Re Walker, D.R. Ex parte Walker, D.R. v Mercantile Credits Ltd

[1992] FCA 235

JUDGMENT No. .%3%..1j

C A T C H W O R D S

Bankruptcy - Bankruptcy notice - application to set aside - securing payment of the sum referred to in the notice to the satisfaction of the court - relevant considerations to the court's determination.

BankruDtcv Act (1966) - s.41(2)(b)(ii)

Re Harrv Reicher: Ex Darte DeDUtV Commissioner of Taxation of the Commonwealth of Australia - Federal Court Victoria, B365 of 1990.

C O O D ~ ~ J.. Brisbane. 24 ADril. 1992

RE:  DONALD ROBIN WALKER: EX PARTE: D O W D ROBIN WALKER,

MERCANTILE CREDITS LIMITED A.C.N.	000 030 508
No. 265 of 1992

LIMITED DISTRIBUTION

C A T C H W O R D S

*

Bankruptcy - Bankruptcy notice - application to set aside - securing payment of the sum referred to in the notice to the satisfaction of the court - relevant considerations to the court's determination.

Bankru~tcv Act (1966) - s.41(2)(b)(ii)

Re Harrv Reicher: Ex parte Deputv Commissioner of Taxation of the Commonwealth of Australia - Federal Court Victoria, B365 of 1990.

Coo~er J

Brisbane

24 April, 1992

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT
OF THE STATE OF OUEENSLAND

9             No. 265 of 1992

RE: DONALD ROBIN WALKER

1 Judcrment Debtor)

EX PARTE: DONALD ROBIN WALKER

MERCANTILE CREDITS LIMITED

A.C.N. 000 030 508

J Respondent L

MINUTES OF ORDER

JUDGE MAKING ORDER:	Cooper J
DATE OF ORDER:	24 April, 1992
PLACE :	BRISBANE
THE COURT ORDERS THAT:

1. The application be dismissed.

2.        The applicant pay the respondent's costs of and incidental to the application, including any reserved costs, to be taxed.

1. The time for compliance with the bankruptcy notice be extended to 4 pm, Monday, 27 April, 1992.

NOTE:	Settlement and entry of orders is dealt with in Rule
124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT

OF THE STATE OF OUEENSLAND

q No. 265 of 1992

RE: DONALD ROBIN WALKER

J Judament Debtor 1

EX PARTE: DONALD ROBIN WALKER

MERCANTILE CREDITS LIMITED

A.C.N. 000 030 508

f Respondent 1

CORAM:	Cooper J
DATE :	24 April, 1992
PLACE :	BRISBANE

EX TEMPORE REASONS FOR JUDGMENT

This is an application by Donald Robin Walker to set aside a bankruptcy notice dated 19 February 1992 or for a declaration that the applicant has secured payment of the sum referred to in the notice to the satisfaction of the court.

The respondent, Mercantile Credits Limited, advanced to the applicant the sum of $50,000 in February 1988 on mortgage security over six blocks of land at Herberton. The applicant defaulted under the mortgage and the respondent entered judgment in the District Court at Brisbane for $67,016.54 on 3 January 1992.

At the time of the original advance, the loan was
supported by a valuation of Mr. D.J. Duffield of Richard Ellis

Valuers i n the sum o f $63,000. On 24 January 1991, t h e

appl icant advised t h e respondent by way o f explanat ion o f h i s

d e f a u l t under the loan agreemen*, i n t e r a l i a :

The most outs tanding problem i n t r y i n g t o

d ispose o f the proper ty invo lves t h e contamination o f 15 per cent o f the proper ty by the Great Northern Mines o f arsen ic . T h i s has r e s u l t e d from t h e

over f low from t h e i r adjo in ing property.

Any s a l e o f h is proper ty would no t s e t t l e

a s counci l would no t a l low t h e t i t l e t o

pass	hands.	H e	s t a t e s	t h i s i s be ing k e p t
q u i e t	a t present ,	b u t has	t h e potent ia l	t o

be another Kingston problem. In v i e w o f

t h i s , he i s going to approach t h e mining

company t o purchase t h e land as a quick

s o l u t i o n t o h i s problem otherwise i t could

become q u i t e a drawn out a f f a i r .

On 4 March 1991, M r . D u f f i e l d , on t h e i n s t r u c t i o n s

o f t h e respondent, revalued the land tak ing i n t o account, so

f a r as he could , the ques t ion o f contamination. His t h e n

value was $34,500. I n h i s repor t o f 4 March 1991, Mr D u f f i e l d

s a i d , amongst o ther t h i n g s :

A l a r g e area t o t h e w e s t o f t h e sub jec t

proper t ies i s known t o be contaminated by

t a i l i n g s and i s considered t h a t , even i f

contamination o f t h e sub jec t property i s

found t o be o n l y minor, psychological

e f f ec t s o f having a large area o f

contamination i n c l o s e proximity would be

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

t h e s u b j e c t proper t i e s .

Th i s a p p l i c a t i o n was adjourned when it came b e f o r e

me on	7	A p r i l	1992	t o enable t h e appl icant	t o o b t a i n va lua t ion
material	and	t o have	survey work	done	t o e s t a b l i s h t h e e x t e n t
t o which mine	t a i l i n g s encroached	on t h e subjec t	land .	In	an

a f f i d a v i t o f M r . Squ i res , t h e s o l i c i t o r f o r t h e a p p l i c a n t ,

filed by leave this day, Mr Squires deposes in paragraph 5 as

follows :

"I am further advised by the said Donald Robin Walker and do verily believe that he owns a number of other blocks of land in the vicinity of the blocks of land, the subject of these proceedings, and he has now caused to be carried out a survey of all these blocks of land, and it is now clear that the blocks of land that are not the subject of these proceedings are the blocks that are most affected by the

encroachmen t " .

Mr. Squires annexes a valuation dated 23 April 1992 of Don Gordon, Valuer, of Herberton. Mr. Gordon values the land at $72,500. His report makes no reference to the question of arsenic contamination of all or any of the parcels. Mr. Duffield, on 20 April 1992, confirmed his valuation at $34,500. On 18 December 1991, the applicant wrote to the Great Northern Mining Corporation NL, alleging that the land had been totally or partially submerged by arsenic tailings from the Great Northern Mine, and alleging that the access road to the blocks, Emma Street, was also

approximately 10 metres.	totally submerged with arsenic tailings to a depth of
Mr. Gordon's valuation is, in part, predicated on his being advised that upgrading of access roads will be provided by the Herberton Shire Council upon commencement of construction of council-approved improvements on any of the lots.
The subject land has been categorised by the Chemical, Hazards and Emergency Management Unit as probable contamination sites under the provisions of the Contamination of Land Act 1990, and has been entered in the Contaminated Sites Register as such. By section 27 of that Act, the land can only be sold if a written notice is given to the intended purchaser that the land is a probable site of contamination. The unit advises that it holds no concrete evidence in the form of soil samples and assays to confirm or refute the contention that the land is contaminated.
Counsel for the applicant has submitted that I should prefer the valuation of Mr. Gordon to that of Mr. Duffield because of the survey and because of the Valuer- Generals valuation placed on the land. In the absence of some clear indication that Mr. Gordon has considered the question of contamination either on or near the land, I am not prepared to do so. It is unclear whether Mr. Gordon, in arriving at his values, has used any, and if so, what, comparative sales
material, and if he has done so, whether those sales are near areas of contamination.
There is no question that the subject land is either directly affected or immediately adjacent to area of tailings from known mining operations which the applicant has consistently asserted are contaminated with arsenic. His original comments to the respondent in January 1991 relate to the problem of trying to dispose of the land because of
contamination.

Assuming, but: not deciding, for the purposes o f t h i s

application, t ha t t he reference " t o secure the payment o f t he

debt	or	sum	t o the s a t i s f a c t i o n o f t he court	or	the creditor"
' i n section	4 1 ( 2 ) ( b ) ( i i ) o f	t he	Bankru~tcv Act	covers	an

ex i s t ing security provided prior t o the service o f t he

bankruptcy notice as opposed t o security being o f f e r e d a f t e r service o f the bankruptcy no t ice , t he approach t o be taken by the court i s t ha t la id down by Jenkinson J . i n Re Harrv

Reicher:  Ex Darte D ~ D U ~ V Commissioner o f Taxation B 3 6 5 o f

1990, unreported 1 November 1990.	A t pages	11/12 o f h i s
reasons, h i s Honour says:

"Legislat ion thus empowering the judgment credi tor must, i n m y opinion, be understood t o contemplate that only such a secur i ty as w i l l assure the judgment

credi tor	o f	a	prompt	and	fac i l e
sa t i s fac t ion	o f	the	judgment	ought	t o

engender the curial sa t i s fac t ion t o which

section	41 ( 2 )	( a ) (ii)	r e f e r s .	The grant	t o
the	court	o f	power	t o preclude	the
commission	o f	the	impending	act	o f

bankruptcy by approving a secur i ty

unacceptable t o the credi tor m u s t be

supposed t o r e f l e c t the l e g i s l a t i v e

in tent ion tha t what i t had provided t o

creditors i n section 4 0 ( l ) ( g ) o f the

Bankruptcv Ac t 1966 should not be

a v a i l a b l e for unreasonably precipit ive use when the debtor was able and wi l l ing s a t i s f a c t o r i l y t o assure the creditor o f

payment	o f t he d e b t a f t e r a short	in terval
by giving a	s ecur i t y for that payment.	In
exercising	the discretionary power	o f

giving o r re fus ing i t s approval o f the

secur i ty o f f e r e d , the Court would, a s I th ink , be required t o determine what delay i n payment i t considered reasonably consistent with the creditors in t e res t s and then t o determine whether a t the end ,of that period o f delay, the secur i ty

could be con f iden t l y expected t o assure

the creditor of prompt satisfaction of the

judgment 'l.

The security over the land at Herberton does not

satisfy this test. I am far from persuaded that the market

value of the land exceeds the judgment debt. Nor, am I persuaded that the security is sufficient to confidently expect that the respondent is assured of prompt satisfaction of the judgment. There is real doubt as to when, if at all, and in what sum the land could be sold exercising the power of sale under the mortgage.

The application to set aside the bankruptcy notice is refused, and I decline to make the declaration sought. An alternative ground to extend time for compliance with the bankruptcy notice until proceedings were taken against the mining company and determined was not proceeded with.

I order that the application be dismissed and that

the applicant pay the respondent's costs of and incidental to

the application, including any reserved costs to be taxed.

I order that the time for compliance with the bankruptcy notice be extended to 4 pm, Monday, 27 April 1992.

Counsel for the Applicant:	Mr. C. Carrigan
Solicitors for the Applicant:	Crouch & Lyndon
Counsel for the Respondent:	Mr. M. Kent
Solicitors for the Respondent:	Phillips Fox
Date of Hearing:	24 April, 1992
Date of Judgment:	24 April, 1992

I c e r t i f y that t h i s and the preceding s i x

( 6 ) pages are a true copy of the Extempore

Reasons for Judgment herein of the

Honourable M r . Justice cooper. -

Date :  24 April, 1992 &m W /W'. &&.W. Associate