Minister for Immigration and Ethnic Affairs v Pochi

[1980] FCA 85

I ' .

C A T C H W O R D S

Bankruptcy - Credltor's petitlon - whether debtor 1s "able to pay hls debts"

Bankruptcy Act, 1966 - s.52(2)(a)

Ronald Grafton Sarlna Ex parte The Councll of the Shlre of

Wollondilly

No. P. 1900 of 1979

Coram: Deane	J.
Sydney
6 June, 1980.

RE: RONALD GRAFTON SARIXA

EX PARTE. THE COUNCIL OF THE SHIRE

OF WOLLONDI LLY

O R D E R S

JUDGE MAKING ORDER. Deane J .

DATE OF ORDER. 6 J u n e , 1980

WHERE MADE: Sydney

THE COURT ORDERS THAT:

1. T h e P e t i t i o n be d i s m l s s e d .

2 . T h a t t h e d e b t o r p a y t o t h e p e t l t l o n l n g c r e d l t o r Its

c o s t s o f t h e p r o c e e d l n g s u p t o a n d i n c l u d l n g t h e p r o c e e d i n g s

b e f o r e t h e C o u r t on 28 Apr i l , 1980.

3. Tha t t he amoun t o f $2790 pa id I n t o C o u r t b y t h e d e b t o r

remaln i n Cour t for t h e p e r l o d of t w e n t y e l g h t d a y s f r o m t h e

d a t e h e r e o f . I n t h e event t h a t n o a p p e a l from t h e J u d g m e n t

a n d o r d e r s h e r e i n 1s l n s t l t u t e d w i t h l n t h a t p e r l o d , I DIRECT

t h a t t h a t amount b e p a i d o u t t o t h e d e b t o r R o n a l d G r a f t o n S a r l n a .

I n t h e e v e n t s u c h a n a p p e a l 1s i n s t i t u t e d w l t h l n t h a t p e r l o d ,

I DIRECT t h a t t h e amount renaln I n C o u r t a n d a b l d e t h e o r d e r

made by t h e Court d l s p o s l n g o f t h a t a p p e a l or, I n t h e e v e n t o f

no o r d e r i n t h a t r e g a r d being made by t h a t C o u r t , t h e f u r t h e r

o r d e r of t h i s C o u r t .

-2-

4 . T h a t t h e e x h l b l t s b e r e t a l n e d for t h e p e r l o d OP twenty

e l g h t d a y s . In t h e e v e n t t h a t no appeal 1s l o d g e d w l t h i n t h a t

p e r l o d I ORDER t h a t t h e e x h i b l t s be handed out to t h e p a r t l e s

t e n d e r l n g t h e same.

. . ..

.

I N THE F DERAL COURT OF BANKRUPTCY )

BANKRUPTCY DISTRICT OF THE STATE OF ) No. P. 1900 of 1979

NEW SOUTH WALES AND THE AUSTRALIAN )

TERRITORY CAPITAL 1

RE: RONALD GRAFTON SARI A

EX PARTE: THE COUNCIL OF THE SHIRE

OF WOLLONDI LLY

CORAM: Deane J.

F r i d a y 6 June, 1980.

REASONS FOR JUDGMENT

T h e C o u n c i l o f t h e S h i r e of W o l l o n d l l l y ( " t h e

p e t l t i o n i n g c r e d l t o r " ) p e t l t i o n s t h e Court f o r a s e q u e s t r a t i o n

o r d e r against t h e es ta te of R o n a l d G r a f t o n S a r i n a ( " t h e d e b t o r " ) .

The act o f b a n k r u p t c y u p o n w h l c h t h e p e t l t i o n l n g c r e d i t o r

relles is t h e d e b t o r ' s f a i l u r e t o c o m p l y w i t h t h e r e q u l r e m e n t s

of a twenty one day bankruptcy motlce served on h lm on 18

Oc tobe r , 1979 and requiring t h e payment of t h e amount of

$2289.88 due t o t h e p e t i t l o n m g c r e d l t o r u n d e r a f i n a l o r d e r

of t h e Supreme Cour t of N e w S o u t h Wales. The amount I n q u e s t l o n

r e p r e s e n t e d t a x e d c o s t s o f an a c t i o n b e t w e e n t h e p e t i t l o n l n g

c r e d i t o r a n d t h e d e b t o r i n t h a t Court .

-2-

I t e m e r g e d u p o n t h e h e a r l n g t h a t t h e d e b t o r 1s also

i n d e b t e d t o t h e petitioning credl tor , I n a d d l t l o n t o t h e

amount ment ioned, i n a t o t a l amount of $ 3 7 2 8 . 8 5 r e p r e s e n t i n g

t h e t a x e d costs of o t h e r p r o c e e d i n g s between t h e p a r t l e s .

The ev idence led o n b e h a l f o f t h e p e t l t i o n l n g c r e d l t o r

sa t l s f ies me t h a t t h e d e b t o r c o m m l t t e d t h e act of bankrup tcy

a l l e g e d a n d t h a t , s u b j e c t t o matters ralsed by t h e debtor by

way of o p p o s l t l o n , a s e q u e s t r a t i o n o r d e r i n r e s p e c t of t h e

d e b t o r ' s estate	s h o u l d be	made	a t t h e s u l t	of	t h e p e t l t l o n l n g
c r e d i t o r .

The matters of o p p o s l t l o n r a i s e d b y t h e d e b t o r , who

a p p e a r e d i n p e r s o n , c a n b e c o n v e n l e n t l y s u m m a r i z e d u n d e r t h r e e

head lngs . These are

t h a t h e 1s " a b l e t o p a y h l s d e b t s " w i t h l n

t h e m e a n l n g of t h o s e w o r d s as u s e d I n s.52(2)(a)

of t h e B a n k r u p t c y Act, 1966 ( " t h e Act") and

t h a t , f o r t h a t r e a s o n , a s e q u e s t r a t l o n order

shou ld no t be made ,

t h a t h e h a s c r o s s a c t l o n s or c o u n t e r claims

aga ins t t h e p e t l t l o n l n g credltor i n e x c e s s o f

t h e amount c la lmed;

(111) t h a t a s e q u e s t r a t l o n order o u g h t n o t b e made

" f o r o t h e r	s u f f l c l e n t c a u s e "	( s . 5 2 ( 2 ) ( b )	of	t h e
A c t ) .

- ..

-3-

I n s u p p o r t of t h e s e g r o u n d s of o p p o s l t l o n , two a f f l d a v l t s

o f t h e d e b t o r were f i l e d . The flrst of t h e s e a f f l d a v l t s con-

t a i n e d a large body of materlal r e l a t l n g t o d l s p u t e s a n d l i t l g a t -

i o n b e t w e e n t h e p e t l t l o n l n g c r e d l t o r a n d t h e d e b t o r . I t s

c o n t e n t s were r e l l e d upon by t h e d e b t o r t o show t h e e x l s t e n c e

of t h e a l l e g e d cross a c t i o n s a n d c o u n t e r clams a g a i n s t t h e

p e t l t l o n i n g c r e d i t o r a n d is t h e basis of h i s c l a m t h a t " o t h e r

s u f f l c i e n t cause" h a s b e e n shown t o w a r r a n t t h e C o u r t I n r e f u s l n g

t o make a s e q u e s t r a t l o n o r d e r p u r s u a n t t o t h e p r o v i s i o n s o f

s . 5 2 ( 2 ) ( b ) of t h e Act. I t can be s a l d a t o n c e t h a t t h e e v l d e n c e

b e f o r e me f a l l s c o m p l e t e l y t o s a t l s f y me t h a t t h e d e b t o r h a s a

cross a c t i o n or c o u n t e r clalm a g a i n s t t h e p e t l t l o n l n g c r e d l t o r

e i t h e r e x c e e d l n g or e q u a l l l n g t h e d e b t s o w l n g b y h lm t o t h e

p e t l t l o n l n g c r e d l t o r . I n d e e d , I am n o t s a t l s f l e d b y t h e e v l d e n c e

t h a t t h e d e b t o r h a s a n y b a s l s f o r a n y c l a m a g a l n s t t h e p e t i t l o n -

i n g c r e d i t o r a t a l l . The ev ldence a lso f a l l s c o m p l e t e l y t o

s a t l s f y m e of t h e g r o u n d of o p p o s l t l o n referred t o i n (lil)

a b o v e , t h a t 1s t o s a y , t h a t t h e r e 1s " o t h e r s u f f l c i e n t c a u s e "

for r e f u s i n g t o make a s e q u e s t r a t i o n order I n a c c o r d a n c e w l t h .

t h e p r o v i s l o n s of s . 5 2 ( 2 ) ( b ) o f t h e Act. T h e r e r e m a l n s f o r con-

s i d e r a t l o n t h e q u e s t l o n w h e t h e r I s h o u l d r e f u s e t o make a

s e q u e s t r a t l o n o r d e r o n t h e g r o u n d t h a t t h e d e b t o r is " a b l e

t o p a y h l s d e b t s " w l t h l n t h e m e a n l n g of t h o s e words a s u s e d I n

s . 5 2 ( 2 ) ( a ) of t h e Act.

S e c t l o n 5 2 ( 2 ) o f t h e Act provldes .

"If t h e C o u r t i s n o t s a t i s f i e d w i t h t h e proof of any of

t h o s e m a t t e r s , o r i s s a t i s f i e d by t h e d e b t o r --

( a ) t h a t h e i s a b l e t o p a y h i s d e b t s ; o r

.

- 4 -

( b ) t h a t for o t h e r s u f f i c i e n t c a u s e a s e q u e s t r a t i o n

o r d e r o u g h t n o t t o h e m a d e ,

i t may d i smi s s t h e p e t i t i o n " .

The "matters" r e f e r r e d t o I n t h e i n t r o d u c t o r y w o r d s o f t h e

s u b - s e c t l o n are t h o s e matters of t h e p r o o f of w h l c h t h e C o u r t

is r e q u i r e d t o b e s a t l s f l e d by t h e provls lons of s.52(1) b e f o r e

i t may make a s e q u e s t r a t l o n o r d e r .

' I t 1s n o t s u g g e s t e d on b e h a l f of t h e p e t l t i o n l n g

c r e d l t o r t h a t , i f I be s a t i s f l e d t h a t t h e d e b t o r is " a b l e t o

p a y h l s d e b t s " w i t h i n t h e m e a n l n g of t h e w o r d s u s e d i n s.52(2),

I s h o u l d p e t i t i o n l n g n o n e t h e l e s s make a s e q u e s t r a t l o n o r d e r . I n d e e d , t h e

c r e d i t o r d l d n o t d i s p u t e t h a t t h e w o r d "may" u s e d

i n t h e sub-section i s , i n t h e c o n t e x t of t h e i n t r o d u c t o r y w o r d s

a n d t h e p rov l s ions of c l a u s e (b) , m a n d a t o r y . T h e i s s u e b e t w e e n

t h e p a r t l e s is w h e t h e r t h e d e b t o r 1s "able t o p a y h l s d e b t s "

I n t h e re levant sense.

T h e u n d l s p u t e d e v i d e n c e p l a l n l y e s t a b l l s h e s t h a t t h e

d e b t o r 1s s o l v e n t . He h a s more t h a n $9000 e l t h e r o n h a n d o r

on b a n k d e p o s i t . H e owns l a n d e s t m a t e d t o have a t o t a l va lue

of $2300,000. W l t h h l s wlfe, h e ~ o l n t l y owns l a n d of an

e s t m a t e d v a l u e o f $200,000. Ev ldence was given t h a t two b locks

o f l a n d h a d r e c e n t l y b e e n s o l d w h l c h w o u l d y i e l d a n e t r e t u r n t o

t h e d e b t o r I n excess o f $ 1 7 , 0 0 0 . I n a d d i t l o n , as a c o n d i t l o n

of a p r e v l o u s a d J o u r n m e n t , a n amount of $2790 ( r e p r e s e n t l n g t h e

amount of t h e d e b t a l l e g e d t o be owlng i n t h e p e t l t l o n a n d some

$500 o n a c c o u n t of c o s t s ) h a s b e e n p a i d I n t o t h l s Cour t and 1s

h e l d a w a l t l n g t h e f u r t h e r o r d e r of t h e C o u r t . A p a r t f r o m

-5-

moneys owing to the petltionlng credltor, the debtor's only

llabllities are in respect of land tax and councll rates and total

approximately $10,000. In the words of Lord Hanworth M.R. in

In re Dyson (unreported, quoted in 3 Halsbury Laws of England,

4th Edition, paragraph 355) It is plaln that the debtor 1s in

a position to "pay immediately In the sense of a reasonable

time" all the debts which he owes. Indeed, It 1s fan- to say

that it was common ground between the parties that the debtor

was both solvent and capable of paying hls debts. The debtor's

default In payment of the debt owing to the petltlonlng creditor

is not the result of any deficiency in means. It is because,

notwithstanding that he has the necessary funds, the debtor

simply refuses to pay the relevant amounts to the petitlonlng

..

credltor.

It was submltted on behalf of the petitionlng credltor

that, even though the debtor had the capaclty to pay his debts,

his contlnuing refusal and unwllllngness to pay them precluded

the Court from being "satisfied by the debtor" that he was "able

to pay his debts" for the purposes of s.52(2)(a) of the Act.

The word "able" In s.52(2)(a) should, It was argued, be read

as meanlrg "wllling and able". In support of this contentlon,

reference was made to a declslon-of McKercher J. In In re

Freeholders Oil Company Llmlted ([l9531 9 West. W. Rep. (NS)

241) where the vlew was lndlcated that the word "able" should

be so read. The pollcy of the Act, it was sald, supported

thls construction of s.52(2)(a) in that it was scarcely to

be contemplated that a creditor was entltled to lose the

beneflt of the procedures available to h m under the Act If,

-6-

on	t h e h e a r l n g o f t h e p e t l t i o n , h l s d e b t o r c o u l d p r o v e t h a t
he	was able t o p a y h l s debts w h l l e r e f u s i n g s o t o d o .

Whlle I c a n see c o n s l d e r a b l e f o r c e I n t h e a r g u m e n t s

advanced on b e h a l f o f t h e p e t l t i o n l n g c r e d i t o r , t h e y h a v e ,

i n t h e e n d , f a i l e d t o p e r s u a d e m e t h a t t h e word "ab le" In

s . 5 2 ( 2 ) ( a ) s h o u l d be g l v e n o t h e r t h a n Its o r d l n a r y m e a n l n g . I t

d o e s n o t a p p e a r t o me t h a t it IS p o s s l b l e t o d l v l n e a n y p o l l c y

u n d e r l y i n g t h e p rov i s lons o f t h e Act t o t h e e f f e c t t h a t a

c r e d i t o r s h o u l d b e e n t l t l e d t o make a r e c a l c l t r a n t d e b t o r

bankrup t even t h o u g h t h e d e b t o r s a t l s f i e s t h e C o u r t t h a t h e

1s p l a l n l y s o l v e n t and able to p a y h l s debts. I t seems t o m e

t h a t It may well b e t h a t t h e l e g l s l a t l v e l n t e n t was t o l e a v e

a c r e d l t o r , I n t h o s e circumstances, t o t h e o r d i n a r y r e m e d l e s

by way of execut ion a n d g a r n i s h e e .

I n the r e s u l t , I f l n d t h a t t h e debtor has, for t h e

p u r p o s e s o f s . 5 2 ( 2 ) ( a ) , s a t l s f i e d me t h a t h e "1s able t o pay

h l s d e b t s " . T h e p e t i t l o n l n g c r e d l t o r h a s n o t s u g g e s t e d t h a t ,

I n t h e e v e n t of s u c h a f l n d l n g , I s h o u l d d o o t h e r t h a n d l s m l s s

t h e p e t l t l o n .

The re remam f o r c o n s l d e r a t l o n t h e q u e s t i o n o f c o s t s

a n d t h e q u e s t l o n o f t h e a p p r o p r l a t e o r d e r t o be made 111 r c s p e c t

o f t h e moneys p a l d I n t o C o u r t . I have found bo th of t h e s e

q u e s t l o n s o f more t h a n u s u a l d l f f l c u l t y . I s h a l l d e a l f ~ r s t w l t h

t h e q u e s t l o n o f c o s t s .

N o t w i t h s t a n d i n g a s u b m l s s l o n by t h e d e b t o r t o t h e

c o n t r a r y , t h e r e 1s n o t h l n g a t a l l I n t h e materlal b e f o r e me t o

-7-

s u g g e s t t h a t t h e p e t l t l o n l n g c r e d l t o r a c t e d o t h e r t h a n w l t h

c o m p l e t e p r o p r i e t y I n p r e s e n t l n g its p e t l t l o n . T h e d e b t u p o n

w h i c h t h e p e t i t l o n w a s b a s e d w a s p l a i n l y o w l n g t o I t . The

d e b t o r h a d c o m m i t t e d t h e ac t o f b a n k r u p t c y a l l e g e d I n t h e p e t l t l o n

T h e p e t l t l o n i n g c r e d i t o r can s c a r c e l y be c r l t l z e d for f a l l l n g

t o a n t l c l p a t e a defence t h a t t h e d e b t o r w a s s o l v e n t a n d h a d

t h e means available t o e n a b l e h l m t o p a y a l l hls d e b t s l n c l u d l n g

t h a t owlng t o t h e p e t l t l o n i n g c r e d i t o r w h l c h h e h a d f a l l e d t o p a y .

The Notlce of O p p o s i t i o n f l l e d on b e h a l f of t h e d e b t o r

c o n t a i n e d no ment lon of t h e d e f e n c e t h a t t h e d e b t o r was a b l e t o

p a y h l s d e b t s u p o n w h l c h h e h a s u l t i m a t e l y s u c c e e d e d . T h a t

de fence on ly emerged when an a f f l d a v i t o f s o l v e n c y was f l l e d

on 3 J u n e , 1980. The f a c t t h a t t h e d e b t o r c l a i m e d t h a t h e ..

was a b l e , i f h e so wished , t o p a y t h e d e b t owlng t o t h e

p e t l t l o n i n g credltor had , however , appeared I n t h e course of

t h e p r o c e e d l n g s b e f o r e t h e Court on 28 A p r l l , 1 9 8 0 when the

d e b t o r v o l u n t e e r e d t o p a y t h e a m o u n t of t h e d e b t alleged I n

t h e p e t i t l o n I n t o Cour t . The conc lus lon wh lch I h a v e r e a c h e d

is t h a t t h e a p p r o p r l a t e order as t o c o s t s 1s t h a t t h e d e b t o r

p a y t h e p e t l t l o n l n g c r e d l t o r ' s c o s t s up t o a n d l n c l u d l n g t h e

p r o c e e d l n g s b e f o r e t h e Court o n t h a t d a y . I n a l l t h e c l r c u m -

stances, l n c l u d l n g t h e f a c t t h a t t h e debtor h a s f a l l e d c o m p l e t e l y

on t h e i s sues t o w h l c h t h e b u l k of t h e materlal b e f o r e me w a s

d l r e c t e d ,	I	p r o p o s e	t o	make	no o r d e r as	t o t h e costs	s u b s e q u e n t
t h e r e t o .

As r e g a r d s t h e moneys pa ld I n t o C o u r t , lt h a s b e e n

submitted on b e h a l f of t h c p e t l t i o n i n g c r e d l t o r t h a t I s h o u l d

o r d e r t h a t t h e y b e p a l d o u t t o t h e p e t i t l o n l n g c r e d l t o r t o b e

-8-

applled towards satlsfying the debt owing to It by the debtor.

Whlle I am conscious of the essential common sense which under-

lies thls approach, I am of the view that I should not adopt

it. Examlnation of the transcript of the proceedings of 28

Aprll, 1980 indlcates that the money was not pald Into Court to

await determinatlon of the simple questlon whether the debtor

actually owed to the petltioning creditor the amount alleged

in the petition. It was, as I read that transcript, lodged

essentially as a pledge of the genuineness of the debtor's case

in opposition to the petltion. The debtor has succeeded In

that oppositlon. In my view, subject to the protectlon of

the petltloning creditor's posltlon in the event of an appeal,

the approprlate	order is that the moneys be pald out to the
debtor.

Flnally, I should mention that the debtor, In the

course of hls submisslons, sought an award of $100,000 damages

agalnst the petltlonlng credltor for the wrongful presentatlon

of the petltlon. Qulte apart from the fact that I have no	-
Jurlsdlctlon to make such an award of damages, there 1s no

concelvable basls in the evldence before	me upon whlch such an
award could be made.

The orders that I make are:

1. I dlsmlss the petitlon.

2. I ORDER that the debtor pay to the petltloning credltor

Its costs of the proceedlngs up to and lncludlng the proceedlngs

before the Court on 28 Aprll, 1980.

-9-

3. I DIRECT t h a t t h e amount of $2790 p a l d I n t o C o u r t

by t h e debtor r e m a l n i n C o u r t f o r t h e perlod of t w e n t y e l g h t

days from t h e J u d g m e n t a n d o r d e r s t h e da te h e r e o f . I n t h e e v e n t t h a t no a p p e a l from

made by me 1s I n s t i t u t e d w l t h l n t h a t

p e r l o d , I DIRECT t h a t t h a t amount be

pa id o u t t o t h e d e b t o r

-

& R o n a l d G r a f t o n S a r i n a . I n t h e e v e n t ti?& a n appeal fnnn4Amt

yid- is i n s t - w l t h l n t h a t p e r l o d , I DIRECT

t h a t t h e a m o u n t r e m a i n i n C o u r t a n d a b i d e t h e o r d e r made by

t h e Court d l s p o s l n g of t h a t a p p e a l or, i n t h e e v e n t of n o o r d e r

i n t h a t regard b e i n g made by t h a t C o u r t , t h e f u r t h e r o r d e r of

t h i s Court .

4 . I ORDER t h a t h e x h i b i t s be re ta lned f o r t h e p e r l o d of

t w e n t y e l g h t d a y s . I n t h e e v e n t t h a t no appeal is l o d g e d w l t h l n

t h a t p e r i o d I ORDER t h a t t h e e x h l b l t s b e h a n d e d o u t t o t h e -.

par t les t e n d e r i n g t h e same.