Serafino, J. v Classic Manufacturing Pty Ltd

[1985] FCA 430

Ill THE FEDERAL COTJRT OF AIJSTEALIA	)
)
GENERAL DIVISION	)
)
BANI2UPTCY 9ISTRICT OF THE STATE	) NO. P 946 Gf 1 9 2 5
)
OF NEW SOIJTH WALEC AND THE	)
)
AUST?.ALIAN CAFITAL TEF.>.ITGRI:	j

MIMUTE OF OEDEP

JUDGE %KING OR9ER : Neaves J .

DATE OF ORDER : 30 Bugust 1985

WHERE MADE	: Canberra
THE COURT ORDERS THAT:

1. The further hearing of the petltion be adjourned to a date to be fixed.

2 . The debtor file and serve on the petitionlng

credltor not later than 10 September 1985

particulars of the "other sufficient cause" within the meaning of those words in paragraph 52(2)(b) of the Bankruptcv Act 1966 upon which the debtor intmds to rely in support of his claim that a sequestratlon order ought not to be

mad e .

3 . The costs of the proceedings upon the petitlon

and upon the notlce of intentlon to oppose the

petition filed on behalf of the debtor on 14

August 1085 be reserved.

Note:

Settlement and entry of orders is dealt with in

Order 36 of tine Federal Court Rules.

IN THE FEDERAL COURT OF AIJSTRALIF.	I
)
GENEEAL DIVISION	)
)
BANRRUFTCIT DISTRICT QF THE STATE	) No. 0 946 of 14e5
1
OF NEM SOUTH MALES ADii3 THE	I
)

AUSTRALIAN CAPITAL TERRITORY )

Re : JOHN SERWiNO

Debtor

Ex parte: CLASSIC MANUFACTURING FT?. LIMITED

Petltionlng CrediLor

B: Neaves J.

DATE: 30 August 19P5

REASONS FOR JUDGMENT

This is a credltor's petitlon presented on 2 0 June

1985 by Classlc Manufacturlng Pty. Llmited ("the petitioning creditor") for a sequestration order against he estate of John Serafino ("the debtor"). The petition alleges that the debtor

was at the date of the commission of the act of bankruptcy

specified In the petltion personally present In Australia, that

he is justly and- truly indebted to the petitioning creditor in

the sum of $15,004.27 bemg the balance due under a final judgment recovered in the Supreme Court of New South Wales on

14 December 1 9 8 4 and that the petitioning creditor holds no

security over property of the debtor for the payment of the

an act of bankruptcy consistlng In hls failure on or before 5 June 1985 to comply wlth the cequlrements	of a bankruptcy
notice served. on hlm on 13 Aprll l ?E5 .

The date f lxed for the hearlng 0: the petitlon war, 20

August 1985. On 13 August 1965 the debtor, pursuant to rule 20

of the Bankruptcl? Rh1e5, flled an2 served notlce of his

lntenclon to opFose the petltlon. ELT thac notlce the debtor

disputed that he was ~ustly and truly lndebted to the

petltlonlng credltor In the amount of $15,004.27. The notlce

also set out the grounds upon which the debtor intended to

oppose the petitlon In the following terms -

"1, That he is able wlthln the neaning of

s.52(2)(a) of the Bankruptcy Act to pay

his debts.

2.  That In the circumstances of the ca'se a

sequestration order against him ought

not to be made. 'I

The petltlon came on for hearing on 20 August 1985.

Proof was tendered on behalf of the petitloning creditor of the

matters of which section 52 of the Eankruptcy Act 1966 ("the debtor relies in opposltlon to the petition, the pecitioning credltor has established a case for the makmg of a sequestration order. There ls, however, a question whether

paragraph 4 of th? pecltlon accurately states the act of

bankruptcy on which the petitlonlng credltor relles.

As I nave already mentloned, the petltlon allc~es that

the debtor falled r.n or before 5 JuRe 1985 to comply w1t.h the

requlrements of the bankruptcy notice served upon him. The bankruptcy notlce, which specifled a perlod of 14 days after servlce as the perlod wlthln which to comply with Its

requlrements, was served on che debtor on Saturday, 13 April

1985. On 26 Aprll 1985, that 1 s to say wlthln the period for

compliance specifled in the nor;lce, the debtor filed an

affldavit under sub-sectlon 4 1 ( 7 ) of the Act statlng that he had a counter-clalm against the petltionmg cr2dicor in the ?um of $15,500. The amounc claimed by the petitlonmg creditor II?

the bankruptcy norice was $14,395.32.

The matter came before the Court on 20 May 1985 and

was adjourned to 23 May 1985. On the latter date the matter

was agaln adjourned until 4 June 1985 when an order was made

dismlssinq the debtor's application. The time for compliance

wlth the bankruptcy notice was not extended beyond 4 June 1985.

In these circumstances the act of bankruptcy relied

upon consists In the failure of the debtor on or before 4 June

1985 to comply with the requirements of the notice. It 1 s

appropriate, however, to glve leave to the petitioning creditor

to amend paragraph 4 of the petition by substituting that date

4.

f O l ; r!ir t h t e 5 June 1985 there appearing and to dispense with

the necessity to re-verify the petitlon .md to re-serve it.

..

The only ground specifically referred to In the notlce

of opposltlon flled on behalf of the aebtor is the ground set out In paragraph 52(2)(a) of the Act, namely that the debtor 1 s

"able to pay hls debts" and that 1 s ';>e only ground that has

been argued before me. Coun3el f o r rhe debEor has, however,

foreshadowed that the dejtor also mzhez to rely on the ground

set out in paragraph 52(2)(b), namely that "for other

sufficient cause J. sequestrstlon order ought not to be made".

The debtor has agreed that the petltioning credltor 1 s entltled

to particulars of the "other sufflclent cause" relled upon.

In support of his assertion that he is "able to pay

his debts" the debtor relies upon an affiiavlt sworn by him on

19 August 1985 as supplemented by his oral evldence.

It 1 s clear on the evidence that the debtor's only

source of income is Sydar Pty. Llmited, a company in which the

whole of the issued share capital is owned beneficially by the

debtor, as to 51%, and his wlfe, as to 49%. That company

carries on at Double Bay, N.S.W. the business of a retaller of

men's and women's clothlnyr. No evidence was given as to the

current financial position of the company. All that appears

are the statements made by the debtor that the company is trading satisfactorily, that it has "plant and stock sufficient

" I do no t be l leve chct my Income from the company

S y h r P ty . Llmltet! f o r t h e y e a r ended 30 June , l985

o r t h e income of my sald wife w l l l b e s u b 2 t a n t i a l l y

l ess than t ina t disclosed I n Yne r s t u r n s of income

whlch are e s h l b i t e d t o chls m y a f f i d a v l t . "

Paragraph 9 of the a f f i d a v i t r e a d -

"The a f f a i r s of t h e company p rov ide t ha t I r ece lve

from i t a gro35 sa l a ry of approximately ;540.00 per

week and my sald wlfe rece ives f rom the company a

salary ~n the sum of $385 per week."

Apar t f r o n hl-; shares In :::Jar F t y . Lmited and

Stylefino Pty. Lmited, the debtdc's onl:r assets consist in the

family home and Its contents, a s z s t s whlch are ~ointly owned. by

the debtor and his wlfe, and a race krarse vall;ed, accordin? to

the debtor, at approxinately $2 ,500 . He has no bank account

and owns no motor vehlcles o r other property.

/ .

....

Ths d e b t o r ' s e'.TlaeLce ~ 7 . 5 5 t h a c I r e dld n c t have c , ~ h

cesuurcej a v a i l . i b l e LO hln a t che preLenk Llme t o pay che

p e t i t l o n l n q credlcor'z uebt and if t h e debt we:e t o b e p a ~ d he

would have t o borrow money to ena5le him t o do so. Such

borrowinq would Involve him p r o v l d i n q f u r t h e r security, the

o n l y a s s e t s available as such secur1t:r belnq the con ten t s of

the family home. He za id in ev i r l rncc that he would not commit

h i m s e l f t o r a i s e B bank' l o a n t o enable th? d e b t t o be paid.

The most he would do would be t o commit himself t o ~ e d u c e t h e

debt by quarter ly payments of $ 5 , 0 0 0 .

The debtor t-siled upc'r. che de - i s lon of tni: Cour t i n

Re Sar ina ; Z::.: parte WollondillTT S h i r e Co1.1nc11 (13903 30 L . L . R .

2 6 6 , (14E0) 32 A.L.R. 53E. However, t h e r e waz no c'oubt l n that

case on the evldence that t he deS to r wa3 a b i e to pay h12 d e b t s .

The quect1or.s that a r o s e conssc!uent upm that f l . n< inq a re of no

re levance t o t h e presen t (case.

In my opinion t h e deb to r ha- f a i l e d t o d i scha rge t he

onus that rests upon h i m t o e s k a h l i s h that he i s a b l e t o pay

h i s d e b t s s o as t o b r m q t h e c a s e w i t h i n p a r a g r a p h 52!2)(a) of

the Act. Thls ground of oppos i t i on t o t h e p c l t l o n i s ,