Miller, D.E.E v Bondi Securities

[1994] FCA 654

DORIS EMILY ELIZABETH MILLER v BONDI SECURITIES AND THE OFFICIAL TRUSTEE IN
BANKRUPTCY
No. NB739 of 1993
FED No. 654/94
Number of pages - 23
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
GENERAL DIVISION
BEAZLEY J

CATCHWORDS

Bankruptcy - application pursuant to s153B of the Bankruptcy Act 1966 to annul bankruptcy - whether sequestration order irregularly obtained - whether on annulment application court should look behind the judgment to determine whether a debt exists - in looking behind judgment court may be guided by similar principles to those which govern setting aside of judgments - effect of fraud or falsehood in affidavit of debt - whether order for substituted service of Bankruptcy Notice and Creditor's Petition was obtained by fraud - court's residual discretion whether to annul bankruptcy, even where ground made out - factors relevant to that discretion - whether applicant is solvent - delay in bringing the application.

Bankruptcy Act 1966

Re Frank; Ex parte Piliszky (1987) 16 FCR 396
Re Williams (1968) 13 FLR 10
Re Finn and Anor; Ex parte Amoco Australia Ltd and Official Receiver in Bankruptcy (1982) 41 ALR 487
M V Bourke and Anor v Beneficial Finance Corporation Limited (unreported Full Court of the Federal Court 8 December 1993)
Emerson v Wreckair Pty Ltd (1992) 33 FCR 581
Corney v Brien (1951) 84 CLR 343
Wren v Mahony (1972) 126 CLR 212
Owens Bank Limited v Bracco (1992) 2 AC 443
Monroe Schneider Associates (Inc) v No. 1 Raberem Pty. Limited (No. 2) (1992) 37 FCR 234
Trojan v Corporation of Hindmarsh (1987) 16 FCR 37

HEARING

SYDNEY, 7 March, 5, 6 and 16 May 1994
#DATE 2:9:1994

The applicant appeared in person.

Counsel for the Respondent: Mr J K Chippindall

Solicitors for the Respondent: Beilby Poulden Costello

ORDER

1. The application be dismissed.

2. The applicant pay the respondent's costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

BEAZLEY J This is an application brought pursuant to s153B of the Bankruptcy Act 1966 to annul the bankruptcy made on 23 March 1993 against the estate of Doris Emily Elizabeth Miller. Section 153B provides:

"If the Court is satisfied that a sequestration order ought not to have been made...the Court may make an order annulling the bankruptcy."

1. The application was based broadly on two grounds. First, the applicant alleges that the bankruptcy was irregularly obtained. Secondly, she alleges there is or was no debt owing to the petitioning creditor. For the reasons which appear below, I propose to dismiss the application.

Background
3. In early 1983, the applicant guaranteed two loans incurred by Kinconne Pty Ltd (Kinconne), a company of which the applicant was a shareholder and director, in respect of borrowings from Bondi Securities Pty Ltd (the petitioning creditor) for the purchase of both the realty and the business of the Avoca Nursing Home at 183 Avoca Street, Randwick. Kinconne is now in liquidation.

1. In 1989, the petitioning creditor commenced proceedings against the applicant in the Supreme Court of New South Wales, Commercial Division, (the Supreme Court proceedings), seeking judgment in the sum of $279,166.62, being the amount alleged to be outstanding in respect of the guaranteed loans. The Supreme Court proceedings were heard by Cole J, who, on 8 June 1990, gave judgment in favour of the petitioning creditor in the sum of $257,000. In his judgment, Cole J set out details of the various transactions which gave rise to the applicant's indebtedness. Save to the extent that I state below, his Honour's findings in relation to those transactions were not challenged by the applicant in these proceedings (the annulment proceedings), and his Honour's judgment thus provides a convenient source from which to draw the background information in the matter.

2. The purchase price of the business of the Avoca Nursing Home was $60,325. Statements made during the course of the annulment proceedings raise a doubt as to whether the petitioning creditor was the vendor of the business. However, there is no dispute that on 26 September 1983, the petitioning creditor loaned Kinconne $40,000 towards the purchase price. That loan was repayable by twelve equal instalments of $3,333.33. It appears that sometime prior to that, the petitioning creditor had given Kinconne an option to purchase the land upon which the nursing home was built, together with a home unit at Waverley (the realty). On 26 September 1983, the petitioning creditor and Kinconne also entered into an agreement for the sale of the realty, in respect of which the petitioning creditor advanced the sum of $265,000 to Kinconne, secured by mortgages over the realty (the mortgage). The mortgage advance was repayable in two instalments, the first of $130,000 after three years and the balance in six years. Interest payments were $3,533 per month. Both loan transactions were settled on 30 September 1983. The applicant and another person guaranteed Kinconne's obligations under both loans.

3. Cole J found that in July 1985, Kinconne received a further $50,000 advance from the petitioning creditor (the $50,000 advance), which became incorporated into the principal sum due under the mortgage. His Honour also found that on 29 July 1985 the petitioning creditor advanced the sum of $20,000 to the applicant personally (the $20,000 personal loan). An amendment to the pleadings was permitted to include this amount, which became part of the judgment sum.

4. One of the issues in the Supreme Court proceedings related to a deed of charge over the whole of Kinconne's assets, executed on 18 May 1987 by Kinconne in favour of the petitioning creditor. The deed of charge was expressed to be given in respect of all monies then or thereafter becoming owing by Kinconne to the petitioning creditor. At that time, Kinconne owned a boating business called "Mr Boats". The petitioning creditor exercised the power of sale given by the deed of charge and sold the Mr Boats business for $150,000 plus stock for $35,000. The petitioning creditor lent to the purchaser the total sum of $185,000, which was repayable by instalments. His Honour held that these terms of sale were permitted by the deed of charge. His Honour further held that the effect of the power of sale provision in the deed of charge was that only such sums as were actually received were to be credited to Kinconne's account with the petitioning creditor and only from the date of receipt. Only $70,000 of the purchase price was paid. However, holding charges exceeded this amount. Consequently, there were no credits to Kinconne's account arising out of this transaction.

History of the Bankruptcy Proceedings
8. On 29 May 1991, the petitioning creditor applied for the issue of a bankruptcy notice based upon the judgment in the Supreme Court proceedings, together with interest, requiring the payment of $304,555.57 or the securing or compounding of such sum within 21 days after service of the notice. On 17 October 1991, the period within which service of the bankruptcy notice was to be effected was extended to 29 May 1992. On 25 November 1991, the petitioning creditor applied for an order of substituted service of the bankruptcy notice. On 4 February 1992, an order for substituted service of the bankruptcy notice was made, together with an order that the bankruptcy notice be amended so as to require compliance within 21 days after 3 March 1992, excluding that date.

1. On 12 May 1992, the petitioning creditor presented the creditor's petition, alleging that the applicant was indebted to it in the sum of $257,000, being the amount due under the Supreme Court judgment; that the applicant had committed an act of bankruptcy by failing to comply, on or before 24 March 1992, with the bankruptcy notice served on her on 3 March 1992; and that the applicant had not satisfied the court that she had a counter-claim, set-off or cross demand equal to or exceeding the sum specified in the bankruptcy notice. The Creditors Petition was signed by one of its director's Mrs Josephine Petrie (Mrs Petrie). Paragraphs 1, 2 and 3 of the Bankruptcy Petition were verified by Ken Petrie (Mr Petrie), Mrs Petrie's husband who was also a director of the petitioning creditor.

2. On 28 August 1992, the petitioning creditor filed an application for substituted service of the petition. The affidavit in support of the application for substituted service was again that of Mr McAllison, sworn 25 August 1992. On 21 September 1992, the Court made an order for substituted service of the petition. Service was effected in accordance with the order of the court.

3. The petition was first listed for hearing on 23 October 1992 before Registrar Jurd. Mr Pooley, solicitor, appeared for the petitioning creditor and Mr English of Verekers, Solicitors, appeared for the applicant and filed a notice of intention to appear at the hearing of the petition. The grounds of opposition contained in the notice were that the applicant did not receive the bankruptcy notice and that the calculation of the judgment debt required consideration. By consent, the registrar adjourned the petition to 24 November 1992 and directed the applicant to file and serve any affidavits in opposition to the petition within fourteen days. Affidavits in reply were to be filed within a further fourteen days.

4. On 18 November 1992, the applicant's solicitors requested particulars of the outstanding debt which, as at 24 November 1992, had not been provided. On 24 November 1992, the petition again came before Registrar Jurd. Mr Pooley appeared for the petitioning creditor and Mr Johnson of counsel appeared for the applicant. By consent the petition was adjourned until 15 December 1992 for further directions. The petitioning creditor was directed to provide, on or before 8 December 1992, the particulars of debt sought in the letter of 18 November 1992. On this occasion, the registrar noted that the debt underlying the petition was in dispute.

5. On 15 December 1992, the matter was listed before Registrar Lane. Mr Johnson of counsel appeared for the debtor and Mr Pooley appeared for the creditor. The matter was adjourned to 22 February 1993, and the registrar directed the petitioning creditor to provide on or before 31 January 1993, the particulars of debt sought on 18 November 1992. The registrar noted that "particulars had not been provided earlier due to illness". The illness referred to was that of Mr Petrie, the director of the petitioning creditor. Mr Petrie did not recover from his illness and died on 24 January 1992.

6. The matter came before Registrar Lane again on 22 February 1993. Mr Motbey of counsel appeared for the petitioning creditor and Ms P Giessller, solicitor, appeared for the applicant. On this occasion, the registrar made the following directions: "(1) That the debtor file and serve by 4:00pm on Thursday 11 March 1993 all affidavit evidence that she intends to rely upon in defence of the petition; (2) That the proceedings stand adjourned to 9:15am on 23 March 1993 for hearing".

7. On 23 March 1993 the matter was listed before Registrar Segal. Mr English appeared for the applicant and Mr Motbey appeared for the petitioning creditor. At this time, the particulars had still not been provided in full and Mr English made an application for discovery, which if granted, would have involved a further adjournment of the matter. Registrar Segal referred the matter to Burchett J, who refused the order and remitted the matter back to the registrar, who made a sequestration order against the applicant's estate. The registrar noted that the date of commission of the act of bankruptcy was 24 March 1992.

8. Nothing happened in the matter thereafter until 27 August 1993, when the Official Trustee in Bankruptcy, as trustee of the applicant's estate, made an application to the court under s135(1) of the Bankruptcy Act 1966 to enter into a transaction with Nancy Charlotte Bartlett in respect of the Kiama Private Nursing Home, a business of which the applicant had been the proprietor. The applicant opposed that application. However, in submissions which the applicant made in opposition to that application, she appeared to seek to challenge the underlying basis of the sequestration order. She subsequently filed the annulment application.

9. I have already set out briefly the grounds upon which the annulment application is based. It is now necessary to deal with the grounds as they were advanced in the course of the proceedings. Pursuant to directions which I made, the applicant's son, Mr Tubb, who assisted the applicant in the annulment proceedings, filed a statement of "Perceived Issues". That document stated:
   

"That the Sequestration Order dated 23/03/1993 in the proceedings B1376 of 91 be annulled on the grounds that the order ought not to have been made for the following;

a. That Josephine Petrie at the time of signing her Affidavit dated 22nd March 1993 was suffering distress and exhaustion, and at the relevant time had no knowledge of the facts matters or circumstances surrounding the proceedings to enable her to properly swear any Affidavit. b. That the Creditors Petition dated 11th May 1992 is in error. c. That all assets seized by the Petitioning Creditor for payment of the alleged debt in the Creditors Petition has not been accounted for or offset against that debt at the time.

d. That Substituted Service was obtained from scandalous and hearsay information for the purpose of denying me any right of defence.

e. Petitioning Creditor's legals (sic) acted with a conflict of interest and in collusion.

f. That untrue and misleading information was submitted to the courts to dispense with normal time factors and expediate

(sic) its process."

1. Before dealing with each of these grounds, it is convenient to refer to the principles which govern an annulment of a bankruptcy.

Principles Governing Annulment of Bankruptcy
19. It is clear, both from the language of s153B and the authorities, that the court has a discretion as to whether or not to annul a bankruptcy. In Re Frank; Ex parte Piliszky (1987) 16 FCR 396 Fisher J, in dealing with s154(1)(a) of the Bankruptcy Act (which relevantly is in the same terms as s153B), stated at 403, after reviewing the authorities:

"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."

1. In Re Williams (1968) 13 FLR 10, the court was concerned with a misleading statement in the affidavit verifying the petition, namely, an assertion that, the statements in the petition were within the deponent's own knowledge true, when this was not the case. Gibbs J said at 23 (also dealing with s154):
   

"Section 154(1) provides that where the court is satisfied (inter alia) that a sequestration order ought not to have been made the court may make an order annulling the bankruptcy. Under this section there are two matters which the court has to consider, first, whether a sequestration order ought not to have been made, and then, if the court is satisfied of that, whether in the exercise of the court's discretion the order should be discharged (see Delph Sing v Wood (1918) 25 CLR 497 at 498, per Street J whose decision was affirmed by the High Court). In determining the question whether the sequestration order ought not to have been made, the court is entitled to consider not only the case as disclosed at the time the order was made, but as it would have been disclosed had all the true facts been before the court on the making of the order (Re Cook (1946) 13 ABC 245 at 249). If the court is satisfied that the order ought not to have been made, it is not bound as a matter of course to annul the order, but must consider in the light of all the circumstances of the case whether the order ought to be annulled. (Delph Sing v Wood at 498-9; Re Lawson (1939) 11 ABC 137 at 139)."

His Honour concluded, at 24, that on the evidence before him, the statements were in fact true and stated: "(i)f the matter is viewed in the light of the evidence that has been placed before me as well as in the light of the affidavits placed before (the trial judge) it seems to me that it cannot be held that the sequestration order ought not to have been made." Other factors which his Honour took into account in the exercise of his discretion in refusing to annul the bankruptcy were that the bankrupt had delayed for a period of over two years before making the application for annulment and had not placed any evidence before the court to show that he was solvent. Further his Honour stated at 25: "In all the circumstances of the case, even if it were right to say, contrary to the view that I have formed, that the sequestration order ought not to have been made, I would in the exercise of my discretion refuse this application for annulment."

1. In Re Finn and Anor; Ex parte Amoco Australia Ltd and Official Receiver in Bankruptcy (1982) 41 ALR 487 Fitzgerald J considered that matters relevant to his discretion in that case were the inability of the bankrupts to pay their debts, the fact that it was in accordance with the spirit of the Bankruptcy Act that persons such as the bankrupts, who are unable to pay their debts, should have their estate administered for the benefit of their creditors by a trustee; the fact that the creditor had not obtained an advantage through its failure to comply with the Act; and the delay in the bringing of the application to annul the bankruptcy.

2. In the proceedings before me, as it is part of the applicant's case that Cole J's judgment was in error and further that she does not owe the monies alleged by the petitioning creditor in the petition, it is also necessary to consider the circumstances in which the court will go behind a judgment debt to determine whether there is, in truth, a debt owing to the petitioning creditor. It is to be remembered of course that the application here is not to set aside the Supreme Court judgment, but to annul the bankruptcy, including, as I have said, upon a ground that there is no debt owing to the petitioning creditor and that Cole J was in error in his judgment in finding that there was. That ground requires the court to consider whether it should look behind that judgment to determine whether, in truth, a debt exists. In the exercise of that jurisdiction the court may in an appropriate case be guided by similar principles to those which govern the setting aside of a judgment: see M V Bourke and Anor v Beneficial Finance Corporation Limited (unreported Full Court of the Federal Court 8 December 1993).

3. In Emerson v Wreckair Pty Ltd (1992) 33 FCR 581 the Full Court of the Federal Court said that it is not open to doubt that a court exercising jurisdiction in bankruptcy may "go behind" a judgment to ascertain whether or not the judgment was founded on a real debt. (Corney v Brien (1951) 84 CLR 343). The basis upon which it may do so was expounded by Barwick CJ in Wren v Mahony (1972) 126 CLR 212 at 224:
   

"The judgment is never conclusive in bankruptcy. It does not always represent itself as the relevant debt of the petitioning creditor, even though under the general law, the prior existing debt has merged in a judgment. But the Bankruptcy Court may accept the judgment as satisfactory proof of the petitioning creditor's debt. In that sense that court has a discretion. It may or may not so accept the judgment. But it has been made quite clear by the decisions of the past that where reason is shown for questioning whether behind the judgment or as it is said, as the consideration for it, there was in truth and reality a debt due to the petitioning creditor, the Court of Bankruptcy can no longer accept the judgment as such satisfactory proof. It must then exercise its power, or if you will, its discretion to look at what is behind the judgment: to what is its consideration."

1. It must be remembered that this statement has to be applied within the context of the principle that there should be finality to litigation. See Owens Bank Limited v Bracco (1992) 2 AC 443, where Lord Bridge said at 489:
   

"An English judgment, subject to any available appellate procedures, is final and conclusive between the parties as to the issues which it decides. It is in order to preserve this finality that any attempt to reopen litigation, once concluded, even on the ground that judgment was obtained by fraud, has to be confined within such very restrictive limits."

1. This passage was cited with approval by the Full Court of this court in Monroe Schneider Associates (Inc) v No. 1 Raberem Pty. Limited (No. 2) (1992) 37 FCR 234. As intimated in the Owens Bank case, a classic example of the circumstances in which a court will go behind a judgment is where the judgment has been obtained by fraud. However, in the case of fraud, it must be proved by fresh evidence which was not available and could not have been discovered with reasonable diligence before the judgment was delivered: see Monroe Schneider; Cabassi v Vila (1940) 64 CLR 130, Orr v Holmes (1948) 76 CLR 632, McDonald v McDonald (1965) 113 CLR 529, Re Barrell Enterprises (1973) 1 WLR 1. Although the giving of perjured evidence may constitute a species of fraud, the courts have been reluctant to set aside judgments solely on the ground that perjured evidence was given. In Monroe Schneider the court stated, at 242, that evidence going to a collateral issue, such as the credit of witnesses who gave evidence and were cross examined at trial, may lack the necessary materiality for the court to act upon it for the purposes of setting aside the judgment.

2. Another restriction upon the court going behind a judgment arises, at least in the case where the court is determining the validity of a bankruptcy notice, where it is found that although there was an error in the amount of the judgment, monies are still in fact owing to the petitioning creditor. See Emerson and Anor v Wreckair Pty Ltd (1992) 33 FCR 581 at 588-589 where the Full Court said:
   

"It would...seem appropriate that upon an application to a court exercising jurisdiction in bankruptcy to set aside a bankruptcy notice the court should not go behind the judgment where the grounds upon which the judgment is challenged are such that, if accepted, they would only support a finding that the amount of the debt be reduced and will not support a finding that there was in truth no debt at all."

In my opinion, this principle also applies where the court is dealing with an application for annulment of a bankruptcy upon a ground that the judgment debt or part of it was not owing.

Grounds of Application
27. It is now necessary to turn to the various grounds upon which the applicant relies to have the bankruptcy annulled, which it is convenient to summarise as and in the following order, and in doing so I will indicate the paragraph letter of Mr Tubb's "Perceived Issues" which I consider to be included in the ground: (i) whether Mrs Petrie's affidavit of debt was false - ground (a); (ii) whether the debt is in fact owing and whether the court should go behind the judgment - ground (b); (iii) whether the orders for substituted service were obtained by false or scandalous evidence and for an improper purpose - ground (d) and possibly ground (f); (iv) whether the petitioning creditor's solicitors acted with a conflict of interest or collusively - ground (e); (v) whether credit should have been given for assets of the applicant which have been sold so as to offset the debt alleged in the petition - ground (c).

Whether Mrs Petrie's Affidavit of debt was false
28. It will be recalled that Mr Petrie died on 24 January 1992 and that the Rule 21 affidavit of debt was sworn by Mrs Petrie. There was an obvious error in the jurat clause of that affidavit, which stated that the affidavit was sworn at Bondi Junction where the petitioning creditor's solicitors had their office, whereas it was sworn at Mrs Petrie's home at Randwick. This error was explained by Mr Pooley, solicitor. He said that he had initially intended that Mrs Petrie attend his office to swear the affidavit. When he rang to arrange for her to do so, Mrs Petrie was unwell and unable to get to his office. Mr Pooley then went to Mrs Petrie's home at Randwick, and the affidavit was sworn there in his presence. Apparently he overlooked that the jurat clause referred to Bondi Junction. As he said in his affidavit: "The discrepancy on the Affidavit as to the location being Bondi Junction, was merely an error on my part". Mr Pooley was not cross-examined and Mrs Petrie confirmed this evidence. I accept this explanation and do not consider the error to be of any significance in this application.

1. However, the content of the affidavit of debt raises different considerations. As the matters to which Mrs Petrie deposed are central to the applicant's application to annul the bankruptcy, it is necessary to set out the relevant portion of the affidavit which was as follows:
   

"3. I have checked the accounting records of the Petitioner relating to the abovementioned Debtor, I have made due enquiries with the Petitioner's Solicitors Lyons and Lyons, and had numerous discussions with Ken Petrie (deceased) the Managing Director of Bondi Securities Pty Limited, and have found that the debt stated in paragraph 2 of the petition is still owing by DORIS EMILY ELIZABETH MILLER subject to a reduction of the debt by $75,000 for monies received from Kinconne Pty Ltd a company associated with DORIS EMILY ELIZABETH MILER."

1. Mrs Petrie said she read the affidavit and knew that it was about the monies that were owing to her husband or the company. She also said that her solicitor probably explained the affidavit of debt to her. Mrs Petrie conceded in cross-examination that before swearing the affidavit, she did not examine the accounting records of the petitioning creditor. She said that she signed the affidavit because over the years the subject of monies owing had come up and she "...just took it for granted and left it all to my husband...". She also said that she took her husband's and solicitor's word for the fact that there were monies owing. She said she couldn't say that the amount stated in paragraph 3 was correct "...because I wouldn't know. I just took the other people's word for it. Because I was acting on behalf of my dead husband." She said that she was not involved in the business in any way and did not examine the company records before swearing the affidavit.

2. Mrs Petrie stated that at all times Mr Lyons of Lyons and Lyons had been her instructing solicitor. However, whilst Mr Lyons had acted as solicitor for the petitioning creditor both before and after the Supreme Court proceedings, he had not been involved with its financial dealings. Mr Lyons gave evidence that from time to time other solicitors in the office had carriage of legal work on behalf of the petitioning creditor and Mr Petrie. It is apparent from other evidence that Mr Pooley, a solicitor with the firm of Lyons and Lyons had the carriage of the bankruptcy proceedings on behalf of the petitioning creditor. There was no evidence that he was the solicitor referred to in paragraph 3 of Mrs Petrie's affidavit of debt, and the earlier evidence of Mrs Petrie does not indicate this was so. In any event, Mrs Petrie's evidence that she had checked the petitioning creditor's books and records was admittedly false.

3. I consider the fact that paragraph 3 of the affidavit of debt was false not only to be a serious matter, but it also provides a ground upon which the bankruptcy could be annulled. However, whether the bankruptcy should be annulled involves a consideration of all the circumstances of the case.

Whether Debt Owed to Petitioning Creditor/Whether Court should go behind the Judgment
33. As I have said earlier, on 8 June 1990, judgment was entered for the petitioning creditor against the applicant in the sum of $257,000. The applicant's position as to whether she owed any monies to the petitioning creditor varied during the course of the annulment proceedings. Initially, Mr Tubb stated that save for the $50,000 advance, the applicant was not disputing the existence of a debt owed to the petitioning creditor. He reiterated this on several occasions. If this was the case, it would not be appropriate for the court to go behind the judgment: Emerson and Anor v Wreckair. However, later in the proceedings, he said that liability for the debt was challenged and the applicant gave evidence that no monies were owed. The case which was finally made in respect of the existence of the debt was that Cole J erred in finding that the $50,000 advance was a loan from the petitioning creditor to Kinconne; that the $20,000 personal loan was a loan from Mr Petrie and not from the petitioning creditor; that his Honour had erred in finding that Kinconne did not keep proper books and records; that his Honour had relied on the hearsay evidence of Mr Lyons; and that credit should have been allowed for the $185,000 sale price of the Mr Boats business. The applicant did not abandon her contention that she had repaid the debt to the petitioning creditor in full. It will be immediately apparent from what I have said as to the principles governing whether a court should look behind a judgment that none of these factors is sufficient to cause the court to do so. However, as the applicant expended considerable time and energy on this issue, it is appropriate that I address these contentions more fully.

1. The applicant's evidence in the Supreme Court proceedings was based, in part, upon a computer printout prepared by the applicant's son, Mr Tubb. During the course of the annulment proceedings, Mr Tubb asserted from the bar table that the computer printout had been prepared from the books and records of Kinconne. Kinconne's accountant, Mr Ward had assisted in the preparation of this document and confirmed in the annulment proceedings that it had been prepared from books and records of the company. The printout showed that Kinconne claimed it had paid $103,198.94 to the petitioning creditor for which it had not received credit. This amount comprised 21 separate payments, or as Cole J referred to them in his judgment, "disputed items". Cole J refused to allow credits for 6 of those items, totalling $15,605.26. The balance of approximately $90,000 was allowed in favour of Kinconne. On those calculations there was still a debt owed to the petitioning creditor. There were also other amounts which Cole J found to be owing to the petitioning creditor, namely, the $50,000 advance, the $20,000 personal loan, and the amount $185,000 being the purchase price of the Mr Boats business and its stock. Each of those matters was the subject of evidence, argument or both in the annulment proceedings and I will deal with each in turn.

The $50,000 Advance
35. Cole J found that the petitioning creditor had lent an additional $50,000 to Kinconne on 29 July 1985. As recorded in his Honour's judgment, Mr Petrie's evidence in respect of the advance was that he had borrowed $50,000 from the ANZ Bank by way of a fully drawn loan, which was advanced by the petitioning creditor to Kinconne in order to assist Kinconne to meet group tax liabilities to the Commissioner of Taxation. Kinconne was to repay the principal and interest to the ANZ Bank. The applicant's evidence in the Supreme Court proceedings, as set out in her statement of evidence in respect of the $50,000 advance was:

"I agree that on 29 July 1985 that $50,000 was advanced to Kinconne by Mr Petrie. The monies so advanced were drawn on the account to which annexure relates. I had no discussions with Mr Petrie to the effect that the monies...mortgages or the guarantee the subject of these proceedings".

Cole J noted that this evidence did not make sense and that it clearly contained an omission. Of that omission his Honour said at p5 of his judgment:

"...no endeavour was made to correct (the omission) by oral evidence. One might speculate that what was omitted was in substance evidence that the admitted $50,000 advance was not to be the subject of the mortgages or the guarantees".

1. His Honour dealt with the evidence which supported the applicant's version of the transaction and other evidence relating to the matter, including the fact that Kinconne had executed a variation of mortgage, which, his Honour found, included the sum of $50,000 and evidence of Mr Lyons, solicitor, who at that time was acting for both Mr Petrie and the petitioning creditor and the applicant and Kinconne. The effect of Mr Lyon's evidence was that he recollected being instructed by both the applicant and Mr Petrie in terms which were consistent with the petitioning creditor having advanced the additional $50,000 to Kinconne.

2. The applicant contended in the annulment proceedings that Cole J erred in respect of her evidence as to the $50,000 advance. She said:
   

"I did not borrow from Mr Petrie $50,000. I was not made aware of where Justice Cole had erred until I have (sic) seen in this court his summing up. And when I seen (sic) his summing up, which I have never seen before, I have never been advised by the solicitors that acted for me of what the actual finish of the case was other than that we had lost it. When I seen the summing up I realised that Justice Cole had erred on what I had said in this witness box. I stated that I had borrowed 50,000 and 20,000 from Mr Petrie. 20,000 was the only amount of money that was ever involved with Mr Petrie in that matter in 1985, but for some unknown reason Justice Cole has seen fit to add the 20,000 and the 50,000 together and put another 70,000 onto the existing account, and I could never work out exactly what had happened there, and I have since gone through my banking with Mr Ward who has - - -

...(t)he only thing that I am very sure of is that Mr Petrie did not lend me $50,000 in 1985..."

1. The applicant explained the $50,000 distribution of which Mr Petrie gave evidence as follows:
   

"Of the 50,000 Mr Petrie borrowed on his unit, not one penny of that money came to me at all. He borrowed from St George's building society $20,000. About a fortnight after he had given me the 20,000 he put the 20,000 (back) in St George's and $30,000 went to Manilla where he had vast investments."

There was no other evidence to support any of these contentions.

1. The applicant further contended that the petitioning creditor had never loaned the sum of $50,000 to Kinconne, but that that amount had been borrowed by Kinconne from a Mr English, who is the father of Mr English, the solicitor referred to earlier, who acted for the applicant in the bankruptcy proceedings. The applicant sought to support this evidence with evidence from Mr Ward, the accountant. Mr Ward recalled personally attending to the payment of Kinconne's group tax in 1985. He stated that the monies for that payment had come from the following sources: $50,000 from Mr English; $25,000 from a Mr Peter Shaw; $25,000 from a Mrs F Walters; and the balance of $108,000 from Mrs Miller's personal account. Mr Ward said that he saw Mr English's cheque for the $50,000. Initially he stated that Mr English had advanced the monies to Kinconne. It is unclear whether this was his final evidence or whether his evidence was that the monies had been lent to the applicant, who had on-lent the monies to Kinconne. He did recall that he was told by the applicant that the Shaw and Walters loans were made personally to her. Mr Ward conceded that if an advance by the petitioning creditor of $50,000 had been made and paid back, the fact of the loan would not have reflected in the balance sheet. However, he said that from his records he saw no evidence of a loan of $50,000 to Kinconne from the petitioning creditor.

2. I accepted that Mr Ward attempted to give honest and straightforward evidence. However, he readily conceded that in some respects, he was relying upon what the applicant had told him as to the source of borrowings and the repayment of monies. Although I accept his evidence that the applicant had borrowed an amount of $50,000 at about that time from a Mr English, that does not preclude a loan from the petitioning creditor in the same amount nor does it explain the applicant's statement of evidence before Cole J which I have set out earlier. That evidence constituted an admission by the applicant that Kinconne had received $50,000, although the admission was that the loan had been from Mr Petrie, and not from the petitioning creditor. There was nothing said at all, so far as his Honour's judgment reveals, that the applicant gave any evidence about a loan from Mr English in the Supreme Court proceedings. The applicant did not give or adduce any evidence before me to the effect that she had given such evidence. Further, her explanation contained in the evidence before me, which I have just set out, does not explain how she came to put in her statement in the Supreme Court proceedings that Kinconne had borrowed $50,000 from Mr Petrie. The complaint she made about this issue was the way in which his Honour had dealt with the obvious omission in her statement. There was no evidence before me to prove that Mr Petrie and Mr Lyons gave perjured evidence.

3. If I assume that the applicant, for whatever reason, made a mistake in giving her evidence in the Supreme Court proceedings which may have led the court into factual error, that does not provide a sufficient reason for a court to act either to set aside a judgment or to go behind it. The mere fact that Mr Ward stated that the books of account of Kinconne did not reveal a loan from the petitioning creditor, is not conclusive of that matter. Accordingly, I do not consider that the applicant's contentions in relation to the $50,000 advance provide a ground to annul the bankruptcy.

The $20,000 Personal Advance
42. There was no dispute raised in the annulment proceedings that there had been a $20,000 personal advance. The applicant's case was, however, that the monies had been borrowed from Mr Petrie personally and not from the petitioning creditor and that, in any event, she had repaid the loan in full within about six to eight weeks.

1. Mr Ward gave evidence that he recollected that Mr Petrie had made a loan of $20,000 which appeared in the banking records of Kinconne as part of a deposit of $21,700 on 23 July 1985. He said he had understood that this loan was a personal loan to Mrs Miller which she then on-lent to the company. He also stated, that at about the time that he was preparing his affidavit, he was advised that the $20,000 loan from Mr Petrie was repaid. He said, however, that he had "no record here to prove that", and that he did not really know if that amount had been repaid as he was only relying on such information as was supplied to him.

2. This issue falls into the same category as the last, namely, it is a matter about which the applicant asserts the contrary proposition to the findings of Cole J. That is not a sufficient basis for the court to go behind the judgment.

The Mr Boats credit
45. The next issue raised by the applicant in respect of the existence of the debt related to the purchase price of the Mr Boats business. The applicant gave evidence before me that after the judgment of Cole J she "...understood that the moneys that was to come from the sale of Mr Boats would be held in trust for the guarantor". I have referred to this issue earlier, as I have also to his Honour's finding that upon a proper construction of the deed of charge, credit did not have to be given for the purchase price or any instalments thereof, unless received. If his Honour's conclusion was legally erroneous, and I do not suggest it was, that would be a matter for the appellate process and provides no basis to go behind the judgment.

Whether debt had been repaid in full
46. Finally, there was no evidence before me which permitted a finding that the whole of the monies advanced by the petitioning creditor were repaid. I have already dealt with such evidence as there was in respect of the repayment of the $20,000, and as I have said, even Mr Tubbs' own computer printout revealed that there were monies still owing to the petitioning creditor. Once there is added to those amounts the sum of $185,000 for the sale of the Mr Boats business, it is clear that their remains a debt owed to the petitioning creditor.

Whether Order for Substituted Service was Obtained by Fraudulent Affidavit
47. Orders for substituted service of both the bankruptcy notice and the creditor's petition were obtained. The process server retained to effect service of both documents, a Mr McAllison, swore affidavits to support both applications for substituted service. In his affidavit sworn 7 November 1991 in support of the application for substituted service of the bankruptcy notice, Mr McAllison stated that he first attempted service upon the applicant at premises at 11 Gordon Grove, Malvern, which were premises occupied by a Mr and Mrs Lolicato, whom he had ascertained were the non-resident owners of a property in Malvern East, which operated a special accommodation home called Riga House. During the course of his oral evidence in the annulment proceedings, Mr McAllison stated that that was the address with which he had been provided for the purposes of service. In his affidavit, Mr McAllison also stated that the applicant was the matron of Riga House and that, in about 1982, he had served the applicant with court process at Riga House on many occasions, that she was well known to him and that she always denied her identity when being served. He also gave details of attempted service at the Kiama Private Nursing Home, having ascertained from the Department of Health that the applicant was the proprietor of that nursing home. He said in fact that on one occasion he recognised the applicant in attendance there but was told that she was not in and might be back later. He said he went into the yard to attempt to find her but she had disappeared. Subsequent attempts at service at that address were unsuccessful and the applicant had not contacted him despite him having left his cards with the matron requesting that she contact his office. He also attempted service at Chadstone Gardens Retirement Village, but was told the applicant was not in, and would not be back until later. He returned to the address later but said nobody returned. He said further attempts to contact the applicant at that address by telephone and through business partners had been unsuccessful.

1. The applicant gave evidence in the annulment proceedings that she had never met Mr McAllison nor had she had anything to do with Riga House. She asserted therefore that Mr McAllison's statements in the affidavit to that effect were false. She said that she had moved to Sydney to live in 1981, and produced banking records showing withdrawals from Sydney branches of major banks to corroborate this and to prove that she could not have been in Melbourne at the time that Mr McAllison alleged he had served her there. However, the fact the applicant resided in Sydney at that time would not preclude her having been in Melbourne from time to time during that period.

2. In the affidavit of attempted service of the creditor's petition, Mr McAllison swore to attempts at service in September 1992 at the Kiama Private Nursing Home and Chadstone Gardens Retirement Village without success. He also referred to a telephone call from a woman who identified herself as "Doris" on 15 September 1992 to his office. He stated in his affidavit that the person ringing:
   

"...spoke to one of our girls, Jenny, telling her to pass on to me to "stop annoying people at Kiama Nursing Home and to stop chasing her all around the world regarding Bondi Securities". She said she is no longer at Kiama and refused to divulge a current address or phone number to be contacted on. She said that I would be contacted - she has my mobile phone number".

1. Mr McAllison did not include in that affidavit any record of a further telephone call on 17 September 1992 from a Mrs Margaret Johnson of Robinsons (Insolvency) and Associates. Mr McAllison was cross examined about this omission in the annulment proceedings and as to whether he had informed the petitioning creditor's solicitors of that telephone conversation. This cross-examination was directed to establishing that Mr McAllison was part of a collusive effort to have the applicant declared bankrupt or otherwise cause her harm and it is thus necessary to deal with the matter in detail. Mr McAllison stated that he did not recall such a telephone call, nor could he recall writing to Lyons and Lyons and telling them that the applicant was entering a Part X Arrangement under the provisions of the bankruptcy notice. Having answered the question in that way, he was then shown an undated report he had prepared in respect of his attempted service of the petition. Included in that report was the following statement:
   

"On the 17th September, 1992 our officer received a phone call from a Margaret Johnson of Robinsons (Insolvency) and Association

(sic) of 1/3 Male Street, Brighton, Victoria. Phone: [phone] who stated that she is acting for Doris Miller who is entering into a "Part 10"(sic) and that Doris had given her our officers details. She knew of Bondi Securities and that "Doris" is currently in Sydney. She further stated that "Doris" is no longer involved with Kiama. She signed over all interests the last month

(a(m) attempting to get more details from Health Department). She knows of the attempts to serve the Creditors Petition and has stated that she will try to talk Doris into accepting. (Our officer did not mention that you have a Sub Service hearing this close]). Doris is ringing her next week and by then she hopes to have set up a Creditors Meeting."

A little later in the cross-examination he was asked:

"MR TUBB: I, again ask you did you notify the firm of Lyons and Lyons that Mrs Miller was intending to enter a part 10?(sic)--- Well, to quote from the report that you have previously mentioned, it mentions in there that Margaret Johnson rang and said that she was acting for Doris Miller who was entering into a part 10(sic), so the answer to your question is, yes, they were informed.

Then, Mr McAllison, why have you answered, no, to the same question?---Sorry?

Why have you answered, no, to the previous question before?--- Which question was that, Mr Tubb?

Did you notify the firm of Lyons and Lyons that Mrs Miller was intending to enter into a part 10?(sic) The answer was, no. Since reading that document the answer is now, yes?---I had forgotten that. That is not part of an affidavit. That is part of a report, I had forgotten about."

1. Mr McAllison stated that he did not include the fact or content of the telephone conversation with Mrs Johnson in his affidavit as he did not consider it important.

2. I do not consider that Mr McAllison was deliberately misleading the court when he gave his earlier answer. It was quite clear that he had no recollection of the telephone call from a Mrs Johnson when initially asked, and his answer as to whether he had informed Lyons and Lyons of the Part X proposal was not an emphatic denial, as appears to have been asserted by Mr Tubb in his questioning. Rather, he stated that he did not recall writing to them and telling them about that matter. Having been shown the relevant material, he readily conceded that he had done so.

3. Mr McAllison was also cross examined as to whether he had supplied information in relation to the applicant to a reporter from the Melbourne Age. This cross-examination was also directed to establishing collusive conduct on the part of Mr McAllison. Mr McAllison stated that he had had discussions with a reporter who had contacted him. He said that the discussion related only to information which was a matter of public record and that the reporter had given him more information than he gave her. He recollected that the reporter was looking for confirmation as to whether he was attempting to serve documents and files. Mr McAllison denied that any information that appeared in an article in the Age by the reporter had been given to her by him and he denied that he had informed the reporter that the applicant had had her licence revoked in New South Wales. He admitted that he had sent a copy of the Age article to the petitioning creditor's solicitors but could not recall having sent it to anyone else. He could not recall whether he had shown a photograph of the applicant to the reporter. However, he clearly recalled having shown a photograph to an officer of the Department of Health when making enquiries as to the proprietorship of various nursing homes. He said that he was asked why he was making those enquiries and explained that he was a process server and that he was attempting to serve documents on the applicant.

4. Under cross-examination, Mr McAllison was steadfast in his evidence, save to the extent that he made appropriate concessions. On the other hand, there were times when the applicant was an unsatisfactory witness. The following passages are clear demonstrations of this. During cross-examination as to the case the applicant had sought to make in the proceedings before Cole J and in particular as to whether Kinconne owed the petitioning creditor any monies she was asked, and answered, the following questions:
   

"And you allege that certain moneys which were due were reduced by certain payments, did you not?---I wouldn't know now.

You would not know. You swore a lengthy affidavit in these proceedings, did you not?---I probably swore them the same way as Mrs Petrie did."

This last answer was unresponsive and unwarranted.

1. A little later the applicant was asked questions about the Deputy Commissioner's proof of debt in the sum of $250,653.61. The applicant stated that she believed that amount could be contested and said that the position might be that the Deputy Commissioner owed her something. The questioning and answers then proceeded:
   

"...You see that the commissioner is claiming that you did not remit income tax deductions from wages; is that right or not?---I wouldn't know because I have not done the final figures of the Kiama Nursing Home; I've not been paid final monies that's owed on it; and I have not done the final figures. You'd perhaps better bring Mr Finlay in and see if he's done it. Because, after all, at the present moment, that's his job, isn't it?

Madam, the commissioner is asserting in this proof that you have not remitted instalments of tax deductions in the sum of $207,000 from the first - - -?---Well, I - - -

Let me finish the question, madam. From 1 June 1990 until 31 March 1993. Do you understand that to be his allegation?---From when? From when?

1 June 1990 to 31 March 1993?---I'd say that the commissioner of taxation is mad."

1. There were other occasions when the applicant sought to assert herself in an aggressive way toward counsel for the respondent. The following questions and answers was an occasion when this occurred:
   

"Mrs Miller, you said in an affidavit you never worked at the premises at Riga House. Is that true?---That is correct, yes.

I suggest to you that at one stage you were the matron there. What do you say about that?---Well I suggest you are incorrect."

This answer was given in an aggressive tone and manner. Much of this aggression I attribute to the injustice which the applicant perceives she has suffered at the hands of the petitioning creditor and its solicitor, whom it will be recalled had also acted for her. She views their actions as destroying her life long work, causing her to lose substantial assets. However, her attitude did affect her evidence. I accept Mr McAllison as a truthful witness and one, it follows, I prefer his evidence to that of the applicant wherever their evidence is in conflict.

1. My finding as to McAllison's evidence means that I reject the applicant's contention that the orders for substituted service were obtained fraudulently. It seems to me however, that whatever be the truth about Mr McAllison having served the applicant with documents in 1982, or his attempts at service in 1991 and 1992 with the bankruptcy notice and the petition respectively, which attempts were unsuccessful, it is clear that the applicant herself became aware of these attempts at service. When she did so she retained legal representation for the express purpose of:
   

"...see(ing) what (the legal representatives) could do about this order that was chasing me around, the substituted order, which I didn't find out about until September of 1992 and why it does appear, that there wasn't as much effort as one might put it by the solicitor acting for me that perhaps he should have done and didn't do, because really we didn't have sufficient evidence before us and most of this evidence that I have obtained in the last 12 months since I have come into this court has been given to me through the Law Society and most of it was obtained from the offices of Lyons and Lyons".

In response to a question as to when she retained Verekers, Solicitors, to act for her she answered:

I believe October, and how that came about, your Honour, our Mr McAllison, to whom I've learnt a great deal more about, I was totally unaware of who was continually coming to the nursing home asking for me, was tormenting relatives, asking questions, telling a number of lies to people, going to the health department - - -".

1. It is also clear from the cross-examination of Mr McAllison that the applicant did not dispute that the applicant made the telephone call to his office complaining about the manner in which service was being attempted. Nor was it disputed that Mrs Johnson had made the telephone call advising the applicant's intention to enter into a Part X arrangement. Further, it was abundantly clear that not only did the applicant's solicitors know what the proceedings were about once they were retained, and acted for her in respect of those proceedings, the applicant knew, at least by November 1992, that the petitioning creditor was, as she said, "trying to obtain an order for bankruptcy". The applicant had earlier said:
   

"...I was aware that somebody was looking for me but because of my position with the Avoca Nursing Home at one stage that incurred three of the people being removed from Australia because of their interests in drugs and because of my possible protection of my grandson, I was a little bit wary of anybody that was looking for me because I have already been blasted with a shotgun through my bedroom window over exactly the same scene. And had Mr McAllison stated that he wished to serve papers on me I would have accepted those papers."

1. Having regard to all of the circumstances, I am of the opinion that no basis for the annulment application is established arising out of the circumstances surrounding the service of the bankruptcy notice and the petition.

Collusive Conduct of the Solicitor's Acting for the Petitioning Creditor
60. The precise collusive conduct of which complaint was made, was never particularised. However, the claim appears to relate to an allegation that the solicitors acted towards the applicant in a way which was not proper, given the previous solicitor-client relationship and so as to harm her financial interests. The following particular matters were the focus of this attack:

- first, whether Mr Lyons gave information to the Age reporter about the applicant - Mr Lyons denied he did so and said he referred the reporter to Mr Petrie.

- secondly, whether he had passed information relating to the applicant's financial affairs and her bankruptcy, to Messrs Dunhill Madden Butler who were acting for Westpac Banking Corporation in proceedings against the applicant. Mr Lyons denied he had exchanged information as to the applicant's affairs with Dunhill Madden Butler, save that they had asked him how the bankruptcy proceedings were going which, he said was a matter of public knowledge.

- thirdly, that Mr Lyons had been in possession of many of the applicant's financial records which had subsequently disappeared. As to this Mr Lyons said that he had provided all the documents he had to the Supreme Court pursuant to a subpoena issued at the request of Kinconne's liquidator. He said the documents had not been returned and he had subsequently made extensive searches and enquiries in respect of those documents but had been unable to locate them.

- fourthly, there again appeared to be a challenge as to why the purchase price of the moneys paid for the Mr Boats business was never credited against Kinconne's account so as to reduce Kinconne's indebtedness to the petitioning creditor. However, as I have already said, this issue was dealt with by Cole J on the basis of the proper construction of the deed of charge. - Mr Lyons was also challenged as to why monies which were in fact paid by the purchaser were never credited to the Kinconne account with the petitioning creditor. Mr Lyons said he did not know as he was not the solicitor from his firm dealing with these transactions. However, it seems to me that the answer is probably found in a letter dated 23 November 1992 from Lyons and Lyons apparently written by Mr Pooley, to Verekers, in which Verekers were advised:

"...we confirm that the business of "Mr Boats" was sold, and an amount of approximately $70,000 was received.

Unfortunately, the holding charges exceeded the monies received on the sale of the business.

This resulted in a further loss of approximately $50,000 to Bondi Securities."

1. Other matters appeared to fuel the applicant's belief as to Mr Lyons' collusive conduct: the fact he gave evidence for the petitioning creditor in the Supreme Court proceedings, which the applicant described at one stage as "hearsay evidence"; the fact that it appears that there is, or was, an investigation being conducted by the Law Society, either into Mr Lyons or his firm, arising out of or related to matters involved in the Supreme Court proceedings - I should state at this juncture that there is no evidence before me as to the nature or extent of this investigation; the fact that Mr Lyons had given a photograph of the applicant to Mr McAllison; and the fact of the alleged irregularities in the bankruptcy proceedings. As to the former of these two matters, it is perfectly proper for a solicitor to provide a photograph of a person to assist with identification for the purpose of service. As to the latter point, it is of great concern to the court that affidavits are prepared in a form where it might be inferred the solicitor knew that the deponent could not truthfully swear to its contents, or alternatively, did not know whether the deponent could do so. However, having regard to the conclusion which I have reached that the application for annulment should be dismissed, I am not satisfied that there is anything in this conduct which should affect or alter my decision as to the outcome of the matter. Finally, I should add that I do not consider there was any aspect of the conduct of Mr McAllison that could be considered to be collusive conduct. Accordingly, I reject this ground as a basis to annul the bankruptcy.

Whether Credit Given for Assets Sold by the Liquidator of Kinconne and by Secured Creditors

62. This ground was summarised in a statement made by Mr Tubb from the bar table:

"See, there is also another avenue, your Honour, as previously mentioned, when Kinconne went into voluntary - into provisional liquidation we had certain other assets seized. One of them in particular, your Honour, is my house. The only mortgage that was on my house, your Honour, wsa $380,000. That house was sold for $750,000, I have been unable to obtain any answer as to what has happened to the balance of that (sic) moneys that AGC has taken and to my knowledge have no right.

Now, the same applies to an asset of Mrs Miller. She had a waterfront property over at Coogee, there was a mortgage to AGC, AGC took possession of the premises prior to taking possession of my premises. That asset was sold far above the value of the mortgage held by AGC. Still, your Honour, we get remuneration from it any attempts to contact these people is ridiculous. You try to contact the provisional liquidator as we have done - and I do not know how successful our learned friend has been with three subpoenas in the court this morning before the registrar to try and get documentation but the last response we had from the liquidator at Kinconne is that his secretary has burnt all the records."

1. However, there was no evidence before me of any of these matters. Accordingly, I reject this as a ground upon which I should annul the bankruptcy.

Other Factors Affecting the Courts' Discretion
64. Of the matters which I have considered to this point, the only matter which would cause me to annul the bankruptcy is the false affidavit of debt sworn by Mrs Petrie. However, notwithstanding that that is a ground upon which the court could make an order to annul the bankruptcy, it retains a discretion as to whether to do so. In this case, factors relevant to that discretion are whether the applicant is solvent and the delay in bringing the application.

Applicant's Solvency
65. In her statement of affairs filed on 10 November 1993, the applicant disclosed liabilities of $82,000 and assets of $3,832,800. The composition of these assets is important. They were summarised in the trustee's report as follows:

"ASSET STATED VALUE $ Furniture and Effects 35,000 Fixtures and Fittings 27,000 Licence to Operate Kiama Nursing Hom(e) 180,000 Livestock (2) Guard Dogs 1,000 Jewellery 200 Shares (9) in Kinconne Pty Ltd (in liquidation) Value Not Shown Cash as Bank (Advance Bank, Campbelltown) 167 Motor Vehicle 1984 Holden 2,400 Debtors:

S. Finney 94,000 R. Licardy 9,400 Frank Schossi 3,500 NZI Insurance 7,000 Mrs Bartlett 1,000 Residents Accounts and Fees (Kiama Nursing Home) 25,000 Kinconne Pty Ltd 2,345,700 Kemp Strang and Chippendale(sic) 45,460 Australian Guarantee Corporation 600,000 Richard Brien and Co, Liquidator of Kinconne Pty Ltd 412,000 TOTAL 3,543,060" This total should read $3,788,827.

1. It will immediately be seen from the above that the major portion of this sum comprises monies allegedly owed by Kinconne which went into provisional liquidation in 1989 and into liquidation in 1990. The applicant appears to allege that there has been poor or wrongful administration in the liquidation of that company and that she has had no satisfactory explanation as to what has happened to the surplus of the sale of assets of the company. However, as the company has been in provisional liquidation or liquidation for five years, I am of the opinion that the appropriate way to deal with this asset in Mrs Miller's estate is to treat it as being highly unlikely to realise any return. I am of like opinion in respect of the debt allegedly owed by Kinconne's liquidator.

2. The Kiama Nursing Home licence, which the applicant alleges is valued at $180,000, is the subject of the transaction with Mrs Bartlett. As I propose to approve that transaction, that asset's value should be treated as $25,000.

3. There is little information to enable an assessment of the recoverability of the other debts. However, it seems certain that there would be a dispute as to whether monies totalling $94,000 are owed by Syd Finney, as in her statement of affairs, the applicant provides this commentary in relation to those monies:
   

"Cheque fraudulently Cashed by Syd Finney 16,700.00 (this was reported to Police with no

result)

The above funds were for loan applications

and were purported to me to be refundable

if loan not obtained."

1. The sum of $600,000 said to be owed by Australian Guarantee Corporation is presumably the amount alleged to be the excess of the proceeds of the sale of a waterfront property owned by the applicant at Coogee. However, as I have already stated in relation to that matter, there is no evidence before me to establish that those monies are in fact owing by Australian Guarantee Corporation. I am of the opinion that in the absence of some evidence to establish, even on a prima facie basis, that the monies are owing, I should treat the debt as not recoverable.

2. I should add, that in the trustee's report, the trustee states that assets worth only $22,000 have been recovered to date and that an additional $25,000 will be received if the s135 application is approved.

3. The liabilities disclosed in the Statement of Affairs revealed that there would be a tax debt in 1992, although no amount was stated. However, on 29 November 1993, the Deputy Commissioner of Taxation lodged a proof of debt in the sum of $250,653.51 for unpaid group tax in the sum of $207,450.01 and for additional and penalty tax. The Deputy Commissioner claims that the sum of $207,450.01 is a preferential debt under s221P of the Income Tax Assessment Act.

4. The report of the Official Trustee in Bankruptcy reveals that in addition to the tax debt, there are further liabilities totalling $382,919.07 which were not included in the applicant's statement of affairs. This amount includes the debt of $257,000 owing to the petitioning creditor (noting that interest on that amount will be accruing), and a debt of $38,376.99 owing to an Elizabeth Mary Nagel, of which the applicant says she has no knowledge. Proofs of debt including those of the Deputy Commissioner and E A Nagel totalling $314,414.72 have been lodged. The Official Trustee expects that the costs associated with the administration of the estate, together with the petitioning creditor's costs are expected to be in the order of $42,000, of which an amount just in excess of $14,000 has already been paid. Thus, total liabilities plus expenses of administration are in excess of $715,000.

5. Finally, it should be said that the applicant's only source of income is a social security pension of approximately $4,500 per annum, although she said that she had had some financial assistance from her family.

6. Having regard to my finding in relation to the monies owed to the applicant by Kinconne and doubt about the recoverability of other monies, I am not satisfied that the applicant is able to pay her debts as they fall due. In Trojan v Corporation of Hindmarsh (1987) 16 FCR 37 the Full Court of this court, in considering the circumstances in which the court might refuse to make a sequestration order stated, at 48, that s52(2), which provides:
   

"If the Court is not satisfied with the proof of any of those matters, or is satisfied by the debtor:

(a) that he is able to pay his debts; or

(b) that or other sufficient cause a sequestration order ought not to be made;

it may dismiss the petition."

envisaged "a situation which will probably bear fruit in payment". In my opinion, the same approach should be adopted when considering the question of solvency for the purposes of an application for annulment. In this case, it cannot be said that the applicant's financial circumstances would permit her to pay the petitioning creditor's debt or any other debt. For this reason alone, I am of the opinion that I should not exercise my discretion to annul the bankruptcy.

Delay in Bringing the Application
75. The annulment application was not brought until 10 November 1993 approximately 8 months after the making of the sequestration order, nor had any steps been taken in the meantime to seek a stay of that order. Although Mr English continued to act for the applicant after 23 March 1993, he did not seek a stay of the sequestration order. His reason for doing so was based on what he understood his instructions to be, which he explained as follows:

"...to attempt to summarise what Mrs Miller had been telling myself and also Mr Johnson in the presence of myself on a prior occasion, was that she was an old lady, that the legal bills were mounting up. She was an old age pensioner; she had been personally threatened by - I assume, I think she said from memory, Mr Petrie - in relation to all of this; that she was just reaching the end of her tether and that basically, just go in there and see what you can do. But at the end of the day she was prepared to - she said, she really doesn't have any assets and it doesn't really matter whether she goes bankrupt or not because she has just been totally harassed by all the parties and she's just sick and tired of fighting any more. And so on that basis I interpreted those instructions as I said I indicated to your before, but Mr Johnson of counsel was caught in another court and I had to run the matter as the instructing solicitor and that after coming back down from Burchett J I put up a submission in relation to the best of my ability as the instructing solicitor, which was denied, and the registrar then made the order, and I interpreted the instructions those way - I didn't rush across the road to find the counsel to see if we could put a stay on, which would involve the firm in further personal liability in relation to these. I interpreted the instructions the way they were given to me, in that fashion..."

1. However, after the making of the sequestration order, his firm did engage a forensic expert to consider the signatures on Mrs Petrie's affidavit of debt. His firm also arranged for legal representation for Mrs Miller in respect of action which the trustee was taking in relation to certain property in Melbourne. In addition, he had discussions with Mrs Miller about challenging the judgment of Cole J. He believed however, that cost considerations overrode any other consideration in relation to the matter and no appeal or application for leave to appeal was lodged. It also appears that the applicant was under immense emotional pressure at this time. This is revealed in her answer to a question as to whether she was concerned to find out what Cole J decided:
   

"Look, I had just lost everything I had worked 50 years for. I had just had my son killed in an accident and really I didn't give a damn."

1. The need for there to be both finality and certainty as to the outcome of litigation, so that the affairs of interested and affected parties can be appropriately ordered, are powerful reasons why delay of the length involved here in bringing an application for annulment should militate against making an order for annulment. The delay must of course be considered in context, including in light of the applicant's personal circumstances. However, notwithstanding the distressing personal circumstances in which the applicant found herself at the time of and after the making of the sequestration order, I am of the opinion that the delay here was lengthy and is a factor which weighs against the exercise of the discretion.

Conclusion
78. In conclusion therefore, I am of the opinion that the application should be dismissed.