Re King, H. Ex parte Denholm, L

[1992] FCA 298

IN THE FEDERAL COURT OF AUSTRALIA

EXERCISING FEDERAL JURISDICTION

IN BANKRUPTCY

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA

RE: HANK KING

Judgment Debtor

EX PARTE: LAURENCE DENHOLM

Petitionina Creditor

COURT :	NORTHROP J
PLACE :	MELBOURNE
DATE :	22 APRIL  1992 2 1 MAY 1992

EX TEMPORE REASONS FOR JUDGMENT PRINCIPAL REGISTRY

This is the return of a petition seeking a sequestration

order against the estate of Hank King. The judgment debtor

has sought an adjournment of the hearing of the petition for 1

month to enable a meeting of creditors to be held pursuant to

an authority under Part X of the Bankru~tcv Act 1966 signed by

the debtor on 13 April of this year, authorising Richard Jell

judgment debt in the sum of about $41,000.

Mansell to call a meeting of his creditors pursuant to Part X.

It is important to note in this case that the petition was presented to the Court on 28 January 1992 and so the 12 months' period for the life of that petition is nowhere near

yet being expended. The petition is founded upon an act of
bankruptcy alleged to have been committed on 24 December 1991
being the non-compliance with a bankruptcy notice, issued on a

The petition was served on 16 February 1992 but it is noted be held within 35 days of the signing of the authority and the Act contains provisions for the making of reports by the trustee within 14 days after consenting to exercise the powers conferred by the authority. Reference is made to s189A of the

that the Part X authority was not signed until 13 April 1992,
almost 2 months after the date of service of the petition.

Bankruptcy Act.	Here the consent was signed by the trustee
on 13 April.	The 14 days have not yet expired and there is

no report before the Court by the trustee as to the matters
referred to in s189A.

The debtor has filed an affidavit sworn on 22 April which

in substance merely states that he proposes to enter into a
scheme of arrangement under Part X and exhibits the authority
and the debtor's proposals and the affidavit verifying his

statement of affairs.	The debtor's proposal is for a deed of
arrangement under which the deed will provide for the

assignment of all his divisible property available as if he
were declared bankrupt and includes an additional contribution
of $20,000 to be provided by relatives; and so there is this
additional amount of $20,000 to be brought into the estate,
otherwise the estate is to constitute the property which would
be available as on a bankruptcy. The affidavit verifying the
statement of affairs of the debtor shows estimated total

liabilities of $1.56M, estimated value of assets of $5,340 and

a total deficiency of $1.56M. There are some large debts

secured but the securities are not sufficient to pay the
amount of the debts owing.

An affidavit was filed by the solicitor for the

petitioning creditor to support a belief that there may well
have been other property available but not disclosed in the
affairs of the debtor, but I place no reliance on the material

provided in that affidavit.

The main argument put by counsel for the debtor in

X of the

support of the adjournment, was the existence of the signature no practice at all that the mere execution of an authority for the calling of a meeting of creditors under Part
to the authority under Part X and the prejudice that would be
suffered to the debtor if a sequestration order was made.

Bankru~tcv Act of itself is sufficient to justify the granting

of an adjournment of the hearing of a petition to enable that
meeting to be held. This is made clear by Field v The

Commercial Bankina CO of Svdnev Ltd (1978) 22 ALR 403, and in
particular per Sweeney J at p 411.	Likewise, the fact that a

sequestration order may be made is a factor to be taken into

account. The law is quite clear, under s52(1) of the

Bankru~tcv Act:

"52(1) At the hearing of a creditor's petition, the

Court shall 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

the fact that the debt or debts on which the

(c) petitioning creditor relies is or are still owing,

and, if it is satisfied with the proof of those matters, may make a sequestration order against the estate of the

debtor. "

At pp 411 to 412 of Field's case, Sweeney J sets out a

number of factors which are quite commonly taken into account
in determining whether to grant an adjournment or not, and one

of those factors is numbered two, and I quote:

(2) The attitude to the application of the petitioning
creditor, as prima facie, on proof of the matters
mentioned in s 52(1) of the Bankruptcy Act 1966, the
court will proceed to make an order for sequestration

(see Rozenbes v Kronhill (1956) 95 CLR 407)."

There are a large number of other factors relevant to be

considered in the granting of an adjournment. One of them is

the course of dealings between the parties, I have no

information on that at all. Another is the general financial

position of the debtor, and in this case, the financial
position of the debtor is very clear: he is insolvent. There
is no suggestion at all that there would be any gain to the
creditors apart from the $20,000 that is to be paid into his
estate, but a large amount of that would normally be expected
to be expended in the costs of the trustee in calling the
creditors' meeting and other expenses associated therewith.

Another aspect is the question of the size of the debt of

the petitioning creditor and of any other creditor. In this
case the debt of the petitioning creditor is $41,000
approximately, but there is a supporting creditor who is owed
the sum of about $400,000 which is more than 25 percent of the
total debts of the debtor. Counsel for the supporting
creditor has indicated that at the present stage his client
would oppose the acceptance of any proposal under Part X of

the Bankru~tcv Act. Nevertheless, it is quite clear that

attitudes can change and that a creditor could change its mind during the conduct of a meeting. Nevertheless, at the present time it is sufficient to say that there are sufficient

creditors presently opposing the adjournment to ensure that,
in all likelihood, unless something unexpected happens, there

is no hope of the scheme being approved.

One also has a feeling that this is a case where there

would not be much advantage to the creditors generally by the
adoption of the scheme or arrangement as proposed, although in

the absence of a report from the trustee, no final view can be

which I have mentioned, it seems to me that this is not a case	expressed on that. In all the circumstances, and weighing up all the factors
where the Court should grant the adjournment. The Court refuses the adjournment as sought.
I certify that this and the preceding four (4) pages are a
true copy of the Ex Tempore Reasons for Judgment of the Honourable M r Justice R.M. Northrop.
Associate :
Date:  /CI ,&ad 1792