Re Jones, R.N. v Ex Parte Office Screens Pty Ltd

[1990] FCA 791

Re: RICHARD NOEL JONES
Ex Parte: OFFICE SCREENS PTY LIMITED
No. D B26 of 1987
FED No. 791
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE NORTHERN TERRITORY OF AUSTRALIA
Foster J.(1)

CATCHWORDS

Bankruptcy - discharge pursuant to s 150 Bankruptcy Act 1966 - consideration of trustee's objection - whether bankrupt omitted to keep appropriate business records - whether bankrupt failed to account satisfactorily for assets.

Bankruptcy Act 1966 - s 149(3)(c), s 149(4)(c) and (d), s 149(11), s 150(1), (3), (5), (6)(a) and (b), (12).

Bankruptcy Rules - Rule 53

HEARING

DARWIN

#DATE 7:12:1990

Solicitor for the Applicant: Mr R.W. Morgan

ORDER

The applicant be discharged from bankruptcy pursuant to s 150 of the Bankruptcy Act 1966.

NOTE: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

This is an application by the bankrupt, Richard Noel Jones, pursuant to s 150 of the Bankruptcy Act 1966 ("the Act") for an order discharging him from his bankruptcy. He became bankrupt on 25 June 1987 on the petition of Office Screens Pty Limited in respect of a debt to that company of $2,100.

1. Michael Journet Mount, an accountant carrying on a practice in Adelaide, was appointed trustee of the bankrupt's estate. He has furnished a report pursuant to s 150(3) of the Act and Rule 53 of the Bankruptcy Rules. He has not appeared at the hearing. This was no doubt due to financial constraints, there being no funds in the estate and to the distance to be travelled. The Court has, however, consequently been deprived of his answers to questions and been obliged to depend solely on the material in his report. None of the numerous creditors have sought to be heard.

2. The trustee, on 28 April 1988, had lodged a notice pursuant to s 149(3)(c) of the Act objecting to the automatic discharge of the bankrupt under that section on the grounds that he had failed to co-operate in the administration of the estate and that his conduct, either in respect of the period before or the period after the date of bankruptcy, had been unsatisfactory. This notice had the effect of extending the period of the bankruptcy up to and including 25 June 1992. By this application, the bankrupt seeks to overcome the effect of this notice and obtain his immediate discharge, pursuant to s 149(11).

3. The relevant provisions of the Act are as follows:-
   

"s 150(1) A person who becomes, or has before the commencement of this subsection become, a bankrupt may apply to the Court at any time for an order of discharge.

...

(3) On the hearing of an application under this section, the Court shall take into consideration a report in writing by the trustee about the bankrupt and the bankrupt's conduct and examinable affairs both in respect of the period before and the period after the applicant became a bankrupt.

...

(5) The Court shall, if any of the matters specified in sub-section (6) is established-

(a) refuse to make an order of discharge; or

(b) make an order of discharge but suspend the operation of the order as the Court thinks proper, either unconditionally or subject to conditions.

(6) The matters upon the establishment of which the Court may exercise the powers specified in sub-section

(5) are as follows-

(a) that the bankrupt has omitted to keep and preserve such books, accounts or records as

sufficiently disclose his business transactions and financial position within the period of 5 years immediately preceding the date on which he became a bankrupt;

...

(d) that the bankruptcy has failed to account satisfactorily to the trustee for any loss of, or depreciation of, assets or for a deficiency of assets. ...

(12) A report referred to in sub-section (3) is, for the purposes of this section, prima facie evidence of the statements contained in it."

1. Additionally, it may be noted that the trustee's objection to discharge was lodged pursuant to ss 149(4)(c) and (d) of the Act. In a letter of 7 June 1990 to the bankrupt the trustee indicated that the reasons for objection pursuant to subparagraph (c) (failure to co-operate) "included failure by you to produce books and records and a failure by you to produce adequate and satisfactory answers to question put to you in writing". In relation to subparagraph (d) (unsatisfactory conduct) the trustee instanced the following: "you failed to disclose seven aquabikes in your statement of affairs, you obtained goods from Beaurepaires for Tyres without informing them that you were an undischarged bankrupt and you carried on business under a firm name, Northern Office Machines, without disclosing to Beaurepaires for Tyres the fact that you were and undisclosed bankrupt". By the same letter the trustee indicated that he did not intend to withdraw his objection.

2. These matters are elaborated upon and added to in the trustee's report to which is annexed the correspondence which passed between the trustee and the bankrupt. The bankrupt has filed an affidavit which seeks to provide relevant explanations and also annexes correspondence which is, for the most part, the same as that annexed to the trustee's report. I do not propose to set out all this material in these reasons. I have carefully considered all of it. I have also had the benefit of careful submissions from Mr Morgan on behalf of the bankrupt.

3. It is convenient to make some general observations at the outset. In the first place, it is obvious from the bankrupt's letters to the trustee that he was a person of no great sophistication or capacity to express himself. Secondly, considerable difficulty was obviously entailed by the fact that the bankrupt resided in Darwin whilst the trustee carried on his business in Adelaide. This resulted in the seeking and obtaining of information by way of letter rather than by face to face interviewing, a process which clearly led to problems in this case and also to considerable and understandable frustration on the part of the trustee. Thirdly, the financial condition of the estate is such as to preclude the payment of a dividend. Indeed, there has been no significant activity in the administration since July 1988.

4. The first matters I consider are those that arise under s 150(6) of the Act. The trustee raises in his report (paragraph 9.1) the question whether the bankrupt omitted to keep and preserve appropriate books, accounts and records in relation to his financial and business affairs (s 150(6)(a)). It was also submitted that he had failed to account satisfactorily in respect of assets (s 150(6)(d)). If these matters were established then the Court is unable to make an outright order for discharge. These matters must, of course, be established to the standard required for proof of an offence.

5. The absence of books is only relevant if the bankrupt was carrying on business personally. It is clear that he was employed by family companies as a salesman; so much in acknowledged in the trustee's report although it must be recognised that the amount of information provided by the bankrupt to the trustee was irritatingly sparse as to his activities in this regard. The trustee formed the view that additionally the bankrupt carried on business on his own account in relation to the hiring of aquabikes, film processing and the sale of office equipment. The bankrupt, in applying to Esanda for a loan in relation to the acquisition of several aquabikes, described himself as self-employed under the trade name Northern Office Equipment. The bankrupt asserts that the description was careless and did not represent the correct position which was that the business was carried on by a family company, Hurldall Pty Limited. Similarly, the film processing business was carried on by a family company. He further asserted that he had not infrequently registered business names to protect them, not intending that they be used by him personally but by family companies should it become appropriate.

6. It is difficult not to share the suspicions of the trustee that there were businesses carried on by the bankrupt personally but it is not, in my view, established that this was so and that there was therefore a relevant failure to keep and preserve books and accounts.

7. I am similarly of the view that breaches of s 150(6)(d) are not established. The aquabikes were not established to my satisfaction to be property of the bankrupt. Shares in family companies were no doubt valueless and were ultimately disclosed in correspondence. The debt of $1,000 referred to was disclosed, if not fully explained, The Toyota Landcruiser is not established to my satisfaction as having relevantly been an asset of the bankrupt, although the situation is left unclear.

8. I am, therefore, satisfied that there is no basis for refusal of the order sought under s 150(5).

9. I should add that certain matters were in fact reported to the Australian Federal Police, as is referred to in the trustee's report. The police found no sufficient evidence to warrant prosecution.

10. The next consideration is whether I should, in my discretion, refuse the order sought under s 150(9) of the Act. The trustee complains in his report, as he did continuously in his correspondence, of a lack of co-operation by the bankrupt in the answering of questions and the provision of information. It is not difficult to share his feelings of frustration. I too have found the bankrupt's answers to questions in the correspondence irritatingly cryptic and imprecise. I have already stated my view as to the inherent difficulties involved in the gathering of information by correspondence in this way. It may be, as the trustee clearly considered it was, that the unsatisfactory nature of many of the answers was a product of guile. It may also be, as is urged upon me, that the lack of sophistication on the part of the bankrupt was a significant factor. I find it unnecessary to set out the detail of these matters. I am not satisfied that the bankrupt has satisfactorily explained the advertising for sale of a Toyota Landcruiser. It may be that this was done on the part of a company and not personally. It could certainly have been made clearer earlier if this was so. Nor am I satisfied that he dealt directly with certain rental payments in respect of units at 38 Wells Street, Ludmilla. He may have dealt with Beaurepaires personally and not on behalf of a company. These things remain unclear on the material before me.

11. These are, however, matters that are now considerably in the past. His bankruptcy has now extended well beyond that three year period envisaged by s 149. I ask myself whether the public interest requires that it continue. There is no suggestion that any worthwhile contribution can be made to his estate if it does. The evidence does not suggest to me that he is now likely to be a commercial menace if his bankruptcy status is removed.

12. I have nevertheless experienced some serious hesitation in this matter. I am not impressed by the pose of injured innocence adopted in the bankrupt's letters. I consider that his level of co-operation and conduct fell short of what the trustee might reasonably have expected.

13. Finally, however, I have decided that it is appropriate to make the orders sought. I therefore order, pursuant to s 150 of the Bankruptcy Act 1966, that the applicant be discharged from bankruptcy. I make no order as to costs.