Wright, F.W. v Marac Finance Australia Ltd

[1995] FCA 216

NOT FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA    )
GENERAL DIVISION  )
BANKRUPTCY DISTRICT OF THE          )          No NN 3940 OF 1994
STATE OF NEW SOUTH WALES            )

Re:FREDERICK WILLIAM WRIGHT & CAROLYN YVONNE WRIGHT

Ex parte:FREDERICK WILLIAM WRIGHT & CAROLYN YVONNE WRIGHT

Applicants

MARAC FINANCE AUSTRALIA LIMITED (ACN 008 098 402)
  Respondent

CORAM:Lindgren J

PLACE:Sydney

DATE:21 March 1995

REASONS FOR JUDGMENT

In this matter the parties have reached an accommodation to this extent: it has been agreed that the debtors' application to set aside the bankruptcy notice should be dismissed.  I have been informed that the debtors have paid the amount of the debt in question today.  The application was before the Registrar on 6 March 1995.  The Registrar adjourned it to today and extended the time for compliance with the bankruptcy notice also to today.  In view of what I have said earlier, the bankruptcy notice has apparently been complied with.

Unfortunately (in view of the fact that the parties have been able to resolve their differences otherwise) it falls to me to
determine the issue of costs.  The ordinary rule would be that costs would follow the event, that is to say, that the debtors would pay the creditor's costs, and the ordinary order would be that they pay costs on the usual party and party basis.  I will indicate now that the conclusion at which I have arrived is that the ordinary rule should apply.  Accordingly, there will, in due course, be an order that the debtors pay the creditor's costs on the usual basis.

Mr C R C Newlinds of counsel, who appears for the creditor, seeks a different order, namely, an order that the debtors pay the creditor's costs on an indemnity basis.  Mr Frank, solicitor, who appears for the debtors seeks an order that in the special circumstances of the case the creditor should pay the debtors' costs.  In my view neither of those special orders is warranted.

There is filed in support of the debtors' application for an order to set aside, two affidavits of Frederick William Wright and Carolyn Yvonne Wright both sworn 15 December 1994, and two further affidavits by them both sworn 16 March 1995.  Although it may not do complete justice to the debtors' case, it seems fair to say that the basis of Mr Frank's application on behalf of the debtors is to be found in paragraphs 11 and 12 of Mr Wright's affidavit sworn 15 December 1994.  Those paragraphs refer to a conversation which Mr Wright had in or about May 1988  with a Mr Keith Bartlett then of the creditor company.

There was a discussion at that time - that is in May 1988 - in relation to the amount of the judgment debt and the fact that interest was accruing on it.  Apparently Mr Wright said to Mr Keith Bartlett that he could not afford to keep up payments and the conversation concluded with a statement by Mr Bartlett, according to Mr Wright's affidavit, that implied that one day Mr Wright would come into money and on that occasion the creditor would take the opportunity to seek to recover the amount of the debt owed to it.  Mr Bartlett's thinking was, in fact, expressed more vividly as follows:

"No, Fred one day you are going to kick a goal and I'll come and tap you on the shoulder."

Years passed after that conversation in May 1988 before the bankruptcy notice was issued on 22 November 1994. 

What Mr Frank submits is that when the creditor became convinced that his client had "kicked a goal", the creditor took the opportunity of procuring the issue of the bankruptcy notice and was using bankruptcy as a means of debt recovery.  In effect, Mr Frank puts it that it is an abuse of the process of the Court for the creditor to sit by, after such a conversation at least, for such a period of time and then to take advantage of bankruptcy procedures for what is, according to the submission, transparently a debt recovery exercise.

There is some merit in the submission of Mr Newlinds that to varying extents and notwithstanding statements that bankruptcy should not be used merely as a debt collection mechanism, a creditor who resorts to bankruptcy is, usually at least, not being altogether altruistic and acting merely in the public interest.  To varying extents, from case to case, a creditor is acting in his or her own interests.  Creditors who procure the issue of bankruptcy notices are not usually averse to receiving payment in full of the amount of the judgment debt, even if there is a possibility that the amount may have to be disgorged subsequently as an undue preference.

Mr Newlinds submits that there never was a case for the setting aside of this bankruptcy notice.  He has taken me to the affidavits which were filed in support of it.  In this respect he has taken me to an affidavit filed in other proceedings in which there was an application to pay by instalments.  In effect, he has put that the debtors were "blowing hot and cold" and were, in effect, informing another court that they could not pay the judgment debt in full and needed time to pay, and yet would now have it in these proceedings today that they are solvent.  As well, he has submitted that on the evidence of Mrs Wright filed in these present proceedings, at least she is not solvent.

For some time I was attracted to the submission of Mr Newlinds that perhaps this is one of those exceptional cases where there should be an order for payment of indemnity costs.  On the evidence which has been read I would not have set aside the bankruptcy notice and on that evidence I would have thought the case to be a clear one for dismissal of the debtors' applications.  But this alone does not indicate that the creditor should have indemnity costs.  It is not shown, in my view, that the debtors did not make their applications to set aside in good faith and did not have a belief in the case which has been put on their behalf by Mr Frank. 

In summary, I reject the submission of the debtors that the creditor company has abused the process of the Court in issuing the bankruptcy notice but likewise I reject the submission of the creditor that the debtors' applications have been made in such circumstances as would warrant a departure from the usual rule as to the basis on which the debtors should be ordered to pay the creditor's costs.

In the result, first, by consent, I dismiss the debtors' applications to set aside the bankruptcy notice.  Secondly, I order the applicant debtors to pay the creditor's costs.

I certify that this and the preceding 4 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lindgren.

Associate:

Dated:10 April 1995

Heard:         21 March 1995

Place:         Sydney

Decision:      21 March 1995

Appearances:    Mr Andrew Frank, solicitor, of Frank & Woods, solicitors appeared for the applicants.

Mr C R C Newlinds of counsel instructed by Kemp Strang and Chippindall, solicitors, appeared for the respondent.