Re Jambrecina, D. Ex parte Jambrecina, D

[1992] FCA 798

LIMITED DISTRIBUTION JUDGMENT. No. .?2g.a../ .2.2

IN THE FEDERAL COURT OF AUSTRALIA	) )
GENERAL DIVISION	) No. AB 220 of 1992
BANKRUPTCY DISTRICT OF THE	1
I

A U S T ~ I A N	CAPITAL TERRITORY	j
DRAGO JAMBRECINA

RECEIVED Re:

A Bankrupt

FEDERAL COURT OF	DRAGO JAMBRECINA
AUSTRALIA	EX parte:
PRINCIPAL REGISTRY

Applicant

C O N : Neaves J.

W : 2 November 1992

REASONS FOR JUDGMENT

On 19 October 1992 I dismissed an applicatlon by Drago Jambrecina ("the bankrupt") for an order pursuant to s.153B of the Bankruptcy Act 1966 (Cth) ("the Act") that h ~ s

bankruptcy be annulled on the ground that the Court should be

satisfied that the sequestration order made against his estate

on 21 August 1992 should not have been made. I ordered that the costs of Westpac Savlngs Bank Limlted ("Westpac) and Beneflclal Finance Corporation Limited, creditors of the bankrupt opposlng the appl~cat~on for annulment, be paid out of the bankrupt's estate as if those costs were the costs of a

dismissing the bankrupt's applicatlon.

petitioning creditor. I also ordered that the costs of Barry

Anthony Taylor, the trustee of the estate of the bankrupt, be paid out of the estate. I now set out my reasons for

The sequestration order was made upon the petitlon of Westpac presented on 26 March 1992. It was founded upon an act of bankruptcy constituted by the failure of the bankrupt on or before 18 November 1991 to comply w ~ t h the requirements of a bankruptcy notice served on him on 4 November 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 par. (a) of the bankruptcy notice, being a counter-claim, set- off or cross demand that he could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained.

The bankruptcy notice was based upon a flnal judgment obtained by Westpac against the bankrupt in the Magistrates Court of the Australian Cap~tal Territory on 20 March 1990 In the sum of $16,980.66 plus $220.00 for costs, a total of $17,200.66. The bankrupt's liability represented the debit balance when the account was closed on 8 February 1989 ($12,719.08) of an account in the name of the bankrupt wlth

overdraft facllity had been made available by the bank,	the Klngston Branch of Westpac in relatlon to whlch an
together with Interest on that debit balance. Paragraph (a) of the bankruptcy notlce required the bankrupt to pay to Westpac the sum of $22,876.97, belng the amount of the judgment debt plus interest.
The petition alleged that the bankrupt was indebted to the petltionlng credltor in the sum of $24,080.92, the difference between that amount and the amount referred to in par.(a) of the bankruptcy notlce representing further lnterest on the judgment debt
The petltion, which was served on the bankrupt on 9 April 1992, was listed before a Deputy Registrar of the Court on 24 April 1992. The petltion was adjourned, by consent, until 22 May 1992, the Deputy Registrar being informed that agreement had been reached between the partles that Westpac would be provlded within 14 days with certain information, including a list of assets and llabllities and details of any
d~spute as to the amount of the judgment sum.
By letter dated 8 May 1992, the solicitors then actlng for the bankrupt gave to the solicitors for Westpac certam information lncludlng a list of assets and llabilitles. In relat~on to the judgment sum, the letter included the following:

"During 1988 our client had an overdraft account

wlth your cllent.

Our cllent authorised and dlrected your client to pay certaln mortgage payments by the 15th day of each month and your client agreed to do so. This arrangement continued for some tlme. On three particular occasions however your client failed to pay the mortgage payment to Farrow Corporation by the due date. As a result our cllent was charged a penalty lnterest rate of $1,911.67 on each occasion. On 24 March 1988, 24 August 1988 and 23 December 1988 payments were made by the bank pursuant to the direction of our cllent. However, these payments were not made by the 15th day of each of these months due to the bank's oversight. Your cllent admitted responsibility to our client and advised our cllent that they had wrltten to Farrow Mortgage Services stating that payment was late due to the bank's oversight.

Our client has therefore suffered damage as follows:

Interest charged on this figure by Farrow Corporation at 18 .75% per annum, calculated from 2 4 December 1 9 8 8 to 7 May 1 9 9 2 is $3,604 .77 . Total claim by way of setoff of our cllent is therefore

$9,339 .78 .

We look forward to confirmation that your client will accept a mortgage over the property at Pindarl Crescent in the sum of $ 1 5 , 0 7 1 . 0 1 being the balance of your client's claim."

On 22 May 1992, the petltion was further adjourned

by consent to 1 9 June 1 9 9 2 . On that date, the petition was

again adjourned until 1 7 July 1 9 9 2 , the bankrupt being required, however, to file an affldavlt within 1 4 days verifying the facts upon which the adjournment had been

granted. The bankrupt's affidavit, sworn on 3 July 1992 ,

contained the following paragraphs:

"3. On 1 9 June 1992 the credltor and I, through my solicitor, agaln applled for an adjournment as there were negotlatlons taking place in relatlon to a settlement in this matter.

4.   Negotiations have taken place due to the fact that I believe I have a clalm and/or set off agalnst Westpac Banklng Corporation in relatlon to interest I was charged by Pyramld Building Society. MY payments to Pyramld Bullding Soclety in relation to a mortgage were to be made out of a Westpac Banklng Corporation account and Westpac, on a number of occasions, failed to pay Pyramid by the due date. Rather than make a separate claim or seek to get judgment set aslde, we are attempting to negotiate a settlement wlth Westpac in relatlon to a reduction in the amount they are claiming.

5.  Once the amount payable to Westpac Banklng Corporation has been resolved, it is envisaged that arrangement of repayment of the amount owed to Nestpac Banking Corporation will be made and further discussions are also taking place in relation to securlng the amount owed by way of mortgage over one of my properties.

6.  As these negotiations are still continuing, and it appears that settlement may be reached in the near future, the creditor and I jointly sought an adjournment of the matter from 19 June 1992 until 17 July 1992.

7.  On this basis an adjournment was sought on 19 June

1992. "

On 15 July 1992, the solicltors acting for the bankrupt gave notice on his behalf of hls intention to oppose the petltlon on the ground that he "1s able to pay his debts". No supporting affidavit was filed on behalf of the bankrupt

On 17 July 1992, orders were made by consent that the petltion be adjourned until 14 August 1992 and that the bankrupt flle and serve an affidavit of solvency on or before that date. No such affldavlt was flled or served.

When the matter came before the Court on 14 August 1992, the bankrupt was not legally represented. Westpac, through lts counsel, informed the Court that the negotiations between the bankrupt and Westpac had not resulted in a settlement and that Kestpac sought the making of a sequestration order. Evldence was adduced of the matters referred to In s.52(1) of the Act. No evidence was placed before the Court by the bankrupt. He referred, however, to his clam that Westpac was llable to pay to hlm amounts totalling $5,735 representing penalty lnterest charged to him by Farrow Mortgage Servlces (referred to ln the affldavlt sworn on 3 July 1992 as Pyramld Bullding Soclety) by reason of

Westpac's alleged failure on three occasions to make timely payments on his behalf of monthly interest instalments due to Farrow Mortgage Services. The bankrupt indicated his intention to pay Westpac the amount claimed as being due to it less the sum of $5,735 and requested a further adjournment of the petition to enable him to do so. The bankrupt informed the Court that, although he had a number of creditors, no creditor other than Westpac was pressing for payment.

After hearlng the bankrupt's submlsslons and those of counsel for Westpac in reply, I adjourned the hearing of the petition until 21 August 1992. The bankrupt was informed that the evidence before the Court was sufficient to warrant the making of a sequestration order and that, as no evidentlary material had been placed before the Court to support his alleged clalm against Westpac, he should expect

Westpac's debt was pald in full before the matter agaln came	such an order to be made on the adjourned date unless	before the Court.
On 21 August 1992, the bankrupt was legally represented. No further material was put before the Court on his behalf and the Court was informed that, although the bankrupt had the necessary funds in his possession to pay part of Westpac's debt, he was not then in a posltlon to pay the debt in full. An appllcatlon for yet another adjournment of the petltlon was opposed by Westpac. In the circumstances, the adjournment was refused and a sequestration order was made against the bankrupt's estate.
On 10 September 1992 the applicatlon for the annulment of the bankruptcy was flled. It was supported by a number of affidavits. It came on for hearing on 19 October 1992.
Affidavit evldence before the Court established that the applicatlon and the affidavits filed ln support of it had been served on 10 companies or organisations, presumably on the basls that those companies and organlsatlons were creditors of the bankrupt. Westpac and Beneflcial Finance Corporation Limited appeared to oppose the application. The trustee of the bankrupt's estate attended in person on the hearing of the application.
A notice of intention to oppose the applicatlon glven on behalf of Beneflcial Finance Corporation Limited stated that judgment had been given in the Supreme Court of New South Wales on 14 August 1991 ln favour of the company agalnst the bankrupt In the sum of $114,385.55 plus $494.00 for costs, that that judgment remalned unsatisfied, that a bankruptcy notlce founded upon the ludgment and claiming the sum of $130,839.93 had been served on the bankrupt on 26 August 1992 and that the bankrupt had falled withln the tlme specified ln the notlce to comply wlth lts requirements or to satisfy the Court that he had, as against the company, a counter-claim, set-off or cross demand of the kind referred to in s.40(l)(g) of the Act. Non compliance was, of course, inevitable in vlew of the making of the sequestration order on
21 August 1992.
Much of the affidavit materlal upon which the bankrupt relied in support of the application was objected to on the ground of relevance. The material objected to was, however, admltted into evidence subject to the objection. In dismissing the application I dld not find it necessary to make a final ruling upon the objection.
The affidavits filed in support of the appllcatlon included those sworn by the bankrupt on 10 September 1992 and 25 September 1992 respectively.
In those affldavlts the bankrupt stated that in 1988 he and his wife owed money to Farrow Mortgage Services (formerly Combined Mortgage Servlces), having been loaned
$458,800 on 16 September 1987; that monthly instalments of
$5,257 by way of interest were requlred to be made by 5 p.m. on the 23rd day of each month; and that arrangements had been made with Westpac early in 1988 for those monthly instalments to be paid to Farrow Mortgage Servlces by Westpac from an account which he had with that bank. (It may be noted that the day of the month by whlch the instalments were sald to be payable differs from that stated in the letKer dated 8 May
1 9 9 2 from the then solicltors for the bankrupt to the
solicitors for Westpac.) In the affidavits the bankrupt further said that the instalments due by 5 p.m. on 2 3 March
1988 , 2 3 August 1 9 8 8 and 2 3 December 1 9 8 8 were not paid on or
before those dates respectively, as a result of which Farrow Mortgage Services, on each occasion, charged to the bankrupt and his wife an amount referred to as a "Higher Interest penalty payment" of $1,911.67, making a total penalty of
$5 ,735 .01 . The loan statement furnished to the bankrupt and
his wife by Farrow Mortgage Services and annexed to the bankrupt's affidavit sworn on 2 5 Septenber 1 9 9 2 showed amounts
of $ 5 , 2 5 7 . 0 0 as having been credited to the account on 24
March 1988 , 24 August 1 9 8 8 and 2 3 December 1 9 8 8 . The account
further showed amounts of $1,911 .67 as having been debited to the account against the item "Hlgher interest" on 2 5 March
1988 , 2 5 August 1 9 8 8 and 2 5 December 1 9 8 8 respectively. The
account did not show, and there was no other evldence to
establish, that those amounts were ever paid to Farrow Mortgage Serv~ces. There was no evidence to show that Farrow Mortgage Services claimed interest on the amount of $ 5 , 7 3 5 . 0 1
as alleged in the solicitor's letter dated 8 May 1 9 9 2 .
The affidavit sworn on 1 0 September 1992 further stated that the bankrupt had recelved from Westpac a letter dated 11 Aprll 1 9 8 8 reading as follows:

"We refer to your letter 6 April and adv~se that we have written to Farrow Mortgage Services advising them that your payment was late due to the Bank's oversight.

We trust this will suffice.

Please accept our apologies for any inconvenience

caused. "

I accepted that that letter related to the payment that fell due on 23 March 1988.

Counsel for the bankrupt approached the matter on the basis that it was necessary, and sufficient, for the bankrupt to show that he had a counter-claim, set-off or cross demand against Westpac of the kind referred to in s.40(l)(g) of the Act, that is to say a counter-claim, set-off or cross demand whlch he could not have set up in the actlon in whlch the judgment upon which the bankruptcy notice was founded was obtained and whlch was equal to or exceeded the amount of the judgment debt. In the course of discussion, however, it emerged that counsel was not disputing that the bankrupt had conmutted the act of bankruptcy alleged in the petition. It

was not suggested that the bankrupt had made any attempt to	satisfy the Court, wlthln the appropriate time, that he had a
counter-claim, set-off or cross demand of the requisite klnd. It also emerged that the bankrupt was not seeking to go behlnd the judgment obtalned against him by Westpac or to show that ~t was not founded on a real debt.
In these circumstances, the provisions of s.40(l)(g) of the Act were not of signlflcance in deternnnlng whether the sequestration order ought not to have been made. That issue was to be determined by reference to the provisions of s.52 of the Act. Sub-section (1) of that sectlon provides that, at the hearlng of a creditor's petition, the Court is to require proof of -

(a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b) service of the petition; and

(c) the fact that the debt or debts on which the petitioning credltor relies is or are still owing.

The sub-section further provides that, if it is satisfled wlth the proof of those matters, the Court may make a sequestratlon order against the estate of the debtor. Sub-section (2) provides that, lf the Court is not satlsfled wlth the proof of any of those matters, or is satisfled by the debtor -

(a) that he is able to pay his debts; or

(b) that for other sufflclent cause a sequestratlon order ought not to be made,

it may dlsmlss the petltlon.

It was common ground between the parties that the bankrupt took no steps to defend the proceedings brought agalnst him by Westpac ln the Magistrates Court of the

Australian Capital Territory, belng the proceedings whlch

resulted in the judgment on whlch the bankruptcy notlce was founded. As already mentioned, it was not disputed that, upon the servlce of the bankruptcy notice upon him, he took no steps within the tune specified in that notice - and that time was not extended - to endeavour to satisfy the Court that he had a counter-claim, set-off or cross demand of the kind referred to in s.40(l)(g) of the Act. Further, at no tune did he take any action to enforce any claim against Westpac.

I did not find it necessary to form a definitive opinion as to the strength of the case whlch the bankrupt might have been able to mount against Westpac for the reimbursement of an amount equal to the penalty lnterest of $5,735.01 claimed against the bankrupt and hls wife by Farrow Mortgage Services. It was not necessary to do so because of two circumstances. First, success ln the claim would not have had the consequence that there was not due to Westpac a debt sufficient to found the making of the sequestration order and, secondly, contrary to the assertion made by the bankrupt at the hearing on 14 August 1992, there was at least one other

creditor, Beneficial Finance Corporation Limlted, presslng for	payment of its debt, that debt bemg in an amount exceeding
$115,000 and belng the sublect of a final judgment agalnst the bankrupt. I concluded that the materlal placed before the Court in relation to that claim did not satisfy me that the sequestration order ought not to have been made.
Counsel for the bankrupt also submitted that the affidavits flled in support of the applicat~on for annulment of the bankruptcy established that the bankrupt was entitled to recover from Westpac unliquidated damages arising out of an alleged breach by Westpac of the duty it owed to the bankrupt, the breach consisting in its fallure to make timely payment to Farrow Mortgage Services of the monthly instalments of interest due on 23 March 1988, 23 August 1988 and 23 December
1988. It was submitted that the actions of Westpac resulted
in a deterioration in the bankrupt's health for which he was entltled to general damages.
Reference has already been made to the evidence relied upon to establish that Westpac had, on the occasions in question, failed to make timely payment to Farrow Mortgage Services. The other sworn evidence relied upon was contalned in the bankrupt's affidavit sworn on 25 September 1992 and in the affidavit of Jadranka Jambrecina, hls wife, sworn on 30 September 1992. In additron, counsel for the bankrupt tendered a document dated 16 October 1992 slgned by Dr T. Nlewiadomski of 13 Callum Street, Queanbeyan which was
admltted Into evidence subject to objection as to relevance.
Paragraph 7 of the bankrupt's affidavit, speaking as of a tlme shortly after he had been informed that the payment due on 23 August 1988 had been received by Farrow Mortgage Services after that date, stated:

"7. About this time I started havlng arguments wlth my wlfe about the matter. I was worried and didn't want her CO interfere but I had to try and get it sorted out. I also started picklng on my children."

After speaking of subsequent events, ~ncluding the late payment of the December 1988 instalment and of subsequent conversations with officers of Westpac, the affidavit stated in par. l4 :

"14. Thls whole business has made me bitter angry and depressed. I had to see my Doctors in Queanbeyan."

In her affidavit, the bankrupt's w ~ f e stated:

"4. Drago has never been the sort of man to let things

get him down. He has never gone to the Doctor
unless he has needed to.

5.   In 1988 and 1989 he went to the doctors quite often.

6.  He became angry when the problems with late payment by Westpac to Farrow happened. He started to be cross with hlmself and we would fight. He would plck on the ch~ldren, particularly the boys. He started belng disturbed in his sleep. He would not trust or believe anyone anything they said especially the children.

7.  He has not been right slnce the trouble with Westpac

began. "

The document signed by Dr Nlewiadomski read:

" M r D. Jambreclna, dob 25.2.47 has been my patient on 4.1.89 Dg. Depression. Treatm. prescr .

Tryptanol. "

That was the totality of the evldence adduced in support of the clalm for general damages and I concluded that that evldence did not provlde a suffic~ent cause for holdlng that the sequestration order ought not to have been made.

For the reasons set out above, the application for the annulment of the bankruptcy was dismissed.

I certify that this and the preceding 14 pages are a true copy of the Reasons for Judgment herein of the Honourable Mr Justlce Neaves .

Associate

Dated:  2 November 1992

Counsel for the applicant : C. Ryan

Solicitors for the applicant : Lesley Anne Christian

Counsel for Westpac Savings

Bank Llmited : Mr R. Refshauge

Solicitors for Westpac Savlngs

Bank Llmited : Macphillamy Cummlns

& Glbson

Counsel for Beneficial Flnance

Corporation Limlted : Mr R. Barnes

Solicitors for Beneflclal

Flnance Corporation Limlted : Nelson & Co.

Barry Anthony Taylor, the trustee of the estate of the applicant, attended in person.