Re Mitchells Concrete Products Pty Ltd v Ex parte Towers, J.H

[1987] FCA 573

JUDGMENT No. 5 7.3/.h?, t ..

NOT FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )

)

GENERAL DIVISION	)
)
BANKRUPTCY DISTRICT OF	) No. P.622 of 1987
)

THE STATE OF	NEW SOUTH WALES AND	)
)

THE AUSTRALIAN CAPITAL TERRITORY )

RE :

JOHN HUNTER TOWERS

Debtor

EX PARTE:

MITCHELL'S CONCRETE PRODUCTS

PTY LIMITED

Petltloning Creditor

CORAM: WILCOX J

PLACE: SYDNEY

DATE : 1 SEPTEMBER 1987

MINUTES OF ORDER	, .	; +
I . 1 2 6*OCT 1987

-cglRToE

THE COURT ORDERS THAT:

1. The matter be stood over untll 9.30 a.m. on Thursday

3 September 1987.

2. The costs of today be reserved.

NOTE :

Settlement and entry of orders 1s dealt wlth in

Bankruptcy Rule 124.

NOT FOR GENERAL DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA )

GENERAL DIVISION

BANKRUPTCY DISTRICT OF

THE STATE OF NEW SOUTH WALES AND

THE AUSTRALIAN CAPITAL TERRITORY

RE :

JOHN HUNTER TOWERS

Debtor

EX PARTE:

MITCHELL'S CONCRETE PRODUCTS

PTY LIMITED

Petitioning Credltor

CORAM: WILCOX	J
PLACE: SYDNEY

DATE : 1 SEPTEMBER 1987

EXTEMPORE REASONS FOR JUDGMENT

This matter has been referred Into Court by the

Registrar because there is a contest between the parties as to whether there ought to be a further ad~ournment of the hearlng of the sequestratlon order. The bankruptcy petltion 1s dated

26 February 1987 and it appears from an affidavit of service which 1s on the flle that the petition was personally served

upon the debtor on 7 May 1987. The petltion discloses that

the petitioning credltor relies upon a ~udgment signed in the

4 2 .

Supreme Court of New South Wales on 11 October 1983. The

~udgment debt was apparently $55,931.50, but with accrued

interest the amount now clalmed by the Judgment credltor is

$85,685.47.

Apparently the debtor formed an intention of oppos~ng

the maklng of a sequestration order, but he took no steps to

flle a Notice of Opposltion prlor to the hearing of the

bankruptcy petition, as required by Rule 20 of the Bankruptcy

Rules. The matter came before the Court on 2 3 June when the debtor was represented and Indicated that he desired to flle a

Notice of Opposition. By consent, orders were made by the

Reglstrar requiring the debtor to file hls Notice of affidavits in support of his Notice of Opposltion within 21

days. The matter was stood over untll 4 August, upon the

assumptlon that, by that time, all	of the prellminary matters
would have been dealt with.

I am told by counsel that there was some

mlsunderstandlng between the legal representatlves of the

partles about the hearing on 4 August and, in the event, there

was no appearance on behalf of the debtor: but I attach no

criticism to that fact. What happened was that the matter was

stood over until 11 August, when the debtor was represented by

counsel. The Registrar was, on that occasion, agaln told that

there was a desire to oppose the petition and, apparently by

consent, or at least without active opposition, the Reglstrar

3 .

made a further directlon that the debtor file and serve both

the Notlce of Opposltlon and all affldavits upon whlch he

proposed to rely by 25 August 1987. Once agaln, upon the

basis that the matter would be in order on the next occaslon,

the matter was stood over until today.

I am informed by the solicitor for the petltlonlng

creditor that, as she understood, the matter would proceed to

a hearlng today and upon that assumptlon the son of the person

controlling the ~udgment creditor came down from Newcastle

with an appropriate affidavit of debt. Thls is perhaps a

small matter but it emphasizes the lateness of any notlce to

the petltloning credltor about the posslbllity of an

adjournment. It 1s conceivable that there may have been some

problem because of a telephone message not being passed on and

I do not dlstrlbute any blame. It 1s enough to say that, at a

date which 1s now almost four months after the servlce of the

petition and which is two months after the date upon whlch the

Notice of Opposition was supposed to be filed pursuant to the

first direction, the Court 1s asked to give to the debtor a

third opportunity of putting hls house in order.

Certain documents have been produced to me this

morning in order to indicate the nature of the defence to the petitlon which the debtor wishes to raise. It 1s conceded by hls counsel that these documents are not in order for filing. However, lt appears from them that the basis of the opposltlon

to the making of a sequestration order will be that the debtor

4 4.

is solvent and able to pay his debts. A number of affldavlts

have been shown to me which are lncomplete but which deal with

the debtor's financlal affairs. It appears that the debtor,

with hls wife, controls at least two proprletary companles

whlch carry on business and whlch possess certain assets.

According to a balance sheet made up as at 30 June 1986, one

of those companies, Quality Sand and Ceramlcs Pty Limited owes

to the debtor a sum of $79,794.59 on a loan account. Thls 1s shown on the balance sheet as a deferred llablllty, although the accountant says In his affldavit that in fact the money 1s

payable on demand, I accept what he says although I am

puzzled that, if thls was so, the same accountant should have

described the liability as being a deferred liablllty.

So far as I can see thls 1s the only asset of the

debtor revealed by the evldence as being held In his own name,

at least as to the legal estate. There is another asset, a

parcel of real estate upon which grazlng activitles are

undertaken, known as "The Ridge", in which it is sald that the land. It appears to be subject to a mortgage. Although 1t is possible that there 1s an equity in thls land held by the debtor which is sufflclent to pay off the present debt, it cannot be said that this emerges with any clarity from the materlal which has been produced.

debtor and his brother have a one half beneficlal Interest.

5 .

Mr Montgomery, on behalf of the debtor, does not

suggest that the material which he has been able to produce

debts, within the meaning of that phrase in s.52(2) of the	positively establishes that the debtor is able to pay hls information in these documents which ought to cause the Court
to believe that a case of ability to pay his debts might be
made by the debtor if given a further opportunity to do so .
It is inappropriate for me to attempt to reach any conclusions as to whether Mr Towers is able to pay his debts or not. I do
not have the material to enable this to be done, and what
material has been shown to me has not been able to be tested
in any way on behalf of the petitioning creditor.

I think it is possible that, given sufficient time,

Mr Towers could make out a case that he is able to pay his debts. But the question I have to decide IS whether it is lust, under all the circumstances, that he be given that

further time. In this regard I have to bear In mind the

history of the proceedings in this Court. No explanatlon

whatever has been given to the Court for the failure of the

debtor to comply with the directions given on the two earlier

occasions: indeed no explanation is given as to why the

debtor did not comply with the rules by filing a Notice of

Opposition prior to the return date of the petitlon.

The debtor is a man of business who has at all tlmes

been represented by solicitors and by his own accountant, who

has looked after his financial affairs for many years. It 1s

6.

difficult to avoid the conclusion that the debtor and those

acting on his behalf have treated with disdain both the rules

of the Court and the directlons whlch have been given. I

think that it is only ~n a case where a proper explanation has

been provided, or where there is reason to believe that a

serious injustice wlll be sustained, that the Court should

glve a thlrd opportunity to a person to file the approprlate

documents.	As I have sald, no explanation has been given ln
this case.

I have pressed counsel €or the debtor upon the second

question, namely the possibllity of in~ustice. He says that, although Mr Towers is able to pay the debt the sub~ect of the

petition, he has chosen not to do so because he has a dispute

wlth the principal of the credltor company, namely Mr Noel agreement made between companies controlled by the two gentlemen back in August 1981. As I understand the posltlon

the ~udgment debt arose out of a claim by Mitchell's Concrete

Products Pty Limited against Mr Towers on a guarantee of the performance by his company, then known as Ralnbow Sands Pty

Limited and now known as B A Mitchell Sands Pty Limited, in

respect of the purchase by that company of a buslness

conducted by Mitchell's Concrete Products. The Supreme Court

~udgment was obtained by default, and no applicatlon has ever

been made to set aside the default judgment notwithstanding

the lapse of almost four years since ~udgment was signed.

However, very recently, after the service of the bankruptcy

petition, an action was commenced in the Supreme Court of New

7.

South Wales by B A Mitchell Sands Pty Llmlted agalnst

Mitchell's Concrete Products Pty Limited and Mr Mltchell

alleging a breach by the two defendants of the agreement for

the sale of the business in August 1981. I say nothlng as to

whether this action has any merit; that wlll be a matter for

determlnation In the Supreme Court In due course. I have been

concerned as to whether there would be any effect upon the

ability of the plaintlff in that action to prosecute the

action on its merlts if a sequestration order were now made

against Mr Towers. I cannot see that this would be s o . The

supreme Court action 1s brought by a dlfferent plalntlff, that

is the company rather than Mr Towers. It may well be that Mr

Towers would be limlted in the control he could directly exercise in relation to the prosecution of those proceedings

by B A Mitchell Sands Pty Limlted as a result from belng

disquallfied as a director. But if he has control of that

company -- as I assume he has, given the embarkatlon on the

Supreme Court action -- one would have thought that other

directors would continue to carry out hls desires.

So far as I can see the making of a sequestratlon order wrll not affect the future course of the Supreme Court

actlon; but I must say that, lf I am wrong about that, lt is

not a matter which I would regard as necessarlly decisive. I

have to bear in mind that the Supreme Court actlon 1s brought

almost slx years after the contract was made and the flrst

alleged defaults occurred, and three and a half years after

judgment against Mr Towers was obtained without any defence or

other action being commenced at that time. If partles choose

8.

to slt upon their rights for many years I think that they

cannot complaln too strongly if, by some intervening event,

they flnd difficulty in prosecutlng an action at a later tune.

In my oprnlon there is no warrant for giving to the debtor a further opportunity to put on documentatlon, includlng a Notice of Oppositlon and affidavits In support. I thlnk that the sequestration order should be disposed of without further ado.

However, I have Inquired of Mr Montgomery whether, lf I took this view, his client would wlsh to have an

opportunity, which would have to be for a very short time

Indeed, to pay out the ~udgment debt rather than to suffer

bankruptcy. He has asked for this opportunity. The solicitor for the petitionlng creditor does not oppose thls course beinq taken, although it is falr to say that she, as lndeed counsel

for the debtor, has no express instructlons. If Mr Towers is

indeed in a position to pay out the judgment debt, it would

seem desirable that he be given the opportunity.

I am therefore prepared to adjourn the matter until

9.30 a.m. on Thursday, 3 September. I indicate that, lf by

that time the judgment debt is paid out, then I would be

prepared to dismlss the petitlon; lf not, I would propose to

make a sequestration order. I think, under the clrcumstances,

it would not be necessary that a further affldavit of debt be

provided, particularly as that involves somebody comlng down

from Newcastle for the event.

9.

S

6 I stand over the matter until 9.30 a.m. on Thursday 3

September 1987. I reserve the costs of today.

I certlfy that this and the eight (8)

preceding pages are a true copy of

the Reasons for Judgment of

his Honour Justice	Wilcox.
Associate:

Date: 9 October 1987

fippearance €or the Petitioning

Creditor:	MS Sally Nash, Solicitor
Solicitors for the Petitoning
Creditor:	Sally Nash & CO
Counsel for the Debtor:	Mr R E Montgomery

Solicitor for the Debtor: Mr Peter Kelso

Date(s) of hearing: 1 September 1987