Re Alice Dempster Ex Parte: Porter Western Limited [1991] FCA 5 (22 January 1991)

FEDERAL COURT OF AUSTRALIA

Re: ALICE DEMPSTER
Ex parte: PORTER WESTERN LIMITED
No. W P941 of 1990
FED No. 46
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
GENERAL DIVISION
French J.(1)

CATCHWORDS

Bankruptcy - creditor's petition - judgment debt - judgment disputed - money owed by debtor to stockbrokers for purchase of shares - share transactions requested by debtor's husband - transactions allegedly carried out in existing account in name of debtor for administrative convenience of stockbrokers - debtor dissatisfied with such arrangement - arrangement continuing nonetheless - husband's ostensible authority to bind debtor - contract for sale and purchase of shares thereby made between creditor and debtor - sum owed still outstanding - sequestration order made.

HEARING

PERTH
22:1:1991

Mr D. Dempster appeared for the Debtor

Counsel for the Creditor: Mr J.R. Birman

Solicitors for the Creditor: Birman and Ride

ORDER

The estate of Alice Dempster be sequestrated.

The taxed costs of the petitioning creditor be paid out of the estate.

The time limited for appeal against this decision be extended to 28 days from 22 January 1991.

Note: Settlement and entry of Orders is dealt with in Rule 124 of the Bankruptcy Rules.

DECISION

On 5 September 1990 Porter Western Limited filed a creditor's petition for a sequestration order against the estate of Alice Dempster.

2. The petition cited as the relevant act of bankruptcy failure to comply with a bankruptcy notice served on 25 July 1990. The notice claimed a sum of $38,997.97 due under a final judgment of the District Court given on 17 August 1989. The figure comprised $28,582.33, being the amount of the judgment, plus costs of $1,349.30, pre-judgment interest of $4,874.94 and interest on the judgment of $4,042.36. The petition alleged that the debtor was justly and truly indebted to the petitioner in the sum of $34,806.57 and was verified by an affidavit of Marilyn Clarke Murphy, an associate director of Porter Western Limited, authorised to make the affidavit.

3. The petition came on before Registrar Jan on 22 October 1990, at which time there was no appearance for the debtor, and the matter was adjourned to 20 November. On 20 November the debtor was represented before the Registrar by her husband and the following orders were made:
1. Leave to the debtor to file and serve any notice of

opposition supported by affidavit by 30 November 1990.
2. The creditor file and serve any affidavit in reply by 6
December 1990.
3. Matter adjourned to 10 December 1990 at 9.30 am.
4. The debtor pay the creditor's costs of today in any
event.

4. As appears from a statement of claim exhibited to an affidavit sworn by Marilyn Clarke Murphy on 7 December 1990, the petitioning creditor sued the debtor in the District Court on the basis of an oral agreement said to have been made in December 1986 with the defendant under which the plaintiff, which is a stockbroker and financial planner, agreed to act as the debtor's agent for the purpose of trading in shares and other securities. Express and/or implied terms of the agreement were that:

1. The debtor would pay the creditor a fee for its agency
services calculated on the basis of the creditor's usual
brokerage rates prevailing at the time of each transaction.
2. The debtor would indemnify and reimburse the creditor for
all expenses reasonably incurred by the creditor in
performing its obligations under the agreement including,
but not limited to, the cost of acquiring securities
required by the debtor and any stamp duty payable on them.
3. If the debtor failed to complete a contract or a number
of contracts or some portion of a contract for the
purchase or sale of securities on demand, the creditor
could resell or repurchase the whole parcel or sufficient
marketable parcels of the securities at the debtor's risk
and expense which would include brokerage and stamp duty.
If a loss resulted, the debtor would be liable to the
creditor for such loss and if a profit resulted, the
creditor would account to the debtor for such profit.

The statement of claim referred to transactions undertaken by Porter Western Limited between 12 November 1987 and 3 May 1988, particulars of which were supplied separately from the statement of claim. Pursuant to the terms of the agreement, it was said that Mrs Dempster owed Porter Western $28,582.33. An application for summary judgment pursuant to O.14 r.3 of the Supreme Court Rules was filed in the District Court on 18 April 1989, supported by an affidavit sworn by Ms. Clarke Murphy on 12 April 1989 and a further affidavit on 2 May 1989. An affidavit in opposition was filed on 2 June 1989 and on 3 July 1989 the Deputy Registrar of the District Court made the following orders:

1. That Mrs Dempster have leave to defend the action on
condition that she pay the sum of $28,582.33 to the
District Court by 4 pm on 3 August 1989.
2. Failing such payment being made there be judgment for
Porter Western Limited against Mrs Dempster in the sum of
$28,582.33, with Mrs Dempster to pay Porter Western
Limited's costs of the action to be taxed.

The payment in condition was not complied with, and judgment was entered on 17 August 1989.

5. In her affidavit in opposition to the summary judgment application in the District Court, Mrs Dempster said that at the time of the alleged oral agreement in December 1986 share scrip which she owned was sold by Porter Weston Limited on instructions - "it was simply a transaction involving a parcel of scrip of which they received their commission". I take this to be a suggestion that it was an isolated transaction. She denied that she had given Porter Western Limited the alleged directions for the transactions relied upon in the statement of claim as giving rise to the debt. Her affidavit in opposition to the summary judgment application went no further than that.

6. On 4 December 1990, an affidavit in opposition was filed out of time in these proceedings, in which she made the following statements:
1. I have never purchased any shares. 2. In December 1986 on my behalf and on my instructions my

husband Duncan Dempster rang Ray Porter and Partners and
asked them to sell my Kia Ora and Forsayth shares given
to me by my late father.
3. Porter and Partners sent a cheque as payment in full for
the shares.
4. I have never instructed my husband to purchase any shares.
5. I have never requested Ray Porter and Partners (now
Porter Western) to open an account on my behalf.
6. I have never requested my husband to open an account on
my behalf with any stockbroker.

She exhibited to the affidavit a "list of documents" comprising notes of two sell contracts from Ray Porter and Partners dated 30 January 1987 and 19 December 1986 respectively relating to Kia Ora Gold and Forsayth NL shares.

7. When the matter came on before me on 10 December 1990, counsel for the petitioning creditor had not had an opportunity to obtain instructions in relation to the affidavit in opposition, and I adjourned the hearing of the matter to 12 December to enable him to take instructions and indicated that I would hear evidence from Mrs Dempster in elaboration of what was contained in her affidavit.

8. The case continued on 12 December when both Mr and Mrs Dempster gave oral evidence. Mrs Dempster denied that she had had any dealings with Porter Western other than their sale, on her husband's instructions, of two parcels of shares left to her by her father. Mr Dempster said he had not had any business with Porter Western before that time. But some time after these sales he and his wife "heard something on the radio" and decided to buy some shares. Mr Dempster rang Porter Western and spoke to a Mr Quinn. He told Quinn he would like to buy shares but did not have an account. Quinn referred to an account already open in his wife's name which was evidently on the record in relation to the sale of her father's shares. He asked whether Mr Dempster was going to be trading or holding shares. Dempster said he would be a trader only. According to his evidence, Quinn said there were too many inactive accounts and that he would rather not open one especially but would prefer to use the existing account in Mrs Dempster's name. Mr Dempster said that he told Quinn he was definitely trading in his own name. There was, he said, an understanding that his first buying order was for Duncan Dempster and not for his wife. Subsequently he received quarterly statements addressed to his wife. He dealt successively with a Mr Craig Carter and a Mr Brian Sims at Porter Western and according to Mr Dempster, Sims asked him about the Alice Dempster account name and he told him of the arrangement he had with Quinn.

9. In cross-examination it emerged, and it had not before, that Mr Dempster had opened an account in about October 1987 under the name Portfolio Holdings which was a business name he had registered in 1969 but never used. He agreed that from October 1987 until May 1988 he was managing two accounts, one in the wife's and one in the name of Portfolio Holdings. He agreed that he received statements and buy and sell notes on both accounts. He claimed that on a number of occasions in 1987 he had told Sims to transfer all debits on the account in his wife's name to Portfolio Holdings. He did not ever tell Sims to close the account in his wife's name. Nor could he recall ever complaining that Porter Western had entered credits or debits from share transactions on the account in his wife's name. He said he had told his wife, not long after he began trading, that the account was being traded in her name on Quinn's advice. She never instructed him to close the account but merely said he was buying the shares in his name not hers. She did tell him, he said, on a number of occasions to terminate the arrangements with Porter Western under which transactions were recorded in her name. He had told Bruce Sims that she did not want transactions conducted in her name, but Sims had said it did not matter until the account got into arrears.

10. It was Mrs Dempster's evidence that she had authorised her husband to sell the shares left to her by her father. She recalled that Sims had phoned her husband on more than one occasion when she answered the telephone, but she had never raised the fact that the statements were in her name. In her mind, it was her husband they were dealing with, and he had given her a reasonable explanation for the decision to use her account. She relied entirely on what her husband told her. Mrs Dempster explained the limited scope of her affidavit in answer to the summary judgment application in the District Court by reference to the limited information given to the solicitor who was acting for her in those proceedings.

11. At the conclusion of the hearing on 12 December counsel for Porter Western asked to be given an opportunity to obtain instructions on the conversations said to have taken place between Mr Dempster and Messrs Quinn and Sims. The petition was therefore adjourned and relisted for today, at which time affidavit evidence was tendered to the effect that the petitioning creditor had been unable locate either Sims or Quinn and that Carter's dealings with Dempster were very limited. The affidavit went on:-

"The Creditor has never had a policy and never would
have instructed its employees not to open separate
trading accounts for reasons that the accounts may
have been "inactive" or expensive to open. The
creditor opens and operates accounts in accordance
with instructions from its clients. It is not
uncommon for a client of the Creditor to have more
than one account".

12. I am satisfied on the balance of probabilities that the decision to trade in shares was a joint decision of Mr and Mrs Dempster. This is suggested by Mr Dempster's own language in evidence when he said:-

"... following something we heard on the radio we
wanted to buy some shares, so I rang Porter Western".

In my opinion he agreed to use the account in his wife's name; whether as a matter of convenience for the broker or otherwise is immaterial. But it was in his wife's name that he entered into the transactions in question with a least her apparent authority. And although he may have communicated her desire not to have further transactions conducted in her name the arrangement was not terminated nor the apparent authority revoked.

13. Accepting that there may have been some misunderstanding on Mrs Dempster's part of the consequences of the trading in her name it would be difficult not to feel some sympathy for her. On the evidence however, I am satisfied that there is no reason to suppose that the judgment was other than regular and lawfully obtained and that in all probability it represented the true position. In the circumstances, being satisfied that the requirements of the Act are otherwise satisfied, I propose to make a sequestration order.