Re Bailey, G.B.

[1992] FCA 114

Re: GEOFFREY BERNARD BAILEY
Ex Parte: VOITA INTERNATIONAL TRADING PTY LTD
No. BN872 of 1991
FED No. 114
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE
OF SOUTH AUSTRALIA
Von Doussa J.(1)

CATCHWORDS

Bankruptcy - application to set aside a bankruptcy notice - whether the Court should go behind a judgment entered in the District Court of Adelaide - whether there was in truth a real debt owed by the judgment debtor to the judgment creditor - bankruptcy notice set aside.

HEARING

ADELAIDE

#DATE 12:3:1992

ORDER

1. The bankruptcy notice issued herein against Geoffrey Bernard Bailey on 10 October 1991 be set aside.

2. The judgment creditor pay Geoffrey Bernard Bailey his costs to be taxed of and incidental to the bankruptcy notice and of the application to set the same aside.
   NOTE: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

JUDGE1

This is an application to set aside a bankruptcy notice issued on 10 October 1991, and served on the alleged debtor ("Mr Bailey") on about 25 October 1991. The bankruptcy notice was based on a judgment of the District Court of Adelaide entered on 23 September 1991 for $48,750.00 plus interest and costs against Mr Bailey as the sole defendant in the action. Mr Bailey seeks to set aside the bankruptcy notice on the ground that there is in truth no real indebtedness by him to the judgment creditor Voita International Trading Pty Ltd ("Voita").

1. A court exercising jurisdiction in bankruptcy has undoubted jurisdiction to go behind a judgment obtained by default or compromise, or where fraud or collusion is alleged, to enquire whether the judgment is founded on a real debt: Corney v. Brien (1951) 84 CLR 343. In this instance the judgment was obtained by default. The Court will not enquire into the validity of a judgment debt as a matter of course. There must be substantial reason for questioning whether there is a debt in truth and reality: Re V and J Removals; ex parte Earl (unreported, 21 June 1985, Pincus J.). When the matter was first referred by the Registrar to a Judge of this Court, after receiving submissions from the parties based on the affidavit evidence then on file, I ruled that there were grounds for going behind the judgment and enquiring whether there was in reality a debt due by Mr Bailey. I now give my reasons for that ruling.

2. The proceedings in the District Court were commenced by summons on 18 April 1991. On 24 June 1991 judgment was entered in default of an appearance. On 15 July 1991 a bankruptcy notice was issued on that judgment against Mr Bailey, and on the following day proceedings were also commenced in the Supreme Court of South Australia by Voita to wind up two companies, Benmix Pty Ltd ("Benmix") and Tideway Pty Ltd ("Tideway") alleging against each company that it was indebted to Voita. Against each company a failure to comply with a sub.s.460(2) notice under the Corporations Law was alleged, and an additional ground of indebtedness based on a dishonoured cheque was also pleaded against Tideway.

3. Voita alleged in the particulars of claim first pleaded against Mr Bailey, and in the affidavits in support of the winding-up summonses against the companies, that Mr Bailey, Benmix, and Tideway were each indebted to it for rent due under an oral sub-lease of premises situated at 5th Floor, 97 Pirie Street, Adelaide. It was alleged that the sub-lease from Voita to Mr Bailey, Benmix and Tideway commenced in about December 1989, and that rent was unpaid from the month of May 1990.

4. It has always been Mr Bailey's position that the sub-lease from Voita had been to the company Benmix, and that he was not a party to the sub-lease. He acknowledged that he had negotiated the sub-lease with Voita, but had done so as agent acting on behalf of Benmix, whose identity he had disclosed.

5. The default judgment entered in the District Court against Mr Bailey on 24 June 1991 was set aside by order of a Master of the District Court on 5 September 1991. At that time Mr Bailey was represented by solicitors. The order of the Master was in the following terms:
   

"Order that the judgment entered herein on the 24th June 1991 be set aside on the following terms; firstly, that the defendant file an appearance and defence within 7 days; secondly, that the defendant pay to the plaintiff, within 14 days from today, the sum of $735, being the costs agreed upon as the plaintiff's costs thrown away, both in this Court and in the Federal Court. Order that the plaintiff be at liberty, within 7 days of today, to file and deliver amended particulars of claim and in that event, that the time for the defendant to file his defence will run from the date of receipt of the amended particulars of claim."

1. On 5 September 1991 Mr Bailey entered an appearance. On 12 September 1991 amended particulars of claim were filed. Originally, the particulars of claim had alleged:
   

"In or about December 1989 the defendant, Benmix Pty Limited and Tideway Pty Ltd and each of them as sub-lessees ("Sub-lessees") and the plaintiff as lessee entered into an oral agreement

(Agreement) for the plaintiff to sub-lease to the Sub-lessees and each of them the Premises."

The amended particulars of claim alleged that:

"In or about October or November 1989 the defendant as sub-lessee and the plaintiff as lessee entered into an oral agreement

(Agreement) for the plaintiff to sub-lease to the defendant the Premises."

The allegation in the original particulars of claim that the "sub-lessees" had failed and refused to pay the plaintiff the rent payable under the Agreement was amended to read that "the defendant" had failed and refused to pay to the plaintiff the rent payable.

1. On 18 September 1991 a defence was filed. Mr Bailey denied that he was indebted to Voita, and asserted that the sub-lease agreement was made by him, not on his own account, but expressly as agent for and on behalf of Benmix as the plaintiff well knew at all times.

2. Although the defence was filed within the time limited by the Master's order, the amount of $735 was not paid within 14 days. The explanation which Mr Bailey has given to this Court for not doing so, which has not been disputed, is that the sum of $1,000 was forwarded by him to his solicitors with the intention that the sum of $735 be paid from that amount. However, the solicitors retained the money on account of their costs.

3. On 23 September 1991 the solicitors acting for Voita filed an affidavit in the District Court registry swearing that the sum of $735 had not been paid. Paragraph 6 of the affidavit read:
   

"As the order of Deputy Master Garsden made on 5 September 1991 was that the judgment entered herein on 24 June 1991 be set aside on certain terms including that payment of the sum of $735 be made within 14 days of 5 September 1991, and as that term has not been satisfied, the plaintiff is entitled to enter judgment against the defendant."

Upon this affidavit it appears that Voita was allowed to again sign judgment, notwithstanding that the appearance and defence had been filed.

1. The next development was that Mr Bailey was served with another bankruptcy notice, the one which he now seeks to have set aside. As I have said, that was served on or about 25 October 1991. From that point in time, Mr Bailey has been unrepresented. He has appeared on his own behalf in subsequent hearings in the District Court, and in this Court. On 25 October 1991 Mr Bailey applied to the District Court by interlocutory summons to set aside the judgment entered on 23 September 1991. The application was refused by a Master on 13 November 1991. The solicitor who appeared on the hearing for Voita has deposed in an affidavit filed in this Court that the Master gave reasons to the following effect for refusing the application (and Mr Bailey does not dissent from this account of what was said):
   

"The debtor must apply for leave to set aside judgment pursuant to rule 71B of the Local Court Rules. I refuse the application on the ground that no leave has been sought under rule 71B of the Local Court Rules. The debtor is at liberty to apply for leave to set aside judgment, but because no leave was sought, the application is refused. In order to apply for rule 71B leave the debtor must file an interlocutory summons to show why he has not complied with the terms on which the previous order setting aside judgment was made."

1. Rule 71B of the Local Court Rules provides as follows:
   

"A party shall not, except by leave...make more than one application to set aside any judgment or order. A party seeking leave to make any such application subsequent to the first shall file an affidavit setting out the facts upon which he intends to rely."

In my opinion a strong case can be made out on Mr Bailey's behalf that judgment was wrongly entered against him on 23 September 1991, and that Rule 71B did not apply to the subsequent application to set aside that judgment. Upon a fair reading of the order of Deputy Master Garsden made on 5 September 1991 payment of the sum of $735 was not a precondition to the filing of a valid appearance and defence. Furthermore, counsel who appeared for Voita when the matter first came on for hearing before me was unable to point to any rule of the District Court which would permit judgment to be signed upon non-payment of that amount, as if the order of 5 September 1991 were a self-executing order. The judgment entered on 23 September 1991 which Mr Bailey was seeking to set aside was a separate and distinct judgment from that which had earlier been set aside, and was based on different particulars of claim. It is difficult to understand how the application was a second application "to set aside any judgment or order. Rather the application appears to have been a first application to set aside a second judgment which was separate and distinct from the first.

1. However it is not necessary to finally resolve these questions. The significant consideration is that Mr Bailey has sought to litigate his indebtedness to Voita in the District Court and has not been able to do so. The affidavits filed in this Court showed that Mr Bailey had substantial grounds for contending that he was not indebted to Voita. For these reasons I ruled that this Court should go behind the District Court judgment and enquire whether Mr Bailey was truly indebted to Voita. It would have been open to Mr Bailey to appeal against the order of the Master made on 13 November 1991, but at that time the matter was about to be relisted in this Court. Time for compliance with the bankruptcy notice had earlier been extended by a Registrar up to and including 14 November 1991. When the matter first came before me on 9 December 1991 I considered that the real issue in dispute between the parties could be more quickly determined in this Court on the present application. Directions were given to permit the parties to file any further evidence by affidavit, and the matter was set down for trial.

2. The evidence before me discloses that although the particulars of claim in the District Court action were amended on 12 September 1991 to allege that the sub-lease was made between Voita and Mr Bailey, a like allegation was not made by Voita in the applications to wind up Benmix and Tideway. Material filed on one or other of the applications by Mr Bailey in the District Court had asserted that at the time of the oral agreement for sub-lease alleged by Voita, Tideway did not exist, and was not in fact formed until May 1990. On 6 September 1991 John Edward Gallagher, the General Manager of Voita, who had sworn the affidavits in support of the winding-up summonses on 16 July 1991, filed supplementary affidavits in each proceeding in the Supreme Court asserting that both companies were still indebted to Voita, and correcting certain matters in the earlier affidavits. In particular the earlier assertion that the sub-lease was between Voita on the one part and Benmix, Tideway and Mr Bailey on the other part was amended to assert that the sub-lessees were Benmix and Mr Bailey. As I will recount later in these reasons, early in 1991 Tideway had given a post-dated cheque to Voita for $48,750 to cover the outstanding rent. That cheque was dated 7 March 1991. It was not met on presentation, and the indebtedness arising on the dishonoured cheque justified the continuance of the winding-up proceedings against Tideway. But the continued assertion in the Supreme Court against Benmix that it was a party to the sub-lease was inconsistent with the amended particulars of claim filed against Mr Bailey in the District Court of Adelaide.

3. On 11 September 1991 orders were made in the Supreme Court winding up both Tideway and Benmix.

4. On the hearing of the application in this Court, the affidavits of Mr Gallagher filed in the Supreme Court were tendered by Voita. Mr Gallagher also filed a further affidavit sworn on 14 February 1992 which deposed, among other matters, that the sub-lease was negotiated by him on behalf of Voita with Mr Bailey; that Mr Bailey at no time asserted that he was acting on behalf of anyone else; that Mr Gallagher considered that the sub-lease was made between Voita and Mr Bailey personally; and that he first became aware of Benmix when the creditor received a rent payment for the premises. That payment, the first which was made, was made by cheque by Benmix in March 1990.

5. Mr Bailey has given evidence before this Court that prior to July 1989 he carried on practice in Adelaide as an accountant, although he does not have qualifications that are recognised by the Australian Society of Accountants. For some considerable time he had been working as a consultant with a fish exporter named Seapack. In the early months of 1988 Seapack was taken over by Van Ommeren International Trading Australia Pty Ltd ("Van Ommeren"). Thereafter Voita was formed as a joint venture company between Van Ommeren and Metro Meat Limited. Van Ommeren had previously been the lessee of the premises in question, but a sub-lease was then registered from Van Ommeren to Voita.

6. At about April 1989 Mr Bailey completed his consultancy work with Seapack, and then commenced consultancy work for Van Ommeren setting up an accounting system for the export of fish products. Whilst undertaking this work he was stationed on the fifth floor of 97 Pirie Street, one part of which was occupied by Van Ommeren and the other part by Voita. He had a desk in the Voita section and from time to time had contact with Mr Gallagher, and more frequently with Voita's financial accountant, Mr Mirasgentis (commonly known as Mr Miras). Mr Bailey's consultancy work was to end in June 1989. He says that in the few days before the completion date he discussed his future plans at some length with Mr Miras. Those plans were to become the managing director of Benmix, a company then owned by John and Con Melas of Maroubra in New South Wales. Benmix was involved in property development. He was to oversee the South Australian operation, and the company had in mind to borrow overseas funds with a view to erecting a 28 storey high-rise residential block in Queensland, to acquiring land in South Australia, and to erect a tavern, and a reception centre at North Haven, South Australia.

7. Mr Bailey took up the role of managing director of Benmix early in July 1989. He says that on one occasion in about July 1989 he went back to Voita's premises at 97 Pirie Street to discuss with Mr Gallagher the method of calculating wastage in crayfish. On that occasion they were together for about one hour and during their conversation he informed Mr Gallagher about the work that he was proposing with Benmix, and said that he was involved with Sydney directors.

8. Some months later, in about October 1989 Mr Bailey again went to the premises at 97 Pirie Street. He did so to collect a final payment which was due to him by Van Ommeren for consultancy work. By chance, he met Mr Miras in a foyer Mr Bailey said that Van Ommeren, who were about to leave the premises and transfer their operation to New South Wales, had offered him "their end of the fifth floor of the building". Mr Miras said words to the effect "You can have this end" indicating the part of the fifth floor occupied by Voita. Voita was then planning to move its operations to another location in Adelaide. Mr Miras said he had been instructed to take steps to find a tenant. Mr Bailey was seeking premises in Adelaide for Benmix at the time. The Voita space was suitable. The two men discussed what furnishings, fittings and other equipment might be included in the sub-lease. These discussions were later pursued in several telephone conversations. In one of them, Mr Bailey said "We would be offering $30,000 per annum". About one week later Mr Miras telephoned Mr Bailey. Mr Miras said he had spoken with Mr Gallagher who was keen to lease the premises, but $30,000 rent per annum was not enough. Mr Miras suggested that Mr Bailey come in and discuss the matter with Mr Gallagher.

9. Mr Bailey did so about two days later. The only two people present at that discussion were Mr Gallagher and Mr Bailey. Mr Bailey's account of the conversation is as follows: There was an exchange of pleasantries. Mr Gallagher said "Mr Miras has said you have made an offer of $30,000". Mr Bailey replied: "Yes we have made an offer of $30,000". Mr Gallagher said this would not be sufficient and Voita was seeking around $50,000. It was paying a higher sum as lessee for the premises, but would be prepared to accept a loss over the balance of the term of the lease. Mr Bailey said that $50,000 was above the figure he had discussed with his other directors, but he had been instructed to secure the premises at a reasonable rental if he could. Mr Bailey then offered $40,000. Mr Gallagher said the furnishings and fittings could remain in the premises and at the end of the term these could be bought at a written down value by the tenant. Mr Bailey then said "I believe my directors would agree to $45,000 and on these terms we would accept a rental of $45,000". Mr Bailey said he would ring "the Sydney boys" and let them know the proposed terms of the sub-lease. This was the end of the discussion between them.

10. Mr Bailey says that he discussed the proposed rent with the Sydney directors of Benmix, and then had further discussions with Mr Miras confirming the proposed sub-lease and settling on details about plant and equipment. There was discussion about the drawing of a sub-lease, and Messrs Thomson, Simmons and Co. were to be instructed. However, each party seems to have assumed that the other would give those instructions and in the result no sub-lease was drawn up.

11. Voita moved out of the premises in December 1989. The key to the premises was given to Mr Bailey. He and other Benmix staff moved into the premises, and rent commenced from 1 January 1990.

12. The first payment of rent was not made until March 1990 when three months rent was paid. Mr Bailey said that on an occasion in March he was conferring with a Mr Bernard in his office, when Mr Gallagher telephoned him enquiring why the rent had not been paid. Mr Bailey said that he would write a cheque forthwith and have it delivered. He signed a Benmix cheque for three months rent. The cheque was delivered shortly afterwards by Mr Bernard to the Voita office in Hurtle Square, Adelaide. A bare cheque was delivered with no covering explanation. Mr Bernard has given evidence confirming that such a conversation occurred in his presence and that he delivered the bare cheque to the reception counter of Voita. The cheque was accepted. There was no communication about it with Mr Bailey.

13. The evidence given by the parties before this Court traversed a number of events which occurred thereafter. I do not propose to recite them. It is sufficient to say that in the early months of 1990 Mr Bailey in his capacity as managing director of Benmix was negotiating with Australian and overseas financiers. He was absent from South Australia for significant periods of time. The money did not eventuate as he hoped. By April 1990 Benmix was negotiating with an overseas financier who showed interest in investing in South Australia but did not want to be involved in a Queensland development which Benmix owned. At this time Benmix was running short of cash, and to facilitate a possible joint venture with the overseas financier, restricted to a South Australian operation, a new company, Tideway, was formed. Mr Bailey says that he informed Mr Gallagher of the formation of Tideway and explained why it was necessary to form another company. Mr Bailey informed him that Tideway would accept responsibility for the Benmix rental debt.

1. In July 1990 Mr Bailey suffered a heart attack. He was away from work for some months. Negotiation of the proposed joint venture between Tideway and the overseas financier was much delayed. Late in 1989, when Mr Bailey had returned to work, he tried to reconstruct the proposed transaction with the overseas financier. He contacted Mr Gallagher and informed him of the position. Mr Gallagher requested that he be sent copies of letters from the overseas financier by facsimile and this was done. In the hope that the joint venture would proceed Mr Bailey wrote out three cheques on a Tideway cheque account post-dated for $12,500 payable on 25 January 1991, $12,500 payable on 1 February 1991 and $12,000 payable on 8 February 1991. The Tideway venture had not come to fruition when the first of these cheques became payable. There was no money in the Tideway account when the cheque was presented. There were further discussions between Mr Bailey and Mr Gallagher. The post-dated cheque for $48,750, payable on 7 March 1991, was then given to Mr Gallagher, again drawn on Tideway. On 7 March 1991 the joint venture had still not been confirmed. Tideway had received no money from the overseas financier. The cheque for $48,750 was not met on presentation.

2. On or about 25 March 1991 Voita distrained for rent allegedly due by Mr Bailey, Benmix and Tideway. No further attempt was made to negotiate the joint venture, partly because, Mr Bailey says, all his papers were seized in the distraint. Then followed the Court proceedings earlier outlined.

3. At trial in this Court, the applicant led evidence from Mr Con Melas, a Sydney director of Benmix, and from Mr Bernard. Mr Miras and Mr Gallagher gave evidence for Voita.

4. Mr Gallagher confirmed his knowledge of the consultancy engagements prior to July 1989 about which Mr Bailey had given evidence although he could not remember when Mr Bailey ceased to be so engaged. He said that in about July or August 1989 Mr Bailey approached him and asked if Voita would lease the premises as he could be interested in renting them. Later in the year, in about October 1989, Mr Gallagher says he contacted Mr Bailey and asked if he intended to take over the premises. Mr Bailey said he would do so. They discussed the terms of the rental and agreed on $45,000 per annum and settled details about the fixtures and fittings, and an option to purchase them at the expiry of the sub-lease. Nothing was committed to writing. Mr Bailey was to have a formal sub-lease drawn up. Mr Gallagher says that no mention was made in either of these two discussions (which were the only two he had with Mr Bailey) about Mr Bailey being involved with a company, or with people in Sydney. He says that he assumed that the leasing agreement was with Mr Bailey personally, although he did not turn his mind to the question how someone in Mr Bailey's position could pay $45,000 per annum in rent. He had heard some "office talk" that Mr Bailey was involved with people in Queensland and in residential development, but that was not mentioned by Mr Bailey. Mr Gallagher said that he did not hear the name Benmix until he received copies of the financiers' letters by facsimile late in 1990 from Mr Bailey. This assertion is in contrast with one earlier made in the affidavit sworn by him on 14 February 1992 that he first became aware of Benmix when he received the first rental payment for the premises. In his oral evidence, Mr Gallagher denied that he saw the cheque for that payment, or that he became aware of the identity of the drawer when the cheque was received.

5. The assertion that Mr Gallagher did not learn of Benmix until November 1990, or, if his affidavit is to be preferred to his oral evidence, until March 1990, stands in contrast with the sworn assertions made by him in his affidavits in support of the summons to wind up Benmix. In his oral evidence he sought to explain this inconsistency by saying that the affidavits in the winding-up proceedings were sworn with "hindsight": when cheques were received first from Benmix and then from Tideway for rent he was not certain who was the contracting party.

6. I was impressed by Mr Bailey, and I accept his evidence in preference to that of Mr Gallagher wherever there is conflict. The evidence of Mr Bailey was substantially supported in matters of detail by Mr Miras. I was left with the firm impression by Mr Gallagher's evidence that he had a poor recollection of conversations which occurred in 1989 regarding the sub-lease of the premises, and that his affidavits, taken with his oral evidence, showed that he had from time to time changed his story as aspects of his recollection were shown to be defective. I think it is most probable that at about the time when Mr Bailey's consultancy work came to an end in mid-1989 Messrs Miras and Gallagher talked with Mr Bailey about his plans for the future. I am satisfied that both men knew prior to the discussions about the premises in October 1989 that Mr Bailey was working on a project for a development company with interstate directors, being a project of such a magnitude that Mr Bailey would not personally be acting as the intending developer. I find that Mr Bailey, as he said in evidence, disclosed that he was acting on behalf of Benmix in negotiating and agreeing to take the sub-lease. I find that Mr Gallagher knew, when it was received, that the first rental payment was paid by Benmix. That he did not seek any explanation about that company at the time from Mr Bailey is further evidence, although of slight weight in itself, in favour of the conclusion that he was already aware of the company's involvement.

7. I therefore find that Mr Bailey was acting for a disclosed principal, Benmix, when he entered into the sub-lease agreement.

8. Mr Melas gave evidence that he and his brother, as directors of Benmix, instructed Mr Bailey on behalf of Benmix to enter into the sub-lease agreement. I find that Mr Bailey had the authority of the directors to contract on behalf of Benmix. This finding is however based substantially on my acceptance of Mr Bailey's evidence rather than on the weight which I attach to the evidence of Mr Melas. Mr Melas was cross-examined on a letter dated 2 May 1991, marked exhibit MFI C5. The letter was not formally proved in evidence. It would have been necessary to adjourn the proceedings to enable a solicitor from Sydney to be called to prove it. The letter was written by solicitors who acted for Mr Con Melas in his personal affairs shortly after the sub.s.460(2) notice of demand had been served on Benmix. The letter denied the involvement of the company as a sub-lessee. The letter has the hallmarks of an attempt to obfuscate and delay. I accept Mr Bailey's evidence that he was totally unaware of the letter until it was shown to him in his cross-examination. Rather than delay the proceedings, I have acted on the footing that the letter is adequately proved, and I have taken it into account in my assessment of Mr Melas' evidence. The letter is damaging to the credit of Mr Melas. Nevertheless I accept his evidence that he and his brother authorised Mr Bailey to agree to the sub-lease in the name of Benmix.

9. It follows from my findings that the sub-lease was entered into by Mr Bailey as an agent for a disclosed principal and that he has no personal liability to Voita for the amount claimed. The bankruptcy notice will be set aside as it is not supported by a real debt due to Voita.

10. In his final address, counsel for Voita sought to uphold his client's actions in proceeding both with the claim against Mr Bailey in the District Court on the footing that he was the only party to the sub-lease, and with the winding up of Benmix on the footing that it was a contracting party to the sub-lease. Counsel argued that the Court should find that Voita learned of Benmix only after the sub-lease agreement was reached. When the agreement was made, Mr Bailey, it was submitted, was acting for an undisclosed principal. When Voita learned of the principal, Benmix, it was entitled to sue both Mr Bailey and Benmix.

11. At law, a party contracting with an agent for an undisclosed principal, on learning of the principal's identity, may sue both principal and agent, but before judgment, must elect whether to take a judgment against one or the other. The liability arising under the contract cannot be enforced to judgment against both the agent and the principal: see Cheshire and Fifoot's Law of Contract, 5th Aust Ed, para.1662; Halsbury's Laws of England, 4th Ed Re-issue Vol.1(2), paras.143, 168. Even if the facts were as counsel contended, by September 1991 Voita was aware that Benmix was the principal, and the facts had been canvassed at some length in affidavits. With this knowledge Voita proceeded with the summons to wind up Benmix, and obtained an order to that end on 11 September 1991. In my opinion that conduct amounted to an election to proceed against the principal and barred further action against the agent.

12. The bankruptcy notice will be set aside on the ground that there is not in truth a liability owed by Mr Bailey to Voita. Voita must pay the costs of Mr Bailey.