Re Greer, A.J. v Ex parte Supalux Paint Pty Ltd

[1995] FCA 339

CATCHWORDS

BANKRUPTCY - control over property of debtor - whether necessary in the interests of creditors for order to be made - whether necessary when Supreme Court order applicable to debtor - evidence of withdrawal of assets.

Bankruptcy Act 1966 s50

Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118
Clyne and the Deputy Commissioner of Taxation (1984) 52 ALR 657
re Penning and Anor; Ex parte State Bank of South Australia and Anor (1989) 89 ALR 417

RE ALAN JAMES GREER EX PARTE SUPALUX PAINT PTY LTD
NO WP 622 OF 1995

R D NICHOLSON J
PERTH
24 MAY 1995

IN THE FEDERAL COURT OF AUSTRALIA   )   LIMITED DISTRIBUTION

GENERAL DIVISION                   )

BANKRUPTCY DISTRICT OF THE STATE    )

OF WESTERN AUSTRALIA               )     NO WP 622 OF 1995

LIMITED DISTRIBUTION

REALAN JAMES GREER       

Judgment Debtor

EX PARTE  SUPALUX PAINT PTY LTD  

Petitioning Creditor

MINUTE OF ORDER

JUDGE MAKING ORDER:     R D NICHOLSON J

DATE OF ORDER:         24 MAY 1995

WHERE MADE:            PERTH

THE COURT ORDERS THAT:

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA   )   LIMITED DISTRIBUTION

GENERAL DIVISION                   )

BANKRUPTCY DISTRICT OF THE STATE    )

OF WESTERN AUSTRALIA               )     NO WP 622 OF 1995

LIMITED DISTRIBUTION

REALAN JAMES GREER

Judgment Debtor

EX PARTE SUPALUX PAINT PTY LTD

Petitioning Creditor

CORAM:R D NICHOLSON J

DATE:24 MAY 1995

PLACE:PERTH

REASONS FOR DECISION

This is an application pursuant to s50 of the Bankruptcy Act 1966 in which an order is sought that Christopher Michael Williamson be appointed interim receiver of the property of the debtor; and further that Mr Williamson in that capacity take possession and control of the whole of the property of the debtor, including particular enumerated assets; and further that the debtor deliver all books, documents etcetera to the interim receiver. The application also seeks a direction as to the amount which the applicant should deposit with the interim receiver to meet the latter's fees and expenses. The application is brought Ex parte.

Section 50 of the Act in subs(1) reads:

"If, on application by a creditor, it is shown to be necessary in the interests of creditors, the court may, at any time after the presentation of a creditor's petition and before sequestration, direct the official trustee or a specified registered trustee to take control of the property of the debtor and make such orders in relation to that property as the court considers just."

That section has been considered in Deputy Commissioner of Taxation v Clyne (1983) 50 ALR 118 at 123 per Neaves J. It is clear from what his Honour there said that the section only has application, as its terms clearly indicate, where it is "necessary in the interests of the creditors." His Honour there described the provision as a necessary and ancillary provision designed to enable appropriate steps to be taken to preserve and protect the property of a debtor so that in the event of a sequestration order being made the property will be available for distribution equitably amongst them in accordance with the relevant statutory provisions. In that cases, Neaves J looked at the purpose and conduct of the judgment debtor to reach his judgment. His judgment was considered by the Full Federal Court in Clyne and the Deputy Commissioner of Taxation (1984) 52 ALR 657 but relevantly his reasoning on the import of the section was not there affected by what was said in the reasons for judgment of the Full Court.

The section has also been the subject of consideration by von Doussa J in Re Penning and Anor; Ex parte State Bank of South Australia and Anor (1989) 89 ALR 417. At 425 his Honour stated that the apparently regular presentation of a bankruptcy petition alleging an act of bankruptcy verified on oath by or on behalf of the petitioning creditor brings s50 into operation. His Honour pointed out that such an order can be resisted by the debtor on grounds, for example, that the petition is irregular; that the debtor is not indebted to the petitioning creditor or that no act of bankruptcy has occurred. He then went on to deal with the position which would arise if the petition was dismissed. He pointed out that if resistance occurred the court will require at least prima facie proof that the creditor's petition is well founded before making an order under s50.

The application in this instance is supported, firstly, by an affidavit of the managing director of the applicant creditor. In that affidavit there is testimony that the debtor has committed an act of bankruptcy and that a petition against the debtor has been presented in this Court.  The circumstances are recounted in which the debt is said to have arisen, namely, as a result of defalcations by the debtor while employed by the applicant as financial consultant/controller. 
The affidavit also evidences that proceedings have been issued in the Supreme Court whereby the applicant claimed an amount of $305,768.37 as stolen or misappropriated by the debtor.  Further, it states that in an affidavit filed in that Court and sworn by the debtor on 21 April 1995, the debtor admitted that he had stolen the sum of $235,919.08 from the applicant.  There is evidence that summary judgment proceedings were issued in the Supreme Court resulting in judgement being entered for the applicant against the debtor in that sum.  The debtor was given leave to defend the balance of $69,849.29.

In his evidence the managing director of the applicant creditor stated that although the debtor had been restrained by order of the Supreme Court of disposing of the assets, nevertheless it would be unwise to leave him in control of his assets without adequate protection.  For that reason, the application was brought. 

When the matter first came before me I had some hesitation whether it would be "necessary in the interests of creditors" for an order to be made under s50 given that evidence before me on that occasion showed an order had already been made by the Supreme Court of Western Australia placing an obligation on the debtor to hold his assets. I therefore adjourned the matter for consideration.

During the adjournment a further affidavit was filed by a member of the applicant creditor's solicitors.  That affidavit annexes a copy of the judgment of the Supreme Court on 28 April 1985.  In that judgment, authority was given for the applicant creditor to be reimbursed and paid from funds standing to the credit of the debtor in the action in the debtor's banking accounts.  It is also stated in this second affidavit that prior to the entry of judgment, the debtor had been permitted to withdraw the sum of $680 from his bank account for living expenses.  The judgment does not give him any continuing authority to do that in relation to his accounts.  There is also evidence in the second affidavit that the debtor has been advised by his own solicitors not to withdraw further funds from his bank accounts following the judgment of the Supreme Court and the orders then made but that is of a hearsay nature and I do not rely on it.

Also annexed to the second affidavit is a list of what is said to be confirmation of the withdrawals made by the debtor from his bank accounts which, it is said, show that the debtor has been able to withdraw funds in excess of the amount allowed to him by order of the Supreme Court.  That exhibit bears no imprimatur which speaks of its own authority and I must therefore rely entirely on the evidence of the solicitor in par6 of his affidavit as to the authenticity of that list.  It is apparent from that list that withdrawals have been made from the account of the debtor after 28 April (the date of the entry of judgment).  Although these withdrawals have each been in the amount of $680, there have been six of them after the date upon which it would appear further withdrawals were not to be permitted.  I have not, however, had explained to me how it is that the debtor would obtain moneys to live on if it is correct the debtor had no continuing authority to make withdrawals after the entry of judgment.

It is apparent from the evidence before me that the conditions for the application of s50 are established so far as they require there to be clear evidence of the lodgment of a petition and of indebtedness. The question which arises is whether it is "necessary in the interests of creditors" for control to be taken of the property of the debtor. The evidence before me establishes prima facie that if it is the case that the debtor continues to make unauthorised withdrawals from his accounts, the assets available to the creditors will diminish.  It would, on the authority of the cases previously referred to, therefore be necessary in the interests of creditors to protect the assets.

However, the nature of the evidence upon which I am relying is that which is available to me in the absence of evidence from the debtor himself.  I have pointed already to the hearsay nature of some evidence and to the nature of the evidence relating to the withdrawals from the bank account.  It seems to me that in those circumstances it would not be appropriate for me to make an order in terms of the orders sought in the application, that is, appointing an interim receiver and making the orders in the form sought.

I observe that in Re Penning (supra) at 420, Fisher J made an ex parte order that a certain person be appointed to take control of the property of the debtors until further order and liberty was granted to each of the debtors to apply within three days of service of the order upon him or her to vary or discharge the order.  An order in similar form would seem to me to provide the opportunity to the debtor to come back to this Court with any other evidence.  In saying that, I appreciate that an order appointing a person to take control of the property of the debtors is, on the authorities previously referred to, nevertheless an order equivalent to an order having the effect of appointing a receiver.  It is apparent from Re Penning (supra) that if such an order proves in the long run not to be appropriate that the law provides the appropriate mechanism for that to occur without any difficulties being derivative from the fact that an Ex parte order may initially have been made.

Given that there is evidence before me that prima facie it appears the assets are being depleted, I consider that my discretion should be exercised pursuant to s50 subject to consideration of the effect of any such order on the orders in the Supreme Court. In par5 of the judgment of the Supreme Court the plaintiff is given the right to be reimbursed and paid from funds standing to the credit of the defendant in the defendant's banking accounts. Subsequent to that date, the applicant creditor in this matter chose to commence bankruptcy proceedings in this court. I am therefore assured by counsel for that party that any order made under s50 on this application before me would not frustrate in any sense the right of the plaintiff pursuant to par5 of the Supreme Court order.

It is further made apparent by counsel for the applicant creditor that the restraint imposed upon the debtor by the Supreme Court in relation to disposal of his assets may not have been in terms which endured beyond the judgment of 28 April 1995.  Having that matter in mind, as well as the evidentiary difficulties to which I referred previously, it seems to me that rather than only give the debtor liberty to apply within a certain number of days to vary or discharge the order, he should have that liberty and, in addition, the matter should be set down to come back before the Court in order that any evidentiary deficiencies to which I have pointed in these reasons can be addressed by further affidavit and the debtor can raise any further evidence that may be relevant to the exercise of the discretion of the court to make a further order in relation the control of the property of the debtor.

For those reasons, I propose to make an order in the following terms:-

(1)that Christopher Michael Williamson be appointed to    take control of the debtor's property until further order;

(2)that the applicant creditor deposit with Christopher Michael Williamson the sum of $1500 to meet his fees and expenses;

(3)there be liberty to the debtor to apply within four days of service of this order upon him to vary or discharge the order;

(4)that the debtor be served with this order and a copy of the reasons given for the order no later than 4 pm Friday 26 May;

(5)that the matter be set down in any event before me on Tuesday, 6 June at 3.30 pm.

I certify that this and the preceding 6 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson.

Associate:

Date:

APPEARANCES

Counsel for the Applicant:       Mr M Levit

Solicitors for the Applicant:      Mossensons

Date of Hearing:   24 May 1995

Date of Judgment:  24 May 1995