Francis Patrick Luton A Bankrupt

[1983] FCA 244

IN THE FEDERAL COURT OF AUSTRALIA	1
)

GENERAL DIVISION, BANKRUPTCY DISTRICT)

) No. NSW 323 of 1977

OF THE STATE OF NEW SOUTH WALES AND )

)

THE AUSTRALIAN CAPITAL TERRITORY 1

- RE: FRANCIS PATRICK LUTON

A Bankrupt

O R D E R

JUDGE IIAKING ORDER: Neaves J.

DATE OF ORDER:	12 September 1983
WHERE MADE:	Sydney

THE COURT ORDERS THAT:

1. The applicant be discharged from bankruptcy.

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I N THE FEDERAL COURT OF AUSTRALIA	1
)

GENEKAL DIVISION, BANKRUPTCY DISTRICT 1

) No. NSW 323 of 1977

OF THE STATE OI' NEW SOUTH WALES AND

THE AUSTRALIAN CAPITAL TERRITORY )

- RE:FRANCIS PATRICK LUTON

A Bankrupt

CORAM:	Neaves J.
-	DATE :	12 September 1983

REASONS FOR JUDGPENT

(Ex tempore)

This i s an appl icat ion by Francis Patr ick Luton,

("the bankrupt") pursuant to section 150 of the Bankruptcy

_. Act 1966 f o r an order of discharge from his bankruptcy.

A seques t ra t ion order w a s made aga ins t t he e s t a t e

of the bankrupt on 7 June 1977.

On 1 6 Ju ly 1980 an object ion to the discharge

of the applicant from bankruptcy by force of sect ion 1 4 9

of the Act was lodged by the Off ic ia l Rece iver on the

ground t h a t t h e r e was a d e f i c i e n c y i n t h e e s t a t e i n e x c e s s

of $80,000. That objection has not been withdrawn.

In h is s ta tement of a f fa i r s the bankrupt

d i sc losed asse ts of $103,134. The assets so d isc losed

included cash deposited with an accountant ($11,0841,

moneys held by a f i r m of sol ic i tors ($6,4001, equi ty in

fou r sepa ra t e pa rce l s o f l and a t Russe l l I s l and , Queensland

a l l 05 which were subjec t to mor tgage , the bankrupt ' s

equi ty as shown to ta l l ing $76 ,500 , and book d e b t s t o t a l l i n g

$8,650. The bankrupt a lso disclosed a cont ingent asset of

$15 ,000 , being a c la im ar i s ing out of a f i r e tha t des t royed

a house property a t Mount Tambourine i n Queensland.

A l l t h e land d isc losed as an asset i n t h e

s t a t emen t o f a f f a i r s was subjec t t3 mortgage. I n the case

of three of those parcels the mortgagee has exercised

porrer of sale. In each case a l o s s appears to have been

sus ta ined on t h e sale of the secur i ty .

The Nat ional Australia Bank Limited, wh ich

t7as sh0x.m i n the s t a t emen t o f a f f a i r s as having a mortgage

over 15 blocks of land a t Russell Island, Queensland, has .

n o t y e t r e a l i s e d i t s secu r i ty bu t i s i n the course of doing

so . The bankrupt has expressed a d e s i r e t o p a r t i c i p a t e i n

t h e s a l e o f t h i s l a n d so as to achieve h igher pr ices for it

than might otherwise be the case.

On the evidence before me the only moneys t h a t

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may come t o the es ta te o therwise than by way of surplus

on t h e sale of the land mortgaged to the National Australia

Bank Limited are moneys which the bankrupt says are due t o

h i m from a company known as Incent ive Programmes Pty. Limited,

t o which I w i l l r e f e r l a t e r in these reasons.

The sum of $9,152.20 has been brought t o t h e

c r e d i t o f t h e e s t a t e . O f t h a t sum $5,500 was received by

the t r u s t e e from the bankrupt who s t a t e d t h a t it came from

h i s ea rn ings s ince becoming a bankrupt.

In h i s s t a t emen t o f a f f a i r s the bankrupt

d i sc losed ce r t a in secu red c red i to r s and seven unsecured

c r e d i t o r s i n amounts t o t a l l i n g $9,657. Twenty-three

credi tors proved in t h e e s t a t e f o r amounts t o t a l l i n g

$90,333. The t rus t ee r epor t s t ha t o f t ha t number 11

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c r e d i t o r s f o r amounts t o t a l l i n g $14,854 subsequently

withdrew t h e i r claims i n the estate following an approach

made t o them by the bankrupt. In evidence before me t h e

bankrupt stated that he had approached a l l h i s c r e d i t o r s

and had made payments t o a number of them. The moneys

used t o make those payments were said t o have come from

his earnings s ince bankruptcy - he worked, he said, from-

t ime to t ime as a freelance salesman, floor cleaner and

motor car salesman. The bankrupt said he had paid some

$12,700 t o c r e d i t o r s i n t h i s way.

It appears that there are e i g h t c r e d i t o r s

remaining for a t o t a l of $75,479. Of t h a t some $38,000

3.

i s shown as being due to the Na t iona l Aus t r a l i a Bank

L i m i t e d and in respec t 01 which Lhe Lank, as I have pre-

I v ious ly sa id , ho lds secur i ty .

On 2 3 June 1981 t h e t r u s t e e p a i d a d iv idend to

proved credi tors of 4 . 5 1 2 cents in t h e d o l l a r . The balance

of the moneys in t h e e s t a t e a r e s u i f f i c i e n t t o pay a f u r t h e r

dividend of 3 .4 cents i n t h e d o l l a r .

Since making h i s app l i ca t ion fo r d i scha rge the

bankrupt has sent a no t i ce to each of h i s c r e d i t o r s r e q u e s t -

i ng the c red i to r t o wa ive h i s c l a im-aga ins t t he estate, t o

withdraw the proof of debt lodged with t h e t r u s t e e and t o

r a i s e no objec t ion to h is d i scharge . The bankrupt has

s t a t ed on oa th tha t some of h i s c r ed i to r s have ag reed to

th i s reques t . There i s no independent evidence of t h i s

from any other source but no creditor has appeared to

oppose the appl ica t ion for d i scharge .

The bankrupt has a lso s ta ted on oa th tha t he

wishes to pay a l l h i s c r e d i t o r s i n f u l l as soon as he i s

i n a p o s i t i o n t o do so , even i f he i s discharged from

bankruptcy.

I

The public examination of the bankrupt took

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p lace on 1 5 September 1980.	It was on that date	adjourned
genera l ly .

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The bankrupt i s a married man aged 47 yea r s ,

w i th h i s w i fe and one ch i ld aged 8 years dependent upon

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him for suppor t .

From 1971 t o 1976 the bankrupt carr ied on through

a company, Frank Luton Investments Pty Limited, a proper ty

development business. The company was wound up i n J u l y 1977

s h o r t l y after he became a bankrupt.

From October 1973 t o December 1974 when t h e

company Ocean City Marine Pty L i m i t e d was wound up, the

bankrupt was involved i n the conduct of a bus iness of

s e l l i n g b o a t s , f i s h i n g t a c k l e and marine equipment. -Although

the bankrupt was a c r e d i t o r of the company, no moneys were

received by reason of	a defa lca t ion i n the course	of the
winding up.

In 1973-74 the bankrupt agreed to purchase 120

a l lotments of land a t Russell Island, Queensland. In Ju ly

1975 he en tered in to cont rac ts to purchase in excess of

116 acres of land a t Mount Tambourine i n Queensland. The

bankrupt proposed to subdivide and redevelop the property.

.

He took up res idence i n a partly completed dwelling on the

land. The dwelling, which was not insured , was t o t a l l y

destroyed by f i r e i n January 1976. The bankrupt claims

t h a t his s o l i c i t o r had been negligent in not insuring the

property, but the claim has not been pressed. The bankrupt

has stated that the vendor took act ion to determine the

5 .

cont rac ts and a l l moneys paid thereunder were forfei ted.

The bankrupt i s a t present self-employed as a

p ro jec t consu l t an t w i th h i s g ross weekly income amounting

t o $350 out of which he is requi red to pay $70 f o r the

r en t o f h i s r e s idence a t 4 1 Bolinda Street, Eight Mile

Plains, Queensland, which i s owned by h i s p r i n c i p a l cl ient,

Incent ive Programmes Pty Limited. That company became the

r eg i s t e red p ropr i e to r o f t he p rope r ty on 18 November 1980.

Incent ive Programmes P t y Limited was incorporated

on 26 March 1975, i t s d i rec tors be ing the bankrupt and h i s

w i f e . On 1 4 August 1980 the bankrupt res igned as a d i r e c t o r

and he was replaced by Francis James Luton. The present

d i r e c t o r s are the bankrupt ' s wife and Norman Granville L e w i s .

It appears tha t the bankrupt ' s sharehold ing in

t h a t company was taken over by h i s s o n f o r a cons idera t ion

of $9. The bankrupt has s ta ted tha t the company had not

t r a d e d a t a l l p r i c r t o h i s d i s p o s i n g of h i s s h a r e s . The

t r u s t e e a c c e p t s t h a t the estate has not been disadvantaged to

any s u b s t a n t i a l extent by t h i s i r r e g u l a r t r a n s a c t i o n . c

The bankrupt c la ixs tha t Incent ive Programmes

Pty L i m i t e d will become indebted to him in t h e sum of

$30,000 when a land development proposal of t h a t company,

. I

i n r e l a t i o n t o which he is engaged as consul tan t , i s

regis tered fol lorr ing the obtaining of a l l necessary approvals

6 .

He has undertaken to the court to s ign an i r revocable

a u t h o r i t y d i r e c t i n g the cor~~pany to pay t h e trustee the

moneys t h a t become payable t o him i n r e s p e c t o f his work

as a consul tan t on t h a t p r o j e c t .

The bankrupt was charged i n Queensland with

1 4 other persons, it b e i n g d l e g e d t h a t between 1 January

1968 and 1 October 1979 they conspired to defraud the

publ ic by dece i t fu l ly inducing persons to buy land on

Russell I s l and . The charge arose from prospective buyers

being shox-m advertisements and brochures depicting good

qual i ty land wi th views, whereas the land w a s a swamp.

The t r u s t e e r e p o r t s t h a t t h e Crown entered a nol le prosequi

i n r e spec t o f the charge la id against the bankrupt .

No books of account or records were produced by

the bankrup t t o th s t ru s t ee . He s t a t e d , however, t ha t he

kept a f u l l se t o f double en t ry books and t h a t t h e s e were

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destroyed i n the f i r e t o which I nave r e fe r r ed . The t r u s t e e

h a s s a i d t h a t t h e a d m i n i s t r a t i o n o f t h e e s t a t e was n o t

hampered by the l ack of records .

The bankrupt has a t t r ibu ted h is bankruptcy to -

"Vendor d i shones ty in my purchase of the Tambourine

property - house f i re - so l i c i to r ' s neg l igence" .

The t r u s t e e ' s o p i n i o n i s t h a t t h e prime cause of his

bankruptcy was the lack of capi ta l for the bankrupt ' s

r e a l estate dea l ings .

7.

The t rus tee does not repor t any matters pursuant

t o sub - sec t ion 150(6) of the A c t .

The applicant has been bankrupt for more than

six years . H i s conduct towards the trustee o f h i s e s t a t e

has no t been en t i r e ly sa t i s f ac to ry bu t he has, a l b e i t

be l a t ed ly , supp l i ed the t ru s t ee with such ma te r i a l a s t he

t r u s t e e has requested. He has not provided a g r e a t dea l o f

in format ion to the cour t as to h i s ea rn ings ove r t he pe r iod

of his bankruptcy hut he was for a considerable per iod

involved in the cr iminal proceedings i n Queensland to which

I have referred, and which he says - and I accept - sub-

s t a n t i a l l y r e s t r i c t e d h i s e a r n i n g c a p a c i t y . He has made

payments t o t h e t r u s t e e f o r t h e b e n e f i t o f c r e d i t o r s of

$5 ,500 , and has , a l though in an i r regular manner , provided

moneys t o t a l l i n g $12,700 d i r e c t l y t o c r e d i t o r s . The present

s i t ua t ion appea r s t o be t h a t t h e r e are outs tanding claims by

unsecured creditors of approximately $37,000 and the only

asset i n t h e e s t a t e i s the bankrup t ' s equ i ty in l and a t

Russel l Is land over which the Nat ional Austral ia Bank has

a mortgage. In the event of the sale of that land a t a

p r i c e which r e s u l t s i n a s u r p l u s a f t e r s a t i s f y i n g t h e b a n k ' s

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secured debt , that surplus will be ava i l ab le to the

c red i to r s . The bankrupt has also undertaken, as I have

s a i d , t o make a v a i l a b l e f o r t h e b e n e f i t o f h i s c r e d i t o r s

t h e sum of $30,000 by way of consultancy fees from Incentive

Programmes Pty Limited.

8 .

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I

The bankrupt has the offer of a sen ior executive

p o s i t i v ~ l with a company-in Brisbane engaged i n the develop-

I

ment and cons t ruc t ion of i n d u s t r i a l b u i l d i n g s and shopping

cen t r e s . Th i s o f f e r of employment i s condi t iona l upon h i s

rece iv ing a discharge from his bankruptcy.

Sub-section 150(9) of the A c t provides that

where n o n e o f t h e m a t t e r s s p e c i f i e d i n s u b - s e c t i o n 150(6)

i s e s t ab l i shed -	and t h a t i s so in t h i s c a s e	-	the couri:
may -

(a) r e f u s e t o make an order of discharge;

(b) make an order of d i scharge ; or

(c ) make an order of discharge but suspend i ts .

ope ra t ion e i the r uncond i t iona l ly	or	subjec t
t o c o n d i t i o n s .

Sub-section 150 (10) , however , provides that the

court shal l not under sub-sect ion 150(9) suspend Ehe opera t ion

of an order of discharge beyond the per iod of th ree yea r s

commencing on the date of his bankruptcy. In t h i s case that

per iod has already expired.

In considering whether a bankrupt should receive

a discharge the cour t must have r ega rd no t on ly to the

in t e re s t s o f t he bankrup t and h i s c r ed i to r , bu t a l so to

t h e i n t e r e s t s of t he pub l i c and of commercial morality.

The cour t must also consider the conduct of the bankrupt

r e l evan t t o h i s bankrup tcy .

9 .

Having given the matter careful consideration I

have come to the conclusicn that no useful purpose, so far

I

as creditors are concerned, would be served by a continuacion

of the applicant's status as a bankrupt. In my view, the

period of over six years during which he has been a bankrupt

is sufficient in all the circumstances. Further, the interests

of the public and of commercial morality do not in this case

require that the status of a bankrupt continue.

I, therefore, order that the applicant be dis-

charged from bankruptcy.

- =~

- a -

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I -ertify tha t t h i s and the (9)

pre e-1-3 pages ere a tice copy of the

Rexons for Judgment herein	of h i s Honour
Mr Justice Fleaves

k ,c3 ssociate

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