Jensen v Hore - [2007] FMCA 1307

FEDERAL MAGISTRATES COURT OF AUSTRALIA

JENSEN & ORS v HORE

[2007] FMCA 1307

BANKRUPTCY – Creditor’s petition – alleged tender of amount claimed – tender rejected – sequestration order made.

Bankruptcy Act 1966, s.40(1)(g)

Applicants:

KIM LYNETTE JENSEN, ARLENE LEILA WERNER, GRAHAM VINCENT WERNER & MARK ANDREW WERNER, TRADING AS TOOGOOLAWAH SAWMILLS

Respondent:

ROBERT HORE

File number:

BRG 447 of 2007

Judgment of:

Wilson FM

Hearing date:

27 July 2007

Date of last submission:

27 July 2007

Delivered at:

Brisbane

Delivered on:

27 July 2007

REPRESENTATION

Counsel for the Applicant:

Mr A. Nase

Solicitors for the Applicant:

Norman & Kingston Solicitors

Solicitors for the Respondent:

In person

ORDERS

A Sequestration Order be made against the estate of ROBERT HORE.
The Applicant Creditor’s costs (including reserved costs, if any) be taxed and paid from the estate of the Respondent Debtor in accordance with the Bankruptcy Act 1966.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG 447 of 2007

KIM LYNETTE JENSEN, ARLENE LEILA WERNER, GRAHAM VINCENT WERNER & MARK ANDREW WERNER, TRADING AS TOOGOOLAWAH SAWMILLS

Applicants

And

ROBERT HORE

Respondent

REASONS FOR JUDGMENT

On 3 November 2006, the applicant creditor obtained judgment against the respondent debtor in the Magistrates Court of Queensland at Toogoolawah. The judgment was for $1850, including interest and costs. That judgment was not satisfied.
On 8 January 2007, the applicant creditor brought on an enforcement hearing and obtained a further order for costs in the amount of $205. The total of the judgment debt and the order for costs is $2055.32. Neither of those sums have been paid.
On 15 March 2007 the applicant caused a bankruptcy notice to be issued and directed to the respondent. It correctly stated the amount of the debt owing and sought payment of it. Relevantly, at paragraph 3 of the bankruptcy notice which incorporates the relevant provision of section 40(1)(g) of the Bankruptcy Act, it provided that the debtor was required to pay the amount owing within 21 days after service on him of the bankruptcy notice.
The bankruptcy notice was served on 23 March 2007. If payment was not made within 21 days of that date, then, in terms of s.40(1)(g) of the Bankruptcy Act 1966, the debtor committed an act of bankruptcy. As I calculate it, the 21-day period expired on 13 April, although the exact calculation of this date is not of critical importance because it is common ground that no attempt was made to pay any moneys until May 2007. The respondent debtor therefore committed an act of bankruptcy by not complying with the bankruptcy notice.
On 1 June 2007, the applicant issued a creditor’s petition, properly verified, seeking a sequestration order against the estate of the respondent debtor. It recounted and relied on the act of bankruptcy at paragraph 4 of the petition, asserting that an act of bankruptcy had occurred on 13 April 2007.
The respondent debtor has filed a Notice of Grounds of Opposition to the petition which sets out grounds as follows:
That lawyers Carroll & O’Dea requested time to pay, 26 March ’07, that T. Kingston (Norman and Kingston, solicitors for applicant) agreed to extend to 18 May 2007, and that Norman and Kingston did accept and receipt payment of $2055.32 on 16 May 2007.
In my view, the first ground stated is plainly not a ground of opposition to the making of a sequestration order. The mere request for time to pay, without any evidence of that being accepted, is insufficient. In my view, the evidence does not support a finding that an agreement was made to allow the debtor further time to pay.
The principal ground upon which the petition is opposed is that, on 16 May 2007, the respondent debtor tendered a bank cheque for $2055.32, and it is said that this was accepted by the applicant creditor. In his oral submissions, the respondent said that, on that date, there was no other debt and he paid in full the amount said to be owing.
The solicitor for the applicant and the respondent have each sworn affidavits deposing to various conversations which have taken place between them. In his affidavit, the respondent does not depose to any conversations between him and the applicant’s solicitor between

23 March 2007
, being the date of service of the bankruptcy notice, and 10 May 2007. The respondent does refer to a letter from his solicitors to the applicant’s solicitors dated 26 March 2007. The solicitors for the respondent pointed out that the respondent had a personal injuries claim and, when proceeds of that were received, he expected to be in a position to discharge his indebtedness. The letter stated:
In the circumstances, we respectfully request you to advise your client not to proceed with the bankruptcy notice at the present time. Our client will attend to the payment of the outstanding amount as soon as he receives the lump sum compensation, as claimed.
As I have said, nothing further occurred between the sending of that letter and the commission of the act of bankruptcy. There was no agreement to allow further time to pay.
It came to the knowledge of the respondent that the applicant, by its solicitors, intended to proceed with bankruptcy proceedings. The respondent says that, on 10 May 2007, he spoke to the applicant’s solicitor and advised him that he had obtained employment at the local abattoirs. He said that he was in a position to pay the amount owing. The respondent says in his affidavit at paragraph 9 that the applicant’s solicitors said words to the effect, “I’ll have to get back to you tomorrow with the amount.” In response to his, the respondent said, “I’ve got the papers in front of me, and the amount is $2055.32.” The respondent repeated this evidence when being cross-examined. The applicant’s solicitor said that he would ring back the next day, and the respondent gave him permission to speak to Ms Rosemary Watkins on his (the respondent’s) behalf.
The applicant’s solicitor, at paragraph 8 of his affidavit, says that he did not have a telephone call with the respondent on 10 May 2007, but goes on to say that he did receive a telephone call from the respondent on 9 May requesting that he advise him how much was required to be paid in order to have the matter resolved, and he (the solicitor) informed him (the respondent) that he had not worked out the precise amount and would get back to him the following day.
Despite the discrepancy in dates, it appears that there was a telephone conversation between the respondent and the applicant’s solicitor in which the respondent was offering to pay the amount of the debt, and the applicant’s solicitor was saying that he would have to get back to the respondent with an amount that would be accepted. It is evident that, on either version of the conversation, no agreement was reached that the sum of $2055.32, or, indeed, any other sum, would be accepted in satisfaction of the applicant’s debt, or to compromise the present proceedings. There was, on both accounts, no agreement to pay $4,800.00.
The applicant’s solicitor instructed his receptionist to telephone the respondent and provide details of the amount owing. A file note is produced which says that the receptionist spoke to Ms Waterson on

10 May and informed her that $4810.84 was required to be paid to the solicitor’s trust account by someone other than the respondent on or before 18 May so that the matter could be resolved.
The respondent, in his affidavit, says that somebody from the applicant’s solicitor’s office did telephone Ms Watkins and advised that, if he (the respondent) paid the amount of $4800 by 18 May, all proceedings would cease. Thus, on both accounts, there was a statement from the applicant’s side that a payment of $4800 was required in order to compromise the proceedings.
The respondent says that he spoke to the applicant’s solicitor on

14 May and asked him to send an itemised account, as the amount he was being asked to pay was more than double the judgment debt. The respondent said that he was going to obtain legal advice about the increased amount which was being required.
The applicant’s solicitor says, by reference to his file note, that he did have a conversation with the respondent on 14 May in which the respondent asked for confirmation of the amount that his partner had been advised by telephone was required to be paid. The solicitor’s file note deposes to the conversation turning to other matters which are not addressed in the respondent’s affidavit.
Apparently acting on legal advice, the respondent determined to pay $2055.32 to the applicant’s solicitors. He obtained a bank cheque for that amount and had an associate, Mr Frees, attend at the applicant’s solicitor’s office to deliver it. There is no dispute that the cheque was delivered by Mr Frees, and, indeed, he has sworn an affidavit to that effect. The cheque was made out to the applicant’s solicitors’ trust account. It was in the amount of $2055.32. It is also not in dispute that a receptionist at the solicitor’s office issued a receipt addressed to the respondent and ascribed the payment to, “Payment of bankruptcy notice.”
There is no evidence that the receptionist was expressly authorised to receive payment of the amount provided to her, although, in my view, for reasons which I will shortly give, the issue of authority is not critical.
The applicant’s solicitor, upon becoming aware that a cheque had been delivered to his office, on the same day returned the cheque to the respondent and sought return of the receipt. It is therefore common ground, on the evidence, that, on the same day that the cheque was delivered to the applicant’s solicitor’s office and before it was banked, it was returned to the respondent.
There was then a further attempt by the respondent to pay a slightly highly amount, which apparently included an amount for interest. On this occasion, cheques were delivered by another person on the respondent’s behalf, a Ms Wood. On this occasion, the receptionist refused to accept the cheques and returned them.
In my view, from the sequence of events which I have outlined, there was no tender on 16 May 2007. There was the delivery to the applicant’s solicitor’s office of a cheque for an amount which corresponded with the amount in the bankruptcy notice. However, that cheque was never negotiated and, immediately becoming aware of it, the applicant’s solicitor returned it to the respondent.
It is well settled law that, upon expiry of the period allowed for compliance with a bankruptcy notice and once an act of bankruptcy has been committed, the tender of the full amount specified in the bankruptcy notice can be refused by the creditor. Therefore, in the present case, even if all the creditor was seeking was $2055.32, it was legally entitled to refuse a tender of that amount made after the time for compliance with the bankruptcy notice had expired.
The reasons for that are obvious. Upon non-compliance with a bankruptcy notice, a debtor commits an act of bankruptcy which can be relied upon by any creditor. By accepting the payment of an amount, the party who issued the bankruptcy notice may subsequently be found to have accepted a preference and be liable to disgorge it to the bankrupt’s trustee. This is, no doubt, why, in seeking the payment of some $4800 by 18 May, the applicant’s solicitor asked that it be paid by a person other than the respondent.
In my view, the evidence does not establish that there was any agreement to extend time for payment to 18 May 2007 and, even if there was such agreement, the evidence from both sides is that payment was not made by the respondent in the amount of $4800 by that date.
Having found, as I have, that the applicant creditor was not obliged to, and did not, in fact, accept payment of the $2,055.32, it follows that the grounds of opposition to the creditor’s petition are not made out. No other ground, such as solvency, is raised. It follows, therefore, in my view, that a sequestration order must be made against the estate of the respondent, and I will make such order. I will note that the date of the act of bankruptcy is 13 April 2007, and I will order the respondent to pay the applicant’s costs from the estate.
I certify for counsel.

I certify that the preceding twenty-seven (27) paragraphs are a true copy of the reasons for judgment of Wilson FM

Associate:

Date: