Re Perry, E.P.G

[1985] FCA 80

Re: EMILY PHYLLIS GERTRUDE PERRY
No. 862 of 1981
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF SOUTH AUSTRALIA
Fisher J.

CATCHWORDS

Bankruptcy - opposed application for discharge - circumstances surrounding Bankruptcy - conduct of bankrupt - matters under s.150(6)(a) and (c) - period of suspension.

Bankruptcy ACT 1966 ss.149, 150.

HEARING

ADELAIDE
#DATE 7:3:1985

ORDER

1. The application for discharge of bankruptcy be granted but be suspended until the 4th December 1985.

2. There be no order as to costs.

JUDGE1

This is an application pursuant to s.150 of the Bankruptcy Act 1966 ("the Act") by Emily Phyllis Gertrude Perry ("the bankrupt") for an order of discharge. The application was opposed by Bagot's Executor & Trustee Company Limited ("Bagot's") a creditor, on the ground that she was likely, within five years from the date of bankruptcy, to make a significant contribution to her estate.

1. The bankrupt was obliged to make application for a discharge pursuant to s.150 of the Act as she was not discharged by operation of law in accordance with s.149. She was not discharged under this latter section because the Acting Official Receiver on behalf of the Official Trustee had on 22 November 1984 entered an objection which had not been withdrawn or lapsed. This objection was, as provided by s.149(4), on the ground "that the conduct of the bankrupt either in respect of the period before or the period after the date of the bankruptcy, has been unsatisfactory". The Acting Official Receiver filed his report under s.150(3) on 31 January 1985. The only statement in this report which the bankrupt disputed by notice under Rule 54 was the statement that she had omitted to keep and preserve proper books of account (s.150(6)(a)). She gave evidence in relation to this matter, which evidence is dealt with subsequently in these reasons. Further matters relevant to her application are to be found in the report of the Acting Official Receiver, supplemented, to the extent relevant, by oral evidence given by the bankrupt and her husband.

2. The estate of the bankrupt was sequestrated on 4 December 1981. Assets disclosed in her statements of affairs amounted to $1,420.00 which assets realised only $172.11. Liabilities disclosed in the statement of affairs amounted to $20,650.00 but proofs of debt were received totalling $58,789.18. No contributions by way of income or otherwise have been received from the bankrupt and in consequence the Official Receiver's costs and fees remain unpaid and of course there has been no dividend paid to the creditors. In relation to creditors the major omission from the statement of affairs was the debt due to the petitioning creditor, in respect of which a proof for $36,590.06 was lodged and accepted.

3. The bankrupt has suffered a number of vicissitudes in recent years, one of which is current at the present time. Normally these troubles might not be seen as relevant, but they have been relied upon by the bankrupt as causing her insolvency in 1981 and as the reason for her present application for a discharge. At the time the sequestration order was made on 4 December 1981, and at the earlier time of service of the creditor's petition, the bankrupt was an inmate of the Womens' Rehabilitation Centre. She was serving a sentence of imprisonment, having been convicted on a number of counts of having administered poison to her husband with intent to kill. These convictions were ultimately set aside by the High Court and quashed on 4 May 1982 and a new trial ordered (Perry v R. (1982) 44 A.L.R. 449). However the prosecution elected to take the matter no further.

4. The applicant contended that her insolvency was a direct consequence of her arrest in February 1980 on these charges. She said she first became unable to pay her debts as they fell due in about April 1981, and the cause thereof was "her arrest on a charge of attempted murder". It is my opinion that this event was neither the sole nor in fact the prime reason for her financial difficulties and I do not accept her evidence in this regard.

5. At the time of hearing of her application for a discharge the bankrupt was contesting extradition proceedings in Adelaide, the purpose of which was to have her answer in Victoria a charge in relation to the death from arsenic poisoning of a former husband. She contends that she is severely prejudiced in obtaining financial assistance in the extradition and any subsequent proceedings because she is an undischarged bankrupt. As such, she says, she is prejudiced in obtaining legal aid and in relation to any public appeal for assistance.

6. Prior to the time of her arrest in February 1980 the bankrupt and her husband had already substantially over committed themselves both in respect of a development project and in borrowing money which they did not have the capacity to repay. The applicant in 1968 engaged in real estate speculation in purchasing land and in sub-dividing and selling it as allotments. In 1978 she was probably solvent, although the land she owned was substantially encumbered as security for loans. She and her husband were working and able to meet their commitments under the mortgages. Thereafter however she entered into substantial additional commitments, borrowing more than $209,000 during 1978 and 1979 to finance her activities. At about the same time her husband became ill and was invalided from his employment in 1978. When questioned as to her ability to make the required repayments on the borrowings and in particular of the sum of $2,370.00 per month payable to Lensworth Finance Limited the bankrupt said that she used further borrowings to meet these commitments.

7. The bankrupt also displayed lack of business prudence by opening a shop in 1979 from which she proposed to sell and repair pianolas and pianola accessories. This business at all times operated at a loss and ultimately was sold for an amount sufficient only to cover arrears of rent. Furthermore she, on more than one occasion, obtained loans as a result of a representation that she had assets totalling $45,000, primarily pianolas which realized very considerably less than this amount.

8. Doubtless the financial difficulties of the bankrupt were aggravated by the illness of her husband and the fact that in February 1980 she was arrested and charged. However it is apparent that she was at the time considerably over-committed through imprudent borrowings. There is no doubt that she contracted debts without having any reasonable ground of expectation that she could pay them, and a submission to this effect by the Official Receiver in his Report (s.150(6)(c)) was not disputed by her.

9. She did however dispute the contention that she had omitted to keep and preserve sufficient books of account to disclose her financial position within the period of 5 years before bankruptcy. She gave evidence to the effect that she did "keep" such books but agreed that she failed to "preserve" them. Both she and her husband stated that he had destroyed them. I do not find her evidence concerning the books she said she kept at all convincing, and the evidence of her husband did little if anything to corroborate such evidence.

10. The bankrupt contends that she is seriously prejudiced by her bankruptcy in financing her opposition to the present extradition proceedings. However her evidence consisted primarily of assertions and she did not satisfy me that she is in fact suffering any such detriment or that the provision of legal aid is in any way dependent upon her obtaining a discharge.

11. Bagot's opposed the bankrupt's application for a discharge. It is the executor and trustee of the deceased estate of a Mrs. Scriven who was the petitioning creditor on whose application the sequestration order was made. It's contention was that the bankrupt was likely within 5 years of the date of bankruptcy to be able to make a significant contribution to her estate. This contention is based on the fact that the husband of the bankrupt in 1982 received the sum of $5,000 from a magazine "New Idea", as a fee paid for his story of happenings in the preceding few years. The proposition was pressed that the bankrupt was also likely to sell the story of her experiences and thus obtain funds which could be available to her creditors. However in my opinion it is very unlikely that the estate will receive any funds from this source by December 1986. The bankrupt said that she does not intend that such a story will be sold in her lifetime, and even if it was it is, in my opinion, too easy to ensure that the fees do not fall into the category of after acquired assets accruing to the estate during this period. I do not see this objection as a ground upon which to refuse the application for a discharge, particularly as at the present time both she and her husband are in receipt of invalid pensions.

12. The two grounds under s.150(6) upon proof of which I am obliged at least to suspend the operation of a discharge have been made out. I find that the bankrupt failed to keep and preserve books of account as alleged, and that she incurred a substantial liability to the petitioning creditor which she had no prospect of paying. This latter ground was not disputed. Moreover this was not the only occasion upon which she contracted a debt without reasonable prospect of repayment. The Official Receiver's Report and the evidence established that this occurred on a number of occasions and that the bankrupt was reckless and irresponsible in the manner in which she incurred obligations. Furthermore she has consistently refused to accept that she was guilty of such conduct. In my opinion the interests of the public and commercial morality require that this Court express its disapproval of the bankrupt's behaviour. I accept that the principles which guide the exercise of my discretion in relation to a discharge and any suspension of the operation thereof are such as set out by McGregor J. and Lockhart J. in Re: Kolomy (1981) 56 F.L.R. 157 at pp. 164-166 and Re: Harding (1981) 57 F.L.R. 320 at p.332 respectively.
    

I am prepared to make an order of discharge, but propose

to suspend its operation for a period of one year from the date upon which the bankrupt might have been entitled to a discharge by operation of law. I therefore make an order and suspend the operation thereof until 4 December 1985.