Re McArthur, E.H.

[1993] FCA 454

54 1993

JUDGMENT No. .... 4 ........ ..l ..,.,.,.

IN THE FEDERAL COURT OF AUSTRALIA	1	No. QB 1061 of 1991
GENERAL DIVISION	1
BANKRUPTCY DISTRICT OF	1
THE STATE OF OUEENSLAND	1

RE :  ELIZABETH HELEN McARTHUR and
JOHN SCOTT McARTHUR

EX PARTE: COOPER BROWN PTY. LTD.

MINUTES OF ORDER

JUDGE MAKING ORDER:	Drummond
DATE OF ORDER:	24 June, 1993
WHERE MADE:	Brisbane
THE COURT ORDERS THAT:

1.        The bankruptcies are annulled.

2.        The respondent/petitioning creditor pay the applicants' costs of and incidental to the application to be taxed.

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3.        The applicants pay the respondent/petitioning creditor's costs of and incidental to the petition up to 22 April, 1993, to be taxed.

NOTE :	Settlement and entry of orders is dealt with in Rule
124 of the Bankru~tcv  Rules.

IN THE FEDERAL COURT OF AUSTRALIA	1	No. QB 1061 of 1991
GENERAL DIVISION	1
BANKRUPTCY DISTRICT OF	1
THE STATE OF OUEENSLAND	1

RE:  ELIZABETH HELEN McARTHUR and
JOHN SCOTT McARTHUR

EX PARTE: COOPER BROWN PTY. LTD.

CORAM:	Drummond J
PLACE :	Brisbane
W:	24 June, 1993

EX TEMPORE REASONS FOR JUDGMENT

In this matter, the bankrupts apply for an annulment of the bankruptcy on the ground that the sequestration order ought not to have been made.

The petition was founded upon non-payment of a judgment debt of almost $1,600.00. There is evidence from the

bankrupts that by 22 April last, a compromise agreement had been entered into with the petitioning creditor. The male bankrupt says that the terms of this compromise agreement were as follows: firstly, that he would pay the full amount of the judgment debt in the sum of $1,599.50 by 7 May, 1993 and, secondly, that he would pay costs agreed in the sum of $1,200.00 within two to three weeks after payment of the debt, but not until he had received a breakdown of those costs from the solicitors for the petitioning creditor.

The creditor accepts that a compromise agreement was then made and that a total of $2,800.00 would be paid, but it appears, from what its solicitor said in his letter of 28 April, 1993, that the terms the creditor says were agreed were significantly different from those which the debtor contends were agreed. The evidence as to what the creditor asserts was the agreed compromise is very brief. The respondent creditor has not chosen to dispute what the debtor says were the terms of this compromise agreement, other than by putting before me, without further explanation, the letter of 28 April last from its solicitor and the letter from its solicitor of 21 May last.

I do not think the two matters on which the creditor
relies to throw doubt on the bankrupt's credit, one of which

in any event was really acknowledged as being ineffectual to

the position appears to be in relation to the ownership of the	do that, are of any significance, particularly in view of what
house that the bankrupt referred to. NO one, before me, sought to resolve the dispute as to just what the terms of the compromise agreement were by a cross-examination of the persons involved. I therefore accept the bankrupt's evidence as to the terms of that compromise.
There is evidence from the debtor, in exhibit "JSMl", that indicates that $800.00 was paid on 22 April, 1993 and received by the creditor's solicitor, being tendered by the debtor in part payment of the judgment debt and, in part, performance of a compromise agreement set up by the debtor. Given what ' I have found to .be 'the terms of the compromise agreement, it was not open to the creditor to accept that payment on any other basis than that.
The evidence is clear, in my view, that this particular tender of payment was accepted by the creditor:
see exhibit "Ml" . Moreover, in its solicitor's letter of 25
May, 1993, this $800.00, plus a further $800.00 later paid by the bankrupt to the creditor's solicitor, is described as being "paid on account of the judgment debt." The creditor's submission was that the receipt of the $800.00 was a conditional receipt only, conditional upon performance by the debtor of all obligations under the compromise agreement, and that it is for this reason that it was open, as it sought to
do, to reject the tender and receipt of the $800.00 paid on 22
April, 1993 later on.
In exhibit "A" to the affidavit of Mr. Ffrench, the creditor's solicitor, which is Mr. Ffrench's letter of 28 April, 1993 to the bankrupts, the solicitor said:

"You have not complied with the settlement which was agreed with our Mr Ffrench. ... On the basis of your breach of the terms of settlement, our client will be proceeding to sequestration and we advise that the matter has been adjourned to 6 May 1993."

On 3 June, the creditor's solicitor says that, on the hearing of the creditor's petition, he informed the District Registrar who was hearing the matter that he held two cheques, saying:

"I held two cheques in the total sum of $1600.00 and that the Petitioning Creditor did not accept those cheques in satisfaction of its debt. I further informed the Registrar that I would recommend to the Petitioning Creditor that the two cheques be handed to the Debtors' Trustee in Bankruptcy."

There is no evidence that the debtor breached the terms of the compromise agreement I have accepted was made, apart from the assertions by the creditor's solicitor in the correspondence before me to that effect. I am not prepared to accept that as requiring a finding to be made that the agreement was terminated by the creditor after a breach by the debtor. That the debtor was prepared to offer payments

additional to those covered by the compromise to stave off the

sequestration order which the creditor was insisting on

seeking does not, I think, justify a conclusion that he accepted that the original compromise was at an end. The creditor cannot ignore the significance of its receipt of the initial $800.00. It was on the basis of a view that it could do that, that Mr. Cooper, the officer of the creditor who swore the affidavit of debt that was used when the sequestration order was made, swore that the creditor had --- -

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never received any payment, either in whole or in part, in
respect of the judgment debt.

I should say that it appears to me that the full position was not disclosed to the court when the sequestration order was sought. I have already referred to what the creditor's solicitor says he told the court about holding two cheques. It appears to me that went no further than creating the impression that the solicitor for the creditor then held two cheques from the debtors, when in truth that cannot be the case, given that at least the initial cheque paid over on 22 April by the bankrupts had been accepted, received, and banked on behalf of the creditor.

Moreover, there is no suggestion in what the solicitor says that any reference was made to the court of the existence of a compromise agreement under which the $800.00 was paid in part satisfaction of the judgment debt.

The Official Trustee has filed his report but has made no submissions. Notwithstanding what he says in the last page of his report to the effect that, if a statement of affairs were lodged, it might reveal additional creditors, there is no evidence to suggest that the debtor is other than solvent, as he says is the case, or even that he has any other creditors of any significance, apart from the petitioning creditor.

If the true facts had been disclosed to the court, namely that $800.00 of the $1,600.00 debt had been tendered in part payment of that debt and accepted in circumstances in which the payment partially satisfied the judgment debt, the court would have seen that it was without jurisdiction to make the sequestration order in view of ss. 52(1) (A) and 44(1) of the Bankruptcv Act. In view of the fact that the petition was founded on non-payment of the judgment debt of $1,600.00, I therefore propose to make an order annulling the bankruptcy.

I' will make an order, which is not opposed by the applicant, that the applicants pay the petitioning creditor's costs of and incidental to proceedings on the petition, up to

22 April 1993 to be taxed.

I note the undertaking of the Official Trustee to refund the $1,600.00 to the solicitors for the respondent to this application and I will note also that there is no opposition raised to that course by the applicants.

I certify that this and the preceding

five pages are a true copy of the
reasons for judgment herein of the

Honourable Mr. Justice Drummond.

Associate:

'A/ / -

Date :  24 June, 1993