Re: Zero Population Growth (Formerly David Roy Hughes)
[1990] FCA 319
•30 MAY 1990
Re: ZERO-POPULATON-GROWTH (FORMERLY DAVID ROY HUGHES)
No. W1783 of 1987
FED No. 319
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
BANKRUPTCY DIVISION
Burchett J.(1)
CATCHWORDS
Bankruptcy - application for annulment - discretionary considerations - court's concern with bankrupt's conduct, the position of creditors and commercial morality - observations concerning inadequacy of trustee's report.
Bankruptcy Act 1966 - ss.55 and 154
HEARING
SYDNEY
#DATE 30:5:1990
Mr Zero-Population-Growth, formerly David Roy Hughes appeared in person.
Counsel for the Official Trustee : Miss Wikramanayake
in Bankruptcy
Solicitor for the Oficial Trustee: Australian Government Solicitor
in Bankruptcy
ORDER
1. The application be dismissed.
2. The applicant bankrupt pay one half of the Official Trustee's costs.
NOTE: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.
JUDGE1
Section 55 of the Bankruptcy Act provides for the presentation of a debtor's petition and for bankruptcy by virtue of such a petition. Section 55, sub-sections 1 to 3, as at 25 November 1987 - the section was amended shortly afterwards - read as follows:
"(1) Subject to this section, a debtor may present to the Registrar a petition against himself accompanied by a statement of his affairs, verified by affidavit, and a copy of that statement.
(2) The petition and statement of affairs shall each be in accordance with the prescribed form.
(3) Where it appears to the Registrar that a petition presented to him under this section is in accordance with the prescribed form and that the statement of affairs accompanying the petition is also in accordance with the prescribed form or the Court directs, under sub-section (4), the Registrar to accept the petition -
(a) the petition shall be accepted by the Registrar, who shall endorse it accordingly; and
(b) thereupon, by force of this sub-section, the debtor becomes a bankrupt by virtue of the presentation of the petition."
On 25 November 1987, Mr David Roy Hughes, who has since changed his name by deed poll to Zero-Population-Growth, presented a debtor's petition, accompanied by a statement of affairs, against himself, which was on the same day accepted by the Registrar and endorsed by him as contemplated by section 55(3). Mr Zero, as he at the present time prefers to be called, thereupon became a bankrupt. His statement of affairs showed a large deficiency.
The bankrupt now applies under section 154(1)(a) for an annulment of his bankruptcy. That section relevantly provides:
"(1) Where the Court is satisfied -
(a) that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Registrar; or
. . . the Court may make an order annulling the bankruptcy."
What is alleged is that, in the words of the section, "the petition ought not to have been presented." In support of this allegation, made, it will be appreciated, against himself, Mr Zero says he deliberately overstated his debts and understated his assets in his statement of affairs. He claims to have presented the petition for tactical reasons of some kind, though the plan of campaign in which those tactics were to be employed was not fully explained.
I think the proper inference is that, if what Mr Zero now says is correct, he was probably motivated, at least in part, by a desire, however illogical, to make it impossible for a particular creditor to enforce her judgment immediately against him. That creditor was a Mrs Dennison, who had secured a judgment against him under which, with costs, an amount a little in excess of $100,000 was due. Mr Zero makes it plain today that he regards the judgment as a result of perjury, though he did not appeal against it, and he would be unwilling to pay it. He may well have felt even more strongly at the time. In any event, if he had some ill-thought-out design of this kind, he has succeeded beyond what might have been expected. For the whole debt is still outstanding, and little seems to have happened in the administration of the estate.
As the Full Court said in Boral Johns Perry Industries Pty Limited v. Piccardi (unreported, Wilcox, Burchett and Hill JJ., 23 June 1989) at page 15:
"The court has a wide discretion under section 154, but in deciding whether to exercise it, the court must have regard both to the interests of the various parties (the bankrupt and the creditors) and to the interest of the public."
The Full Court also referred to two statements made in the old case re Hester (1889) 22 QBD 632. The first of those statements was by Lord Esher M.R., who said that the court, under the Bankruptcy Act:
"will consider not only whether what is proposed is for the benefit of the creditors, but also whether it is conducive or detrimental to commercial morality and to the interests of the public at large ... ."
The other statement was by Lord Justice Fry, who said:
"It is an idle notion that the Court is bound by the consents of the creditors. The Court has far larger and more important duties to perform than merely to consider whether the creditors have consented to the rescinding of the order. We are bound in the exercise of our discretion in such a matter, and I think I might almost say in all matters under this Act, to take a wider view. We are not only bound to regard the interests of the creditors themselves, who are sometimes careless of their best interests, but we have a duty with regard to the commercial morality of the country."
Similar statements, or citations of these statements, are to be found in In re Flatau, ex parte Official Receiver (1893) 2 QB 223 at 224, Re Buildmat (Australia) Ltd (1983) 1 NSWLR 291 at 295-6, and Re Zdeneck Weiss; ex parte Official Trustee in Bankruptcy, an unreported decision of my own given on 29 August 1986.
When a bankrupt, who is plainly unwilling to see a particular large creditor paid, seeks an annulment before any payment has been made, relying substantially on the proposition that he is not insolvent, the discretionary considerations which were referred to in Trojan v. Corporation of Hindmarsh (1987) 16 FCR 37, at 46 to 48, also apply, and with redoubled force. In Trojan those considerations were taken into account when considering whether a sequestration order should be made; here, the question is whether a bankruptcy should be annulled. The court's discretion must be exercised in a case where the applicant relies on the alleged deliberate falsity of his own statement of affairs. What he has done has secured the result that Mrs Dennison was prevented from enforcing her judgment for a substantial period. The applicant now asks the court to annul the bankruptcy just when it appears a sale of property may possibly open the way to some payment becoming available.
If he had otherwise made out his case, I do not think, in these circumstances, it would be right to exercise a discretion to annul this bankruptcy before the payment of the bankrupt's debts. After they have been paid, if that in fact proves possible, an application can be made to the court under section 154(1)(b).
But, in any case, I am not satisfied that Mr Zero was not insolvent when he presented his petition. I simply do not know. He then solemnly affirmed that he was. He now denies it. The Official Trustee's report appears to accept that some of the assets may now be worth much more than was stated in the statement of affairs, but that does not demonstrate that they were then, since I do not know what factors may have affected values during the period of over two years which elapsed between 25 November 1987 and 26 February 1990, the date of the Official Trustee's report. Mr Zero's case largely rests on unproved assertions, and I am not satisfied that I should accept his present assertions against his verified statement of affairs made in 1987.
Before parting with this case, I cannot refrain from expressing my disquiet at the Official Trustee's report. It is well out of date, and has not been updated. It leaves me quite uncertain whether reasonable diligence has been devoted to the administration of this particular estate. I trust that those responsible will look into the outstanding questions without further delay. If Mr Zero's application accomplishes that, it will have achieved something. I note that a similar situation was adversely commented upon by Mr Justice French in a case which is noted in the Bankruptcy Practice. (See Australian Bankruptcy Law and Practice, 5th ed., vol. 1 at 4081.)
The application is dismissed. I order that the applicant bankrupt pay one half of the Official Trustee's costs.
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