Re Willis, C.G. v Ex parte The Official Trustee in Bankruptcy

Re: CHARLES GRAHAM WILLIS
Ex Parte: THE OFFICIAL TRUSTEE IN BANKRUPTCY
No. NSW 791 OF 1980
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES
Pincus J.

CATCHWORDS

Bankruptcy - discharge - application for order that there be no discharge under s.149 - failure to disclose address - fraudulent trading during bankruptcy - obtaining credit etc. without disclosing bankruptcy.

Bankruptcy Act, ss.80(1), 149, 269, r.51A

HEARING

BRISBANE
#DATE 22:10:1985

ORDER

The bankrupt not be discharged from bankruptcy by virtue of s.149 of the Bankruptcy Act 1966.

NOTE: Settlement and entry of orders is dealt with in Order 36

of the Federal Court Rules.

JUDGE1

The applicant is the Official Trustee in Bankruptcy, Sydney, who seeks an order pursuant to s.149(12) of the Bankruptcy Act 1966 that the bankrupt, Mr Willis, not be discharged from bankruptcy.

Mr Willis became bankrupt, on a creditor's petition, on 25 August 1980. He would thus have been discharged on 25 August 1983 were it not for the fact that on 23 June 1983 an objection was entered under s.149(3)(c).
By s.149(7)(a), the objection would have lapsed five years from the date of bankruptcy, i.e. on 25 August 1985. However, an order under s.149(8) was made on 12 August 1985, before the expiration of the five years, having the effect that the period at the expiration of which the objection is to lapse is that ending on 23 October 1985.
Section 149(12), under which the application before me is made, reads as follows:-

"The court may, at any time before the discharge of the bankrupt, on the application of the Registrar, the Inspector-General, the trustee or a creditor, direct that the bankrupt shall not be discharged from bankruptcy by virtue of this section."

By the combined operation of s.149(13) with r.51A, the Court is to take into account the matters set out in that rule in deciding the application. Those of them which appear most relevant to the present circumstances are the following:-

"(a) Whether the bankrupt is able, or is likely within five years from the date of the bankruptcy to be able, to make a significant contribution to his estate;

...

(c) Whether the bankrupt has co-operated in the administration of his estate;

(d) The conduct of the bankrupt, in respect of the period both before and after the date of the bankruptcy."

Mr North, who appeared for the bankrupt, relied in part upon the provisions of par. (a) of r.51A, just set out. I find that the bankrupt is not able, nor is it likely that he will become able, to make a significant contribution to his estate. That was not seriously in issue; the disputed questions related to the conduct of the bankrupt during his bankruptcy.

It is necessary to say at the outset that I am not able to form any comprehensive view on that subject. For example, as is set out in more detail below, I am by no means confident about the places at which the bankrupt lived during his bankruptcy; he has given various versions. There is a considerable quantity of material before me, but not a great deal of information from any independent source as to the bankrupt's activities during the earlier years of his bankruptcy. That is important, because the bankrupt proved to be a most unreliable witness and, where there is no corroboration of what he says, I am not (speaking generally) inclined to accept his version of events.
The evidence included the transcripts of two public examinations; it ranged over a number of topics, but I do not propose to deal with them all. Two of primary importance are the question of the bankrupt's address and his business activities in recent years.

Address

Under s.80(1):-

"A bankrupt shall forthwith notify the Registrar and the trustee in writing of any change in his name or address that occurs during his bankruptcy."

When he was made bankrupt, on 25 August 1980, the bankrupt's address was given as 289 Hindmarsh Drive, Rivett in the Australian Capital Territory. The applicant complains, and I find, that from 17 March 1981 until 27 November 1984 he was unaware of the bankrupt's whereabouts. The former date is that on which the first public examination was held, in Sydney. On 21 January 1982 the Official Receiver wrote to the bankrupt requiring him to provide his then residential address. The letter was sent to the bankrupt at Box 487, P.O., Woden, A.C.T. On 6 February 1982 the bankrupt replied saying he was "relying on relations throughout the area" and had no fixed address. On 9 March 1982 the Official Receiver wrote again saying among other things:-

"You are also required to notify me of your current residential address and notify me of every change of address."

The bankrupt replied on 11 May 1982, again asserting that he had no fixed address. On 9 March 1983 the Official Receiver sent the bankrupt (whose last known address was still P.O. Box 487, Woden, A.C.T.) a questionnaire to complete and asked again for his address. That letter was not delivered, as the box had been closed. On 8 April 1983, having received some information, the Official Receiver wrote to the bankrupt at 25 Brunton Street, Wanniassa, A.C.T. That letter was, also, not delivered and the matter was then placed in the hands of the police. They reported that the bankrupt resided at 25 Brunton Street, Wanniassa, until November 1982 but then left, declining to give a forwarding address. They also claimed that the bankrupt had left 289 Hindmarsh Drive, Rivett, about two years before. Shortly after that, on 23 June 1983, the Official Receiver entered the objection referred to above.

In his public examination of 18 June 1985, the bankrupt said that he ceased residing at 289 Hindmarsh Drive, Rivett, about December 1982. That is inconsistent with the information supplied by the police that the bankrupt left Hindmarsh Drive about two years before June 1983. In his public examination, the bankrupt went on to say that he went from Rivett to Kambah, was there for about 15 months and then moved to Wanniassa in the Australian Capital Territory, whence he went to live at 19 Maureen Court, Broadbeach. Apart from the discrepancy between the police information and that evidence, it is significant that on 18 June 1985 the bankrupt did not suggest that at any material time he had no fixed address. He said then that he was living at 289 Hindmarsh Drive, Rivett, in 1982.
Another version emerged in the evidence before me. The bankrupt told his counsel that he moved to Broadbeach from Canberra about November 1982; that was, of course, about the time he had said (on 18 June 1985) that he moved to Kambah. He also told Mr North, after discussing the circumstances in which he left Canberra, that he moved directly to the Gold Coast. That was contradicted, immediately, by his saying that he resided at Casino for some months in late 1982. In cross-examination Mr Logan, for the applicant, pointed out to the bankrupt that he had previously said that he moved directly from Canberra to Queensland. The bankrupt then told Mr Logan that he "had occasion of stopping off" at Casino from time to time. He elaborated on that by saying that he resided at Casino "on and off" and said "I kept going backwards and forwards from Canberra to Casino, prior to moving to Queensland". I find it curious that he was financially able to do so. He said that in the six months prior to moving to Queensland he had been staying most of the time at Wanniassa but had travelled five times to Casino.
In the result, it is not at all clear where the bankrupt lived from the date of his bankruptcy. He appears, when questioned about the matter, to be unable to remember what previous versions he has given. Most importantly, in none of his oral evidence did he say that there was a substantial period during which he had no fixed address. That was the excuse given to the Official Receiver in the correspondence referred to above for his not having supplied an address, but merely a post office box number. In evidence before me he referred to the post office box as having been in operation during the time he lived at Wanniassa, which, according to that evidence, was shortly before he came to Queensland. I do not know when he lived at Wanniassa but am satisfied that he had no good reason for failing to give his various residential addresses to the Official Receiver, that he knew that he was obliged to do so, and that he has made no serious attempt to give me an accurate account of his places of residence.
The question arises why the bankrupt declined, despite repeated demands, to supply his address to the Official Receiver. I am satisfied that the reason he repeatedly gave (that he had no fixed address) was false and think it probable that the true reason was that he was apprehensive that the Official Receiver or, perhaps, someone else might be in a position to find out what, if anything, he was doing. That derives added plausibility from the fact that the name "Nationwide Contractors" which had until 1979 been the bankrupt's, was said to have been transferred to his wife in that year and during the bankruptcy, according to his evidence, he did some work as agent for his wife under the name.
In summary, what happened was that shortly after his bankruptcy the bankrupt moved house, and did not inform the Official Receiver where he was, because he did not want the latter to know that. He continued conduct of that sort for most of the period of his bankruptcy. I have no doubt that he has told untruths about his place of residence and think that he did so before me. The general policy of not letting out information about where he lived from time to time appears to have been continued during the very hearing of the application.
It is my opinion that the circumstances just referred to are ample justification for allowing the application by the Official Trustee. No doubt many bankrupts evade or flout the system provided by the Act; to ensure that they do not would require considerably greater resources than are presently available. However, the course this bankrupt has taken, of deliberately concealing his whereabouts for some years, is one which, if widely emulated, would make the administration of the Act impossible. It appears to me that the Court's disapproval of it should be made very clear.

Conduct of Business

In the ordinary course of events - i.e., absent the objection to which I have referred - the bankrupt would have been discharged by virtue of the provisions of s.149(1) on 25 August 1983. Towards the end of that year he engaged a solicitor, Mr Ian Pilgrim, to enquire as to his status. Mr Pilgrim wrote to the Official Receiver on 24 November 1983 saying:-

"We presume that as three years has (sic) passed he is entitled to an automatic discharge unless there is any objections (sic). Would you please advise us if this is correct in our client's case."

The Official Receiver merely referred Mr Pilgrim to the Registrar. After a number of unanswered requests by Mr Pilgrim, an answer was obtained on 21 February 1984, explaining that an objection had been lodged and that "Mr Willis must remain bankrupt for another two years and will be due for discharge on 26 August 1985". Mr Pilgrim wrote to his client asking that he contact him, but the bankrupt claims that he did not get the letter. According to the bankrupt, he did not hear any further from Mr Pilgrim and therefore, having discussed the matter with a number of people, was sure everything was all right and that he had been discharged. I do not believe his story. On 17 October 1984 the bankrupt wrote to the Registrar enquiring whether he had been discharged. That letter is, in one sense, rather helpful to the bankrupt because it supports the inference that he was then a little uncertain whether he had been discharged or not. But it is plainly inconsistent with the suggestion that, prior to writing the letter, he was sure he had been discharged. However that may be, on 27 November 1984, as mentioned below, it became quite clear to the bankrupt that he had not.

It is quite possible that the bankrupt knew positively at all relevant times that he was not discharged, and that is supported by the evidence, referred to below, that he told one Greenwood in March 1984 that he was an undischarged bankrupt. However, I am prepared to assume in his favour that he was in a state of some uncertainty from August 1983 until November 1984. The period I am reviewing, then, falls into three segments:-

1. From the date of bankruptcy until 25 August 1983, a period during which it was clear to the bankrupt that he had not been discharged.

2. From 25 August 1983 until November 1984, when he was uncertain whether or not he had been discharged.

3. From November 1984 to the present time, a period in which, as is admitted, the bankrupt has been aware that he is undischarged.

During each of these three periods he carried on business, in circumstances set out in more detail below.

Section 269 reads in part as follows:-

"A bankrupt shall not -

(a) either alone or jointly with another person, obtain credit to the extent of $500 or more from a person without informing that person that he is an undischarged bankrupt;

...

(ab) either alone or jointly with another person, enter into a hire-purchase agreement with a person, or enter into a contract or agreement for the leasing or hiring of any goods from a person, being a hire-purchase agreement, contract or agreement under which the amounts payable to that person amount in the aggregate to $500 or more, without informing that person that he is an undischarged bankrupt;

(ac) either alone or jointly with another person, obtain goods or services from a person by promising to pay that person or another person an amount of, or amounts aggregating, $500 or more without informing that person that he is an undischarged bankrupt;

(ad) either alone or jointly with another person, obtain an amount of, or amounts aggregating, $500 or more from a person by promising to supply goods to, or render services for, that person or another person without informing that person that he is an undischarged bankrupt; or

(b) carry on business under an assumed name, in the name of another person or, either alone or in partnership, under a firm name without disclosing to every person with whom he or, if he is carrying on business in partnership under a firm name, the partnership deals, his true name and the fact that he is an undischarged bankrupt."

In a conversation with Miss Lee, of the Official Receiver's office, on 27 November 1984, the bankrupt said that he had not worked since the date of his bankruptcy. That was untrue. The evidence as to his having worked, however, begins with his connection with one Drake, referred to below, in July 1983. If it matters, I am not at all satisfied that the bankrupt told Miss Lee the truth, even as to the period before July 1983. There is no worthwhile evidence, however, as to the activities (if any) in which he was engaging from August 1980 until July 1983.

K.G. Drake made an affidavit deposing that in July 1983 the bankrupt got in touch with him with a view to having a house removed by Mr Drake's company, Keith Drake Pty Ltd. He told Mr Drake that he was moving the house for a client and a written agreement was made with the bankrupt, dated 2 July 1983. The price for removal was $2,650. At the time when Mr Drake dealt with the bankrupt, the latter wore a jacket or blazer with a badge on it reading "Nationwide Contractors", the name which he said he had sold to his wife in 1979. On 26 September 1983 the bankrupt made a similar contract with Mr Drake, for removal of a house at a price of $4,700. That contract required an initial payment of $1,500, but the bankrupt paid only $200. Nevertheless, the house was moved. In 1984 Keith Drake Pty Ltd sued the bankrupt and subsequently obtained judgment for $2,987.02, said to be the balance due under the second contract. At no time did the bankrupt tell Mr Drake of his status.
It is not clear from the evidence of Mr Drake whether there was any breach of s.269(b); I am not prepared to find that the bankrupt carried on business, in dealing with Mr Drake, under the name Nationwide Contractors. It does appear, however, that there was a breach of s.269(ac) in that the bankrupt obtained services by promising to pay amounts aggregating $500 or more without informing Mr Drake that he was an undischarged bankrupt.
In March 1984 a firm called Viking Equipment advertised for a commission agent to sell a product called "Dirtbuster". The bankrupt answered the advertisement and it was agreed that, instead of being an agent for the firm, he would buy and re-sell the product. It was also agreed that the bankrupt would try to interest people in buying a high-pressure cleaning machine distributed by Viking Equipment, for a fee of between 5% and 10% of the price; he was to be a "spotter". The firm sold the bankrupt $3,352.80 worth of the detergent and he paid with a cheque dated 10 July 1982 in the sum of $2,352, being part of the money due. The cheque was dishonoured. An action was brought for money due and judgment was obtained, but execution on the judgment did not proceed because the bankrupt told the bailiff of his status, in May 1985. Again, it seems clear the bankrupt obtained goods on credit to the extent of more than $500. However, that does not appear to be in breach of the statute, because Mr Greenwood of Viking Equipment swore that the bankrupt told him before the sale that he was an undischarged bankrupt. The bankrupt challenged that version of events, saying in effect that he merely told Greenwood that he had been bankrupt. If the bankrupt's story in that respect is true, then he was acting in breach of the section. I prefer Mr Greenwood's account.
The bankrupt's connection with Viking Equipment played a part in the next series of transactions deposed to, which took place in September 1984. Mr A.J. Wisseling says that in that month, in response to an advertisement, he arranged to see the bankrupt who told him that he had a large amount of steam-cleaning work lined up. The bankrupt proposed to sell him a business including a distributorship of the detergent "Dirtbuster". It is clear from the evidence of Mr Greenwood that the bankrupt had no right to purport to sell any distributorship. He was merely a person who had bought some of the product (and not paid for it). The bankrupt told Mr Wisseling that he (the bankrupt) would arrange for someone to collect orders in the area, north of the Coomera River, in which the distributorship was located and that all Mr Wisseling had to do was to deliver the product. The bankrupt proposed to sell Mr Wisseling the business which he had described, together with a Gerni cleaning machine, a 1975 Falcon utility and a paging device, for $12,500. Mr Wisseling told the bankrupt he did not have so much and it was agreed that he would pay $9,500 only, with the balance to be extracted from additional commission. A contract was signed and Mr Wisseling paid a bank cheque in the sum of $9,500. The bankrupt did not, as he had undertaken, arrange for a considerable amount of work to be done by Mr Wisseling. He obtained only a few jobs for him totalling $922 in value.

The account given by Mr Wisseling was not challenged. It is consistent with the advertisement which was in evidence as Exhibit P10 to the affidavit of the Official Receiver. The bankrupt gave Mr Wisseling a letter which is Exhibit P11 to the same affidavit in which he purported to "validate the qualities" of the business. Among other things the letter said:-

"Currently this cleaning business is generating work six days a week and returning an average of $200 a day (substantiated to approved clients)."

I am satisfied on the evidence that that assertion was quite untrue. In view of the absence of any contradiction of what Mr Wisseling says, no conclusion is open than that the whole transaction was a fraud.

In the same month, the bankrupt sold a similar "business" to one Thomas Haussrer. To substantiate his claims that there was a considerable amount of work available the bankrupt produced what purported to be a receipt book which showed various sums. Mr Thomas Haussrer's father, Mr Wilhelm Haussrer, asked why there were no names on the receipts and the bankrupt said "I never pay tax". Some copies of what purported to be receipts by the bankrupt were tendered and became Exhibit 4. They do not, however, correspond with those described by Mr Haussrer. Nevertheless, they are of some interest. Each of them appears on its face to relate to sales of the "Dirtbuster" product except for the following:-

3 August 1984 $23.50

29 August 1984 Pacific Removals - $23.50

5 September 1984 Caltex Runaway Bay - $152

2 October 1984 Painting of roof - $240

4 October 1984 Painting of warehouse - $475

12 October 1984 Painting of roof - $195

16 October 1984 Painting of boat - $170

22 October 1984 Painting of bulldozer - $242

The total which could relate to the cleaning businesses, each of which was "validated" as taking $200 per week, is $47. No explanation was advanced with respect to the receipts for painting of roofs, which are signed by one Brown. It seems evident that this was another venture of the bankrupt, of which no details were given.
Among other things the bankrupt told the Haussrers that he was the sole agent for "Dirtbuster" for Brisbane and south-east Queensland, which was untrue. The Haussrer business proved to be illusory also and after considerable effort the Haussrers induced the bankrupt to promise to buy the business, for which $12,500 had been paid, for $11,000. That was subsequently reduced to $10,500 but of course nothing came of that. Again, it seems clear that the dealings with Mr Haussrer were fraudulent from start to finish.
The third victim in the same month was Mr N.D. Smith. The details of his dealings with the bankrupt do not, as it seems to me, require to be related. It is important to notice, however, that the bankrupt gave Mr Smith a letter, on "Nationwide Contractors" letterhead, signing as "managing director" purporting to introduce Mr Smith as "regional promotions manager, acting for and on behalf of Nationwide Contractors". The date the letter was given is uncertain, but it is clear that the $2,000 Mr Smith paid to the bankrupt was handed over in December, for on 18 December 1984 the bankrupt gave Mr Smith a receipt, Exhibit P30 to the affidavit of Mr Blewitt, on "Nationwide Contractors" heading. Again, breaches of s.269 are clear and it is also clear that they occurred at a time when the bankrupt plainly knew himself not to be discharged - in the third period mentioned above.
The next burst of activity disclosed by the evidence occurred in March 1985, when the bankrupt induced one Peter Harris to pay him $5,000 for a contract. Again, the receipt is on "Nationwide Contractors" stationery and the $5,000 is said to be "for the right to operate trucking transport service as per contract agreement". The representations were that Mr Harris could expect to earn $1,000 per week for five days a week. It is hardly necessary to mention that the amount of work in fact supplied was less. Between 11 March 1985 and 20 April 1985 payments totalling $1,119.38 were received - i.e. less than $200 per week. Subsequently Mr Harris got a further payment, a cheque for $329.25, which was dishonoured when first presented, but later honoured. The next cheque, paid in May, was for $285.25 and was twice dishonoured.
Mr R.R. Artz, about the same time, was similarly defrauded. He paid $2,500 on representations that the bankrupt's company "Nationwide Contractors" had a lot of work lined up. His experience was similar to that of Mr Harris.
These activities were interrupted by the public examination referred to above, of 18 June 1985, during which the bankrupt was questioned about the matters just mentioned. However, he does not seem to have been deterred by that experience. In late June or early July, in response to an advertisement, a Mr and Mrs Carruthers phoned the bankrupt to buy a house, the bankrupt claiming to have houses for sale. He showed them some houses and obtained from them a sum of $500 which was described as a holding deposit. He then became rather elusive, promised to return the money but of course broke his promise. As a reason for refusing to pay, the bankrupt told Mr Carruthers that they had been "bad-naming him and that he had lost $50,000-$60,000".
I find that there has been a persistent pattern of obtaining money by fraudulent misrepresentations during the bankruptcy.
The only other matter of fact which it is desirable to mention in detail is Exhibit P4 to the affidavit of Mr Blewitt, an application to Esanda Ltd for finance made on 7 June 1984 which was, the bankrupt agreed, "a pack of lies". In it he asserted that his house was valued at $76,000 and had $50,000 owing on it to one Marriot. His evidence was that in fact he rented the house. In the form, opposite "board/rent house payments" he put $480 as monthly expenditure. That was inconsistent with his evidence that his rent was $90 and he explained the discrepancy by saying that "when you borrow money, you have to have the credibility to show where your money is going". In the same form his monthly income was said to be $3,500-$4,000 after tax, which is quite inconsistent with his story to me. In evidence he said that that was in fact the amount - apparently gross - which he was receiving jointly with his wife (who is also a bankrupt). He claimed, in the same form, to own a Mercedes Benz vehicle valued at $13,500. Of course, he did not; he had taken such a vehicle on hire purchase terms. He also said, falsely, that he had furniture valued at $15,000.
The document just referred to illustrates the bankrupt's disinclination to tell the truth. It is a curiosity of this case that each of the transactions which took place during his bankruptcy and has been dealt with by the evidence has been tainted by fraud. It is conceivable that there are other transactions, of which the bankrupt has not told the Court, which are of a different character - namely, honest ones. But on the evidence I have, all the transactions were dishonest. Most of them involved the obtaining of money by the pretence that the bankrupt had for sale an interest in an existing and thriving business.
In effecting the transactions, the bankrupt has not been in the least inhibited by his status - except as to the transactions with Viking Equipment; he told Mr Greenwood, as I have found, that he was an undischarged bankrupt. He did not mention that status to any of the other people he dealt with.
That the application should succeed seems very clear. The evidence discloses an almost complete lack of regard for the obligations of bankruptcy, and that alone would suffice to justify making the orders sought. However, in my view, the breadth of r.51A obliges me to take into account the fraudulent nature of the transactions into which the bankrupt entered.
Counsel for the bankrupt urged me, if I were disposed to grant the application, to specify some period during which, in my view, the bankruptcy should continue. I am not prepared to do that. Were there nothing more in the matter than the bankrupt's non-disclosure of his whereabouts, it would, perhaps, be reasonable to specify a date at which, absent any further misconduct, the bankrupt might reasonably apply for discharge. But the bankrupt's apparent addiction to fraud creates a special problem.
I will direct that the bankrupt not be discharged from bankruptcy by virtue of s.149 of the Bankruptcy Act 1966.

[1985] FCA 541

22 OCTOBER 1985