Re Park, J.L. v Ex parte Park, J.L

[1989] FCA 619

," IDGlVlENT NO. 6 I 9 .Y..?..,?.."-.

IN THE FEDERAL COURT	)	LIMITED DISTRIBUTION
OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT	)
OF THE STATE OF	1
WESTERN AUSTRALIA	)	NO. 578 OF 1987 RE: JUDITH LORRAINE PARK EX PARTE: JUDITH LORRAINE PARK

Applicant

CORAM: LEE J.

DATES: 26 AND 29 JUNE 1989

EX TEMPORE REASONS FOR JUDGMENT

Mrs Park has made application to be discharged from bankruptcy. Having read the further affidavit of Mrs Park presented to me this morning, it is clear that bankruptcy has had particular impact upon her as a result of her change of status from a person free of restrictions to a person sublect to the terms of the Bankruptcy Act 1966 ("the Act") and without control of her own affairs.

The intention of the Act is, of course, that a sequestration order should effect such a change of status and have a consequential impact upon a bankrupt's affairs. I accept, however, that bankruptcy has had particular effect upon Mrs Park and her application for discharge is not based merely upon the inconvenience of it or her dislike of being in a state of

bankruptcy.

The Act is not intended to be punitive in its purpose but seeks to satisfy various objects. Perhaps the principal object is to provide an aid to creditors to have a better opportunity to rationally and equitably recover some portion, if not all, of their debts. To that extent, an act of sequestration is a very important act because it does bring with it the threat of and the possibility of penal, or quasi-penal, consequences.

Amongst other objects of the Act is the provision of some form of future protection for creditors in that the process of bankruptcy may obviate a similar situation occurring in the future. In that regard the Act provides some form of education for bankrupts as to how they should be conducting their affalrs where they have not been adequately instructed before.

By no means the least of the objects of the Act is the provision of assistance to bankrupts to introduce some rationality in dealing with their problems of excess of debt over assets and an opportunity for such persons to get a platform on which to start again. Bankruptcy is not meant to be a lifetlme stigma or

as much a means for a fresh start as it is anything else.	to destroy the position of the bankrupt in the community. It is
The Court must have regard to each of these matters when examining an application for discharge. The Act, by sub-s.149(1), itself stipulates that a person who becomes bankrupt is discharged from bankruptcy upon the expiration of 3 years from the date of bankruptcy. The Act also provides, however, the opportunity for a bankrupt to apply to the Court for a discharge from bankruptcy before that 3 year period has expired (see 5.150). In order to grant an early discharge, the Court will look to being persuaded that there are appropriate circumstances and reasons for an order for discharge being granted. A discharge order should not be given as a matter of course.
As Mr Machlin has pointed out, the Court must consider the public interest when examining an application for discharge. In the present case, as I outlined on 26 June 1989 in part, I am satisfied that there can be no further public purpose served by continuation of the bankruptcy in this case. There is no role for any further inquiry, it would seem, as to the manner of conduct of the bankrupt's affairs. There is no question of breach of commercial morality in this case.
Mrs Park's bankruptcy appears to have occurred as a result of her agreeing, with her husband, to CO-guarantee the liabilities of the business which her husband operated. The
of commonsense. It was part and parcel of conducting a business provision of the guarantees by Mrs Park was not made in defiance
that had been conducted successfully for some time and it was not improper to have entered into that arrangement as a director anticipating that the company would be able to pay the debts which were the subject of the guarantees. It was foolhardy in a sense to take on a personal liability of that order without personal assets, but it was understandable in the circumstances.
Amongst the factors to be taken into account in this case in considering whether an order for discharge should be made are the size of Mrs Park's estate, which remains without contribution, and the fact that trading creditors have been involved.
A counterbalancing element against the size of the deficiency, however, is that the debts in question have resulted from guarantees of credit arrangements given as a spouse of the controller of the enterprise. Her degree of culpability, if you like, in undertaking such liabilities may have been substantially less than that of other persons who controlled the conduct of the business.
However, Hrs Park was a director of a company and as such had obligations and duties to fulfil under the Companies Code. It must be recognized that no person should be giving guarantees lightly without regard to the ability to discharge the
this debtor there may have been an expectation at the time the liability if ever called upon to do so. No doubt, in the case of
guarantees were given that substantial assets would be held, or may be available, to justify the giving of guarantees.
Also one should not lose sight of the fact that the dramatic reverse in the debtor's affairs can be traced to the default of a debtor to the business under a major contract that went awry. Otherwise the operations of the company of which Mrs Park was a director and out of which the guarantees arose had been properly conducted for a number of years and would have continued but for that unfortunate event.
It is my view that the public interest will be at least as well served by discharge of the bankrupt as by continuing the bankruptcy. In the circumstances, the need for Mrs Park to get on with her life, I think, transcends any other considerations that may be left in the remnants of the bankruptcy. She has, as one may anticipate, by the mere loss of assets and the disruption of her family, suffered a loss of dignity and self-esteem. 1n addition, her marriage has broken up and her state of health has been adversely affected. It is not the purpose of the Act to impose suffering.
I propose that there be an order for discharge but upon condition and that the order for discharge be suspended. I will
order that there be discharge from bankruptcy for this bankrupt, suspended until 10 August 1989, and it be a condition of her
discharge that the bankrupt not conduct business on her own account for a period of 3 years from 10 August 1989.
It is not appropriate to make any order in relation to costs because there is nothing in the estate and such an order only leads to further problems. It would be unusual to make an order for costs in this case and I do not propose to make one.

I will make orders in the terms I have just outlined.

I certify that the preceding
six (6) pages are a true copy of the
Reasons for Judgment of his Honour Mr Justice Lee

Counsel for the Applicant for discharge: Mr P.L. Lafferty Solicitor for the Applicant for discharge: Kay & Lafferty

Counsel for the Petitioning Creditor (Bell Basic Industries):

MS L. Howell

Counsel for the Petitioning Creditor (CSR Ltd.): Mr W. Machlin
Counsel for the Official Receiver: Mr J.F. Busher

Dates of Hearing: 26 June 1989 and 29 June 1989 Dates of Judgment: 26 June 1989 and 29 June 1989