Re Maxwell, Derryl Michael

I N THE

FEDERAL

COURT OF AUSTRALIA )

GENERAL	D I V I S I O N	)
1

BANKRUPTCY DISTRICT I N THE STATE	)
1
OF NEW SOUTH WALES AND THE	) )

AUSTRALIAN

C PITAL

TERRITORY

)

No.

W236 of

1 9 7 5

RE:	DERRYL MICHAEL MAXWELL

ORDER

Judge making order:	Beaumont, J.
Date of order:	21 July, 1983.

Where made

Sydney.

THE COURT ORDERS:

The

public

examination

o f the bankrupt shal

,l be deemed

to have been concluded on

17 July 1978.

I order the discharge of the

bankrupt.

The operation of the order of dlscharge shall

suspended for a

period of nlne months from thls

date.

IN THE FEDERAL COURT OF AUSTRALIA	)
1
GENERAL DIVISION	i
)

BANKRUPTCY DISTRICT IN	THE STATE	)
1

OF NEW SOUTH WALES AND THE

) )

AUSTRALIAN CAPITAL TERRITORY

)	No. W236 of 1975

RE:	DERRYL MICHBEL MAXWELL

CORUM:

BEAUMONT,

DATED

21 July, 1983.

REASONS FOR JUDGMENT

Derryl Michael Maxwell ("the bankrupt") has made an

appllcation for dlscharge from bankruptcy pursuant to

s.150 of

the Bankruptcy Act 1966 (Cth.) ("the Act"). No objection to

this applicatlon for discharge has been lodged by any creditors.

The Official Receiver does not oppose the application.

The estate of the bankrupt was sequestrated

on 18 June,

1975, upon the petition of a credltor, Orange Commonwealth

Employees Credit Union Limlted. The bankrupt would have been

discharged under the

provisions of s.149 of the

Act, before

its amendment In

1980, upon the explratlon

of flve years from

the date of the bankruptcy. On

5 June, 1980,

an oblection to

discharge from bankruptcy by force of s.149 of the Act was

lodged by the Official Receiver on the ground that "there

1 s

a deficlency in the estate in excess of $30,000.00." This

- 2 -

oblectlon prevented the bankrupt's "automat1c"discharge

from

bankruptcy In 1980 .

So far as concerns the deficiency of

$30,000 referred to ln the

ob~ectlon,

the bankrupt clalms

that a debt of

$24,924.00

was dlscharged by hls father under

a court order In

1 9 7 8 .

In his statement of affalrs the bankrupt revealed the

follomng assets:

"Balance of bank account at

Westpac Banking Corp. Ltd.

Camden

$4.50

Cash In

hand

90 .00

Freezer	$450.00
Less amount owing under
hire purchase agreement
to Avco Financial

Services Ltd.

580.00

Nl1

Deflclency

$130.00

$94.50

The freezer was repssessd

the finance company.

A total of $163.32 has been brought to the credlt

of he

estate account as follows:

- 3 -

“Deposlt on petltlon

$ 20.00

Refund of stamp duty	1.03
Balance bank account	2.29
Contrlbutlons - 1976 $70.00

1980

$70.00

140.00

$163.32

The bankrupt disclosed five unsecured creditors for

amounts totalllng $2,126.98. He also dlsclosed a hlre purchase

creditor, Avco

Fmancial Services Limited. Twelve creditors

have lodged claims in the estate of which eleven were admitted

to rank for divldend for amounts totalling $10,046.00. The

remaining proof of debt for $24,924.90 lodged by

W.M.

Malskaltis has not been admltted to rank for dividend. This

debt is in part supported by a guarantee from the

bankrupt’s

father, Keith Maxwell and on

14 December, 1978

Mr. and Mrs.

Malskaitis obtalned a Dlstrict Court judgment agalnst him

- for $19,304.10.

No dlvidend has been pald in this estate. Petltloning

creditor‘s costs have been estlmated at $300.00 and an amount

of $47.71 was paid on account of such costs.

A further amount

of $1,340.94 is required to meet the balance of the estlmated

petitionlng credltor’s costs, offlclal fees and costs of

administration.

The publlc examinatlon

of the bankrupt

was set down for

15 December, 1975, 17 February, 1976, 6 March, 1978, 31 Nay,

1978 and 17 July, 1978. The bankrupt falled to appear on

all

of these dates except for

1 7 February, 1976 .

On 20 July,

1 9 7 8 the Registrar In Bankruptcy Issued

a warrant for the

apprehenslon of the bankrupt, as he had failed to attend for

an examlnation under

s .69 of the Act which had been set down

for 1 7 July, 1 9 7 8 .

On 1 7 July, 1 9 7 8 ,

the examination was

ad~ourned

to a date to be fixed.

On 25 July, 1978 the bankrupt

was brought before the Registrar for examination under s.81.

On that date the examination was concluded.

The bankrupt is

a marrled man aged thlrty three years.

His wife, whom he marrled in

1 9 7 9 and two chlldren aged four

years and six months, are fully dependent upon him for support.

The bankrupt is required to pay maintenance of

$15.00 per week

for two children of a previous marriage.

H 1s presently em-

ployed as a

commission agent by the

A.M.P. Society and recelves

an average weekly commission of

$200.00. The income received

by the bankrupt is unclear because

of his failure to lodge

come tax returns. The last lncome tax return lodged by hlm was

for the year ended

30 June, 1973 .

The bankrupt has attributed

the cause

of his bankruptcy to his refusal to pay the loan to

the petitioning creditor.

The report of the Official Receiver dated

3 June, 1983,

deals comprehensively with the facts leadlng up to the

bankruptcy. In February,

1972 , the bankrupt acquired a Ford

sedan costing

$3,577.00 on hire purchase from Assoclated

Midland Corporation Ltd. In October,

1 9 7 2 the vehlcle was

repossessed as lnstalments were in arrears.

- 5 -

In July, 1 9 7 2 the bankrupt borrowed

$600.00 from the

Orange Commonwealth Employees Credlt Unlon Llmlted. The loan proceeds were used to purchase household furniture. In October,

1 9 7 2 this loan was reflnanced. An amount

of $1,365.23 was

borrowed. Of that sum, $665.23 was used to repay the flrst

loan and the balance of

$700.00 was used to purchase

1 9 6 9

Honda Sedan. In that same month, the bankrupt traded in the

Honda Sedan recently purchased for

$600.00 and acqulred a new

Ford Capri Sedan for

$3,880.00

by means of a hlre purchase

agreement wlth Esanda Llmlted. The bankrupt later declined to

pay instalments to the finance company as the dealer had

allegedly refused to flx a number of mechanical faults. The

vehicle was repossessed on 1 5 March, 1 9 7 4 .

In December, 1 9 7 2 the bankrupt's first wife left home,

taklng wlth her all the household items purchased with the

proceeds of the credit union loan. The bankrupt then decllned

to pay the instalments under the loan agreement, as he consldered

that his

wife, having possession

of the items, should pay at

least one half of the

mstalments payable.

Early In

1973 , the bankrupt

was transferred in his

employment as a telephone technician to the Camden Telephone time employment as a security guard and pursuant to such employment, obtained a flrearms licence.

On 5 October, 1 9 7 3 the bankrupt borrowed

$2,000.00 from

Communication Credit Unlon Llmlted.

He later resigned hls

- 6 -

employment wlth Telecom after dlsclpllnary actlon had been taken agalnst hlm for engaging In outside employment wlthout consent. Superannuatlon and long servlce leave moneys were

not refundedas part of the dlsclpllnary actlon,	It 1s clalmed
by the bankrupt.

From about October,

1973, the bankrupt carrled on

business under the name of "Southern Hlghlands Securlty Service".

The business provlded

a general type of security servlce to

clients and was conducted from the bankrupt's residence at guaranteed by the bankrupt's brother, Bllan Keith Maxwell. It

Campbelltown. Overdraft accommodatlon was provlded by the

appears that thls business continued

tradmg up to February

1978 when the registration

f the business name expired. On

1 October, 1979 the bankrupt's then de factor wife, Maureen

I Susan Lillis, became the registered proprietor	of the firm
name.

By an agreement dated

13 May, 1974, the bankrupt pur-

chased for $16,000.00 from Wolfgang Marius Malskaitis and Jill

Malskaitis the company structure, goodwill and equlpment of

a security service

busmess known as Camden Security Service

Pty. Limited. The bankrupt took no action to have hlmself

recorded as a director of Camden Securlty Servlce Pty. Llmited.

Its dlrectors were still recorded as W.M.

& J. Malskaitis.

The purchase price was to be financed as follows:

Deposlt - $7,000.00

To be borrowed from Alliance

Acceptance Ltd. Mr. and Mrs.

Malskaltis gave a mortgage over

thelr property at Camden as

securlty for the

loan. The bank-

rupt was to pay

che monthly mort-

gage Instalment of

$239.24 .

Balance - $9,000.00

Payable on or before

26 Aprll,

1 9 7 7 with interest of

1 2 % payable

monthly.

The transactlon was supported by a guarantee from the bankrupt's father, Keith Maxwell.

In a separate arrangement, the bankrupt agreed to pur-

chase an additional securlty business known as Plcton Securlty

Service plus a

pool table from

P 4 r . Malskaltls. Neither of these

transactions was supported by a guarantee from the bankrupt's

father. The bankrupt leased the business premlses

at 65

Broughton Street, Camden from Mr. and Mrs. Malskaitis for a

period of twelve months at a weekly rental of

$40.00. The company,'

Camden Security Service Pty. Limited and the buslness, Picton

Securlty Service, both appear to have contlnued trading untll

approximately September,

1975 .

On 18 December, 1 9 7 4 a Holden Station Sedan was acqulred on hlre purchase from Citicorp Ltd., in the name of Camden Security Service Pty. Llmited. The transaction was supported

by a personal guarantee from the bankrupt. In October, 1 9 7 5 ,

the

vehlcle was repossessed wlth the

loss on sale amounting

$827.00.

The bankrupt could not honour the personal guarantee

when called upon to do

so.

In February, 1975 the bankrupt was evicted from business

premises leased from Mr. and Mrs. Malskaltis. On 17 February, 1975 he leased premlses at 109 Argyle Street, Camden from

Peppertree Propertles Pty. Llmlted for

a period of slx months

at a weekly rental of $35.00. The bankrupt used these premises

as both a resldence and

busmess premises for Southern Highlands

Securlty Service and Camden Security Service Pty. Llmlted. The bankrupt was evicted from these premlses in June, 1975 and moved to new premises at Narellan. Whilst trading from premises

_ ,

at 109 Argyle Street, Camden the bankrupt became lndebted to the

Shell 011 Company of Australia Limited for $820.00. The debt

was incurred in the name of Southern Hlghlands Securlty Servlce.

In September, 1975, both Camden Security Service Pty. Limited and Picton Security Service ceased tradlng. The bank-

rupt cannot recall detalls

of the company's flnanclal positlon

at the tlme

It ceased tradlng. He has not indicated what became

of the company assets. On 22 December, 1978 Camden Security Service Pty. Limited was struck off the register of companies. The bankrupt still contlnued to trade as Southern Highlands

Security Servlce.

On 12 September, 1975 the bankrupt's brother, Allan Kelth

Maxwell became the registered proprletor of Cash Security and security servlce and traded from the bankrupt's residence at Narellan. The business was managed by the bankrupt for approx- imately three years. He endeavoured to dlvldehls time equally

- 9 -

between his brother's business and that of hls own whlch stlll

traded as Southern Hlghlands Securlty Servlce.

On 1 January, 1977 the bankrupt's second wlfe, Delma

Maxwell, whom he divorced in 1979, became a reglstered proprletor

of Cash Securlty and Protectlon Service wlth Bllan Kelth Maxwell.

At hls public examlnatlon on 25 July,

1978, the bankrupt stated

that his former wife dld not take up any part In the business

following breakdown of

thelr marriage. The registratlon of the

firm name was cancelled

on 21 May, 1979.

On 22 May, 1978 the bankrupt was convlcted

on four

changes relating to cheques which were not met on presentation. was dismissed but without proceeding to a conviction. The bankrupt was dlscharged under s.5568 of the Crimes Act upon

entering into a bond of

$300.00 to be of good beha&.our for a

period of three years	and to appear to receive sentence if
called upon.

Southern Highlands Securlty Servlce ceased buslness

durlng February, 1978. The bankrupt's then de facto

wlfe,

Maureen Susan Lillis, whom he marrled in 1979, subsequently established three businesses, the nature of each belng Identical to those formerly conducted by the bankrupt. The businesses

were Cash Security Services registered on

1 November, 1978;

Cash Security Couriers reglstered on

11 May, 1979 and Southern

Hlghlands Security Servlce reglstered on

1 October, 1979. The

- 10 -

bankrupt obtalned a number of loans either in his own name

or jolntly with his de facto

wlfe, to provlde some worklng

capital for these buslnesses. He dld not dlsclose hls bank-

ruptcy at the time such loans were obtalned and was later con-

victed on a number of charges

relatmg to these loans. The

bankrupt was the sole employee of each buslness which ceased

tradmg during 1979 and 1980. The bankrupt was nnemployed

until November, 1980.

On 25 November,

1980, the bankrupt was sentenced in the

Dlstrict Court (Criminal and Special Jurlsdiction) at Sydney

to twelve months imprlsonment following his convlctlon on each

of ten charges under the Act and one charge under the Crimes

Act.	The sentences were to be served concurrently commenclng

from 25 May, 1980. Following his release from prison in employed at various periods as an insurance agent.

The Offlcial Receiver in his report states that the

conduct of the bankrupt since the date of his bankruptcy, has

been unsatlsfacory. He points to the bankrupt's failure to

attend for examination under s.81 of the Act on

17 July, 1978

and his subsequent apprehension pursuant to a warrant issued

by the Registrar in Bankruptcy. More Importantly, he provldes

detalls of offences. The bankrupt's conviction under the

Crimes Act related to a cheque for $250.00 whlch

was not met

on presentation and the ten charges under s.269(a) of the Act

involved obtaining credit to the extent

of $200.00 or more

without first

informing the creditors concerned that he was an

- 11 -

undlscharged	bankrupt.	Dezalls	of	these	ten	offences	are	as
fol lows:

Between 3 June,

1 9 7 7 and 14 October,

1 9 7 7 a t Sydney,

t h e

sum

of $923.48 obtalned

from Natlonal

Bank

Aus t r a l a s l a

Llmlted,

Bankcard

Department.

August, 1978,

~ o i n t l y w l t h Maureen

Susan

Maxwell

(nee L i l l i s ) , c r e d l t o f

$ 2 , 0 0 0 . 0 0

obtained from the

Commerclal Banking

Company of

Sydney.

Between 1 6 October, 1978 and 26 January,

1 9 7 9 a t Sydney,

c r e d i t o b t a i n e d i n t h e

sum

of $1,551.47

from

t h e

Commonwealth

Trading

Bank

of Aus t ra l ia .

4 .

January,

1 9 7 9 ,

~ o l n t l y w i t h Maureen

Susan

L l l l i s and

Allan Keith Maxwell , obtained credit

i n

t h e

sum

$5,147.83

from

C.B.F.C.

Limited Sydney.

Apr i l ,

1 9 7 9 a t Orange, obtained credi t

i n t h e

sum

$ 1 , 2 0 0 . 0 0

from

the Na t lona l

Bank

Aus t r a l a s i a .

6 .

30 Apr i l ,

1 9 7 9 ,

~ o i n t l y w l t h Maureen

Susan L i l l l s ,

ob-

t a i n e d c r e d i t i n t h e

sum

of $1,460.87

from

t h e

Commonwealth Trading Bank

Aus t r a l l a .

7 .

May,

1 9 7 9 ,

c r e d i t c b t a l n e d I n t h e

sum

$ 1 , 0 0 0 . 0 0

from t h e Bank

N e w South Wales.

- 12 -

8 . 4 May, 1979 credlt obtalned In the sum of $1,250.23 from the Commonwealth Tradlng Bank.

9. Between

19 September, 1979 and 2 3 November, 1979 obtalned

credit in the sum of $2,415.72 from	Australia and New
Zealand Bankmg Group Limited.

10.

October, 1979 obtained credlt to extent of $350.00 from

Bank of New South Wales, Bankcard Department.

Sub-sectlons ( 5 ) and (7) of

s.150 of the Act are the rel-

evant source

of power to grant a dlscharge. Sub-sectlon (5)

requires the court, if any of the matters specified ln sub- section (6) is establlshed, to refuse to make an order of discharge or to make an order of dlscharge but suspend its

operation, as the court thlnks proper, either uncondltionally

or subject to conditions. Sub-section (7) prevencs the court

under sub-section

( 5 ) , from suspending the operation of an order

of discharge subject to condltlons that require or have the

effect of requiring the bankrupt to make payments from hls income

at any time after the expiratlon	of five years commenclng on the
date of the bankruptcy.

One of the matters specified in sub-section

( 6 ) of s.150

is establlshed in the present

case, namely s.150(6)(1), "that

the bankrupt has been convicted of an offence agalnst thls Act

or the repealed Act or of any other offence related to his

bankruptcy". Hence, the power

of the court in this applicatlon

is confined by the terms of sub-sectlons

( 5 ) and

( 7 ) .

- 13 -

In conslderlng whether the bankrupt should recelve

dlscharge, it has been lald down repeatedly that the court must

have regard not only to che Interests of the bankrupt and hls

credltors, but also to the lnterests of the publlc and

commerclal morallty; see Re Halnes (1937) 10 A.B.C.

87;

Re Gray (1960) 10 A.B.C. 29; Re Trautwein (1950) 15 A.B.C.

119. In the exerclse of its dlscretlon, the court must also

conslder the conduct of the bankrupt relevant to his bankruptcy.

In this case, there are arrayed agalnst the bankrupt's

appllcation for dlscharge, hls convlctlonsfor offences under

the Act and the Crlmes Act. As detailed earlier, these offences

are numerous and were committed between

June, 1977 and October,

1979. In Re George Dennis (1909) 26 W.N.

(NSW)

123, Salisbury,

J. held that where a bankrupt obtains credit without first

informing the creditor that he

is a bankrupt, the offence

should be regarded as one of the more serious of those mentioned

in s.40 of the Bankruptcy Act, 1898 saying (at p.124):

"To my mind thls offence is one of the more serious

those set out In

s.40.

The bankruptcy law long laboured

under the stigma that

I provided no means for

compelling

uncertified bankrupts to dlsclose their posltion when

obtaining credit, but allowed them by adoptlng some such

expedient as moving to a dlstrict where they and

then

history were unknown, to start trading afresh on the

credit given by a new body of creditors until they were

agaln compelled to seek relief from the court. The Act

60 Vict. No. 29 attempted by the enactment whlch now

1 s

known as sub-sectlon (r) of section

4 0 of the Bankruptcy

Act 1898 to reform this abuse. All that the enactment does, however, 1 s to make the fallure on the part of an uncertlfled bankrupt to dlsclose the fact of hls bank- ruptcy when obtaining credit a ground for refuslng or suspendlng an order of dlscharge In a subsequent

bankruptcy.

- 14 -

In Re Charles James Flemlnq (1922)

3 S.R. NSW 169 at

173, Street, C.J. took a slmllar vleyw.

However, it must be remembered that the bankrupt has

suffered the punlshment lmposed by the Dlstrlct Court for the

offences concerned. Since his release from prlson in Septmeber,

1981, the bankrupt has been elther unemployed or employed at

varlous periods as an insurance agent.

He is presently employed

as an insurance agent. The Official Recelver reports that the

bankrupt did not keep any books of account or records for any

business venture in which he was engaged prlor

to his bankruptcy.

However, he notes that the failure

of the bankrupt not to maintain

adequate records did not hamper the trustee in the admlnlstration

of his estate.

In Re Gray (1960) 19

A.B.C. 29, Clyne,

J. sald (at p.31):

"Upon such an application for discharge, the court has a wide

discretion. It may grant an unconditional discharge.

certain events it may either refuse

or suspend a drscharge.

'After all, the overriding

mtention of the Legislative in

all Bankruptcy Acts is that the debtor on glving up the whole of his property shall be a free man again, able to earn his livellhood and havlng the ordinary inducements

to industry. Sometlmes it is not rlght that the bankrupt

should be free immediately, he must pass through a period

of probatlon and theoretlcally there may be cases

in whlch

he ought not be free at all'. (Re Gaskell 119041

2 K.B.

478 at p.482).

Some cases are plalnly not theoretical."

In my

view, It would be appropriate to grant a discharge to

this applicant, but having regard to hls unsatlsfactory

commercial

dealings and his convictlons for offences under the Crlmes Act and

the Bankruptcy

Act, I propseto order that the order of discharge

be suspended for a perlod of nine months.

- 15 -

I order that the

publlc examlnatlon of the bankrupt shall

be deemed to have been concluded on 17 July, 1978.

I order

the discharge of the

bankrupt.

I further order that the oper-

atlon of the order of dlscharge be suspended for a

period of

nine months from this

date.

I certlfy that tha8 8nd the I?

arecedlngpagesareatrue copyofthe

Reasons for Judgment herein of his Honour t

I Mr. Justice B

[LaLunprJr

Associate

[1983] FCA 151

21 Jul 1983