Re Grose, D.J. Ex Parte State Bank of New South Wales

[1992] FCA 537

IN THE FEDERAL COURT OF AUSTRALIA ) JUDGMENT No. .... .......,.....J ..A S33 Q

I No. NP 3713 of 1991

OF NEW SOUTH WALES

RE :  DAVID JOHN GROSE
Debtor

EX PARTE:	STATE BANK OF NEW SOUTH WALES
P e t i t i o n i n a

C O W :	WILCOX J	/y or,
PLACE :	SYDNEY
DATE :	29 JUNE 1992

WILCOX
should be yet another adjournment of the petition. On 3
April 1991 I dealt with various grounds of opposition and
rejected them. But I granted an adjournment because there had
recently come into existence a contract whereby Obita Pty
Limited, a company with which Mr Grose is connected, had

guaranteed certain advances to companies controlled by him.

conditionally agreed to sell a property at Haymarket owned by
it to Castlepines Corporation (Australia) Limited for the sum
of $63 million dollars. The property is subject to a
mortgage, to Estate Mortgage Corporation. But the surplug,
after paying out the mortgage, would be enough to pay out the
debt owing to the State Bank which is, in effect, the subject

of the present claim. The claim arises because Mr Grose has

On 3 April, the matter was adjourned till 28 April. It has been in the list on a number of occasions since that date.

I should say at once that I have considerable sympathy for the position in which Mr Grose finds himself. I am satisfied that he has done his best to expedite the transaction with Castlepines Corporation and to have the contract made unconditional. It is obviously in his interest to do this, but sometimes people do not take all of the action that is in their interests. I think Mr Grose has done that. I can well understand that he will feel distressed if he is made bankrupt and it turns out in due course that the property is sold for a sum sufficient to clear the debt to State Bank independently of any moneys which result from his bankruptcy. It is because I have felt that there was a reasonable prospect of the contract becoming unconditional within the foreseeable future that I have been prepared to grant adjournments. However, I have regretfully come to the conclusion that we are

now at the end of the road.

Evidence has been given this morning by Mr James Freemantle, who is the chairman of Castlepines Corporation. I accept what Mr Freemantle says and, in the light of his evidence, I accept that the interest of his company in the site owned by Obita is genuine. Nonetheless, it is conditional upon a number of matters.

It seems that, in Castlepines thinking, the acquisition of the Haymarket property owned by Obita is dependent upon the company first acquiring a property in Collins Street, Melbourne, which is presently owned by the South Australian State Government Insurance Corporation. There are current negotiations in respect of the Collins Street property and Mr Freemantle is optimistic about them. But there is yet no agreement as to the terms of sale, still less a signed contract.

After the Collins Street property is secured, Mr Freemantle intends to put a proposal to his company's financiers. This proposal will involve the use of the Collins Street property, which is apparently tenanted by government authorities and has a significant cash flow, to provide finance for the acquisition, not only of the Collins Street property, but also of what he calls "the Grose properties". As I understand it, the Grose properties include the Haymarket property owned by Obita. So there are really two steps before

Castlepines would be in a position to make its contract with

Obita unconditional. First, there would have to be agreement

on the Collins Street transaction. Secondly there would have to be approval of the finance. As to the latter, there have been discussions with a financial institution bug no agreement has been reached. As Mr Freemantle made plain, the terms will have to be sorted out once the details of the Collins Street transaction are available, including information about rental guarantees in respect of the government occupancies.

I asked Mr Freemantle how long it would be before Castlepines Corporation would be in a position to make its contract with Obita unconditional. He indicated that this was extremely difficult to say, and I do understand that, but his estimate was 60 days.

The contract which was signed between Obita and Castlepines called for completion towards the end of August. It is now obvious that there is no chance of the contract being completed on the date which it specifies. This, in itself, is not a major concern to me. But the effect of what Mr Freemantle has said is that the current uncertainty would remain for a period of some 60 days; and I think one has to be realistic and expect that it may be more. There has already been a period of some three months during which the petitioning creditor's application for a sequestration order has been left in abeyance pending sorting out this matter. To add another 60 days, means that a creditor, who prima facie is entitled to a sequestration order, is precluded from obtaining

this without any certainty whatever that, at the end of the

that relief for a period of something like five months; and

day, the Obita transaction will proceed.

Furthermore, I have to .take into account the fact that the making of a sequestration order does not necessarily mean that the sale from Obita to Castlepines Corporation will not proceed. It is to be emphasised that Mr Grose is not a party to the contract. It is true that Castlepines Corporation has asked Mr Grose to make himself available for a period of two years to assist it in regard to the management of the Haymarket property and that Castlepines has expressed the preference that he not be a bankrupt during that period. I can well understand that desire. But I think that, if the transaction is inherently profitable to Castlepines Corporation, it is likely to proceed whether or not Mr Grose is bankrupt. Furthermore, of course, if Castlepines decides to proceed, and does pay the full amount to Obita as contemplated by the contract, it would be possible for

Mr Grose to obtain annulment of his bankruptcy. I appreciate

that he would rather not go bankrupt at all, rather than be a person whose bankruptcy has been annulled. But, in terms of his utility to Castlepines Corporation in managing the property, I do not think that it would make all that much difference.

It is said on Mr Grose's behalf that the creditors
will not be any better off if he is made bankrupt. That is a

matter about which I cannot make a judgment. It is very rarely the case that a judge who makes a sequestration order

is able to predict what benefits, if any, will be achieved by the creditors from the order. Normally this depends upon the information whfch is unearthed by the trustee in bankruptcy, supplemented perhaps by public examinations of the bankrupt and other people. I have no knowledge of what transactions Mr Grose may have undertaken in the past, which might be of interest to a trustee and perhaps yield benefits to his creditors. I do not know that there are any such transactions. But that is the very point; there may or may not have been. Nor do I know much about Mr Grose's assets. I know enough to think it unlikely that his personal estate will enable him to pay out the debt owing to the State Bank, still less any other creditors. But it is impossible to say whether or not the State Bank or other creditors wlll be advantaged by a sequestration order. All that I know is that prima facie the State Bank is entitled to that order and, despite the evidence that has been given, counsel informs me that his instructions are to press for a sequestration order. Notwithstanding my sympathy for Mr Grose's position, I feel that it would be unfair to the petitioning creditor for me any longer to resist that application.

Accordingly, I propose to make a sequestration order today. There is now no dispute about formal matters. The previous disputes were dealt with on 3 April. I am satisfied that the debtor within six months before the presentation of

petition, namely he failed on or before 7 August 1991 either the petition committed the act of bankruptcy alleged in the

to comply with the requirements of a bankruptcy notice served on him on 24 July 1991 or to satisfy the Court that he had a counter-claim, set off or cross demand equal to or exceeding the sum specified in paragraph (a) of the bankruptcy notice. I am satisfied of the other matters of which section 52 of the Bankru~tcv Act requires proof. I note the consent to act as trustee of William James Hamilton. I make a sequestration order against the estate of the debtor. I order that the costs of the petitioning creditor, including reserved costs, be paid out of the estate of the debtor.

I certify that this and the preceding six (6) pages
are a true copy of the Reasons for Judgment
of the Honourable Justice Wilcox.

Associate: p &

Dated:  29 June '1992

Counsel for the Petitioning Creditor:	G C Lindsay
Solicitors for the Petitioning Creditor:	Dunhill Madden Butler
Counsel for the Debtor:	S J McMillan
Solicitors for the Debtor:	Bouris Cominos
Date(s) of hearing:	29 June 1992