Re Maurice Raymond Brooham Ex Parte Lynette Roslyn Brown & ORs

[1979] FCA 159

- h 3

JUDGMENT No. ..k?-.w.~ 77

IN THE FEDERAL COURT OF AUSTRALIA	) )
NEW SOUTH WALES DISTRICT REGISTRY	)
)
GENERAL DIVISION	)
) No. P. 1263 of 1979
BANKRUPTCY DISTRICT OF THE STATE	)
\
OF NEW SOUTH WALES AND THE	)
)
AUSTRALIAN CAPITAL TERRITORY	)

RE : MAURICE RAYMOND BROOMHAM

Debtor

EX PARTE: LYNETTE ROSLYN BROWN, PATRICIA ANNE HUDSON, JOHN PEARY BINGLE and KERRY FRANCERS BINGLE

Creditor S

CORAM: Deane J.

Thursday 22 November, 1979.

REASONS FOR JUDGMENT

This is a contested bankruptcy petition. It is not

disputed by the debtor that, if the commission of an act of bankruptcy by the debtor is established, and subject to any question of an adjournment, a sequestration order should be made. The only issue between the parties is whether on the

evidence the commission of an act of bankruptcy has been

established. The resolution of that issue is far from being

f r e e of difficulty. I have, however, come t o a f i rm conclusion

i n r e l a t i o n t o it and th lnk i t p r e f e r a b l e t h a t I g i v e my

d e c i s i o n forthwith.

The e s s e n t i a l f a c t s i n t h e ma t t e r may be b r l e f l y s t a t e d .

On 11 January, 1979 t h e p e t i t i o n l n g c r e d i t o r s ob ta lned a d e f a u l t

judgment a g a i n s t t h e deb to r i n t h e D i s t r i c t Court of New South

Wales a t Q u i r i n d l i n t h e amount of $4775.79, t oge the r w i th

c o s t s i n t h e amount of $178, making i n a l l $4953.79. On 26

March, 1979 t h e p e t i t i o n l n g creditors caused t h e i s s u e of a

bankruptcy n o t i c e d l r e c t e d t o t h e deb to r r e q u i r i n g e l t h e r

payment o f $4995.07, belng t h e amount due under t h e judgment

and i n t e r e s t t o t h e d a t e of t h e n o t l c e , o r t h a t t h e payment

of t h a t amount be secured o r compounded.

The bankruptcy n o t i c e was a 21-day n o t i c e . I t was

served upon t h e deb to r on 26 May, 1979. Shor t ly a f t e r s e r v i c e

of t h e bankruptcy n o t i c e upon hlm, t h e deb to r telephoned t h e

o f f i c e of t h e petitioning c r e d i t o r s ' s o l i c l t o r s and had a

te lephone conversa t ion w l t h an unidentified female. The

d e b t o r ' s account of t h a t te lephone conversa t ion was:

"I asked the yomg lsdy I spoke t o i j ' 1 couZd gad ,LT o f f

and she said t o ge t a form jrcm i+iena Bouse asi.i?:g i~'

they would accspt it".

The r e f e r e n c e t o Mena House, was p l a l n l y a r e f e r e n c e t o t h e

D i s t r i c t Court o f f i c e which i s s i t u a t e d i n t h a t Sydney building.

I n accordance wi th t h a t adv ice , t h e deb to r made application t o

t h e D i s t r l c t Court of New South Wales f o r an o rde r t h a t t h e

judgment d e b t be paid by ins ta lments .

On 31 May, 1979, an order was made by a Registrar of

the New South Wales District Court, pursuant to s.88 of the

New South Wales District Court Act 1973, that the unpald amount

of the judgment debt be paid by instalments of $60 per month,

the first payment to be made on or before 22 June, 1979. It

is to be presumed that a copy of this order was duly forwarded

to the judgment creditors. Under s.88 (5) of that Act, the

judgment creditors were entitled to file, within 14 days after

notice of the order was given or sent to them, a notlce of

objection to payment by those instalments. In the event that

such notice of objection had been glven, the debtor's applicat-

ion for payment by instalments would have been requlred to be

set down for determination by a judge of the Dlstrlct Court

(s.88(6) ) .

The judgment creditors failed to file any notice object-

ing to the Registrar's order for payment by instalments.

In the result, the Registrar's order remained in force and,

by virtue of the provisions of s.88(8) of the Dlstrlct Court Act,

operated, subject to an irrelevant exception, as a stay of

enforcement of the petltionlng creditors' judgment agalnst the

debtor.

On 13 June, 1979, the first payment of $60 was recelved

from the debtor in the District Court at Quirindi in accordance

with the order for payment by instalments. The evidence does

not disclose whether this amount had been passed on to the

judgment creditors by 16 June whlch was the last of the 21

days limited by the bankruptcy notice for compliance wlth its

terms.

The debtor duly complled wlth the terms of the order for payment by instalments in respect of the July and August payments. A petition seeking a sequestration order in respect

of the estate of the debtor issued on 12 September, 1979. The

petltion plainly credits the debtor with the payment of the

flrst and second instalments in that the amount of the alleged

indebtedness is $120 less than the amount which had been

specified in the bankruptcy notlce. It was served on the

debtor on 20 August, 1979. By that date, the debtor had made

five payments of $60 to the District Court at Quirlndi. One

of those payments, that due on or before 22 September, 1979,

was not received in the District Court until 26 September,

1979, that is, some four days after the due date.

It is not suggested on behalf of the petitioning

creditors that they were unaware of the terms of the order for

payment by instalments or that the payments made by the

debtor to the Distrlct Court at Quirindi were not duly passed

on to them or that, prlor to the service of the petition,

they did anything to inform the debtor of their unwillingness

to accept payment of the judgment debt by the instalments

ordered by the New South Wales Dlstrict Court.

Section 40(l)(g) of the Bankruptcy Act 1966 provldes

that a debtor commlts an act of bankruptcy:

" i f a c red i tor who has obtained against $ 7 ~ dzk tcr a ji'itaZ

judgment o r fittaZ order, being a J'udgmdnt 61' srddr Lhe executioit o f i~hiclz has not been stayed, has serzlad s n

t h e debtor . . . a bankruptcy ~ t c t i c e ilridsr t h i s Act"

and the debtor does not wlthin the relevant tlme, comply with

the requirements of the notice or satisfy the Court that he

has a counter-clalm,set-off or cross demand of a specified kind.

In my view that requirement that the execution of the ludgment

or order had not been stayed falls to be satisfied as at the

time of service of the bankruptcy notice (see re Dennls ex

parte Dennls (1888) 60 L.T. 348; re Bennett (1932) 5 A.B.C.

111 at p. 113; and re Moss; ex parte Tour Flnance Limlted

(1938) 13 F.L.R. 101 at pp. 103-104) . Section 41(3) (b) of

the Bankruptcy Act precludes the issue of a bankruptcy notice:

" i f , a t the time of the applzcation f a . i t s i s sue ,

execution o f the judsment	or order	t o ~ l h z e i ~	t
relates has been stayed."

There is, however, nothing in the provisions of the Bankruptcy a bankruptcy notice is based during the period between service of the notlce and expiry of the tune whlch is limited for compliance wlth its requirements. A stay of execution of a judgment after the issue of a bankruptcy notice based upon it does not in ltself either invalidate the bankruptcy notlce

or excuse compliance wlth the terms of the notice. Indeed, it

was not submitted on behalf of the debtor that the stay of

execution resulting from the order for payment by instalments

had the effect by ltself of either excuslng compliance with

or

the terms of the bankruptcy notice/of preventing the commission

of an act of bankruptcy. The argument advanced on behalf of

the debtor was that agreement between the petitioning creditors

and the debtor for compounding of the debt and acceptance of

payment by way of instalments was established by, or should

be inferred from, the evidence, and that, in all the circum-

stances, the making of this agreement prevented any failure to

comply with the terms of the bankruptcy notice or the commission

of any act of bankruptcy.

Putting to one side for the moment any question of

estoppel by conduct, the critical temporal reference point for

consideration of the debtor's argument is 16 June, 1979 which

was the last day limited by the bankruptcy notice for compliance

with its terms. If by the end of that day there was no agree-

ment between the debtor and the petitioning creditors as to

terms of repayment, it is conceded by the debtor that the

debtor, subject to any question of estoppel, committed an act

of bankruptcy. In support of the argument there was such an

agreement concluded on or before that day, the debtor pointed

to: (1) the suggestion by the unidentified female at the office made; (iv) the failure by the petitioning creditors to file notice of objection to payment by those instalments; (v) the failure by the petitioning creditors to indicate to the debtor their unwillingness to accept payment by these instalments; and of the petitioning creditors' solicitors that the debtor apply

to the District Court for an order to pay by instalments;

(ii) the application which the debtor made to the District

(vi) the payment by the debtor in accordance with the order

of the first instalment of $60 and the acceptance by the

petitioning creditors of that instalment.

The evidence does not establish that the petitioning

creditors were, on 16 June, 1979, aware that the first instal-

ment had been paid to the Dlstrict Court on 13 June, 1979 or

that, on or before 16 June, 1979, the moneys pald had been

passed on to them. Even I£ it be assumed against the petitloning

creditors that they had, on or before 16 June, 1979, accepted

the benefit of the first instalment, I am unable to flnd in

the evidence any proper basis for concluding that there was

an actual agreement between the petitioning credltors and the

debtor that the debt should be compounded or the payment of the

debt should be accepted by way of instalments. The statement step against the debtor if the terms of the bankruptcy notlce which they had caused to be served upon hlm were not complied

made by the unidentified female in the offlce of the petltionlng

credltors' solicltors was in my vlew no more than a plece of

gratuitous advice which could not properly be regarded as

constituting an offer or representation on behalf of the petition-

lng creditors that would add to the effect of any order for

payment by instalments which the debtor might obtaln from the

with. The fallure of the petitloning credltors to flle notlce

of objection to the order for payment by instalments dld not amount to any offer or representation by them that they would refrain from exerclsing rlghts which remalned unaffected by

the order for payment by instalments. The acceptance of the

$60, belng part of the debt owing to them, did not lnvolve any

that

offer or representation/they would refraln from exerclslng

their rlghts under the bankruptcy legislation in respect of the

outstanding balance of the debt.

Nor, in my view, is there a proper basis in the evidence

for holding that the petitioning creditors are estopped by

their conduct, before and subsequent to the time of expiry of

the bankruptcy notice, from denying that there was an agreement

between themselves and the debtor for the compounding of the

debt and acceptance of payment by instalments of $60 per month.

The petitioning creditors' delay in taking out the petition may

well have lulled the debtor into a false sense of security.

Once the conclusion is reached however, that whatever was said

to the debtor in the conversation with the unidentified female

in the petitioning creditors' solicitors office could not

properly be regarded as an offer or representation made on

behalf of the petitioning creditors. I am unable to see,

in the delay in taking out the petition or in the acceptance

of the payments that were made or in any other conduct of

the petitioning creditors, any representation which could

serve as the basis for an estoppel against the petitioning

creditors precluding them from denying they had reached any

agreement with the debtor which would give to the order for

payment by instalments any greater operation or result than

it would otherwise have. In those circumstances it is unnecess-

ary to consider whether an estoppel by conduct which operates

inter parties can in any event be relied upon to preclude on

the hearing of a bankruptcy petition between those parties the

commission of an act of bankruptcy being established.

In the result, I am satisfied that the debtor committed

the act of bankruptcy alleged in the petition.

The question now arlses whether in those circumstances

I should proceed to make a sequestration order in respect of

the debtor's estate or accede to the debtor's submlsslon that, in the event I should flnd against him on the issue of whether there was an available act of bankruptcy, I should grant an

adjournment to enable the debtor to attempt to extricate hlmself

from his present flnanclal predicament without being subjected

to the effect of a sequestration order. It is suggested on

behalf of the debtor that I grant an initlal adjournment of

two or three weeks.

Prima facie, the petitlonlng creditors are entltled to

the sequestration order whlch they seek. On the other hand,

there have to date been no adjournments of the petitlon and

neither the public lnterest nor the interests of the partles

are served by the maklng of a sequestration order in respect

of the estate of a debtor who may, given some Indulgences of circumstances whlch may well have been responsible for the present imminence of a sequestration order in respect of the debtor's estate. He applied for an order to pay by instalments in accordance wlth gratuitous and, no doubt, well-lntentioned advice given to him by someone in the office of the solicitors for the petitioning creditors. He no doubt believed that the order for payment by instalments removed the threat of bankruptcy proceedings for so long as he complied wlth the terms of the

time, be able to discharge or compound his liabilltles wlthout

the expense, inconvenience and, indeed, the ordeal of bankruptcy.

order. The petitlonlng creditors, by accepting the instalments

which he had made and permitting some three months to elapse

before presentation of the petition, helped conflrm him in

that mlstaken belief.

In all the clrcumstances I conslder the debtor should

be granted a reasonable adjournment of the petltlon to permlt

him to exhaust the posslbilitles of discharging the debt other

than through bankruptcy. I propose, initially, to adjourn the

further hearing of the petition for a perlod of some three

weeks. On the adjourned date, ~f the debtor wishes to apply

for a further adjournment, it will be necessary for hlm to

place some evidence as to hls assets and llabilitles before

the Court.