Re Dummett, L.W. & Ors v Ex parte Sterland Bros Pty Ltd
[1985] FCA 488
•27 SEPTEMBER 1985
Re: LAURENCE WALTER DUMMETT; VICTOR WILLIAM DURIE and CLIFFORD WILLIAM GLEW
Ex Parte: STERLAND BROS PTY LTD
No. W639 of 1984
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Beaumont J.
CATCHWORDS
Bankruptcy - application for discharge - Bankruptcy Act, l966, ss.l49, l5O - principles governing exercise of discretion.
Re Benda - Toohey, J. unreported 26 April l985 - con.
Re Maher - Woodward, J. unreported, 2l August l985 - con.
HEARING
SYDNEY
#DATE 27:9:1985
ORDER
1. The applicant be discharged from bankruptcy.
2. Suspend operation of order l until 8 July 1986.
3. No order as to costs.
JUDGE1
By his application filed on 24 July l985 pursuant to s.l5O(l) of the Bankruptcy Act l966 ("the Act") Mr. Laurence Walter Dummett seeks a discharge from his bankruptcy. The Act provides, subject to certain exceptions, for his discharge at the expiration of three years from the date of his bankruptcy (s.l49(l)). Since the sequestration order against his estate was only made on 9 July l984, the bankrupt will not be discharged until at least July l987.
The bankrupt appeared in person on the application which was opposed by one of his creditors, Network Finance Limited.
Neither party sought to challenge the information and opinions contained in the trustee's report of Mr. M.W. Prentice dated l2 September l985 filed pursuant to s.l5O(3). According to the report, the bankrupt owed unsecured creditors $69,836. That amount was calculated by reference to, inter alia, an estimated shortfall for secured creditors in the sum of $4,O68. It would seem that this deficiency was underestimated and that the deficiency was in the order of $2l,OOO. In other words, as at the date of bankruptcy, unsecured creditors were owed about $87,OOO.
It appears that no dividend will be paid to those creditors since his only asset, his home, was mortgaged to two creditors and, upon realisation of the property, there were insufficient funds to pay out the second mortgagee, Network Finance Limited. As at the date of realisation, that creditor was still owed approximately $2l,OOO. It seems that the amount of that debt has, with interest and other expenses, increased to some $33,OOO. The largest creditor claims something in excess of $55,736.
The bankrupt was owed $66,OOO on his director's loan account with Spanish & Colonial Homes Pty. Limited (in liquidation). That company is insolvent and no part of this debt will be recovered. The bankrupt was the holder of one-third of the share capital of the company, one of its directors and its secretary. It carried on business as a builder of project homes. The company suffered in the economic recession in l982. Its financial collapse directly affected the financial standing of the bankrupt who had guaranteed many of the company's debts.
The trustee of the bankrupt's estate is also one of the liquidators of the company. He has made no adverse comment on the conduct of the bankrupt either in his personal capacity or in his role as a director of the company. However, the trustee points out that the bankrupt has made no contribution to his estate.
According to the trustee's report, the bankrupt is 36 years of age and married with two young children. At the date of the sequestration order, he was employed as a sales analyst at a gross wage of $292 per week.
On the hearing of the application, the bankrupt first indicated that he did not wish to adduce any evidence but merely to rely on the material in the trustee's report. However, in the course of his submissions, the bankrupt sought to advance a number of contentions which were principally matters of fact. I therefore directed that he give evidence so that the matter did not rest in his assertion in address (cf. Vanguard Service Print v. Merkovich, Full Court (Sweeney, Sheppard and Beaumont JJ.) unreported 20 September l985, at p l7). At first, the bankrupt suggested that he was experiencing difficulty in obtaining accommodation and employment by reason of his bankruptcy. However, it later emerged that he held employment as a property manager for a real estate agency at a gross salary of $3O5 per week and that he and his family were living in rented accommodation, although there was an indication that his landlord wished to sell the property. The bankrupt also said that his wife's health was suffering because of his bankruptcy but did not seek to tender any medical evidence.
The general principles to be applied in the exercise of the discretion vested in the Court by s.l5O(9) of the Act were recently considered by Woodward, J. in Re Maher, unreported 2l August l985. In agreeing with Toohey, J. in Re Benda, unreported, 26 April l985, that an applicant need not show "special circumstances" to succeed, Woodward, J. held that an applicant must show some "cogent" ground for the favourable exercise of that discretion: "A mere dislike of being a bankrupt - a consciousness of the stigmas of bankruptcy, attaching to all bankrupts but felt more by some than by others cannot of itself be enough" (at p.l9). Earlier, Woodward, J. (at p.l3) had indicated some of the matters which could be material to the discretion given by s.l5O(9) -
"....the Court is not restricted to consideration of matters of the type listed in sub-s.(6), although these of course will be relevant. Other relevant circumstances that may be taken into account include such diverse matters as: the age of the applicant (Re Mallan), the magnitude of the deficiency in the estate (Re Harding), the number of creditors (Re Benda and Re Reilly), the objections to the application of, or absence of objections from, creditors (Re Gianacas and Re Benda), the applicant's "culpability" in entering into the original debts (Re Benda), his present domestic, social and financial circumstances, whether he is in employment or whether his bankruptcy is affecting his chances of obtaining employment (Re Gianacas and Re Benda), any contribution he has made to the estate since its sequestration, his general conduct in dealing with the trustee, and even the effect of the social stigma of bankruptcy."
In opposing the discharge, Network Finance Limited relies on the circumstance that the bankrupt has made no attempt at restitution; that he has not demonstrated any pressing need to be discharged; and that it is against public policy that he be discharged.
Although the bankrupt has made no contribution to his estate, he has no assets and his net income would be exhausted in supporting his dependent wife and children.
On the whole, I am of the view that the circumstances of the case do not warrant the grant of an absolute discharge at this stage. On the other hand, there are present here mitigating factors, especially the absence of any suggestion of misconduct, which support the conclusion that the statutory period of bankruptcy should be reduced from three to two years. In short, I am of the view that a proper balancing of the private and public interests involved calls for the grant of a discharge provided it were suspended so that the duration of the bankruptcy would be two years.
I make an order of discharge but suspend the operation of the order until 8 July l986. I make no order as to costs.
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