Ure v Robertson
[2011] FMCA 750
•30 September 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| URE v ROBERTSON | [2011] FMCA 750 |
| BANKRUPTCY – Creditor's Petition – solvency – other sufficient cause – counterclaim or cross demand – no proof of counterclaim or cross demand – abuse of process – no abuse of process. |
| Bankruptcy Act 1966, ss.52(1), 52(2)(a), 52(2)(b) Uniform Civil Procedure Rules 1999 |
| Cain v White (1933) 48 CLR 639 Hubner v ANZ Banking Group Limited [1998] FCA 1779 International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 Ling v Enrobook Pty Ltd (1997) 74 FCR 19 Narain v Euroasia (Pacific) Pty Ltd [2010] FCA 1352 Randall v Deputy Commissioner for Taxation [2008] FMCA 858 Re Dolman; Ex parte Elder Smith Goldsbrough Mort Ltd (1967) 10 FLR 384 Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 Rozenbes v Kronhill (1956) CLR 407 Sandell v Porter (1966) 115 CLR 666 Ure v Robertson [2010] QSC 483 Wilcox v Cottrell [2000] FCA 1656 |
| Petitioning Creditor: | LYNN KATHLEEN URE |
| Debtor: | PATRICIA JUNE ROBERTSON |
| File Number: | BRG 413 of 2011 |
| Judgment of: | Jarrett FM |
| Hearing date: | 20 July 2011 |
| Date of Last Submission: | 20 July 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 30 September 2011 |
REPRESENTATION
| Counsel for the Petitioning Creditor: | Mr Amerena |
| Solicitors for the Petitioning Creditor: | Callaghan Lawyers |
| Counsel for the Debtor: | Mr Ward |
| Solicitors for the Debtor: | Campbell Standish Partners as town agents for McCormick Lawyers |
ORDERS
A sequestration order be made against the estate of PATRICIA JUNE ROBERTSON.
The petitioning creditor’s costs be taxed and paid in accordance with the Federal Magistrates Court (Bankruptcy) Rules 2005 and the Bankruptcy Act 1966.
THE COURT NOTES:
That the date of the act of bankruptcy is 10 May, 2011.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 413 of 2011
| LYNN KATHLEEN URE |
Petitioning Creditor
And
| PATRICIA JUNE ROBERTSON |
Debtor
REASONS FOR JUDGMENT
(As corrected)
This is an application for the making of a sequestration order against the debtor. The proceedings have their genesis in an order for costs made by the Supreme Court of Queensland on 28 October, 2008. The costs have been assessed and on 4 February, 2011 an order was issued that the debtor pay to the petitioning creditor $51,771.74 in respect of those costs.
On 4 April, 2011 the petitioning creditor applied to the Insolvency and Trustee Service for the issue of a bankruptcy notice against the debtor and the bankruptcy notice was issued. It was served upon her on
19 April, 2011.
There is nothing on the face of the bankruptcy notice, and nothing was put to me in the course of submissions that suggests that the bankruptcy notice is anything other than valid. It was not suggested that it has not been validly served. Service of the bankruptcy notice was effected on 19 April, 2011.
It was not suggested that the debtor complied with the requirements of the bankruptcy notice. Accordingly, she committed an act of bankruptcy on 10 May, 2011.
On 25 May, 2011 the petitioning creditor caused a creditor’s petition to be issued relying upon the act of bankruptcy constituted by the debtor’s non-compliance with the bankruptcy notice. The petitioning creditor proves that the debt is still owing and that the debtor has committed an act of bankruptcy. Accordingly, the petitioning creditor has a prima facie entitlement to the making of a sequestration order: Cain v White (1933) 48 CLR 639 at 645-646; Rozenbes v Kronhill (1956) CLR 407 at 414; Re Dolman; Ex parte Elder Smith Goldsbrough Mort Ltd (1967) 10 FLR 384 at 391.
The debtor filed a notice of her grounds of opposition to the petition on 14 July, 2011 wherein she opposes the petition on the ground:
That the petition be dismissed pursuant to s.52(2) of the act (sic) namely that the debtor can pay her debts and in the alternative that there is sufficient cause for the petition to be dismissed.
Background
The parties to this petition are locked in litigation in the Supreme Court of Queensland, and have been so for some time. The petitioning creditor commenced proceedings against the debtor on 26 March, 2007. The proceedings were set down for trial on 28 October, 2008. The debtor defended the proceedings and an amended Defence was filed on 22 October, 2008.
At the debtor’s request the trial was adjourned to enable her to proceed with a counterclaim against the petitioning creditor, the petitioning creditor’s husband (who is the debtor’s brother) Ronald Ure and Summerhill Property Developments Pty Ltd. The debtor filed a further amended Defence and Counterclaim on 3 September, 2010 almost two years after the trial was adjourned.
On 22 December, 2010 A. Lyons J gave judgment in an interlocutory application brought by the petitioning creditor and the other defendants to the debtor’s counterclaim to have her pleading, or parts of it, struck out: Ure v Robertson [2010] QSC 483. In that judgment, her Honour summarised the claims and counterclaims between the parties. I can do no better than to repeat that summary:
The Statement of Claim
[10] In the statement of claim Mrs Ure claims an alleged breach of contract. Mrs Ure alleges that on or about July 2002 Ms Robertson orally agreed that Mrs Ure was, for reward, to take all steps necessary to obtain development, building and operational works approvals from the Noosa Shire Council in respect of a vacant block of land that Ms Robertson owned at 10 Park Road, Noosa Heads (Noosa property).
[11] Mrs Ure claims that by 27 November 2006 she had obtained a development approval subject to conditions and had applied for a building approval.
[12] Mrs Ure claims a second oral agreement was entered into with Ms Robertson on 27 November 2006 at Clayfield in the presence of Mr Ure whereby Mrs Ure undertook to cause the fulfilment of the conditions imposed by the Council to obtain building approval and operational works approval and Ms Robertson would pay for those services in the sum of “$800,000 net of architect and engineer fees at settlement from the proceeds of the sale of the Property.”
[13] Mrs Ure claims that building and operational approvals were obtained on 2 January 2007 and the property settled on 22 February 2007 for a contract price of $3,015,000. Mrs Ure also claims that an amount of $800,000 was paid by Ms Robertson into her solicitor’s trust account pending an order of the court. Mrs Ure claims that despite demand the amount of $800,000 owing under the agreement has not been paid.
Defence
[14] Ms Robertson denies the alleged oral agreements.
[15] Ms Robertson pleads by way of defence that:
(a) all arrangements she had were with her brother, Mr Ure, and not with Mrs Ure;
(b) she owned the property at 10 Park Road Noosa and Mr Ure owned the adjoining property at 8 Park Road Noosa;
(c) Ms Robertson and Mr Ure had previously been engaged in the joint development of property at Buderim through a company, Summerhill. Summerhill is the third defendant by Counterclaim.
(d) in relation to Mr Ure obtaining development approval for her Noosa Property there was an arrangement that Mr Ure represented in November 2003 that the money owing to Ms Robertson from the development of the Buderim land, through Summerhill (the vehicle for that development) would be used to defray expenses of architects, engineers, council and building approvals in respect of each of 8 and 10 Park Road;
(e) Mr Ure represented that the balance remaining in the Summerhill account, which account was under his control, would be shared between Mrs Ure and Ms Robertson once the costs of obtaining approvals had been met;
(f) there was no agreement that Mr Ure or Mrs Ure were to receive any personal reward for the obtaining of building approvals over the Noosa property owned by Ms Robertson.
The Counterclaim
[16] The Counterclaim relates to a partnership or joint venture (the fiduciary relationship) entered into between Ms Robertson and her brother, Mr Ure and is pleaded on the basis set out below.
[17] Summerhill was the corporate vehicle used. The purpose of the fiduciary relationship was to purchase and subdivide the Buderim property which was purchased by Summerhill in 1985.
[18] The profits from the development and sale of the Buderim property were to be distributed equally between Ms Robertson and Mr Ure, through Summerhill As a result of the partnership (or joint venture) relationship a fiduciary duty arose between Ms Robertson, Mr Ure, and Summerhill.
[20] The Buderim property was unencumbered when it was sold. It was subdivided and sold over the period from May 1989 to January 2003. The total sale proceeds were $2,050,000.00, being the approximate net profits of the partnership, and were paid into Summerhill's ANZ bank account.
[21] Ms Robertson, on her pleaded case, owned or was entitled to half of those proceeds. [22] Ms Robertson pleads that the proceeds have largely disappeared without her knowledge or consent and that the available inference is that they have been dishonestly misappropriated by Mr Ure with the knowledge of Summerhill (which he and Mrs Ure controlled).
[23] Paragraph 26 of the Counterclaim alleges that in breach of the fiduciary duty owed to Ms Robertson, Mr Ure has refused to account to Ms Robertson for her share of the profits from the fiduciary relationship and has fraudulently misappropriated Ms Robertson's share of the profits.
[24] The particulars relied on to support these allegations are set out in paragraphs 2(c)(iii), 2(c)(iv) and 9(g)(iv)A to 9(g)(iv)C of the further amended defence. Those allegations are as follows:
(a) In November 2003, Mr Ure represented that the money owing to Ms Robertson pursuant to the fiduciary relationship would be used to meet the costs of obtaining development approval for her Noosa Property and for Mr Ure’s neighbouring property.
(b) Mr Ure represented to Ms Robertson that the balance of the money in Summerhill's account (the profits from the partnership) would be shared equally between him and Ms Robertson.
(c) On 19 April 2005, without Ms Robertson's knowledge or consent, Mr Ure and Mrs Ure caused:
(i) Ms Robertson to be removed as one of the two directors of Summerhill (the other director being Mr Ure) and replaced by Mrs Ure; and
(ii) Ms Robertson to be removed as the company secretary of Summerhill, again without her knowledge or consent.
(iii) Ms Robertson's one share in Summerhill to be transferred to Mrs Ure (the other share being owned by Mr Ure).
Opposition to the making of a sequestration order
The debtor argued both grounds set out in her notice of opposition, namely solvency and that there is other sufficient cause for declining to make a sequestration order.
Solvency
The debtor points out that the test of whether a debtor is able to pay his or her debts for the purposes of s.52(2)(a) of the Bankruptcy Act1966 was considered in Sandell v Porter (1966) 115 CLR 666 where Barwick CJ observed at 670 that:
Insolvency is expressed in s.95 as an inability to pay debts as they fall due out of the debtor’s own money. But the debtor’s own moneys are not limited to his cash resources immediately available. They extend to moneys which he can procure by realization by sale or by mortgage or pledge of his assets within a relatively short time-relative to the nature and amount of the debts and to the circumstances, including the nature of the business, of the debtor.
The conclusion of insolvency ought to be clear from a consideration of the debtor’s financial position in its entirety and generally speaking ought not to be drawn simply from evidence of a temporary lack of liquidity. It is the debtor’s inability, utilizing such cash resources as he has or can command through the use of his assets, to meet his debts as they fall due which indicates insolvency.
The terms of s.52(2) are somewhat different now compared to when Sandell v Porter was decided. The observations set out above, however, are still apposite. In International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 Katz J stated:
[17] In spite of the legislature’s failure to include, in terms, in para 52(2)(a) of the Act the language either of "when those debts become payable” or of ''from the debtor's own money”, the debtor nevertheless treated the paragraph before me as requiring that he prove an ability to pay, from his own money, his debts when they become payable. He did so by submitting: first, that, at the time of the hearing, he was required to and did satisfy the test of solvency set out in subs5(2) of the Act; and, secondly, that the test of solvency set out in subs5(2) of the Act "simply adopts the earlier test in Sandell v Porter”.
[18] For the purpose of determining the present petition, I propose to act upon that construction of para52(2)(a) of the Act upon which the debtor proceeded before me. I do so, not only because of the debtor’s approach, but also because two other Judges of this Court have also relied, in whole or in part, upon that construction and I have found no authority which is opposed to that construction.
The debtor submits that she is able to pay her debts as and when they are due and payable in accordance with the interpretation of the legislation set out above.
The evidence upon which the debtor relies is a deposition by her solicitor, Mark Ian Gregory contained in his affidavit filed on 14 July, 2010, in the following terms:
24. I am informed by Mrs Robertson verily believe own unencumbered home in Byron Bay which she conservatively values 2.5 million dollars and has no debts save for the claim before this court which she has offered to pay in full from her funds as is detailed in the letter she caused to be forwarded by our office to the Applicants solicitors on 29 June 2011.
(errors in the original)
That paragraph was the subject of objection from the petitioning creditor, apart from other reasons, for the reason of hearsay. There are many difficulties with that paragraph as original evidence of the matters stated in it. The objection to its admissibility was conceded.
In any event, if I am wrong about the concession, I rule that the paragraph set out above be struck out. It is clearly inadmissible.That being so, there is no evidence before me that the debtor has the ability to pay her debts as and when they fall due, from her own money or otherwise. The onus of proof in respect of that issue is upon her: Re Dolman; Ex parte Elder Smith Goldsbrough Mort Ltd (1967) 10 FLR 384 at 390 and Narain v Euroasia (Pacific) Pty Ltd [2010] FCA 1352 at [9]. The debtor fails to discharge that onus.
It is common ground between the parties that the debtor deposited to her solicitors’ trust account the sum of $800,000 in 2007. At that time the debtor intended to sell certain real property in Noosa the subject of the Supreme Court claim. The petitioning creditor had lodged a caveat over the title to that property claiming an estate or interest in the land. In return for removing the caveat, the debtor agreed to the deposit of $800,000 (the monetary value of the petitioning creditor’s claim) to her solicitor’s trust account on certain terms and conditions. The terms of the deposit are recorded in a document signed by the debtor on
8 February, 2007 and entitled “Authority, Direction and Undertaking”. The document requires the $800,000:…to be invested on my behalf until such time as:
· the written consent of the Ures and myself has been provided to Messrs McCormick Lawyers to attend to a distribution of the principle (sic) or;
· until an Order of a Court of competent jurisdiction has been made as to the distribution of same, or;
· the Ures having failed to commence proceedings, in respect of the matters raised on their behalf in the letter…..
On 29 June 2011, the debtor offered to satisfy the costs order from the funds on deposit. The debtor submits that such a payment falls within the purpose for which the money is held. The petitioning creditor refused, and continues to refuse to agree to the payment from the debtor’s solicitors’ trust account. By implication so too does Mr Ure. The debtor submits that she is able to pay the costs order from her own money which is held on trust for her by her solicitors.
In my view, however, the debtor’s argument misconstrues the basis upon which the funds have been invested by her solicitors. The $800,000 is in the legal ownership of the debtor’s solicitors to be held by them on the terms and conditions of the trust established by the authority, direction and undertaking. The potential beneficiaries of the fund are the debtor and the Ure’s, but their respective entitlements, if any, have not been settled, either by agreement or order of a court of competent jurisdiction.
To the extent that the debtor argues that she has funds available which could be used to pay the debt, if only the Ure’s would agree, it is clear from the authority, direction and undertaking, and the Supreme Court claim that at best the invested funds could only be described as a contingent asset of the debtor – her interest is qualified by the terms of the authority and she has no present entitlement to that money. Moreover, there is no indication in the evidence as to when her entitlement, if any, will vest.
The debtor points out that the debt arises by reason of a costs order made in the Supreme Court. She also alleges that there have been delays in the Supreme Court claim because the petitioning creditor and Mr Ure have been difficult about disclosure of documents. She points particularly to paragraphs 6 and 7 of A. Lyons J’s judgment. Those paragraphs are in the following terms:
[6] It is clear that Ms Robertson has had some difficulties in obtaining subpoenaed material. There have also been unsuccessful attempts to obtain documents relating to the change of shareholdings and officers in Summerhill from the accountant who maintains the registered office for that company. A subpoena directed to that accountant and a notice of non party disclosure of 7 July 2010 have yielded a response that the accountant has no documents relating to the changing of the ASIC details of Summerhill.
[7] A notice of non-party disclosure directed to Mr Ure was responded to on the basis that he objected to providing any of the documents sought.
It said by the debtor (by her solicitor) that the difficulties with disclosure continue. However, I do not think that the difficulties with disclosure bear on the matters I am required to determine in these proceedings. The connection between the alleged disclosure difficulties in the Supreme Court proceedings, the failure to comply with the bankruptcy notice and the making of a sequestration order is not clear. There is nothing in the material (or the reasons of A. Lyons J) that indicates:
a)that the debtor has sought to have the difficulties with disclosure addressed using the means at her disposal pursuant to the Uniform Civil Procedure Rules 1999 (Qld);
b)the reason for the debtor’s delay in having any alleged disclosure issues addressed in an appropriate way; and
c)the objections taken to disclosure by the defendants by counterclaim (particularly Mr Ure) are not valid objections.
Further, the debtor asserts that the costs order is necessarily an order which engages the terms of the trust and authorises the distribution of the funds held on trust. It is argued that there is, therefore, no impediment to the satisfaction of the relevant debt from the invested funds. That would result in the debtor meeting the requirement to pay her debts as they fall due. For the reasons I have given above, however, I do not accept that submission.
Other sufficient cause
The debtor submits that that, for other sufficient cause, a sequestration order ought not to be made. The reasons identified by the debtor to reach that conclusion are:
a)the debtor has a bona fide counterclaim and set off against the petitioning creditor for a sum greater that the asserted debt;
b)the petitioning creditor seeks a sequestration order for a collateral purpose, namely to place pressure on the debtor in relation to the ongoing Supreme Court Proceedings; and
c)the petitioning creditor seeks to use the “Insolvency Regime” for the purpose of enforcing the payment of a debt.
COUNTER CLAIM OR SET OFF
There is no doubt that in appropriate circumstances, the existence of a genuine counterclaim or cross-demand may amount to “other sufficient cause” for the purposes of s.52(2)(b) of the Bankruptcy Act1966. The debtor points to the judgment of Davies, Wilcox and Branson JJ in Ling v Enrobook Pty Ltd (1997) 74 FCR 19 1 where their Honours discussed the issue of the making of a sequestration order in circumstances where there was a counter-balanced claim in the following terms (at p.26):
The above authorities do not, in our view, support the appellant's contention that the courts recognise a public interest in allowing a debtor to prosecute litigation commenced by the debtor. The public interest recognised by such authorities is that which, in broad terms, is reflected also in s 40(1)( g) of the Act; that is, that a sequestration order ought only to be made on the basis of an indebtedness which is not counterbalanced by a claim by the debtor against the petitioning creditor. Such authorities provide no comfort to a debtor who asserts a claim, not against his or her creditor, but against a third party.
The authorities also show that satisfaction that the debtor is well advanced with litigation likely to result in the debtor being in a position to pay his or her debts may well provide a basis for a finding that there is a "sufficient cause" for a sequestration order not to be made"
In the present case, the only material before me which attempts to establish the debtor’s counterclaim or cross-demand against the petitioning creditor is her Further Amended Defence and Counterclaim dated 2 September, 2010 in the Supreme Court. In respect of that document, I can make these observations:
a)The truth of the facts pleaded in it are not sworn to by the debtor;
b)The debtor does not swear to anything at all – there is no affidavit by her in support of her counterclaim or cross-demand;
c)The claim by the debtor against the petitioning creditor is formulated in paragraphs 26(b) and 27 of the Further Amended Defence and Counterclaim.
d)The claim by the debtor against the petitioning creditor in the Further Amended Defence and Counterclaim is for:
i)An account;
ii)An order for the payment of any amount found due on the taking of the account;
iii)Damages in equity;
iv)Interest and
v)Costs.
Paragraphs 26(b) and 27 of the Further Amended Defence and Counterclaim were struck out by order of A. Lyons J – see her Honour’s reasons referred to above at [65]. No amended pleading has, on the material before me, been delivered. Thus, insofar as the petitioning creditor is concerned, there is no pleaded case against her. In those circumstances, it is simply impossible to make any assessment of the validity of the debtor’s claims sufficient to justify a dismissal of the petition (cf. Re Schmidt; Ex parte Anglewood Pty Ltd (1968) 13 FLR 111 at 115 – 116).
To the extent that the Further Amended Defence and Counterclaim pleads claims against Mr Ure and Summerhill, those claims do not assist the debtor to establish other sufficient cause because they are claims against third parties, not the petitioning creditor: Randall v Deputy Commissioner for Taxation [2008] FMCA 858.
Moreover, the debtor does not establish that she is well advanced with the litigation and that her state of insolvency is likely to be of only short duration. Presently there is no pleaded case against the petitioning creditor. Amendments to properly plead a case against the petitioning creditor were not foreshadowed before me. There is no draft pleading before me. As to the length of time it will take to finalise the proceedings, her solicitor swears in his affidavit filed on 14 July, 2011:
17. The bankruptcy notice delivered by Mr’s (sic) Ure relates to the costs assessed in respect of the cost thrown away on the adjourned trial which was adjourned so as to enable Mrs Robertson to proceed with a Counterclaim against Mrs Ure, Ms Robertson’s brother, Ronald Ure (Mr Ure) and Summer Hill Property Developments Pty Ltd (Summerhill). As at the date of this my Affidavit Mrs Robertson is unable to proceed further wit her counter claim and consequently her defense of Mrs Ure’s initial claim which is completely denied by her.
I am not satisfied that the debtor demonstrates other sufficient cause for not making a sequestration order by reason of a counterclaim or cross-demand she has against the petitioning creditor.
ABUSE OF PROCESS
The debtor directs my attention to Wilcox v Cottrell [2000] FCA 1656 wherein Conti J considered when an improper purpose as described by the High Court in Rozenbes v Kronhill (above) might amount to “other sufficient cause” for the purposes of s.52(2)(b) of the Bankruptcy Act. His Honour said:
There is an abuse of process if a pending bankruptcy petition or a threat of proceedings in bankruptcy is used as a means of extortion. The word "extortion" is not a technical term and it has in bankruptcy law "no special and artificial significance divorced altogether from the ordinary implication of the word". The court will look strictly at the conduct of a creditor using or threatening bankruptcy proceedings and extortion may be held to have taken place if the creditor has used or attempted to use a pending petition or threat of a petition in order to extract from the debtor money which the debtor is not bound to pay or in order to obtain some secret or unfair advantage over other creditors. But extortion will not be held to have taken place "in the absence of mala fides or anything amounting to oppression in fact". There must be a real intention on the part of the creditor to use the process for some other end than its legitimate end, and there must be a real exertion of pressure. "
Nothing in the evidence persuades me that the petitioning creditor has used or attempted to use the pending petition in order to extract from the debtor money which the debtor is not bound to pay. She is bound to pay it – there is an order to that effect, an order which has not been stayed. Nor am I satisfied that the petition has been filed in order to obtain some secret or unfair advantage over other creditors.
Failure to enforce costs order pursuant to UCPR 1999
The debtor submits that the petitioning creditor has not sought to enforce the payment of the costs order as provided for under the Uniform Civil Procedure Rules 1999 (Qld) but instead has unnecessarily sought to invoke the jurisdiction of the “Bankruptcy Regime” for a collateral purpose.
I was taken to no authority to support the proposition that the petitioning creditor must exhaust all other avenues of enforcement of her debt before she might pursue a creditor’s petition.
Petitioning creditor’s conduct
The debtor submits:
23. The Respondent submits that the conduct of the Applicant in:
a. failing to agree to the payment of the Cost Order out of the monies held in trust;
b. the seeking of a sequestration order in circumstances where they were alive to the Counter Claim made against the Applicant Creditor;
c. commencing Bankruptcy Proceedings in circumstances where the Respondent is able to pay her debts (with such knowledge arising out of the family relationship) they seek to place pressure on the Respondent to pay, rather than properly invoke the Courts jurisdiction in insolvency for a proper purpose; and
d. seeking to utilize the Bankruptcy regime to enforce a Costs Order, instead of through the normal process of Judgment Enforcement pursuant to the UCPR;
is conduct designed to exert pressure on the debtor, who is 76 years of age and living in northern New South Wales, for an ulterior purpose being the payment of the costs order.
24. In these circumstances it is open to the Court to infer that the bringing of these proceedings is an abuse of process and to dismiss the Creditors Petition.
For the reasons I have expressed above, I am not prepared to infer that the bringing of these proceedings is an abuse of process.
The petitioning creditor is entitled to enforce her order and one way in which that might be done is through the use of bankruptcy proceedings: Hubner v ANZ Banking Group Limited [1998] FCA 1779 per Dowsett J where his Honour pointed out:
The process prescribed by sub-section 40(1)(g) provides a formal system for demanding a judgment debt, with a clear outline of the consequences of non-compliance. Non-compliance will, itself, constitute a basis for bankruptcy, presumably because it provides evidence of insolvency. The tacit process of reasoning may be as follows:-
(a) The creditor has the benefit of a money judgment against the debtor.
(b) The debtor has been advised that unless he pays by a fixed date he may be bankrupted.
(c) He has not paid by the fixed date.
(d) The reasonable inference is that he cannot pay, ie he is insolvent.
(e) Therefore he should be bankrupted.
The statutory scheme is designed to facilitate both the recovery of debts and the administration of insolvent estates. Where an act of bankruptcy has been committed, any creditor qualified to present a petition may rely upon it. See Re Barker; Ex parte Mitchell (1958) 18 ABC 195. Thus the significance of a failure to comply with a bankruptcy notice goes beyond the relationship between the judgment creditor and the judgment debtor.
Conclusion
The petitioning creditor has proved that there is a debt owing to her by the debtor. She has proved an act of bankruptcy. She has proved the other formal matters required to be proved by s.52(1) of the Act.
There is no valid counterclaim against the petitioning creditor identified in the material before me. The debtor does not satisfy me that there is other sufficient cause for not making a sequestration order.
I make the orders set out at the commencement of these reasons.
I certify that the preceding forty (40) paragraphs are a true copy of the reasons for judgment of Jarrett FM
Associate:
Date: 30 September 2011