Re Mottee, Jack Peter ex Parte Mottee, Gloria Ann

[1977] FCA 20

.

I I N 'THE FEDEXqL COVET OF BAKRRUPTCY )

I IJANKXIPTCY DISTRICT OF T I E STATE @F I - No. N.S.W. 532 of 1975

NEW SOUTH WALES AXD THE ~~JSTRALIIAX ) -

CAPITAL TERRITORY	1
)

RE : JACK PETZR MOTTEE --

EX PARTE: GLORIA ANN MOTTZE, Appij c a n t

THE OFFICIAL RECEIVER,

Kesp6ndent .

REASOKS FOR JUCGYENT

R i l cy J.

_- 18 Xay 1 9 7 7

T h i s i s an a p p l i c a t i o n b y Gloria Ann N o t t e e , t h e

fonner w i f e of the bankrup t J ack Peter Kot tee who on h i s own

1 p e t i t i o n became bankrupt pursuant to S. 55 of the Eankruptcy

A c t 1 9 6 6 on 1 9 December 1975. Though dated 3 June 1976, the

a p p l i c a t i o n was i n fac t f i l e d on 2 June 1 9 7 6 . It is oppose2

by t h e O f f i c i a l Receiver, t h e t r u s t e e of t h e b a n k r u p t ' s e s t a t e .

As amended b y l e a v e , t h e a p p l i c a t i o n s e e k s :

(1) a n o r d e r t h a t t h e b a n k r u p t c y b e a n n u l l e d , o n t h e

ground t h a t t h e p e t i t i o n p r e s e n t e d by the bankrup t

ough t no t t o have been p resen ted ;

( 2 ) o r , a l t e r n a t i v e l y , a d e c l a r a t i o n t h a t

(a) t h e p r o p e r t y of the bankrup t does no t Lx lu i ! c

t h e sum of $15,000 which sum i s p o r t i o n of

t h e moneys r e a l i s e d or brouyht t o c r e h t i n

t h e es ta te f rom the sale o f t h e f o r r e r

m a t r i n n n i a l home kncwn a s 7 \Toodi?arZ F l a c e ,

S t . Ivcs, t o q e t h c r w i t h i n t e r e s t t h e r e o n

c a l c c l z t c ? e t t h e r a t e of 1 2 % p e r xm: fro!.;

2 A p i l 1 9 7 6 ; o r

-2-

( b ) t h e Off ic ia l Receiver as t ru s t ee o f t h e es ta te

of t h e b a n k r u p t s h a l l b e a t l i b e r t y t o pay

t o t h e a p p l i c a n t t h e s a i d sum of $15,000

t o g e t h e r w i t h i n t e r e s t t h e r e o n c a l c u l a t e d a t

t h e rate of 1 2 % p e r annum from 2 Apri l 1976

u n t i l date of payment;

(3) an o r d e r for c o s t s .

Mr. and Mrs. Mottee were mar r i ed in 1959 and l ived

together u n t i l 1 9 7 3 when M r . Mottee l e f t h i s wife. A t t h a t t ine

they were l i v i n g i n t h e matrimonial home 7 Woodward Place,

St. Ives, near Sydney. T i t l e t o the house was r e g i s t e r e d i n

their j o i n t names.

:I On 4 Apri l 1974 Mrs. Mottee p r e s e n t e d a p e t i t i o n t o

the Fami ly Law Divis ion of the Supreme Cour t o f New South Wales

i n w h i c h s h e s o u g h t d i s s o l u t i o n o f t h e m a r r i a g e on the ground of

: t

a d u l t e r y . She alsc sought i n t e r a l i a o r d e r s f o r m a i n t e n a n c e

and, as t o t h e former mat r imonia l home, o r d e r s t h a t M r . Mottee

t r a n s f e r t o h e r h i s o n e h a l f i n t e r e s t i n it, s u b j e c t t o an

e x i s t i n g mortgage, and make the repayments under the mortgage

to the mortgagee. The par t ies appa ren t ly conduc ted t he p roceed l r

i n a l e i s u r e l y manner u n t i l i n J u n e 1 9 7 5 , p a y m e n t s u n d e r t h e

m o r t g a g e h a v i n g f a l l e n i n t o arrears, the mor tgagee th rea t ened t o

enter i n t o possess ion and s e l l the ma t r imon ia l home. The

p e t i t i o n e r t h e r e u p o n a p p l i e d for an exped i t ed hea r ing . On 8

December 1975 the Cour t f i xed a l a t e r d a t e f o r t h e h e a r i r . g o f

t h e cause, and a l s o made o r d e r s a s t o the mat r imonia l hone .

The h u s b a n d ' s s o l i c i t o r h a d a s k e d f o r a n o r d c r t h a t t h e h o x e - .

be so ld and t r u s t pend ing tha t t he husband ' s sha re o f t he p roceeds r ema in in

t he hea r ing of t h e s u i t . B e c a u s e t h e w i f e ' s

, i s h a r e w o u l d b e i n s u f f i c i e n t t o e n a b l e h e r t o buy a home f o r

I - 3-

h e r s e l f a n d t h e c h i l d r e n of the mar r i age , and i n o r d e r t o avolcl

h e r c a p i t a l b e i n g w a s t e d i n r e n t , and h e r r e t e n t i o n of i t , i f

not invested i n a home, j e o p a r d i z i n g h e r p e n s i o n r i g h t s , t h e

Court made t h e f o l l o w i n g o r d e r s :

"(a) The P e t i t i o n e r i s he reby appo in ted the agen t o f

t h e R e s p o n d e n t f o r t h e p u r p o s e o f s e l l l n g t h e

s a i d p r o p e r t y a n d the Respondent i s hereby

d i r e c t e d , a t t h e r e q u e s t o f t h e P e c i t i o n e r , t o

execute a l l c o n t r a c t s , i n s t r u m e n t s a n d t r a n s f e r s

t o give e f f e c t t o a sale o f t h e s a i d p r o p e r t y a s

n e g o t i a t e d by the P e t i t i o n e r , a n d t h e P e t i t i o n c r

i s f u r t h e r h e r e b y a p p o i n t e d t o execu te any con t r ac t

i n s t r u m e n t s o r t r a n s f e r s i n t h e name of t h e

Respondent and t o d o a l l t h i n q s n e c e s s a r y t c a i v e

v a l i d i t y a n d o p e r a t l o n t o t h e sale a n d t r a n s f e r of

t h e s a i d p r o p e r t y .

(b) Upon complet ion of any sale as a f o r e s a i d o r o f any

sale nego t l a t ed by a g r e e p e n t o f t h e P e t i t l o n e r a d

the Respondent and a f t e r p a y i n g a l l mortgages,

e n c u r b r a n c e s a n d c h a r g e s i n r e s p e c t o f t h e s a i d

p r o p e r t y t h e P e t i t i o n e r j s orde red t o c a u s e t h e

n e t proceeds of sale t o b e r e t a i n e d i n h e r

s o l i c i t o r ' s t r u s t a c c o u n t	and	t o use	t h e	same
o n l y a s h e r e i n a f t e r o r d e r e d .

(c) The P e t i t i o n e r i s h e r e b y d i r e c t e d t o e n t e r i n t o a n

agreement t o purchase a home f o r t h e o c c u p a t i o r . of

h e r s e l f a n d t h e c h i l d r e n o f t h e m a r r i a g e w i t h l n

t h e Sydney Ketropol i tan Area, a t a p r l ce wh lch will

enable the purchase to be coFple ted and a l l ccsts

d u t i e s a n d e x p e n s e s t h e r e f o r p a i d o u t of t h e

moneys h e l d i n h e r s o l i c l t o r ' s t r u s t a c c o u n t i n

accordance wi th o rder (b) above . For the purporc

of the purchase hereby d i rec ted and not o thcrw:se ,

t h e P e t i t i o n e r i s a u t h o r i s e d t o u s e t h e s a i d money:

(d) Khen t h e home i s purchased by t h e P e t i t i o n e r , as

h e r e i n b e f o r c d i r e c t e d s h e 1s o r d e r e d n o t t o sell,

mortgage, encuxber , lease or otherwise d e a l w i th

t h e s a i d p r o p e r t y , b u t t o h o l d t h e same t o a b i d e

t h e f u r t h e r o r d e r o f t he Court .

(e) The home so purchased by t h e P e t i t i o n e r i s t o be

t r e a t e d as t h e p r o p e r t y c l a m e d b y t h e P e t i t i o n e r

and Respondent, as t h e s u b ~ c c t of orders soGght

under Sec t ion 86 of the Matr i r ronial Causes Act,

i n l i e u o f t h e p r o p e r t y 7 1:oodward P l a c e , S t . Ives.

and what i s - ju s t and equ l t ab le in t h e circL7rrstaI<-e-

of t h e case i s t o be ad -~udgcd r ega rd lc s s of

i ' t h e sale of t h z t p r o p e r t y an6 t h c purchase of a

! I d i f f e r e n t home as f i i r c c t e d b y t h e s c o r 2 e r s .

( f ) The P e t i t i o n e r i s o r d e r e d t o q i v e n o t i c e of any

proposed sale o f t h e p r o p c r t y 7 Koodward Place,

S t . I ves , and t o fort:ard a copy of t h e propo:>.ld

l

-4-

c o n t r a c t o f sale t o t h e R e s p o n d e n t ' s s o l i c i t o r s

72 hours before exchang ing con t r ac t s w i th a

proposed purchaser .

( g ) The proposed purchase P e t i t i o n e r is o r d e r e d t o g i v e n o t i c e of any

of a home and t o forward a

copy of t h e p r o p o s e d c o n t r a c t o f p u r c h a s e t o the

R e s p o n d e n t ' s S o l i c i t o r s 52 hours be fo re

exchang ing con t r ac t s w i t h a proposed vendor.

( h ) T h e p a r t i e s are g r a n t e d l i b e r t y t o a p p l y i n

r e l a t i o n t o t h e s e o r d e r s . "

An a p p e a l a g a i n s t those o r d e r s was lodged and A s t a y

of proceedings was sought by t h e husband, but t h e s t a y was

r e f u s e d on or abou t 1 6 Decexrber 1975; and on 18 December t h e

'I husband p re sen ted h i s own p e t i t i o n i n b a n k r u p t c y . I t was

g	accepted, and the husband	the re fo re	became	a	bankrupt , on
l,
1 9 December.

The s t a t emen t o f a f f a i r s accompany ing the d e b t o r ' s

p e t i t i o n p r e s e n t e d i n p u r p o r t e d c o m p l i a n c e w i t h S . 55 o f t h e

I ;

Bankruptcy Act was n o t s t r i c t l y i n a c c o r d a n c e , as t h e s e c t i o n

i	i
i r e q u i r e s , w i t h t h e p r e s c r i b e d f o r m , w h i c h by R u l e 24 (c ) i s

Form 11 on ly a debt of "approx. i n t h e First S c h e d u l e t o the Rules . P a r t 111 shows

$28,000" secured on a p r o p e r t y t h e v a l u e

i

!

of which s u r p l u s of i s e s t i m a t e d a t $86 ,000 , ye t a l so shows an e s t i r r a t ed

$55,000. Par t I (Summary), on the other hand, shoxs

i n t e r a l i a t h e "amount by which t h e s e c u r e d d e b t s d u e t o

c r e d i t o r s are less t h a n t h e v a l u e of t h e s c c u r i t i c s a c c o r d i n g

t o P a r t 111" as $6,500 approx.", and i s not comple ted . The

f a i l u r e o f t h e statement of a f f a i r s t o a c c o r d w i t h t h e p r e s c r i b c c

form is n o t so s e r i o u s as t o r e q u i r e a n n u l m n t of t h e bar.kruFLcy

if annulment were s o u g h t o n t h e g r o u n d t h a t t h e p e t i t i o n o u g h t

:I

l n o t t o have been accep ted , bu t i n my view t h e p e t i t i o n arid

l s t a t emen t o f a f f a i r s shou ld no t have been accep ted wi thoc t t h e

l a t t e r be ing co r rec t ed . . Sec t ion 55 g o e s t o s o m p a i n s t o

s t a t e t h e r e q u i r e m e n t t h a t the p e t i t i o n end t h c s t a t e m e n t of

-5-

af fa i r s s h a l l e a c h b e i n t h e p r e s c r i b e d form, and it is o n l y if

they bo th appea r t o t h e R e g i s t r a r t o b e so t h a t a c c e p t a n c e a n d

consequent ly bankruptcy nay fo l low.

1 l Had it b e e n c o r r e c t e d t h e statement of a f f a i r s would

have shown u n s e c u r e d c r e d i t o r s f o r a m o u n t s t o t a l l i n g $ 2 0 , 9 4 0 ,

and t h e f o l l o w i n g assets:

Household property 7 Woodwarc? Place 86,000

Less: amount owing	under	mortgage	28,000
58 , 000

Less: wife's one-ha l f 29 ,000 share 29 , 0

fu rn i tu re Househo ld 5 ,000

I

l Other assets --_- 68

$34,066

The mat r imonia l home 7 Woodward P lace was not sold

p u r s u a n t t o t h e o r d e r o f 8 December. On 2 6 February 1976 t h e

f irst m e e t i n g o f t h e b a n k r u p t ' s c r e d i t o r s a u t h c r i z e d t h e

Off ic ia l Receiver t o j o i n w i t h Krs. Mottec i n a c c e p t i n g an o f f e r

of $85,000 for it. After payment of the amount due t o t h e

mortgagee, rates a n d l e g a l c o s t s , t h e sale r e a l i z e d $ 5 3 , 1 7 0 ,

of which one half ($26,585) has been brought t o t h e c r e d i t of

t h e b a n k r u p t ' s estate t o g e t h e r w i t h o t h e r a m o u n t s w h i c h b r i n g t h c

-	I
'	I t o t a l c r e d i t t o $27,726.

On 2 A p r i l 1976 Carmichael J. made a d e c r e e n i s i fo r

divorce on t h e wife's p e t i t i o n and made c e r t a i n o r d e r s f o r t h e

payment of main tenance , inc luding an order for the payment of a

lump sum of $15,000, which on 8 October 1.976 t h e F u l l C O U i t of

the Family Court	of	A u s t r a l i a v a r i e d b y s u b s t i t u t i n g	$6,COO	f o r
$15,000.

As I u n d e r s t a n d t h c b a s i s o f t h e a p p l - i c a n t ' s casc

t h a t t h e p e t i t i o n should n o t have been p resen ted and tha t

t he re fo re the bankrup tcy shou ld bc annu l l e2 , it is t h a t t h e

l

-6-

bankrupt was not inso lvent , and took advantage of the procedure

available under S. 5 5 not for t h e p u r p o s e s of h a v i n g h i s cs ta te

a d m i n i s t e r e d i n b a n k r u p t c y f o r t h e b e n e f i t o f h i s c r e d i t o r s

and u l t i m a t e l y o b t a i n i n g a release from h i s d e b t s b y d i s c h a r g e ,

bu t f o r t h e u l t e r i o r p u r p o s e o f c a u s i n g h i s i n t e r e s t i n t h e

mat r imonia l home 7 Woodward Place to vest i n t h e O f f i c i a l

Receiver and so d e f e a t t h e o r d e r o f 8 December and indeez prcvent

the Matr imonia l Causes C o u r t f r o m s e t t l i n g t h a t i n t e r e s t on

h i s f o r m e r wife or o t h e r w i s e d e a l i n g w i t h it i n h e r f a v o u r .

The submissions on b e h a l f o f t h e O f f i c i a l Receiver

on t h i s p a r t of t h e case were:

1. t h a t t h e a p p l i c a n t was not competent t o make

t h e a p p l i c a t i o n ;

2. t h a t t h e g r o u n d s of t h e a p p l i c a t i o n had Rot been

e s t a b l i s h e d ;

4

l 3. t h a t even i f t h e y h a d I s h o u l d i n my d i s c r e t i o n

I n o t a n n u l t h e s e q u e s t r a t i o n o r d e r .

! !	So f a r as t hey are material t o t h i s case, S.	151(1)
.	I	,

p r o v i d e s t h a t "Where t h e C o u r t i s s a t i s f i e d ... I i n t h e c a s e

of a been presented d e b t o r ' s p e t i t i o n , t h a t t h e pe t i t ion ough t no t t o have

... I t h e C o u r t may make a n o r d e r a n n l l l l i n g t h e

bankruptcy"; and S . 303 p r o v i d e s t h a t "Where i n r e s p e c t of any

matter t h i s A c t p r o v i d e s t h a t ... t h e Court ... may exercise a

power, and does n o t s p e c i f y ... thc person on whose appl rca t ioz

t h e power may b e e x e r c i s e d , ... t h e power may b e e x e r c i s c d on

t h e a p p l i c a t i o n	of	any person aggrieved by	or	i n t e r e s t e d i n
t h a t m a t t e r " .

The re have been jud ic i a l dec i s ions on each of t h e

e x p r e s s i o n s "a pe r son aggr i evcd" and "a pe r son in t e re s t ed" ,

and t h e i n t e n t i o n i n u s i n g b o t h e x p r e s s i o n s i n S. 303 was

1

o b v i o u s i y t o a l l o w resort t o a l l t h o s e d e c i s i o n s . Thc words

. ,

" i n t h a t matter" h e l p t o e x p l a i n t h e n a t u r e of t h e a g g r i - J c d n e r s

or i n t e r e s t : c f . I n re Rocharrpton Swimnincj Pool L in> i t t+ . , ---_

-7-

1 W.L.R. 1693, 1697 . They refer t o t h e matter " i n respect of"

w h i c h " t h i s A c t p r o v i d e s t h a t . . . t h e C o u r t may exercise a

power". The power which S. 1 5 4 p r o v i d e s t h a t t he cour t may

exercise is a power t o "make a n o r d e r a n n u l l i n g t h e b a n k r u p t c y " .

The matter in respec t of which the power of annulment may be

e x e r c i s e d is " the bankruptcy" . The a p p l i c a n t , t h e n , must be

a g g r i e v e d b y o r i n t e r e s t e d in the bankruptcy .

The a p p l i c a n t ' s c o m p l a i n t a b o u t t h e b a n k r u p t c y h e r e

is t h a t t h e r e s u l t of it was tha t , wh i l e p roceed lngs by he r

for maintenance were pending in the Matr imonia l Causes

J u r i s d i c t i o n , it e f f e c t i v e l y p r e v e n t e d t h e N a t r i m o n i a l C a u s e s

Court from making i n the pend ing p roceed ings fo r maintenance any

o rde r , bu rden ing he r husband ' s i n t e re s t i n t h e f o r m e r

mat r imonia l home i n h e r f a v o u r , s u c h as Carmichael J. s a i d a f t c r

the bankruptcy he would have madc had the bankruptcy not

i n t e rvened ; and in s t ead of s u c h a n o r d e r s h e c o u l d o b t a i n o n l y

the o rde r t ha t he r bankrup t husband pay he r a sum of money.

"The words 'person aggrieved' are of wide import

and shou ld no t be sub jec t ed t o a res t r ic t ive i n t e r p r e t a t i o n .

They ... do i n c l u d e a person who has a genuine grievance because an order has bcen made w h i c h p r e j u d i c i a l l y a f f e c t s

h i s in te res t s" : A.-G. of the Gapbia v . K'Jie, ( 1 9 6 1 ) A .C . 6 1 7 ,

634 per Lord Denning. Though t e c h n i c a l l y a bankruptcy under

S . 55 of the Bankruptcy Act does no t come about by an order of

I .

I

' i I ) t h e C o u r t , t h e a p p l i c a n t h e r e I n my op in ion i s i n t h e sanic

p o s i t i o n as t he pe r son desc r ibed by Lord Denning, and i s a persor

aggr ieved by the bankruptcy .

I a l s o t h i n k s h e may b e p r o F e r l y d e s c r i b e s as a person

i n t e r e s t e d I n t h e b a n k r u p t c y i f s h e h a s a p r o p r i e t a r y o r

p e c u n i a r y i n t e r e s t i n it or i n h a v i n g it a n n u l l e d ; I n re

Roehampton Swirninq Pool L i n i t e d ( s u p r a ) ; c f . Re Peesley ,

-

'i

-8-

(1975) 1 A l l E.R. 385 , 388 (where t he ques t ion pu t a s ide by

I	Goulding J. a t 3 8 7 ,	( b ) ,	( c ) , i s similar	t o t h a t which	has
i

a r i s e n h e r e ) . I am of o p i n i o n t h a t as the bankrup tcy p reven tcd

the Matr imonia l Causes Court from sub jec t ing h e r h u s b a n d ' s

in te res t i n t h e m a t r i m o n i a l home t o a n o r d e r i n h e r f a v o u r s h e

had such a p e c u n i a r y i n t e r e s t , a n d t h e r e f o r e f o r t h a t r e a s o n a i s o

was competent t o make t h i s a p p l i c a t i o n .

The n e x t ques t ion is whether , wi th in the meaning of

S. 154(1 ) ( a ) , t h e d e b t o r ' s p e t i t i o n o u g h t n o t t o have been

p resen ted . The enactment of S. 55 marked a d e p a r t u r e from

l

Eng l i sh and A u s t r a l i a n l e g i s l a t i v e p r e c e d e n t i n two ways. F i r s t ,

t h e l e g i s l a t u r e d i d n o t re-enact the r equ i r emen t o f S . 57 of t b c

Bankruptcy Act 1 9 2 4 t h a t a d e b t o r ' s p e t i t i o n s h o u l d a l lege th3.t

he was unable t o pay h i s debts. I am n e v e r t h e l e s s o f o p i n i o n

t h a t t h e f a c i l i t y p r o v i d e d b y S . 55 was no t i n t ended t o be, ar.d

is n o t , a v a i l a b l e t o a s o l v e n t d e b t o r . "The essent ia l f e a t u r c s

of a bankruptcy system are s e q u e s t r a t i o n a n d d i s t r l b u t i c n -.

an i n i t i a l t a k i n g i n t o custody o€ a n i n s o l v e n t d e b t o r ' s p r o p e r t y ,

and t h e s u b s e q u e n t r e a l i z a t i o n and d i v i s i o n among c r e d i t o r s " :

R. v. Davison (1954), 9 0 C.L.R. 353, 375-6 per F u l l a g a r J .

(my u n d e r l i n i n g ) . S e c o n d l y , t h e l e g l s l a t c r c e l i m i n a t e d t h e

need for the making i n e v e r y c a s e of a j u d i c i a l o r d e r , a n d

' I

i n s t i t u t e d t h e p r o c e d u r e w h e r e b y o n h i s own p e t i t i o n a d e b t o r

may become bankrup t by fo rce of t h e A c t w i t h o u t t h e l n t e r v e n t i c n

of such an order . Thus it is t r u e , as i s s t a t e d i n t h e

Bankruptcy Practice, 4 t h e d n , 1 2 4 (pa ra . 2 7 7 ) , t h a t t h e

p r e s e n t a t i o n of a d e b t o r ' s p e t i t - l o n c a n n o t b e a n a b u s e of proces .

i n t h e s tr ict s e n s e ; b u t i n my op in ion the consequen t

bankruptcy may be annul led where a d e b t o r was n o t " e n t i t l c d t G

use thc machinery of the Bankruptcy Act" ( I n re a Dcb tc r , ( ] ? G 7 1

Ch. 590, S96) a n d t h e p r e s e n t a t i o n of h i s p e t i t i o n nay p l o p c r l s

,

-9-

be c h a r a c t e r i z e d as an abuse of the procedure provided by S . 55.

(Cf. R e Pepper ( 1 9 6 9 ) , 1 4 F.L.R. 2 8 2 , 283.)

The b a s i c e v i d e n c e as t o w h e t h e r or n o t t h e b a n k r u p t

was s o l v e n t when h e p r e s e n t e d h i s p e t i t i o n i s h i s sworn s t a t e r e n t

o f a f f a i r s , w h i c h showed t h a t as a t 1 8 December 1975 h i s

unsecured debts amounted t o $ 2 0 , 9 4 0 and h i s assets t o $34,065,

of which $29,000 was r e p r e s e n t e d b y h i s o n e - h a l f i n t e r e s t i n

the matriaonial home. The r e a l i z a t i o n of t h a t i n t e r e s t was

a t t h a t time a remote p r o s p e c t , a n d i n e f f e c t h e h a d a c c o r d i n g

t o h i s s t a c e m e n t o f a f f a i r s $ 5 , 0 6 8 ( o f w h i c h f u r n i t u r e i n t h e

matrimonial home	rep resen ted	$5	,000)	w i th	wh	ich	t o	meet	hzs
unsecured deb t s .

I d o n o t t h i n k t h a t t h e a p p l i c a n t c o n t e n d e d t > a t , i f

t h o s e f igu res c o r r e c t l y showed t h e b a n k r u p t ' s f i n a n c i a l p o s i t i o n ,

he was n o t t h e n i n s o l v e n t i n t h e s e n s e d e s c r i b e d i n S a n d c l l v .

i _-

Porter ( 1 9 6 6 ) , 115 C.L.R. 6 6 6 , 570. B u t a n a t t a c k was laLnched

! ,

on t h e c o r r e c t n e s s of t h e s t a t e m e n t o f a f f a i r s . I n my view it

did n o t succeed. An a t t e m p t was Fade t o c h a l l e n g e c e r t a i n

d e b t s shown i n t h e s t a t e m e n t of a f f a i r s , i n p a r t i c u l a r t h o s e

t h e r e s a i d t o b e o w i n g t o W r i q h t S w i r m i n g Pools ($3 ,400) ,

Miss Lennon ($500) and Mr. Bizannes ($4 ,850) . Kiss Lennol?

(now Mrs. Mottee) submit ted a proof o f deb t for $1,548 which

she reduced to $1,493 and which has becn admit tcc! by the Cff ic ia l

Receiver. Mr. B i z a n n e s ( t h e b a n k r u p t ' s o l i c i t o r ) s u b m l t t e d

a proof of debt for $7,051 which has not becn ac?mit ted, and

Wright Swinuxing Pools has no t submi t t ed a proof. The evldenct:

l e d i n r e s p e c t o f t h e l a s t two d e b t s i n d i c a t e d t h e n e c e s s i t y

f o r c a r e f u l t h e a p p l i c a n t d i d n o t e s t a b l i s h t h a t t h e d c b t o r ' s s t a t c r : ? n t i n v e s t i g a t i o n o f thcm by t h c O f f i c i a l R e c e i v c r . B u t

o f a f f a i r s h a d o v e r s t a t e d h i s i n d e b t e d n e s s or t h a t h e w2-s n o t

i

i n s o l v e n t ; and on t h e who12 CC t h e e v i d c n z c it was n o t sl-&;'n ti-.a'

- 10-

l

i	when	h e p r e s e n t e d h i s p e t i t i o n	h e d i d n o t h o n e s t l y b e l i e v e	on
!

,	r easonab le g rounds tha t he	was	unab le	t o pay	h i s d e b t s :	c f .
I
I

I I n re Dunn, (1949) Ch. 6 4 0 , 648; In re a Debtor , (1969) Ch.

590, 595.

1

l

The next ques t ion i s whe the r t he bankrup tcy shou ld be

I	a n n u l l e d o n t h e g r o u n d t h a t t h e p r e s e n t a t i o n	of	t h e	p e t i t i o n
i

I was f o r o t h e r reasons an "abuse of p rocess" .

I	There	i s	n o d i r e c t e v i d e n c e b e f o r e	me	.shoving	t h a t
i
!

Mr. Mottee p r e s e n t e d h i s p e t i t i o n f o r a n y r e a s o n o t h e r t h a n

t ha t he was, or a t any ra te thought he was, in so lven t ; and t h e

fac tua l founda t ion for t h i s p a r t o f t h e a p p l i c a n t ' s case is

1

I the s e q u e n c e o f e v e n t s s h o r t l y p r e c e d i n g t h e p r e s e n t a t l o n ,

from which it i s sought t o d r a w t h e i n f e r e n c e t h a t h i s p u r p o s e

i	was	t h e u l t e r i o r p u r p o s e	I	have mentioned of withdrawing his
i	1

! i n t e r e s t i n t h e m a t r i r o n i a l h o n e b e y o n d t h e r e a c h o f t h e

Matrimonial Causes Court. (As I h a v e s a i d , it was n o t shown

i

t h a t h e was s o l v e n t . ) A s s u m i n g t h a t t h a t i n f e r e n c e s h o u l d b e

drawn, I d o n o t t h i n k it wou ld fo l low tha t t he bankrup t was

g u i l t y o f a n a b u s e of the procedure provided by S . 55.

The o n l y c a s e t o wh ich counse l r e fe r r ed me i n argument

on t h i s p o i n t was Ex p a r t e P a i n t e r , ( 1 8 9 5 ) 1 Q.B. 85, where a

l

I	d e b t o r	became bankrupt on	h i s	own	p e t i t i o n	i n o r d e r	t o d e f e z t
I

p roceed ings a s a resu l t o f which he might have b s c n r e q u i r e d t o

I

l

I	pay	a	judgment debt	by	ins ta lments which he would have bad to
I
I

p a y o u t o f h i s i n a l i e n a b l e p e n s i o n . VaucJhan Willjams J. s a i d

!

( ( a t 9 1 ) :

! i "I have come t o t h e c o n c l u s i o n t h a t we are n o t

I	e n t i t l e d t o a n n u l a n a d ~ u 2 3 . c a t i o n	~ a 2 . s on	a	d e b t c r ' s
!

own p e t i t i o n rrerely bcrxusr. t!lc t lcbtor has n 3

assets, nor because kc! i s Fcsccsscc: of an icalienable

p e n s i o n , n o r b ~ c a u s e , b ? . v ~ n ~ rho as5~3 t5 r.nd l-leinc. i n

possession of such a pc'r?slon, hc has p r c w r . t c d h15

p e t i t i o n f o r the exprrs:, ;xrposc- of p r c v c n t i r l y t!lc

a p p l l c a t i o n of t h e Eebtors 7.ct to conpcl hi^ t o

I

t h i s dc.bt o u t of h l s p c n s l o n . . . I t scems TIC) PC t!l2-'-

-11-

i f it c a n n o t r i g h t l y b e s a i d t h a t t h e r e c e i v i n g o r d e r

ough t no t t o have becn made because it was on a

p e t i t i o n p r e s e n t e d f o r a p u r p o s e f o r e i g n t o t h e

bankruptcy laws, we canno t . . . annu l it".

And Kennedy J. s a i d ( a t 9 1 - 9 2 ) :

"NO doubt t h e o b j e c t o f t h e d e b t o r i n t h i s case i n

p r e s e n t i n g h i s p e t i t i o n was t o p r o t e c t h imsel f

f r o m t h e p a y m e n t o f t h i s d e b t ; b u t c a n we s a y ...

t h a t t h i s i s a purpose so f o r e i g n t o t h e a d r n n i s t r a t i o n

of the bankrup tcy law a s t o be an abuse of t h e p r a c c s s

of t h e C o u r t ? I d o n o t t h i n k t h a t w e can . No doubt

i n pas s ing the Sankrup tcy Act o f 1 6 8 3 t h e l e g i s l a t u r e

had i n view t h e i n t e r e s t s of c r e d i t o r s a n d o f t h e

commerc ia l comnuni ty genera l ly ; bu t they had a l so

r e g a r d t o t h e in te res t o f t he deb to r ; and I t h i n k

t h a t a l t h o u g h t h e p r i m a r y o b j e c t of a d e b t o r i s t o

s h i e l d h i m s e l f a g a l n s t t h e r e n e d l e s of h i s c r e d i - c o r s

by making himself a b a n k r u p t , t h a t i n i t s e l f i s n o t

s u f f i c i e n t t o d e p r i v e h i n of h i s r i g h t t o an

a d j u d i c a t i o n on h i s own p e t i t i o n .

There may be cases i n w h i c h t h e d e b t o r ' s o b j e c c i n

p r e s e n t i n g a p e t i t i o n i s so d i s t l n c t l y f o r e i n n t o

the purposes of the Bankruptcy Acc t h a t it is a

mere abuse of the process of t h e C o u r t ; b u t i n rry

, l o p i n i o n t h i s i s not. such a c a s e , a 6 I t h i n k t h a t

t h e a d j u d i c a t i o n o u g h t t o s t a n d . "

I n I n re IIancock, ( 1 9 0 4 ) 1 K.B. 585, t h e d e b t o r f a i l e j .

t o pay a judgmen t deb t , whereupon the c red i to r ob ta ined an

o r d e r f o r p a y m e n t b y i n s t a h e n t s . The i n s t a l n e n t s f e l l i n t o

arrear, and the credi tor o b t a i n e d a commit ta l o rder , under

p r e s s u r e of w h i c h t h e d e b t o r p a i d t h e arrears. Again the

i n s t a l m e n t s f e l l i n t o arrear, and a g a i n a c o n n i t t a l o r d e r was

o b t a i n e d . T h i s t ine, t h e d e b t o r p r e s e n t e d h i s okn p e t i t i o n

and ob ta ined a r ece iv ing o rde r and ad jud ica t ion . The re was

no c r c d i t o r o t h e r t h a n t h e j u d q m e n t c r e d i t o r , a n d t h e b a n k r u p t

had no a s s e t s b e y o n d h i s p e r s o n a l e a r n i n g s . So much o f t h o s e

e a r n i n g s as was n o t n e c e s s a r y f o r t h e s u p p o r t of nirnself 2nd

h i s f ami ly wou ld be a v a i l a b l e i n t h e b a n k r u p t c y f o r p a y r e n t of

t h e j u d g m c n t c r c d i t o r . Vaughan It i l l iams L . J . s a i d ( a t 530):

"Under t h c s c c i r c c T s t a ? c e c it seems t o m inipossihle

t o say t h a t t h e p r e s e n t - a t l o n o f t h i s p e t i t i o n KC.:,

abuse of t h e p r o c e s s o f t h e C o u r t . J t i s crue h a t

t h e r e s o l t of t he r e c e i v i r , q o r d c r wll.1 be th:t this

dcbkor will n o t be l l a b l e t o p r e s s u r e from tirv t o

-12-

time by t h e o b t a i n i n g o f a c o m r i t t a l o r d e r a g a i n s t

him; but I an n o t a t a l l p repa red t o say t h a t t h e

L e g i s l a t u r e d i d n o t i n t e n d t h a t a d e b t o r who had

b e e n s u b j e c t c d t o s u c h p r e s s u r e s h o u l d r e l l c v e

himself from t h a t p r e s s u r e b y o b t a i n i n g ar.

a d j u d i c a t i o n i n b a n k r u p t c y a g a l n s t h i m s e l f " .

I n I n re Dunn, ( 1 9 4 9 ) Ch. 6 4 0 , 6 4 7 , Evershed M.R.

said of Ex parte Painter :

I, ... I t h i n k it c l e a r l y m e r g e s frcm t h a t c a s e t h a t

t h e c i r c u m s t a n c e t h a t t h e c ? e b t o r h a s flled h l s

p e t i t i o n i n o r d e r t o p r o t e c t h i m s e l f f r o m e v i l s whlch

he might o therwise s u f f e r , and not with any benevo1er.t

i n t e n t i o n of b e n e f i t l n g h l s c r e d i t o r s b y s e c u r i n g

a f a i r d i s t r i b u t i o n o f assets among them, i s no reasor!

why a n o r d e r " ( o f a d j u d i c a t i o n ) "shoulc? not be made."

.And i n I n re a Debtor , (1967) Ch. 590, 5 9 6 , Goff J.,

d e l i v e r i n g t h e j u d g n e n t of himself and Stanp J., s a i d t h a t

t h e r a t i o dec idend i of Ex p a r t e P a i n t e r a n d I n re Hancock was

"that t h e d e b t o r was e n t i t l e d t o use t h e n a c h i n e r y of t h e

Bankruptcy Act f o r h i s own purpose so as to s h i e l d h i m s e l f f r m

f u r t h e r l i a b i l i t y t o c o m i t t a l o r o t h e r h a r a s s m e n t " . I n I n re

-- Betts, (1901) 2 K.B. 39 , 4 1 , R. S. Wright J. s a i d o f Ex p a r t e

P a i n t e r t h a t it e s t a b l i s h e d " t h a t w h e r e a d e b t o r f i l e s h i s own

p e t i t i o n t h e p r o c e e d i n g s i n b a n k r u p t c y o u q h t n o t t o b e s t o p p e d

merely on t h e g r o u n d t h a t h i s o b j e c t i n f i l i n g t h e p e t i t i o n i s t o

e scape the effect o f an o rde r aga ins t h im unde r the Deb to r s

A c t " , and added t h a t h e d i d n o t w i s h t o c r i t l c i z e a wcrd

t h a t was s a i d i n t h a t case; b u t t h e d e c i s i o n i n I n re Betts

shows t h a t t h a t p r i n c i p l e w i l l n o t e x t e n d t o t h e l e n g t h of

a l l o w i n g t h e d e b t o r t o use the bankruptcy law i n o r d e r t o

assist him i n c o m n i t t i n g f r a u d s o n h i s c r e d i t o r s , e.g. by

becoming a " p r o f e s s i o n a l b a n k r u p t " .

The p r i n c i p l e w h i c h I t h i n k may be ex t rac ted f rom th?

cases t o which I h a v e r e f e r r e d is t h a t , w h e r e a man who is

i n s o l v e n t , o r r casonab ly 1 j e l i evc . s t ha t he j s i n s o l v c n t , pYescI:t!:

a p e t i t i o n a g a i n s t h i m e l f , and docs not t! lereby comuit ( a s

-13-

I n re Betts, s u p r a ) a f r a u d o n h i s c r e d i t o r s , h i s b a n k r u p t c y

w i l l no t be annu l l ed mere ly because h i s motive i n p r e s e n t i n g

his p e t i t i o n was, i n the words o f Eve r shed M . R . , " t o protect

h imsel f from e v i l s which he might o therwise suf fer" .

I

l

O t h e r i n s t a n c e s of abuse of process have been d iscussed

i n cases where pe t i t i ons have been p resen ted no t by deb to r s bu t

by c r e d i t o r s , who have oppor tun i t i e s fo r aboses such as e x t o r t i o n

and oppression n o t so r e a d i l y c p e l ? t o p e t i t i o n i n g d e b t o r s :

see e.g. King v. Henderson, (1898) A.C. 720; Dowling v. Cslonjal --

Mutual Life Assurance Society Ltd. (19151, 20 C.L.R. 509;

Rozenbes v. I t ronhi l l (1956) , 95 C.L.R. 4 0 7 . There i s , I t h i n k ,

I no th ing i n t h o s e cases t o d e n y t h e p r i n c i p l e I h a v e t r i e d t o

s ta te above.

I am t h e r e f o r e o f o p i n i o n t h a t , a s s u m i n g t h a t it

should be i n f e r r e d t h a t t h e b a x k r u p t h a d t h e n o t i v e t h e app1lcci.t

seeks to a t t r i bu te t o him, t h e a p p l i c a n t h a s n o t made a case

for annulment of the bankruptcy.

F u r t h e r , i f I am wrong, and i f as a matter o f law t h e

p e t i t i o n o u g h t n o t to have been p resen ted o r ough t no t t c have

been accepted , I t h i n k t h a t my d i s c r e t i o n s h o u l d n o t b e exerc:ist:Z

by making an order of a n n u l r e n t . The bankruptcy occurrec! on

1 9 December 1 9 7 5 , b u t t h e a p p l i c a t i o n f o r a n n u l v e n t was n o t

made u n t i l 2 June 1 9 7 6 . I n t h e i n t e r v e n i n g six r ronths , the

a p p l i c a n t j o i n e d w i t h t h e O f f i c i a l Receiver i n s e l l i n g thc?

mat r imonia l home a n d r e c e i v e d h e r s h a r e o f t h e p r o c e e d s , t h c

Matrimonial Causes Court made an o rde r fo r ma in tenance on the

b a s i s t h a t t h e h u s b m d was a b m k r u p t , a n d t h e O f f i c i a l P w e i v P r

I

made c o n s i d e r a b l e p r o g r e s s i n t h e a d m i n i s t r a t l o n o f t h e *-c:tzLt.

Proofs of debt have been loc?qed, and i n v c s t i g a t l o n o f t1.r-x has

p r w e e d e d . The e v i d e n c e i n t h i s c a s e a s t o t h e h a n k r u y t ' s

-14 -

af fa i r s , incomplete as it was, i n d i c a t e s t h a t h e i s i n s o l v e n t

and t ha t a d m i n i s t r a t i o n o f h i s es ta te in bankrup tcy i s d e s i r a b l e .

I n t h e c i r c u m s t a n c e s I t h i n k t h a t as a m a t t e r o f d i s c r e t i o n

the bankrup tcy shou ld no t be annu l l ed .

I dismiss t h e a p p l i c a t i o n f o r a n n u l m e n t .

I The a p p l i c a n t c l a i m s i n t h e a l t e r n a t i v e a d e c l a r a t i o n

i n h e r f a v o u r as t o t h e sum of $15 ,000 , pa r t o f t he amoun t

brought t o t h e c r e d i t of t h e estate a s a r e s u l t o f t h e s a l e o f

t he ma t r imon ia l home. The argument , as I unders tand it, is as

I

I fo l lows . When t h e a p p l i c a n t p r e s e n t e d h e r p e t i t i o n t o t h e

I Family Law D i v i s i o n of t h e Supreme Court of N e w South Walcs on

4 A p r i l 1 9 7 4 , t h a t Cour t a c q u i r e d j u r i s d i c t i o n u n d e r Par t VI11

o f t h e K a t r i m o n i a l Causes Act 1959 t o make an order pendinc; the

d i s p o s a l of the p roceed ings . The o r d e r of 8 December 1975 was

such an o r d e r . Its effect was t o o p e r a t e as a conve r s ion , so

t h a t from i t s d a t e t h e p r o c e e d s of s a l e o f t h e m a t r i m o n i a l hc1r.c

must b e r e g a r d e d a s p e r s o n a l t y . It a l s o d i v e s t e d t h e h u s b a n d of

I h i s i n t e r e s t i n t h e l a n d , a n d s u b s t i t u t e d a n e x p e c t a n c y o f a

c o n t i n g e n t interest i n t h a t p e r s o n a l t y . T h a t e x p e c t a n c y was

! not q u a n t i f i e d o r i d e n t i f i a b l e u n t i l t!le o rde r o f 2 A + r i l 1 9 7 6 ,

when it cculd b e i d e n t i f i e d as amounting t o one-ha l f o f the

l

b a l a n c e l e f t a f t e r deduc t ing $lS,OCO p l u s i n t c r c s t f r o m t h c

n e t p r o c e e d s o f s a l e . (The o rde r o f 8 October 1 9 7 6 made on

a p p e a l i n c r e a s e d t h a t e x p e c t a n c y by $ 9 , 0 0 0 , a s it r e d u c e d t h e

! $15 ,000 t o $ 6 , 0 0 0 ) . The re fo re a t t h e d a t e o f t h e b a n k r u p t c y t h e

b a n k r u p t ' s i n t e r e s t i n t h e n a t r i r o n i a l home d i d n o t p a s s t o t h e

Off ic ia l Receiver : RC I n k s m i ' s T r u s t s ( 1 @ 5 5 ) , 21 Heav. 310;

52 E.R. 878. Some p a r t of the a rgummt was based on thc

assumpCion t h a t t h e b a n k r u p t c y r e l a t e d b a c k t o a d a t c C a r l i e r

than 19 December 1975; b u t a s t h e r e i s no evidc:ncc t h a t on any

earlier d a t e a n a c t	of	bankrl lptcy was cormit ted,	there	1s	no
-15-

r e l a t i o n b a c k : 9.115 (2) (b) .

Tha t a rgumen t f a i l s i n m o r e t h a n o n e r e s p e c t . F i r s t ,

t h e o r d e r of 8 December was t o t h e e f f e c t t h a t t h e matrimoqial

I home be sold a n d t h e p r o c e e d s a p p l i e d i n t h e p u r c h a s e of a n o t h e r

home; t h e r e f o r e i f it worked a convers ion it worked a doub le

convers ion , and the proceeds are to be regarded as r e a l t y a n d

!

not as personal ty: Megarry & Wade, Law of Real P r o p e r t y ,

2nd edn,280; (1907) 1 Ch. 1 6 Halsbury , 4 th edn , para . 1372; In re Granqc,

313, 316; (affd.) ( 1 9 0 7 ) 2 Ch. 2 0 , 22.

The order of 8 December c o n t e n p l a t e d t h a t t h e m a t r i n o n i a

home should be sold and i t s p roceeds used in the pu rchase of

another house which would take i t s p l a c e a n d f o r a l l purposes

l

of the Matr imonial Causes Court be regarded as the ma t r imcn la l

home as though t he subs t i t u t ion had no t been made. The i n t c n t

of para. ( e ) of t h e o r 2 e r c l e a r l y was t h a t t h e new home s h ~ u l d

1 be t r e a t e d as “ p r o p e r t y t o w h i c h t h e p a r t i e s a r e . . . e n t i t l e d ”

wi th in the mean ing of S. 86 of the Matr imonia l Causes Act 1959.

A t tha t s t age the ma t r imon ia l cause had no t been hea rd , and

I the pa r t i e s had been be fo re the Cour t on ly on the ques t i cn of

maintenance pending the hear ing of t h e s u i t . The o r d e r

a p p o i n t e d t h e a p p l i c a n t t o be he r husband’ s agen t fo r t he purpos-.

of s e l l i n g t h e o r i g i n a l p r o p e r t y , b u t i n my o p i n i o n d i d cot

1

dives t him of h i s i n t e r e s t i n t h a t p r o p e r t y . I n a n y e v e n t , t h e

: a p p l i c a n t by j o i n i n g w i t h t h e O f f i c i a l Receiver i n s e l l i n s t h e

p r o p e r t y is I t h i n k now p r e c l u d e d f r o m a s s e r t i n g t h a t n o i n t c r e s k

a t a l l i n t h e p r o p e r t y h a d v e s t e d i n t h e C f f i c l a l Rcceivcr as

I

a	r e s u l t	o f t he bankrup tcy .
F i n a l l y I t h i n k t h a t t h e o r c l e r of 8 Dccerbcr ga-,’e t hc l

a p p l i c a n t n o t h i n g more t h a n t h e r i g h t t o p r o c e e d u n d e r it t o

t h e sale of t h e m a t r i c o n i a l h c n 2nd the pu rchase of a n o t h e r

-16-

p r o p e r t y , a c t i n g as he r husband ' s agen t so f a r as h i s i n t e r e s t

i n t h e p r o p e r t y was concerned. It d i d n o t g i v e h e r a n y

i n t e re s t , by way of charge or o t h e r w i s e , i n h e r h u s b a n d ' s

i n t e re s t , and the l a t t e r i n t e r e s t b e c a n e v e s t e d i n t h e O f f l c i a l

Receiver f r e e of any encumbrance as one o f t he assets i n t h e

b a n k r u p t ' s es ta te . The o rde r o f 2 AFr i l 1 9 7 6 , v a r i e d b y t h e

o r d e r o f 6 October 1 9 7 6 , means t h a t t h e a p p l i c a n t became a

c r e d i t o r of t h e b a n k r u p t a f t e r t h e d a t e o f t he bankruptcy and

therefore h a s n o t a d e b t p r o v a b l e i n t h e b a n k r u p t c y .

Accordingly I am of o p i n i o n t h a t t h e a p p l i c a t i o n for

a d e c l a r a t i o n f a i l s .

The order I make as t o t h e a p p l i c a t i c n o f 3 June 1976

is: A p p l i c a t i o n d i s m i s s e d , w i t h c o s t s i n c l u d i n g r e s e r v e d COSKS.

' I