Re Robinson, Dennis Edwynne

[1983] FCA 173

I N THE FEDErVLL COURT OF AUSTRALIA

1

GENERAL DIVISION 1 1

BANKRUPTCY DISTRICT THE STATE OF	1
1

NEW SOUTH	WALES	-AND	THE	AUSTRALIAN	)
1

CAPITAL TERRITORY ) No. W67 of 1 9 7 8

THE BANKRUPTCY ACT 1 9 6 6

Sectlon 1 5 0

APPLICATION FOR DISCHARGE

DENNIS EDWYNNE ROBINSON

ORDER

Judge making order:	Beaumont , J .
Date of order:	4 August, 1 9 0 3 .
Where made:	Sydney.

THE	COURT	ORDERS:
1.	T h e publ ic examination of the bankrupt shal l be deemed

t o have been concluded on 3 J u l y , 1 9 7 8 .

2 . I order the discharge of the bankrupt.

3 . I order the bankrupt t o pay the costs of the Of f i c i a l

Receiver.

I N THE FEDERAL COURT OF AUSTRALIA )

GENERAL D I V I S I O N 1

BANKRUPTCY D I S T R I C T THE STATE O F )

NEW SOUTH WALES AND THE AUSTRALIAN 1

CAPITAL TERRITORY 1 No. W67 of 1978

THE BANKRUPTCY ACT 1966

Sec t ion 150

APPLICATION FOR DISCHARGE

DENNIS ECWYNNE ROBINSON

CORAM:	B e a u m o n t ,	J.
DATED:	4 A u g u s t ,	1983.

REASONS FOR JUDGNENT

Thls 1s an a p p l i c a t i o n for an order for discharge

made p u r s u a n t t o S .l50 of t h e B a n k r u p t c y A c t 1 9 6 6 ( " t h e

A c t " ) .

I n h i s r e p o r t d a t e d 19 May, 1 9 8 3 , t h e C f f l c i a l

T r u s t e e reported on t h e backclround t o t he a p p l l c a t l o n In

terms w n i c h I summarise a s follows. On l* Februa ry , 1978, E

2 .

seques t ra t ion o rder was made aga ins t t he bankrup t upon the

p e t i t i o n o f Mercantile C r e d i t s L i m i t e d , a c r e d i t o r . An

ob jec t ion t he t o d i scha rge t he o f bankrup t from h l s

bankruptcy by force of s .149 of t h e A c t was lodged on 20

January , 1981, by the Off ic ia Rece iver l as t rus tee on the

following grounds :

"There i s a d e f i c i e n c y i n t h e e s t a t e I n

excess of $1,000,000.00."

The o b ~ e c t i o n has n o t been withdrawn.

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

the fo l lowing a i se t s :

i

Land a t Emu P l a i n s $2,150,000.00

Less amount owlng under

mortgage t o Mercant i le

Credi ts Limlted 2,206,263.00 i

Deficiency 56,263.00

Land a t Emu P la ins $2,140,000.00

- Less amount owlng under

mortgage t o I n d u s t r l a l

Acceptance Corporatlon

Limited 2,535,571.00

Deficiency 395,571.00

Land a t 166 Franc ls

S t r e e t , Rlchmond $126 ,000 .00

Less amount owlng

under mortgage t o

the Westpac

3 .

Banking Corp. Ltd 107,013.00 18, 987 . O O

Cash a t Westpac Banklng Corp. Ltd.

60 Martln Place, Sydney .25

110.00	Cash i n hand
Eook debt - M r . A . Ward 5 . 0 0 0 . 0 0

$24,097.25

The bankrupt was, a t the da te o f bankruptcy , the

m

r e g i s t e r e d p r o p r i e t o r of the f o l l o w i n g p a r c e l s o f l a n d a t

Emu P lans regis tered mortgage: ove r wh ich t p e t i t l on lng c r ed l to r he ld a

L o t 3, Old Bathurst Road, Emu P la ins

L o t 1, i n Deposited Plan 534 698, Emu P la ins

Sec. 20 , R u s s e l l S t r e e t , Emu P l a l n s

The mortgagee has est imated the value of the above

s e c u r i t y a s r e a l i s i n g an amount of $1,591.000.00, resul t lng

i n a n below). e x p e c t e d d e f i c i e n c y o n s a l e o f $ 6 1 5 , 2 6 3 . l 9 ( s e e

Although the mcrtgagee has en te red In to posses s ion

of the proper ty , a s a l e has no t a s ye t occu r red .

The bankrupt w a s , a t t he d a t e of bankruptcy, t he

r e g l s t e r e d p r o p r l e t o r of t h e following pa rce l s of land (also

a t Emu P la lns) over whlch Cl t lcorp Aus t ra l ia L lml ted he ld

regis tered mortgages:

-2

4.

Lot 2 , Old Bathurst Road, mu P l a l n s

Port ion 68, Old B a t h u r s t Road, Emu P l a l n s

Lot 3, Greendale Road, Wallacla

By 2 8 A p r i l , 1 9 8 2 , t h e a b o v e p r o p e r t i e s h a d all

been sold t o g e t h e r w i t h a d d i t i o n a l s e c u r l t y i n the form c f

r e a l e s t a t e mortgaged by Dennis Robinscn Investments Pty.

. Ltd. , as guaran to r , ‘wh ich r e su l t ed i n a n e t d e f i c i e n c y on

sale of $3,401,915.37.

Westpac B nklng Corp. L t d . has informed the

O f f i c i a l T r u s t e e t h a t the land a t Francis 166

Street,Richmond was sold on 4 May, 1981 f o r an amount of

$91,500.00. The bank has lodged a c l a i m i n the e s t a t e f o r

an amount mortgage. o f $15 ,969 .09 . be ing the ba lance owlng under

An amount of $ 2 , 7 0 8 . 0 3 h a s b e e n b r o u g h t t o t h e

c r e d i t o f the e s t a t e a s f o l l o w s :

Deposit $20 .00 on pe t i t ion

Proceeds from rent on property

s i t u a t e d a t 188 Rivers ide Road,

1 ,713 .03 Ernu Pla ins

Contr ibut lons:

1978 S625 .OO

1979 350.00 975.00 $2,708.03

5 .

The book deb t p roved to be i r r ecove rab le .

I n h i s s t a t emen t o f a f f a i r s , t he bankrup t d i sc losed

unsecured c r ed i to r s fo r amounts to ta l l lng $893,821.15 . I n

addi t ion , the bankrupt d i sc losed Le i tz Leeholme Stud Pty.

L td . a s damages for breach of a l e a s e . a c r e d i t o r f o r a n unknown amount be ing fo r a l l eged

The bankrup t a l so d i sc losed

the t h r e e s e c u r e d c r e d i t o r s r e f k r e d t o a b o v e .

O f t h e t e n p r o o f s o f d e b t l o d g e d a g a l n s t t h e

e s t a t e , f i v e h a v e b e e n a d m l t t e d t o r a n k f o r d i v i d e n d f o r

amounts to t a l l i ng $1 ,148 ,438 .00 a s fo l lows :

NAME OF CREDITOR AND AMOUNT - YEAR

DETAILS Ordinary Deferred Total

T.E . Dawson &

Associates - account- ancy fees $2,534 2,534 1974

t o

1978

Deputy Commr. o f . 211,301 211,301 Y/E

Taxation - income 30.6.72

t a x a s s e s s e d on Y/ E

P e n r i t h , Emu 30.6.73

Pla lns Transpor t

Co. Pty. Liq. ) payment of which was guaranteed by the bankrupt Ltd. ( I n

D . W . Suther land 2,037 2,037 1974

& Assoclates - t o

accountancy fees 1 9 7 5

Deputy Commr. of 34e, S07 119,246 467,753 Y/E

Taxation - incomc 30.6.59

tax

1973,

1974

L e l t z 464,813 Leeholme 464,813

Stud P /L - r e n t I n

r e s p e c t c f l e a s e

$1,029,192 $119,246 $1,14.8,4.38

Mercant i le Credl ts Ltd. , the p e t i t i o n i n g c r e d i t o r ,

has lodged a c la im in the s ta te for $3 ,352 ,592 .00 . The

! c l a m has been admitted i n t h e sum of $615,263.00 being the

amount of the unsecured debt a t t h e d a t e of the bankruptcy.

The b a l a n c e o f t h e d e b t has n o t b e e n d e a l t w i t h a s t h e

c o m p a n y ' s e c u r i t y i s s t i l l s u b l e c t o r e a l l s a t i o n . A

f u r t h e r f o u r i nves t iga t ion a s fo l lows	p r o o f s	o	f	d e b t	a r e	t h e	s u b j e c t	o f	f u r t h e r
:

NAME OF CREDITOR AMOUNT

In t e rmar ine	Aus t r a l i a	$	173,830.00
Ltd.

Condor Street T ading 200,950.00

P t y . Ltd.

15,969.00	Banking	Westpac
Corp. L t d .
Aus t ra l ia Cl t lcorp 3 ,401 ,915 .00
Ltd.

$3,792,664.00

The ba l ance . o f funds i n the e s t a t e a c c o u n t a r e

s u f f i c i e n t t o p a y the p e t l t l o n l n g c r e d i t o r ' s c o s t s , t h e f e e s

and cos t s o f admin l s t r a t lon . No 6lvidend w i l l be paid ln

t h i s e s t a t e .

The bankrupt 1s a dlvorced man aged 4.9 years w l t h

no dependants. He i s c u r r e n t l y employed a s a caretzlcer by

. \

c 7 .

Kent Farm Pty . L m l t e d , a family company, on a n e t weekly

income of approxmate ly $80 . O O . In a quest lonnalre lodged

wlth t h e o f f i c i a l T r u s t e e on 1 Apri l , 1983, t h e bankrupt

d i s c l o s e d t h a t t h e o n l y a s s e t h e p o s s e s s e d was c a s h i n hand

of $154.00. Copies of income tax returns prcduced by the

bankrupt d i sc losed h i s g ross lncome f o r t h e p r e v i o u s f l v e

y e a r s a s follows:

GROSS INCOME

1978 ($987.00) Loss

1979 $7,510.00

1980 $3,320.00

1981 $4,400.00

1982 $5,625.00

I n 1967, the bankrupt purchased land a t Emu P l a i n s

for an amount of $125,000.00. The proper ty was financed by

means of an advance under a mortgage to Mercan t i l e Cred l t s

Limited. A po r t lon of t h i s l a n d was s o l d f o r $125,000.00

whlch Cischarged part of the mortgage debt. From 1968 t o

1973, the bankrupt began purchaslng various holdings of land

i n t h e i n d u s t r i a l Emu P l a i n s d l s t r i c t f o r t h e p u r p o s e o f r e s a l e a s

s i t e s . F i n a n c e was obtained by means of advances

under mortgages to Industrial Acceptance Corporatlon Limited

(now known as C l t l co rp Aus t r a l l a L iml t ed ) and Mercant l le

Cred i t s L iml t ed . These l oans were made e l t h e r t o t h e

b a n k r u p t o r t o v a r i o u s companies con t ro l l ed by hlm. The

bankrupt ' S f l n a n c l a l d i f f i c u l t l e s beqan In 1973 w l t h t h e

d rop In l and s a l e s . In A p r l l , 1 9 7 5 , c'ne bankrupt entered

8.

lnto an arrangement wi th Industr ia l Acceptance Corporat lon

Llmlted	and	Mercant l le	Credl	ts	Limited	to	have	h l s	a f f a l r s
managed.

On 1 J u l y , 1973, t he bankrup t en t e red In to a s1x

year lease agreement with Lel tz Leeholme Stud Pty. Limited

f o r t h e Luddenham Road, l e a s e of t h e p r o p e r t y known a s Leeholme S t u d ,

S t . Marys. Although he c o n t r a c t e d t h e l e a s e

i n h i s Scarlet own name, the p roper ty was operated and managed by

Stud Pty. Limited. The lease p rovided for an annual

r en ta l o f $59,250.00 for the per iod ending 30 June, 1976,

and a f u r t h e r amount of $150,000.00 per annum f o r t h e p e r l o d

1 J u l y , 1976 t o 30 June, 1979. The bankrupt repudiated the

lease agreement on 8 March. 1976. The lessor accepted the

repudia t ion and terminated his occupancy of t h e premises.

Leitz Leeholme Stud Pty. Limited was awarded amages i n a n

amount of $464,812.50 in proceedlngs	i n t h e Supreme Court of
New South Wales.

P r i o r t o 1976, the bankrupt and Peter Freeburn were

engaged I n a p a r t n e r s h i p c a r r y l n g o n a d a l r y b u s l n e s s

t r ad lng a s The Wines Dalry a t Wallacia. At t h a t t ime, t he

bankrupt he ld shares i n B a l l m a Waterways P ty . L t d . ,

Spi l lway Inn Pty. Ltd. , Si lverdale Helghts Pty. L t d . and Emu

S tud P ty . L t d . Because o f t h e b a n k r u p t ' s d e t e r i o r a t l n g

f l n a n c i a l p o s i t i o n and h l s I n a b l l l c y t o meet h l s share of

t he commltments o f t h e p a r t n e r s h l p , a deed was executed on

9.

24 November, 1976 under which the bankrup t t r ans fe r r ed h i s

shares in the above companles to M r . Freeburn In exchange

for an assignment t o t h e b a n k r u p t of M r . F r e e b u r n ' s I n t e r e s t

i n the dalry farm. A second reglstered mortgage was taken

by Mr. Freeburn over the dalry farm property In the sum of

$90,000.00 t o s e c u r e moneys p r e v l o u s l y a d v a n c e d t o t h e

b a n k r u p t . I n A p r i l , 1977, by o r d e r o f t h e C o u r t , t h e

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

former wife , subject t o t h e encumbrances thereon.

From 2 8 December, 1964, the bankrupt was a d i r e c t o r

a n d s h a r e h o l d e r o f B i l l i a r d E q u i p m e n t P t y . L t d . , Dennis

Robinson Investments Pty. L t d . , Wyong Hotel Investments Pty.

L t d . , Summerland Investments Pty. Ltd. , Scar le t Lodge Pty.

L t d . , Scar le t Stud Pty. Ltd. , W.A. Trot t ing Transpor t Co.

Pty. Ltd. , Trans-Australia Stock Transport Co. Pty. Ltd. ,

' r

W.A.	Livestock Depot P ty . L t d . and Llvestock	Transport	Co.
p t y .	Ltd.

On 2 8 September, 1964, B i l l i a r d Equlpment P ty . L t d .

was incorporated. The bankrupt and h i s t h e n w i f e , Thelma

May Roblnson, were d i r e c t o r s and shareholders . The company

was formed wi th t h e o b j e c t of car ry ing on t h e b u s l n e s s of

manufacturing and s u p p l y i n ? s p o r t l n g o r b i l l l a r d equipment .

Hrs. Robinson r e s i g n e d a s d l r e c t o r an 2 4 December, 1971, a n d

Mr. D . W . Sutherland was appointed I n l l e u . The bankrupt

gave personal guarantees to the Bank of New S o u t h Wales on

10.

behalf of t h e company. On 18 February, 1977, the company

was o r d e r e d Commissioner of t o be wound up upon t h e p e t l t l o n o f t h e Deputy

Taxation. The company was i l n a l l y s t r u c k

o f f the r e g i s t e r on 18 A p r i l , 1980 pursuant t o s.30e of the

Companies A c t , 1961 ( N . S . W . ) .

On 16 December, 1969, Dennis Roblnson Investments

.

Pty. Ltd. was incorpora ted . The bankrupt and his former

wife were company were t o directors and shareholders . The o b j e c t s of t h e

i n v e s t , s e l l and dea l i n l and . Aga in , Mrs.

Roblnson resigned as director on 24 December, 1971 and M r .

D.W. Sutherland was appo in ted i n l i e u . The company acqulred

v a r i o u s p a r c e l s of l and i n Emu Plains which were mortgaged

t o Ci t icorp Aus t ra l ia L imi ted . I t would a p p e a r t h a t t h e

company g a v e g u a r a n t e e s f o r l l a b l l l t l e s o f t h e b a n k r u p t t o

Ci t icorp Austral ia Limited and the guarantees were supported

by these mortgaaes (see above) .

Wyong Hotel Investments P t y . L t d . was incorporated

on 8 September, 1970. The bankrupt and G . R . Roblnson were

t h e d i r e c t o r s and shareholders. The company was fonned w i t h

t h e o b l e c t o f managing and conduct lng a h o t e l a n d m o t e l

bus iness . The company purchased the Grand Hotel a t Wyong.

The purchase was financed by a mcrtgage t o t h e Bank of New

South Wales $126,000.00 and a b l l l of secure to an dvance th In amount cf

s a l e o v e r t h e h o t e l s r o c k t o t h e

vendors, M . K . & R . M . Gascolgne, in the sum of $150,000.00

executed on 29 July, 1974. On t h e s a l e o f t h e h o t e l , the

proceeds were suf f lc len t to d l scharge the b i l l of s a l e and

the mortgage. A surp lus o f $46,000.00 was re t a lned by t he

Bank t o s a t l s f y c e r t a i n o t h e r l l a b i l i t i e s .

SummerJ.and Investments Pty. L t d . w a s incorpora ted

on 25 February, 1971. The bankrupt, Mr. R.J. Pldcock and

Mr. P . Freeburn were appo in ted d i r ec to r s . The bankrupt was

a major shareholder in the company. The company was formed

wi th the ob jec t s t o deve lop l and fo r subd iv i s ion and r e s a l e ,

and t o e r e c t r e s l d e n t i a l and commerc ia l bu i ld lngs . The

company purchased proper t ies T in tenbar , a t P iml ico and

Newrybar which were mortgaged t o Custom Credl t Corporat ion

Limited t o secure advances in the amount of $270,000.00. I t

would appear t ha t the mor tgagee has not ye t rea l i sed a l l i ts

securi t ies .

Sca r l e t Lodge P t y . L t d . was i n c o r p o r a t e d o n 9

September, 1971. 'The bankrupt and M r . C.W. Sutherland were

i t s d i r e c t o r s D The bankrupt sa id tha t he was I' t he

b e n e f i c l a l owner" of the company. The company was formed

with t h e o b j e c t s of breedlng and t r a ln lng r acehor ses . The

company's assets included stables and improvements a t

Warwlck Farm whlch were mortgaged to Industr ia l Acceptance

Corporatlon Limited. The mortgagee real ised i t s s e c u r l t y

but lncurred a def lc lency on s a l e . Cn 2 3 October, 1979, t he

company was s t r u c k o f f t h e r e g i s t e r a s a defunct company

12.

pursuant to s.308 of the Companies A c t 1961 ( N . S . W . ) .

S c a r l e t S t u d P t y . L t d . w a s i n c o r p o r a t e d o n 1 3

September, 1973. The bankrupt , M r . D.W. Sutherland and M r .

E.K. Hayes were appointed directors. The bankrupt was the

major shareholder in the company. The company was formed

for the purpose of breeding and t r a i n i n g r a c e h o r s e s . On 5

May, 1974, a f loa t ing cha rge w a s g iven over the property and

a s s e t s o f t h e company t o P a t r i c k - I n t e r m a r i n e ( A u s t r a l l a )

Ltd. t o secure a l i a b l l i t y of $380,000.00 (see above) . I n

November, 1979, t h e company was s t r u c k o f f the r e g l s t e r a s a

defunct company pursuant t o s.308	of t h e Companies A c t ,	1961
(N.S.W.).

I n h i s r e p o r t , t h e O f f i c i a l T r u s t e e also s a l d t h a t

i n r e spec t o f t he da i ry f a rm a t Wal l ac l a , the bankrupt kept

a c a s h prcduced and i n b o o k , l e d g e r a n d ~ o u r n a l . T h e s e r e c c r d s w e r e

t h e o p i n i o n of t h e O f f i c i a l T r u s t e e , a r e

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

T o t he O f f i c i a l T r u s t e e , t h e b a n k r u p t a t t r l b u t e d

t h e c a u s e o f h l s b a n . k r u p t c y t o : " R e c e s s i o n - Land n o t

sa leable m expressed, no challenge va lue o f a t r tgages" . Al though shor t ly

has Seen made to t he accu racy o f

t h i s s t a t emen t .

13.

I n the opln ion of the Of f i c l a l T rus t ee , t he conduc t

of the bankrupt durlng h l s bankruptcy was s a t l s f a c t o r y o t h e r

t h a n t h a t he f a l l e d t o r e t u r n q u e s t l o n n a i r e forms forwarded

t o him a t Kent Farm, Cast lereagh Road, Cast lereagh by the

O f f i c i a l R e c e i v e r o n b e h a l f o f t h e O f f i c i a l T r u s t e e i n

Bankruptcy , t rus tee of the bankrupt es ta te , on 1 July, 1979,

4 J u l y , 1980, 1 July,. 1981 and i July, 1982. In response t o

t h e s e p a r t i c u l a r a l l e g a t i o n s , t h e b a n k r u p t s a y s ( a n d h e was

not c ross -examined on the po in t ) tha t he gave a l l but t h e

1980 q u e s t l o n n a i r e t o h i s a c c o u n t a n t , V ? . T.E. Cawson, and

h e b e l i e v e s t h a t Mr. Eawson forwarded them t o t h e O f f i c l a l

Receiver w i t h a copy of each year‘ S income t ax r e tu rn . The

b a n k r u p t c l a i m s t h a t t h e f i r s t time h e became aware t h a t t h e

Off ic ia l Rece iver had not rece ived the ques t lonnai res was

when h e r e a d t h e O f f i c l a l T r u s t e e ‘ s r e p o r t .

So f a r as the 1980 ques t lonna i r e is concerned, he

s a y s t h a t he p e r s o n a l l y f o r w a r d e d t h a t d o c u m e n t t o t h e

Off ic ia l Rece iver w l t h a l e t t e r d a t e d 14 Aprl l , 1980. H e

b e l l e v e s t h a t the Of f i c l a l T rus t ee has both t h a t l e t t e r and

the 1980 q u e s t l o n n a i r e I n h i s F o s s e s s l o n . I n t h e l e t t e r

dated 14 A p r i l , 1980. the bankrupt said:

“I have been malnralnlng and upkeeplng the

proper ty to an acceptab le s tandard w i n l s t

awalt ing a s a l e . I n r e t u r n I am rece lv lng

board and lodglng that 1s v a l u e d a t $30.00

per week a s shown i n a t t ached t he

ques t lonna i r e . I t has been funher agreed

t h a t I s h a l l r e c e l v e d c u b l e a n a g e n t ‘ s

commission on comple t lon o f a s a l e f o r

services rendered. As I am not a

benef lc ia ry under my f a t h e r ’ s w i l l ( S I C ) . ‘ l

14.

The app l i ca t ion was adjourned on a number of

occaslons so t h a t the Of f l c l a l T rus t ee cou ld exp lo re the

p o s s i b i l i t y k h a t o t h e r a s s e t s m i g h t be a v a i l a b l e f o r t h e

purposes o f the bankruptcy . In par t lcu lar , ev idence was

g lven tha t the bankrupt had f a i l e d t o d i s c l o s e h i s o w n e r s h l p

of a narrow s t r i p of land running from Cast lereagh Road t o

Peach Tree Creek, Penrith. However, I am s a t i s f i e d , from

ev idence g iven by a R e a l i s a t i o n C f f i c e r e m p l o y e d i n t h e

O f f i c i a l R e c e i v e r ' s o f f i c e , t h a t t h e l a n d i s of no more than

nominal value. I am a l s o s a t i s f i e d t h a t t h e b a n k r u p t h a s no

en t i t l emen t t o any i n t e r e s t under h i s m o t h e r ' s w i l l .

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

b e n e f i c i a l i n t e r e s t i n a l e a s e from the S ta t e Ra i l Au thor i ty

of New South Wales, held i n h l s name, o f c e r t a i n l a n d a t

Emu Pla ins ( lease agreement T 81/459). The bankrupt

a c k n o w l e d g e s t h a t he h o l d s t h l s l e a s e h o l d ' I n t e r e s t upon

t r u s t f o r P r a i r i e Vale Pty. L t d . , company a cont ro l led by

M r . G . A . Wray. Apparently, a d i spu te has a r i s en between Mr.

Wray and Mrs. J.E. Blngham i n which Mrs. Blngham c l a i m s

reimbursement for moneys paid by her on behalf of P r a i r i e

Vale Pty. b a n k r u p t s t a t e s L t d . i n connection w l t h t he Emu P la ins l and . The

t h a t , upon payment by P r a i r l e Vale Pty. L t d .

o f t h e amounts i n ques t ion , he w l l l t r ans fe r t he l ea seho ld

i n t e r e s t t o t h a t company, t h u s g l v i n g e f f e c t t h e t o

acknowledged t r u s t . Thls p r o p e r t y , t h e r e f o r e , s t a n d s

ou t s ide the bankruptcy ( BankruDrcy Act, 1966,

1 5 .

para .l16	( 2 ) ( a ) ) .
The bankrupt gave evldence arrangement an of

between members of h i s fami ly a r i s ing ou t o f the p roposed

sa le of the faml ly proper ty known a s Kent Farm, Cas t le reagh

Road, C a s t l e r e a g h ( s e e t h e l e t t e r d a t e d 1 4 A p r i l , 1980

q u o t e d a b o v e ) . I f a s a l e v e n t u a t e s , it i s p r o p o s e d ,

appa ren t ly , t ha t he bankrup t w i l l receive, presumably for

h i s e f f o r t s i n t h a t b e h a l f , an amount being twice the s c a l e

commission payable t o a r e a l e s t a t e a g e n t I n such a

t ransact ion. Al though the bankrupt , hrough h i s counsel ,

o f f e red t o submi t t o a condi t ion tha t the bankrupt consent

t o the en t ry o f judgment in f avour o f t he Of f i c l a l T rus t ee

i n t h i s amount, t h e p r o v i s i o n s of sub-sect ion 150(7)

preclude course: c h a r a c t e r i s e d thls any such amount should be

a s i n t h e n a t u r e o f lncome and sub-sect ion

150(7 ) p rov ides t ha t the Court shal l not , under sub-sect ion

150(5), s u s p e n d t h e o p e r a t i o n o f a n o r d e r o f d i s c h a r g e

s u b l e c t t o c o n d i t i o n s t h a t r e q u i r e , or have the e f f e c t o f

requi r ing , the bankrupt t o make payments from hls lncome a t

any time commencing on the a f t e r t h e e x p i r a t i o n of the pe r i cd o f f i ve yea r s

da t e o f h l s bankruptcy. That perlod has

a l ready passed.

I n the c l rcumstances , the Off ic la l Trus tee ne l ther

o p p o s e s n o r s u p p o r t s t h e a p F l l c a t i c n f o r d l s c h a r q e . He

r epor t s no matters pursuant t c sub-sec t lcn 150(6) . Despl te

r

16.

the mass lve def ic iency , no c red l tor appeared on the hear ing

t o oppose the app l l ca t ion , a l though the pe t i t l on ing c red l to r

d i d appear a t an ear ly s tage of these proceedings .

There i s no s u g g e s t i o n t h a t a n y o f t h e m a t t e r s

spec i f led in sub-sec t ion 150(6) a re es tab l l shed . No at tempt

has been b a n k r u p t mgde t o make o u t a case t h a t the conduct o f the

e i t h e r b e f o r e o r a f t e r t h e b a n k r u p t c y , was

u n s a t i s f a c t o r y .

On an app l i ca t ion fo r d l scha rge , t he func t ion of

t h e Cour t 1s " n o t merely t o r e l l e v e u n f o r t u n a t e d e b t o r s " .

It i s an equal ly impor tan t par t o f i ts d u t y " t o p r o t e c t and

uphold commercial m o r a l i t y " a n d " t o p r o t e c t t h e t r a d i n g

community and the publ lc genera l ly aga lns t persons who have

shown themselves in the p a s t t o b e u n f i t t o t r a d e o r t o be

i n d i f f e r e n t t o or ignorant of those p r i n c i p l e s of commercial

morality by which a l l hones t t raders should be guided" (see

R e Todd N o . 2 10 S.R . ( N . S . W . ) 490 a t p . 5 0 4 ) .

I n t h e p r e s e n t c a s e , by v i r t u e o f t h e s t r u c t u r e o f

t h e l e g l s l a t i o n t o r e f u s e a s it now stands, the Court 1s cons t ra lned

t h e d i s c h a r g e o r t o g r a n t ~t u n c o n d l t l o n a l l y .

This follows from the absence of any offendlng conduct of

the type prescr ibed by sub-sect lon 150(6) and from the te rms

of sub-sect ion 150(10) . Under t h e l a t t e r p r o v l s l o n , t h e

Court has no power t o suspend the operat lon of an order of

1 7 .

discharge beyond the pe r lod o f t h ree yea r s commenclng on the

d a t e of the bankruptcy . In the p resent case , t h a t per iod

has a l ready no question passed. For the reasons I have a l ready grven.

of any payment from lncome can a r l s e by v l r t u e

o f t he ope ra t lon o f sub - sec t lon 150(7 ) .

Can it b e s a i d , t h e n , t h a t h e c o n d u c t of t h e

0

bankrupt is such as t o warrant a r e f u s a l o f t h e a p p l i c a t i o n ?

I n my opin ion , a l though the case is , i n many r e s p e c t s , a

marginal one, h i s conduct 1s n o t , o f i t s e l f , s u f f i c l e n t t o

merit such a p e n a l t y ( c f . R e Kolomy (1981) 5 6 F.L.R. 157:

Re Hardlnq (1981) 57 F . L . R . 320). Although t h e t r a d i n g

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

a s p e c t s , w a s q u l t e unimpressive, involv ing as it does, a

success ion of bus iness fa i lures , the f a c t r e m a i n s t h a t none

of t h e s e f a i l u r e s , o n t h e v i d e n c e b e f o r e me, can be

a t t r ibu ted ' - to any d l shones ty , neglec t , mis feasance o r even

incompetence on the part of the bankrupt. Whilst one i s

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

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

a t t a c k on him on t h i s s c o r e , he must be given t h e b e n e f l t o f

the doubts g i v e n I have. I n comlng t o t h i s concluslon, I have

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

O f f i c i a l T r u s t e e had ample oppor tun l ty t o rnves t iga t e t hese

m a t t e r s a n d t h a t h e was r e p r e s e n t e d b y c o u n s e l a t t h e

hear ing of t h e a p p l l c a t i o n .

-2

1 8 .

The s i z e t h d e f i c i e n c y o f and the nommal

c o n t r l b u t i o n made by t h e b a n k r u p t t o h l s e s t a t e a r e o f

g r e a t e r c o n c e r n . P r i m a f a c l e , t h e y a r e s u f f i c l e n t t o

d l s e n t i t l e t h e a p p l i c a n t t o the r e l l e f h e seeks. But t h e r e

a r e m i t i g a t l n g f a c t o r s t o be taken in to account . In the

f i r s t p l a c e , t h e d e f i c i e n c y , m a s s i v e t h o u g h It i s , a r i s e s

from t h e c o l l a p s e o f t h e r e a l e s t a t e market In t he 1973 -

1975 per iod and t h u s , it may be s;Pid, a r i s e s t o some e x t e n t

f rom c i r cums tances beyond t he con t ro l o f t he b a n k r u p t .

Secondly, the u n f o r t u n a t e c r e d i t o r s who s u f f e r e d most of t h e

de f i c l ency a re expe r i enced f inanc ie r s who m u s t be assumed t o

have l en t p rope r ) r a t e s moneys t o the bankrupt a t commercial ( b u t q u l t e

of i n t e r e s t i n t h e knowledge t h a t any co l lapse

o f t h e s p e c u l a t i v e real e s t a t e m a r k e t c o u l d s e r l o u s l y

jeopard ise the i r p rospec ts o f recovery of p r i n c i p a l , l e t

a lone i n t e re s t . Th i rd ly , and most important , it could not

be suggested s u f f i c i e n t that t i e earning potential of the bankrupt 1s

t o make a n y i m p a c t , l e t a l o n e a s i g n i f i c a n t

impact, upon the s h o r t f a l l whlch e x i s t s : i n t h i s s e n s e ,

c o n t i n u a t i o n o f t h e a p p l i c a n t ' s s t a t u s a s a bankrupt would

a p p e a r t o b e f u t i l e so f a r a s e x i s t i n g c r e d i t o r s a r e

concerned.

I have found t h i s a most t roub l lng a spec t of t h e

case . A t f i r s t g l a n c e , it would appea r t ha t t he bankrup t

d e l i b e r a t e l y e l e c t e d t o embark upon a perlod of subs l s t ence

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

p o t e n t i a l . On f u r t h e r e x a m i n a t l o n , h o w e v e r , s u c h f l r s t

impressions may do l e s s t h a n l u s t l c e t o t h e b a n k r u p t . H e

l acks voca t iona l qua l l f i ca t lons and , i n the main, h i s

experience has been of an entrepreneurial k ind. And, it i s

submitted, economic condi t ions which ave prevai led s ince

h is bankruptcy have no t been conducive to employment, on

f a v o u r a b l e t e r m s , o f a p e r s o n i n t h e p o s i t l o n o f t h e

bankrupt. I have formed the view that I should g ive the

bankrup t t he bene f i t o f my doub t s i n t h i s c o n t e x t also.

Is then the s i z e o f t h e d e f i c i e n c y a l o n e a reason

f o r r e f u s i n g a d ischarge? In my o p i n i o n , g i v e n t h e o r i g i n

o f t h e d e f i c i t , it i s n o t o f i t s e l f a s u f f l c l e n t r e a s o n t o

v i s i t u p n t h e b a n k r u p t a c o n t i n u a t i o n o f h i s s t a t u s as a

bankrupt. In this connectlon, it may be obse rved t ha t , so

f a r a s p r o b a b l y one can predict , the r e f u s a l o f a d ischarge would

n o t r e s u l t a n y i n s i g n i f i c a n t i c r e a s e i n

c o n t r i b u t i o n s t o the b a n k r u p t ' s e s t a t e . The ev idence in the

app l i ca t ion sugges t s t h a t the bankrupt has l l t t l e , If any,

e a r n i n g c a p a c i t y a n d t h e r e 1s n o r e a s o n t o e x p e c t a n y

lmprovement i n t h i s c o n n e c t l o n . I n t h l s s e n s e , t h e r e f u s a l

o f t h e a p p l i c a t l o n would a c h i e v e v e r y l l t t l e .

On the other hand, the app l i can t has suf fered the

s t a t u s o f a bankrup t fo r f i ve and a ha l f yea r s . Is t h l s a

s u f f i c i e n t p e r l o d I n t h e c l r c u m s t a n c e s ? I n my o p l n l o n ,

although the case 1s marglnal acd, i n many r e s p e c t s ,

' ."

20.

unsa t i s f ac to ry , it is s u f f l c l e n t : I t i s almost twice the

p e r l o d e n v i s a g e d by t h e s t a t u t e a s t h e o r d l n a r y t e r m o f

bankruptcy. Given the s ize of the def ic iency and the poor

" t rack record" o f the appl icant , wi th some h e s l t a t l o n , I am

p e r s u a d e d t h a t he h a s now se rved an adequa te t e rm o f

bankruptcy i n a l l t he c i r cums tances . I propose to make an

order of discharge b u t , because of the nature of t h e case ,

the bankrupt mus t pay t h e c o s t s o f t h e O f f l c l a l T r u s t e e .

I propose t o make the fol lowing orders :

1. I order tha t the publ ic examinat ion of t he bankrupt -

s h a l l be deemed to have been concluded on 3 July, 1978.

2 . I order the discharge of the bankrupt .

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

I

Off ic ia l Rece iver .

7 ..

I c e r t l f y t h a t th13 and the 19

precedlngpages are a t r u e copTof the

Reasons for Judgment here ln o f hls Honour

hk. Jus t l ce 6s-

<-+L3	\c
Assoclate