Tanner, Re P. Elms Family Import-Export Property Enterprises Pty Ltd, Ex Parte

Not for distributlon

BANKRUPTCY -

creditor's petition on ground that

Cpe

notice that he suspended payment	of his debts	- relevant
consideratlons.
Bankruptcy Act 1966

Ex parte Oastler. In re Friedlander

( 1 8 8 4 ) 13 Q.B.

471.

In re Scott. Ex parte Scott C18967 1 Q.B. 619.

Clouqh v . Samuel &

Ors. C19057 A.C. 442.

Cropley's Limlted v. Vickery & Ors.

( 1 9 2 0 ) 27 C.L.R.

3 2 1 .

Re Hewson;

Ex parte Sydney Stock Exchanqe Ltd.

(1967) 10 F.L.R. 479.

Re Carney G Carne.1; Ex parte Ampol Petroleum (Oueensland)

Ptv.Ltd. (1983) 76 F.L.R. 97.

PE PETER THOMAS TANNER; EX PARTE THE ELMS F-VlILY IMPORT-EXPORT

F'RC)PEP.TY MID INVESTMENT ENTERPRISES PTY. LTD.

No. 948 of 1986

SPENDER J.

i	BRISBANE
24 DECEMBER 1986.
I
i

IN THE FEDERAL COURT OF AUSTRALIA

) )

)	QLD. PET. 948 of 1986

GENERAL DIVISION

I I

BANKRUPTCY DISTRICT

OF THE SOUTHERN )

I	1
I

!	DISTRICT OF THE STATE OF OUEENSLAND )

RE :

PETER THOMAS TANNER

Debtor

Ex PARTE:

THE ELMS FAMILY IMPORT-EXPORT PROPERTY

AND INVESTMENT ENTERPRISES

PTY.

LTD.

petitioning Creditor

DATE JTJDGMENT DELIVERED

24 DECEMEER 1986

COUNSEL :

. for the debtor

Mr. Morris instructed by Mr. Underhill of Messrs.

McCarthy, Palethorpe

& Blanch

. for the petitioning creditor Mr.

D. Murphy instructed by

Miss McVeigh of Messrs.

J . A .

McCullough & Robertson

THERESE MACDERMOTT

ASSOCIATE TO SPENDER J.

IN TIE FEDEPAL COURT OF AUSTRALIA	)
1

GENERAL

DIVISION

PET.

QLD.

948 of 1986

BANKRUPTCY DISTRICT

OF THE SOUTHERN )

I	DISTRICT OF THE STATE OF OUEENSLAND )

PETER THOMAS T-WNEF?

Debtor

E<	PmTE:	THE ELMS F-WILY IMPORT-EXPORT PROPERTY	AND
IfiKESTMENT ENTERPRISES PTY.LTD.

Petitioning Creditor

MINUTES OF ORDER

JIJDGE MAKING ORDER:

SPENDER J.

I	DATE ORDER MADE:	26 DECEMBER 1986
i
WERE MADE:	BRISBANE
i	i
!	THE COURT ORDERS THAT:
l	I

The petition be dismissed.

!	I
l
i

NOTE:

Settlement and entry of orders is dealt with in

Bankruptcy Rule

124.

IN THE FEDERAL COURT OF AUSTRALIA

) )

DIVISION

GENERAL

)

QLD. PET. 948 of 1986

BANKRUPTCY DISTRICT

OF THE SOUTHERN )

)

DISTRICT OF THE STATE OF OUEENSLAND )

B:	PETER THOMAS TANm.

Debtor

EX P‘ARTE:

THE ELMS F.4MILY IMPORT-EXPORT PROPERTY

AETD INVESTMENT ENTEPPRISES

PTY-LTD.

Petitioning Creditor

SPENDER J.

BRISBANE

24 DECEMBER, 1986.

RFXSONS FOR JUDGMENT

This is an application

f o r a sequestration order against

the estate of Peter Thomas Tanner. The act of bankruptcy relled

on is that Mr. Tanner, “on or before 2 July 1986, gave notice to

his Creditor (sic) that he has suspended payment

of his debts.“

The

Creditor’s

Petition

claims

that

Mr.

Tanner

“justly and truly indebted

as at

8 August 1986 to the petitioning

creditor in the sum of $20,073.47, together with interest

2 .

compounded at the rate of 15 per cent per annum for moneys lent

and not repaid.

In fact, it emerges that Mr. Tanner is the guarantor of

a loan by

the

petitioning

creditor

a company,

Rycourt

Pty.Ltd.,

which

Mr.

Tanner

was

formerly

director.

further

appears

that

Mr.

Tanner's

involvement

with

Rycourt

Pty.Ltd. was terminated on the basis that

Mr. Gallus, the other

guarantor and director of Rycourt Pty.Ltd., would indemnify Mr.

Tanner in respect

any liability on Tanner's part to the

petitioning creditor.

The petitioning credltor's case is that at a meeting

held on 2 July 1986, Mr. Tanner not only signed

an acknowledgment

of his indebtedness but also made statements which amount to the

commission of the act of bankruptcy specified in paragraph

40(l)(h) of the Bankruptcv Act

1966, which provides:-

"A debtor commits an act of bankruptcy in each of

the following cases:-

(h) if he

gives notice to any of his creditors

that he has suspended, or that he is about

to suspend, payment

of his debts;"

It will be necessary to turn

to that meeting in more

detail later but, in the affidavit verifying the petition, Mr.

Elms, a director of the petitioning creditor, said that:-

"The

abovenamed

Debtor

on the

2nd

July

1986

acknowledged that as at the 30th June

1986 the

Debtor

owed the sum of $19.768.70 to

the

Petitioning

Creditor

together

with

interest

compounded at the rate of 15 per centum per annum

and that although	the Debtor was most anxious to
pav the said debt	to the Petitioning Creditor the

be%tor was unable to

so . I'

!This is the extent of the evidence

in the affidavit

of Mr. Elms,

directed to establishing the act

of bankruptcy relied on.

An affidavit by

Mr.

Douglas Beames, solicitor for the

petitioning creditor, swore simply that the act of bankruptcy

alleged in the petition	"is within my	own knowledge true".	I
ruled it inadmissible.

Oral evidence

was given by Mr. Elms, Mr. Beames and Mr.

Tanner.

The Notlce of

Intention to Oppose Petition asserts these

grounds

"1.

That the said Creditor's Petition does not

allege

an act

of bankruptcy of the type

referred to in sectlon 40(l)(h) of the Bankruptcy Act, 1966 to have been committed by the Debtor;

Alternatlvely, that the Debtor did

not-commit

the act of bankruptcy alleged in the said

Creditor's Petition;

3. That the said debtor is able to pay his

debts;.

. .

to what constitutes the giving by a debtor of

notice that

he intends to suspend payment

of his debts, it is

important to recognize that

each case falls for determination on

its own facts.

Some reference to the cases, however,

is useful.

In Ex

parte Oastler. In re Friedlander

(1884) 13 Q.B.

471, the debtor had made an oral statement to his creditor that

was not able to pay his debts in full.

In the Court of

Appeal, Baggallay,

L . J .

said at 474:-

"In	my opinion the conversation which is relied

upon did not amount to

such a notice of

intention to suspend payment as is contemplated by

sub-s.l(h1 of

5 . 4 . "

(This is	the equivalent of s.40(l)(hl	of	the Bankruptcy Act
1966).

"It is suggested that

the debtor in effect said,

am unable to pay my debts,' and that this is

equivalent

saying,

'I am

about

suspend

payment

debts'.

I cannot so view

it.

Looking at sub-s.l(f) I do not thlnk that

statement by a debtor that

he is unable to pay his

debts can be regarded as equivalent to a notlce

that he is about to suspend payment of his debts."

Cotton L.J. said

at 474:-

' I . . .

all

the

circumstances must be taken into

consideration, as well as the

words

which were

used by the debtor. Even if the words 'suspend

payment'

had been used in the present case,

think it would be a serious question whether under

the circumstances there had been such

a notice as

is contemplated by sub-s.l(h1. But the debtor did

not in fact intimate either that he had suspended

payment of his debts, or that he had any intention

of stopping paying

his creditors.

He only said,

My assets are insufficient to pay my debts in

U11

And later,

"To my

mind, there is a great difference between

saying, 'If all my assets are distributed

creditors will not get

20s.

in the pound,' and

saying, 'If any

creditor

comes

to me in the

ordinary course for

payment I shall not pay him,'

or 'I have suspended the payment of

my debts'.''

Lindley L.J. at 475 said:-

"The first question is, what is the meaning

of a

debtor's 'giving notice' that

he has suspended, or

about to suspend, payment of his debts?

think it does not mean mere

casual

talk; it must

be something formal

and deliberate, something done

by the debtor

with a consciousness that

he is

'giving notice,' and intended to be understood in

that sense.

An act of bankruptcy

1 s

a serious

matter.

I am of opinion that what was done in the

present case did not amount to

a 'giving notice'

within the Act. If it was a notice at

all, it was

only a

notice that the debtor might have

to pay

his creditors a composition; not a notice that he

had suspended,

or that

he was about to suspend,

payment of his

debts"

In re

Scott.

Ex parte

Scott

E18967 1 Q.B. 619

establishes that the act of bankruptcy presently relied

applies to non-traders as well	as to traders.	In that case, it
was held that:-

"A statement made by a debtor

will amount to a

notice that he

has suspended, or is about to

suspend, payment of his debts, withln the meaning

of 5.4,

sub-s.l(h), of the Bankruptcy Act, 1883,

so as to constitute

an act of bankruptcy, if it is

in effect a statement that the debtor is unable to

pay his

debts,

and Intends to deal with his

creditors collectively."

At 624, Vaughan Williams

J. said:-

"If we look at this case as if there had only been

an application

for payment, and the creditor had

been told

to call again, and receive payment for

himself and for

Mr. Lewis,,and when he called

again the next day the debtor had said, 'I cannot

pay now, but I hope to pay every one soon,' that in itself would not amount to a notice of

suspension of payment.

I am convinced that

5.4,

sub-S. l(h), is meant to apply

to the case

of a

debtor dealing

with his creditors as

a body."

6 .

He continued:-

“In the present case the only notice given was that

given by the debtor to

Mr.

Sear, that at that

moment she could not pay him and

Mr. Lewis, or any

of her creditors.

That by itself might not come

within the section; but she went on to add that she had taken advice, and that she would not pay

any one.

That is not

an answer to these two

people only; what she was really saying was,

’I

cannot pay you or any one else;

I have taken

advice, and I am advised that I must deal with my

creditors collectively.”’

In Clouqh v. Samuel &

Ors. E190511 A . C . 442, the Earl of

Halsbury L.C. said at

444:-

“The statute mlght have said that

an admission of

insolvency should be enough,

or that a present

state of

insolvency should be enough, but it is

sufficiently clear that neither one nor the other

wlll be sufficient as

an act of bankruptcy.

earller

tlmes

bankruptcy

was

a crime, and in

dealing wlth our law to commlt

the crime It was

necessary to commit

an act of bankruptcy. Two

most distingulshed judges, Lord

Selborne and Lord

Watson, have pointed out in this House that a

declaration of inability by

a debtor does not of

itself

and

without

reference

context

circumstances satisfy the statute; and

if I look

to the circumstances

or the words used, I concur

with the Court of Appeal here

that the

debtor

neither did nor intended to do any such thing as

to give notice to his creditors

or to any of them

that he intended to suspend the payment of his

debt

s .

I‘

Lord Macnaghten,

who dissented, said at 446:-

“The notice need not be in writing. It is enough

if notice is given

any one of the creditors.

No particular form

is required. There is nothing

said in the

Act about the debtor’s intention. The

question

what effect would the communication

have on the

minds

of the persons

to whom it is

addressed.

That is the test as laid down in this

House.

It is only a matter of common sense, as

A.L. Smith L.J. observed. All that is required

that a

communication proceeding from the debtor,

made seriously, should glve the credltors or any

of the credltors to understand from the state of

circumstances

as disclosed at the time that the

debtor has suspended or that he is about

suspend payment.

Lord Robertson, at

449, said:-

"It is, of course, entirely conslstent with thls

view

that

the

questlon

whether

notice

suspenslon

has been given must depend on the

import of what was sald or	written and is relied
on as notice.
Now, the question is, Dld	Mr. Rels give notlce

that he had suspended payment

of hls debts,

or was

about to suspend It? It seems to me that	he did
nothlng in that direction except to shew	(to two

of	hls credltors) hls clrcumstances to be such

that suzpenslon of payment was one of the courses

open to hlm.

The occasion and object

the

intervlew founded

on was to arranqe with two

brokers about closlng the account. It 1 s true that at that lntervlew disclosure was made of a

state of affalrs

whlch

would

have

justlfled

suspenslon of

payment. But to me it

1 s equally

clear that what 1 s relled on

as having been said

dld not, In Its reasonable sense, Import notlce of

l	an lntentlon to take that step, and it 1 s at least doubtful whether the tenor of the communlcatlon did not rather polnt in the opposlte dlrectlon."

The Hlgh Court considered this ground in Cropley's

Limited v. Vickery &

Ors.

( 1 9 2 0 ) 27 C.L.R.

321.

Knos C.J. at

325, in a passage whlch has frequently been cited,

said:-

"Without going into the cases at length, it is

perfectly clear that to constitute this act of

bankruptcy two things are requisite: first,

intention residing in

the mind of the debtor that

he will,

in a sense voluntarily, that is, as his

own act, refuse to

pay his debts as they become

due, and, secondly, a communication of that

, h

’ ,

intention to one

of his creditors. It is not

necessary to go through every word of

the evidence

because the tacts of one case wlll never,

or very

rarely, be the same

as those

of any other case.”

In Re Hewson:

Ex parte Svdnev Stock Exchanqe Ltd. (1967)

10 F.L.H. 479, Sir Harry Gibbs, then sitting in

the Federal Court

of Bankruptcy, considered this act	of bankruptcy. He said at
483-4:-

“However, on behalf of Hewson it was submitted that

to constitute an act of bankruptcy within s.52(k)

it is necessary that the debtor should intend to

refuse of his own free will to pay hls debts and

communlcate

that

intention

one

his

creditors, and that

it 1 s not enough if he merely

says that by force

of circumstances he is unable

to pay. In this argument reliance was placed on

the judgments in Cloucrh v. Samuel C19053

A.C.442

and

CroPlev’s Ltd.

v. Vickerv (1920) 27 C.L.R.

321.

These cases show that an admlsslon of lnsolvency

of lnaoillty

to pay debts

1 s not enough In

itself to

constltute an act of bankruptcy wlthln

this subsectlon, and that the debtor must have an

actual

intention

suspend

payment

his

creditors. The passage

which

counsel

for

Hewson most strongly relled is contained in the

judgment of Knox CIJ-. In Cropley’s Ltd.

v. Vlckery

(1920) 27 C.L.R.

at p.325.”

He then clted the passage to which I	have earlier referred, and
he continued:-

“By using the words ‘voluntarily’ and ‘refuse’ Knox

C.J. did not mean that thls act of bankruptcy can only be committed by a debtor who has a free and unconstrained choice, in the sense that he is

possessed

of sufficient funds to enable him to

meet	his obligations and is not acting under

necessity, and yet refuses to pay. Usually, a man

suspends payment of his debts because

he is unable

to pay them and it has never been held that this

act of bankruptcy is limited to the case where the

debtor is able

to pay but for some reason decides

not to do SO.

A debtor

commits

this

act

bankruptcy

when

decides

not

meet

his

engagements as they fall due, and gives notice of

that

decision

his

creditors,

although

the

reason for hls decision 1 s that any other course

would be futile. As Lord Robertson pointed out in

Clouqh v.

Samuel C19051 A.C., at p . 4 4 8 , a man who

is insolvent has

a number of choices open to him.

'may try to arrange wih

his more pressing

creditors, or he may put off

the evil day and

stagger on, leaving the stoppage of his career to

be brought about by the actlon of others'. If he

chooses either of these courses

he does not intend

to suspend payment of

his debts. Another course

open however is to give up

the struggle and make

no attempt to pay his debts, and if

he chooses

that course, even if it is the only sensible

course, he does not intend to pay his creditors in

the course of his

trade (to use the words of Rlch

J. in Croplev's Ltd. v. Vickery (1920) 27 C.L.R.,

at p.327 and does Intend to suspend Pavment. If a

- . ,

debtor says that

he 1 s unable tb pay, and means no

more than thet, it is not enough, but

if In the

circumstances his words mean that he has not the intentlon of paying his debts as they become due, that will be notlce that he 1 s about to suspend

payment

(see Crook

v. Morley E18913 A.C. 316, at

pp. 320-324;

In re a Debtcr C19293 1 Ch. 362, at

pp 369, 371-372 and Re Francls (1941) 12 A.B.C. 111; aff'd 65 C . L . R .

662(n).

As I have lndlcated, In the

clrcumstances of the

present case Hewson's statements went beyond

mere declaratlon of

hls lnabllity to pay his

debts.

They

made it

clear

that of necessity he

had given up

the struggle and intended to do

nothlng towards paylng

hls debts as

they became

due in

the

ordinary course of h1s trade as

stoclibroker."

In Re Carney & Carnev; Ex parte

Ampol

Petroleum

(Oueensland) Ptv.Ltd. (1983) 76 F.L.R.

97, Fitzgerald J.

at 99

said:

"As

the

debtor's

intentions

appear

from

the

statements which were made. the debtors intended

t o continue to trade and to pay creditors in the

course of their business as they could, and they said nothing. in fact, to the contrary. They did continue to trade and to pay creditors. They did

not indicate an intention to suspend payment to their trade creditors generally. They did not have that intention, and they did not do so.

1 %

10.

Accordingly,

the

petition

based

solely

upon

s.40(l)(h) of

the Act must be dlsmlssed.

It is,

01 course, open to the petitionlng creditor to

give

bankruptcy notice based on the Supreme

Court judgment

which it obtained prior to the

presentation of the present petition."

In this particular case there is

no judgment debt.

Turning to the clrcumstances of

the meeting of

2 July

1986, there are significant inconsistencies between the accounts

of the various particlpants, each with the other, and there are

also lnconslstencies between what is sald by Mr. Elms

in his

affidavit and wlth is oral evidence concerning the circumstances

of that

meeting.

I thlnk

that,

the

highest

for

the

petitioning creditor, Mr. Tanner indicated that he was

in an

embarrasslng financlal posltion and that

he was in no posltion to

pay his debts. Mr. Beames seclously contradicted

hmself in his

evldence as to whether Mr. Tanner had other debts.	He said in his
evidence:-

"I asked him whether he had any other debts. I do

not

recall

gettlng

a dlrect

the

question.

And only a short time later in

his evidence he said:-

"I asked him

if he had any debts, and

he responded,

'yes', and then the conversation changed.

It was

as though it was not

a matter to

be pursued."

As to the context

of the conversations, Mr. Elms said:-

I .

"It was just a discussion there to confirm a debt

and f i n d

OUL when the debt would be

paid.

That

was the purpose of the meeting."

Given the inconsistences in the oral evrdence of

Mr. Beames and

Mr. Elms and the affidavit material

for the petitioning creditor,

and the circumstances and nature

the meeting, I

prefer the

account given by

Mr. Tanner.

On any view of the matter, however,

i am quite satisfled

that

there

was

never

any

communlcatlon

by Mr. Tanner as

contemplated by s.40(l)(h).

That act

of bankruptcy is not made

out and, for that reason, I dismlss the petitlon.

Further,

Mr.

Tanner flled an affidavlt deposing to

his olvenclr . This

shows

assets

of some $377,000.00 and

liablllt'les $76,500.00.

No ser'lous challenge vas made to Mr.

Tanner's evldence

that he

1 s solvent and

on that basls also

refuse to make the order sought in the petition.

I order that the petition be dlsmissed.

[1986] FCA 658

24 Dec 1986