN THE FEDERAL COURT OF AUSTRALIA )
1
GENERAL DIVISION i I No. W 1638 of 1988 BANKRUPTCY DISTRICT OF THE ) ) STATE OF NEW SOUTH WALES )
Re: BARRY STEPHEN LIPSCOMBE
A Bankrupt
Ex parte: JAMES RITCHIE ROBERTSON Applicant
THOMAS WILLIAM FREDERICK DIXON
Respondent
CORAM: Neaves J.
DATE: 2 July 1993
REASONS FOR JUDGMENT
James Ritchie Robertson ("the applicant"), who claims to be a creditor of Barry Stephen Lipscornhe, a
bankrupt, has applied to the Court pursuant to s.104 of the
Bankruptcv Act 1966 (Cth) to review the decision of Thomas William Frederick Dixon, the trustee of the estate of the bankrupt, rejecting a proof of debt lodged by the applicant. The debt is alleged to have arisen out of arrangements made between the applicant, the bankrupt and a company or firm called "Instant Air" in relation to the purchase and subsequent sale of certain ACMA portable air conditioning units. To the detail of those arrangements it will be necessary to return.
A sequestration order was made against the estate of the bankrupt on 13 October 1988. The creditor's petitlon on which the sequestration order was made was presented on 15 August 1988. The petition was based upon the failure of the bankrupt to comply on or before 23 May 1988 with the requirements of a bankruptcy notice served upon him.
On 9 April 1990, the applicant's solicitors lodged with the trustee a proof of debt dated 21 March 1990 in which the applicant claimed that the bankrupt was on the date on which he became a bankrupt and was still justly and truly indebted to him in the sum of $60,000.00. The debt was sald to have arisen under a loan agreement dated 20 September 1988, a copy of which was enclosed with the proof of debt. That agreement was expressed to be between Barry Lipscombe trading
agreement as "the Creditor"). It recited that "the Creditor as Airlec Services (referred to in the agreement as "the Debtor") and the present applicant (referred to in the obtained an overdraft facility with the State Bank, Wentworthville at the request of the Debtor for the benefit of the Debtor" and that the agreement provided for "the repayment of that advance". The operative part of the agreement was in the following tens -
"1. The Debtor agrees to repay the sum of SIXTY THOUSAND DOLLARS ($60,000.00) plus interest accrued thereon on or before the 30th June, 1988.
2. The Debtor agrees to repay the said sum into the
Bank Account of the Creditor held wlth the State Bank,
Wentworthville Account No.77-0660-00."
The trustee made enquiries into the applicant's claim, seeking further information from the applicant and information from the bankrupt and from one Ronald Stanley Mawhinney.
Enquiries of the apulicant
In response to a request by the trustee to be informed whether the applicant had received any moneys on account of the debt said to be due to him by the bankrupt, the applicant's solicitors, by letter dated 12 July 1990, informed the trustee that the bankrupt had made no payments to the applicant but that the applicant had received "the sum of $13,026.00 from people other than the Bankrupt on account of the debt owed to him by the Bankrupt".
Asked for details of the people from whom the applicant received the sum of $13,026.00, the applicant's solicitors, by letter dated 29 August 1990, provided the following list:
"$1,074.00 Mal Hamilton Products
1,049.00 B. Ware
1,074.00 Alcan Credit Union
1,049.00 N.S. Home Repair
1,049.00 Bank Cheque
1,049.00 Bank Cheque
1,049.00 R.O. Robertson
1,049.00 P. Haynes
3,550.00 Vammay [sic] (R. Mawh~nney)
1,000.00 Karen J. Micalef1,074.00 Vammay [sic]
$13,026.00"
It is to be noted that the amounts listed in fact total
In a subsequent letter, dated 6 September 1990, the applicant's solicitors informed the trustee that the cheques detailed in the earlier letter had been received by the applicant from the bankrupt, that the cheques were bank or credit union cheques made out in favour of the bankrupt and that the bankrupt had "endorsed such cheques over to our client".
In a conversation with the trustee on 28 March 1991, applicant stated that the only moneys received by him from the
the applicant's solicltor informed the trustee that the
sale of air conditioners was as previously advised; that he did purchase two air conditioners and these were advertised for sale; and that he denied having received any other units, particularly the L5 units referred to in a previous telephone discussion.
Enauiries of the bankrupt By letter dated 9 April 1990 addressed to the bankrupt, the trustee requested the bankrupt to supply him with certain information in order to assist him in investigating the bankrupt's affairs. The letter included the following -
"(4) Set out in writing, in detail, your explanation in regard to the transaction involving Mr. J. Robertson who claims to be owed approximately $60,000. He disputes that he was ever involved in the transactions for the purchase of air conditioning units, other than to provide you with a letter of credit for the purchase of the units.
(5) Advise me what became of the air conditioners which on Tuesday, 25th October, 1988 were on your premises at 29 Centennial Avenue [sic], Merrylands. These units were not on the premises when I attended there on Thursday, 27th October, 1988."
I digress to say that, according to an affidavit sworn by the trustee on 19 June 1992, he had, after the making of the sequestration order, visited the premises at 29 Centenary Road, Merrylands and observed upon the premises
contained mobile air conditioners; and that on or about 1 approximately 15 cartons; that he believed those cartons November 1988 he spoke to the bankrupt who told him that: the units had been removed from his premises by a person unknown. It appears from other material that the trustee's visit to the premises at Merrylands took place on 25 October 1988.
By letter dated 1 May 1990, the bankrupt's
solicitors wrote to the trustee in connection with the
applicant's claim. In relation to the agreement dated 20
September 1988, the sol~citors stated:
"We are instructed that thls overdraft was initially needed to allow Mr. Lipscombe to buy certain plant for a business transaction he was to undergo. The business transaction never eventuated and a letter of credit was required not an overdraft facility. The overdraft facility was never obtained, nor did our client ever deal with the State Bank at Wentworthville. He did not receive any moneys from the said State Bank or from any other Bank on the account of Mr. James Ritchie Robertson and instructs us therefore that the agreement to repay the money fails for total lack of consideration."
By letter dated 8 August 1990, the bankrupt, in reply to the trustee's letter dated 9 April 1990, informed the trustee as follows:
"4. I do not owe Mr J. Robertson $60,000. He has never given me a letter of credit for $60,000 made out in my favour nor has he given me a cheque or cash to this value. The agreement signed by me for a letter of credit should have been destroyed and I was under the impression that it had been as the offer was never taken up.
5. The air conditioners that were on my property at 29 Centenary Road, Merrylands on the 25th October 1988
were the property of Mr J. Robertson and he took The trustee had a meeting with the bankrupt on 4 April 1991. He recorded the bankrupt as saying that the applicant bought 66 air-conditioning units from Instant Air on 27 November 1987; that in May 1988 it was intended that the bankrupt would purchase and sell a further 60 units; that the applicant was to finance the transaction and receive a percentage of the profit; that the arrangement did not proceed; and that, after he became a bankrupt on 13 October 1988, he accompanied the applicant when a number of air
possession of them."
conditioning units (said by the bankrupt to be part of the
original purchase of 66 units and to be the applicant's property) were removed from the bankrupt's home at 29 Centenary Road, Merrylands and taken to "Vamhay (Mawhinnie)" factory at Toongabbie and subsequently to a house or garage at Blacktown.
In a statutory declaration dated 8 April 1991 and handed by him to the trustee, the bankrupt made the following statements concerning the agreement dated 20 September 1988 between himself and the applicant:
"3. The agreement had been prepared anticipating a business arrangement I had intended entering into with Mr. Robertson whereby Mr. Robertson was to buy air conditioning units from a Company known as Instant Air. I also wished to purchase air conditioning units from Instant Air. It was decided between Mr. Robertson and myself that Mr. Robertson would be able to obtain a lower price for each air conditioning unit if we combined our respective orders. In essence, Mr. Robertson would purchase
units on my behalf at the cheaper price. I would then pay to Mr. Robertson an amount equal to part of the gain achieved by obtaining a lower price for each unit. I benefited by obtaining the units at a
cheaper price.4. However the business arrangement referred to in the previous paragraph never went ahead. At no stage did Mr. Robertson ever purchase any air conditioning units on my behalf pursuant to this arrangement.
5. No monies were advanced to me by Mr. Robertson pursuant to the agreement dated 20th September,
1988. "
Other inquiries bv the trustee
The trustee obtained from "Instant Air" a copy of an invoice numbered 161 and dated 27 November 1987. The invoice describes Instant Air as a Division of Dylime Pty Ltd. The body of the invoice, which is addressed to the applicant, reads :
"Supply Sixty-Six (66) ACl4A Portable
Air Conditioners @ $900.00 $59,400.00" By letter dated 21 March 1990, Mr Mawhinney informed
the trustee -
"To my knowledge Jim Robertson paid for the units and M r Lipscombe was acting as a commission sales agent. When they got into difficulty selling them, Barry asked could I help through my Company (then named Vamhay P/L) in selling the Portable A/C. To help them out I agreed, but to protect my company name from exposure, the condition was they use Airlec's name in adverts and my telephone number and address and only pay me for out of pocket expenses. In that time we sold a Qty for cash and cheque transaction. The following are units we sold by cheque, which we passed on to M r Robertson to deposit along with cash. Adding alone the cheque amounts this constitutes a total of (39) units."
Some details then followed of units said to have been sold.
Trustee's decision
By notice dated 24 April 1991, the trustee informed the applicant that his claim against the estate of the bankrupt had been rejected in full on the ground that mo moneys were owing by the bankrupt to the applicant pursuant to the loan agreement dated 20 September 1988.
Further evidence before the Court
In his affidavit sworn on 13 May 1991 and filed in support of the present application, the applicant "conceded" that he had received sums totalling $13,026.00 in reduction of
the debt, leaving, he said, a balance owing of $46,974.00. Reference was made to the letter dated 12 July 1990 from the applicant's solicitors to the trustee. The moneys received were said to represent the proceeds of bank and credit union cheques endorsed over to the applicant by the bankrupt.
By his affidavit sworn on 17 June 1991, the applicant gave further details of the cheques endorsed over to him in reduction of the debt of $60,000.00. He said that the amounts received totalled $22,566.00. Those payments were said to have been received between 27 October 1988 and 2 December 1988 (both dates inclusive), details being as
follows
"27.10.1988 - B. Ware
27.10.1988 - Hamilton:
02.11.1988 - Alcan 02.11.1988 - N.S. Homerepairs
02.11.1988 - Commonwealth
Bank cheque02.11.1988 - Advance Bank
cheque
02.11.1988 - P.O. Robertson
21.11.1988 - Haynes
21.11.1988 - Arnway
21.11.1988 - Flex
02.12.1988 - K.J. Mucaleff02.12.1988 - Tara (Int)
Travel
The amount of $22,566.00 includes all the amounts referred to in the letter dated 29 August 1990 referred to earlier in these reasons and an amount of $8,500.00 received on 21
November 19 8 8.
The bankrupt swore an affidavit in these proceedings on 10 September 1991. Paragraphs 3 - 9 of that affidavit read as follows -
"3. I agree that I signed an agreement dated 20th September, 1988 between myself and the applicant.
4. I do not know whether the applicant in fact obtained
an overdraft facility with the State Bank, Wentworthville, referred to in the said agreement but I say that no monies were advanced to me or advanced for my benefit by the applicant as contemplated by the said agreement.
5. I deny that the sum of $60,000.00 or any part thereof was advanced to me or used for my benefit by the applicant.
6. I did have an arrangement with the applicant,
whereby I sold on his behalf air conditioning units but these units were, to the best of my knowledge, purchased by the applicant from a business known as Instant Air. As far as I was concerned these units were the applicants. The units were not purchased
me commission on sales. by the applicant on my behalf and were at all times the property of the applicant. The applicant paid 7. Pursuant to the arrangement referred to in the previous paragraph I received payment from purchasers of the air conditioning units but all such payments were accounted by me to the applicant. This was usually done by my endorsing the cheque to the applicant. I also accounted to the applicant for cash payments received, although at the time of swearing this affidavit I am unable to determine the amount of such payments.
8. In addition to the amounts now conceded by the applicant in his affidavits, I say that I endorsed to the applicant a cheque for $8,440.00 drawn on the 24th June, 1988 made payable to Airlec Services by Southern International Constructions Pty Limited. This cheque was drawn on Westpac, Liverpool and Castlereagh Streets Branch cheque No: 887410.
9. On or about 25th October, 1988, I had stored at my home at 29 Centenary Avenue, Merrylands, approximately 15 mobile air conditioners which were the property of the applicant. I believe that these mobile air conditioners were part of stock originally purchased by Mr. Robertson from Instant Air. The air conditioners were collected by the applicant from my house on or about 25th October, 1988. I estimate the value of these mobile air conditioning units at approximately $12,000.00."
By a further affidavit sworn on 16 June 1992, the applicant responded to the bankrupt's affidavit. For convenience, he numbered each response with the number of the paragraph of the bankrupt's affidavit to which he was responding. The relevant paragraphs of the applicant's affidavit read:
"4. I say and the fact is that Lipscombe was well aware that I obtained an overdraft facility with the State Bank, Wentworthville. It was Lipscombe's idea that I seek a financial facility from my bank and it was at his express request that I approach the State Bank, Wentworthville, to negotiate a financial facility that would enable Lipscombe and a partner
of his to import and pay for 66 air conditioning units. Pursuant to this arrangement Lipscombe and his said partner, one Ronald Stanley Mawhinney, acquired title to the said 66 air conditioning units. It was part of the agreement between Lipscombe and I that I would receive a fee or commission of $6,000.00 for making the financial facilities available to him and to Mawhinney. I am informed by my solicitor, Alan Brawn, and verily believe, that Ronald Stanley Mawhinney was at all material times a director of Dylime Pty Limited and this company caused my said bank to pay from the said finance facility arranged by me an amount of $59,400.00 on or about 18th March 1988. Annexed hereto and marked with the letter 'A' is a copy of a letter dated 18th March 1988 from the said bank to me.
6. I deny that there was any arrangement between myself and Lipscombe whereby he sold alr conditioning units on my behalf. I never purchased any air conditioning units from a business known as 'Instant A . My entitlements were governed by the deed dated 20th September 1988 and an oral arrangement between myself and Lipscombe whereby I would receive a fee or commission of $6,000.00 by reason of my having provided the financial facility hereinbefore referred to. I deny that I paid Lipscombe any
commission whatsoever.
7. I admit that Lipscombe from time to time endorsed cheques over to me but this was after my bank had paid out a total of $59,400.00 pursuant to the financial credit facility arranged by me and I received whatever moneys I could from Lipscombe in order to reduce my liability to the bank. I deny that I ever received any cash money from Lipscombe.
8. I deny that I received a payment of $8,440.00 from Lipscombe as alleged. Mawhinney sold some air conditioners and retained the proceeds of sale. Lipscombe owed money to Mawhinney.
9. I deny that the mobile air conditioners therein referred to were my property but state that I did seize 8 of them as I was owed a considerable amount of money and hoped that by seizing and then selling 8 air conditioners I would be able to reduce the debt owed by Lipscombe to me. I in fact did sell 8 air conditioning units for a total of $4,000.00, which is to be brought to account as between me and Lipscombe . These 8 air conditioners were not collected from Lipscombe's house as alleged but from premises at 25 Oregon Street Blacktown owned by a Wayne Fellwood, and whom I believe to be a partner of Mr Mawhinney."
The letter dated 18 March 1988 referred to in par.4 above was
in the following terms:
"We refer to our telephone conversation of 16 March 1988 and wish to advise that we have today released an amount of $59,400.00 in order to honour the Bank Guarantee in favour of Dylime Pty Limited. As these funds were debited to your Current account, it will be necessary for you to contact this office as soon as possible in order that arrangements can be made for repayment of the debt.
Please treat this matter as urgent."
The applicant, the bankrupt and Mawhinney gave
oral evidence.
As I understand the applicant's evidence, Dylime Pty Ltd was to import 66 ACMA portable air conditioning units and those units were to be made available to the bankrupt who was to sell them on his own behalf. Dylime Pty Ltd was to allow the bankrupt 90 days credit and it was contemplated that the bankrupt would be able to sell sufficient of the units within that time to put himself in funds to pay the amount of $59,400.00 owing to Dylime Pty Ltd. Dylime Pty Ltd required some security that they would receive the sum of $59,400.00 at the expiration of the 90 day period and to this end the applicant arranged with the State Bank at Wentworthville for the provision of an irrevocable letter of credit in favour of Dylime Pty Limited. His appreciation of the situation was that there would be no necessity to draw against the letter of credit as Dylime Pty Ltd would be paid from the proceeds of
with the bankrupt, he was to receive commission of $6,000.00 the sale of the units. He said that, under the arrangement for financing the transaction. The applicant denied that he was the purchaser of the 66 units. He further denied that he had ordered any air conditioners from Dylime Pty Ltd (or Instant Air) and that he had never received the invoice numbered 161 details of which are set out earlier in these reasons.
There is in evidence a document described as a "guarantee" dated 2 December 1987 by whlch the State Bank of New South Wales agreed to hold, and to continue to hold, the sum of $59,400.00 at the disposal of Dylime Pty Ltd until the Bank received notice or confirmation from that company that the sum was no longer required or that the company required payment of that sum to be made to it.
It appears that the amount of $59,400.00 was paid by the bank to Dylime Pty Ltd following the receipt by the bank of a letter from that company dated 29 February 1988 accompanied by the invoice numbered 161 to which reference has been made. It further appears that that invoice was prepared solely for the purpose of being presented to the bank. The amount of $59,400.00 was debited to the applicant's account with the bank on 17 March 1988. The bank informed the applicant by letter dated 18 March 1988 that the amount of $59,400.00 had been paid to Dylime Pty Ltd.
The applicant gave evidence that, after receiving panic and tried to get some of the money recouped back". He
the letter dated 18 March 1988 from the bank, he "got in a
said that, some time after the receipt of that letter, he had a conversation with the bankrupt who said: "It's all right, we'll fix everything up". He also gave the following evidence:
"Q. And did you ask him what he was proposing to do about recouping the guarantee which you had been forced to pay out on?
A. Yes, of course.
Q. And what did he say to you?
A. He said he'd pay the money back.
Q.
Now, you say that he did pay certain moneys back over a period of time, is that the situation?
A. Yes.
Q.
Now, did you make any other approach to Lipscombe to secure this liability?
A.
Yes, he signed an agreement to say that he owed me $60,000.
Q.
Is that the agreement which is attached to your proof of debt?
A. Well, there's only one agreement of that amount."
Later, the applicant, in answer to further questions concerning he conversation with the bankrupt, said:
Q. What did you say to him and what did he say to you, doing your best? A. Well, he was just trying to help me out by saying that, okay, he had the machines and he was going to cover me that he owes me money. Q. He had the machines for quite some time by that time, hadn't he?
A.
He got them at the wrong time of the year for selling them.
Q. Yes?
A.
He got them, as far as I can remember, after the heat.
Q. And he couldn't sell them?
A.
Couldn't sell them, that [is] what I was under the understanding. That is why the whole thing has been a shambles.
Q.
What was the agreement which you and he reached in these discussions which preceded the signing of this document? Tell me what it was?
A.
Well, it is just down here that he owed me the money.
Q. That was the whole of the discussion, was it? A. Yes.
Q. How was he to repay it?
A.
Well, this was to be agreed afterwards. Once the machines were sold, he would give me some money back. "
The applicant appears to have regarded the air
conditioners then remaining in stock as becoming his property
"because it's my money that ended up paying for them" and any
made on his, the applicant's, behalf. The arrangement was, he subsequent sales of those units by the bankrupt as having been said, "(t)hat eventually Lipscombe would hopefully give me some money back which I'd lost". According to the applicant, after this arrangement was made, "a lot [of these air conditioners] went missing".
The applicant strongly denied that he was a party to any proposal or arrangement for the purchase of further air conditioners as alleged by the bankrupt.
The bankrupt, in his oral evidence, agreed that he had signed the agreement bearlng date 20 September 1988 and that he had done so quite freely and voluntarily. He said he believed the date "20 September 1988" had been inserted later, the agreement having been made in March, April or May 1988.
The bankrupt also said that part of the order for the 66 air conditioners to which reference has already been made came into the country from Singapore just before or just after Christmas 1987; that those units, numbering about 10 to start with, were delivered to his home at Merrylands where he had an office showroom; that the balance of the units were delivered "in dribs and drabs . . . they came every month"; and that the 66 units would not fit into his showroom and some were taken to a factory at Toongabbie where they were stored.
According to the bankrupt, the units "started to sell all right to start with but then with air conditioning it all depends on the season, how the summer goes". He said that the applicant was worried the units were not selling as quickly as they should have done and that he, the bankrupt, told the applicant that "we should be able to sell them in three months", that being the period at the end of which, as the applicant had told him, payment for the units had to be made.
The bankrupt denied that the purpose of the agreement dated 20 September 1988 was to protect the applicant in respect of the amount deblted to his bank account in respect of the purchase of the 66 air conditioners. According to the bankrupt:
"That document is for - because when they flrst came out with selling them, they were going okay and - talked about getting some more in and then when it died off, said: No, I'm not going to go ahead with it, getting the
next lot in. "
He expanded on this evidence by saying that, because the units were selling well to start with, he, the bankrupt, thought of getting more units; that he approached the applicant in March, April or May 1988 in relation to the purchase from Instant Air of additional units; and that, because the sales of the earlier batch of units had fallen off, he, the bankrupt,
additional units. The bankrupt agreed that he had approached decided not to proceed with the proposed purchase of the applicant to finance the purchase of the additional units in an amount of $60,000.00 and that he had done so at a time when he knew the applicant was already in debt to the bank for an amount of approximately $60,000.00. He gave the following evidence :
"Q. At that time, I put it to you, he was complaining bitterly that he was in debt to the bank and wanted to repay the bank and get that debt down as quickly as possible?
A.
At that stage, everything was going well, I was selling well.
Q.
I see, but I am putting it to you that he was telling you that he was in a desperate situation and needed sales immediately of air conditioners, is that not so?
A.
No, I would say that was later on in the year not to commence straight away."
Asked whether his situation was that he did not owe any money to the applicant, the bankrupt said:
"Well, after a few inquiries I made yesterday, I've
realised that there is some money owing."
Asked to explain, he said:
"Well, I was under the assumption that Mr Mawhinney had paid him some moneys and he thought that I'd paid him it and it just got that way that they weren't paid and I only found this out yesterday and I was under the impression that there was - because when the units were
wasn't in Sydney at the time, I was away - I can't picked up - when he picked up the remaining units I remember exactly where I was but I wasn't there, and to my knowledge - from memory, there was probably at least - I thought at least 20 units were still there but apparently Mr Robertson only picked up 8 units from there so somewhere along the line was gone, someone's lifted them or they've gone missing and as I was selling them for him and I had possession of them I feel I'd be responsible if they disappeared or that the moneys weren't paid, I was responsible to pay the money to him."
Later, when asked to explain the contrary statements
that he had made in the statutory declaration dated 8 April
1991, the text of which is set out earlier in these reasons,
the bankrupt eventually said:
"As I said it is that long ago I can't remember the exact arrangements. You are talking about three or four years ago. I can't remember exactly what we were going to do."
Mr Mawhinney was a director of Dylime Pty Ltd and Vamhay Pty Ltd. He ceased to be a director of Dylime Pty Ltd in June 1988. The bankrupt, he said, was a subcontract
installer for Instant Air which, as previously mentioned, was
a Division of Dylime Pty Ltd. That company was the importer of air conditioners from Singapore, the units being paid for by a 30-day irrevocable letter of credit payable against shipping documents.
He said that in October and November 1987 he had discussed with the bankrupt the sale of air conditioners imported by Dylime Pty Ltd. He said that Dylime Pty Ltd had had a fairly good response to the first container lot of air
actually landed. The response was so good, he said, that the conditioners, sales being effected before the goods were bankrupt and he "discussed him getting a few in so that he could sell them and make a dollar as well on the next shipment". The following evidence was given:
"Q. Was there any further discussion between you and Barry [the bankrupt] as to how this venture was to be financed?
A. Yes.
Q. With whom was the discussion?
A. Mr Lipscombe. We discussed the finance and how you could finance it. Because of our predicament where we had to pay up front, we had quite a bill to pay heavily up front and we sort of wanted fairly good security.
Q.
Was there any discussion as to what that security might be?
A.
Well, we agreed upon a letter of credit, a 90-day letter of credit and that was agreed. Barry went away obviously and came back and said he had arranged with Mr Robertson to finance the arrangement for the sale of the units.
Q.
Well, as a result of that discussion, what was then done?
A.
Well, the official request was accepted. A price was agreed upon. A letter of credit was then raised against the quantity of 66 units.
Q. A letter of credit raised by whom?
A. By Mr Robertson on the State Bank in Wentworthville."
It is clear from other evidence given by the witness that a price of $900.00 for each unit was agreed between himself,
was carried on under the name "Airlec Services". The price of acting for Dylime Pty Ltd, and the bankrupt, whose business $900.00 per unit appears on the invoice number 161 dated 27 November 1987 which was raised by Instant Air and forwarded to the State Bank of New South Wales at Wentworthville, so M r Mawhinney said, "as proof of the deal that he wasn't just borrowing the money to spend on some other source".
In cross-examination, M r Mawhinney was asked whether the bankrupt said to him that the units could be sold in the 90-day period so as not to suffer a shortfall. He replied:
"Yes, which we thought would have been quite achievable as well. That is why we gave them the ninety days, because we thought with the response that we had initially to them and we didn't want to be too hard, but as long as we were securely covered for our debt we thought it was quite advantageous to them to give them a ninety day credit arrangement so that if they did turn them over in a month they were better off by X amount of dollars. So, we thought it was all a fairly good deal all round."
m Mawhinney, in his evidence in chief, said that the bankrupt had informed him that the units were going to be sold by him on the applicant's behalf. He agreed that he had no discussion with the applicant in relation to the arrangements made between himself and the bankrupt or in relation to the arrangements between the bankrupt and the applicant.
According to Mr Mawhinney some of the units were because the bankrupt did not have enough room for them at his
stored for the bankrupt at the premises of Vamhay Pty Ltd
own premises. He said:
".... we consequently stored some of the units for him at
our premises at Toongabbie Road and as he sold them we'd
draw off the stock. Unfortunately, he didn't sell all of
them that season and they were left as surplus to
requirement and I stepped in to offer assistance in
trying to sell them for them."
Asked for whom he was trying to sell them, Mr Mawhinney said:
"For - well principally for Mr Robertson, to get him out
of his debt at the bank as quickly as possible."
Having said that he had some discussion with the applicant about the matter, he was asked what that discussion was. He said:
"Well, I offered my assistance to Mr Robertson to help to move the units for him, from our factory in Toongabbie, as quickly as possible, and agreed to do whatever I could to get rid of them as quickly as possible, to reduce his debt. And the arrangement was that I supply the money to Barry, any moneys that was procured would be given to Barry, and in turn he would give it to Jim to bank with the State Bank in Wentworthville."
This arrangement he said was made in or about February 1988.
Mr Mawhinney's recollection was that he sold over 30
of the units, that Vamhay Pty Ltd received the purchase moneys
and that those moneys were accounted for to the applicant.
Asked whether there were any moneys not accounted for, Mr Mawhinney said: "No, as a matter of fact I had a meeting with Mr Robertson when I was tidying up my affairs with the other businesses and I told him I wanted the units out of the place because they weren't mine and that they started to walk. I wasn't to be held responsible for them and we would like to do - so he came to my office with his wife and we done a complete reconciliation one night in my office. I paid him up all the moneys that were due and everything was agreeable and he went home. That was the last I heard of it."
He said the accounting took place "some time in May or June 1988" and that on that occasion an amount of approximately $7,000.00 was passed over in cheques and cash. He said that the applicant then had the remaining units removed from the company's premises.
Mr Mawhinney said he had no knowledge of any proposal by the bankrupt to buy additional units. His understanding was that the bankrupt had had difficulty since about February 1988 in selling the 66 units the subject of the previous arrangement and that all efforts were directed to selling those units. Referring to the units not moving well on the market, Mr Mawhinney said:
"Well, without pointing the finger at anybody, it was a matter of Barry was [sic] probably a little bit overly worked with our side of the business, the installation side, and couldn't devote enough time to the other side of it and made a bad business decision and missed the season, because we had a fairly good season with ours. As I said, we sold all ours out, but Barry was quite busy installing for us and couldn't devote the time to the other 66 units."
Issues
The only issue argued on the hearing of the application was whether there was an agreement between the applicant and the bankrupt which supports the debt claimed to be owing by the bankrupt to the applicant. The applicant and the trustee agreed that the amount for which the applicant would be entitled to prove in the bankrupt estate in the event of his being successful in the present application is $27,219.00. The applicant and the trustee also agreed that, by reason of having received the sum of $6,000.00 by the selling of 8 air conditioners which, if his version of the facts is accepted were, in truth, property vested in the trustee, the applicant would be required to make an allowance of that sum against the amount of any divldend he might otherwise be entitled to receive.
As there are inconsistencies between some of the statements he has made, the evidence given by the applicant cannot be accepted without qualification. A reservation as to his reliability arises from the circumstance that, in lodging his proof of debt, he failed to give credit for moneys which he later acknowledged he had received in reduction of the amount of the debt. His explanation of why he had failed to do so was quite unconvincing. However, as will appear, based on his evidence and that of MI Mawhinney supported to some extent by the meagre documentary material available, I am satisfied as to the general nature of the arrangements that
were made between the parties. On the other hand, I am not prepared to accept the evidence of the bankrupt. He was an unimpressive witness in the truth of whose statements I can have no confidence. In particular, the evidence he gave that the agreement dated 20 September 1988 related not to any debt owing by him to the applicant arising from the arrangements made in November 1987 but to a proposal made by him to the applicant in March, April or May 1988 under which additional alr conditioning units were to be purchased for sale, with finance to be provided by the applicant, is no more than a fabrication. The bankrupt's
assertion that the new proposal was made because the 66 air conditioning units purchased in late 1987 were selling well is at variance with the true position that, by February 1988, a large number of those units remalned unsold. His evidence was unconvincing to the point where I am not prepared to accept what he has said unless it is supported by other admissible evidence.
Mr Mawhinney's evidence concerning the arrangements leading up to the supply of the 66 air conditioning units by Dylime Pty Ltd is accepted. The remainder of his evidence is generally accepted except in so far as it is based solely upon statements made to him by the bankrupt.
I find that, in or about November 1987, an
arrangement was made between Mr Mawhinney, acting on behalf of
purchase from Dylime Pty Ltd through its division called Dylime Pty Ltd, and the bankrupt whereby the bankrupt was to Instant Air 66 ACMA portable air conditioning units at a price of $900.00 per unit. Under the arrangement, the bankrupt was to be allowed 90 days within which to pay the purchase price provided adequate security was made available to Dylime Pty Ltd. The bankrupt then approached the applicant who made the arrangements with the State Bank of New South Wales at Wentworthville to which reference has already been made. The
applicant was not the purchaser of the air conditioning units nor was the bankrupt, in purchasing those units, acting as his agent. The applicant's part in the arrangements did not extend beyond providing the security required by Dylime Pty Ltd. I further find that the invoice number 161 did not evidence a sale of the units from Instant Air to the applicant. That invoice was raised, as Mr Mawhinney said, solely for the purpose of providing some information to the bank.
Although, as I find, the bankrupt, the applicant and
Mr Mawhinney were confident that the air conditioning units
could be sold by the bankrupt at a profit within the period of 90 days' grace allowed by Dylime Pty Ltd so that no occasion would arise for Dylime Pty Ltd to call upon the State Bank for payment under the facility arranged by the applicant, their confidence was misplaced. The evidence does not establish how many of the units were sold by the bankrupt before the period of grace expired but it is clear that no part of the purchase
to be made by the State Bank. company, by letter dated 29 February 1988, requiring payment price was paid by the bankrupt to Dylime Pty Ltd prior to that Although the applicant and the bankrupt did not expressly direct their minds to what was to happen if, contrary to their confident expectations, Dylime Pty Ltd had recourse to the facility made available by the State Bank, it is implicit in their arrangements that the bankrupt was to indemnify the applicant in respect of any amount that the bank was obliged to pay to Dylime Pty Ltd. I am not prepared to find that the applicant was, under the terms of the arrangement, to bear any loss arising from the inability of the bankrupt to sell the units for an amount sufficient to pay the purchase price to Dylime Pty Ltd. The steps which the applicant took after he became aware that the bank had paid the sum of $59,400.00 to Dylime Pty Ltd did not, in my opinion, amount to a variation of the arrangement so that, thereafter, instead of having a right to recover from the bankrupt an amount equal to the amount paid by the bank to Dylime Pty Ltd, he was entitled only to receive from the bankrupt whatever proceeds might arise on any sales subsequently effected.
In the result I am satisfied that, at the date of the bankruptcy, a provable debt was owing by the bankrupt to the applicant. Earlier in these reasons I have noted the agreement reached between the applicant and the trustee that, in the event of the applicant being successful in this
estate in the sum of $27,219.00 but that he would make an application, he would be entitled to prove in the bankrupt allowance of $6,000 against the amount of any dividend he
might otherwise be entitled to receive.In the course of preparing a draft of these reasons,
it seemed to me to be desirable to have the benefit of
submissions upon a question which had not been adverted toduring the course of the hearing. That question was whether the applicant was entitled to prove in the bankrupt estate for the sum of $27,219.00 while at the same time retaining the benefit of the amounts totalling $22,566.00 the receipt of which the applicant acknowledged in his affidavit sworn on 17 June 1991, those amounts having all been received after the date upon which the sequestration order was made against the estate of the bankrupt. Pursuant to arrangements made in that behalf, counsel for both parties attended upon me in Chambers on 10 August 1992 when the matter was discussed. Counsel agreed to consider the matter further and make written submissions thereon. Despite a number of enquiries as to the progress of the matter, no submissions have been made. In view of the lapse of time since the matter was heard I have decided to give judgment in the matter.
For the reasons set out above, the decision of the trustee made on or about 24 April 1991 rejecting the proof of debt lodged by the applicant is set aside. It is declared that, at the date of the making of the sequestration order
bankrupt to the applicant and that such debt was provable in against the estate of the bankrupt, a debt was owing by the the bankruptcy. Liberty is reserved to the parties to apply as they may be advised. The costs of the applicant and the trustee, when taxed, are to be paid out of the estate of the bankrupt.
I certify that this and the preceding 29 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justice Neaves .
& k i . *
Dated: 2 July 1993
Counsel for the applicant : Mr J. Shaw Solicitor for the applicant : Alan R. Brawn Counsel for the respondent : Mr J.K. Chippindall
Solicitors for the respondent : Roxburgh & Co.
Date of hearing : 19 June 1992
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