Re Cavanagh, P.R. & Anor. v Dalgety Farmers Ltd

[1992] FCA 1050

JUDGMENT F ; : . .J..Q.s.P$~&~

THE FEDERAT, COURT OF A U S T W

-

BANKRUPTCY DISTRICT OF THE	)	NO. NB 3134 of 1992
STATE OF NEW SOUTH WALES	)

PETER ROSS CAVANAGH

JAN ELSIE CAVANAGH

. .

Debtors

i

EX PARTE :  DALGETY PetiEXing F RS LT C : e d i t o o 1 ;: '

HILL J	RFCFIVED 5 '	1 -
i
;-.

SYDNEY 3 0 APR 1993

23 NOVEMBER 1992 FEDERAL COURT OF I

l!.	AUNI*	I
PRINCIP*~	i

, REGISTR~

FX TEMPORE REASONS FOR JUDGMENT	e	2	, .
:
, '

V, @ . ~.

In this matter Dalgety Farmers Limited ("Dalgetys") petitions the Court for an order of sequestration against the estate of Mr and Mrs Cavanagh (the debtors). The petition is opposed by the debtors on the basis that the petitioning creditor has not proved an act of bankruptcy. There are two acts of bankruptcy relied upon by the petitioning creditor in the petition. First, it is alleged that the debtors, within six months before the presentation of the petition, made a disposition of their property which would have, if they had become bankrupt, been void as against the trustee (see s.40(l)(b)

I

1991 at the Land Titles Office as number	E36752 over the whole of the land comprised
i n Folio I d e n t i f i e r 105/753950, known a s
Palmerston, 'Be l la ta ' . "
The second ac t o f bankruptcy re l ied upon, but only i n

of the Bankru~tcv Act 1966 ( "the Act" ) ) . The particulars of that act of bankruptcy contained in the petition are in the following

terms :

"Mortgage dated 1 August 1991 to Roger Martln Cavanagh registered on 5 November

t h e case o f M r Cavanagh, i s t h a t he gave not ice t o one o f h i s

credi tors t ha t he had suspended payment o f h i s debts . The

particulars i n t h e pe t i t ion i n respect o f t ha t ac t o f bankruptcy

are i n t h e following terms:

"On 25 November 1991 Peter Ross Cavanagh a t

a meeting t o discuss h i s indebtedness t o t h e

pet i t ioning credi tor Informed John Shaw on behalf o f the petitioning credi tor tha t he had no money with which t o pay h i s debts and had suspended payment o f them. "

Mr Cavanaghes brother, Mr Roger Cavanagh, i n an

a f f i d a v i t f i l e d i n t h e proceedings, deposed t o a conversation i n

or about August 1988 wi th h i s brother i n which Mr	Peter Cavanagh
had	said:

" I know you are get t ing $80,000 from Dad's
property,	can I have a loan o f i t , i f you

don ' t need it s traight away?. Jan and I w l l l pay it back when we are i n a posi t ion t o do so. "

According t o Mr Roger Cavanagh he said i n rep ly :

" I got a government job and there i s a house provided and I don ' t need the money r igh t

away. I am qu i te happy t o give it t o you

but you must give me some secur i ty for i t ,

I cannot l i v e i n government houses a l l t he

time and I certainly want to buy my own
place if that occurs."

Mr Roger Cavanagh was cross-examined in respect of this conversation. He knew at the time that Mr Cavanagh was intending to purchase a property known as "Palmerston" with his wife Jan and which property in fact was purchased in October 1988 for a price of $175,000, along with plant and equipment to the value of $45,000.

Mr Roger Cavanagh conceded, however, that the discussion concerning the loan was a discussion solely with his brother and not with Mrs Jan Cavanagh. As far as he was concerned, the loan was a loan to his brother and not to his brother and his brother's wife. Further, Mr Roger Cavanagh conceded that in that conversation he had not discussed with his brother the question of a mortgage as deposed to in his affidavit, rather, the brother had said words to the effect:

look after you. If you need the money	"As soon as Palmerston goes through I'll
you'll be right".
According to Mr Roger Cavanagh 'S oral evidence, the

l

I	question of a mortgage did not arise until a later conversation
I
4	in June or July of 1990, well after he had lent the money to his
I	brother.
!
Mr Peter Cavanagh, in his evidence, insisted that the question of a mortgage had arisen prior to the loan and during the August 1988 conversation. His version of that conversation was in the following terms:

"I sald to Roger: 'That $80,000 from Dad's property - can I have a loan of it if you don't need it straight away. You can have it back when we can afford it'. Roger replied: 'I've got a permanent job. I don't need the money now. You can borrow it, but I want some security'. I said: 'Well, you can have a Mortgage on 'Palmerston' when the settlement goes

through in October'. "

I have had the opportunity of observing both Peter Cavanagh and Roger Cavanagh in the witness box and, where they are in conflict, I prefer the oral evidence of Mr Roger Cavanagh.

I think that it is more probable than not that the terms of such

loan as was made were very informal at the time the conversation deposed to took place. Further, it seems unlikely that there

were detailed discussions about either interest or the term of	the loan at this time, although there was conflicting evidence
given about this by both Mr Roger Cavanagh and Mr Peter Cavanagh.
According to Mr Roger Cavanagh, in the first half of 1990 he formed the intention to purchase a house when a likely transfer from his then position to a school in Darling Downs would come through. Accordingly, in July/August 1990, Mr Roger Cavanagh went to see his brother and sister-in-law and asked them to return the $80,000. Mr Peter Cavanagh told his brother that
times were tough and that the loan could not then be repaid. Mr Roger Cavanagh was, he said, annoyed, and told his brother so. Mr Peter Cavanagh is then said to have said:

"Look, why don't we sell the property and
I'll pay you then."

According to Mr Roger Cavanagh, the conversation continued by Roger Cavanagh saying:

"I am not happy with that at all. You must

-	give me a mortgage. That was what you promised me, and I wouldn't have lent you the money if you hadn't made this promise.
I want a formal mortgage now."

That evidence is, of course, inconsistent with the evidence of Mr Roger Cavanagh given in cross-examination that there had been no earlier promise. To that extent, I reject it. The property was not put on the market by Mr Peter Cavanagh until January 1991. According to Mr Roger Cavanagh, at a meeting,

I	presumably in July/August 1990, Mr Peter Cavanagh agreed to have	a mortgage executed and to get a Mr Hannigan, his solicitor, to
1	prepare it.
There is no doubt that Mr Hannigan ultimately prepared a mortgage and that it was executed by all the parties to it on
1	1 August 1991. A letter, tendered in the proceedings, from Mr Hannigan to a Mr Winter, mlght well suggest that Mr Peter
I	Cavanagh and his wife visited Mr Hannlgan on 13 May 1991 in
i
connection with the preparation of a mortgage. The letter, however, suggests that the mortgage was not a mortgage to Mr Roger Cavanagh but, rather, a mortgage to Mr and Mrs Harold Cavanagh, the parents of Peter.
Since the money actually lent originated from Mr Harold Cavanagh, this would make a certain amount of sense. Mr Hannigan also asked Mr Winter to advise the principal of the loan, the interest to be charged upon the principal and the date upon which the loan was given. Mr Peter Cavanagh sought to explain this

-.letter by saying that there was some other loan initially made by his father, although ultimately he said that no mortgage was entered into to secure that loan, nor was any money owing to his father, at least by this time.

The possibility of the loan having been a loan from the
father is made more likely by a letter from Mr Hannigan to the

State Bank, Moree, seeking consent to the mortgage that was

the second mortgage from Mr and Mrs Cavanagh as being "for family	ultimately entered into and registered. That letter refers to
estate planning reasons". It is difficult precisely to know what that meant and certainly neither Mr Peter Cavanagh nor Mr Roger Cavanagh seemed able to explain it. I should say that none of Mr Winter, Mr Hannigan nor Mr Harold Cavanagh gave evidence. I make no finding on this matter and am prepared to assume that the loan was, in fact, made by Mr Roger Cavanagh to his brother.
It was put to Mr Roger Cavanagh that his purpose in wanting the mortgage executed was in essence to give him a preference over other creditors. Mr Roger Cavanagh concededthat he looked to the mortgage for protection. That protection, he said however, was not protection against his brother. He was unable to say against whom he needed protection. He said that the matter was a family one and it was appropriate to formalise what otherwise was a family arrangement.

i

Mr Peter Cavanagh denied that the purpose of the.

mortgage was to prefer his brother against other creditors. He denied also having advised his brother of the existence of other creditors. It is unnecessary for me to make any finding on that matter. It suffices to say that the evidence establishes that at the time the loan was originally made, there was no agreement that a mortgage be given. The question of security had not then been raised. No question arises, therefore, that there was an agreement to give a mortgage in existence at the time the loan

was made.

The subsequent discussions concerning the giving of a

mortgage did not alter that position, so that when a mortgage was

l	in due course executed in August 1991, that was the first time in which Mr and Mrs Cavanagh had given security to Mr Roger
i
I	Cavanagh. Of course, if the loan was not to Mrs Jan Cavanagh, it would be the first time indeed that Mrs Cavanagh had even
i
!
I	acknowledged her obligation to repay it, but having regard to my finding that there was no equitable mortgage, it is unnecessary to pursue that particular matter.
The petition was dated 30 December 1991, that is to say the petition was presented less than six months after the grant of the security. On this basis, the giving of the security would represent the conferring of a preference, being a charge, given in favour of Mr Roger Cavanagh and having the effect of giving Mr Roger Cavanagh a preference or advantage over other creditors
within six months of the presentation of the petition. I shou-ld.
say that at the time the charge was given, it was clear from the evidence that Mr Roger Cavanagh was unable to pay his debts as they became due from his own moneys. It was not suggested to the contrary.
The Palmerston property was sold by at least 22 November 1991, this being the date of the transfer of the property. There was no evidence before me as to the precise
date of the contract, but it can be assumed that the contract would have been at some earlier time. The sale price was
$180,000. By the time the mortgage came to be executed, the debtors owed approximately $300,000 to Dalgetys, as well as approximately $100,000 on the security of the Palmerston property and the $80,000 said to be owing to Mr Cavanagh. The only assets were the Palmerston property and some stock to which reference will shortly be made. On any view, the liabilities far exceeded the value of the assets.
It is unnecessary to pursue the second act of bankruptcy alleged to have been committed by Mr Cavanagh. Some of the evidence advanced in favour of that is, however, relevant to the question of the financial position of Mr Cavanagh at the time of entering into the mortgage. I will accordingly shortly deal with it.
i
There is a stark conflict of evidence between the evidence given by Mr Shaw from Dalgetys and that given by Mr Peter Cavanagh, particularlythe evidence of a conversation which
I	Mr Shaw says took place shortly after the sale of the Palmerston
!	property on 25 November 1991. Mr Shaw made a note of that conversation at the time or shortly after and that note was tendered in evidence. There is no reason not to believe Mr Shaw; he gave his evidence forthrightly, and to the extent to which there is a conflict, I prefer his evidence to that of Mr Cavanagh.

I find that in this conversation the following took

place. Mr Cavanagh said:

"I've got a disappointment for you."

Mr Shaw:

"How do you mean a disappointment?"

Mr Cavanagh:

"Well, I'm finished, I've had it.	It's all
over.	"

Mr Shaw:

"What do you mean finished? You've sold 'palmerston ' , haven't you, you must have some money from that?"

Mr Cavanagh:

"Sold i t .	You mean gave it away.	I ' v e got
no money,	I'm broke and	l i v i n g i n a rented

house i n N a r r a b r i . "

Mr Shaw:

"Okay, but what	about	t he c a t t l e , where have
you got them?"

Mr Cavanagh:

"There are no c a t t l e . "

Mr Shaw:

"What do you mean there are no ca t t l e? You sold 140 odd t o Ramsey's over the p a s t few weeks, you had 940 head. There should be

about 800 l e f t . "

Mr Cavanagh:

"No, t h a t ' s them.	That ' s a l l there was and
now t h e r e ' s none l e f t .	They're a l l gone. "
The reference t o there having been 940 head o f c a t t l e

i s a re ference t o other evidence tha t was given by M r Shaw.

B r i e f l y Mr	Shaw deposed t h a t he v i s i t e d Mr	Cavanagh on 8 October
1991 t o inspect t he c a t t l e and	t o obtain what	he re ferred t o as

an updated stock mortgage duly signed by M r and Mrs Cavanagh.

I I

While t here , Mr Shaw alleges and Mr Cavanagh denies t h a t Mr

l	I	Cavanagh said there were 940 animals i n addit ion t o a fur ther number o f c a t t l e making a t o t a l o f 2 , 0 0 0 head i n a mob which Mr
Cavanagh was looking a f t e r . The parties agree t h a t there were
a large number o f c a t t l e t ha t Mr Cavanagh was looking a f t e r on
agistment from other people. The cattle were spread out along
a stock route adjacent to a roadway. According to Mr Shaw's
evidence, Mr Shaw, together with Mr Cavanagh, drove through the
cattle in Mr Shaw's car. According to Mr Cavanagh's evidence,
it would have been impossible to drive through the cattle in the l

I ,

car and in any event Mr Cavanagh at no time was in the car with	I..
Mr Shaw.

I I

1. I accept the evidence of Mr Shaw that he was told at the time that there were 940 head of cattle. Mr Shaw completed

   the form of stock mortgage indicating-940 head on the property.

   It is highly unlikely that that figure was one which he made up.

   Mr Shaw says that in the later conversation, Mr Cavanagh admitted

   that Mr Cavanagh had lied to Mr Shaw as to the number of cattle

   and that, indeed, by October, there were but a few head of cattle

   on the property, in the order of 160. It seems abundantly clear

   that Mr Cavanagh's financial position in August, therefore, was

   not such as to permit him to pay his debts as they fell due and

the same comment of course follows in respect of his wlfe. In

these circumstances I would find the act of bankruptcy proved.

Having regard to my findings, I am satisfied of the
proof of the matters stated in the petition and of the other

matters set out in 6.52 of the Act and I am satisfied that the

I	I	first act of bankruptcy upon which the petition was founded has
I	been committed. Accordingly, I would make a sequestration order
l
against the estate of the debtors.

All costs, including reserved costs, are to be paid in

accordance with the Act.

I certify that this and the preceding eleven (11) pages are a true copy of the Reasons

for Judgment herein of his Honour

Mr Justice Hill.

Date: 30 March 1993

Counsel and Solicitors	Mr J. Chippindall instructed by
for Debtor:	Potts Latimer as agents for Hannigans
Counsel and Solicitors	Mr M.R. Aldridge instructed by
for Petitioning Creditor:	Minter Ellison
Date of Hearing:	23 November 1992
Date Judgment Delivered:	23 November 1992

I N THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DTVTSION	1
) No. NB 3134 of 1 9 9 2
STATE OF NEW SOUTH WALES	)

PETER ROSS CAVANAGH

JAN ELSIE CAVANAGH

o-A%&-Q d -b3 Debtors 1

U

m ' -

EX PARTE :  DALGETY FARMERS LTD

-,&L&.

30.4 -9% M+ Pe t i t i on ing Credito

. -

CORAM :	HILL J
PLACE :	SYDNEY
DATED :	23 NOVEMBER 1992

EX TEMPORE REASONS FOR JUDGMENT I

I n t h i s matter Dalgety Farmers Limited

p e t i t i o n s	t h e	Court	f o r an	order	of	seques t ra t ion	aga in s t	t h e	1
1

e s t a t e of M r and M r s Cavanagh ( t h e deb to r s ) . The p e t i t i o n i s

opposed by t h e debtors on t h e ba s i s t h a t t h e p e t i t i o n i n g c r e d i t o r

has not proved an a c t of bankruptcy. There are two a c t s of

bankruptcy r e l i e d upon by t h e pe t i t i on ing c r e d i t o r i n t h e

p e t i t i o n . F i r s t , it i s a l leged t h a t t h e debtors , wi th in six

months before t h e p resen ta t ion of t h e p e t i t i o n , made a

d i spos i t i on of	t h e i r property which would have, i f they had
become bankrupt,	been void a s a g a i n s t t h e t r u s t e e ( s e e s . 4 0 ( l ) ( b )

of t h e Bankruptcy Act 1 9 6 6 ( " t h e A c t " ) ) . The p a r t i c u l a r s of t h a t

a c t of	bankruptcy	contained	i n t h e p e t i t i o n a r e i n t h e fol lowing
terms :

"Mortgage dated 1 A u g u s t 1991 t o Roger

Martin Cavanagh r eg i s t e r ed on 5 November

1991 a t t he Land T i t l e s Off lce a s number
E36752 over t h e whole of t h e land comprised

time and I certainly want to buy my own
place if that occurs."

Mr Roger Cavanagh was cross-examined in respect of this conversation. He knew at the time that Mr Cavanagh was intending to purchase a property known as "Palmerston" with his wife Jan and which property in fact was purchased in October 1988 for a price of $175,000, along with plant and equipment to the value of $45,000.

Mr Roger Cavanagh conceded, however, that the

discussion concerning the loan was a discussion solely with his

brother and not with Mrs Jan Cavanagh. As far as he was concerned, the loan was a loan to his brother and not to his brother and his brother's wife. Further, Mr Roger Cavanagh conceded that in that conversation he had not discussed with his brother the question of a mortgage as deposed to in his affidavit, rather, the brother had said words to the effect:

look after you. If you need the money	"As soon as Palmerston goes through I'll
you'll be right".

According to Mr Roger Cavanagh's oral evidence, the question of a mortgage did not arise until a later conversation in June or July of 1990, well after he had lent the money to his brother.

Mr Peter Cavanagh, in his evidence, insisted that the question of a mortgage had arisen prior to the loan and during the August 1988 conversation. His version of that conversation was in the following terms:

"I said to Roger: 'That $80,000 from Dad's property - can I have a loan of it if you don't need it straight away. You can have it back when we can afford it1. Roger replied: 'I've got a permanent job. I don't need the money now. You can borrow it, but I want some security'. I said: 'Well, you can have a Mortgage on 'Palmerston' when the settlement goes

through in October' . "

I have had the opportunity of observing both Peter Cavanagh and Roger Cavanagh in the witness box and, where they are in conflict, I prefer the oral evidence of Mr Roger Cavanagh.

I think that it is more probable than not that the terms of such

loan as was made were very informal at the time the conversation deposed to took place. Further, it seems unlikely that there were detailed discussions about either interest or the term of

the loan at this time, although there was conflicting evidence	given about this by both Mr Roger Cavanagh and Mr Peter Cavanagh.
According to Mr Roger Cavanagh, in the first half of 1990 he formed the intention to purchase a house when a likely transfer from his then position to a school in Darling Downs would come through. Accordingly, in July/August 1990, Mr Roger Cavanagh went to see his brother and sister-in-law and asked them to return the $80,000. Mr Peter Cavanagh told his brother that
tunes were tough and that the loan could not then be repaid. Mr Roger Cavanagh was, he said, annoyed, and told his brother so. Mr Peter Cavanagh is then said to have said:

"Look, why don't we sell the property and
I'll pay you then."

According to Mr Roger Cavanagh, the conversation continued by Roger Cavanagh saying:

"I am not happy wlth that at all. You must give me a mortgage. That was what you promised me, and I wouldn't have lent you the money if you hadn't made this promise.

I want a formal mortgage now. "

That evidence is, of course, inconsistent with the evidence of Mr Roger Cavanagh given in cross-examination that there had been no earlier promise. To that extent, I relect it. The property was not put on the market by Mr Peter Cavanagh until January 1991. According to Mr Roger Cavanagh, at a meeting,

presumably in ~uly/August 1990, Mr Peter Cavanagh agreed to have	a mortgage executed and to get a Mr Hannigan, his solicitor, to
prepare it.
There is no doubt that Mr Hannigan ultimately prepared a mortgage and that it was executed by all the parties to it on 1 August 1991. A letter, tendered in the proceedings, from Mr Hannigan to a Mr Winter, might well suggest that Mr Peter Cavanagh and his wife vlsited Mr Hannigan on 13 May 1991 in connection wlth the preparation of a mortgage. The letter, however, suggests that the mortgage was not a mortgage to Mr Roger Cavanagh but, rather, a mortgage to Mr and Mrs Harold Cavanagh, the parents of Peter.
Since the money actually lent originated from Mr Harold Cavanagh, this would make a certain amount of sense. Mr Hannigan also asked Mr Winter to advise the principal of the loan, the interest to be charged upon the principal and the date upon which the loan was given. Mr Peter Cavanagh sought to explain thls letter by saying that there was some other loan initially made by his father, although ultimately he said that no mortgage was entered into to secure that loan, nor was any money owing to his father, at least by this time.
The possibility of the loan having been a loan from the father is made more likely by a letter from Mr Hannigan to the State Bank, Moree, seeking consent to the mortgage that was
ultimately entered into and registered. That letter refers to the second mortgage from Mr and Mrs Cavanagh as being "for family estate planning reasons". It is difficult precisely to know what
that meant and certainly neither Mr Peter Cavanagh nor Mr Roger Cavanagh seemed able to explain it. I should say that none of Mr Winter, Mr Hannigan nor Mr Harold Cavanagh gave evidence. I make no finding on this matter and am prepared to assume that the loan was, in fact, made by Mr Roger Cavanagh to his brother.
It was put to Mr Roger Cavanagh that his purpose in wanting the mortgage executed was in essence to give him a preference over other creditors. Mr Roger Cavanagh concededthat he looked to the mortgage for protection. That protection, he said however, was not protection against his brother. He was unable to say against whom he needed protection. He said that the matter was a family one and it was appropriate to formalise what otherwise was a family arrangement.
Mr Peter Cavanagh denied that the purpose of the mortgage was to prefer his brother against other creditors. He denied also having advised his brother of the existence of other creditors. It is unnecessary for me to make any finding on that matter. It suffices to say that the evidence establishes that at the time the loan was originally made, there was no agreement that a mortgage be given. The question of security had not then been raised. No question arises, therefore, that there was an agreement to give a mortgage in existence at the time the loan
was made. The subsequent discussions concerning the giving of a mortgage did not alter that position, so that when a mortgage was
in due course executed in August 1991, that was the first time in which Mr and Mrs Cavanagh had given security to Mr Roger Cavanagh. Of course, if the loan was not to Mrs Jan Cavanagh, it would be the first time indeed that Mrs Cavanagh had even acknowledged her obligation to repay it, but having regard to my finding that there was no equitable mortgage, it is unnecessary to pursue that particular matter.
The petitlon was dated 30 December 1991, that is to say the petition was presented less than six months after the grant of the security. On this basis, the giving of the security would represent the conferring of a preference, being a charge, given in favour of Mr Roger Cavanagh and having the effect of giving Mr Roger Cavanagh a preference or advantage over other creditors within six months of the presentation of the petition. I should say that at the time the charge was given, it was clear from the evidence that Mr Roger Cavanagh was unable to pay his debts as they became due from his own moneys. It was not suggested to the contrary.
The Palmerston property was sold by at least 22 November 1991, this being the date of the transfer of the property. There was no evidence before me as to the precise date of the contract, but it can be assumed that the contract would have been at some earlier time. The sale price was $180,000. By the time the mortgage came to be executed, the
debtors owed approximately $300,000 to Dalgetys, as well as approximately $100,000 on the security of the Palmerston property and the $80,000 said to be owing to Mr Cavanagh. The only assets were the Palmerston property and some stock to which reference will shortly be made. On any view, the liabilities far exceeded the value of the assets.
It is unnecessary to pursue the second act of bankruptcy alleged to have been committed by Mr Cavanagh. Some of the evidence advanced in favour of that is, however, relevant to the question of the financial position of Mr Cavanagh at the time of entering into the mortgage. I will accordingly shortly deal with it.
There is a stark conflict of evidence between the evidence given by Mr Shaw from Dalgetys and that given by Mr Peter Cavanagh, particularlythe evidence of a conversation which Mr Shaw says took place shortly after the sale of the Palmerston property on 25 November 1991. Mr Shaw made a note of that conversation at the time or shortly after and that note was tendered in evidence. There is no reason not to believe Mr Shaw; he gave his evidence forthrightly, and to the extent to which there is a conflict, I prefer his evidence to that of Mr
Cavanagh .
place. Mr Cavanagh said:

I find that in this conversation the following took

"I've got a disappointment for you."

Mr Shaw:

"How do you mean a disappointment?"

Mr Cavanagh:

"Well, I'm finished, I've had it.	It's all
over.	"

Mr Shaw:

"What do you mean f inished? You've sold 'Palmerston', haven' t you, you must have some money from that?"

Mr Cavanagh:

"Sold i t . You mean gave it away. I ' v e got

no money, I 'm broke and	l i v i n g i n a rented
house i n Narrabri. "

M r Shaw:

"Okay, but what	about t he c a t t l e , where have
you got them?"

M r Cavanagh:

"There are no c a t t l e . "

Mr Shaw:

"What do you mean there are no c a t t l e ? You sold 140 odd t o Ramsey's over the p a s t few weeks, you had 9 4 0 head. There should be

about 800 l e f t . "

Mr Cavanagh:

"No, t h a t ' s them. That ' s a l l there was and

now t h e r e ' s none l e f t . They're a l l gone. "

The re ference t o there having been 940 head o f c a t t l e

i s a reference t o other evidence t h a t was given by Mr Shaw.

B r i e f l y Mr Shaw deposed t h a t he v i s i t e d Mr Cavanagh on 8 October

1991 t o inspect t h e c a t t l e and t o obtain what he re ferred t o as an updated stock mortgage duly signed b y M r and Mrs Cavanagh. While t h e r e , M r Shaw alleges and Mr Cavanagh denies t h a t Mr Cavanagh said there were 940 animals i n addit ion t o a fur ther number o f c a t t l e making a t o t a l o f 2 , 0 0 0 head i n a mob which Mr

Cavanagh was looking a f t e r . The parties agree t h a t there were

a large number o f c a t t l e t h a t Mr Cavanagh was looking a f t e r on

agistment from other people. The cattle were spread out along a stock route adjacent to a roadway. According to Mr Shaw's evidence, Mr Shaw, together with Mr Cavanagh, drove through the cattle in Mr Shaw's car. According to Mr Cavanagh's evidence, it would have been impossible to drive through the cattle in the car and in any event Mr Cavanagh at no time was in the car with Mr Shaw.

I accept the evidence of Mr Shaw that he was told at the time that there were 940 head of cattle. Mr Shaw completed the form of stock mortgage indicating 940 head on the property. It is highly unlikely that that figure was one which he made up. Mr Shaw says that in the later conversation, Mr Cavanagh admitted that Mr Cavanagh had lied to Mr Shaw as to the number of cattle and that, indeed, by October, there were but a few head of cattle on the property, in the order of 160. It seems abundantly clear that Mr Cavanagh's financial position in August, therefore, was not such as to permit hlm to pay his debts as they fell due and the same comment of course follows in respect of his wife. In

these circumstances I would find the act of bankruptcy proved.

Having regard to my findings, I am satisfied of the proof of the matters stated in the petition and of the other matters set out in s.52 of the Act and I am satisfied that the first act of bankruptcy upon which the petition was founded has been committed. Accordingly, I would make a sequestration order against the estate of the debtors.

All costs, including reserved costs, are to be paid in

accordance with the Act.

I certify that this and the
preceding eleven (11) pages
are a true copy of the Reasons
for Judgment herein of his Honour

Mr Justice Hill.

Date: 30 March 1993

Counsel and Solicitors	Mr J. Chlppindall instructed by
for Debtor:	Potts Latimer as agents for Hannigans
Counsel and Solicitors	Mr M.R. Aldridge instructed by
for Petitioning Creditor:	Minter Ellison
Date of Hearing:	23 November 1992
Date Judgment Delivered:	23 November 1992