Re David Holroyd Hardwick Ex Parte: David Holroyd Hardwick [1984] FCA 79 (4 April 1984)

FEDERAL COURT OF AUSTRALIA

Re: DAVID HOLROYD HARDWICK
Ex parte: DAVID HOLROYD HARDWICK
No. W 450 of 1977
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Morling J.

CATCHWORDS

Bankruptcy - application for discharge - unresolved question about interest of bankrupt in land - money advanced to bankrupt - whether a debt or a gift - whether appropriate to withhold order of discharge - matters upon which court to be satisfied before making order

Bankruptcy Act 1966, s. 149, s. 150(5), (6)(b), (c)

HEARING

SYDNEY
4:4:1984

ORDER

1. The applicant is discharged from bankruptcy.

2. The Official Trustee's costs to be paid by
the bankrupt.

DECISION

This is an application for discharge from bankruptcy by Mr David Holroyd Hardwick. A sequestration order was made against his estate on 10 August 1977 upon the petition of Mercredits Finance Limited. An objection in accordance with s. 149 of the Bankruptcy Act, 1966, in the form it then took, was lodged by the Official Trustee in Bankruptcy. Accordingly the automatic discharge from bankruptcy, which otherwise would have eventuated had the objection not been lodged, did not occur. The objection has still not been withdrawn but should I make an order of discharge on this application, which is brought under s. 150 of the Act, the objection will lapse by virtue of the provisions of s. 149(11) of the Act.

2. The application for discharge was lodged on 8 July 1983. Upon the hearing of the application the Official Trustee was represented by counsel, as was a creditor, Mr Balyck.

3. In his statement of affairs the bankrupt disclosed assets of about $25,000. However, only about $4000 has been brought to the credit of his estate. There has been a considerable change in the proofs of debt which have been lodged against the estate. As the position presently stands, debts to the value of about $69,000 have been admitted. Proofs of debt for about $17,500 have not been admitted. In recent times proofs of debt to the order of about $40,000 have been withdrawn.

4. The bankrupt has been publicly examined. It appears that notwithstanding the lapse of time since his estate was sequestrated there is still an unresolved question as to whether or not he has an interest in land at Windang in New South Wales. He claims that he has no such interest. He says that his wife and children are entitled to an interest in that land. Counsel for Mr Balyck has appeared primarily for the purpose of protecting his client's interest as Mr Balcyk disputes that the bankrupt or any member of his family has an interest in the land.

5. I do not think that the unresolved question about the Windang land should be treated as a factor militating against an order of discharge. It is plain that even if the bankrupt is discharged it will be competent for his trustee to pursue any action that he thinks may be productive in respect of the land. The bankrupt gave oral evidence before me on this matter and on the material before me he does not appear to have any interest in the land. In making that observation I am not in any way expressing any concluded view on the matter. I make it only to reinforce the observation I have already made that I do not think the outstanding question should be seen as justifying the withholding of an order of discharge.

6. It is plain that the bankruptcy arose out of improvident and unfortunate business dealings by the bankrupt. There is nothing in those dealings which indicates any gross commercial misbehaviour by the bankrupt. The Official Trustee has drawn to the court's attention the fact that in 1976 this court found that the bankrupt's administration as trustee of the assigned estate of one Alafaci was negligent. At that time the bankrupt was an Official Trustee, his profession being that of accountant. However, the circumstances surrounding his failure to properly administer that estate do not warrant the refusal of his application for discharge.

7. The Alafaci matter was heard by Riley J. His decision is reported at (1976) 9 A.L.R. 262. It is plain from his Honour's judgment that although he found the bankrupt to be negligent he did not find that he had been guilty of any moral impropriety. Nor did he find that the bankrupt's administration of the assigned estate was carried out in such a way as to advance his personal interests.

8. The bankrupt is a married man aged 49 years. As I have said, he is an accountant by profession. There is evidence that he appears to have been in more or less continuous employment since 1977 but his income has not been such as to enable him to make any significant contributions to his estate; in fact, contributions to the extent of only about $500 have been made.

9. Under cross-examination by counsel for the Official Trustee the bankrupt stated that it is not his present intention to recommence in practice as an accountant on his own account. He said that he makes a living out of performing accountancy work for a few people, most of whom appear to be friends. I have no reason to think that he gave me an inaccurate account either of his work or of his income. I am satisfied that even if this application were to fail the income which he is likely to earn in the foreseeable future would not be so great as to enable him to make any significant contribution to his estate.

10. In the first of his two reports the Official Trustee has reported that the bankrupt kept records which were sufficient for the type of busness which he conducted. He has also reported that the conduct of the bankrupt during his bankruptcy has been satisfactory. It is now over six years since the bankrupt's estate was sequestrated and he not unreasonably wishes to obtain a discharge. There is evidence before me that he is embarrassed in the social and religious circles in which he moves by the fact that he is a bankrupt. I accept that this may well be the case.

11. I would have no difficulty at all in granting this application were it not for the fact that the Trustee had reported matters (b) and (c) under s. 150(6) of the Act. Sub-sections (5) and (6) of the Act provide in part as follows:

"(5) The Court shall, if any of the
matters specified in sub-section (6) is
established -

(a) refuse to make an order of discharge;
or

(b) make an order of discharge but
suspend the operation of the order as
the Court thinks proper, either
unconditionally or subject to
conditions.

(6) The matters upon the establishment of
which the Court may exercise the powers specified
in sub-section (5) are as follows:

(a) ...

(b) that the bankrupt has, after knowing
himself to be insolvent, continued to
trade or obtained credit to the
amount of $100 or upwards;

(c) that the bankrupt has contracted a
debt provable in the bankruptcy
without having at the time of
contracting it any reasonable or
probable ground of expectation (proof
of which lies on him) of being able
to pay it after taking into
consideration his other liabilities
at the time;"

12. The circumstance relied upon by the Official Trustee as showing that the matters referred to in paragraphs (b) and (c) of sub-s. (6) have been established are that in July 1977 the bankrupt borrowed a sum of $1100 from Mr Garry William Boyd. There is some doubt whether the amount of the alleged loan was $1000 or $1100.

13. Counsel for the bankrupt argued that I should take the view that the amount advanced by Mr Boyd was not a loan at all but was in the nature of a gift. In support of that submission he relied upon the fact that Mr Boyd now makes no claim to the money and, indeed, has expressly forgiven the debt. But, as counsel for the Official Trustee has pointed out, Mr Boyd did in fact lodge a proof of debt and the bankrupt included it amongst the debts in his estate. Further, in an affidavit filed in support of this application the bankrupt says that he accepted the money from Mr Boyd "on the basis of it being a loan". I therefore reject the argument that the amount advanced by Mr Boyd was not a loan. This means that it has to be treated as a debt provable in the bankruptcy for the purposes of paragraph (c) of s. 150(6).

14. However, I do not think that concludes the question whether the court should be satisfied, to the necessary degree of satisfaction, with proof of the matters referred to in the subsection. It is clear from Mr Boyd's evidence that he was on terms of close friendship with the bankrupt. He says that he and the bankrupt had common church, cultural, social and sporting interests. I should at this stage say that the bankrupt is a member of the Reorganized Church of Latter Day Saints, as is Mr Boyd, and they appear to have strong common ties.

15. The impression I have from Mr Boyd's evidence is that he did not require payment of the loan until such time as the bankrupt would be able to pay. I think that whilst the transaction was very close to a gift it was legally a loan. Nevertheless, it is necessary to have regard to the terms of repayment and although no terms were stipulated in the ordinary sense I think it is a fair inference from Mr Boyd's evidence that the loan was not to be repaid whilst ever the bankrupt had other debts which he could not pay.

16. The bankrupt's affairs at the time he obtained the loan from Mr Boyd were complicated. It is true that during the course of his public examination he apparently made an admission that he was insolvent. However, he has explained in some detail in his affidavit supporting his applcation facts which might be thought to cast some doubt upon whether that admission was necessarily correct.

17. The point is a fine one, and I need to bear in mind that I am required to be satisfied to a high degree of satisfaction of the matters referred to in the sub-paragraphs. I do not think on the facts of this case, and having regard to the lengthy material in the applicant's affidavit upon which he has not been cross-examined, I should be satisfied of the matters referred to in paragraphs (b) and (c).

18. I should add that even if I had come to a different conclusion and been required to suspend the operation of an order for discharge, I would have suspended the operation of the order for only a very short time.

19. Taking into account all the matters referred to in the affidavits filed in support of the application and in counsel's arguments I think the appropriate order is that the applicant should be discharged from bankruptcy.

20. In my view it is proper that the Official Trustee should receive his costs. I order the Official Trustee's costs be paid by the bankrupt. So far as Mr Balyck's costs are concerned, whilst his counsel's submissions have been helpful to the court, I do not think that I should order his costs to be paid by the bankrupt. There are two reasons why I hold this opinion. The first is that Mr Balcyck's main purpose in being represented was to protect his own interests rather than to oppose the application. The second reason is that it would have been known that the Official Trustee was being represented by counsel and that all matters which should properly be drawn to the attention of the court would indeed be brought to its attention. I therefore make no order in respect of Mr Balcyck's costs.

21. The order of the court is that the applicant is discharged from bankruptcy.