Thanos, Re R. Thanos, Ex Parte P.

[1988] FCA 595

l? .

CATCHWORDS

BANKRUPTCY - application for annulment of bankruptcy	-
inadequate and misleading statement	of affairs - whether

debtor presented petition to frustrate orders to be made in

Family Court - whether debtor's petition an abuse	of process
Bankruptcy Act 1966 (Cth) - s . 5 5 ,	s.154
Re Mottee (1977) 29 F.L.R.	406

Deputy Commissioner of Taxation v. Swain (unreported, Davies,

Lockhart, Burchett JJ., 13 July 1988)

RE DIAMANDA THANOS EX PARTE PHILIPOS THANOS

No. SA 822 of 1988

Davies J.
14 October 1988

Sydney

l

I .

IN THE FEDERAL COURT OF AUSTRALIA	L
BANKRUPTCY DISTRICT	OF THE
STATE OF SOUTH AUSTRALIA	NO. 822 Of 1988

, .

- RE : DIAMANDA THANOS

!

Debtor

EX PARTE:  PHILIPOS THANOS

Applicant

. I

CORAM:	Davies 3.	!
? i
-	DATE :	14 October 1988	..

PLACE : Sydney

MINUTES OF ORDER

THE COURT ORDERS THAT:

c

1.	The	bankruptcy be annulled.
2.	The applicant pay remuneration	and expenses of the

Official Trustee in the sum of $1000.00.

L

NOTE :  Settlement and entry of orders is dealt with in i

Order 2 4 of the Bankruptcy Rules.	. .I
; :
I . '

I

t

!

, .

i	IN THE	FEDERAL	COURT	OF AUSTRALIA	)	i .
1	i

BANKRUPTCY DISTRICT OF THE 1 1

STATE OF SOUTH AUSTRALIA 1 No. 822 o f 1988

- RE : DIAMANDA THANOS

Debtor	I
i.

EX PARTE:  PHILIPOS THANOS

I

Applicant i

CORAM:  Davies J.

I '

-	DATE :	14 October 1988
PLACE:	Sydney

REASONS FOR JUDGMENT

On 23 September 1988 I ordered, under s.154(1) of the ..

Bankruptcy Act 1966 (Cth)("the Act"), that the bankruptcy of

the debtor, Diamanda Thanos, be annulled. I announced that I

would deliver my reasons subsequently. These are the reasons

for that order.

The applicant, Mr Philipos Thanos, and the bankrupt,

Mrs Diamanda Thanos, were married on 20 July 1974 and have two children, both of whom are presently living with Mrs Thanos. They separated on or about 28 December 1984 and a decree nlsi

f o r dissolution of their marriage was pronounced on 6 March

1986.   Mr and Mrs Thanos had had complex financial dealings,

i 2.

particularly after March	1977 when Mr Thanos and his father
won almost $400,000 from Lotto. Mr	Thanos received one half
of that win.

Mr and Mrs Thanos are the registered joint

..

proprietors of the former matrimonial home at 11 Wllton I '

Terrace, Torrensvllle, being the land described in Certificate	I :
of Title, Volume 4165 Folio 575.	Mr Thanos applied to the

Family Court of Australia for orders that Mrs Thanos transfer
to him the whole of her estate and interest in that property,

that she return to him certain items of furniture and that she

pay to him such further amount by way of lump sum as the Court

deemed just and equitable, Mr Justice Gun heard this

application in May 1988 and, on 16 June 1988, he delivered

reasons for judgment.

In those reasons, his Honour examined the complex

financial transactions of Mr and Mrs Thanos and did his best

to trace their moneys. His Honour came to the conclusion that

Mrs Thanos had appropriated and had not accounted for the

proceeds of the sale of two properties. His Honour said:-

"I summarise the above evidence by saying that the

wife has received and retained the following amounts

from the proceeds	of the sale of the Henley Beach and
Rosewater units and	has not accounted for the
disposition thereof:

Proceeds of sale of

Rosewater units $103,974

mortgage Less 23,582 $ 80,392

Amount removed from	WP3
on 23/5/84	10,000
Two amounts of $5,0	00

I paid to "Commonweal th" 10,000

Amount withdrawn from	ANZ2
to close account	1,067
Three cheques withdrawn in
June 1984 (see above)	8,883 $110,342

I have no doubt that the wife has spent some of that

money on living expenses for herself and the chlldren
and I propose to make allowance for that fact. I have
no doubt, however, that the wife has retained some of

this money in some form of investment, either in South

Australia, or in Greece.	I am unable to say	how much
she has so retained.	I am satisfied that it	has at all

times been within her power to explain what happened to

the above moneys by producing the appropriate records

and by calling her father and Mr Weber who could	no
doubt help to explaln what has happened	to these funds.
In these circumstances,	I propose to proceed on the

basis that the wife has retained all of the above moneys

and to make some allowance for living expenses for

herself and the children between October 1984 and

October 1985. In my opinion, the course which I am

adopting, is appropriate	and in accordance with the
judgmenf of the'Fui1	Court in the case of Mezzacappa
(1987) FLC 91-853. "
His Honour concluded that the	net assets of the

parties amounted to	$234,875 including $110,342, the amount
which his Honour found was retained by	Mrs Thanos from

proceeds of the sale of the Henley Beach and Rosewater units.

His Honour concluded that it would be just and equitable to

award 60% of the net assets	to Mrs Thanos and 40% to Mr
Thanos.	His Honour concluded that of 60% of the total assets,

$140,925, Mrs Thanos had had property to the value of

$130,632. His Honour concluded that I'Irs Thanos should

transfer her interest in the matrimonlal home to the applicant

and that the applicant should pay to Mrs Thanos the balancing

sum of $10,293.

His Honour did not make a final order on this matter.

on 16 June 1988 but adlourned the matter to 20 June 1988 with

a view to hearing counsel as to the form of the orders to be

made, as to costs and to the question of personal effects.

Mrs Thanos saw her solicitor and counsel on the

morning of 20 June 1988 and, prior to the resumed hearing
before Mr Justice Gun, and being aware that, by becoming
bankrupt, she could frustrate the making of the orders
proposed by Mr Justice Gun in his reasons for judgment, Mrs
Thanos decided that she would go forthwith to the Bankruptcy

Registry and present a petition for her bankruptcy. Her

counsel appeared before	Mr Justice Gun and advised his Honour
that his client was then in the course	of presenting her own
petition for bankruptcy. His Honour accordingly adjourned	the
proceedings before	him.
On arrival at the Bankruptcy Registry, Mrs Thanos first offered an appointment for the afternoon. However, she sought and obtained an urgent consideration of her matter by the Deputy Registrar. A debtor's petition was written out and	was
signed, a statement	of affairs was written out and completed
and an affidavit verifying that statement was written out and

sworn. These documents were presented and accepted by the

Deputy Registrar at 10:22 a.m. on 20 June 1988. Pursuant to : .

s.53(3) of the Act, Mrs Thanos thereby became	a bankrupt.	..
i '
!
' .
I.'
I

5.   1:

I-

Had the orders proposed by	Mr Justice Gun been made	;' I
i

prior to the acceptance of the debtor's petition, the

I
I'

bankruptcy would not have affected their validity	or force.	I_!
L.
The orders would have been maintenance orders under	the Family	i
;.

Law Act 1975 (Cth) and s.123(6) of the Act would have applied.	i
I ,
That section provides:-	' : :.
!_,
I ,

"Nothing in this Act invalidates, in any case where a I .

debtor becomes a bankrupt, a conveyance, transfer,

charge, disposition, assignment, payment or -. I.

obligation executed, made or incurred by the debtor,

before the day on which the debtor became a bankrupt,

under or in pursuance of a malntenance agreement or

order. maintenance " !

However, on the bankruptcy, Hrs Thanos' property,

including her joint interest in the home at	11 Wilton Terrace,	, ,
, .
Torrensville, became vested in the Official Trustee and was	I	>
, L
divisible for the benefit of creditors. Any maintenance order	T. .

made thereafter could affect only the surplus, if any, left L I

after the due administration of the estate. Any claims which	I- ) '
Mr Thanos had against that property were claims	to be pursued

i .

in the bankruptcy, not in the Family Court of Australia. II.

For these reasons, application has been brought under !.

:. '

s.154 of the Act to annul the bankruptcy. Section 154(1)

-

'	/
I	-

provides, inter alia:-

"where the Court is satisfied -

(a) that a sequestration order ought not to have I _

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; ...	I.
..
the Court may make	an order annulling the
bankruptcy."

The application is brought on	the ground that the petition
ought not to have been presented and ought	not to have been
accepted by the Registrar.

Section 5 5 of the Act provides, inter alia:-

"(l) 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.

( 4 )	Where it appears to the Registrar that a
petition presented to him under this section,	or the
statement of affairs accompanying such	a petition, is

not in accordance with the prescribed	form, the	! _.
I

Registrar shall not accept the petition unless the	I
Court, upon reference by the Registrar, directs him
to accept it."	i
The statement of affairs, which accompanied	the

petition, showed debts amounting to $ 8 9 , 9 5 0 . 8 3 . Of this sum,

$60,000 was said to be due to the Australian Taxation Office

for taxation and $12,000 was said to be due to Mrs Thanos'

.. l.

I .

solicitors, Frank Webster and Associates. The $60,000 alleged

I .

debt to the Australian Taxation Office was in fact not owing. :

In these proceedings, counsel	f o r the Deputy Commlssioner o f
Taxation appeared to say that there was	no unpaid assessment

against the debtor and that Mrs Thanos had not lodged a return

4

of income for the past years. Counsel for the Deputy notice of the proceedings, no creditor appeared to oppose the

Commissioner did not oppose the annulment of the bankruptcy.

order sought by the applicant. Mrs Thanos' solicitors, who

have acted in these proceedings to the extent of filing an
affidavit on their client's behalf, sought and were granted

leave to withdraw. They did not appear as creditors.

As to assets, the statement of affairs disclosed

merely the half interest in	11 Wilton Terrace, Torrensville,
which was valued at $60,000.	No moneys were disclosed and the

furniture and effects were stated as "nil" . There was no

disclosure of the applicant's claim against the property at	11
Wilton Terrace, Torrensville.

The statement of affairs showed a total deficiency of

$29,950.83, arrived at by deducting the value	of the
Torrensville property from the total of	the stated
liabilities.

! ...	8.
I	.

This application has been brought on the ground that

the debtor's petition was an abuse of the process of the

Court. It was submitted by Mr N. Morcombe, counsel for M r

Thanos, that the purpose of the petition was to defeat the I

proceedings in the Family Court of Australia.

It would not be proper to stay or annul proceedings

for bankruptcy merely because proceedings in the Family Court
of Australia were on foot. See Clyne v. Deputy Commissioner

of Taxation (1984) 154 C.L.R. 589 at pp.599-600; Re Mottee

t .

(1977) 29 F.L.R. 406, particularly at pp.412-416 and Deputy

I
I

Commissioner of Taxation v. Edelsten and Others (Unreported,

..

Burchett J., 10 March 1988). Recently, in Deputy Commissioner

of Taxation v. Swain (unreported, Davies, Lockhart and

Burchett JJ., 13 July 1988) the Court said, inter alia:-	I '
l
l
I

' l . . .	A sequestration order reflects	a right of a
creditor, and creates rights as between a debtor and his creditors and trustee. The Family Court, rn the	, ,	.,

pursuit of its duty (in an appropriate case) to

adjust rights as between the parties to a marriage,

has no power to deprive other parties of their

rights. Its power to deal with the property of the

parties over whom it has jurisdiction must start with

the wrowertv that is theirs, not with wrowertv that

the law- (whether the Bankruptcy	Act or-some o:her	i
law) has vested in another."

However, in the present case, there was an abuse of

process in that the statement of affairs presented to the

Deputy Registrar misrepresented	Mrs Thanos' financial affairs.
Her interest in the Torrensville home	was disclosed but not

the application in the Family Court of Australia that Mrs

Thanos transfer her interest therein to	Mr Thanos. No	..
furniture or personal effects were disclosed though	Mr Justice	..

; . -	9.
I

i	Gun referred	to	these	and	the	affidavit	by	Mrs	Thanos	in	these
I

proceedings does not suggest that she had none. On the

liabilities side, the debt of $60,000 shown as owing to the	, .!
1

Australian Taxation Office	was not owing and	no assessment was
imminent.

In In Re Mottee, cited above, at p.412, Riley J.

said:-

"The next question is whether, within the meaning of s.l54(l)(a), the debtor's petition ought not to have

been presented. The enactment of s.55 marked a

departure from English and Australian legislative
precedent in two ways. First, the legislature did

not re-enact the requirement of s.57 of the

Bankruptcy Act 1924 that a	debtor's petition should
allege that he was unable to pay his debts.	I am
nevertheless of opinion that the facility provided	by
s.55 was not intended to be, and is	not, available to
a solvent debtor.	'The essential features of a
bankruptcy system are sequestration and distribution	I '
- an initial taking into custody	of an insolvent
debtor's	property, and the subsequent realization and
division among creditors':	R. v. Davison ((1954) 90
C.L.R.	353, at pp.375-376) per Fullagar J..
Secondly, the legislature eliminated the need	for the

making in every case of a judicial order, and

instituted the procedure whereby on his own petition

a debtor may become bankrupt by force of the Act

without the intervention of such an order. Thus it

is true, as is stated in McDonald, Henry & Meek's ..

Australian Bankruptcy Law and Practice, 4th ed.

(1968), p.124 (par.[2771), that the presentation of a

!

debtor's petition cannot be an abuse	of process in
the strict sense; but in my opinion the consequent
bankruptcy may be annulled where a debtor	was not

'entitled to use the machinery of the Bankruptcy Act'

(Re A Debtor; Ex parte The Debtor v. Allen ([l9671	I,.
Ch.590, at p.596) and the presentation of his	i
petition may properly	be characterized as an abuse of
the procedure provided	by s.55 (Cf. Re Pepper ((1969)

14 F.L.R. 282, at p.283)."

In Clyne v. Deputy Commissioner of Taxation, cited above, at p.599, Gibbs C.J., Murphy, Brennan and Dawson JJ. expressed

agreement with the view there stated that the acceptance of

:

' .

i	* '	~	10.
I	.
I

the debtor's petition may be annulled if the presentation of

the petition was an abuse of the procedure provided by s.55.

Had the Deputy Registrar been informed of the true

position, she would have been entitled to refuse to accept the

petition until it was accompanied	by a substantially accurate
statement of affairs. If the liability of	$60,000 to the
Australian Taxation Office had been omitted,	the Deputy

Registrar might well have queried whether the petition was

presented to achieve	an administration of Mrs Thanos' estate
and whether it ought to	be accepted.

Moreover, I am not satisfied that Mrs Thanos was

insolvent or believed herself to be so. Mr Justice Gun

expressed dissatisfaction with her evidence and with the evidence produced on her behalf and was unable to determine

whether or not Mrs Thanos still had assets in Australia	or
overseas resulting from the moneys she had received.
Likewise, Mrs Thanos' statement of affairs made	no real
attempt to disclose	her assets. Her evidence before me was
equally unsatisfactory.	Mrs Thanos gave evidence that she
presented her petition because she	was insolvent, yet it is
quite clear that she presented the petition when she did to
frustrate the making of the orders which	Mr Justice Gun had
announced.

Having regard to all these matters I am satisfied

that the petition ought not to have been presented and, if

presented, ought not to have been accepted. I am satisfied

I

I .

. - 11.

that it was accepted because it was accompanied by a false and

misleading statement of affairs.

I .

Section 154 confers a discretionary power. In the

present case, that power should	be exerclsed. The bankruptcy
was obtained on false information and with a	view to
frustrating proceedings in	the Family Court of Australia and
to prejudicing Mr Thanos. Such an abuse of process ought	to
be set aside.	No creditor has appeared to oppose the
annulment.	If, hereafter, Mrs Thanos wishes to achieve an
administration of her estate in the interests	of her

creditors, she will be entitled to bring a fresh petltion. I.

For these reasons the bankruptcy should be annulled.

Mr J.A. Huppatz, Official Receiver, appeared for the Official

Trustee and sought an order as to costs. After discussion, I ordered that the applicant pay remuneration and expenses of

the Official Trustee amounting to $1,000. The order was so

made as the applicant obtained the benefit of the annulment.

I

I certify that this and the 10

preceding pages are a true copy of

the Reasons f o r Judgment herein of

the Honourable Mr Justice Davies.

!.

Date :  M c t o b e r 1988

I

I

!

I-

12.   !

'_

I.

Counsel for the applicant:  Hr N. Morcombe

.-

Solicitors for the applicant:  Bonnin & Partners

i

Respondent appearing	!I
for herself:	Mrs D. Thanos
Official Receiver appearing
for the Official Trustee:	I4r J.A. Huppatz
Counsel for the Deputy
Commissioner of Taxation:	Mr R. Fisher
Solicitor for the Deputy
Commissioner of Taxation:	Australian Government Solicitor
Date of hearing:	23 September 1988
Place of hearing:	Adelaide