Taraporewalla, Re C.J. Silloo, Re C.

[1986] FCA 135

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NOT FOR GENERAL DISTRIBUTION

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CATCHWORDS

Bankruptcy - Application for discharge - Duty of trustee - Adequacy of trustee‘s report - Principles governing exercise of discretion

Bankruptcy Act 1966 (Cth) , s.150

Re: CYRUS JALAJER TARAPOREWALLA, A,Bankrupt . .

Ex parte: CYRUS JALAJER TARAPOREWGLA

No. W 379 of 1984

Re: SILLOO CYRUS TARAPOREWALLA, A Bankrupt

Ex parte: SILLOO CYRUS TARAF’OREWALLA

No. W 902 of 1984

Neaves J.

22 April 1986

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IN THE FEDERAL COURT	OF AUSTRALIA	)
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GENERAL DIVISION	)
1 No. W 379 of 1984

BANKRUPTCY DISTRICT OF THE STATE )

OF NJZW SOUTH WALES AND THE )

AUSTRALIAN CAPITAL TERRITORY )

Re :	CYRUS	JALAJER	TARAPOREPRLLA
A Bankrupt

Ex parte: CYRUS JALAJER TARAPOREWALLA

MINUTE OF ORDER

JUDGE MAKING ORDER	: Neaves J.
DATE OF ORDER	: 22 April 1986
WERE MADE	: Sydney
THE COURT ORDERS THAT:

The application for an order of discharge from !

bankruptcy be refused.	I. .
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Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.

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IN THE F'EDERAL COURT OF AUSTRALIA	)
1

GENERAL	DIVISION	1
) No. W 902 of 1984

BANKRUPTCY DISTRICT OF THE STATE )

OF NEW SOUTH WALES AND THE )

AUSTRALIAN CAPITAL TERRITORY )

Re : SILLOO CYRUS TARAPOREWALLA

A Bankrupt

Ex parte: SILLOO CYRUS TARAPORENALLA

MINUTE OF ORDER _.

JUDGE MAKING ORDER : Neaves J. i L

DATE OF ORDER : 22 April 1986

WHERE MADE	: Sydney
THE COURT ORDERS THAT:

The application for an order of discharge from

bankruptcy be refused.

Note: Settlement and entry of orders is dealt with in rule 124 1 :

of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA ) )

DIVISION	GENERAL	1
) No. W 379 of 1984

BANKRUPTCY DISTRICT OF THE STATE )

OF NEW SOUTH WALES AND THE 1

AUSTRALIAN CAPITAL TERRITORY )

Re :	CYRUS	JALAJER	TARAPOREWALLA
A Bankrupt

Ex parte: CYRUS JALAJER TARAPOREhIALLA

IN THE FEDERAL COURT OF AUSTRALIA	)
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DIVISION	GENERAL	)
) No. W 902 of 1984 1.1

BANKRUPTCY DISTRICT OF THE STATE 1 1 :

OF' NEW SOUTH WALES AND THE )

AUSTRALIAN CAPITAL TERRITORY )

Re :	SILLOO	CYRUS	TARAPOREWALLA
A Bankrupt

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Ex parte:	SILLOO	CYRUS	TARAPOREWALLA	I- 1
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CORAM: Neaves J.

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U: 22 April 1986

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REASONS FOR JUDGMENT

I have before me two applications each of which seeks

an order under 5.150 of the Bankruptcy Act 1966 (Cth) ("the

Act") discharging the applicant from bankruptcy. One

application is that of Fyrus Jalajer Taraporewalla whose estate

was sequestrated on 7 May 1984 on the petition	of Sterland	3 .
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Bros. Pty. Limited. The trustee of his estate is Mr Maxwell

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William Prentice, a registered trustee. The other application

is that of Silloo Cyrus Taraporewalla (also known as Silloo

Cyrus Mahernosh) who became a bankrupt on 25 September 1984 by

force of sub-s.55(3) of the Act following the presentation of

her own petition. Silloo Cyrus Taraporewalla is the wife of

Cyrus Jalajer Taraporewalla. The Official Trustee in

Bankruptcy is the trustee of her estate.

On the hearing of the applications Mr and Mrs

Taraporewalla appeared in person. They were not legally

represented. In each application there was before the Court a

report in writing by the trustee of the estate. There was no

appearance by or on behalf of the trustee of the'estate of Mr

Taraporewalla. Mr D.J.N. Bluett, Official Receiver for the

Bankruptcy District of the State of New South Wales and the

Australian Capital Territory, appeared on behalf of the

Official Trustee in Bankruptcy in the application by Mrs	I -.
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Taraporewalla. Mr Schaffer, Solicitor, appeared in each matter
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on behalf of General Credits Limited to oppose the granting of	!
an order of discharge.	I j ,
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Neither applicant proferred to the Court any evidence

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on affidavit in support of his or her application and neither

sought o adduce any oral evidence. Mrs Taraporewalla,

however, was sworn and answered questions put to her by Mr

Bluett and Mr Schaffer.

3 .

In his statement of affairs sworn on 5 June 1984 Mr

Taraporewalla disclosed assets of $352 (being cash in hand $52

and household furniture and effects $ 3 0 0 ) , liabilities of

$56,729 owing to eight unsecured creditors and a deficiency of

$56,377. There is no information before the Court concerning

proofs of debt lodged or admitted in the estate of Mr

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Taraporewalla.	Mr Prentice,	however,	certified	to	the	.
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Registrar in Bankruptcy that there.were twelve creditors of the

estate who were to be notified of.the application for an order

of discharge. The amount of the bankrupt's indebtedness to

those creditors is not shown.

In her statement of affairs sworn on 25 September 1984

Mrs Taraporewalla disclosed assets of $720 (being cash in hand

$320 and household furniture and effects	$400), liabilities of	. .
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$9,459 owing to two unsecured creditors and a deficiency of

$8,739. In her estate, two proofs of debt have been admitted

to rank for dividend in sums totalling $9,187. The Official

Trustee has certified that there are two other creditors of the

estate, the amount claimed to be due to them	by the bankrupt
not, however, being stated.

Amounts of $40 and $220 have been brought to the

credit of the estates of Mr and Mrs Taraporewalla respectively,

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being contributions made by the bankrupt in each case. No

dividend has been paid in either estate and none	is likely to
be paid.

4.

In the case of neither estate has a public examination

of the bankrupt been held.

It appears that Mr and Mrs Taraporewalla migrated to I-

Australia from India in 1971. Mr Taraporewalla was a civil

engineer. Mrs Taraporewalla qualified as a medical

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practitioner in India. After her arrival in Australia she was .:

employed until 1975 as a registrar in public hospitals in New

South Wales. She went to India for about three months in 1975

and on her return to Australia joined a group medical practice

at Newcastle comprising three doctors. She received a salary

for the first year and then became partner on a one-quarter

share basis. The partnership was apparently not successful.

In August 1977 Mrs Taraporewalla commenced her own

medical practice at Mayfield, purchasing the goodwill of an

existing practice for $7,000. The necessary funds were

borrowed and were later repaid in full. The practice was

gradually built up with financial assistance from her husband

who operated a business as a consultant engineer and builder.

Mrs Taraporewalla has stated that by 1979 both she and her

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husband	were	operating	successful	business	ventures.	She	I .
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estimated that their combined assets were in excess of

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$100,000.

5.

On 15 June 1978 Mr and Mrs Taraporewalla purchased a

shelf company, Coratex Pty. Limited. The company had a paid up

capital of $ 2 . Mr and Mrs Taraporewalla were the only

shareholders and directors. Mrs Taraporewalla said in her oral

evidence that she took no active part in the running of the

company's business which onsisted primarily the In

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construction of home units in the Newcastle area. According to

Mrs Taraporewalla, the entire savings of herself and her

husband of $85,000 were lodged with the State Bank, Mayfield to

secure overdraft accommodation for Coratex Pty. Limited. Mr

and Mrs Taraporewalla received a combined salary averaging

between $400 and $500 per week from the company plus

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entertainment expenses.

Mrs Taraporewalla travelled to India in September 1982

when her mother died and again in August 1983 after her

father's death. All expenses were paid by the company. Mrs

Taraporewalla then assumed responsibility for her brother, who

I s a paraplegic and is said to be fully dependent upon her for

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support. A condition of his being allowed to enter Australia

was that she would guarantee his maintenance. I

In 1977 Mr and Mrs 'Tardporewalla purchased a house

property known as 64 Scenic Drive, Merewether and took up

residence there. The purchase price is not known. There was a

mortgage on the property in favour of the Newcastle Building

Society Limited. The property was sold by the mortgagee in

1984 for $114,000, a deficiency resulting.

6.

In 1982 Mr and Mrs Taraporewalla purchased two parcels

of land known as 20 Brown Street, Wallsend and Lot 2 Campbell

Street, Warners Bay for $98.000 and $92,000 respectively.

Deposits of 20% were paid from their savings and the balance was obtained by way of loan from General Credits Limited and

secured by first mortgages on the land. As collateral

security, second and third mortgages were given over the

property at Scenic Drive, Merewether.

The land was purchased to enable Coratex Pty. Limited

to construct a total of 24 home units on the land, 7 on the

Wallsend property and 17 on the Warners Bay site. 'The project,

which was initially costed at $900,000, was financed by General

Credits Limited and was expected to be completed within 12

months. Advances from General Credits Limited were made direct

to Mr and Mrs Taraporewalla, they in turn lending the moneys to

Coratex Pty. Limited to enable the company to finance the

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building of the units. The loan agreement required periodical

payment of interest only, the principal amount being repayable

upon completion of the project.

The company's operations were affected by a down turn

in the real estate market in 1982-83 and continuing industrial

disputation in relation to the building work. The project fell

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behind schedule by nearly three months. The company

encountered a serious cash flow problem and defaulted in the

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payment of interest to General Credits Limited. It ceased

operations in August 1983 and went into liquidation on	10
November 1983, Mr J.E. Walker being appointed liquidator.	In

addition to their obligations to General Credits Limited, the

bankrupts were personally liable under certain guarantees given

in respect of debts of the company.

General Credits Limited entered into possession of the

sites in question and is completing the building work. A

number of units have been sold but a deficiency in the sum of

$1,000,000 is said to be the likely result after all the units

are sold.

The trustee of neither estate has received a report ! '

from the liquidator of the company. Most of the company's

books and records are said to have been lost in transit when

being delivered from the company's accountants, J. Rosen and

Associates, to the liquidators. Mr Prentice has reported that

he has ascertained from the only cash book held by the

liquidator that some records of payments were kept in pencil

and that Mr Taraporewalla was drawing a wage of $450 per month

from the company although he had advised the liquidator that he

did not draw a wage. The liquidator has informed Mr Prentice

that the company has no assets and, at the date of liquidation,

had an estimated deficiency of $130,271.

a.

In relation to the books and records of the company Mr

Taraporewalla produced to the Court an undated note from J.

Rosen and Associates reading as follows -

"This office was the Accountants for Coratex

Pty. Limited, prior to liquidation.

A Cash Payments and Receipts Journal was kept

Taraporewalla, Mr by and a Bank

Reconcellation Csicl thereon prepared by this

firm. A list of Accounts Receivable and

Accounts Payable was also provided to us.

In our opinion proper Books of Account were

kept.

We are not aware of any matters in which the

Directors of the Company, Coratex Pty.

Limited did not act in the interests of the

Company. "

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After the making of the sequestration order against I '.

his estate, Mr Taraporewalla undertook a course of study at a College of Advanced Education in Sydney to qualify himself as a

teacher in mathematics and computers. While doing so, he was

supported by his wife. He is now employed in Sydney as a

teacher by the Department of Education of New South Wales at

salary of $300 per week.

Mrs Taraporewalla stated that, after the company

ceased operations, she lost interest in her medical practice.

However, in approximately June 1984 she commenced employment as

a medical practitioner with a company, Morsfill Pty. Limited

and is still so employed. That company changed its name to

Silloo Mahernosh Pty. Limited on 4 October 1984. The sole

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shareholders of that company are Mrs Taraporewalla's brother in

law, Dr Taraporewalla, and Mr J. Rosen, Accountant. Dr

Taraporewalla does not, however, work in the practice: he is

employed at a hospital in Brisbane but makes periodic visits to

Mayfield where the company's business is being conducted by Mrs

Taraporewalla as the sole medical practitioner in attendance.

The business is conducted from the same premises from which Mrs

Taraporewalla previously conducted her own medical practice.

The Official Trustee in Bankruptcy has reported that

Mrs Taraporewalla stated her income during the years ended 30

June 1982 to 1985 inclusive to be -

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Year ended

30 June 1982 14,984

30 June 1983 1,075

30 June 1984 nil

30 June 1985 20,000

In her oral evidence Mrs Taraporewalla said that her present

net income after tax is $1,255 per month. She has the use of a 1 .

motor vehicle owned by the company which meets all maintenance

and operating expenses. She is at present living in premises

rented from her father-in-law.

The source of much of the information set out above i s 7

the report made by the Official Trustee in Bankruptcy

concerning- Mrs Taraporewalla; her conduct, trade dealings,

property and affairs. I cannot forbear from commenting that

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the report made by the trustee of the state of Mr

Taraporewalla is most unsatisfactory as it Contains Scant

information concerning Mr Taraporewalla's conduct, trade

dealings and affairs. In particular, no information is given

concerning Mr Taraporewalla's involvement in the conduct of the

business of Coratex Pty. Limited or the circumstances

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surrounding the financing of the building projects in which

that company was engaged. No doubt the trustee would say that

the loss of the company's books and the absence of a full

report from the liquidator made his task in this regard more

difficult. But no indication is given whether the trustee has

taken any steps to obtain information in regard to those

matters, either from the bankrupt or his creditors, and, if he

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has done so, with what result. As Woodward J. said in

Maher (19851 61 A.L.R. 592 at p.595 "the trustee is under a

duty to ensure that the court has before it all material that

will assist it in considering the application for discharge,

and is not bound by the ordinary rules of evidence". Further,

as has already been mentioned, the trustee of Mr I

Taraporewalla's estate was not represented	at the hearing of
the application.

General Credits Limited opposed each application on

similar grounds which may be summarised as follows -

(a)	"he magnitude of the deficiency in the
estate; I

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(b) The small amount contributed to the

estate by the bankrupt;

(cl	The circumstance that the bankrupt is
capable of contributing significantly
more to the estate;
(d)	Sufficient particulars of the bankrupt's
liability to General Credits Limited
were not included in the bankrupt's
statement of affairs; and

(e) The bankrupt has not shown cogent

grounds for the making of an	order of
discharge.

In the case of neither application does the trustee's report allege the existence of any of the matters specified in

sub-s.150(6) of the Act nor is it alleged that any offence

against the Act has been committed.

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In Re Maher (supra) Woodward J. at pp.601-2 said:

"Although I have stated that I am of the

opinion that there is no presumption that a

bankrupt should be discharged by effluxion of

time under s.149, it does not follow that :'. ,.

every applicant under 5.150 is entitled to a

discharge simply by reason of the fact that ..

there is nothing to be said against the

granting of that order. The court still must

be persuaded to exercise its discretion in

favour of the granting of a discharge order.

It is for the applicants to persuade it.

Whilst I agree with Toohey J. in Re Benda

that an applicant need not show 'special

circumstances' to succeed, he or she must, in

my opinion, show some cogent ground or

grounds for the exercise of that discretion

in his or her favour. A mere dislike of

being bankrupt - a consciousness of the

stigma of bankruptcy, attaching to all

bankrupts but felt more by some than others	-
cannot of itself be enough."

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Adopting that approach, I am not persuaded that the

Court should exercise its discretion in favour of the granting

of an order of discharge in the case of either bankrupt. I am

not so persuaded because neither bankrupt has advanced any

cogent ground or grounds for the exercise of the discretion in his or her favour. Mr Taraporewalla stated as the only ground

on which he Sought an order of discharge that he would like to

be discharged from bankruptcy because he is in a profession

where he is dealing with the public; that he would like to have

his name cleared so that he can start again and live a normal

life. Mrs Taraporewalla said simply that, as a medical

practitioner, she would like to have her name cleated; that the

bankruptcy had had a tremendous effect on her psychologically.

In both cases it can be said that nothing positive has

been shown against the granting of orders of discharge -

although that state of affairs reflects to some extent at least

the absence of material relating to the affairs of Coratex Pty.

Limited and the manner in which the business of that company was conducted by the bankrupts. In any event that circumstance

is not enough to warrant the exercise of the Court's discretion

in the bankrupts' favour. I note, too, Mrs Taraporewalla's

evidence that she took no active part in the running of the

business yet she appears to have been paid a salary by the

company which also paid her entertainment expenses and met the

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I	cost of her travel to India in September 1982 and again in
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August 1903. I also note that no real effort appears to have

been made to make any substantial contribution to their

respective estates for the benefit of creditors.

Having considered the available material I am of

opinion that both applications should be refused and I so

order.	_ I
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I certify that this and

the preceding 12 pages are

a true copy of the Reasons

for Judgment herein of the

Honourable	Justice	Mr
Neaves .

I Associate

Dated: 22 April 1986