St George Bank Ltd v Helfenbaum

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FEDERAL COURT OF AUSTRALIA

St George Bank Ltd v Helfenbaum [1999] FCA 1337

BANKRUPTCY – Creditor’s petition – Grounds for refusal of sequestration order – Sufficient cause – Whether set‑off or cross claim sufficient cause – Whether real claim likely to succeed – Whether debtor able to pay debts – Meaning of “able to pay debts” – Whether “able” means “willing and able”.

Bankruptcy Act 1966 s 52(2)

Ling v Enrobook Pty Ltd (1997) 74 FCR 19 applied
Cain v Whyte (1933) 48 CLR 639 applied
Re Player (1962) 19 ABC 277 applied
Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 applied
Commonwealth Bank v McDonald [1999] FCA 984 applied
Re Rivett; Ex parte Edward Fay Ltd (1932) 5 ABC 182 applied
Re Douglas Griggs Engineering Ltd [1963] 1 Ch 19 cited
Vogwell v Vogwell (1939) 11 ABC 83 cited
Bank of Australasia v Hall (1907) 4 CLR 1514 considered
Re Jones; Ex parte Clutterbuck Bros (Adelaide) Ltd (1930) 2 ABC 89 applied
Re Noye; Ex parte Deputy Commissioner of Taxation (1958) 18 ABC 77 applied
Sandell v Porter (1966) 115 CLR 666 applied
Re Eather; Ex parte Polada (unreported, 30 May 1996, Cooper J) cited
Re McVey; Ex parte Carswell & Co (unreported 22 May 1996, Cooper J) cited
International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 cited
Re Sarina; Ex parte Wollondilly Shire Council (1980) 32 ALR 596 applied
Clyne v Deputy Commissioner of Taxation (1981) 150 CLR 1 applied

ST GEORGE BANK LIMITED v JEFFREY LEON HELFENBAUM

VG 7911 OF 1998

SUNDBERG J
24 SEPTEMBER 1999
MELBOURNE


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 7911 OF 1998

BETWEEN:

ST GEORGE BANK LIMITED (ACN 005 513 070)
Applicant

AND:

JEFFREY LEON HELFENBAUM
Respondent

JUDGE:

SUNDBERG J

DATE OF ORDER:

24 SEPTEMBER 1999

WHERE MADE:

MELBOURNE

THE COURT ORDERS THAT:

1.The application be dismissed.

2.The applicant pay the respondent’s costs of the application.

Note:   Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

VICTORIA DISTRICT REGISTRY

VG 7911 OF 1998

BETWEEN:

ST GEORGE BANK LIMITED (ACN 005 513 070)
Applicant

AND:

JEFFREY LEON HELFENBAUM
Respondent

JUDGE:

SUNDBERG J

DATE:

24 SEPTEMBER 1999

PLACE:

MELBOURNE

REASONS FOR JUDGMENT

BACKGROUND

  1. On 17 February 1998 the applicant’s predecessor, Advance Bank of Australia, obtained judgment against the respondent in the Magistrates’ Court at Melbourne for $21,117.20 for money owing under a loan contract. It is not necessary to distinguish between the applicant and its predecessor, and I will refer to each of them as “the Bank”. The respondent was granted a three months stay of the judgment. The stay expired on or about 17 May 1998. On 13 July 1998 a bankruptcy notice was served on the respondent. The notice was based on his failure to pay the amount of the judgment. On 30 July the respondent applied for a further stay of the judgment, which was refused. On 31 July he…

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Details
Case
[1999] FCA 1337
Decision Date

CaseChat Overview and Summary

In the case of St George Bank Ltd v Helfenbaum, the dispute involved the Bank's petition for the sequestration of the respondent's estate under the Bankruptcy Act 1966. The Bank sought to have the respondent declared bankrupt based on the respondent's failure to pay a judgment debt. The respondent opposed the petition, claiming he was able to pay his debts and had applied for an instalment order to pay the debt over time. The central legal issues revolved around whether the respondent had a sufficient cause to set aside the bankruptcy notice and whether the respondent was able to pay his debts within the meaning of the Act. Specifically, the court needed to determine whether a real claim or cross-claim was sufficient cause to set aside the bankruptcy notice, and what it meant for the respondent to be "able to pay debts."

The court found that the respondent's counterclaim against the Bank did not constitute sufficient cause to set aside the bankruptcy notice because the respondent could have raised it in the original proceedings. The court also considered the respondent's ability to pay his debts, noting that the respondent had applied for an instalment order but had failed to make full and frank disclosure of his debts, leading to the cancellation of the order. The court held that the term "able to pay debts" in the context of the Bankruptcy Act meant more than just having the willingness to pay; it also required the debtor to be in a position to meet their financial obligations in a manner consistent with the Act. Given the respondent's history of non-disclosure and the failure of his instalment application, the court concluded that the respondent did not have a viable means to pay his debts, which was a necessary condition to oppose the sequestration order.

The court dismissed the Bank's application and ordered the Bank to pay the respondent's costs of the application. This decision underscores the importance of full disclosure and the need for debtors to demonstrate a genuine ability to meet their financial obligations when opposing a sequestration order.

Orders

Orders of the court

1. The application be dismissed.

2. The applicant pay the respondent’s costs of the application.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

On 17 February 1998 the applicant’s predecessor, Advance Bank of Australia, obtained judgment against the respondent in the Magistrates’ Court at Melbourne for $21,117.20 for money owing under a loan contract. It is not necessary to distinguish between the applicant and its predecessor, and I will refer to each of them as “the Bank”. The respondent was granted a three months stay of the judgment. The stay expired on or about 17 May 1998. On 13 July 1998 a bankruptcy notice was served on the respondent. The notice was based on his failure to pay the amount of the judgment. On 30 July the respondent applied for a further stay of the judgment, which was refused. On 31 July he sought to have the notice set aside on the ground that he had a counterclaim against the Bank for over $300,000 “which is currently being pursued”. On 30 September the application was dismissed on the ground that his claim against the Bank could have been set up in the proceedings in which judgment had been obtained against him. Cf ss 41(7) and 40(1)(g) of the Bankruptcy Act 1966 (“the Act”). On 30 November the Bank served a creditor’s petition on the respondent relying on the act of bankruptcy which occurred on the dismissal of the application to set aside the bankruptcy notice. On 9 February 1999 the respondent filed a notice of intention to oppose the petition which is in part as follows:“1.I am able to pay my debts, as I have readily realisable assets exceeding the value of the debt.2.These readily realisable assets are, however, essential for my work and home, being chiefly manufacturing and computer equipment (tools of trade) and furniture and personal items.3.I have lodged an Application for an Instalment Order with the Registrar of the Magistrates Court of Victoria …. If approved, this will result in the Applicant’s debt being paid over time.”The petition and the notice of opposition are the matters that are before me.THE EVIDENCE The notice of intention to oppose was supported by an affidavit in which the respondent deposed that he had lodged an instalment application with the Magistrates’ Court on 8 February 1999, a copy of which was an exhibit to the affidavit. In the application the respondent applied to pay the judgment debt by forty‑eight monthly instalments of $504.05. He gave as his reason for seeking an order that “the debtor does not have the funds to pay the judgment debt in one lump sum and is unable to borrow sufficient funds”. In an accompanying Statement of Affairs the respondent disclosed a weekly income of $1,385, assets of $54,400, weekly expenses of $548 and other debts of $10,000. On 24 February the respondent filed an affidavit purportedly in support of an application to set aside the bankruptcy notice. He said his application for an instalment order had not yet been heard. He claimed to have average weekly earnings of $1,385, average weekly expenses of $757, net disposable weekly income of $628, assets of $54,400 and liabilities of $30,000 (ie net assets of $24,400), and said – “I believe I am not insolvent and that I have the financial capacity to fulfil the terms of the instalment arrangement applied for …”. On the first return of the petition on 10 February 1999 a Registrar acceded to the respondent’s request for an adjournment until after the hearing of the instalment application. On 15 February the Magistrates’ Court made an order that the debt be paid by forty‑eight instalments of $504.05. On 5 March, on the Bank’s application, the instalment order was cancelled on the ground that the respondent had failed to make full and frank disclosure of his debts, in that he had not mentioned that he owed his former solicitors, Herbert Geer & Rundle, $4,459.29.

Decision

Reasons for decision

SUNDBERG J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: SUNDBERG J

Full text does not contain this section.