Re Lenton, J.M. Ex Parte Friends Provident Life Office

[1992] FCA 486

Re: JOHN MAXWELL LENTON
Ex Parte: FRIENDS PROVIDENT LIFE OFFICE
No. W P363 of 1992
FED No. 486
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVSION
BANKRUTPCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
French J.(1)

CATCHWORDS

Bankruptcy - debtor's petition - long standing creditor's petition pending - referral by Registrar for direction - no improper purpose in lodgment of debtor's petition - preference for Official Receiver over trustee proposed under creditor's petition - alleged conflict of interest by trustee - no basis for allegation - direction not to accept debtor's petition.

Bankruptcy Act 1966 s.188, sub-s.55(3A)

HEARING

PERTH

#DATE 25:5:1992

Mr J.M. Lenton appeared on his own behalf.

Counsel for the Creditor: Mrs K. Banks-Smith

Solicitors for the Creditor: Parker and Parker

ORDER

THE COURT ORDERS THAT:

1. The estate of John Maxwell Lenton be sequestrated.

2. Mr Ross Stewart Norgard be appointed trustee of the estate.

3. The Petitioner's costs be taxed and paid out of the estate.
Note: Settlement and entry of Orders is dealt with in Rule 124 of the Bankruptcy Rules.

JUDGE1

In this case a debtor's petition, filed while a creditor's petition is pending, has been referred to the Court by the Registrar in Bankruptcy for directions as to whether it should be accepted.

2. The debtor, Mr Lenton, signed an authority on 16 January 1992 under s.188 of the Bankruptcy Act 1966 authorising Maurice Hodgson Lyford, a registered trustee, to call a meeting of his creditors and to take control over his property and assets. That meeting was convened and subsequently adjourned as representatives of one of the creditors, Friends Provident Life Office, wanted to make investigations in relation to the debtor's assets. At a meeting that followed on 27 February, all creditors, apart from Friends Provident Life Office, voted for a further adjournment of the meeting to allow Mr Lenton time within which to put forward a proposal for either a deed of arrangement or a deed of assignment. But, at the conclusion of that meeting a representative of Friends Provident Life Office served Mr Lenton with a petition seeking an order for sequestration of his estate. The petition rested upon the proposition that Mr Lenton was indebted to the creditor in the sum of $1,418,033.37, being a sum payable by a company called Helliard Limited, to the creditor under a loan agreement between the creditor and Helliard dated 4 November 1988 and guaranteed by Mr Lenton under a deed of guarantee and indemnify made on or about that same date. The act of bankruptcy relied upon was the signature of the authority under s.188 of the Bankruptcy Act by Mr Lenton.

3. Mr Lenton filed an affidavit three days after the filing of the affidavit of service of the petition in Court on 9 March 1992 and in that affidavit, opposing the petition, said that on 7 February a writ had been issued against himself and other co-guarantors in relation to the debt the subject of the petition. He stated there that the writ would be defended. Friends Provident Life Office, he said, is aware that the debt and the amount of the debt is disputed and that there is to be a counter-claim. He stated his belief that in the circumstances it was improper for Friends Provident Life Office to seek to make him bankrupt on a debt which is the subject of a writ before that writ has been resolved one way or the other. He sought an order that the bankruptcy petition be dismissed with costs.

4. It emerged, however, that subsequently in the proceedings commenced against him by Friends Provident Life Office in the Supreme Court of New South Wales, a notice of motion was filed on 10 April seeking an order for summary judgment against Mr Lenton and other defendants. That motion was heard by Cole J. on 1 May and his Honour delivered an ex tempore judgment in which he granted the petitioner summary relief and made an order striking out the statement of defence with leave to the plaintiff, that is to say the Friends Provident Life Office, to sign judgment against the defendants. Judgment was subsequently entered for the sum of $1,418,033.37 against Mr Lenton and four co-defendants. The judgment took effect on 1 May.

5. As appears from that background, the debt has not in fact been disputed, or at least not on any basis which would satisfy the Supreme Court of New South Wales that judgment should not be entered. On 18 May 1992, Mr Lenton filed his debtor's petition and a statement of affairs. At the time his petition was filed, the creditor's petition was still pending. Sub-section 55(3A) of the Bankruptcy Act provides that:

"55(3A) Where, at the time when a debtor's petition is presented under this section, a creditor's petition is pending against the debtor (whether alone or jointly

with another person) or against a partnership of which the debtor is a member, the Registrar must refer the

debtor's petition to the Court for a direction to

accept or reject it."

And, it is pursuant to that provision, although I think it is said in the Registrar's letter, to be pursuant to sub-s.57(3A), that the petition is referred to me now to determine whether the Registrar should accept or reject it.

6. There is no suggestion of impropriety in the filing of the debtor's petition in the sense of an improper purpose designed to shorten the relation back period and thus defeat the claims of the creditor. The opposition to the acceptance of the debtor's petition is made on the basis that under the debtor's petition the official receiver would become the trustee of the bankrupt estate. In respect of the creditor's petition, Mr Norgard, who is also the liquidator of Helliard, has consented to act as trustee. It is said that because his investigations in relation to the company liquidation have commenced and necessarily involved investigations into the position of Mr Lenton and others, it is more economic to have him as trustee in Mr Lenton's bankruptcy, than two separate trustees in respect of these different insolvency procedures. On the face of it, there is some force in that contention. Mr Lenton has contended, by assertion from the bar table, that there may be a potential conflict of interest and that he would feel better served by having the independence of the official receiver as trustee of his estate. That purpose is not an improper purpose. It is a legitimate reason for filing a debtor's petition. However, I am not satisfied in this case that there is any evidence before me from which I could conclude that Mr Norgard is likely to be affected by any conflict of interest. If there is any decision of Mr Norgard's that seems to be contrary to the interests of the creditors or unfairly prejudicial to that of the debtor, Mr Lenton, then there are procedures available under the Act for review of his decisions. Also, of course, in an appropriate another trustee can be appointed.

7. In the circumstances, I think that the creditor's petition, having been on foot since February, the initial statement that it was to be disputed having, as it were, not come to pass, a summary judgment having supervened and the recent filing of the debtor's petition, against that history it is appropriate that the creditor's petition should proceed and the debtor's petition not be accepted.