Re Munt, P.W. Ex Parte The Bankrupt

[1992] FCA 463

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463,92 : '

JUDGMENT No. ...,. ,.,., ,.,.,., , , ,

NOT FOR CIRCULATION

IN THE FEDERAL COURT OF AUSTRALIA )	1
SOUTH AUSTRALIA DISTRICT REGISTRY j	No. SB 463 of 1990
GENERAL DIVISION	1
BANKRUPTCY DISTRICT OF THE STATE	)
1
OF SOUTH AUSTRALIA	1

Re : PETER WILLIAM

Ex Parte: The Bankrupt

EX TEMPORE REASONS FOR JUDGMENT

CORAM:	von Doussa J.
W :	1 June 1992

I -

This is an application for discharge by the bankrupt. The sequestration order was made on 7 May 1990. The relevant act of bankruptcy, which was a failure to comply with a bankruptcy notice, occurred on 29 March 1990. The amount due to unsecured creditors is in the order of $500,000. The only asset got in by the Official Trustee is the sum of $6.80 being the balance of moneys held in a solicitor's trust account. In light of the low level of divisible property got in by the Official Trustee, proofs of debt have not been called for although a number have been received.	I ,
Without more it would be an extraordinary situation for a bankrupt with so many unsecured debts and so little return, to	2.'
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receive a discharge from bankruptcy at this point in the	I, .

administration of his estate. The bankrupt however seeks the order for discharge on the footing that there is some prospect of him being offered a job to work in Ethiopia supervising the installation of grain bunkers by a company called Grain Storage Technology Pty Limited. The bankrupt says that if that employment were offered to him and if he were able to accept it, it is probable that he would travel overseas in about July 1992 and be away for quite some time receiving a salary in the order of $100,000 per annum.

The information supplied about Grain Storage Technology ~ t y Limited is sparse. It appears to be a small company established for the purposes of tendering for a contract or contracts for the installation of grain storage facilities overseas. It seems the company has not yet succeeded in that endeavour. I infer, although the evidence is minimal, that the company is without any great backing at the moment. It is proposed, if the tender for the grain bunker job in Ethiopia succeeds, that the bankrupt would be sole person sent overseas

by the company to supervise the work. It is apparently

thought by the company, that he would thereupon be involved in

the management of the company, an activity prohibited by law if he remains a bankrupt. I confess to having some difficulty with that proposition. It seems to me that he might be involved in the management of the particular job, but that is a very different thing to being involved in the management of the company. Apparently the company has said that if the bankrupt remains a bankrupt, it could not appoint him to the

job.

Mr Marshall, who appears for the State Bank of South Australia, the major creditor, has opposed the discharge. He has done so primarily, as I understand him, on the ground that the evidence about the proposed job and about the company is vague, and that insofar as the job is concerned, his appointment is speculative. The argument is put that if the bankrupt is as valuable as he maintains to the company in the role of a supervisor of works, there should be no great difficulty in devising a way in which the job could be taken up without him being involved in the management of the company, or in any other role that would be forbidden to a

bankrupt. I see considerable force in that argument.

It is also put against the bankrupt that if there is a prospect of him getting highly paid employment, bearing in mind the opportunities that exist for overcoming the apparent bar arising from being involved in the management of a

payment by way of contributions from the earnings of the

company, the creditors are entitled to receive significant

bankrupt. I see force in that argument which weighs heavily against discharge. The bankrupt however argues that that point can be overcome by him offering to enter into an arrangement to pay excess earnings to the Official Trustee if he is lucky enough to get the job. The difficulty about that proposal I endeavoured to explain in the course of argument. The Court cannot make an ,order requiring payment as a

condition of discharge from bankruptcy unless the bankrupt, at the time when the order is made, is in a position to pay the amount ordered. It is not possible to make a contingent order that would come into force in the event that the bankrupt was able to pay. It would be quite wrong to make an order requiring payment of a substantial amount as a condition of the discharge if there were no realistic prospect that the amount would be paid. If it turned out that the bankrupt were not then able to pay the amount, the condition would put the bankrupt back into the position of having more debts than he has assets and ability to pay. The condition would re-create the very problem that bankruptcy is meant to solve.

A further ground of opposition is raised by the Official Trustee namely, that within the meaning of para.l50(6)(c) of the Bankruptcy Act 1966, the bankrupt contracted a debt provable in the bankruptcy without having at the time of contracting it, any reasonable or probable grounds of expectation of being able to pay it after taking into

consideration his other liabilities at the time. Three other

liabilities are identified, being, two liabilities to a leasing company for two motor cars, and a debt for legal expenses to Hume Taylor and Co. for $2,258. The car leases were entered into on 21 October 1988. The debt to Hume Taylor was incurred in about January 1989. Preceding those events notices of demand had been served on the bankrupt by the State Bank of South Australia. On 21 July 1988 a notice of demand under a guarantee in respect of the indebtedness of Dartmoor

Developments Pty Ltd for the sum of $336,000 was served, and on 26 July 1988 a notice under a guarantee of the liabilities of Wistow Stone Works Pty Ltd was also served for $33,750.

The argument of the Official Trustee is that having regard to the amounts outstanding on those dates (which largely remained outstanding until bankruptcy) it may be inferred that there was no reasonable or probable ground of expectation of liabilities arising under the leases for the cars being duly discharged. I say that the debts due to the State Bank largely remained outstanding because the amount due under the guarantee for Dartmoor Developments Pty Limited had been reduced somewhat below $336,000 by the date of bankruptcy. The amount of that debt acknowledged by the bankrupt when he filed his statement of affairs was only $207,000. In the course of giving evidence today the bankrupt disclosed that in June 1988 he had an unsecured overdraft with the AN2 bank in the order of $156,000 which is another factor to be taken into account in considering whether in October

of an ability to pay the lease debts.	1988, there were reasonable or probable grounds of expectation
The bankrupt has given evidence at some length about his involvement in a number of businesses and his expectation of being able to discharge liabilities of the kind arising under the car leases. I confess to having had some difficulty in following his evidence because he swapped from date to date and job to job, but it seems that at times there were

substantial sums of money paid to him or his companies that were then reinvested in other jobs. However, the bankrupt carries the onus of satisfying the Court that at the time that the debts were incurred he had reasonable and probable grounds of expectation of being able to pay them. I am not satisfied that he has discharged that onus. Making as much allowance as I think possible in favour of the bankrupt where there are uncertainties about his evidence, his evidence does not disclose how he could have had any reasonable ground for thinking that he could bear the costs of.two motor cars in October 1988 when he had outstanding demands against him from the State Bank exceeding $300,000 and a further sum in the order of $150,000 due to the AN2 bank.

Without turning to the solicitor's account, I am satisfied in relation to the car leases, that the provisions of para.l50(6)(c) have been enlivened. Under sub-s.150(5) the Court cannot make an unconditional discharge, and must either refuse to order discharge, or, if it thinks fit, suspend the

operation of an order either unconditionally or on conditions.

In my view, having regard to the time that has elapsed since the sequestration order was made and the filing of the statement of affairs, having regard to the extent of the unsecured debts and the very small amount that has been recovered by the Official Trustee, and having regard to the fact that the provisions of para.l50(6)(c) have been brought into effect, the order of the Court should be that the

application for discharge be refused. Order accordingly.

I certify that this and the

preceding pages are a true copy of the Reasons for Judgment of Mr Justice von Doussa

Associate: Dated: //

Applicant appeared for himself

Counsel for creditor	: Mr A Marshal1
Solicitor for creditor	: Ward & Partners
Mr D R Govan for and on behalf of
Official Trustee