Symes v Holbrook [2003] FCA 96 (28 February 2003)

Last Updated: 28 February 2003

FEDERAL COURT OF AUSTRALIA

Symes v Holbrook [2003] FCA 96

BANKRUPTCY - appeal - refusal of application for annulment of bankruptcy - whether in error of law - appellant found to have been insolvent -finding of forged debts in his name - absence of finding of value to be placed on forged debts-materiality of such evidence to determination of solvency at date of bankruptcy

Bankruptcy Act 1966 (Cth) ss 5(2), 99, 99(1), 153A, 153B, Pt X

Stankiewicz v Plata (2000) FCA 1185 followed

Re Coyle (1993) 42 FCR 72 discussed

Re Almassy [1999] FCA 1004 discussed

Re Williams [1968] 13 FLR 10 referred to

Re Dunn [1949] 1 Ch 640 referred to

Re Scott (1975) 6 ALR 558 explained

Re Ditfort (1988) 19 FCR 347 referred to

Re Gollan (1992) 40 FCR 38 referred to

Edelsten v Deputy Commissioner of Taxation (NSW) (1989) 86 ALR 257 referred to

Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666 followed

Borck v Williamson (1994) 49 FCR 16 referred to

Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163 applied

Minister for Immigration & Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323 followed

FREDERICK KEITH SYMES v KIM HOLBROOK

W73 of 2002

RD NICHOLSON J

28 FEBRUARY 2003

PERTH

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W73 OF 2002

ON APPEAL FROM A FEDERAL MAGISTRATE OF THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	FREDERICK KEITH SYMES APPELLANT
AND:	KIM HOLBROOK RESPONDENT
JUDGE:	RD NICHOLSON J
DATE OF ORDER:	28 FEBRUARY 2003
WHERE MADE:	PERTH

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The order of the Federal Magistrate made on 20 February 2002 be set aside.

3. The matter be remitted to the Federal Magistrate for determination in accordance with the law.

4. There be no order as to costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
WESTERN AUSTRALIA DISTRICT REGISTRY	W73 OF 2002

ON APPEAL FROM A FEDERAL MAGISTRATE OF THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:	FREDERICK KEITH SYMES APPELLANT
AND:	KIM HOLBROOK RESPONDENT

JUDGE:	RD NICHOLSON J
DATE:	28 FEBRUARY 2003
PLACE:	PERTH

REASONS FOR JUDGMENT

1 This is an appeal from the judgment of a Federal Magistrate given on 20 February 2002. The judgment dismissed an application by the appellant in which he claimed:

"1. A declaration that the Applicant's bankruptcy No. 803 of 2000 be annulled pursuant to s 153B of the Bankruptcy Act 1966 (the Act).

2. Further or alternatively an order that the proof of an alleged debt of $12,744.81 to be expunged pursuant to s 99 of the Act.

3. Such further or other order as the court may see fit."

Before the Federal Magistrate the respondent did not formally oppose the application and there was no evidence before the court that the application was opposed by any creditor. On the hearing of the appeal the respondent appeared, not to oppose the appeal, but to defend any allegations that he had acted improperly.

2 The application by the appellant to the Federal Magistrate for annulment of his bankruptcy had the unusual feature that the bankruptcy had come about as a consequence of the appellant presenting a debtor's petition.

Relevant statutory provisions

3 The two provisions in the Bankruptcy Act 1966 (Cth) ("the Act") relied upon by the appellant in the application to the Federal Magistrate are as follows. The first reads:

"153B If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy."

4 The second reads:

"99(1) Where a creditor or the bankrupt considers that, by virtue of a decision of the trustee under subsection 102(1), (2), (3) or (4), a proof of debt has been wrongly admitted, he or she may apply to the Court for an order that the proof be expunged or that the amount of the admitted debt be reduced, and the Court may make an order accordingly."

Factual background

5 The facts as found by the Federal Magistrate and set out in his reasons were in part as follows:

"8. By way of background it does not appear to be in dispute that the applicant is a 52 year old plant operator who was married on 31 March 1985. He remained married and living with this wife Susan until her death by suicide on 16 March 2000. There are two children of the marriage, a daughter aged 16 and a son aged 11. The applicant had worked as a plant operator at the Argyle Diamond Mine in East Kimberley from June 1994 to 17 March 2000. He had worked since about mid 1998 on a rotating shift of four weeks at the mine and one week off.

9. During the marriage the applicant indicated that his wife had responsibility for running family finances. The applicant's salary was paid into a joint account and it was the family's sole source of income. As far as the applicant knew he and his wife had one major asset namely a house a (sic) 4 Daly Court Leeming (the property) and it was subject to a mortgage to the ANZ bank which the applicant believed had an outstanding balance in or about 1997 or 1998 of about $50,000. The only other asset owned by the family of some significance was a time share at the Silver Sands in Mandurah which had been purchased according to the applicant for $500 on 30 October 1992. There were two motor vehicles. As far as the applicant knew his income of $87,900 per year ending 30 June 2000 was more than adequate to meet outgoings and living expenses of the family.

10. The tragic death of the applicant's wife not surprisingly was described by the applicant as being "a shattering blow". After the death of his wife the applicant became aware of a number of liabilities purportedly in joint names of himself and his wife or in his sole name and in his wife's sole name. He gathered together information concerning the debts and found that the debts totalled approximately $300,000 in circumstances where he claims that this was approximately $220,000 more than he anticipated.

11. The Applicant's wife died intestate. Amongst the outstanding liabilities were debts in relation to 26 credit cards. It is clear from the evidence that of the 26 credit cards only two could be verified as being legitimate and doubts arose as to the authenticity of the applicant's signature on applications in relation to the other credit cards. It is now evident and seems to be accepted by the parties and indeed the creditors that the applications for credit cards were the subject of forged signatures of the applicant and have ultimately been regarded as not his responsibility given the fraudulent circumstances in which the cards were issued.

12. After discovering the financial circumstances were in such a parlous state the applicant contacted his accountant and after a number of hours of examining the material was advised to seek the advice of the respondent who for the purpose of this application I accept is an insolvency expert to whom the applicant was referred.

13. The applicant met with the respondent at the respondent's office on 14 April 2000. It is important to note that this was less than one month after the death of the applicant's wife. The applicant states that he was then in a state of shock for a number of weeks and uncertain as to how to proceed. At the meeting on 14 April 2000 the applicant states that he told the respondent that the signatures on a number of the credit cards which were purported to be the applicant's were not in fact those of the applicant. He indicated that the respondent advised him that it was likely the debt would be found to be his if the matter were to proceed to court. The respondent in his affidavit indicates that he does not recall whether the applicant claimed at that meeting that a number of signatures were not his. He disputes advising the applicant that it was likely the debt would be found to be his if the matter went to court and instead asserts that he told the applicant words to the effect that it was "unlikely that he would be able to prove the debts were not his in all instances given the time and cost constraints with which he would be faced and given the fact that he did not have any funds with which to pursue such claims". The respondent indicates that at that time he formed the view that it was "likely that Mr Symes would still be insolvent even if he could prove some of his claims".

14. A meeting of the creditors of the applicant was held on 15 May 2000. At that meeting the creditors failed to pass a resolution accepting the applicant's Part X proposal and also failed to pass a resolution that the applicant file his own petition in bankruptcy. According to the applicant he was then advised to become bankrupt by the respondent and acting on that advice signed a debtor's petition for bankruptcy on 15 May 2000. The statement of affairs for bankruptcy was in identical terms to the Part X statement of affairs which had been signed on 20 April 2000. The liabilities totalled $310,315 and assets totalled $253,888.

15. The applicant in his affidavit sworn 5 November 2001 asserts that after the meeting of creditors he was not given any written advice by the respondent. He does not seem to challenge however that he wanted the respondent to address claims being made against him by creditors. He asserts he was told by the respondent that it would cost too much to get a solicitor to investigate the matter of disputed claims and suggested at that stage he was not in a position to pay fees to a solicitor."

6 The reasons of the Federal Magistrate refer to affidavit material in relation an alleged reaction by the respondent to the suggestion the appellant was going to seek legal advice. His Worship concluded that he was satisfied that if there was any reaction it was simply done in the context of an attempt by the respondent to alleviate a tense situation at a time when the appellant was understandably distraught and distressed.

7 The reasons then continue:

"The respondent in the trustee's report filed pursuant to Order 77 Rule 44 concludes that he had received three claims from creditors of the estate totalling $17,467.92 and that the cause of bankruptcy was at least in part excessive use of credit facilities by the applicant's late wife. It is asserted by the respondent that "despite a number of requests the bankrupt has yet to provide me with evidence that all creditors have written off their debts on the basis that they were all incurred fraudulently by someone other than the bankrupt as has been asserted by the bankrupt". The respondent in relation to the applicant's conduct states that since the date of bankruptcy the applicant's conduct has been unsatisfactory "on a whole and that he failed to provide information to me as and when requested." As a result it is said by the respondent that "an objection to the discharge of the bankrupt was filed on 9 August 2001 (and thereby extending the term of his bankruptcy from 3 years to 8 years) on the basis that he failed to provide details of his income.""

8 The reasons continue by recording that the appellant refuted the suggestion that he had not cooperated. They also record that an examiner had recorded that there was forgery or fraud in relation to at least one of the debts arising out of the credit card issued by Visa.

Federal Magistrate's reasoning

9 In connection with the application before him the Federal Magistrate's reasoning was as follows.

"51. On the evidence before me I am satisfied that there is no material to suggest that the applicant at the time of the act of bankruptcy was solvent. Indeed there is affidavit material to suggest that the applicant could not afford the costs of investigating the facts and circumstances surrounding the then unexpected and inexplicable debt arising form the use of credit cards.

52. I have no doubt that a number of the debts incurred at the time were a complete mystery to the applicant and that the costs of investigating each and every one of those applications is significant. I further have no doubt that three were debts incurred properly at that stage and owed by the applicant which although paid subsequent to the date of bankruptcy were nevertheless debts which a trustee acting in accordance with his responsibilities would regard as properly incurred in all the circumstances and debts for which the applicant was liable.

53. I also have little doubt that in the absence of further detailed material and/or the provision of funds to undertake an expensive investigation that the trustee was entitled to refuse to conclude that other debts which were apparently owed to creditors could not in part at least be the responsibility of the applicant.

54. In considering the discretion which the court undoubtedly has in relation to s 153B of the Bankruptcy Act it is clear in my view that the sequestration order made in the case of the debtor's petition in the present case could not be said to be one where the petition ought not to have been presented. The issue is whether in all the circumstances the petition ought to have been accepted by the Official Receiver.

55. The great difficulty in exercising discretion in the present case is that to a large extent information has been obtained since the date of bankruptcy and it is clear on the chronology and the submissions made by the respondent that in any event at the date of bankruptcy there were a number of debts then due and payable by the applicant who at the time was unable to establish solvency. It is common ground that the applicant could not then afford the cost of investigating the circumstances of these debts.

56. Whilst the circumstances of the present case are clearly stressful and undoubtedly tragic, it does not seem appropriate in my view that I should exercise my discretion and find pursuant to s 153B that the petition ought not to have been accepted by the Official Receiver at the date of bankruptcy. On the material then available there was sufficient evidence of debt and insolvency to permit the Official Receiver to accept the debtor's petition.

57. I agree with the submission made for and on behalf of the respondent that in circumstances where it appears that after the date of bankruptcy the debts have either been forgiven or paid that a more appropriate application should be made pursuant to s 153A of the Act. No doubt the quantum of the trustees fees can be dealt with in such an application and presumably the annulment considered according to law.

58. I am satisfied on the material before me that at the time when the applicant consulted the respondent advice was given which with hindsight the applicant may have chosen not to accept. However I am also satisfied that this was a particularly traumatic and upsetting time for the applicant and in those circumstances I prefer the evidence of the respondent who in part relied upon memory and in part relies upon contemporaneous records which accurately reflect the true state of affairs which were then relevant in considering the issue of whether the applicant by his own petition should seek a sequestration order.

59. I do not believe on the material presently before me that there is any basis upon which it could be said that the respondent has acted in a manner which would be considered to be unprofessional or irresponsible. I do accept however that the applicant's dealings with the respondent have caused the applicant and his family great stress though in the circumstances that would appear to be inevitable given the extraordinary financial circumstances and the tragic death of the applicant's wife."

10 For those reasons he dismissed the application.

Grounds of appeal

11 There are four principal grounds of appeal relied upon. The first is that the Federal Magistrate was in error in not finding that the appellant's debtor's petition ought not to have been presented within the meaning of s 153B of the Act. Secondly, that he was also in error in not finding that the circumstances of the case justified the exercise of the discretion to make an order annulling the appellant's bankruptcy. Thirdly, that he erred in his consideration of the matter having regard to particular circumstances and fourthly, that the evidence before the court justifies the exercise of the discretion to annul the appellant's bankruptcy. The grounds in their content and presentation are closely interrelated.

Appellant's contentions

Applicable law on presentation or acceptance of petition

12 The application of the words "ought not to have been" in s 153B of the Act requires the court to consider not only the facts as they were at the time of the bankruptcy but as they may now be known as at that date, but excluding any facts occurring since the occurrence of the bankruptcy: Stankiewicz v Plata [2000] FCA 1185 per Drummond, Sackville and Dowsett JJ. Re Scott (1975) 6 ALR 558 is to be understood in that way.

13 The words "ought not to have been presented" as they appear in s 153B have been understood to mean generally that it is not possible for a debtor to establish that his or her bankruptcy should be annulled on that ground when it is clear that at that time the debtor was insolvent: Re Coyle (1993) 42 FCR 72 at 77 per Drummond J. In so stating his Honour referred to two cases in which voluntary bankruptcies had been annulled on the application of the bankrupt in the face of evidence of solvency. The circumstances in those cases were described by him as follows:

"In Re McCormack (unreported, 6 April 1990), Pincus J granted such an application where the evidence showed that the debtor was solvent at the time he presented his petition; it also seems that that continued to be in the position right up to the time the application was heard by his Honour, although there was reason to think that if an action then on foot went against the bankrupt, he would then become insolvent. In Re Goo Tuck; Ex parte Goo Tuck (1892) 2 BC (NSW) 95, annulment was ordered on the application of the bankrupt who was without assets and whose only liabilities were in respect of his involvement in a partnership. When he presented his petition, he was unaware that his infancy was an answer to the claims of all his creditors. At that time, the position thus was that he owed no enforceable debts of any kind, that is, he could probably be regarded as solvent."

The two cases cited by Drummond J were therefore ones where it was apparent that the debtor was not insolvent at the time the bankruptcy was declared.

14 In Re Almassy [1999] FCA 1004 Mansfield J examined the wording of s 153B and relevantly to the issues in this application said:

"In my judgment, it is necessary for the applicant to establish some circumstance which meant that she was not eligible to present the petition to establish that it ought not have been presented. It is only if that point is reached that the Court has a discretion to annul the bankruptcy.

The expression "ought not to have been made" in s 153B in respect of a sequestration order being cancelled requires there to be shown that there was some matter upon which the order was made which was not in fact correct, although that might be shown not just from the facts as disclosed at the time, but as they would have been disclosed had all the true facts been disclosed at the time of the making of the order: Re Gollan (1992) 40 FCR 38 at 40-42 per Spender J and cases referred to therein. In Re Whithall (unreported, Federal Court, Kiefel J, No QG 7598 of 1997, 7 August 1998), Kiefel J said that it was necessary to show that, on the true facts, the judicial officer was bound not to make a sequestration order: see also per Fisher J in Re Frank (1987) 16 FCR 396.

In respect of the expression "ought not to have been received", a similar threshold has been required. I have referred to decisions on that expression above. Moore J in Re Abbas (at 142) noted that the expression "ought not to have" has been treated as comprehending circumstances where the Registrar or judge making the order was not aware of facts that, had they been known, would have resulted in no sequestration order being made. His Honour noted also that a similar approach had been adopted to the expression "ought not to have been presented" in relation to a debtor's petition. Thus, if the debtor was solvent at the time the petition was presented, the bankruptcy can be annulled: Re McCormack (unreported, Federal Court, Pincus J, 6 April 1990); Re Coyle (1993) 42 FCR 72.

There is every reason to apply the expression "ought not to have" consistently to the terms "made" "presented" and "received" in s 153B: Registrar of Titles (WA) v Franzon [1975] HCA 41; (1975) 132 CLR 611 at 618 per Mason J".

15 It was not in contest in this proceeding that the primary Court was required to approach the section looking first to find whether ineligibility is established and then exercising the general discretion made appropriate by the use of the word "may". Nor was it in contest that the Court was entitled to consider not only the case as disclosed at the time the order was made, but as it would have been disclosed had all the true facts been known: Re Williams [1968] 13 FLR 10 at 23; Re Dunn [1949] 1 Ch 640; Re Scott (1975) 6 ALR 558; Re Ditfort (1988) 19 FCR 347; Re Gollan (1992) 40 FCR 38. The case the appellant was required to make was one required to be discharged to the civil onus: Edelsten v Deputy Commissioner of Taxation (NSW) (1989) 86 ALR 257.

Factors said to ground error

16 The four grounds of appeal are heavily interrelated. They all rely on a submission that the appellant was not properly found to be insolvent at the time the petition was presented or accepted. Specific submissions are:

(1) in par 11 of his reasons the Federal Magistrate made findings that "the applications for credit cards were the subject of forged signatures of the [appellant] and have ultimately been regarded as not his responsibility given the fraudulent circumstances in which the cards were issued." It is submitted that these findings should have led inexorably to the conclusion that the appellant was not insolvent at the time of presentation of his petition. Therefore it is said the finding at par 51 of the reasons contradicts the finding at par 11.

(2) In relation to the conclusion in par 53 that the trustee was entitled to refuse to conclude that other debts apparently owed to creditors could not in part at least be the responsibility of the appellant, it is submitted it was for creditors to prove the debts were the appellant's responsibility and not for the appellant to prove they were not. This error is said to have been repeated in pars 55 and 56.

(3) Even if it were the case the appellant had not established that he was solvent at the time of presentation of the petition, it is said there was error in his Honour regarding that factor as constituting a bar to the exercise of his discretion to grant annulment so that he erroneously fettered his discretion.

(4) Associated with (4), it is submitted the Federal Magistrate should have exercised his discretion in favour of annulment because of the evidence concerning the state of shock and trauma the appellant was in following his wife's death as was so found and the fact that the creditors whose debts were disputed by the appellant stated they were not pursuing the debts.

(5) The evidence of the appellant's solvency at the date of the presentation of the petition is said to be put beyond all doubt by his evidence that the alleged debts from credit cards in his name or the joint names of himself and his wife of which he had no knowledge totalled at least $74,000. Therefore, it is implied, there was not proper foundation for the finding of fact of insolvency made by the Federal Magistrate.

Reasoning

17 Section 5(2) of the Act provides that a person is "solvent" if, and only if, the person is able to pay all the person's debts, as and when they become due and payable. Section 5(3) provided that a person who is not solvent is "insolvent." This test of solvency reflects the well-known test in Sandell v Porter [1966] HCA 28; (1966) 115 CLR 666 at 670 per Barwick CJ. There it was stated that:

"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."

18 The submissions for the appellant that he was solvent at the time of the presentation or acceptance of his petition, so that it ought not to have been presented or accepted, start from the following facts:

"Assets $253,888

Liabilities: $310,315

Net deficiency: $56,427"

The appellant contends that this should have been adjusted by off-setting the alleged debts from credit cards in the names of himself or the joint names of himself and his wife of which he had no knowledge. The result should then have been seen as:

"Assets: $253, 888

Liabilities: $310,315

Less: $ 74,400

Total: $235,915

Surplus: $17,973"

19 That simple equation needs to be understood against the facts which were before the Federal Magistrate. In the trustee's report dated 22 October 2001 the following summary was given of the effect of the statement of affairs filed by the appellant:

"

Assets		$	$
Cash at bank			3,838
Cash - Controlling Trustee			3,300
Household furniture and effects			6,500
Other Assets - Camera			250
Residence at 4 Daly Court, Leeming		230,000
Less: Due to Perpetual Trustees-Home Loan		(194,000)	36,000
Sea-Doo Jet Ski		10,000
Less: Due to AGC		(2,300)
	half share	7,700	3,850
Total Assets			53,738
Liabilities
Unsecured Creditors (10-The bankrupt solely)			(82,843)
Unsecured Creditors (10-The bankrupt - joint with Mrs Symes		Nil	(31,172)
Total Liabilities		Nil	(114,015)
NET SURPLUS/(DEFICIENCY)		$Nil	($60,277)

"

20 In relation to the creditors, the appellant stated in his affidavit that as a result of enquiries by him and others made on his behalf, "most of the creditors whose liabilities led to the bankruptcy now accept that I have no liability to them." He annexed a schedule of creditors' listings for both himself and himself and his wife jointly "with an indication in respect of each creditor as to their attitude to the apparent liability." The lists open themselves to the following analysis:

Total value of creditors on both lists: $111,871

List relating to appellant alone:

Total value: $80,699

Paid in full: $16,603

Written off by creditor: $30,294

Under consideration by creditor: $21,056

Not pursued by creditor: $12,744

List relating to appellant and wife jointly:

Total value: $31,172 (excluding mortgage on home)

Paid in full: $12,941

Not to be pursued by creditor: $10,309

Written off by creditor: $220

"no liability": $846

"under consideration": $6,855

21 So far as it is recorded that a debt on the lists has been "paid in full," it should be noted that another avenue for annulment exists pursuant to s 153A if the trustee is satisfied that "all the bankrupt's debts have been paid in full..."

22 Counsel for the appellant relied upon the figure of $74,405 as the value of the debts which should not have been taken as part of the indebtedness of the appellant on the presentation or acceptance of the petition. This was constituted by a selection of 6 debts from the list relating to the appellant alone and one from the joint list. These debts may be analysed from the lists as follows (although the overall total differs slightly):

Written off by creditor: $30,294

"under consideration": $21,100

"not to be pursued": $23,054

Before the Federal Magistrate were the claims by the appellant in his evidence that the debts had been dealt with in the ways claimed. Those claims were supported by copies of the correspondence with each creditor. Examination of the dates of that correspondence shows the position of the creditor so relied upon was the result of correspondence post-dating the date of bankruptcy (15 May 2000) by a considerable period. In other words, at the date of the bankruptcy the fact that debts were to be written off or not pursued was not known and so could not have been in evidence. The matters so relied upon by the appellant before the Federal Magistrate were not therefore matters which can assist him in his contention that the petition he brought "ought not to have been" presented or accepted. Had the appellant had the means to investigate the creditors prior to taking the step of lodging the petition, the case may have been different in that respect. Absent that, the case for annulment must be judged on the facts as they existed at the date of the act of bankruptcy as now known.

23 Other such factors in the evidence before the Federal Magistrate which did not assist the appellant's case for annulment included the following. The house property was estimated to be worth $230,000 but was stated as being subject to a mortgage of $194,000. It was properly open to inference on those facts that there was not any ability to borrow further against that property to achieve solvency at the time of bankruptcy. The trustee's report shows the jet ski was sold at auction for $6000 to that the alleged assets would be reduced by $4000.

24 There was the further evidence relevant to the appellant's capacity to raise cash resources that on 17 March 2000 he had left his employment at Argyle Diamond Mine so that he had a substantially reduced income at the date of the hearing.

25 Furthermore, at that date the appellant was indebted to the respondent for controlling trustee's fees for the Part X proposal which had not been accepted by creditors: Borck v Williamson (1994) 49 FCR 16 at 20, 21. The trustee's report shows outstanding fees of $12,920.34. The appellant has not shown that he was able to pay this debt at the date of bankruptcy.

26 There was additional evidence of the appellant's difficult financial position at the time of the bankruptcy hearing. He could not afford to commence payments to creditors of $119 per month. He was not then in a position to pay solicitor's fees.

27 However, there were three matters before the Federal Magistrate which had the potential to lead him to a different result to that which he reached.

28 The first was a report of a forensic document examiner who examined the signatures purporting to be those of the appellant on the application for Citibank Visa card from which arose a debt in the sum of $12,744.81. The examiner concluded there was no evidence that the questioned signatures of the appellant on the application for the card were written by him. The report of the examiner is evidence of the true facts which existed at the time of the occurrence of bankruptcy and so was required to be taken into account by the Federal Magistrate to the effect that the debt resulting from the use of the card could not have been the appellant's debt.

29 The credit cards the subject of the Federal Magistrates' finding in par 11 are in the same category. When he found that "it is now evident and seems to be accepted by the parties and indeed creditors that the applications for credit cards were the subject of forged signatures of the [appellant]" the Magistrate made a finding having the effect that debts resulting from the use of those cards were not the appellant's debts at the date of his bankruptcy. However, he did not make a finding on either the value of the debts to which the credit cards related or identify which of the debts in evidence were the product of the use of one of the forged credit cards. Either or both of those facts was a material fact to determining the effect of the exclusion of those debts from the liabilities of the appellant at the date of the bankruptcy and whether that resulted in the appellant having been solvent at that date.

30 There was a further area of material fact raised on the appeal. In his affidavit sworn on 10 September 2001 in support of his application for annulment the appellant gave evidence concerning the secured loan over the home. He said the house was encumbered to ANZ for about $50,000. It is apparent, however, that the position which has been accepted by the trustee is that referred to above which in turn accords with evidence given in relation to his secured creditors. The reasons of the Federal Magistrate do not address the conflict between the appellant's evidence and other evidence in this respect.

31 In my opinion it follows he was in error of law in ignoring relevant material in relation to the material fact of the forgeries as found by him, in assigning a value to them, in addressing the conflict in evidence concerning the housing and in then determining whether in all the circumstances solvency at the date of bankruptcy was established: Craig v South Australia [1995] HCA 58; (1995) 184 CLR 163 at 179 considered and applied in Minister for Immigration and Multicultural Affairs v Yusuf [2001] HCA 30; (2001) 206 CLR 323.

32 For the respondent it is submitted that it would be relevant in any event to the annulment of the appellant's bankruptcy that no provision has been made for payment of the trustees' fees: Almassy; Stankiewicz v Plata (2000) FCA 1185. Given that there is a statutory requirement for an annulment pursuant to s 153A, it is submitted that as a matter of discretion it should be a pre-condition to annulment pursuant to s 153B. It is said that if this were not done the respondent would have a prima facie entitlement to a sequestration order so that it would be futile to grant annulment in such circumstances. Submissions for the appellant contested this issue. Given that I consider the matter should be remitted to the Federal Magistrate for findings on the material facts to which I have referred, that issue would properly be argued before him and so should not be determined now.

33 I note that neither the grounds of appeal or the way in which the appeal was argued raised any issue on the appeal concerning the respondent's conduct to the appellant or the application of s 99 of the Act.

Conclusion

34 For these reasons I consider the appeal should be allowed and the matter remitted to the Federal Magistrate for determination in accordance with the law.

I certify that the preceding thirty- four (34) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice RD Nicholson.

Associate:

Dated: 28 February 2003

Counsel for the Appellant:	Mr AO Karstaedt
Solicitor for the Appellant:	Leask & Co
Counsel for the Respondent:	Mr F Carles
Solicitor for the Respondent:	Carles Solicitors
Date of Hearing:	12 August 2002
Date of Judgment:	28 February 2003