ex parte

[1979] FCA 180

J U & l i r i , ; -. ...:awUU*oe IUJIIGUI.Oa.*

CATCHWORDS

Bankruptcy - creditor's petition - act of bankruptcy

relied upon being notice to petitioning creditor that

the debtor had suspended or that he was about to suspend,

payments of his debts - casual conversation in hotel

bar between petitioning creditor's manager and debtor -

whether intention to suspned payment of debts as they became

due and whether such intention was communicated to the

petitioning creditor.

Bankruptcy Act 1966 (~th.) S. 40 (1) (h)

RE: KEITH RICHARD MULLEY EX PARTE: AUSTRALIAN GUARANTEE

CORPORATION LIMITED	- NO. P. 302 OF 1979
LOCKHART J.
13 NOVEMBER 1979
AT SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

BANKRUPTCY DISTRICT OF THE STATE OF

NEW SOUTH WALES AND THE AUSTRALIAN

CAPITAL TERRITORY

IN THE MATTER OF

THE BANKRUPTCY ACT 1966

AND IN THE MATTER OF

CREDITOR'S PETITION RE

KEITH RICHARD MULLEY

ex parte Australian Guarantee

Corporation Limited

ORDER

JUDGE MAKING ORDER:	LOCKHART J.
DATE OF ORDER:	13 November 1979
WHERE MADE:	SYDNEY
THE COURT ORDERS THAT:

1. A sequestration order be made against the estate of the debtor.

2. Costs, including reserved costs and costs of all proceedings in this matter before any judge of the court, be taxed and paid according to the Act.

3.  A draft of this order be delivered to the registrar within seven (7) days in accordance with rule 124 (2).

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION

I

BANKRUPTCY DISTRICT OF THE STATE OF	No. P. 302 of 1979
NEW SOUTH WALES AND THE AUSTRALIAN
CAPITAL TERRITOXY

IN THE MATTER OF

THE BANKRUPTCY ACT 1966

AND IN THE MATTER OF

CREDITOR'S PETITION RE

KEITH RICHARD MULLEY

Ex parte Australian

Guarantee Corporation

Limited

REASONS FOR JUDGMENT

13 NOVEMBER 1979 LOCKHART J.

This is the hearing of a petition for sequestration

of the estate of Keith Richard Mulley. . .

The act of bankrdptcy relied on by the petitioning

creditor is that the debtor on 19 October 1978 gave notice

to the petitioning creditor that the debtor had suspended, or

that he was about to suspend, payment of his debts: section

40 (1) (h) of the Bankruptcy Act 1966 ("the ~ct").

To constitute the act of bankruptcy there are

two basic requirements. First, the debtor must have the

intention of suspending payment of his debts as they become

due. Proof that he intends to refuse to pay his debts as they

become due generally is sufficient evidence of the requisite

intent. Second, that intention must be communicated to at

least one of the debtor's creditors. As to both requirements,

see Cropleyls Limited v. Vickery (1919-1920) 27 C.L.R. 321

per Knox C.J. at p. 325; InreA Debtor (1929) 1 Ch.D. 362.

It is sufficient that the debtor intends not to

pay his debts as they fall due and gives requisite notice

of that intention notwithstanding that the reasons for his decision is that any other course would be futile: see Re

Hewson; Ex parte Sydney Stock Exchange Limited (1967) 10

F.L.R. 479.

It is not necessary that the notice of the

debtor's intention to suspend payment of his debts be

communicated to a formal meeting of creditors, but generally

it must not be given merely as a haphazard or casual com-

munication: see In re Lamb, Ex parte Gibson & Bolland 4 Mor.

Rep. 25, per Bowen L. J. at p.32and Re Hewson; Ex parte Sydne]

Stock Exchange Limited (supra).

The notice of intention to suspend need not be in

writing. A n oral notice will be sufficient: see Ex parte

Nickoll. In re Walker (1884) 13 Q.B.D. 469.

The act of bankruptcy contemplates the case of a

debtor dealing with his creditors as a body and not merely

with one or more individual creditor: see In re Scott. Ex parte Scott (1896) 1 Q.B.D. 619; In re Kidd. Ex parte The Official Assignee (1903) 3 S. R. (N.S.W.) 363, and Cropley's

Limited v. Vickery (supra).

The act of bankruptcy is available whether the

creditors of the debtor are trade creditors or not:	see In re
Scott. Ex parte Scott (supra).

Whether the statement of the debtor constitutes a

notice of suspension of payment depends on whether the . ./3

statement would naturally induce the creditor who received it to believe that the debtor intended to suspend payment of his debts: see Crook v. Morley (1891) A.C. 316; In re Kidd. Ex parte The Official Assignee (supra); In re 4 Debtor (su~ra).

A mere admission of insolvency is not enough to

establish notice of the requisite intent. It must be

accompanied by words establishing the debtor's intention to

suspend payment: see Re Pike, Ex parte The Official Assignee

(1896) 17 L.R. (N.S.W.) B. & P. 34 per Manning J. at p. 38;

Re Brady; Ex parte The Official Assignee (1898) 19 L.R.

(N.s.w.) B. & P. 6; Re Kidd (supra);ln= A Debtor (supra).

Where the debtor's words are capable of two

reasonable constructions, the court must find in favour of the

innocent one, as the consequences are penal, or quasi penal:

see Re Kidd (supra).

A statement to a single creditor by the debtor is

not so readily construed as a notice of suspension as it would

be if made to creditors generally: see Trustee of the property

of Lord Hill v. Rowlands (1896) 2 Q.B.Dd24 and Cropley's Limite

v. Vickery (supra) per Rich J. at pp. 326 and 327.

Whether the act of bankruptcy is established

depends on the facts of each case.

I turn to the facts. The petitioning creditor

alleges that the debtor is indebted to it in the sum of

$40,953.50. There is in evidence a copy of an agreement made

on 17 July 1978 between the petitioning creditor and the debtor

wherein the debtor acknowledged that he was indebted to the

petitioning creditor in an amount in excess of $27,135.90. He

agreed to pay the petitioning creditor the sum of $500.00 per

month in reduction of his indebtedness, commencing on 14 August

1978. The debtor defaulted in certain of those payments. . . . /4

On 19 October 1978 a Mr. G. R. Matthews, the

Canberra district manager of the petitioning creditor, went to the

Knights Inn Tavern at Wanniassa in the A.C.T. to speak to the debtor. When he walked into the tavern the debtor was at the

bar and Mr. Matthews asked him to join him for a drink. As

drinks were being poured, Mr. Matthews said, "Can we have a chat?"

To which the debtor said, "Yes". Mr. Matthews moved over to a

table close by. As the debtor came from behind the bar he motioned

Mr. Matthews to a table in the corner a slight distance away from the bar where they both sat down. Mr. Matthews said to the

debtor, I1How is the business g~ing?'~.

The debtor said: I1Quite well."

Mr. Matthews then said: "I am here to demand

that you bring the present arrangement of $500.00 per month in

reduction of your debt up to date. You now owe us $900.00."

The debtor said: "I just do not have the money."

Mr. Matthews said: "You are mad if you do not

try and bring it up to date. If you keep the arrangement up to

date we are unable to take any further action against you."

The debtor said: "I cannot afford to pay $500.00 ,

per month. I am only working here and I do not have any moneys

to pay you. I simply do not have $900.00."

Mr. Matthews said: "Can you borrow it from someone

to which the debtor replied, "No, I cannot."

Mr. Matthews said: "Are you not a partner of the

business?".

The debtor said, "No, I only work here. My

mother and Geoff Cotterill own the business between them.ll

Mr. Matthews said, "Well how can you afford to

run a new Torana TR7 on lease?".

The debtor said, "I do not own the car. The

business owns the car and I just drive it."

Mr. Matthewssaid, "Well, you leave us with

no choice but to proceed to bankrupt you. Have you thought of

the effect that would have on your wife and children?"

The debtor said, !'I cannot do anything about it.

If I am made bankrupt it will only be for five years and then I will be out."

Mr. Matthews said, "That is a fine attitude for

a man in your position to take?''

The debtor said, "I simply do not have any other

choice. "

Mr. Matthews then left.

Mr. Matthews has also given evidence of a

conversation between himself and the debtor on 15 August 1979

at certain premises at Liverpool, New South Wales which I need

not refer to in any detail except to say that Mr. Matthews

asked him: "In October 1978 did you have any major debts

apart from the bank" (this was a reference to Bank of New South

wales), to which the debtor replied: "I had a lot of smaller debts.'

There is other evidence that on 19 October 1978 tht

debtor owed money to a number of creditors in addition to the

petitioning creditor.

This is the principal evidence relied on by the

petitioning creditor to establish the act of bankruptcy. None of

the decisions to which I was referred by Mr. Bennett, who appeared

for the petitioning creditor, are based on facts similar to those

in the present case.

In my opinion the evidence establishes that the

debtor intended on 19 October 1978 to suspend payment of his

debts as they became due, and that such intention was

communicated to the petitioning creditor. I reach this

conclusion notwithstanding that the conversation between

Mr. Matthews and the debtor was rather casual - in a bar

of a tavern over drinks - as it was intended by bo6h that

the discussion relate to the financial position of the debtor

including his ability to pay his debts.

I am satisfied that the debtor committed the

act of bankruptcy alleged in the petition, as amended. I am satisfied with the proof of the other matters of which

section 52 ( 1 ) of the Act requires proof. I make a

sequestration order against the estate of the debtor. I

order that costs, including reserved costs and costs of

all proceedings in this matter before any judge of the court,

be taxed and paid according to the Act. I direct that a

draft of this order be delivered to the registrar within

seven ( 7 ) days in accordance with rule 124 (2).

I certify that this and tho

Reasons far Jsdgmsnt herein of hi9 Honour

Mr. Justico Lockhart.

Dated: / ?