Re Wood, J.C. v Ex parte Wood, J.C

[1989] FCA 259

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT	)
OF AUSTRALIA	1
GENERAL DIVISION	)

BANKRUPTCY DISTRICT 1

OF THE STATE OF	1
WESTERN AUSTRALIA	1 NO. 826 of 1988 RE: JOHN CHRISTOPHER WOOD

Bankrupt

- ..

EX PARTE: JOHN CHRISTOPHER WOOD

Applicant

MINUTE OF ORDER

JUDGE MAKING ORDER:	FRENCH J.
DATE OF ORDER:	8 MAY 1989
WHERE MADE:	PERTH
THE COURT ORDERS THAT:

1.          The composition be approved.

2.          The bankruptcy of John Christopher Wood be annulled.

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

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT	)
OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT	)
OF THE STATE OF
WESTERN AUSTRALIA	) No. 826 of 1988

RE: JOHN CHRISTOPHER WOOD

- _ .

Bankrupt

EX PARTE: JOHN CHRISTOPHER WOOD

Applicant

CORAM :	FRENCH J .
8 May 1989

EX TEMPORE REASONS FOR JUDGMENT

This is an application for appl-oval of a composition under s.74 of the Bankruptcy Act 1966 and for annulment of the bankruptcy. The bankrupt, according to the Official Receiver's report, which is not disputed in this case, is a single man of 23

years with no dependants. He is presently employed as a real estate agent and that employment is on the basis of commission

income only.

He was, from 1983 to early 1987, employed by a firm called "Sleeprite", in which he rose to the position of general manager. On 23 May 1984 he committed himself to the purchase of a home unit in Como for some $37,000 with repayments of $365 monthly, later increased to $457, to the First Home-Owners Scheme and Town and Country (WA) Building Society. On 3 March 1987 he became a director of a company called JCW Management Pty Ltd in which he held 19 ordinary fully paid shares and another person, Ian Richard Diffen, held one share. The company acquired the business name, goodwill and stock of two stores at Balcatta and Cannington trading as "Sleeprite". The vendor of the stores was Mr Diffen, who sold them to the company for $20,000 plus stock at

valuation of $110,000. Vendor's finance was provided. A third - store was opened in Morley in the latter part of 1987 and the Cannington store relocated to another site in Cannington later in that year. That relocation was not successful.

The bankrupt attempted to franchise the Sleeprite name without success and expended considerable company funds in that endeavour. The company experienced financial difficulties even though some $180,000 was spent on advertising. On 2 June 1988 Mr A.J. Halse was appointed as liquidator. Total liabilities amounted to some $427,650. The bankrupt was indebted to the company to the extent of $24,707.31 being loans. The Balcatta and Morley stores were sold for some $20,000 plus stock of $85,000 and the Cannington store remained vacant until late 1988 when the premises were re-leased.

The home unit was sold on 21 November for $83,000 with net proceeds to the bankrupt of $14,000 after discharge of mortgage and repayment of a loan to the bankrupt's mother of $31,136.46. The bankrupt had previously owned a vehicle which was subject to finance from Esanda Limited. The payout figure was $8,000, but that vehicle was traded in on a 1985 Mazda 626 for $19,000. some $12,620.69 was paid to Brooking Mazda from the sale proceeds of the unit.

Notwithstanding these financial manoeuvres the bankrupt was subject to pressure from company creditors in respect of personal guarantees. He realised he had no means of paying those debts and ultimately filed his debtor's petition on 8 December

1988. The composition proposal was lodged with - the Official . .

Receiver on 27 January 1989 and without setting out its terms in full, the substance of it involves a payment of $43,500 to be raised by borrowing from the AN2 Bank jointly by the applicant and his mother, Mrs Christine Popp.

The proposal is that the composition be paid on all proved debts from all moneys in the estate held by the Official Trustee in a common investment fund and from the sum of $43,500 which I have already mentioned. The Official Receiver informs me that the proposed composition should yield a result of some 25 cents in the dollar. Under these arrangements the applicant's car would not be sold and a preference claim in relation to the payment to his mother would not be pursued.

I am informed by the Official Receiver that, in substance, the amount being offered represents the realisation value of the car together with the preference said to have been paid to Mrs Popp and he takes it that the creditors have opted for the more expeditious procedure of recovering that money pursuant to the composition than through the ordinary processes of bankruptcy administration.

There is no suggestion that Mr Wood's conduct has been other than satisfactory. His bankruptcy is attributed to the failure of the business venture in which he became involved through JCW Management Pty Ltd and the resulting debts which were based on his personal guarantees. There has been no question of any offences proved to have been committed by him. All the

non-assenting creditors were advised of his application and there -

has been no objection to it. In the circumstances, it seems to me that the public interest and the interest of the creditors will be served by my approving the composition that is proposed and I propose to approve it accordingly.

So far as the annulment of the bankruptcy is concerned, that does not flow automatically from the approval of a composition. However, in the circumstances of this case, there is no question of public interest or commercial morality which would suggest that the annulment sought should not be approved and, of course, there is something to be said in favour of approving annulments as an encouragement to persons to compose with their creditors and perhaps make a greater contribution than they would otherwise be able to make through the ordinary processes of

bankruptcy administration.

In this case, therefore, I propose to order and will

order that:

1.    The composition be approved.

2.   The bankruptcy of John Christopher Wood be

annulled.

I certify that the preceding four (4)

pages are a true copy of the Ex Tempore

Reasons for Judgment of his Honour

Justice French. -

Associate: fki4 & Date: 8 - 5 . 6'

Counsel for the Applicant: Nr G. Kelly

Solicitors for the Applicant: Narks Healy Sands

Mr F. OrDriscoll appeared on behalf of the Official Receiver

Date of Hearing:  8 Nay 1989

Date of Judgment: 8 Nay 1989