Re Bozuwa, H.J. v Ex parte Bozuwa, H.J

BANKRUPTCY - application for discharge

- objection by Official

Trustee - unsatisfactory conduct alleged

- imprecise wording

misconduct under

sub-s. 150(6) shown - choice between refuslng

discharge and suspended discharge - factors affecting discretion - risk of breach of conditions - undesirabilrty of contlnuing court supervision - llttle basis put forward for discharge - history of disregard of creditors' rights - application dismissed.

Bankruptcy Act 1966 s.149, s.150

Re Cook: Ex parte Cook (ynrep. Toohey J. 4/4/85)

Van Reesema v Officlal Trustee (1903) 69 FLR 424

Re:	Zion; Ex parte The Bankrupt (unrep. Smithers J. 26/9/Q6)

RE: HENDRIKUS JOHANNES ROZUWA EX PARTE: HENDRIKUS JOHANNES BOZUWA

NO. 716 of 1983

FRENCH J.

18 AUGUST 1987

PERT11

I N THE

F DERAL

COURT

)

A U S T R A L I A

)

G E N E R A L

D I V I S I O N

)

BANKRUPTCY

D I S T R I C T

O F

STATE

THE

)

WESTERN

AUST ALIA

)

NO.

716 O F 1 9 8 3

RE '

HENDRIKUS

JOHANNES

BOZIJWA

B a n k r u p t

PARTE:

HENDRIKUS

JOHANNES

BOZUWA

A p p l i c a n t

MINUTE

ORDER

JUDGE

MAKING

ORDER:

FRFNCH

DATE OF ORDER:

18 A u g u s t 1987

WHERE

MADE :

P e r t h

THE

COURT

ORDERS

THAT:

The

a p p l l c a t i o n

dismlsscd .

Note:

S e t t l e m e n t and

e n t r y of

orders

1s d e a l t w l t h

i n R u l e 124 of

t h e B a n k r u p t y

R u l e s .

IN THE FEDERAL COURT	)
OF AUSTRALIA	)

GENERAL

DIVISION

)

BANKRUPTCY

DISTRICT

)

OF TtiE STATE OF

)

WESTERN	AUSTRALIA	1	K O . 716 of 1983
Re : HEVDRIKIIS JOHANNES BOZUWA

Bankrupt

EX PARTE: HENDRIKIJS JOHANNES BOZUWA

Applicant

CORAM: FRENCH

18 AUGUST 1987

REASONS FOR JIJDGMENT

Hendrikus Johannes Bozuwa became

a bankrupt on hls own

petition on 28 October 1983.

In the ordlnary course he would have been dlscharged on

28 October 1986 pursuant	to sub-s.149(1) of the Bankruptcy Act
1966.

However on 4 December 1984, the Offlcial Receiver flled a notlce of oblection to discharge under

sub-s.149(3) of the Act.

Assuming the validlty of the notlce, its effect was, by

vlrtue of sub-s.149(3),

to prevent Bozuwa's dlscharge except

order by the Court or until the ob~ectlon

lapsed or was withdrawn.

Rozuwa has therefore applied to

the Court under

s.150

for an order dlscharglng hlm from his bankruptcy.

2 .

The ground of the ob~ectlon as framed ~n the notlce

flled by the Offlclal Trustee 1s as follows:-

"That the conduct of the bankrupt, elther 1n respect of

the period before

or the perlod after the date of

bankruptcy, has been unsatlsfactory.''

No challenqe was made to

the validity of the notice, but

as framed, it leaves sornethlng to be desired.

It repeats the words of the relevant paraqraph

sub-s.149(4) of the Act whlch provides:-

" ( 4 )

An ob~ectlon

shall not be entered under paraqraph

( 3 ) (c) other than on one or more	of	the following
grounds:

(d)	that the conduct of the bankrupt, either ln respect of the period before or the period after the date

of the bankruptcy, has been unsatlsfactory.''

Paragraph (d) contemplates that an ob~ection

based upon

its provisions will specify one or other or both perlods as that in respect of which the bankrupt's conduct has been unsatlsfactory.

As framed, the ob~ectlon

does not specify any period.

A like observatlon was made

by Toohey J. about an

o b ~ e c t i o n

worded in the same terms ln Re Cook:

Ex parte Cook

(unrep. Toohey J. 4/4/85).

3 .

The

power

conferred

upon

the Offlcial Trustee of

preventing a discharge by enterinq an ob~ection attracts an obligation to carefully consider whether there is sufficient basis

for an entry of the oh~ection

upon one or more of the available

grounds - Van Reesema v Official Trustee (1983) 69 FLR 4 2 4 .

It necessarily follows that the	(;round	of ob~ection must be
expressed with some precision.

As the point was not argued in the present case,

7 shall

proceed upon the assumption that

the ob~ection

is effective. That

assumption, of course, does not determine the matter of validity

one way or the other.

The history of the events surrounding the bankruptcy is set out comprehensively in the report of the Official Trustee.

his evldence Mr Bozuwa was taken through that document paragraph

by paragraph, commenting and elaborating on some of the material,

but not substantially contradictlng the bulk of it.

As appears from the report, he was 5 1 years of age when

he became a bankrupt

in 1983.

He had returned to Australia from

Holland on the very same day.

It was his second bankruptcy,

the

first having occurred in Northern Oueensland in 1966.

He was dlscharged

from that bankruptcy after the expiry

of the applicable statutory minimum period, which was then 5

years.

4 .

In 1 9 7 7 Mr Bozuwa and his then wlfe bought a house

and

land at Kalamunda. The history

of events Drecedlnq that purchase

seems to have Involved some kind of dpvelopment ]olnt venture wlth a woman called Brouwer but nothing turns on that for present

purposes. The

home so purchased was sub~ect

to a first rortqaqe

i n favour of Permanent Investment Buildinq Society.

In 1 9 7 8 a company called Moxan Pty Ltd. of which Bozuwa was a dlrector and shareholder, bouqht land at Rallway Parade, Glen Forrest with flnance from Esanda Ltd in the amount of $15,000 secured by a second mortqaqe over the Kalamunda home.

This

company seems

have been a vehicle for another

]oint venture involving Mrs Rrouwer, Mr Bozuwa and another woman.

The company operated the businesses of a licuor store, a grocery and takeway food shop from the premises.

At some time which did not emerge

from the evidence, the

land was sold to a Mr & Mrs Vallelonga. The company continued	to
run the businesses.

In 1981 the company was unable to obtain further credit from the bank. According to Mr Bozuwa it was suggested to him that he should carry on the buslnesses ln hls own name and that if he did, the bank would give him fresh finance to tide him over

until they could be sold.

In the event the Official Trustee's report shows that hc purchased the businesses from the company.

The grocery and takeaway food businesses were sold

1 9 8 1

two

couples

the

name

Van

Rrakel

and Wolf

respectively. The purchase price was $ 1 6 , 5 0 0 . A deposlt of $5,000 was paid and the balance secured by a blll of sale over the assets of the business.

The balance was never paid.

Messrs. Van Brake1 and Wolf

filed thelr debtors' petitions after only	4	or 5	months of
trading.

In August

1 9 8 2 Mr Rozuwa

s o l d the liquor store business

to Mr S Mrs Vallelonga €or $32,500.

A deposit of $4,875 was Daid

and

the balance of $ 2 7 , 6 2 5

was to be Dayable before Auqust

1 9 8 7 .

Stock in trade valued at

$ 1 2 , 4 7 5

was paid for In full.

The proceeds of the sale were applled largely to pay existinq debts.

For some reason, however, which could not

be explained

by him beyond a reference to excessive drlnklng Mr Bozuwa accepted a sum of $ 4 , 5 9 7 ~n full satisfactlon of the balance of the purchase price owinq by the Vallelonga's, namely $10,275.

I n

A u q u s t

l080 h e

h a d

b o u q h t

u n l t s

c r c c t e d

o n

l a n d

a t

J u r i e n

B a y

o r i g i n a l l y

n u r c h a s e d

b y

Moxan

P t y

L t d .

[le

p a l d

$ 1 1 5 , 0 0 0

f o r

t h e m ,

f l n a n c e d w i t h a

loan

S95,090

from

A l l l a n c e

A c c e p t a n c e

ComDany

L i m i t e d a n d s e c u r e d b v n o r t q a q e o v e r

t h e

un l t s .

I n t e r e s t

t h c

l o a n was

$ 1 , 4 0 0

p e r

m o n t h

a n d

f e l l

i n t o

a r r e a r s .

A l l i a n c e

A c c e p t a n c e

u l t l m a t e l v

sold

t h e

u n l t s

under

t h e

m o r t q a q e ,

l e a v i n g

a n

a f t e r - s a l e

d e f i c i e n c y

o f

$ 4 4 , 2 0 8 .

I n

J u l y

1382

M r Bozuwa

w e n t

t o

H o l l a n d ,

w h l c h

t h e

c o u n t r y o f h l s b l r t h .

f i n a n c e d

t h e

t r i p

f r o m

a n

a c c o u n t

w i t h

t h e

A N 2

R a n k ,

M o r l e y

w h i c h

h a d

b u i l t

w i t h

d r a w i n g s

f r o m

t h e

l i q u o r

s to re ,

$ 2 0 0

t h e r e a b o u t s

p e r

w e e k .

W h i l e

i n

H o l l a n d

l i v e d

w l t h

f r i e n d s .

I n o r

a b o u t

O c t o b e r

o r

N o v e m b e r

1 9 8 2

h e

r e t u r n e d

t o

A u s t r a l i a

b u t

o n l y

s t a y e d

f e w

weeks

b e f o r e

g o l n q

b a c k

t o

H o l l a n d .

s a l d

i n e v i d e n c e

t h a t

h e

h a d

n o t h i n g

t o

s t a y

f o r .

I t was

p u t

t o h i m

b y

O ' D r l s c o l l

f o r

t h e

O f f i c i a l

T r u s t e e ,

t h a t

a t t h i s time

h e

h a d ,

a n d

knew

h e

h a d ,

s u b s t a n t i a l

c r e d i t o r s

i n

A u s t r a l i a .

A c c o r d i n g

t o

Bozuwa

h o w e v e r ,

h l s

home

was o n

t h e

marke t

t h e n

a n d

h e

b e l i e v e d

t h a t

h e

h a d

e n o u q h

e q u l t y

i n i t a n d

t h e

J u r i e n

Bay

u n i t s

t o p a y

o u t

t h e c r e d i t o r s .

. .

W h i l e

i n

H o l l a n d ,

b e t w e e n

J u l y

a n d

N o v e m b e r

1 9 A 2 ,

h e

h a d

s o l i c i t o r

l o o k l n q

a f t e r

h i s

a E f a i r s

i n P e r t h .

I n

S e p t e m b e r

1 9 8 2

t h e

s o l i c i t o r

h a d

s u p p l i e d

him

w i t h a

l i s t

o f

d e b t s

t o t a l l i n g

a b o u t

$ 2 0 , 0 0 0 . 0 0

o n

d i f f e r e n t

a c c o u n t s .

I t

d o e s

n o t

a p p e a r

t h a t

h e

m a d e

a n y

a t t e m p t

t o

p a y

a n y

t h e m .

r e t u r n i n g

t o

H o l l a n d ,

h o w e v e r ,

took

w i t h h i m

g o l d

t o

t h e v a l u e o f

a b o u t $ 1 6 , 0 0 0 ,

t r a v e l l e r ' s

c h e q u e s

t o

t h e v a l u e o f

a b o u t

$ 2 , 5 0 0

a n d o p a l s

s a i d

w o r t h

a b o u t

S 3 0 0 .

The

S 1 6 , O O O

s a i d ,

h e

w a s

p a r t l y

d e r i v e d

€rom

t h e

p r o c e e d s

t h e

s a l e

t h e

l i q u o r

s tore,

p a r t l y

f r o m

" p r l v a t e

money"

a n d

p a r t l y

f r o m

money

q i v e n t o him

Mrs

B e r g h u b e r .

His

e v i d e n c e

o n

t h e

o u r c e

a n d

a m o u n t

o f

t h e

s u m s

i n v o l v e d

n o t

n o t a b l e

f o r

i t s c l ,

a r i t y .

I t

q u i t e

apparent

h o w e v e r ,

t h a t

when

l e f t

A u s t r a l l a

t o

r e t u r n

t o

H o l l a n d

i n

1 9 8 2

h e

t u r n e d

h l s

b a c k

o n

h i s

f l n a n c i a l r e s p o n s i b i l l t i e s a n d

took

w i t h

h i m

m o n e y

t h a t

c o u l d

h a v e

b e e n a p p l i e d

t o

t h e

r e d u c t i o n

h i s d e b t s .

His

i d e a

i n t a k i n g

t h e

g o l d ,

h e

s a l d ,

w a s

t o

se l l

i t

i n

H o l l a n d

a n d

m a k e

p r o f i t

o n

i t .

l n t e n d e d

t o i n v e s t

h e

proceeds in goods purchased in Holland for importatlon into	and
sale in Australla by Mrs Brouwer and Mrs Perqhuber.

In January 1983 howevcr,

ti-e two women told h m that

they dld not want to proceed with the venture.

In the meantlme he

had begun llving with a woman in a de facto relatlonshlp ~n Holland and had spent about S3,OOO In furnlture and $700 on a car.

He was payinq a monthly rental of $900.

In Auqust 1983 Bozuwa says he decided he would return to Australia to attend to his affalrs here.

In order to raise the money to

do so, he borrowed $2,500

from the Postglro Bank in Leeuwarden, Holland. Kis de facto wife,

a Mrs Spees, agreed, he said, to pay the amount back to the bank

for him. In	the event she left her employment and did not repay
that loan.

On hls return to Australia

on 28 October 1983, Mr Rozuwa

Immediately presented a debtor's petltion

in bankruptcy. It

appears that thls may have been lnspired

by advlce he had received

that a warrant had issued against hlm. He did concede ~n hls publlc examination that it was likely that at the tlme of hls departure from Australia, leqal proceedlnqs had already been commenced In respect of certain of hls outstanding debts.

The statement of affairs disclosed assets

of $120 and

liabllities of $90,800. However proofs of debt totalling $107,C83

were received and admitted.

Realisation of his assets yielded $1,852.

No unrealised assets are

left in the bankrupt estate.

Official fees and costs of the administration have been	pald in
full to the amount of $1,224.34.

A dividend of 0 . 7 1 cents ~n the dollar was paid to the

nroverl creditors on 4 March.

There

are

funds

held from

which

any

further

distributlon could be made.

The Offlcial Trustee considers

Mr Bozuwa's conduct prior

to h1s bankruptcy to have been unsatlsfactory for	the	following
reasons:-

He departed Australia whilst knowing himself

to be

in	financial difficulty and contrlbuted to his

bankruptcy by the culpable neglect of hls business

affalrs.

2 . He contracted a debt provable in bankruptcy without at the time of contractlng it having any reasonable or probable grounds of expectatlon of paylng i t after taking into account his liabllities at the

t lme

3 .

He continued to obtain credit upwards of

$100 (from

the

Postgiro

Bank In

Holland)

whllst

knowing

himself to be insolvent.

10.

Havinq regard

to the provisions

O E sub-s.l50(6)

the

Act, the Officlal Trustee

contends:-

(a)

That the Bankrupt

has, after knowinq himself to

insolvent, obtalned credlt to the amount of	$100.00
or upward.

(b)

That, whllst in Holland, he borrowed from Postqiro

Ryks Post Spaarbank an amount of S2,500,

a debt

provable in bankruptcy wlthout at the tlme of contracting it any reasonable or probable qrounds

of expectation of paylnq 1t

after taking lnto

account his llabllltles at the tlme.

hls

bankruptcy

by the

culpable neglect of his buslness afEairs.

The effect of the Official Trustee's

ob~ection is to

prevent automatic discharge under s.149 of the Act.

This is the

result of sub-s.l49(3)(c)

which relevantly provides:-

"149(3)

A bankrupt 1s not dlscharqed from bankruntcy by

virtue of thls section

if -

The Registrar, the Inspector-General or the trustee has entered, or a creditor has, wlth the leave of the Court, entered, an ob~ection, in accordance

with the prescribed form and in the prescribed manner, to the discharge of the bankrupt by force of this sectlon and the ob~ection has not been

withdrawn or lapsed

before

the time when

the

bankrupt would have been so dlscharged but for thls

sub-section''

This requires that where the objection has not been withdrawn or lapsed the bankrupt,

in order to secure discharge,

must make application under

s.150 of the Act.

11.

Sub-section

150(6)

enumerates

v a r i o u s

heads

misconduct, any one of which, ~f made out, wlll have thc result that the court is limited to the options specl€ied in sub-s.150(5)

in disposing of	thc	aDplicatlon €or discharge. That sub-scctlon
provides:-

"150(5) The Court

shall,

if any o f the matters

specifled in sub-section ( 1 5 ) is established -

(a)

refuse to make an order of dlschargc: or

( h )

make an order of discharge, but suspend the operation of the order as the court thinks Droper,

elther uncondltlonally or SUbJeCt to

condltions."

There is nothlng to suggest that the

"unsat~sfactory

conduct" which may ground an oblection under

sub-s.l49(4)(d)

limited to the categories of misconduct in sub-s.l50(6).

the

event

that

it falls

outside

any

of those

categories, the court may refuse

a discharge or make an ordcr for

suspended discharge under sub-s.150(9).

However, in such a case

the court also has the power to make an order of

discharge.

In the present case the Official Trustee has set out

his report three areas of Mr Rozuwa's conduct said to fall within

those enumerated in sub-s.150(6).

I	am satisfied on the evidence that Mr Rozuwa did

contribute to h i s bankruptcy by culpable neqlect of his buslness affalrs, a neglect evldenced by his departure to Holland In July

12.

1987 and hls return to that country

In Kovenber.

These absences

occurred at a tlme when

hls affalrs were

In a crltlcal state

decllne and requlred hls close and contlnulnq attentlon.

I am also satlsfled that whlle In Holland he borrowed an reasonable or probable qrounds of expectation of belnr; able to pay It back after taklnq lnto conslderatlon hls other llabllltles at the time.

amount

$2,500

from the Postgiro Bank, wlthout havlng any

In the clrcumstances, two O E the matters specified In sub-s.(6) have been establlshed. The choice 1s open to the court under sub-s.150(5) therefore to elther refuse to make an order of discharge or to make such an order but suspend It uncondltlonally

or upon conditlons.

Conslderatlons relevant to the exerclse of a discretion to discharge a bankrupt under sub-s.(9) are also, 1n my oplnion, relevant to the consideratlon of a suspended dlscharge under sub-s.150(5). In that context It 1s appropriate to have regard to

Mr Bozuwa’s reasons for seeking discharge.

In essence he thought

that

I f dlscharged he would have

a better chance of flnding

employment. That evldence was not elaborated

in terms of any

particular job or type

of employment that he mlght have In mind.

A s a general propositlon

however, it can no doubt

accepted that a subslstlng bankruptcy 1s of no assistance and may

be an Impediment in the search for work.

13.

No creditors apnearcd and onposfd tbe annllcation and I think it riqht to conclude Erom the evidence that the creditors do

not

stand

qain in anyway from the

continuance of this

bankruptcy.

The effect upon the bankruot and

hls creditors of a

continuance of the

bankruptcy 1s but

one

conslderation,

deciding whether or not to make an order for

suspended discharge

as distinct from refusing discharae altogether. The public

interest subsuming commercial morality,	is also to be taken into
account.

In Re: ZlOn: Ex parte The Bankrupt (unrep. Smlthers J.

2 6 / 9 / 8 6 ) ,

Smithers J.

said at paqe 3:-

"Public interest will require that a discharqe be delayed or made conditional i f the conduct revealed or the character of the bankrupt indicates that the return of the bankrupt to the commerclal world in full freedom might involve unacceptable risk to persons likely to be engaged in commercial relations with him in the future. In other words it is for the applicant to show that balancing the policy of the law in favour of the return

to commercial life

of a bankrupt against the dangers

that might accrue to the

public

from full commercial

capacity of the applicant it	is appropriate that the
discharge be granted."

To some extent, the ob~ectives adverted to

by His

Honour can be attained

by a suspended discharge

s u b ~ e c t

conditions

which

would

have

the

effect

restrictlnq

participation by the bankrupt for a time in commerclal life even

after his discharge has come into

effect.

1 4 .

In this case, however, the evldence indicates a robust disreqard by Mr Bozuwa of h l s credltors' riqhts and interests.

To order a susncnded discharqe subject to

conrlltions

Involves an acceptance that the opnllcant

will comply wlth

thc

condltlons and necessarlly lnvolvcs

the court ~n the possibility

of a continuinq supervlsory role

if the conditlons are

breached.

In the present case and having regard

to the history of

this

partlcular bankruptcy, 1 do not conslder that an order susnendln!: the discharge on condition would be in the nubllc interest. In m y

oplnlon the appropriate course

i s to dlsrniss the appllcatlon.

I certify that this and the precedlnq

thirteen (13) pages are a true copy

of the Reasons €or Judgment herein of

His Honour Mr Justice French.

Associate:

Mr D. McKenna appeared on behalf of the Bankrupt.

Mr F. O'Drlscoll appeared on behalf of the Official Recelver.

Date of Hearing:	2 2 June 1987
Date of Judgment:	18 August 1987

[1987] FCA 461

18 Aug 1987