Marko Fode v Stirling Horne (in His Capacity as trustee of the Bankrupt Estate of Marko Fode)
[2012] FMCA 982
•30 October 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MARKO FODE V STIRLING HORNE (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MARKO FODE) & ANOR | [2012] FMCA 982 |
| BANKRUPTCY – Application for annulment under s.153B of the Bankruptcy Act 1966 – whether the debt is a true debt – whether the residual discretion should be exercised in the bankrupt’s favour. |
| Bankruptcy Act 1966 ss.54, 77CA, 153B |
| Clark v Furnari [2007] FMCA 513 Re Frank; Ex parte Piliszky (1987) 16 FCR 396; 77 ALR 511 |
| Applicant: | MARKO FODE |
| First Respondent: | STIRLING HORNE (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MARKO FODE) |
| Second Respondent: | BARRY HAJDINJAK |
| File number: | MLG 302 of 2012 |
| Judgment of: | Riley FM |
| Hearing dates: | 9 and 10 October 2012 |
| Date of last submission: | 10 October 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 30 October 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms Umbers |
| Solicitors for the Applicant: | McDonald Slater & Lay |
| Counsel for the First Respondent: | No appearance |
| Solicitors for the First Respondent: | Madgwicks |
| Counsel for the Second Respondent: | Mr Sanger |
| Solicitors for the Second Respondent: | Burke & Associates Lawyers Pty Ltd |
ORDERS
The application filed on 19 March 2012 is dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 302 of 2012
| MARKO FODE |
Applicant
And
| STIRLING HORNE (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF MARKO FODE) |
First Respondent
And
| BARRY HAJDINJAK |
Second Respondent
REASONS FOR JUDGMENT
This is an application under s.153B of the Bankruptcy Act 1966 for the annulment of the applicant’s bankruptcy. Under that section, the court may make an order annulling a bankruptcy where the court is satisfied that the sequestration order “ought not to have been made”.
In Re Frank; Ex parte Piliszky (1987) 16 FCR 396; 77 ALR 511, Fisher J said at 403:
30.In the light of the various contrasting avenues open to a bankrupt to approach the court to have the sequestration order set aside, it is in my opinion necessary to attach significance to the "careful provisions" of s154 [now, s.153B], and in particular the words "ought not to have been made". In my opinion it can be said that a judge "ought" not to have made an order only if he was "bound" not to make the order. In circumstances where it was open to a judge to make an order in the exercise of his discretion, it can only be said he "ought not to have made the order" if none of the circumstances could justify the making of an order. Alternatively it can be established that an order "ought" not to have been made because subsequent evidence discloses that all of the true facts were not before the court when the order was made (Re Cook(1946) 13 ABC 245 at p.249).
…
32.… In my opinion "ought" in s.154(1)(a) is of imperative significance and an order should not be annulled unless the judge was in the circumstances bound not to make it and even then there is a residual discretion not to annul.
In the present case, the bankrupt argued that:
a)the judgment debt on which the bankruptcy notice and creditor’s petition were founded was not a true debt, because the money was not borrowed by him, but by his company, and the company had repaid the debt; and
b)the residual discretion should be exercised in his favour.
The bankrupt and the petitioning creditor were “double” brothers-in-law, meaning that the bankrupt was, but is no longer, married to the petitioning creditor’s sister and the petitioning creditor was, and still is, married to the bankrupt’s sister. The bankrupt and the petitioning creditor were both separately in business.
From 30 October 1995 until 14 September 2009, the bankrupt was a director, the secretary and the holder of 66 shares in MGD International Wholesalers Pty Ltd (“MGDIW”), which was a food importer. Two other directors, over the same period, were the bankrupt’s son, Gordon, who held 67 shares, and the bankrupt’s brother, Don, who held 48 shares. There was another director, Josip Blazanin, who held 67 shares and who was a director from 21 December 1999 until 15 April 2004. The bankrupt told the court that Mr Blazinin was sent to jail for excise offences and forgery.
A liquidator was appointed to MGDIW on 11 May 2005. In 2005, there was a business and asset transfer from MGDIW to MGD Australia Pty Ltd (“MGDA”). MGDIW was deregistered on 14 September 2009.
The bankrupt was a director of MGDA from 18 April 2004 until that company was deregistered on 12 April 2012. The bankrupt’s brother, Gordon, was a director of MGDA from 2003 until 2007.
The bankrupt was also a director and the secretary of BJMGD Nominees Pty Ltd (“BJMGD”) from 26 February 1999 until that company was deregistered on 14 December 2011. BJMGD was the trustee of the BJMGD Unit Trust, which was established on
26 February 1999 with the bankrupt as the initial unit holder.
The property at 13 Tarnard Drive Braeside was the only asset of the BJMGD Unit Trust. On that property was a warehouse which was leased to MGDIW and from which MGDIW conducted its business. In 2005, following the business and asset transfer, the property was occupied by MGDA.
The property at 13 Tarnard Drive Braeside was sold by MGDA to Josep and Katica Jurgec in about August 2009. They sold the property on 27 June 2011 to the bankrupt’s de facto wife, Silvija Milina, in whose name the property is now registered. The import business continues to be conducted from the same premises by MGD International Pty Ltd (“MGDI”), a company controlled by Silvija Milina.
The petitioning creditor said that:
a)he lent the bankrupt $92,500 in 1998;
b)he lent the bankrupt $90,000 in cash in 1999; and
c)the petitioning creditor’s company, BANP Nominees Pty Ltd, lent the bankrupt and MGDA jointly $96,500 on 8 March 2005.
The petitioning creditor said that the bankrupt repaid the $90,000 cash loan and made some payments in reduction of the other two loans but did not repay them in full. The outstanding balance of the $92,500 loan in 1998 is the subject of these proceedings.
The petitioning creditor, or his solicitor, said that:
a)in 1998, the bankrupt came to the petitioning creditor’s house and asked him for a loan of $92,500;
b)the bankrupt suggested that the petitioning creditor borrow money from the Westpac Bank, lend it to the bankrupt, and the bankrupt would repay the capital and the interest charged by the bank;
c)the petitioning creditor borrowed the money from the Westpac Bank via an Assetbuilder account and advanced to the bankrupt:
i)$85,000 plus $1,171.67 for loan establishment fees on or about 6 March 1998;
ii)$4,000 on or about 16 June 1998;
iii)$25,318.11 on or about 2 September 1998; and
iv)$7,000 on or about 22 September 1998;
d)the account was sufficiently in credit at the relevant times for all of those amounts to be advanced;
e)there was no written loan agreement because it was a family matter and the petitioning creditor trusted the bankrupt;
f)the bankrupt made numerous repayments, but did not discharge the loan in full, and interest continued to accrue;
g)on 11 May 2005, a liquidator was appointed to MGDIW;*[1]
h)the bankrupt acknowledged the debt on about 1 August 2007 by writing, in Croatian:
[1] * The petitioning creditor’s solicitor gave the evidence marked by an asterisk.
Barry, I pray of you to be patient
Once this is all calculated it will all be settled
Marko;
i)as at 6 August 2009, $65,185.17 remained outstanding;*
j)on 28 August 2008, the petitioning creditor’s solicitor sent a letter of demand to the bankrupt;*
k)on 17 August 2009, the bankrupt wrote the applicant a letter containing a commercially sophisticated proposal concerning the purchase of units in the BJMGD Unit Trust;*
l)on 14 September 2009, MGDIW was deregistered;*
m)on 18 November 2009, the petitioning creditor served on the bankrupt a Magistrates’ Court complaint;*
n)on 7 January 2010, judgment in default of defence was entered against the bankrupt;*
o)the bankrupt made no attempt to have the judgment set aside;*
p)on 28 September 2010, a bankruptcy notice was issued against the bankrupt;*
q)on 8 October 2010, the bankrupt’s de facto wife, Sylvija Milina, told a process server that the bankrupt was not at home or at work but accepted a business card from the process server;*
r)on 12 October 2010, the bankrupt telephoned the process server and said that he would never make himself available for service at home or at work;*
s)on 19 November 2010, a Registrar made an order for substituted service of the bankruptcy notice;*
t)the bankrupt committed an act of bankruptcy on 7 January 2011 (by failing to do any of the things contemplated by the notice);*
u)the creditor’s petition was filed on 31 January 2011;*
v)on 16 February 2011, the bankrupt’s de facto wife told the process server that she did not know the bankrupt;*
w)on 4 April 2011, a Registrar made an order for substituted service of the creditor’s petition;*
x)a sequestration order was made against the bankrupt’s estate on 12 May 2011;* and
y)the bankrupt did not attend the hearing of the creditor’s petition.*
The evidence given by the solicitor for the petitioning creditor was not challenged and I accept it.
On 18 July 2011, the bankrupt’s solicitors wrote to the trustee saying that they were instructed the bankrupt had a proper defence on the merits (without suggesting that the defence consisted of the wrong person having been sued) and said that judgement had been entered against the bankrupt, and the sequestration order had been made against his estate, because the bankrupt had been too ill to take care of his affairs (even though he had sent the commercially sophisticated letter dated 17 August 2009, which was after the letter of demand was sent on 28 August 2008 and before the Magistrates’ Court complaint was issued on 8 October 2009).
On 29 August 2011, the bankrupt’s mother died. The bankrupt, or rather, his trustee, is entitled to one sixth of her estate. The bankrupt did not advise the trustee of this circumstance.
The bankrupt filed his application for an annulment on 19 March 2012, about 10 months after the sequestration order was made.
The bankrupt’s trustee, whose evidence was unchallenged, said that:
a)the bankrupt was required to file a statement of affairs within 14 days of being notified of his bankruptcy, but he failed to do so, in breach of s.54 of the Act;
b)on 17 June 2011, the bankrupt told Mr Singh, of the Official Trustee’s office, that he had received documents from the Official Trustee and forwarded them to his solicitor;
c)on 27 June 2011, Mr Singh, on behalf of the Inspector General in Bankruptcy, filed a s.77CA notice regarding the bankrupt’s failure to lodge a statement of affairs;
d)the bankrupt lodged a statement of affairs on 29 June 2011;
e)on 9 February 2012, the bankrupt refused to provide the details of his Westpac account to an officer of the trustee notwithstanding her express request for those details;
f)on 18 July 2012, the bankrupt showed documents to an officer of the trustee which the bankrupt said proved he owed no money to the petitioning creditor, but he refused to allow the trustee to make copies of them until about six weeks later and after a written request;
g)the bankrupt did not disclose in his statement of affairs his residential property, in which he now claims to have an equity of between $200,000 and $240,000;
h)the bankrupt’s mother died on 29 August 2011 but the bankrupt did not advise his trustee of the bankrupt’s interest in his mother’s estate;
i)the bankrupt did not disclose any unsecured creditors in his statement of affairs, but the trustee’s investigations revealed the following potential unsecured creditors:
i)petitioning creditor: $72,787;
ii)Georgina Fode (ex-wife): $197,250;
iii)BANP Nominees Pty Ltd: $92,070;
$362,107;
j)on the information available to the trustee, the debt claimed by Georgina Fode is provable in the bankruptcy but those claimed by the petitioning creditor and BANP Nominees Pty Ltd are not.
The bankrupt accepted that, in 1998, he went to the petitioning creditor’s home and asked for a loan. However, he said that the loan was for MGDIW, not for him personally. The bankrupt produced a copy of the petitioning creditor’s bank statement for the Assetbuilder account, which showed $85,000 being transferred to the bank account of MGDIW on 6 March 1998.
The bankrupt also produced bank records which showed five repayments being made from the account of MGDIW to the account of the petitioning creditor. Those repayments were:
a)$1,000 on 30 April 2002;
b)$5,000 on 9 May 2002;
c)$1,000 on 28 June 2002;
d)$4,029 on 29 October 2002; and
e)$5,000 on 14 April 2003.
The petitioning creditor acknowledged that those repayments had been made in reduction of the debt. Indeed, all but the repayment of $4,029 were included in a schedule to the Magistrates’ Court complaint which included in detail the amounts advanced, the interest which accrued and the repayments. In relation to the $4,029 repayment, the petitioning creditor conveyed to the court by his counsel that it had been missed in the schedule, but that the amount claimed by the petitioning creditor should be reduced by that amount.
The bankrupt also produced bank records which showed that he repaid the petitioning creditor $50,500 on 28 April 2002. The bank records do not show whether the $50,500 came from MGDIW or from the bankrupt directly but do show that sum going into the petitioning creditor’s account. The petitioning creditor acknowledged receipt of the $50,500 but said that it had been in reduction of the cash loan of $90,000 in 1999, rather than the $92,500 loan in 1998. The petitioning creditor said that the balance of the $90,000 loan was repaid a few months later in $100 bills.
The petitioning creditor maintained that the bankrupt had been the borrower of the $92,500. The petitioning creditor said that the fact that the money was paid into MGDIW’s account did not mean that MGDIW was the borrower, but simply that the bankrupt had directed that the borrowed money be transferred directly to MGDIW. Similarly, the petitioning creditor said that the fact that the bankrupt used funds from MGDIW to partially repay the debt did not mean that MGDIW was the borrower. It simply meant that the bankrupt was applying monies that MGDIW owed him in reduction of his own debt.
I consider that the transfer of the funds directly into the account of MGDIW, and the partial repayment of the borrowing from the account of MGDIW, is not conclusive. It is not unusual for borrowers to direct that their borrowings be paid to a particular third party. Nor is it unheard of for people to use company accounts for personal purposes.
It is for the bankrupt to prove his case. As the bankrupt has accepted that the money was borrowed, he needs to persuade the court that the $92,500 was borrowed by MGDIW, rather than by the bankrupt personally, or that it has been repaid. In the absence of a loan agreement, or other solid documentary evidence, the case is essentially one person’s word against another’s.
There are a number of reasons to doubt that the bankrupt has been honest in relation to his financial affairs relating to his bankruptcy:
a)he filed his statement of affairs late and only after the matter was reported by the Inspector General;
b)he said in his statement of affairs that he had no interest in any real estate even though at all relevant times his residential property was registered in his name and he now claims he has equity in it of $200,000 to $240,000;
c)he failed to disclose his $25,000 Mastercard debt in his statement of affairs;
d)he attempted to explain this in oral evidence by saying that the Mastercard was only ever used for a company, and it was not a personal credit card;
e)however, he eventually he agreed that the Mastercard was in his own name;
f)he said in his statement of affairs that he was not the director of a company although at the time he was a director of MGD Australia Pty Ltd and BJMGD Nominees Pty Ltd;
g)he said that he had no help with his statement of affairs and completed it to the best of his ability;
h)however, on 17 June 2011, he told Mr Singh, of the Official Trustee’s office, that he had received documents from the Official Trustee (presumably including the statement of affairs) and had forwarded them to his solicitor;
i)for about six weeks, he refused to allow the trustee to make copies of documents he said proved he did not owe any money to the petitioning creditor;
j)he refused to provide the trustee with details of his Westpac Bank account;
k)he did not advise the trustee of his mother’s death on 29 August 2011 and the fact that he had a one sixth share in her estate;
l)he said that the loan from the petitioning creditor to MGDIW was recorded in the company’s books but he did not produce any company records to indicate that the company had borrowed money from the petitioning creditor;
m)he said most of the company records were seized by Customs, in relation to the prosecution of Mr Blazanin;
n)however, it seems unlikely that Customs would have seized the documents relating to the loan in dispute because Mr Blazanin did not become a director of MGDIW until nearly two years after the loan was obtained;
o)the bankrupt said that MGDIW had an accountant but he did not explain why the accountant was not able to produce copies of relevant documents from his computer records, such as balance sheets and company minutes;
p)the bankrupt said that the loan was obtained with the agreement of his co-directors, his brother, Don, and his son, Gordon;
q)however, neither of the co-directors were called and there was no explanation for the failure to call them (although the bankrupt did say in another context that his son has not spoken to him for five years);
r)he said in oral evidence that he did not deal with the Magistrates’ Court complaint against him because he was sick;
s)however, in his affidavit sworn on 15 March 2012, he said at paragraph 11 that he did not respond to the Magistrates’ Court complaint because at the time he had been discussing with the petitioning creditor that it was a company matter and there were miscalculations in the amount claimed and he did not think the petitioning creditor would proceed with the matter while the bankrupt’s questions were unanswered;
t)when asked about the different explanations for his failure to deal with the Magistrates’ Court complaint, the bankrupt said that his affidavit was correct and his oral evidence had been wrong;
u)the explanation in the bankrupt’s affidavit differed from the explanation given in his solicitor’s letter dated 18 July 2011, when it was also said that the bankrupt had not dealt with the Magistrates’ Court matter because he was sick;
v)the bankrupt did not defend the Magistrates’ Court complaint and did not seek to set aside the judgment at any time between the entry of judgment on 7 January 2010 and the making of the sequestration order on 12 May 2011, even though the bankrupt acknowledged that he was well aware of the judgment;
w)the bankrupt told a process server that he would not accept service of the bankruptcy notice, at home or at work;
x)the bankrupt said in his affidavit that he could not explain his failure to deal with the bankruptcy notice;
y)the bankrupt said that he did not respond to the creditor’s petition because he was unwell;
z)the bankrupt exhibited to his affidavit two medical reports, but neither medical practitioner went on oath himself;
aa)neither medical report specifically explained why the bankrupt was unable to attend court for the creditor’s petition on 12 May 2011, or instruct a solicitor to seek an adjournment;
bb)the medical reports indicate that the bankrupt saw one doctor on 17 February 2011 and then saw him again on 21 July 2011 and the bankrupt last saw the other doctor on 4 January 2011;
cc)while the medical reports indicate that the bankrupt had serious health issues recently, the reports are vague about the impact of those health issues at relevant times; and
dd)the medical reports do not proffer an explanation for the bankrupt being unable to attend to the Magistrates’ Court complaint.
On the other hand, there was nothing to suggest that the petitioning creditor was not an honest witness. However, he did say in cross examination that if he had been unable to recover an investment he had made in BJMGD Nominees Pty Ltd, one of the bankrupt’s companies, he would have sued the bankrupt. When it was put to him that he did not understand the difference between a company and an individual, he said that he had made a mistake, and he would have sued, but, by implication, he would not have sued the bankrupt.
Overall, I prefer the evidence of the petitioning creditor about the identity of the borrower of the $92,500 in 1998 and the repayment of the $50,500. I consider that, in the heat of the moment in court, the petitioning creditor made a mistake about who he would have sued in relation to the BJMGD loan. There was nothing to suggest that he would in fact have sued the wrong person if he had had a chance to reflect on the matter with the benefit of legal advice. Having seen the petitioning creditor in the witness box, I consider that the petitioning creditor was an honest witness.
The bankrupt, conversely, has repeatedly and over an extended period of time been less than honest. He has failed to disclose a number of significant matters to his trustee. He gave one explanation for his failure to deal with the Magistrates’ Court complaint in his affidavit and another in his oral evidence.
Moreover, some of the bankrupt’s evidence was simply unconvincing. He claimed that the records of MGDIW showed that the loan of $92,500 was made to MGDIW. However, he produced no company records to substantiate that claim and did not adequately explain his failure to do so. He said his co-directors had agreed to the borrowing but called no evidence from them and he did not adequately explain their absence.
Some of the bankrupt’s conduct is best explained by the bankrupt accepting, until the present application was filed, that he did in fact owe the debt claimed by the petitioning creditor in the Magistrates’ Court complaint. The bankrupt did not respond to the letter of demand or the complaint. He did not seek to set aside the judgment. He conceded that he told the process server that he would not make himself available to accept service of the bankruptcy notice and he said he had no explanation for his failure to deal with the bankruptcy notice. He failed to attend the hearing of the creditor’s petition.
The bankrupt failed to instruct solicitors to deal with any aspect of the debt until about July 2011. Having done that much, the annulment application was not filed until 19 March 2012. That was three and a half years after the letter of demand was sent in August 2008.
All in all, I do not consider that the bankrupt was an honest witness. I am not persuaded that the petitioning creditor, in 1998, lent $92,500 to MGDIW rather than the bankrupt and I am not persuaded that MGDIW, or the bankrupt, repaid that debt. On the balance of probabilities, and on the evidence before me, I consider that the debt claimed by the petitioning creditor (less the $4,029 that has now been acknowledged as having been repaid) is a true debt owed by the bankrupt.
Even if I am wrong about that, it seems to me that it would not be appropriate to exercise the residual discretion in the bankrupt’s favour.
One reason for that is that the bankrupt does not appear to have been solvent at the time the sequestration order was made on 12 May 2011, leaving aside the debts claimed by the petitioning creditor. At about the time of the sequestration order, the bankrupt claimed that his only significant assets were equity in his residential property and a BMW car he said was worth about $3,000. He provided an appraisal of the property from a real estate agent as at 10 February 2012. The agent said:
… we feel confident of achieving a sale in the vicinity of $400,000 - $440,000.
This was an appraisal rather than a sworn valuation. It seems to me to be proper for present purposes to take the lower value. The bankrupt said that he had a mortgage of about $200,000. That leaves equity of about $200,000. Adding the value of the car gives assets of about $203,000.
Against that is the debt claimed by Georgina Fode. At the time of the sequestration order, that debt was about $188,000. The trustee has admitted the debt, for reasons that are unclear, in the sum of $197,250. For present purposes, it seems to me to be appropriate to use the lower figure.
The bankrupt said that he disputes the debt, and, if the annulment is granted, he will defend the claim in the County Court. However, the bankrupt adduced no evidence to prove that the debt claimed by Ms Fode, and admitted by the trustee, is not a genuine debt. I consider that it should be taken into account as a liability of the bankrupt.
In addition, the bankrupt owes $25,000 to Mastercard. Adding that figure to the $188,000 owed to Georgina Fode gives $213,000. Consequently, the bankrupt’s liabilities exceeded his assets as at the date of the sequestration order, being 12 May 2011.
More to the point, the bankrupt apparently had no means to repay his debts within a reasonable time as at 12 May 2011. He claims to be a pensioner and to have no other source of income. There was some evidence to the effect that the bankrupt still works at the import business, but he did not seek to persuade the court that he is in receipt of income from that source.
Additionally, the bankrupt seemed to be insolvent at the time of the hearing. The bankrupt’s financial position has changed somewhat since May 2011. He expects to receive about one fifth of his mother’s estate. That is likely to be worth about $110,000. However, on his estimate, that money is unlikely to be distributed in less than three months. Consequently, it cannot be taken into account in assessing his present solvency.
In addition, the trustee’s remuneration, disbursements and legal costs total about $55,000. The petitioning creditor’s legal costs, which, in the event of an annulment, the bankrupt would have to pay, are also likely to be substantial. All in all, it seems clear that the bankrupt is not presently solvent.
Be that as it may, the bankrupt submitted that the correct approach in relation to the residual discretion was set out by McInnis FM in Clark v Furnari [2007] FMCA 513 at [20]. His Honour said the relevant factors are:
"(a)Delay by the bankrupt in making the application (see Wong v Robinson[1995] FCA 805 at 7) ("Wong");
(b) Interest of creditors;
(c)Failure to file a statement as to affairs (see Piepkorn v Scott[2005] FCAFC 88 at 3);
(d)Failure to make a full disclosure (see Re Pappas; ExParte Tapp(1997) 78 FCR 524 at 531);
(e)Making arrangements to pay the debt to the petitioning creditor and the trustees costs (see Wong at 8);
(f)conduct of the bankrupt since bankruptcy including committing offences (see Ozer v Australian Liquor Marketers Pty Ltd[1999] FCA 1206 at 26)."
In the present case, the bankrupt clearly delayed in making the application. The sequestration order was made on 12 May 2011. The bankrupt was certainly aware of the order by 17 June 2011, when he told an officer of the trustee that he had received documents from the trustee. The bankrupt had certainly instructed solicitors by 18 July 2011, when those solicitors contacted the trustee. And yet the bankrupt did not file the annulment application until 19 March 2012. That is a considerable delay in a bankruptcy matter.
In relation to the interests of creditors, it was submitted by the petitioning creditor that the BANP debt might now be statute barred. However, there was no evidence of that placed before the court so I disregard it.
Regarding the failure to file a statement of affairs, the bankrupt did not file his statement until the Inspector General in Bankruptcy filed a notice under s.77CA. Even then, the statement of affairs contained a number of inaccurate statements. The bankrupt maintained that he had completed the statement to the best of his ability and without help. However, he is an experienced businessman. The errors in the statement of affairs cannot be explained by the bankrupt’s lack of ability. Moreover, he told the trustee that he had sent the relevant papers to his solicitor. He could clearly have had help if he had wanted it.
The bankrupt failed to disclose various matters, including his inheritance, his directorships and his interest in real estate.
The bankrupt has offered to pay the trustee’s costs from his share of his mother’s estate. He proposes that the annulment be stayed pending the distribution of the estate, in about three months time. I consider that to be a wholly inadequate proposal. The proposal did not clearly include the petitioning creditor’s costs, though that may have been implicit.
Regarding the conduct of the bankrupt since bankruptcy, the bankrupt has clearly filed his statement of affairs late, failed to disclose significant matters to his trustee, made false statements in his statement of affairs and has, in the trustee’s words, been uncooperative. Some of these matters may well constitute offences.
Taking all of the matters identified in Clark v Funari into account, I consider that, whether or not the underlying debt was a true debt, the residual discretion should not be exercised in the bankrupt’s favour.
Consequently, the application will be dismissed.
I certify that the preceding fifty-one (51) paragraphs are a true copy of the reasons for judgment of Riley FM
Date: 30 October 2012
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