King, L. v NZI Capital Corporation Limited

[1992] FCA 1009

1009 1 1992 i

JUDGMENT NO. ........ ........ .. . s n a a a , l w

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IN THE FEDERAL COURT OF AUSTRALIA )
GENERAL DIVISION

m U P T C Y DISTRICT OF THE	No NP 2655 of 1992
STATE OF NEW SOUTH WWES	1

Re :	LESLIE KING and MARIA JOHANNA KING
Debtors

Ex Parte:	N Z 1 C A P I T A L CORPORATION LIMITED
Petitioning Creditor

EINFELD J SYDNEY 1 DECEMBER 1992 . .

The petitioning creditor presents a petition for the

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sequestration of the estate of the debtors Leslie King and	I ,
Maria Johanna King following upon their failure to comply with	,
a bankruptcy notice which sought the payment of a debt
obtained in and by a judgment of the Supreme Court of New	. . !
South Wales in August 1990.	1 .
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The various formal matters associated with a petition as
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required by section 52(1) have been proved but the male debtor
asks for the dismissal of the petition on the grounds that he
has no assets and that sequestration would be futile.	, .
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Alternatively he seeks an adjournment to obtain further
evidence of his insolvency and impecuniosity and a further
opportunity to present to his creditors a suitable proposal	!

for their agreement pursuant to Part X of the Act.	!-
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A creditors' meeting was held on 25 November 1992 to receive and consider such a proposal. The evidence establishes that

16 creditors of some 35 or 36 were present, either in persqrl, l .

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or by proxy, two of whom did not vote, one because a proxyhhad , , ' p, I .

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been ruled invalid and the other by a voluntary: withdrawqlj,, '1 , . - . . -

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from the voting. The consequent vote was seven-.crediForsl b.

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favour and seven against the proposal. I am info&ed th&t :Q£

,X ., . . .-a i -

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the debtors' total debts of just under $10 million, creditors . X \ ,

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accounting for in excess of $9 million of that total voted', -a

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very large majority by value voting against the acceptance of	I
the proposal.
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Despite considerable contrary pressure from the petitioning
creditor and from Westpac Bank as a substantial supporting	i ,..
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creditor, I previously allowed two adjournments in the matter

to permit the meeting to take place.	Although it always	, .
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appeared that the offer made to the creditors was on its face not particularly attractive, I could see no xeason why the creditors should not be given the opportunity to make up their

own minds in the matter.	They have now spoken quite loudly	;.
and quite clearly.	As there is no proposal before the Court,	I .

as there was none before the meeting of which there is any	; I
evidence, that the debtor is in any position to increase the	I
attractiveness of his offer, there is no reason that I can see	!
to grant an adjournment to permit a further Part X meeting at	-.
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some unstated time in the future. There is also no material	I
suggestive that an adjournment should be granted to permit	i . .

additional evidence of the debtor's impecuniosity.	It seems	> =
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quite clear from the evidence that he is insolvent to a very

substantial degree.

~e says that the offer in the Part X proposal to the meeting
was to have been obtained from members of his family. As that offer represented only a very small proportion of the debts, however, it seems quite unlikely that the offer would be able to be expanded sufficiently to make it attractive to any meaningful degree. The application for an adjournment on the grounds that additional evidence could be brought did not feature any evidence of this kind. It would seem that all that more evidence would establish is the debtorsr lack of funds and of capacity to obtain significant funds in the near

future .

The only question that really arises is whether the petition should be dismissed on the grounds that there would be no point in a bankruptcy. No cases or authority were quoted in this regard but the law has always allowed for the possibility

that petitions might be dismissed in circumstances where	sequestration and investigation by a trustee would clearly
achieve nothing. These cases are quite rare and there are very strict limits on the circumstances in which an otherwise proven right to a sequestration order should be denied.
The petitioning creditor suggests with some truth that little is known about the debtors' affairs, and argues that the nominated trustee should have an opportunity to investigate the matter and the estate. Certainly, he will need to be funded to do so as it appears that there will be little in the way of liquid funds in the estate to cover the trustee's costs. However, I doubt that that is a matter which I should really allow to influence me. It is always open to one or a combination of creditors to put a trustee in funds for the purpose of any investigation which the creditor(s) consider might produce some result.
If nothing is done and the trusteeship is aborted in practical terms because it is unfunded, then a debtor may seek discharge. Recent changes to the law in this regard appear basically to have been designed to facilitate the removal of people from bankruptcy where there is no point in continuing the bankruptcy. But it would be a strange case indeed where a debtor had sustained the high degree of indebtedness involved here but have a petition for his bankruptcy dismissed on the grounds that he had no money. This would merely encourage people who have used other people's money to run up debts, and
Court and say that they should not be made bankrupt because then having run out of money altogether, to come along to the
they have spent all the money they took from the other people. This is not the purpose of bankruptcy legislation and cannot be applied here.
There is no reason to bankrupt the female debtor and a sequestration order is not sought against her. I am satisfied that the male debtor has committed the act of bankruptcy alleged in the petition and with the proof of the other matters of which the Act required. I make a sequestration order against the estate of the male debtor and order that costs, including reserve costs, be taxed and paid according to the Act. I direct that a draft of this order be delivered to the registrar with seven days in accordance with rule 124(2).