Re Lewer, M.A. v Ex Parte M.A. Lewer

[1989] FCA 156

. J

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT	)
OF AUSTRALIA	)
GENERAL DIVISION	)

BANKRUPTCY DISTRICT )

OF THE STATE OF	)
WESTERN AUSTRALIA	) No. 481 of 1987 RE: MICHAEL ALAN LEWER

Bankrupt

EX PARTE: MICHAEL ALAN LEWER

Applicant

MINUTE OF ORDER

JUDGE MAKING ORDER:	FRENCH J.
DATE OF ORDER:	10 APRIL 1989
WHERE MADE:	PERTH
TEE COURT ORDERS	THAT:

1. The bankrupt is discharged but that the discharge is

suspended for six months and is conditional upon:

(i) the bankrupt aking all reasonable steps to

c

co-operate with the Offlclal Trustee to recover

-

outstanding commissions forming part of the

bankrupt estate;

(ii) the bankrupt not entering lnto business on his own

account whether as a sole trader, In partnership or

I . . as a director of any company prlor to 1 July 1990

provided that this condltion shall not prevent	him
from acting as a commission agent or salesman.

~ , \ l !

Note:  Settlement and entry of orders is dealt with

in Rule 124 of the Bankruptcy Rules.

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT )

OF AUSTRALIA	)
GENERAL DIVISION	1 No. 481 of 1987
BANKRUPTCY DISTRICT	1
OF THE STATE OF	1
WESTERN AUSTRALIA	1
RE :  MICHAEL ALAN LEWER Bankrupt EX PARTE: MICHAEL ALAN LEWER

Appllcant

CORAM:  FRENCH J.

10 APRIL 1989

EX TEMPORE REASONS FOR JUDGMENT

This is an application for discharge by Michael Alan

Lewer of 31 Shaftersby Avenue, Bedford, the bankruptcy in question

having commenced on 30 June 1987. In the Official Trustee's

report, which is not contested by Mr Lewer, it is said that he had

a successful real estate business for some 20 years until 1985,

being a director of a company called "Pepperbark Pty Ltd" which

C '

traded as "Lewer Real Estate". He was involved predominantly wlth

home unit management and rentals. In 1976 he travelled to the

United States where he studied the concept of strata titled unlts

in caravan parks, that is to say, the strata titling of indivldual

caravan park bays. He felt a simrlar system would be successful in Australia and on his return set about trying to promote the concept, obtaining commercial funding and suitable amendments to the Strata Tltles Act.

L.

In December 1980 and January 1981 he purchased

properties at Victoria Street, West Perth and Charles Street, North Perth. The former he used as a residence, the latter as an office. Finance for those properties was approved by the R. & I. Bank, although both mortgages were taken over in 1982 by the

National Australia Bank. He was involved in several business

ventures during that time, none of which were successful. In 1983

he obtained a one third share in a delicatessen franchise at the

Aquarama Marina in Fremantle. That marina was sold in 1984 and

the franchise withdrawn. In 1983 he had a one third share in a

partnership, Lewter Nominees, which was involved in a duplex

development in East Perth. The builder involved, Kingsley

Constructions, was to build the homes and he was to market and

sell them.	On his account, however, the builder overspent and the
homes were eventually sold	at a loss and his liability amounted to
$11,800.

In 1984, he said, he was advised that amendments were to be made to the Strata Titles Act and his project could go ahead. He sold his real eshte business in early 1985 for $125,000 and $25,000 was held back against future claims for loss of custom, an claimed to have then received about $100,000 at settlement. Some	amount which he did not recover.	The proceeds of that sale were
further reduced after he paid off other	business	debts and the

loan agreements on his office and computer equipment. He used the surplus for living expenses while awaiting financial returns from his caravan park project.

The investor in that pro~ect was a company called Sandgate Developments Pty Ltd. Land was purchased at Seabird for the purpose. The bankrupt designed the caravan park and his arrangement with Sandgate was that he would sell all 180 bays and receive a total commission of $98,500. Another salesman was later brought in and his proposed share reduced to $46,000. He did not

inject any capital into the prolect himself. Although the Strata

Titles Act was finally amended In such a way as would permit the proposed project to go ahead, the Gingin Shire Council refused building permits. Permission to build was finally granted in February 1986, but only after legal actlon agalnst the council.

By 1986 he had accumulated $40,000 in unsecured debts

and said that these related mainly to living expenses and the

pursuit of the strata title project. He entered into a Deed of Arrangement on 10 April 1986 under Part X of the Bankruptcy Act

1966 and under that	arrangement was given 2 years to pay his
debts. It	was his view that once building permission had been

granted, he would receive more than sufficient income to pay them

in full. However, according to Mr Lewer, building costs and

interest rates had increased dramatically from initial projections

and because of that and the fact that Sandgate Developments had

limited capital avallable, he agreed to take his commissions after

he had sold all the bays instead of the normal practice of being

paid at the end of each sale. He sold some 127 of 180 bays in the development over a period of a few weeks in early 1987. He was unable to complete all sales as agreed and blames this in part on

the company which, because of financial restrictions, cut back	on
its advertising. He	did not recelve the commisslon anticipated
and was unable to meet the	conditions of the Deed of Arrangement.

He filed his debtors petition on 30 June 1987.

Mr Lewer had been unable to meet mortgage repayments on

his office block and residentlal property and had vacated them In about October 1987. After a mortgagee's sale by the National Australia Bank the total shortfall was approximately $80,000.

After bankruptcy he worked as the manager/caretaker of

the Seabird Caravan Park from March 1987 when it opened, until May

1988. He was paid $14,000 per annum. After leaving the Park he

was unemployed for a short time before obtaining employment as a courier and from October 1988 was employed as an insurance agent with the Capita Flnancial Group Llmlted.

At the time that this application was filed in January

of thls year, Mr Lewer was still employed with Capita and had undergone a trainlng course with that company. He learnt, however, that while still bankrupt he could not act as an agent in his own right, but only as a sub-agent paying a proportion of his

commission to a heaf-agent. He made the point in his affidavit in

only 9 years in which to rebuild his life and endeavour to put support of the application that he is now 56 years of age and has something aside for the declining years of hrs wife and himself.

This, he said, he could do	only if he applies hlmself by worklng
14 hours a day, 7 days a week and only with the status of	agent.
In his affidavit he sald that he	could become eligible to apply
for a low interest staff home loan from the company and	possibly
qualify for its superannuation scheme.

In the event, at the time that this matter came on for

hearing, Mr Lewer had left Caplta and taken up employment with the

AMP Society as a sub-agent on a retainer against commission basis.

That involves a payment to him of $296 per week paid on a monthly basis, an amount debited against commissions which are earned. He

has only, so far, made two sales and has not concluded

arrangements with hls head agent as to the proportion of

commission to be paid. He says that should the agent follow the

practice that was applicable in Capita, he would expect him to

take about $100 out of every	sale but It might go to a percentage
of 10%, but posslblly less.

A question arose i n the course of the hearing as to

allegations of late filing of income tax returns. The Offlcial Trustee's representative informed the Court that the Commissioner for Taxation had wished to file an objection, but under r.55 of the Bankruptcy Rules was unable to do so because it had not lodged

a proof of debt. This in part arose, so it was said, from the

failure on Mr Lewer's part to file necessary returns. Mr Lewer

gave evidence on thia'point and said that all returns outstanding

antlcipated a small refund arising from them. There is also a	had been lodged save for the 1987/88 financial year and that he
letter sent to the Official Trustee by the National Australia Bank expressing its objection to the appllcation for order of discharge. The Bank, however, did not appear on the hearing of the application and has put no sworn evidence before the Court. I am not in a position to draw any inference adverse to Mr Lewer
from the Bank's ob]ections. The Official Trustee's report
indicates that there is no complaint of conduct of the bankrupt
either prior to or subsequent to bankruptcy which has been
unsatisfactory, nor any matters relevant for conslderation by the
Court under sub-s.150(6) of the Act. He accepts that delay In
obtaining amendments to the Strata Titles Act and building
permits, the rise in building materlals costs and interest rates
and the fallure of Sandgate Developments to pay commlsslon were
all contributing causes to the bankruptcy, together with
insufficient working capltal.

The bankruptcy in this case discloses a substantial

deficrt. Assets totalled $55,065 and liabilities $151,900,

although proofs of debts indicated claims amounting to $159,140.

Reallsations yielded $14,000 and there are, it would seem, no

unrealised assets, although Mr Lewer Indicates there 1 s a	further
$10,500 which he would be entitled	to receive on the sale of the
outstanding bays at	the Seabird Caravan Park of which there are
some 9 or 10.

A dividend was advertised and paid on 5 December 1988.

The trustee under tk'Part X arrangement was paid 100 cents in the

dollar as a priority creditor, in the sum of	$6,180.	All other
proved creditors were paid 1.0867	cents In the dollar.	A	second

dividend of 5.66 cents In the dollar is to be pald, but that wlll

vary if not all creditors lodge a claim. Officlal fees of $300

have been paid to the Reglstrar in Bankruptcy and $1,976 has been

paid in respect of Officlal Trustee's fees.

The	Court	will	not	lightly	discharge	bankruptcy
l .

particularly where questions of public interest or commercial

morality may be concerned. The bankruptcy in this case has

involved a significant loss to the applicant's credltors. On the

other hand there is no suggestion of unsatisfactory conduct in the

operation of hls business affairs. There has been, as I have said, a complaint made by the National Australia Bank, but in the absence of evidence I am unable to draw any adverse inference in

that regard.	The failure to file income tax returns is a serlous
matter and one which cannot be	disregarded in deallng wlth this
application.	I would not wlsh, however, to prevent Mr Lewer from

obtaining an opportunity to maximise his Income on a proper basis

as a commission agent wlth the AMP or any other Insurance body for

that matter. But in taking into account hls interests and those

of his wife, I must balance them against the interests of

creditors and the general publlc interest. I think the best

course that I can take in this case, is to recognise that balance

by ordering discharge but suspending that discharge for six months

and making it conditional upon certaln restrictlons on the

activities of the bankrupt until 1 July 1990, which is the date

upon which his bankruptcy would have been discharged in the

ordinary course by cfL1uxion of tlme.

The order I propose to make is: 

1.    That the bankrupt is discharged but that the

dlscharge is suspended for six months and is

conditional upon: 

(i)  the bankrupt taking all reasonable steps to co-operate with the Official Trustee

recover	to outstanding commissions
forming part of the bankrupt estate;
(ii) the bankrupt not	entering lnto business

on his own account whether as a sole trader, In partnershlp or as a director

of any company prior to 1 July 1990

provided that this condition shall not prevent him from actlng as a commission agent or salesman.

I certify that this and the

preceding seven ( 7 ) pages are
a true copy of the Ex Tempore
Reasons for Judgment of his

Honour Justice French.

Associate: 7 4 U-

Mr M.A. Lewer appeared on his own behalf.
Miss C.J. Stabb appeared for the	Officlal Trustee
Date of Hearing:	10 Aprll 1989
Date of Judgment:	10 April 1989