Re Van Den Broek, W. v Ex parte Portward Pty Ltd

[1989] FCA 319

Re: WILLIAM VAN DEN BROEK
Ex parte: PORTWARD PTY LIMITED
No. P 614 of 1989
FED No. 319
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Neaves J.(1)

CATCHWORDS

Bankruptcy - Creditor's petition - Act of bankruptcy - Debtor and wife registered proprietors as joint tenants of unexpired residue of Crown lease - Agreement to transfer debtor's interest to wife for consideration of one dollar - Events other than registration occurring more than six months prior to presentation of petition - Registration occurring within six months' period - Whether act of bankruptcy to support petition established.

Bankruptcy - Creditor's petition - Act of bankruptcy - Discussion at preliminary conference under Small Claims Ordinance 1974 (ACT) - Debtor and one creditor present at conference - Whether evidence of discussion admissible - Whether what was said by debtor amounted to notice to creditor that he was about to suspend payment of his debts.

Bankruptcy Act 1966 (Cth), pars 40(1)(b), 40(1)(h) and 44(1)(c)

City Area Leases Ordinance 1936 (ACT)

Real Property Ordinance 1925 (ACT), ss.70, 71

Small Claims Ordinance 1974 (ACT)

HEARING

CANBERRA

#DATE 27:6:1989

Counsel for the Creditor : Mr T.M. Johnstone

Solicitor for the Creditor : Ray Swift

Counsel for the Debtor : Mr B.A. Meagher

Solicitors for the Debtor : Barker & Barker

ORDER

The petition is dismissed.

The creditor pay the debtor's costs of the petition.

Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.

JUDGE1

Portward Pty Limited, a company incorporated in New South Wales and trading as Novelty Warehouse, ("the company") has petitioned the Court for the making of a sequestration order against the estate of William Van Den Broek ("the debtor"). The petition alleges that the debtor is justly and truly indebted to the company in the sum of $2,586.23 for goods sold and delivered and that the company holds no security over the property of the debtor in respect of such debt. The petition further alleges that the debtor, within six months before the presentation of the petition, committed two acts of bankruptcy, being acts of bankruptcy prescribed respectively by pars 40(1)(b) and 40(1)(h) of the Bankruptcy Act 1966 (Cth). Paragraph 40(1)(b) relevantly provides that a debtor commits an act of bankruptcy if, in Australia or elsewhere, he makes a conveyance, transfer, settlement or other disposition of his property or any part of his property that would, if he became a bankrupt, be void as against the trustee. By virtue of par.40(1)(h), a debtor commits an act of bankruptcy if he gives notice to any of his creditors that he has suspended, or that he is about to suspend, payment of his debts.

1. The debtor has opposed the making of a sequestration order, relying for that purpose on a number of grounds. In the result I have found it necessary to consider only the question whether the debtor has committed an act of bankruptcy which will support the petition.
   Act of bankruptcy - par.40(1)(b)

2. The company contends that the debtor, within six months before the presentation of the petition, made a transfer or other disposition of part of his property that would, if he became a bankrupt, be void as against the trustee. The property transferred or otherwise disposed of was the debtor's interest, as joint tenant with Alison Van Den Broek, his wife, under a Crown lease of certain land at Hawker in the Australian Capital Territory being Block 27, Section 1, Division of Hawker and known as 21 Alexandria Street, Hawker. The Crown lease, for a term of 99 years commencing on 21 May 1986, was granted pursuant to the City Area Leases Ordinance 1936 (ACT) on 16 July 1986 and was subsequently registered (Register Book Volume 1016 Folio 96) under s.70 of the Real Property Ordinance 1925 (ACT). On 19 November 1987 the debtor and his wife became registered as the proprietors as joint tenants of the unexpired residue of the Crown lease.

3. Section 71 of the Real Property Ordinance provides:
   

"(1) Every Crown lease, upon registration, shall be subject to the provisions of this Ordinance, and (subject to the provisions of the Ordinance in pursuance of which the Crown lease was granted and to the provisions of the Crown lease) may be transferred, mortgaged and dealt with for the same purposes, and in like manner, as if it had been granted by a proprietor of land under this Ordinance and registered in the Register Book.

(2) Any entries which, in the case of a lease granted by a proprietor of land under this Ordinance, would require to be made in the Register Book shall, in the case of a registered Crown lease, be made in the Register Book on the folium constituted by the Crown lease."

1. By a document in standard form entitled "Agreement for Sale (Crown Leasehold)" and dated 11 August 1988, the debtor and his wife, described in the agreement as the sellers, agreed to sell and the debtor's wife, described in the agreement as the buyer, agreed to buy the unexpired residue of the Crown lease. The agreement recorded the total purchase price as being $1.00. Barker & Barker, Solicitors, who acted for the sellers and the buyer, held the Crown lease in safe custody on behalf of the debtor and his wife. The agreement and a memorandum of transfer, the latter undated, were signed by the parties on 11 August 1988 and on that day delivered by the debtor to Barker & Barker "with instructions to proceed with stamping and registration and to utilise the Crown Lease in safe custody to that end". On 2 September 1988, the assessed stamp duty of $1,327.50 was paid, the memorandum of transfer was dated as of that date and the memorandum and the Crown lease were lodged at the office of the Registrar of Titles for the Australian Capital Territory for registration under the Real Property Ordinance. Particulars of the transfer were entered in the Register Book on 27 September 1988.

2. There is no direct evidence before the Court that the purchase price referred to in the agreement was paid. However, in the memorandum of transfer dated 2 September 1988, the receipt of the consideration of $1.00 is acknowledged.

3. In his affidavit sworn on 19 May 1989, the debtor gave the following account of the circumstances which led to the transfer to his wife of his interest in the property known as 21 Alexandria Street, Hawker:
   

"Approximately five years ago my wife and I lived in a home that we owned in Kambah which was in fact next door to the Excells. We separated at about that time because we were having marital difficulties. About a year later, with some assistance from the Excells, who were of great help to us during that period, we were reconciled and recommenced marital life. However, during that period, our relationship was not stable and it remained unstable for some time. About fifteen months ago, we sold the Kambah home and bought the home in Hawker that is the subject of the transfer. During all of that period, there was a distinct possibility that we would separate and our marital property would be divided. During the period prior to the dissolution of the partnership, I was not able to provide much if anything toward the family expenses and my wife, who was working through that period, was able to assist the family by her own income. If, during that period, the marriage had failed and a property settlement became necessary, because of the fact that my wife had carried more than her fair share of the expenses of the family and because of the fact that we had two children, I would have expected that she would be able to obtain in a settlement or Family Court proceeding, a substantial proportion of the Hawker property. In addition, I had been desirous of endeavouring to save the marriage and the marriage has become stable and settled down since the transfer referred to in September 1988. My primary motivation in relation to the transfer was to save our marriage. I believe now and believed then that if Mr Excell were to carry his proper responsibility in respect to the partnership, there would be no danger of there being any creditors defeated."

The references to Mr Excell are references to Ian David Excell who was a partner with the debtor and one Robert John Lamb in a certain business venture to which reference is made later in these reasons.

1. The debtor was not cross-examined upon the part of his affidavit set out above. Indeed, he was not asked any questions concerning the transfer of his interest in the Crown lease, the circumstances in which it came to be made or his motives for making it.

2. To constitute the act of bankruptcy under par.40(1)(b) upon which the company relies to support the petition before the Court, it is necessary for it to show that the debtor made the transfer or other disposition of his interest in the Crown lease within six months before the presentation of the petition (Bankruptcy Act, par.44(1)(c)). The company has not placed before the Court any direct evidence as to the date upon which the petition was presented. However, an examination of the Court file discloses that, in accordance with the practice advocated by a Full Court of this Court in Purden Pty Ltd v. Registrar in Bankruptcy (1982) 43 ALR 512, the petition bears the imprint of an official stamp showing that it was presented on 22 March 1989. In the absence of any evidence to the contrary, that date must be taken to be the date upon which the petition was presented.

3. The only positive action concerning the transfer of the debtor's interest in the Crown lease which took place within the period of six months prior to the presentation of the petition on 22 March 1989 was the action of the Registrar of Titles of the Australian Capital Territory in entering the particulars of the transfer in the Register Book kept under the Real Property Ordinance. The question for determination is whether, in the circumstances of this case, the debtor can properly be said, in terms of par.40(1)(b) of the Act, to have made a transfer or other disposition of his interest in the Crown lease only when particulars of the transaction were entered in the Register Book. The company contends for an affirmative answer to this question. The debtor contends to the contrary.

4. It is not suggested that there was any limitation, arising either from the terms of the Crown lease or the provisions of the City Area Leases Ordinance, on the debtor's right to dispose of his interest in the lease. It is also common ground between the parties that, by virtue of the provisions of the Real Property Ordinance, the interest of the debtor in the Crown lease did not pass to his wife, at law, until the appropriate entry was made in the Register Book on 27 September 1988. The issue between the parties is whether the events which occurred prior to that date and which, indeed, occurred more than six months before the presentation of the petition on 22 March 1989 had created in the debtor's wife an interest in the land, albeit enforceable only in equity, corresponding in effect to the interest that those events would have created under the general law.

5. The essence of the case made on behalf of the company is that the transaction is properly to be characterised as a gift by the debtor to his wife and as a gift which was imperfect until perfected by registration under the Real Property Ordinance of the memorandum of transfer. This approach treats the consideration of $1.00 stated in the transfer as being only nominal in the sense in which that expression is used in Brunker v. Perpetual Trustee Co. (Ltd) (1937) 57 CLR 555 per Dixon J. at p 597. It fails, as counsel for the debtor submitted, to recognise that the instrument of transfer was executed to give effect to a contract made between the parties under which the sellers agreed to transfer the Crown lease to the debtor's wife alone in return for a promise to pay the sum of $1.00. It may be accepted that that sum was in no sense equivalent to the value of the interest contracted to be transferred and was clearly inadequate to constitute the debtor's wife "a purchaser .... for valuable consideration" for the purposes of s.120 of the Bankruptcy Act: Barton v. Official Receiver (1986) 123 CLR 75. That, however, is not the question. The question is whether the consideration of $1.00 was sufficient to create a binding contract under which the debtor's wife acquired an interest in the property of the debtor. That question must, in my opinion, be answered in the affirmative. The position is summarised in the following passage in Lindgren, Carter and Harland, Contract Law in Australia (par.326) -
   

"The law governing the formation of contracts is not concerned with the adequacy of consideration as such. Payment of one dollar or a promise to pay one dollar are often used in legal documents to support quite onerous promises."

See also Cheshire and Fifoot's Law of Contract, Fifth Australian Edition, pars 217, 224.

1. It follows that, by virtue of the making of the contract, the debtor's wife acquired an interest in the land, albeit only an equitable interest therein, and did so more than six months before the presentation of the petition. The consequence is that, even if the transfer would, if the debtor became a bankrupt, be void as against the trustee, the making of the transfer did not constitute an act of bankruptcy which will support the petition at present before the Court.

2. I have also considered whether a different result would be reached if, contrary to the view expressed above, the transaction is to be regarded as voluntary in the sense that there was no consideration for the transfer by the debtor of his interest in the Crown lease. The question is whether, the transaction being voluntary, the debtor had made an effectual disposition of his interest in the Crown lease more than six months before the presentation of the petition. The reasoning of the High Court in Cope v. Keene (1968) 118 CLR 1 and Taylor v. Deputy Commissioner of Taxation (1969) 123 CLR 206 requires, in my view, that the disposition be treated as having been effected if, prior to the relevant date, the debtor had done everything which, according to the nature of the transaction, was necessary to be done by him in order to transfer his interest in the Crown lease. There can be no doubt that the debtor intended to make an immediate transfer to his wife of his interest in the lease. In furtherance of that intention, he executed a memorandum of transfer in registrable form and delivered the same to the firm of solicitors who were acting for his wife as well as for himself. The debtor, no doubt in conjunction with his wife, gave the necessary instructions to the solicitors to proceed with the stamping and registration of the transfer and authorised the solicitors to produce to the Registrar of Titles the Crown lease which they were holding in safe custody on behalf of both parties. Pursuant to those instructions, all necessary steps were taken and the documents were lodged for registration on 2 September 1988. What was done amounted, in my view, to delivery to the debtor's wife of the memorandum of transfer and the Crown lease, entitling her to have the transfer registered without any further intervention on the part of the debtor (see Kennedy v. Tickner (1950) NZLR 62; cf. Wadsworth v. Wadsworth (1933) NZLR 1336). The debtor was not, thereafter, in a position effectively to prevent or obstruct registration of the transfer. Consequently, the transfer or disposition became effective more than six months before the presentation of the petition.

3. For the reasons set out above, the company may not rely on the act of bankruptcy alleged under par.40(1)(b) of the Bankruptcy Act.
   Act of bankruptcy - par.40(1)(h)

4. The company contends that, on 17 February 1989, the debtor gave notice to Soren Jensen, a creditor, that he was about to suspend payment of his debts. That notice was said to have been given in the course of a conference directed to be held under s.10A of the Small Claims Ordinance 1974 (ACT) in proceedings instituted in the Small Claims Court by Mr Jensen against the partnership constituted by the debtor, Ian David Excell and Robert John Lamb to recover a debt of approximately $960 for goods sold and delivered by Mr Jensen to the partnership prior to June 1988. The conference was held by a Clerk or a Deputy Clerk of the Small Claims Court and was attended by Mr Jensen, Mr Excell and the debtor.

5. Counsel for the debtor objected to the admissibility of the evidence adduced on behalf of the company as to what was said at the conference, referring in that regard to certain of the provisions of the Small Claims Ordinance. The purposes of holding a conference prior to proceedings coming before the Small Claims Court for inquiry are set out in s.10A(6) of the Ordinance as follows:
   

"(a) defining and limiting the matters in dispute in the proceedings;

(b) ensuring that the parties are taking all necessary measures to enable the inquiry in the proceedings to take place expeditiously; and

(c) assessing the time that is likely to be required for the inquiry."

Section 10C provides:

"At an inquiry in proceedings, unless the parties otherwise agree, evidence shall not be given, and statements shall not be made, concerning any words spoken or act done at a conference held in accordance with this Division if the words spoken or act done related to any question to be determined by the Court in the proceedings."

Although the objection to the admissibility of the evidence was overruled, I agree with the submission of counsel for the debtor that, in evaluating what was said at the conference, it is relevant to have regard to the provisions of the Ordinance as indicating the setting in which the debtor made the statements relied upon by the company.

1. Before examining the evidence as to what was said at the conference, it is desirable to refer shortly to the debtor's business activities and to certain agreements to which he was a party. This evidence was objected to by counsel for the company and was received subject to that objection. On further consideration, I am of opinion that the evidence is admissible, not for the purpose of determining any question as to any rights which the debtor may have against Mr Excell, a determination which would be quite inappropriate as Mr Excell is not a party to the present proceeding, but as providing further background against which to evaluate what was said at the conference.

2. It appears from the evidence that, for some years prior to 21 September 1988, Ian David Excell, Robert John Lamb and the debtor carried on business in partnership, operating, in Canberra, what are known as "Granny May" stores under franchise from a company known as Granny May Management Pty Limited. Three stores were operated by the partnership, one at Civic, Canberra City, one at Woden and one at Tuggeranong. On 21 September 1988, the partnership was dissolved, two agreements being entered into on that date. By the first, to which each of the partners was a party, Mr Lamb retired from the partnership (clause 5), his one-quarter share being purchased by the debtor (clause 1). No purchase price was payable by the debtor to Mr Lamb, the consideration for the purchase being the debtor's agreement to assume responsibility for all the partnership liabilities and debts incurred to and including the date of the agreement (clause 2). The second agreement, to which Mr Excell and the debtor were parties, evidenced the division between them of the partnership assets and liabilities. The debtor was to have the right to operate the stores at Civic and Woden. Mr Excell was to have the right to operate the store at Tuggeranong. Mr Excell was to assume responsibility for certain debts and liabilities, responsibility for the remainder to be assumed by the debtor. Mr Excell was to pay to the debtor amounts totalling $55,000. It is not clear, on the evidence, whether those amounts were paid.

1. A further agreement was made between Mr Excell and the debtor on 18 November 1988. By the time this agreement was made, the Woden store had been closed. The agreement provided (clause 1) for the transfer from the debtor to Mr Excell of all the debtor's estate, right, title and interest in the store at Civic. The agreement also provided (clause 2) that Mr Excell accepted sole responsibility and liability for, inter alia, all existing and future liabilities and creditors of the former partnership so far as they may have remained with the debtor under the terms of the second of the agreements dated 21 September 1988 and of the Civic and Woden stores. Under clause 3(b), the debtor acknowledged that, to the best of his knowledge the creditors as set out in a statutory declaration made on 11 November 1988 and annexed to the agreement were correct and that, if there were any substantial difference, he would be responsible for the same. Clause 4 provided:
   

"4. Wherever in this deed EXCELL has accepted sole responsibility for the payment of monies due or to become due or the compliance with the terms of leasing agreements, franchise agreements, leases of premises or any other liabilities or obligations and such responsibility or liability may still attach or in the future attach to VAN DEN BROEK in full or in part then EXCELL hereby agrees to indemnify and hold safe VAN DEN BROEK and (sic) respect of any such responsibility or liability."

The statutory declaration set out a list of creditors and their respective debts as at 9 November 1988 totalling $59,180.62. Of this amount $15,165.24 was described as current and the balance, $44,015.38, as overdue. Included in the list was a debt to Novelty Warehouse of $3,000, said to be overdue. The list does not appear to refer to any debt due to Mr Jensen.

1. According to the debtor Mr Excell has continued to carry on the business since November 1988.

2. In his affidavit sworn on 8 May 1989, Mr Jensen said that he went to the Small Claims Court on or about 17 February 1989 in response to a notice issued by the Court and that he there met the debtor and Mr Excell. The affidavit continued:
   

"In their presence I spoke with the Debtor about paying the Claim and he said 'I owe Mr Jensen the money'. He fumbled with his papers and then he said 'There's other people to be paid too'. Then he said 'If anybody starts to sue me for money I'll just go into liquidation. I haven't got any money to pay anyone. I'm living on my wife's money.'"

The affidavit does not state in whose presence apart from the debtor and Mr Excell, the words quoted were spoken. Nor does that affidavit suggest that there was any other relevant discussion.

1. The debtor swore an affidavit in relation to the matter on 19 May 1989. In that affidavit, he stated that the conference in question took place on 17 February 1989. He further stated that what Mr Jensen had deposed to in his affidavit of 8 May 1989 did not accurately reflect what was said. The affidavit continued:
   

"In the conference, which was run by a court officer, the court officer was anxious to ascertain whether there was a dispute concerning the amount of money, which was not great; and if not, why it would not be paid. Mr Jensen and Mr Excell were also there. In response from an enquiry from the court officer as to what the position was in relation to the dispute or payment, I said words to the following effect: 'I have put substantially more into this partnership than either of the other two partners. I can give no more. I would sooner go into a Part 10 (sic) bankruptcy as I can give no more.' Immediately after I said that, Mr Excell said "I feel sorry for Mr Van Den Broek, but this is the way it is.' At the time that I said the words, I was clearly able to pay the amount claimed by Mr Jensen, if need be."

1. In reply, the company relied on the affidavits of Mr Jensen and Mr Excell both sworn 25 May 1989. No objection was taken to the reception in evidence of Mr Excell's affidavit although it was made clear that he was not available for cross-examination. In his affidavit, Mr Jensen stated that he agreed in substance with the facts stated by the debtor but said that more was said than that which the debtor had stated to be the case. His affidavit contined:
   

"After Mr Van Den Broek had said words to the Clerk of the Court to the following effect: 'I have put substantially more into the Partnership than either of the other two parties. I can give no more. I would sooner go into a Part 10

(sic) Bankruptcy as I can give no more', the Clerk said words to the following effect to Mr Van Den Broek: 'I'm not interested in any other things except Mr Jensen's claim'. After this, Mr Van Den Broek replied: 'I owe Mr Jensen the money' and after and whilst fumbling with his papers said: 'There's other people to be paid too'. Then he said: 'If anybody starts to sue me for money I'll just go into liquidation. I haven't got any money to pay anyone. I'm living on my wife's money'."

1. Mr Excell, in his affidavit, stated that the substance of the facts stated by the debtor in his affidavit was correct but that more was said by the debtor than was referred to in that affidavit. Paragraphs 3, 4 and 5 of the affidavit stated:
   

"3. The Clerk of the Small Claims Court asked me whether I disputed the debt owed to Mr Jensen. I replied with words to the following effect: 'I have no reason to dispute that the debt exists, but that in a list of Creditors provided by Mr Van Den Broek he had not referred to Mr Jensen as a creditor and that he had undertaken to be responsible for the creditors not listed'.

4. The Clerk then asked Mr Van Den Broek: 'Do you dispute the debt?' Mr Van Den Broek then replied in words to the following effect: 'I refuse to pay any more money, I have put substantially more into the Partnership then either of the other two parties. I will give no more. I would sooner go into a Part 10

(sic) Arrangement as I can give no more'.

5. The Clerk then asked Mr Van Den Broek 'Do you want judgment to be given against you', to that Mr Van Den Broek replied in words to the following effect: 'No, if people come chasing me for money I will fight it. I have no money, I am working selling real estate, I have only had one sale since November, I'm living off my wife's earnings, I am arranging to see an accountant who specialises in Part 10 (sic) arrangements'."

1. Mr Jensen was cross-examined. He agreed that he had made no note of the discussion on 17 February 1989 and volunteered that he had a very good memory. He could not, however, recall whether anything further was said than was deposed to in his affidavit of 25 May 1989. In particular, he denied that the officer of the Small Claims Court had asked Mr Excell any questions. He could not recall Mr Excell saying anything to that officer though, when a specific question was put to him based upon what Mr Excell had said in his affidavit, Mr Jensen said he did recall that Mr Excell had said that he had no reason to dispute that the debt was owing to Mr Jensen. He denied, however, that Mr Van Den Broek had used the words attributed to him by Mr Excell in par.5 of his affidavit.

2. The debtor was also cross-examined as to what took place at the conference. The relevant part of his cross-examination is as follows:
   

"Q. And at that time you said, I suggest to you, 'I owe Mr Jensen the money.'? A. I did.

Q. And you said, 'There is other people to be paid too.' You agree with that? A. I do.

Q. Yes and you said, 'If anyone starts to sue me for money I will just go into liquidation.'?

A. I do not think they were my words exactly but the theme is right. Q. All right. You might have said, 'Go into bankruptcy.'?

A. I think a Part X bankruptcy, yes, something like that. Q. Right. 'I have not got the money to pay anyone.'?

A. That is what I said.

Q. Right you said, 'I am living on my wife's money.'?

A. Yes.

Q. Do you remember the clerk asked you, 'Do you dispute the debt?'? A. Yes.

Q. And you said, 'I refuse to pay any more money. I have put substantially more into the partnership than either of the other two parties.'? A. Yes.

Q. 'I will give no more.' You said that? A. Yes.

Q. 'I would sooner go into a Part X arrangement as I can give no more.'? A. Yes.

Q. Do you remember the clerk saying to you, 'Do you want judgment given against you?'?

A. Yes.

Q. And you said to him, 'No, if people come chasing me for money I will fight it.'? A. Again, I do not know if that is the exact words, but the theme is right. Q. Right. Then I put to you you said, 'I have no money, I am working selling real estate. I have only had one sale since September - since November.'? A. Yes.

Q. And you said, 'I am living off my wife's earnings.'?

A. Yes.

Q. And, 'I am arranging to see an accountant who specialises in Part X arrangements.'?

A. Yes."

1. Although one may feel confident as to the general gist of the discussion which took place at the conference, the evidence does not enable me to find what were the precise words in fact used by the debtor. Despite his assertion to the contrary, Mr Jensen did not impress as having a very clear recollection of what was said. While I accept the debtor as a witness of truth, his evidence goes no further, at least as to some parts of the discussion, than to confirm its general nature rather than the precise words used.

2. To constitute the act of bankruptcy relied upon, it is necessary for the company to establish that the debtor had an intention not to pay his debts as they fell due and that he communicated that intention to one of his creditors: Cropley's Ltd v. Vickery, (1920) 27 CLR 321: Re Hewson; Ex parte Sydney Stock Exchange Ltd (1967) 10 FLR 479 at pp 483-4.

3. I have taken into account the circumstances in which the discussion took place. Those circumstances include that the requisite notice is said to have been given to a single creditor only and not to the general body of creditors. Other significant features are that the debt in respect of which Mr Jensen was claiming was a debt alleged to be due by the partnership, that Mr Excell had been one of the members of that partnership and that he was present at the discussion. Much of what was admittedly said by the debtor at the conference was clearly referable to the difference which obviously existed as to who, as between Mr Excell and himself, was responsible for meeting the outstanding debts of the dissolved partnership having regard to the terms of the agreements between them dated 21 September and 18 November 1988 to which reference has already been made. It seems to me reasonable to infer that what the debtor said was coloured by the dispute between the former partners and that he was refusing to pay Mr Jensen's debt, and also other partnership debts, in an endeavour to have Mr Excell pay those debts. That that was the position would not, I think, have been lost on Mr Jensen although it was clearly a matter of indifference to him which of the former partners paid his debt.

4. What the debtor said at the conference may be taken to mean that, if he were required to pay all the outstanding debts of the partnership, he would be unable to do so and would be insolvent. But an admission of insolvency is not, of itself, enough to constitute the act of bankruptcy. What was said falls short, in my opinion, of notice that the debtor was about to suspend payment of his debts. There is certainly no evidence that Mr Jensen understood what he said in that sense.

5. In my opinion, the company has not established that the debtor committed the act of bankruptcy prescribed by par.40(1)(h) of the Bankruptcy Act.
   Order

6. For the reasons set out above, the company has failed to establish an act of bankruptcy which will support the petition. The petition is, therefore, dismissed. The company must pay the debtor's costs of the petition.