Re Edwards, M. L. Ex parte Bank of New Zealand

[1993] FCA 467

. .- ,

JUDGMENT No. .... k.k.1. ... I _!!.g

IN THE FEDERAL COURT OF AUSTRALIA ) No. NP 4410 of 1992

1

OF NEW SOUTH WALES 1

RE:	MALCOLM LESLIE EDWARDS Debtor
EX PARTE:	BANK OF NEW ZEALAND Petitioning Creditor

C O M :	WILCOX J
PLACE :	SYDNEY
DATE :	25 JUNE  1993

16 ~ ~ 1 1 9 9 3

EXTEMPORE REASONS FOR JUDGMENT

WILCOX J:  The matter before the Court is an

further adjournment of the hearing of a bankruptcy petition. The petition was filed on 22 December 1992, the ground being failure to comply with a bankruptcy notice served on the debtor on 5 November 1992. The judgment debt upon which the bankruptcy notice was based arose out of a judgment signed in the Supreme Court of New South Wales on 4 September 1992.

The petition came before Registrar Howard on 22 March 1993. A few days before the return of the petition the debtor filed a notice of grounds of opposition in which he specified two grounds. The first ground was that there is a	creditor being satisfied. The second was that it is in the	reasonable prospect of the debt due to the petitioning
interest of creditors generally to allow the debtor to trade out of his present situation.
When the matter came before the Registrar it was adjourned for a period of one week, apparently by consent. On 30 March the matter was adjourned again, this time until 2 0 April, the debtor having given an undertaking not to dispose of any assets. On 20 April the matter was further adjourned to 18 May, apparently by consent. At that time the debtor not only renewed his undertaking not to dispose of assets; he also gave an inter-parties undertaking not to seek any further adjournment of the matter and to consent to the hearing of the petition on 18 May.
When the matter came before the Court on 18 May, despite the inter-parties undertaking, the debtor sought a further adjournment. The question of adjournment being in dispute, the matter was referred to me on that day. I formed the impression that there may have been some misunderstanding
thought that there would be no problem about a further about the position, in that the debtor may have genuinely
adjournment. I was also given information which caused me to think that there was a reasonable prospect that, given some time, the debtor could pay out the debt. Accordingly, over the opposition of the creditor, I adjourned the matter until 4 June.
On 4 June there was a further application for an adjournment. Information was put before me which led me to believe that, given a little more time, the debtor might be able to pay the judgment debt out of funds being obtained on his behalf through a bank in Malaysia. Accordingly, I adjourned the matter until 15 June.
On that day there was a further request for an adjournment. Material was put before me to suggest that the settlement of the Malaysian transaction was becoming imminent. I was told that, given another 10 days or a fortnight, this settlement would be achieved and that there would be enough money to pay out the petitioning creditor, the only creditor pressing the debtor.
Although the outside period in that range would not be until next week, for various reasons it was more convenient to have the matter listed today. I indicated on the last occasion that, if the evidence today showed that settlement was imminent, I would be disposed to allow a further
adjournment for settlement to take place. However, I thought that the matter should come back today because the petitioning
creditor was very sceptical whether there was any emerging settlement.
Today I have been told that settlement is not imminent. I am asked to give a further adjournment until 19
July.
I have a number of problems about the situation, which I have outlined briefly to counsel. The first is some difficulty about the underlying transaction. The money which is said to be on its way is a sum of $US 10 million, being a small proportion of a much larger loan of some $US 550 million said to be coming from lenders in Malaysia or other parts of Asia. Those people have not been precisely identified, although the name of one person has been mentioned. What that person's status or financial condition might be, I do not know.
As far as I understand the underlying transaction, it seems that 15 per cent of the total funds will be kept in a bank account and held available as security. Another 25 per cent will be held temporarily in a bank account, until alternative security is offered. The remaining 60 per cent, so far as I can work out, seems to be totally unsecured. I find this curious.
Secondly, I am at a loss to understand why the transaction should have taken so long, if the money is in fact available. There was a telex message from the Malaysian Bank to the National Bank of Australia on 1 June indicating that a letter of credit would be available upon confirmation. For reasons which I do not fully understand, there was a delay in confirmation. Apparently, the Malaysian Bank did not use the usual code in its telex message. The National Bank therefore failed to give the confirmation and it was only after some comments by me on 4 June that this was done. Subsequently, the Malaysian Bank did confirm to the National Bank that it had sent the original message; but despite the effluction of three weeks since that time, nothing has been done to confirm the telex or to enable a drawing against it. On 15 June when the matter was before the Court, I was told that the hold up was that some change had to take place in the legal documentation. I was told that this was a very small task and would only take a few days and that once that happened then it would be possible to draw on the letter of credit. It was for those reasons that it was thought likely that the matter could be completed by today, or at the latest early next week.
Apparently, there was some newspaper publicity about the hearing on 15 June. Although that publicity made clear that Mr Edwards had indicated that funds would be available to pay out the debt and had paid an establishment fee for the facility on 11 June; and indeed, although I was quoted as saying that I did not doubt Mr Edwards' good faith, Mr Edwards
chances of consummating the arrangement. I frankly do not apparently took the view that this publicity was fatal to his
understand this. If a letter of credit for ten million dollars was available in Australia and a lender had been arranged in the sum of $1.2 million as deposed to by Mr Edwards, I am unable to see the difficulty. I would have thought that this would enable the petitioning creditor to be paid out and there will be no question about imminent bankruptcy.
However, Mr Edwards apparently decided to change tack in relation to this transaction. He has since that time been engaged in a negotiation to discount the letter of credit in Hong Kong or Malaysia; that is to say, the letter of credit will not be sent to Australia after all, but only some funds after discount. When the discount will take place is not revealed. There is no evidence before me to indicate that anybody is interested in discounting and still less is interested in discounting immediately. In short, we seem to be as far away as ever from a resolution of the matter.
I am left with a feeling that, if there is indeed a genuine agreed transaction, for whatever reason. Mr Edwards has chosen not to put the information before the Court. On each occasion the matter has been before me I have suggested, in the strongest of terms, that there ought to be produced to the Court evidence from people actually involved in the transaction, the lenders, the banks, solicitors who have the carriage of the matter, etcetera. There should also be copies
of the documentation. None of this has been done.
Mr Edwards is an intelligent man and an experienced businessman. He has been legally represented throughout. I cannot believe he has not understood what I have been saying and this only feeds my scepticism as to whether, indeed, there is any evidence which would assist his case. I note that when he was cross-examined today Mr Edwards said that the most recent draft documentation was dated 25 March. It does not appear that much has happened since then.
There is one other aspect of the matter which causes me concern. When I first adjourned the matter on 18 May, I gave a direction that the debtor notify all of the persons who claimed to be his creditors, of whom he was aware, of the date of the adjourned hearing, that is to say, 4 June. It now transpires that there is an action pending against Mr Edwards personally in the Supreme Court of Queensland. The matter is fixed for hearing next August, the claim being made by the liquidator of Farrow Mortgage Services Pty Limited, in the sum of $71,658,835.34. Mr Edwards admits that he was at all times aware of this claim. He also admits that he did not inform the liquidator of the pendency of the petition. This was a clear breach of the direction which I made. It adds to my scepticism about his frankness with the Court.
I do not wish to be unduly critical. I am simply left in the situation that, some three months after the return
evidence to indicate any real prospect of the petitioning of the petition and after six adjournments, there is no
creditor's debt being paid out. Under those circumstances I would be preferring indulgence to fairness if I were to grant a further adjournment. At some stage a petitioning creditor is entitled to say to the Court that a debtor has had chances enough and, being unable to demonstrate a reasonable prospect of the debt being paid out, has to submit to the only alternative. I think that this time has come. I regret the position, but I do not think I have any option. Accordingly,
I refuse the adjournment.

[Counsel applied for a sequestration order and read

affidavits filed in support].

I am satisfied that the debtor committed the act of bankruptcy alleged in the petition, namely, that he failed on or before 18 December 1992 either to comply with the requirements of a bankruptcy notice served on him on 5 November 1992 or to satisfy the Court that he had a counter claim or cross-claim equal to or exceeding the sum specified in paragraph A of the bankruptcy notice.

I am satisfied of the other matters of which s.52 of the Bankru~tcv Act 1966 requires proof. I note the consent of Maxwell William Prentice, a registered trustee, to act as trustee of the estate of the debtor in the event that he becomes bankrupt. I make a sequestration order against the

petitioning creditor, including reserved costs, be paid out of	estate of the debtor. I order that the costs of the
the bankrupt's estate.
I certify that this and the preceding seven (7) pages
are a true copy of the Reasons for Judgment of the Honourable Justice Wilcox.
Associate: /&$$J Dated: 25 June

APPEARANCES

Counsel for the Applicant:	D Robinson
Solicitors for the Applicant:	Freehill Hollingdale & Page
Counsel for the Respondent:	J T Svehla
Solicitors for the Respondent:	Price Bent
Dates of hearing:	25 June 1993