Re Davis, Lance Austin Ex parte the Bankrupt

[1981] FCA 115

Re: LANCE AUSTIN DAVIS
Ex parte: THE BANKRUPT
No. 58 of 1962
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
McGregor J.

CATCHWORDS

Bankruptcy - Application (the second) for discharge - unsatisfactory conduct - failure to account for assets - ignoring order to pay sum of money - Bankruptcy Act 1966 s.150(6)

HEARING

SYDNEY

#DATE 24:7:1981

ORDER

That the application for discharge be dismissed.

JUDGE1

LANCE AUSTIN DAVIS (Bankrupt) by application dated 9 September 1980 (pursuant to s.150 of the Bankruptcy Act 1966) sought an Order of Discharge. When first listed on 1 December 1980 the only appearances were by the Bankrupt in person and the Official Receiver.

Reference should be made to some of the history of this matter.

Judgment was obtained in the Supreme Court of New South Wales on 10 August 1961 by the petitioning creditor, Dalgety & Co. Limited, for 9,927 pounds.16.ld. against the Bankrupt and his wife, Edwina Betty Davis. A Bankruptcy Notice was issued on 21 September 1961 and, according to the affidavits of Charles William Holm dated 4 October 1961, was served on the Bankrupt on 3 October 1961 and on his wife on 26 September 1961. The petition dated 7 December 1961 was presented on 8 December 1961 and, according to the affidavit of Roman Cioruch dated 20 December 1961, was served on the Bankrupt and on his wife on 19 December 1961.

The petition was heard on 6 February 1962. There was no appearance by or on behalf of the Bankrupt or his wife. A sequestration order was made against the Bankrupt and his wife.

In the Report of the then Official Receiver dated 8 June 1962 it was said that no assets were disclosed in the Statement of Affairs filed by the Bankrupts in respect of the joint or separate estates. The liabilities were disclosed in the Statements of Affairs, as to the joint estate one unsecured creditor for 9,927 pounds.16. ld. (no doubt being the debt to the Petitioning Creditor) and as to the separate estate of the Bankrupt one unsecured creditor for 60 pounds. 0. 0. There was a further secured creditor in the estate of his wife in the sum of 108 pounds.11. ld.

It was also stated that prior to 1955, the Bankrupt carried on business as a grazier at Yass on a property which, on 17 March 1955, was sold by him for 19,000 pounds. 0. 0. On 15 April 1955, he purchased a grazing property referred to as "Airlie" near Bendemeer for 23,925 pounds. 0. 0. To finance the purchase he borrowed an amount from the Australian & New Zealand Bank (sic) at Tamworth secured by a first mortgage; and the vendors allowed an amount of 6,000 pounds. 0. 0. to be repaid with 5% interest, secured by a second mortgage. The Bankrupt obtained advances from Nemco Ltd. (later amalgamated with Elder Smith & Co.) and his wife from Elder Smith & Co. Further, it appears, according to the Report, that in September 1955, the Bankrupt and his wife advised Elder Smith & Co. that a partnership had been formed whereupon their accounts were amalgamated. The balance in the account of his wife was then 2,313 pounds. 0. 0. and in his name in the sum of 14,829 pounds, totalling 17, 142 pounds.

Further, it was stated that in April 1960, the Bankrupt and his wife obtained an advance from the Petitioning Creditor in the sum of 19,008 pounds. 1.10d. which amount was paid to Elder Smith & Co.

According to the said Report, the local manager of the Petitioning Creditor informed the then Official Receiver's officer that at an interview on 23 August 1961, the Bankrupt had advised him there were no mortgages on the property other than the one in favour of the Australian & New Zealand Bank Ltd. and had requested the Petitioning Creditor to place the property for sale at 10 pounds per acre. By contract dated 26 April 1961, it was sold for 38,500 pounds and the Bankrupt advised the Petitioning Creditor that the amount owing to it would be paid in full from the proceeds thereof. It appears in the Report that from that sale, after various payments of money by Bankrupt's Solicitors, 19,668 pounds.12 8d. was paid to the Bankrupt's account of which 3,930 pounds was paid to the Petitioning Creditor. From an auction sale of stock, equipment etc., a sum of 2,626 pounds.12. 4d. was realised of which 1,566 pounds. 5. 9d. was paid to the Petitioning Creditor and a balance after one other payment was paid to the Bankrupt in the sum of 1,017 pounds. 0. 4d.

Further, according to the said Report, on the 27 May 1961, the Bankrupt opened an account with the English Scottish & Australian Bank Ltd., Goulburn, with a deposit of 18,000 pounds and, on 1 June 1961, a further account with the National Bank, Goulburn, with a deposit of 14,000 pounds being part of the balance held by the firstmentioned Bank.

The Report continued that, in a letter dated 12 October 1961, to Solicitors, the Bankrupt's children stated as follows -

"The finance you are querying on our father's behalf, Mr. L.A. Davis, is as follows: The year 1954 we came into a sum of money as a schooling benefit fund from income of same and in February 1955 we advanced to our father, Mr. L.A. Davis, 19,500 pounds to purchase the property at Bendemeer at 5% interest per year. When the property was sold in March, 1961 we were repaid 16,444 pounds. of the loan by our father, and the balance of 3,000 pounds is to be paid direct to J.K. L.S. & W.C. Davis by the buyer of our Bendemeer property by May 20th 1962. In the month of May 1961. We, J.K. L.S. & W.C. Davis purchased a family home for our mother and father in our father's name. We advanced our father 2,750 pounds to purchase deposit and we pay the balance of the purchase money 2,784 pounds off over 27 years at 4 pounds per week for our parents."

The same Report also states that at the first meeting of Creditors there was produced by the Bankrupt and his wife a book in which were so called Trust Deeds dated respectively 16 November 1946, 24 December 1947 and 4 February 1949 in favour of Jannete K. Davis, Lynette Suzanne Davis and Wendy Christine Davis respectively. Elsewhere in evidence the cash for the trusts was said to have been provided by Bankrupt, by Mr. Arthur Augustus Davis said to be a soldier and a Mr. Henry Davis, and on the birth of each child. (Evidence as to the date of death of Mr. Augustus Davis was inconsistent with this).

The Report continues that each of the so called Deeds provided for a fund of 5,000 pounds. Also in the book was an agreement dated 1 January 1955 in which the Bankrupt was stated to have borrowed 15,000 pounds from the Trust to purchase a property at Bendemeer.

In the said report the opinion was expressed that the Bankrupt had committed an offence under the Bankruptcy Act 1924 (as amended) Section 209(g). I note that this is the equivalent of s.270(1)(a) of Bankruptcy Act, 1966. Fact (b) under s.119(7) of the former Act was reported i.e. failure to keep usual books of account etc.; and that the Report was not filed by the time prescribed as the Bankrupt and his wife had failed to file their Statement of Affairs until 25 May 1962.

Evidence in the now voluminous file includes the reports of Official Receivers dated 8 June 1962, 23 July 1973 and 17 November 1980, transcripts of records and continuations of records of examination of the Bankrupt before Registrars, e.g. on 3 July 1962, 7 March 1963 and 30 July 1963 before Clyne J.

At the public examination on 3 July 1962, the effect of the Bankrupt's evidence was that monies received for the sale of "Airlie" was in part money he had held in trust for his children 15,000 pounds of which had been used to purchase "Airlie"; that the 15,000 pounds had been held in cash in his house at Yass and made up of amounts received in 1946, 1947 and 1949. The funds had come from persons named and himself. Making due allowance for the difficulty in assessing the credibility of evidence merely by reading transcript, the claim that there was a trust does read, to put it mildly, unconvincing. The effect of his evidence is (3 July 1962) that after the sale of "Airlie" he withdrew 15,000 pounds from the proceeds and paid it into a joint account at first with the "National Bank" in Goulburn and then to the Bank of New South Wales in Goulburn into an account in the joint names of the three children; and that it was there "to-day" i.e. 3 July 1962.

On a continuation of this examination on 7 March 1963, and having been referred to a sum of money 11,678 pounds.15.8d., said to have been the proceeds of a cheque drawn by him on 13 June 1961 he said he paid it to the children "to their trust" and later he said he paid it to the children; later he said that he handed it to his daughter Janette and that the children took over 11,000 pounds in cash in 1961.

Referring to the payment, he was asked and answered -

"THE REGISTRAR: Do you still say you gave 11,000 pounds in cash to your daughters?- - - - I paid them their trust money. You handed cash to them?- - - -Yes. MR. MELVILLE: You cannot tell us where the money has gone?- - - -No I cannot. I can only tell you the property they lease."

Before Sweeney J., on his application for discharge, referring to this money, the following was his evidence -

"What do you say happened to that sum of money?- - - -It was spent on the children's education, their housing, their clothing, their food."

The existence, about the middle of 1961, of a large sum of money in the Davis' house was referred to in Mrs. Davis' evidence to the Registrar on 7 March 1963. She said she knew there was trust money there "in the vicinity of 15,000" pounds. She said the children were told to put it in a bank; that she expected this to happen. Later she said she did not know where it is; or what happened to it. I note the withdrawal was on 13 June 1961; the Petition was presented on 8 December 1961.

Miss Jannete Kay Davis gave evidence in an examination before the Registrar on 3 January 1964. She said the largest sum of money in cash she had seen was approximately 11,000 pounds - "a fair time ago" - "about two years ago". She said her father withdrew the money from the bank and "handed it over to us". He said "This is all yours now". She counted it. Asked what happened to it then she replied "That is our business". Later she was asked and answered -

"How was it paid back to you? - - - - It was invested into a bank and withdrawn and we have it now."

She agreed that her father told her that he had put it into the bank account. There were other refusals to answer questions despite admonitions by the Registrar as to her duty in that regard. Later she said the 11,000 pounds was used to buy sheep. Speaking of her denials concerning the 11,000 pounds she was asked and answered -

". . . . you were going to defy the law and not tell - that is right, isn't it? - - - - Yes.

She agreed she "took that attitude" after discussion with her father, that she knew that was his attitude and "it is going to be mine now".

In 1966 an application for certain declaratory orders was made to and heard by Clyne J. concerning, inter alia, the sum of 11,678 pounds.15. 8d. The respondents were the Bankrupt, his three children and his wife. On the first occasion the matter was listed it was adjourned at the request of Counsel for the children. On the second occasion the matter was listed, viz. on 16 February 1966, there was evidence that both the bankrupts were aware the matter was listed and that the children would not be attending. A letter had been received from the Bankrupt and a telephone call from his wife. The matter proceeded on that day. Counsel for the children represented them and offered argument going to support the existence of a trust.

His own submissions conveyed that the Bankrupt knew the matter was listed for hearing. There was evidence before his Honour e.g. by way of transcripts, viva voce evidence of Solicitors who acted in conveyancing transactions and a certificate of the death on 30 July 1946 of Arthur Argustus Davis said to be identical with the settlor in the trust; whereas the first trust was said not to have been created until November 1946. His Honour reviewed the evidence as to the Bankrupt's business transactions and considered the claim of trusts including a letter written by the daughter of the Bankrupt, Jannete Kay Davis quoted earlier and her own evidence. He considered the allegations of the Bankrupt that he was acting on behalf of his children in his various transactions and that the three infant children bought with their own monies a home for themselves could not be accepted. In his opinion the letter said to have been written by the eldest daughter on behalf of herself and her sisters was prepared by the Bankrupt and -

". . . . contains a series of fantastic statements impossible of belief."

His Honour referred to a suspicion he could not resist which need not be repeated here. His Honour reserved his decision. It was delivered on 21 April 1966 and he then made certain declaratory orders which implicitly rejected any notion of a trust, including -

"1. That the land and premises situate at and known as 157 Nicholson Street, Goulburn, comprised in Conveyance Registered No. 728 Book 2575 be vested in or conveyed within 35 days to the Applicant subject to Mortgage Registered No. 142 Book 2428 to the Goulburn Homes and Building Co-operative Society No. 12 Limited and the moneys due thereon. . . . . . . . . . .

3. That Lance Austin Davis, Janet Kay Davis, Lynette Suzanne Davis and Wendy Christine Davis do within 35 days pay to the Applicant the sum of 11,678 pounds/15/8 or transfer within 35 days to the applicant any assets into which the said sum has been transposed."

In his Judgment, his Honour spoke of Bankrupt's defiance of the claims of the Official Receiver.

It is noted from his report dated 17 November, 1980, that on 7 July 1970 an objection to the discharge of the bankrupt from his bankruptcy by force of Section 149 of the Bankruptcy Act 1966, was lodged by the then Official Receiver as trustee on the following grounds -

"1. The bankrupt is unable to explain the deficiency which is in excess of $15,000.00.

2. No contributions have been received."

That objection has not been withdrawn.

An application dated 1 November 1971 for discharge was heard by Sweeney J. on 29 August 1973. The Official Receiver's report dated 23 July 1973 reported adversely on the application. His Honour in his judgment dated 29 August 1973 and after hearing evidence including that of the bankrupt said -

"In dealing with applications for discharge the court shall take into consideration where the trustee is an official receiver, a report in writing by the trustee concerning the bankrupt, his conduct, trade dealings, property affairs, both in respect of the period before and the period after the applicant became a bankrupt. In the present case I have had the assistance of a report by the official receiver and I have also heard evidence given by the applicant. I am satisfied to accept the report of the official receiver and I am satisfied with the conclusions to which the official receiver has come in this report and in particular in paragraphs 17, 18 and 19 of his report, which are sound conclusions and which it is proper for for the court to accept. I should add that quite apart from the material contained in the official receiver's report, the evidence of the applicant himself, and in particular the answers he has given in cross-examination, has been such as to lead to the conclusion not that his application should be granted, but that his application should be refused."

The paragraphs 17, 18 and 19 read as follows -

"17. The bankrupt's conduct throughout his bankruptcy has been most unsatisfactory in that:-

(a) He has made no contributions to his estate

(b) He has changed his address on a number of occasions without advising the Registrar in Bankruptcy or the trustee of such changes as per the provisions of Section 80 of the Act. In correspondence a Post Office box number was generally used.

(c) He has written a series of abusive and threatening letters, at one time threatening to do harm to the then Official Receiver.

(d) He has failed to assist me in the administration of his estate and on one occasion was required to be arrested because of his failure to attend for examination.

(e) He has failed to satisfactorily account to me for the sum of $23,358.00, as mentioned in paragraph 15, or for any assets into which the said sum may have been transposed.

18. I consider the bankrupt has committed offences under the Act as follows:- Section 265 - Being a bankrupt

(b) He did not, to the best of his knowledge and belief, fully and truly disclose to the trustee particulars of any disposition of property made by him within the period of two years immediately preceding the date on which he became a bankrupt in that he has failed to disclose the disposition of the sum of $23,358.00 being part of the proceeds of the sale of a property sold by him on 26th April, 1961. Section 270(1) - (a) He did not keep such books, accounts and records as are usual and proper in the business carried on by him to sufficiently disclose his business transactions and financial position between 6th February, 1957 and April, 1961 being a period in which he carried on business within the five years immediately preceding the date on which he became a bankrupt; or

(b) Having kept such books accounts or records, he has not preserved them

19. I report the following fact under Section 150(6) -

(a) that the bankrupt has omitted to keep and preserve such books, accounts or records as sufficiently disclose his business transactions and financial position within the period of five years immediately preceding the date on which he became a bankrupt;

(d) that the bankrupt has failed to account satisfactorily to the trustee for any loss of, or depreciation of, assets or for a deficiency of assets."

For the purpose of this application I accept, though without holding, that there may be an application for discharge notwithstanding that an earlier application has been refused. See Re Craven-Sands unreported (Street J.) No. 120 of 1956; In re Lloyd Ex. p. Lloyd (1889) 6 Mor. 297.

When the matter was listed on 29 April 1981 before me, the petitioning creditor was represented. It was stated that the petitioning creditor had not been served with the notice, but that the petitioning creditor supported the Official Receiver's objection.

The evidence then of the Bankrupt in support of his application included that he had a disabling medical condition, was an invalid pensioner and that no one was dependent upon him for support. He made allegations that the petitioning creditor had "swindled" him. He stated that before a sequestration order was made against him he had never been served with a Summons, Bankruptcy Notice or Petition, that he first heard about proceedings between the petitioning creditor and himself when a sequestration order was sent to him. Following these assertions these questions and answers appear in the transcript -

"You say the first you heard about any proceedings between you and Dalgetys was that you were given a sequestration order? - - - - That is right. This order was obtained from a New South Wales court by Dalgety & Co. without me ever having a chance to reply. I was at the time trying to recover from my injuries and just out of hospital. Did you make any application to set the sequestration order aside? - - - - No, sir. You must understand at that time I had no idea what these things were. You had no idea of what? - - - - I did not know what was going on about these actions. You at this stage had been so far as the information on the file says a grazier in Yass and Bendemeer? - - - - Yes. You knew what a sequestration order was? - - - - No, I never had any trouble with debts before. You say you did not know what a sequestration order was? - - - - No, I have never owed anyone a penny in my life. However, I signed the court forms under oath and I had them witnessed by a Justice of the Peace."

He said he had never before seen the Bankruptcy Notice dated 21 September 1961 shown him in Court on 29 April 1981. His evidence included allegations of impropriety against e.g. officers of the Official Receiver's office, the petitioning creditor and the "Federal Police". Similar allegations have been made throughout his bankruptcy. See e.g. earlier affidavit of James Martin McCombie of 27 November 1963.

There was evidence in the file that the Bankruptcy Notice and Petition had been served. The Sequestration Order was made ex parte; no proceeding was taken to set aside the Notice or oppose the Petition nor so far as evidence appears, was any attempt ever made to set aside the judgment on which the Notice was issued. The allegations as to his not having been served with any court documents before his estate was sequestrated was not made in his evidence before Sweeney J. in 1973. I do not accept his evidence on this and other matters.

It seems common ground that following the Order of Clyne J. dated 21 April 1966 the sum referred to in paragraph 3 (quoted above) of his orders has not been paid.

That the Bankrupt has made grave unfounded charges, however reprehensible this may be, against e.g. Official Receiver and "Federal Police" would not of itself disentitle him to an order for discharge to which otherwise he was entitled; though his credibility might be affected.

Generally unsatisfactory conduct need not necessarily prevent an order for discharge where there are countervailing factors. His evidence, however, remains unsatisfactory; he continues to disregard the order made by Clyne J. to pay 11,678 pounds.15. 8d.; and fails to make any satisfactory explanation consistent with the rights of creditors as to the disposal of that money. Clyne J., and it seems, Sweeney J., did not accept him as a credible witness. I do not accept him as a credible witness.

That e.g. he may be unwell, unable to work and unlikely to return to any commercial activity or do any work at all and is advancing in years are factors which I have taken into account in his favour on this application. Evidence as to his health indicates that it is worse than when he gave evidence before Sweeney J.

The Bankrupt's behaviour on all the evidence available has been generally unsatisfactory. Moreover I consider, as apparently also did Sweeney J. in his judgment quoted above, that the Bankrupt has failed to account satisfactorily for a loss or deficiency of assets being the sum at least of 11,678 pounds.15. 8d. Bankruptcy Act 1966 s.150(6)(d). I am not able to devise any condition I would regard as suitable to accompany any suspension even if that appeared to be an appropriate course.

Guidance to a Court considering an application for discharge is found in authorities, some of which are collected in Re Zdenek Weiss; Ex parte The Bankrupt (No. 293 of 1978) unreported. In Re David Howard Prince; Ex parte The Bankrupt (1961) 19 A.B.C. 39 at p.41 Clyne J. said -

"In an application for discharge the Court has a very wide discretion qualified to some extent by the proof of certain facts set out in s.119(7) of the Bankruptcy Act. (That Act) subjects a bankrupt to many handicaps and a dishonest bankrupt to serious penalties, but it also provides benefits to a bankrupt, particularly to the unfortunate bankrupt. One of these benefits is his discharge from the debts, with a few exceptions, which he owed at the time when he became a bankrupt. It has been laid down repeatedly that in the exercise of its discretion the court must have regard to the interests of the public, not those only of the debtor and his creditors. In the exercise of its discretion it must also consider such conduct and affairs as have relation to his bankruptcy."

I assume, for the purpose of resolving this matter, that a bankrupt is entitled to apply for a discharge after an earlier unsuccessful application, though perhaps with a case to present on e.g. new or different grounds or evidence. Even so I do not consider the bankrupt has presented an application to which I could accede. Apart from generally unsatisfactory conduct, he has failed to account for assets and ignored and continued to ignore the clear order to pay made by Clyne J. He has not been found to be a witness on whose testimony reliance could be placed.

The application for discharge is dismissed.