Ing, J. v Pendlemoore Pty Ltd

[1995] FCA 158

IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION                 )
BANKRUPTCY DISTRICT              )
OF THE STATE OF VICTORIA  )  No VP 1157/94

Re:             JOHN ING

Debtor

Ex parte:  PENDLEMOORE PTY LTD
  (In Liquidation)

Creditor

Coram:    Olney J

Place:    Melbourne

Date     24 March 1995

REASONS FOR JUDGMENT
On 13 July 1994, the debtor committed an act of bankruptcy when he failed to comply with the requirements of a bankruptcy notice served on him on 29 June 1994.   The bankruptcy notice was issued on the application of Pendlemoore Pty Ltd (Pendlemoore), a company in liquidation.   The demand in the bankruptcy notice related to a judgment debt of $17,666.30 and interest amounting in all to a total of $20,643.53.

The judgment debt arose when the debtor unsuccessfully sued Pendlemoore in the County Court and was ordered to pay the company's costs.   The costs were taxed on 19 March 1993 in the sum of $17,666.30.

After service of the bankruptcy notice, the debtor sought to have it set aside and filed a lengthy affidavit to that end.   The matter was ultimately heard by Northrop J on 2 November 1994.   His Honour held that the affidavit filed on behalf of the judgment debtor did not answer the description of an affidavit required by s 41(7) of the Bankruptcy Act.   There was accordingly no statutory extension of time for compliance with the bankruptcy notice and an act of bankruptcy had been committed at the expiration of 14 days from the date of service.

The creditor's petition now before the Court was presented and issued on 15 November 1994 and served on the debtor on 16 November 1994.   On 30 January 1995, the debtor filed a document entitled "Notice of Intention of Debtor to Appear at Hearing of Petition".   This document runs to seven and a half pages of typescript.   In it the debtor purports to set out the grounds upon which he opposes the petition.   These include, amongst many others, a denial that he owes the amount of the judgment debt and an assertion that the petitioning creditor is indebted to him in a sum in excess of the judgment debt.

The balance of the notice contains an extensive litany of assertions which are to a large extent incomprehensible and to some extent so vexatious and scandalous as to amount to an abuse of process.   The final two sentences of the notice read:

The debtor has further some $500,000 outstanding with 12 of his debtors.   The debtor handles prosecution of his debtors in person and consequently is limited by time available to him to do so.

The debtor has filed an affidavit in support of his opposition to the petition.   To a large extent the affidavit covers the same material as is contained in the notice of objection and it suffers from the same defects.   There are 37 documents exhibited to the affidavit.   Much of the affidavit is based upon mere assertion, some on hearsay, and it is both argumentative and prolix.  

Since the hearing of this matter on 22 March 1995, I have had the opportunity to re-examine the material relied upon by the debtor.   Despite all of the assertions made in the notice of objection and in the affidavit, the debtor has not sought to have the Court go behind the County Court judgment.   Whatever he may say about the petitioning creditor, its former directors and its business associates, he does not say that the judgment should or could be set aside or that it was attained otherwise than in accordance with the normal judicial process.

At paragraphs 31 and 32 of his affidavit, the debtor says:

I am unable to pay all my just debts.   I prosecuted my outstanding debts in a speed that permits me to act in person.   Due to the loss of $106,615 caused by the petitioning creditor to me and due to another fraudulent debtor's outstanding disputed liability of odd $99,000, my resources were depleted.   I have access to an unlimited credit from my relations overseas but I cannot pay further money to a borrower who defrauded me by five times that amount.

These statements, even taken in conjunction with the passage quoted from the notice of objection, are at their best equivocal as to the debtor's present state of solvency.   They say nothing of his assets and his liabilities and are inadequate to establish that he is able to pay his debts.   Whether or not a person is able to pay his debts is a conclusion for the Court to draw on the basis of the evidence adduced.   No evidence has been proffered upon which the conclusion asserted may be reached.

I do not propose to canvass the enormous amount of detail put forward by the debtor.   Sufficient to say that I remain unconvinced that he has any claim against the petitioning creditor that would entitle him to a judgment against the creditor, but even if he has, this is not the time or place to establish that claim.   He has not taken any proceedings against the creditor to recover what he says is owing.   Whether or not he could or should have made such claims in the proceeding which resulted in the judgment debt is not relevant.   The fact is that he made no such claim in those proceedings or any other proceedings.   He has committed an act of bankruptcy and he has not established to my satisfaction that he is able to pay his debts, nor has he demonstrated any basis upon which the Court could reasonably exercise its discretion to dismiss the petition on any other ground.

The petitioning creditor has proved all of the facts that are required to establish its entitlement to a sequestration order and in the circumstances a sequestration order will issue against the estate of the debtor in respect of the act of bankruptcy committed on 13 July 1994.   The trustee of the estate will be Tim Arthur Jonas and there will be an order that the petitioning creditor's costs of the petition, including the costs ordered by Northrop J on 2 November 1994 and any reserved costs be taxed and paid in accordance with the statute.

At the hearing of the petition, counsel appeared for a supporting creditor, one Michael Heaton, who had issued a bankruptcy notice against the debtor on 3 August 1994.   The debtor sought to have that notice set aside but on 8 December 1994, Jenkinson J dismissed his application and ordered him to pay the creditor's costs.   The time for complying with the bankruptcy notice was extended to 16 December 1994.   I infer from the events that have happened that the notice was not complied with and that a further act of bankruptcy was committed on 16 December 1994.

In the circumstances, the costs of the supporting creditor, including the costs ordered by Jenkinson J on 8 December 1994 should be taxed and be paid with the same priority as the costs of the petitioning creditor.   There will be orders accordingly.

In response to the debtor's application for a stay of the sequestration order I say this:   Whilst the Court does have the power to stay a sequestration order for 21 days, it is not a power that is automatically exercised whenever a debtor wishes to consider an appeal, nor is it one that is exercised in the absence of special circumstances.   This case has been entirely dependent upon factual matters.   It has been argued on the basis of largely irrelevant issues and in my opinion the debtor will suffer no prejudice, even in the event of an appeal being entirely successful if a stay is not granted.   I decline to order a stay as sought.

I certify that this and the preceding 5 pages are a true copy of the Reasons for Judgment of the Honourable Justice Olney

Associate:

Dated:   24 March 1995.

Heard:       22 March 1995

Place:       Melbourne

Judgment:     24 March 1995

Appearances:

Mr P. Bornstein (instructed by Lewis Walker) appeared for the petitioning creditor.

Mr R.S. Randall (instructed by Bailey Timms & Nicholson) appeared for the supporting creditor.

The debtor appeared in person.