Re Deputy Commissioner of Taxation v Ex parte Zavros, A

[1987] FCA 359

NOT FOR DISTRIBUTION

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IN THE FEDER 'OURT OF AUSTRALIA )

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EXERCISING FEDERAL JURISDICTION	)	No. P 1185 of 1986
)

BANKRUPTCY IN )

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA

RE : ANDREAS ZAVROS and MARIA ZAVROS

Judgment Debtors

M PARTE: DEPUTY COMMISSIONER OF TAXATION

OF THE COMMONWEALTH OF AUSTRALIA

Petitioning Creditor

COURT: NORTHROP J.

DATE: 29 APRIL 1987

W: MELBOURNE

This is the return of a petition in which the

petitioning creditor, Deputy Commissioner of Taxation of the

Commonwealth of Australia, is seeking a sequestration order

against Andreas Zavros and Maria Zavros who carry on business

making and selling trailers under the name of Europe

Trailers. The petition is based upon a judgment debt which was obtained in 1984 in the order of $11,000 being sales tax.

In the petition there are other debts claimed showing a total

amount owlng of some $98,000 includlng the judgment debt.

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The original return date of the petition was on 10 February

1987 and on that occasion, by agreement, the hearlng of the

petition was adjourned untll 23 March 1987. On that occaslon

the matter was adjourned until yesterday and then yesterday

to today.

The male debtor has filed substantial affidavits in

support of the application for a further adjournment. The

petitioning creditor has opposed the adjournment. Counsel

for the debtors has sought an adjournment to 14 July 1987.

From a consideration of all the evldence, and I

should note that the male debtor was cross-examined at

length, certain facts can be found. I should indicate that

the debtor, Andreas Zavros, has some difficulty with the

English language. To some extent, it appears he has been

getting advice which has not always been as good as it ought

to have been and I exclude from that hls present solicitors

and counsel, but refer specifically to a partnership called

Commercial Advocates R.D. Foley and Company. In addition, they appear to have had problems with their accountants, but

recently they have engaged new accountants.

The substance of the case put is that the debtors,

who are husband and wife, live with their four children, all

dependent upon them, the youngest of whom 1s an invalid and

requires more attention than a normally healthy child

requires. They had been experiencing financial problems with

their business and had attempted to reorganise their

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financial position by borrowing from the State Bank of

Victoria a sum of $90,000 on security of their house, so as

to enable them to try to place their business on a firmer

basis. The current assets of the debtors are said to be as

follows: cash in a savings account of $200; a residence at 5

Finch Street, Thomastown valued at $190,000, but there is

conflicting evidence on this and a realistic valuation is closer to $140,000 to $150,000, but I am prepared to accept

for this purpose that the value is $175,000; furniture and

fittings valued at $30,000; an estimated value of the

business of $150,000, but that is basically the value of

equipment and machinery in the business and nothing for

goodwill. It is noted that the business is conducted from

premises which are rented by the debtors, who have personal

effects of just under $6000. Then there are separate assets

which are motor cars but are shown as assets of the business

in a balance sheet which is before the Court for the year

ending June 1986, a Fairmont motor car and a Commodore motor

car each valued at about $20,000, showing total assets of

about $416,000 which	will	be	reduced by $15,000, say
$400,000.

The liabilities of the debtors which are said to be

owing to the Commissioner of Taxation are estimated at

$89,000. but there is some dispute here and I think a more

realistic figure should be around the $92,500 mark at the

very least; overdraft of about $8,000; an advance from the

bank of about $89,000 and accrued charges of $400, showing a total liability of about $190,000. There is not included in

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those figures any trade debts and from the evidence in the affidavit and from cross-examinatlon It would appear that

there should be added to that quite substantial amounts; for &l '

instance, for the purchase of steel, there seems to be a current Indebtedness of at least $20.000 and I would infer

from the evidence that there are other debts owing as well

and so the figure should be increased to at least, in my

oplnion, $220,000 being the total liabilities of the debtors.

Added to that material, there is before the Court

the profit and loss statement of the business for the year

ended June 1986 which shows that there was a net profit from the business of just over $30,000. But in addition, it was put to the witness that the balance sheet for the same year disclosed that there was a deficiency in the assets over liabilities, but I do not place much reliance upon that, if for no other reason than the fixed assets are probably on the basis of cost value and not on current value, but they also show that at June 1986 the other liabilities were much higher

than apparently those expressed now. But of more importance,

the balance sheet shows that for the year the net profit of

just over $30,000 in reality was a deficiency because there

were drawings by the partners of just over $19,000 which were not shown in the profit and loss statement. So on those

figures, for that financial year there was a loss.

In deciding whether to grant the adjournment or

not, I treat the matter as one where the application is being

made on the ground that given some tlme the debtors would be

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able to realise some of thelr assets, in particular, the

house and the motor vehicles, although there would be need to

repurchase or purchase another motor vehicle to enable the

invalid child to be transported; once that was done the loan

from the bank, at present some $88,000, could be paid off.

The moneys owing to the Deputy Commissioner could be paid

off. The debtors could then rent premises and carry on the

business and eventually trade out of their current financial

difficulties.

One can understand the desire of the debtors, and

particularly Andreas Zavros, who gave evidence today, to avoid, if he can, the stigma attached to the concept of belng

a bankrupt. But at the same time it must be realised that

bankruptcy, in addltion to having that stigma, which these days is not as bad as it used to be, has benefits since It

releases a debtor from his debts and thus enables him to

commence again any business or activity desired to be

undertaken. One has certaln feelings for the debtors in this

case but I find on the evidence that there is no real

prospect that the debtors would be able to pay off their

debts and to continue to conduct their business in a

profitable way and that any adjournment would merely defer

the final decision being made to hear and determine the

petition for the sequestration order.

On the figures I have given it would appear that in

fact if sales were made of the house and one of the cars, the

amount available for paying off the debts would not be much

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more than $100,000 and by the time costs and everythlng else were paid there would be almost none of that money, if any,

left for use by the debtors. The debtors would then need to

flnd a house to rent to accommodate them and their chlldren.

They are still faced with the debts owing in their trade.

They have got the asset of the business and the equipment and

machinery used in that business, but having regard to the

profit and loss account for last financial year one cannot be

very confident that they would	be	able	to	conduct	the
business at a profit.

It is urged upon me that over the period since the

end of June there has been a reduction in the amount Of the

overdraft to the State Bank. That is true, but the overall impression I have got from the whole of the evldence is that

this is a rather nebulous improvement and that in reality,

even if an adjournment were granted to July of this year, the

debtors would be in no better position to be able to pay off

the debts then than they are at the present time.

In all the circumstances, therefore, I exercise my

discretion against the debtors and refuse	the application for
the adjournment.

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