Re John Samarkos Ex Parte: Mohammed Ibraham Ayyoush [1992] FCA 439 (9 September 1992)

FEDERAL COURT OF AUSTRALIA

Re: JOHN SAMARKOS
Ex parte: MOHAMMED IBRAHAM AYYOUSH
No. P27 of 1992
FED No. 753
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NORTHERN TERRITORY DISTRICT REGISTRY
BANKRUPTCY DIVISION
O'Loughlin J.(1)

CATCHWORDS

Bankruptcy - creditor's petition - notice of intention to oppose - claim by debtor that debt secured - claim by creditor that debt unsecured - onus of proof.

HEARING

DARWIN 9:9:1992

Counsel for the Petitioning Creditor: Mr B. Cassells

Solicitors for the Petitioning Creditor: Close and Carter

Counsel for the Judgment Debtor: Mr T. Riley QC

Solicitors for the Judgment Debtor: Elston and Gilchrist

ORDER

THE COURT ORDERS THAT:
1. The petition be dismissed.

2. The petitioning creditor pay the debtor's costs on an indemnity
basis.
3. Any order for costs previously made in favour of the petitioning
creditor, including costs in respect of the Bankruptcy Notice,
shall be set off against the costs which are the subject of the
order this day made.

Note: Settlement and entry of order is dealt with in Bankruptcy Rule 124.

DECISION

There is before the court a creditor's petition seeking the making of a sequestration order against the estate of John Samarkos. The petitioning creditor is Mohammed Ibraham Ayyoush. Mr Samarkos has admitted that he is indebted to Mr Ayyoush pursuant to a judgment that was obtained by consent in the Local Court of the Northern Territory of Australia on 2 December 1991 in an amount of $34,372. Nevertheless, Mr Samarkos has opposed the making of a sequestration order claiming that Mr Ayyoush is, in effect, a secured creditor for moneys lent, and that the value of the security exceeds the amount of the judgment debt.

2. It is claimed that the security comprises five items of jewellery which were physically deposited by Mr Samarkos with Mr Ayyoush at or about the time of the making of the loan in June 1990. The grounds of opposition to the making of the sequestration order are set out in a notice dated 19 June 1992 that was filed in this court on behalf of Mr Samarkos. It was entitled, "Notice of Intention of Debtor to Appear at Hearing of Petition". The grounds, which fairly and squarely raised the question of the alleged existence of security, were as follows:

"The grounds of opposition are that -
1. the creditor has falsely deposed to holding no
security over the property of the debtor or any
part of it for the payment of the judgment debt.
2. the petitioner or his agent or agents in fact holds
security over the property of the debtor for payment
of the judgment debt."

3. It is curious to say the least that Mr Samarkos, the judgment debtor, who was, at all times, legally represented should have permitted the petitioning creditor's claim in the Local Court to go to judgment without addressing the question of security. As Mr Cassells, counsel for the petitioning creditor pointed out in his closing submissions, the judgment debtor merely sought and obtained a stay of execution of the judgment debt free of interest to 28 February 1992 to gain time within which to raise funds sufficient to pay out his debt. Furthermore, his solicitor's letter of 10 March 1992, which apologised for the delay in payment and warned against the futility of attempting execution, made no mention of the existence of security.

4. Mr Ayyoush has denied that Mr Samarkos gave any security. The case for Mr Ayyoush was argued on the premise that the judgment debt which founded the bankruptcy notice and creditor's petition was an unsecured loan of $33,000 that had been made in June 1990. To determine whether Mr Samarkos did or did not give any security to Mr Ayyoush, it is necessary to go back further into the relationship that has existed between these two men.

5. A convenient starting point is June 1989 when it is agreed that Mr Ayyoush lent to Mr Samarkos money upon the security of the physical deposit of certain items of jewellery. Mr Ayyoush said the loan in 1989 was for $35,700, that it was for a period of two months, and that the only interest element was a nominal sum of $300. Thus, according to Mr Ayyoush, a total of $36,000 was repayable. Mr Samarkos said that the loan was for only $30,000, but that the interest component was $6,000. That also makes a total of $36,000. The loan documents that were prepared by Mr Ayyoush and signed by Mr Samarkos support the claim that the loan was for $35,700. Mr Samarkos' banking records however, support his claim that the loan was only $30,000. Both agree that Mr Samarkos repaid a total amount of $36,000 in late September 1989 and both agreed that Mr Ayyoush returned the jewellery that had been held as security for that loan.

6. It is a matter of importance, going to the question of credit, to make a finding about the size of this 1989 loan. It does not seem to me to be possible that either Mr Ayyoush or Mr Samarkos has made an innocent mistake. Either the loan was for $30,000 bearing an exorbitant interest component of $6,000, or it was for $35,700 carrying a nominal payment of interest of a mere $300. Mr Ayyoush said in evidence that he was now an investor and money lender. He acceded to a proposition from Mr Riley QC, counsel for Mr Samarkos, that it would be appropriate to regard him as a lender of last resort. He said in evidence that he had newly entered the business of money lending in 1989 when he made the loan to Mr Samarkos. If, by that, he was suggesting lack of experience, or largesse to acquire clientele, I reject him and his explanation. Mr Ayyoush is far too astute in money matters to be so naive. Mr Samarkos was the party who was naive. So much is indicated by my finding that he was willing to sign documents which did not truthfully reflect the transaction into which he was entering.

7. English was not the natural tongue of either man, and it was very apparent that Mr Samarkos laboured under some difficulties in both speaking and reading. I make that finding, notwithstanding his involvement as a contractor in the tendering for and execution of contracts for large civil works. Mr Ayyoush's difficulties in speech and comprehension were minimal by comparison. Indeed, there were times throughout his cross-examination when he was deliberately obtuse because he thought the cross-examiner was leading him into dangerous waters. For example, in paragraph 14 of his affidavit sworn on 1 July 1992, he had denied that he had ever received from Mr Samarkos a gold bracelet, but his oral testimony made it clear that this assertion was patently false. In his oral testimony he acknowledged that he had once taken such a bracelet as part of the security for the 1989 loan and he further claimed that he had bought such a bracelet, together with two rings, from Mr Samarkos in November or December 1990. Despite this evidence he was, at first, reluctant to acknowledge the clear contradiction between his written and oral testimony.

8. In the same affidavit, Mr Ayyoush had deposed in paragraph 3 to the occasions upon which he had previously lent money to Mr Samarkos. He had stated that there was only one such occasion. In fact, he elsewhere admitted to making five or six loans of smaller sums such as amounts of $2,000, or $3,000, or $5,000. He refused to concede in cross-examination that his affidavit was wrong, stupidly claiming that his affidavit was only intended to refer to large loans. I do not classify this as a deliberate falsehood on his part; rather I regard it as an example of gross carelessness or deliberate obtuseness, such as to make one unwilling to rely on the witness' oath unless it is independently supported by other cogent evidence.

9. I am satisfied that the 1989 loan was a loan of $30,000 and that Mr Ayyoush knowingly and falsely told the court that it was a loan of $35,700. This finding does not thereby mean that I must reject all of Mr Ayyoush's evidence, but it does mean that I must look at it critically and assess it carefully before relying upon it.

10. I pass over the evidence relating to some other loans from Mr Ayyoush to Mr Samarkos. It seems common ground that they were smaller, unsecured and repaid. I also pass over an aborted loan of $12,000 in late May and early June 1991. These matters indicate an ongoing commercial relationship between the two men but they do not assist in determining whether the 1990 loan was secured or unsecured.

11. It is common ground that Mr Ayyoush lent Mr Samarkos a substantial sum of money in June 1990. Mr Ayyoush claimed that the amount of the loan was $33,000. Mr Samarkos said that the loan was $30,000 but in his oral testimony he said that a thousand dollars had been deducted for reasons which he could not clearly explain. Thus, he said, he received only $29,000 and his bank records support this figure of $29,000. On the other hand, as counsel for Mr Ayyoush cogently pointed out in his closing address, Mr Samarkos had claimed in paragraph 3 of his affidavit of 11 May 1992 that the cheque that he had received was for $30,000. Mr Ayyoush's evidence on the quantum of the 1990 loan was that on 12 June 1990 he advanced to Mr Samarkos $4,000 in cash and on the following day he gave to Mr Samarkos a cheque for $29,000.

12. The application form and the loan agreement that were signed by Mr Samarkos support Mr Ayyoush's evidence. They refer to an unsecured loan of $33,000, which was to be repaid with $3,000 for interest, thereby making a total of $36,000 by 12 instalments of $3,000 commencing in July 1990. Such a loan would suggest an interest rate of 10 per cent or higher if regard is had to the fact that instalments of principal were to be repaid calendar monthly. Such a rate in 1990 seems somewhat inadequate to a lender of last resort such as Mr Ayyoush; but it was put to Mr Ayyoush in cross-examination that he had charged Mr Samarkos 20 per cent interest on the 1990 loan and he agreed with that proposition. In so agreeing, he has supported the evidence of Mr Samarkos that the loan was for $30,000. Ignoring adjustments for payment of principal by instalments, a loan of $30,000 for 12 months at 20 per cent would attract interest of $6,000 making a total repayment of $36,000.

13. I cannot classify Mr Samarkos as a good witness. He was very difficult to understand at times and he was easily confused. On other occasions, I had the feeling that he might have been giving answers which he thought were expected of him. However, despite these shortcomings, and the other matters to which I have already made reference, I have come to the conclusion that I prefer the evidence of Mr Samarkos to that of Mr Ayyoush, and I accept Mr Samarkos' evidence where there is conflict between the two men.

14. I have been fortified in coming to this conclusion by certain segments of the evidence which I now proceed to identify. First, there is the independent evidence from Miss Day, a solicitor employed by the firm that was acting for Mr Samarkos; she said that he complained that he had given Mr Ayyoush jewellery as security for a loan and that Mr Ayyoush was threatening to sell the jewellery. It is difficult to determine whether this complaint was made on 14 May or 14 June 1991. Miss Day's file note is dated 14 May, and one of its entries refers to a loan that had been made 11 months earlier. Both items suggest that May 14 was the correct date, but Miss Day had found that on 13 and 14 June, she had dated most of her file notes for those two days with the month of May.

15. Miss Day could not say if this file note should properly be dated May or June. In my opinion, 14 June would more likely fit in with the remainder of the evidence, because it was on 12 June that Mr Ayyoush and Mr Samarkos argued about the amount of the outstanding debt. The date, 12 June 1991 has been fixed with a reasonable degree of certainty because on that date, Mr Samarkos was travelling in his vehicle to an office for the purpose of depositing his tender for a particular job. It was, as he said in evidence, the last day for the lodgment of his tender; the tender documents which were produced in evidence showed that the last day for the lodgment of tenders was 12 June. Mr Ayyoush agreed that some reference had been made by Mr Samarkos in the car to the need to lodge a tender.

16. The evidence was to the effect that Mr Samarkos, whilst driving his car saw Mr Ayyoush on the footpath and stopped and offered him a lift. The two men started to talk. A dispute arose when Mr Ayyoush said that it would be necessary for Mr Samarkos to pay an additional $6,000 because he had been late in his payment. Mr Samarkos' evidence was that he stopped the car and told Mr Ayyoush to get out. As I said, Mr Ayyoush acknowledged that there had been such an occasion when he was given a lift, that a quarrel had occurred and that this had been an unpleasant encounter. In my opinion, it is likely then that such an event would have led to recriminations and, perhaps, a threat to sell the jewellery. In this context, a complaint by Mr Samarkos to his solicitor two days later is more likely than a complaint a month earlier when no evidence is available to support the existence of an earlier cause for such a complaint.

17. However, it seems to me that the matter of greater importance is my acceptance of Miss Day as a witness of truth. This means that I accept her evidence that on either 14 May or 14 June 1991, Mr Samarkos made a statement to her which is consistent with his claim that he gave jewellery to Mr Ayyoush as security.

18. I come then to the amazing turn of events that occurred during the adjournment of these proceedings. The trial had commenced on Monday 6 and continued on Tuesday, 7 July 1992. At the close of proceedings on the Tuesday, Mr and Mrs Samarkos and Miss Day had given their evidence and the matter was then adjourned over to a date when I could return to Darwin to complete the case. At that stage, the many affidavits that had been filed and the oral evidence that had been given made it abundantly clear that the case for the debtor included the important allegation that Mr Ayyoush had possession of the items of jewellery by virtue of the claim that he held them as security for the 1990 loan. It is true, as Mr Cassells pointed out, that Mr Ayyoush had never positively asserted that he did not have possession of the jewellery. His denial was that he had not been given the jewellery as security. Subsequent events have established the careful language that he used in his various affidavits. For example, in his affidavit of 15 April 1992, he had denied that he had ever been given any jewellery at or about the time that the loan was made. On 13 May 1992 he had said in his affidavit of that date, "I did not receive any jewellery from the debtor on those dates or ever as security for the loan".

19. This then was the stand that had been taken by Mr Ayyoush at the commencement of the adjournment period; but, in this period, the solicitors for Mr Samarkos had a stroke of luck. They found a jeweller, Mr Jobson and his assistant, Mr O'Keefe, who deposed in their affidavits of 1 September 1992, that in August 1991, 14 months after the June 1990 loan and two or three months after the altercation between the two men, Mr Ayyoush had deposited two rings with Mr Jobson for sale on consignment and later had deposited a bracelet for sale on consignment. Furthermore, Mr Jobson claimed that the two rings were so distinctive that he was sure that they were the same as those described in a valuation of Mr Samarkos' jewellery that both parties agreed were security for the 1989 loan and which Mr Samarkos claimed were also part of the security for the 1990 loan. Mr Jobson explained that he was unsuccessful in his attempts to make a sale; the three items (that is the two rings and the bracelet) were therefore returned by him to Mr Ayyoush in late 1991.

20. Faced with this new evidence and with the trial resuming on Monday, 7 September 1992, Mr Ayyoush reacted promptly by swearing his affidavit of 4 September 1992 the effect of which was to describe a sale for $21,000 of the two rings and the bracelet:

"In November or December of 1990 the Debtor telephoned me
and said that he needed money for business purposes and
referred to an obligation to put up a bond for a contract.
Shortly thereafter we met at the Greek Club in Nightcliff.
I agreed to purchase the jewellery which I had previously
held as loan security for $21,000.00. We haggled over the
purchase price he wanted approximately one half of the
valuation. I wanted to pay about one third. We arranged to
meet in the Smith Street Mall Darwin on the next day and I
then gave him $21,000.00 cash in exchange for the jewellery
whilst we were drinking coffee at the place called the
Galleria."

Mr Ayyoush also caused to be filed the affidavits of his friends, Gerry Norris and Lionel Curtis, both of whom claimed that they were present drinking coffee with Mr Ayyoush when the sale took place. They both saw, so they claimed, Mr Samarkos hand over two rings and a bracelet and receive a money-bag from Mr Ayyoush in return.

21. Mr Ayyoush was cross-examined at length about his failure to disclose this transaction on an earlier date:

"You knew, Mr Ayyoush, that the whereabouts of the rings was
a matter of vital importance to this case? Not a hard
question?...In my opinion, probably not. Why should be very
important? I don't understand that.
You knew the whole case was about whether or not Mr Samarkos
was telling the truth when he said he gave you these rings
as security?...Was nobody told me anything about...
Mr Ayyoush, answer the question. Listen to the question and
if you would not mind, answer the question. You knew that
the crux of this case - the centrepiece of this case - was
whether Mr Samarkos was telling the truth when he said that
he gave you these two rings as security for the loan?...Yes,
sure, yes.
Thank you. Yet you did not tell your solicitors that you,
in fact, had these rings, did you?...No.
You did not say to your solicitors, 'He couldn't give me
these rings as security, because I'd already bought them,'
did you?...No, I didn't tell him.
You did not say to this court, 'Mr Samarkos can't be telling
the truth, because I own those rings, not him. How could he
give them to me as security. I own them'. You did not say
that, did you?...I wasn't asked.
You did not volunteer it, did you?...No.
You were the only one who knew, were not you?...Why should I
volunteer.
His Honour: I did not hear your answer?...The answer, I
wasn't voluntarily giving...
Mr Riley: Your answer was 'Why should I volunteer', was not
it?...Yes.
Because that would put an end to the case, Mr Ayyoush. The
first time that you mentioned that you had purchased these
rings was last Friday, was not it?...Yes.
You did not bother to tell your solicitors that they were
your rings in any event?...No, why should I?
His Honour: Well, perhaps explain to me, Mr Ayyoush, why it
is that you should not tell your solicitors about the
rings?...Because I consider those separate transaction and
purchase transaction. It is irrelevant to the case."

22. Before I express my findings about this passage of Mr Ayyoush's evidence it is necessary to refer to the evidence of Mr Norris and Mr Curtis, bearing in mind that Mr Samarkos denied any such meeting and any such sale transaction.

23. Mr Norris was called first. He was a bright, cheerful, younger man with an open disposition and an impressive manner. There were only two aspects of his evidence that called for comment. First he said that he had been present at court on the previous occasion and in light of Mr Ayyoush's evidence (that he regarded the purchase of the jewellery as irrelevant to the subject matter of these proceedings and had not told his solicitors of it) one wonders why Mr Norris would have been present, waiting outside the court room ready, presumably, to give evidence. The other matter was that Mr Norris referred to the previous hearing as being "a couple of weeks ago" when in fact it was two months ago.

24. Mr Curtis was a different witness. Within a short time of his cross-examination commencing, he became confused and quickly admitted that two passages in his affidavit were false. He also claimed that he was present at the previous court hearing but said, quite clearly, that his friend and co-witness, Mr Norris was not present. Far from helping Mr Ayyoush, Mr Curtis only succeeded in making an unlikely story wholly unbelievable. The areas in which Mr Curtis lied were not of any great consequence. He had said that he saw Mr Samarkos counting bundles of $50 bills; he admitted that was false. He also admitted that his statement that he saw Mr Ayyoush remove a ring from its box was false.

25. I remind myself of the risk involved in rejecting the whole of a witness' evidence because of some small and inconsequential falsity. Even with that reminder I regard this evidence of a $21,000 sale as one of recent invention to explain away the most damaging evidence of Messrs Jobson and O'Keefe. In rejecting Mr Curtis, this means that I am also rejecting the evidence of Mr Norris. My rejection of Mr Ayyoush's evidence about the size of the 1989 and the size of the 1990 loans, the lateness of his story about the $21,000 purchase and his unlikely explanation in the passage of his evidence that I have quoted and the nervous spluttering diffidence of Mr Curtis amounts to sufficient cause to reject the evidence of the alleged sale of the jewellery. A necessary consequence of this finding is that Mr Norris, despite his apparent openness and despite the good impression that he had created as a witness, must be branded along with Mr Ayyoush and Mr Curtis as a liar. For the reasons that I have canvassed I find myself unable to believe Mr Ayyoush. I cannot accept his evidence.

26. Counsel argued strongly on the question of onus of proof. In the realities of this case it has become an unnecessary exercise because, irrespective of who carries the onus, I am satisfied that the petition in this matter must be dismissed. However, in deference to the able arguments advanced by counsel I will set out my views on the matter. The provisions of the Act and the Rules of Court that affect this argument are first, section 47(1). It states that:

"A creditor's petition -
(a) shall be in accordance with the prescribed form;"

Rule 12 of the Rules of Court identify Form 5 as the prescribed form. In turn, Form 5 contains paragraph 3 where the draftsman of a creditor's petition is offered three options with respect to the question of security. The first and best known of these reads as follows:

"I do not, nor does any person on my behalf, hold any
security over the property of the debtor or any part of it
for the payment of the amount specified in paragraph 2."

Those words are faithfully repeated in the creditor's petition in these proceedings. The remaining two alternatives relate, first, to those circumstances where the petitioning creditor holds security and alleges that it is worth less than the debt and the remaining alternative is where the petitioning creditor admits to holding security and expresses his willingness to surrender it. In the circumstances of this case, it is not necessary to give any further consideration to those two alternatives. The affidavit of Mr Ayyoush sworn 24 June 1992 verified the statements in the petition so far as they apply to this question of security. In other words, Mr Ayyoush has sworn his oath that he does not hold any security.

27. Sub-section 52(1) of the Bankruptcy Act provides as follows:

"At the hearing of a creditor's petition, the Court shall
require proof of:
(a) the matters stated in the petition (for which purpose
the Court may accept the affidavit verifying the
petition as sufficient);
(b) service of the petition; and
(c) the fact that the debt or debts on which the petitioning
creditor relies is or are still owing;
and, if it is satisfied with the proof of those matters, may make
a sequestration order against the estate of the debtor."

28. The words, "those matters" which are last mentioned may, at first blush, be thought to refer back only to "the matters" that are "stated in the petition": vide sub-paragraph (a); but I think that such an interpretation would be unrealistic. The reference to the satisfaction of the court of the proof of "those matters" relates to all subjects encompassed in paragraphs (a), (b) and (c).

29. The question of proof in sub-s.52(1) is to be contrasted with that in sub-s.52(2). That sub-section provides:

"If the Court is not satisfied with the proof of any of
those matters, or is satisfied by the debtor -
(a) that he is able to pay his debts; or
(b) that for other sufficient cause a sequestration order
ought not to be made,
it may dismiss the petition."

Mr Cassells argued that as the question of security had been raised by the judgment debtor, there was an onus on the judgment debtor as the party advancing the issue: he should be regarded as dux litus and as the party bearing the onus of satisfying the court in terms of paragraph 52(2)(b) "that for other sufficient cause a sequestration order ought not to be made". According to Mr Cassells, the petitioning creditor is merely required to prove the existence of a debt of $1,500 or more owing by the judgment debtor to the petitioner creditor and that it remains unpaid. He said that these two elements had been proved; that is correct. He argued that references in the Act to the question of security dealt only with procedural issues, such as what a creditor should do by way of valuing or surrendering his security in those cases where security existed; he argued that his strongest point was that the petitioning creditor should not be called upon to prove a negative: he should not be called upon to prove that he does not hold security.

30. Mr Riley QC claimed however that the provisions of the Act and the Rules of Court identified several discrete subjects (of which security - or the absence thereof - was one) which must be proved by the petitioning creditor to the satisfaction of the court. His starting point was sub-s.52(1) which he said calls for the proof of (a) the matters stated in the petition; (b) service of the petition and (c) the continued existence of the debt.

31. One such matter that is stated in the petition, as has already been established, is the presence or absence of security. Although the court is entitled to accept the affidavit verifying the petition as proof of the matters stated in the petition, when, as here, a discrete matter is put in issue, it is not appropriate to rely on the affidavit. However, the utilisation of a petitioning creditor's affidavit in other cases (where no question of security is in issue) is consistent with, and only consistent with, the petitioning creditor carrying the onus of satisfying the court that the statement in the petition - that is, that no security was given - is correct.

32. I am persuaded that the argument advanced by Mr Riley QC, is correct. The petitioning creditor sought a sequestration order on the basis that he was an unsecured creditor. The judgment debtor challenged his claim that he was unsecured. It was incumbent upon the judgment creditor to satisfy the court that he was an unsecured creditor. In this regard, he has failed. However, I should make it clear that if I am wrong: if the judgment debtor carries the onus of proving that he did give security, then I am satisfied that such an onus has been met.

33. Nevertheless, I emphasise that my findings in this case have not been based on the utilisation of the principle of onus of proof. The combination of my rejection of Mr Ayyoush and his witnesses and my acceptance of Mr Samarkos and his witnesses means that I am satisfied that security was given for the loan. If it had been necessary to convert that finding into a matter of onus on the debtor, I would have been satisfied by the debtor, and I am indeed so satisfied that sufficient cause exists that a sequestration order ought not be made. The reason for my satisfaction is that Mr Ayyoush falsely stated in his petition that he had no security and falsely swore in his affidavit that the contents of the petition were true.

34. The evidence that has been presented satisfies me that Mr Samarkos gave security to Mr Ayyoush for the 1990 loan by physically depositing with him certain items of jewellery. I find that there were five such items, the first four of which are listed in a valuation of a business house called the Jewellery Valuation Centre. That valuation is dated 11 May 1992, and it is annexure D to the affidavit of Mr Jobson sworn on 1 September 1992. In view of its date, I should explain that it was in the nature of a reappraisal of value and it was based on an earlier valuation that was made at a time when the items were examined by the valuer.

"Item No. Description Value
1. 1 x 18 carat yellow gold Gents Dress
Ring set with 1 x 2.2 carat and
24 x 8 point Brilliant Cut Diamonds. $35,616.00
2. 1 x 18 carat yellow gold Gents Dress
Ring set with 1 x 1.11 carat Brilliant
Cut Diamond and 12 x 10 point Princess
Cut Diamonds. $18,921.00
3. 1 x 18 carat yellow gold Gents Bracelet
weighing 68 grams. $ 4,919.46
4. 1 x 18 carat yellow gold Omega De Ville
solid gold Gents Bracelet Watch. $13,356.00
Total Value $72,812.46

35. I further find that the fifth item is a gold bracelet that was custom made by the witness Mr Sweeten for Mr Samarkos at a cost of $8,000 in late 1989, and to which Mr Samarkos makes detailed reference in paragraphs 13 to 15 of his affidavit of 30 June 1992.

36. Notwithstanding these findings, it is to be remembered that the supposed sale to Mr Ayyoush in December 1990 was limited to two rings and one bracelet; thus there was no evidence from Mr Ayyoush as to the whereabouts of the second bracelet or the watch.

37. At this stage, it is necessary to return to the evidence of Mr Jobson and Mr O'Keefe. They explained that following the unsuccessful attempt to sell the larger of the two rings - that is item 1 in the valuation - the ring was, on Mr Ayyoush's instructions broken down and the precious stones were used to make up three new rings. That evidence was not disputed by Mr Ayyoush. Indeed, in a surprising turn of events during the course of his cross-examination, he produced the three rings plus a very heavy gold chain bracelet from his briefcase. He also surprised counsel and the court by vindicating his claims that he dealt in cash by producing from various pockets and his briefcase, cash and money orders which he said totalled about $20,000.

38. It was Mr Ayyoush's evidence that he has lost the other smaller ring, being item 2 in the above-mentioned valuation. Counsel for Mr Samarkos challenged this evidence claiming it was false. He relied heavily on Mr Ayyoush's statement that he had not reported its loss to the police, arguing that the proper inference is that Mr Ayyoush has disposed of the ring to a person whom - or in a manner that - he does not wish to disclose. I do not consider that it is necessary for me to make such a finding. It is sufficient to say for the purposes of these proceedings and any other proceedings that might be instituted in this court, that the missing ring was part of the security taken by the creditor, and that the creditor will have to account for it or its value. I further find that its value was on 11 May 1992, $18,921. I note Mr Sweeten's evidence that he would only pay $5,000 to purchase the ring, but that figure is not its value to Mr Samarkos. He is entitled to its replacement or to its replacement cost, and the only evidence of that figure is $18,921.

39. There was no direct evidence to identify the bracelet that Mr Ayyoush produced in Court as being either that described in item 3 in the valuation or the custom made work of Mr Sweeten. However, counsel for Mr Samarkos pointed out that item 3 was said to weigh only 68 grams and suggested that I should be prepared to accept that the bracelet that was produced in court was far in excess of that weight. The common sense of that argument persuades me to find on the balance of probabilities that the bracelet produced to the court by Mr Ayyoush is the one that was custom made by Mr Sweeten in late 1989 at a cost of $8,000.

40. I have made findings as to the nature of the security given and as to its value - being $8,000 for the custom made bracelet, and the figures in the valuation of 11 May 1992 - for these reasons. Mr Ayyoush is presently a judgment creditor entitled, by virtue of that judgment, to issue and serve a bankruptcy notice on his debtor, Mr Samarkos. Failure to comply with that bankruptcy notice can lead to an act of bankruptcy which can found a creditor's petition. If Mr Ayyoush attempts to exercise those rights at a future date, then, as a petitioning creditor, who, as a result of the findings in these proceedings, is a secured creditor, he will be obliged to comply with the provisions of s.44 of the Act that deals with the rights and obligations of secured creditors who petition for their debtor's bankruptcy.

41. As at this date, assuming no material changes in value, the finding of the court is that the petitioning creditor holds jewellery to the value of $80,812.46 (the security being the five items of jewellery that I have identified) as the security for the judgment debt of $34,372. According to the endorsement on the relevant certificate of judgment, the judgment debt is accruing interest at 11.05% per annum as from 28 February 1992.

42. The contents of a subsequent creditor's petition (if any) will have to accommodate these findings or it will have to establish new and admissible evidence to the contrary. The orders of the court are that the petition be dismissed and that the petitioning creditor pay the debtor's costs. Any order for costs previously made in favour of the petitioning creditor, including costs in respect of the bankruptcy notice, shall be set off against the costs which are the subject of the order this day made.