Macks v House

REASONS FOR JUDGMENT 1 On 2 August 1999, the estates of John Charles Wyndham House and his wife, Patricia Irene House, were sequestrated. The applicant in these proceedings, Peter Ivan Macks ( "the trustee") was appointed the trustee in bankruptcy of the two estates on the same date. Sequestration occurred as a result of the lodgement of a creditor's petition by the Deputy Commissioner of Taxation on 13 November 1998. I will refer to the bankrupts in these reasons as "Wyndham" and "Patricia". John Augustus Willis House and Betty Olive House are the parents of Wyndham and James House is Wyndham's brother. They are the three respondents to these proceedings. I will sometimes refer to them as "John", "Betty" and "Jamie". The trustee seeks the recovery of certain moneys which were received by John and Betty and which it is alleged were property that was divisible among the creditors of Wyndham and Patricia. Separately, the trustee claims that an amount of $10,000 was paid by Wyndham and Patricia to Jamie when the bankrupts were insolvent and when Jamie allegedly had notice of their insolvency; he seeks the recovery of that amount. 2 The resolution of the disputed issues in this litigation has been made the more difficult because the respondents were unrepresented and were clearly unable to comprehend the basis upon which the trustee was entitled to bring his claims against them. The trial proceeded in a most haphazard fashion due to the inability of John, Betty and Wyndham to differentiate between making submissions and giving evidence. [When the time came to make submissions, I had permitted Wyndham, at the request of his parents, to make submissions on their behalf although there were a few occasions when John interjected]. The difficulties in the trial were further compounded as a result of the trustee having sued John and Betty for sums of money well in excess of the amounts to which, at the highest, he might have been entitled. I remain indebted, however, to Mr Rochow, counsel for the trustee, for his patience and his willingness to allow material to be placed before the Court in the hope that, by one means or another, I would become apprised of all relevant facts.

the sale 3 The litigation between the trustee and the respondents has occurred as a result of the sale in 1999 of certain property at Tanunda, South Australia. The identification of the property that was the subject of the sale and the identity of the beneficial owners of that property is at the core of the dispute between the trustee and John and Betty. In brief, John and Betty claimed that only real estate was sold, that they were the registered proprietors of that real estate and that they were and are entitled to the net proceeds of sale. They did, in fact, receive the whole of the sale proceeds. On the other hand, the trustee has alleged that, notwithstanding the fact that the real estate was registered in the names of John and Betty only, the real estate was an asset of a partnership in which John, Betty, Wyndham and Patricia were partners and that the assets that were sold in 1999 included personal assets which, together with the real estate, were the assets of the partnership. The trustee claims that the bankrupt estates of Wyndham and Patricia are entitled to their share in the disposal of the partnership assets. 4 Prior to March 1999, a bed and breakfast and restaurant business had been carried on under the name "Lanzerac Country Estate" out of premises that are described as Lot 5 Menge Street Tanunda. There was some evidence that suggested that the restaurant section of the business might have closed down in 1996 but that the bed and breakfast section was still being operated in 1999 by John and Betty. Wyndham, in making submissions on behalf of his parents, could not, as I have said, differentiate between submissions and the giving of evidence from the bar table. One statement that he made from the bar table was to the effect that he and his wife had left the partnership of Lanzerac Country Estate in 1996 and had set up their own business in Tanunda called "Lanzerac Restaurant". He said that they also operated a bed and breakfast business called "Historic Court Barn". There were references to these two names elsewhere in the papers that were tendered in evidence during the trial. However, I know nothing further about the operations of either of those businesses. 5 In response to the originating proceedings that were instituted by the trustee, John filed, on 21 March 2002, a Notice of his intention to oppose the trustee's application, claiming that it was filed on behalf of himself and Betty. That notice was accompanied by an affidavit that John had sworn on the preceding day, 20 March. In it, he made it clear that he was claiming that no business had been sold and that the proceeds of sale were due only to him and his wife to the exclusion of Wyndham and Patricia. He added, somewhat significantly in view of what Wyndham had said from the bar table that: "In mid 1996 my younger son, Wyndham and his wife Patricia started a business in leasehold premises. It was nothing to do with Lanzerac Country Estate and about 1˝ km distant. The applicant's claim is INCOMPREHENSIBLE."

I infer that the business to which John referred was either "Lanzerac Restaurant" or "Historic Court Barn" or, perhaps, both.

6 The business name extract ("the extract"), as obtained from the ASIC, showed that the business name "Lanzerac Country Estate" was registered as from 12 September 1995 in the three names of Wyndham and his parents John and Betty; Patricia was not recorded as a part owner of the business name. Other information that was recorded in the extract revealed that the nature of the business was "Restaurant/Bed & Breakfast Accommodation/Wine Sales", that the only place of business was Menge Road, Tanunda and that as from 19 March 1999, the persons who were then carrying on the business were David Gordon West and Valerie Claire West, both of 21 Braunack Avenue Tanunda. 7 Before considering the trustee's claims against the respondents, it is first necessary to make findings about the identity of the assets that were sold in 1999. That inquiry starts four months earlier in November 1998. 8 On 20 November 1998, John and Betty entered into a contract ("the contract") with Lesley Ann Johns for the sale of Lot 5 Menge Road Tanunda. Lesley Anne Johns later nominated herself and Garry Ross Johns as the purchasers and, later again, Mr and Mrs Johns assigned their interest as purchasers under the contract to David Gordon West and Valerie Claire West. The memorandum of transfer in respect of the land in Certificate of Title Register Book 5223 Folio 19 (which was the title reference for the land that was the subject of the contract) recorded the following information: · the transferors (and hence the registered proprietors) were John and Betty; · the consideration was $476,000; · the transferees were David Gordon West and Valerie Claire West as to one undivided moiety and Michael Paul Russell as to the remaining one undivided moiety; (the Wests presumably executed an assignment (which was not tendered) of a half interest in the purchase in favour of Russell).

the partnership 9 It is appropriate, at this stage to examine the contents of the contract; included in the sale were the chattels that were listed in its Annexure "B". That list of seven pages referred to items of furniture and fittings that one would expect to find in bedrooms, bathrooms, kitchens and bars. In other words, they were chattels that would be consistent with a "walk-in - walk-out" sale of a bed and breakfast business and, perhaps, a bed and breakfast and restaurant business. 10 There were several aspects of the contract that made it clear that what was being sold, in addition to the land, was a business. That is gleaned from the provisions that were described as Annexure "A" to the contract. In the first place, there was a reference to the transfer of the existing liquor licence. Secondly, there was a reference to "future bookings after the date of settlement" and deposits for them being passed over to the purchasers. Thirdly the "vendor" (that being only John and Betty) accepted a restraint of trade; they undertook not to conduct "any business of a like nature within a radius of 25 kilometres from the said premises for a period of 5 years …". Fourthly, John and Betty, as vendors, offered seven days assistance to the purchasers, free of charge, so that they could introduce the purchasers to "customers and trade representatives". Fifthly, in addition to the references to the sale of a business in the contract of sale, summaries of trading statements for the last three financial years were prepared in the names of John and Betty, signed by Betty and receipted by Mr and Mrs Johns. Although there was no apportionment of the sale price of $476,000 between land, chattels and goodwill, this detailed information puts to rest any suggestion as submitted by John in one of his letters to the Court that only real estate had been sold. 11 The unaudited financial accounts for the financial year that ended on 30 June 1998 for the business that was described as "Lanzerac Country Estate" were prepared by Mick Hislop and Associates of Tanunda; they included a disclaimer which, in part, said: "… we express no opinion on whether they present a true and fair view of the position of the business or of the year's trading and no warranty of accuracy or reliability is given." 12 The Trading Statement and Profit and Loss Account showed profit on trading (together with interest of $3 received) of $99,368, less expenses incurred of $94,184, leaving a net profit of $5,184. That was apportioned in the Balance Sheet in equal quarter shares to Wyndham and Patricia and Wyndham's parents, John and Betty. The Balance Sheet of "Lanzerac Country Estate", as at 30 June 1998, was prepared in such a manner that "Total Proprietorship" was said to be $71,615 and the partners' capital accounts were recorded as follows: Wyndham $44,903 Patricia $44,712 John ($28,664) Betty $10,663 $71,615 Current liabilities were said to exceed current assets by $1,116 and fixed assets were listed as Building and Improvements $298,899 (less provision for depreciation) Plant and Equipment $ 16,787 (less provision for depreciation) Motor Vehicles $ 1,716 (less provision for depreciation) Floor coverings $ 169 (less provision for depreciation) Less working capital ($ 1,116) $316,455 From this must be deducted non-current liabilities (being four loans from the Adelaide Bank)

$244,840 $ 71,615

Finally, it remains to mention that the taxation return for the partnership of "Lanzerac Country Estate" for the financial year ending on 30 June 1998 was signed by Wyndham and Patricia on 10 December 1998.

The Settlement 13 On 11 March 1999, Messrs Millard McClurg, Registered Conveyancers, compiled and issued a "Statement" that was addressed to John and Betty in the following fashion: "Mr JAW & Mrs BO House Menge Street Tanunda 5352"

"Sale of Property Lot 5 Menge St, Tanunda SA SETTLEMENT DATE: 19 March 1999"

The Statement made no reference to a business or to the sale of a business nor did it make any reference to Wyndham or Patricia. It commenced with the entry "Sale Price" and recorded it as being $472,586 whereas, as I have earlier noted, the sale price as stated in the contract was $476,000; the reason for that discrepancy was not apparent from the evidence. The entries in the Statement were as follows:

" DR. CR. Sale Price 472,587.00 Agent's Commission 17,094.00 Kies Real Estate, Gawler Conveyancer's fee 525.00 Total adjustments, see attached 403.56 Payment of Council rates 617.50 The Barossa Council 2,483.95 Payment of Water Rates Discharge of Mortgages 242,295.33 1st: Adelaide Bank Ltd 80.00 2nd: Adelaide Bank Ltd 3rd: Adelaide Bank Ltd Registration of Discharge of Mortgage Amount held pending water meter reading 1,000.00 Disbursements to cover Statutory Searches and Government Cheque charges 430.90 Financial Institutions Duty State tax 18.32 Amount payable to Australian Taxation Office 10,909.97 Balance due to you at settlement 197,535.59 $472,990.56 $472,990.56 E & O E 11/03/99"

the claim of $89,615 14 The Statement of Claim that was filed in these proceedings pleaded, inferentially, that the bankrupts, Wyndham and Patricia, had participated in the sale of "a bed and breakfast facility" but that the net proceeds of the sale of that business had been paid to Wyndham's parents, John and Betty. The relevant extract from the Statement of Claim is as follows: "5. At all material times the Bankrupts [Wyndham and Patricia] conducted a partnership with the first respondent [John] known as Lanzarac Country Estate ("the Business"). 6. …. 7. In or about November 1998 the Business was sold and the whole of the net proceeds of $197,535.59 were paid exclusively to the first and second respondents [John and Betty] ("the Transfer"). 8. The Bankrupts [Wyndham and Patricia] had an interest in the net assets of the Business in the sum of $44,903.00 and $44,712.00 respectively, totalling $89,615.00." 15 By virtue of John and Betty having received the whole of the net proceeds of the sale, the trustee has alleged, pursuant to s 116 of the Bankruptcy Act 1966 (Cth) ("the Act"), that the amount of $89,615 is property that is divisible among the creditors of Wyndham and Patricia; he seeks an order pursuant to subs 129(4) of the Act that John and Betty pay him that sum.

the claim of $40,000 16 There is yet another transaction involving the bankrupts and John and Betty that has been attacked by the trustee. It was alleged in par 21 of the Statement of Claim that on 7 May 1999, the sum of $40,000 was transferred from a bank account that was in the joint names of the bankrupts, trading as "Historic Court Barn", to another account in the joint names of bankrupts that was described as their "home loan account". It was then alleged that on 7 June 1999, a month later: "… $40,000 was withdrawn from the Bankrupts home loan account and paid to … [John and Betty]."

The trustee alleged that the payment of the $40,000 was made by the bankrupts at a time when they were insolvent and when John and Betty had actual or constructive notice of their insolvency. The trustee has claimed that the payment of $40,000 was a fraudulent disposition of property. In the alternative, the trustee has alleged that the payment of the $40,000 comprised a transfer of the bankrupts' property that had the effect of conferring on John and Betty a preference, priority or advantage over the other creditors of the bankrupts. The trustee pleaded that the payment of the $40,000 was void against the trustee either pursuant to the provisions of subs 121(1) or sub s 122(1) of the Act.

17 It was submitted that the trustee had only ever intended to sue John and Betty for the $89,615 and that the additional claim in respect of $40,000 had intended to be a plea in the alternative. That submission does not, however, rest easily with the contents of the statement of claim. What is more, as recently as three weeks or so before trial, the solicitors for the trustee wrote Betty on 15 August 2002 pursuing the claim for $89,615 and the claim for $40,000, offering however "to accept the sum of $100,000 inclusive of costs in settlement" and advising that: "My client reserves the right to tender this letter in court as evidence of their offer to settle and as to the question of costs." Far from achieving a settlement, the solicitors' letter only made John and Betty more intractable in their refusal to pay anything. 18 For reasons which were not made clear, the trustee had earlier failed to exercise his obvious right to examine any of the respondents. If that exercise had been carried out, the information that eventually came to light in these proceedings would have become apparent to the trustee and his solicitors and, perhaps, the quantification of the trustees claim might have been corrected. 19 The circumstances dealing with this sum of $40,000, started with a payment of $70,000. On 30 March 1999, $70,000 was deposited to credit of "Historic Court-Barn" with the Westpac Banking Corporation (Tanunda Branch). The surname of the party who paid in the $70,000 was "House" but the initials are indecipherable and such evidence as was given during the course of the trial did not resolve the issue. The reverse side of the deposit slip identified the drawer of the cheque as "BO JCW & JAW House". However, it was common ground that John and Betty advanced Wyndham and Patricia $70,000 out of which Wyndham and Patricia ultimately paid Jamie and his wife $10,000 and repaid John and Betty $40,000. The trustee has not led any evidence to explain what happened to the remaining $20,000. The case for John and Betty is that the $70,000 was advanced for a two-fold purpose: to assist in meeting the costs of some renovations and to assist in resolving Wyndham and Patricia's problems with the Australian Taxation Office ("the ATO"). I know nothing about the renovations but I do know that the negotiations with the ATO came to nought and that Wyndham and Patricia repaid his parents the $40,000 that was intended for the ATO. 20 Wyndham and Patricia confirmed this. They wrote a letter to the trustee's office on 6 September 1999 in response to a letter from the trustee dated 19 August 1999. In it they said that John and Betty had deposited $70,000 into the bankrupts' account to assist in meeting some of the costs in renovating the "Nitschke Road property" and "secondly to help us with the tax debt". They then wrote: "When no offers for payment of the tax debt were accepted by ATO we returned their money to them." 21 The ATO wrote the trustee on 18 November 1999 in response to a request for information. In the course of giving a summary of some approaches that had been made by John to the ATO with respect to the outstanding tax that was owing by Wyndham and Patricia, the author of the letter asserted that: "We do not consider that an offer was actually made."

"During a telephone conversation with Mr House Senior he advised that he would be in a position to pay $40,000 towards Wyndham and Patricia House's taxation debts once the family property, Lanzerac Estate was sold." 22 In my opinion that letter affords some confirmation of the proposition that, in advancing the $70,000 John and Betty were impressing their money with a trust that it was to be used for a specific purpose. Indeed, the trustee's solicitors wrote John on 14 September 2001 acknowledging that he [John] had been involved in negotiations with the ATO on behalf of Wyndham and Patricia. In my opinion that $40,000 was clearly impressed with a trust and when the object of the trust failed it was not only appropriate, but it was also lawful for Wyndham and Patricia to refund the $40,000 to John and Betty.

the claim of $10,000 23 I turn next to consider the trustee's claim for $10,000 against Jamie. The trustee alleged that on 4 May 1999, Wyndham and Patricia paid Jamie the sum of $10,000 at a time when they were insolvent and when Jamie had actual or constructive notice of their insolvency. 24 Jamie did not appear. Instead, he wrote a letter to the Court advising that because of his wife's visit to her mother interstate, he had to stay at home so that he could mind their children. He did, however, write the Court, claiming that in or about June 1995, he lent his parents, John and Betty, $10,000 and the $10,000 that he received from Wyndham and Patricia in 1999 was to satisfy his parents' debt to him. If that were to be correct, it would mean that the trustee does not have a claim against Jamie but may have another claim (for $10,000) against John and Betty. In support of his claim that he had lent his parents $10,000, Jamie forwarded a photocopy of a "Bank Interchange and Transfer System (BITS) Requisition". It identified the remitter's name and address as Jamie House of 52 Kingsley Street Byron Bay; it identified the account number to which the money was to be credited and it named the bank as "Westpac" at Tanunda but it merely said that the beneficiary of the remittance was "House". No initials were given and there is no evidence that would identify the customer who possessed the account number that was listed in the BITS requisition. 25 In his letter to the solicitors for the trustee, in which he enclosed a copy of the BITS requisition, Jamie wrote: "Any agreement between me and my parents was verbal only and this [ie the BITS registration] is the only record I have. I repeat to you that my parents agreed to repay me on the sale of their property which they did. I had no knowledge of my brother's financial situation at any stage of this loan to my parents."

In a letter to the Court dated 17 June 2002, John, writing in the singular person, confirmed that Jamie "lent me ten thousand dollars which I repaid to him when I sold my property".

26 The matter of the $10,000 can be disposed of quite summarily. The only direct evidence of relevance is that Wyndham and Patricia were instrumental in remitting $10,000 to Jamie and his wife. Out of that transaction - and nothing more - the trustee has assumed that the payment is, for one reason or another, recoverable so that it forms part of the bankrupts' estates and becomes money that is divisible among their creditors. That is not enough. The trustee has to do more than prove that the bankrupts made a payment of money. In this case there is correspondence from John and Jamie that was admitted into evidence that claimed that Jamie had never had any financial dealings with his brother, Wyndham, and that the $10,000 was paid by Wyndham and Patricia, at the request of John and Betty, to satisfy a debt that they (John and Betty) owed to Jamie. That assertion may be true - it may not. I have no way of knowing. It could have been tested if the trustee had chosen to examine John, Betty and Jamie but he did not take that course of action. It is necessary for the trustee to prove either that the $10,000 was a preferential payment to a creditor, or that it was a fraudulent attempt to defeat creditors. Proof that a payment was made is not sufficient. The trustee bears the onus of satisfying the Court, on the balance of probabilities, that he, as the trustee of the bankrupt estates, is entitled to the relief that has been claimed: s 34A of the Act: see also Richardson v The Commercial Banking Co of Sydney Ltd (1951-1952) 85 CLR 110 at 135 per Dixon, Williams and Fullagar JJ where their Honours said, in the context of a claim for preference payments under s 95 of the Bankruptcy Act 1924 (Cth), that: "The burden of showing that a preference resulted is upon the Official Receiver." 27 Perhaps the $10,000, being moneys that were paid by Wyndham and Patricia for and on behalf of John and Betty were originally intended to meet some of the costs of renovations and were also impressed with a trust, but for a different object: or perhaps it was a preferential payment that was made on behalf of two creditors (i.e. John and Betty). But it does not matter which is the correct interpretation. If it was a trust, the money is not recoverable by the trustee in bankruptcy; if it was a preferential payment then the trustee in bankruptcy should have sued either John or John and Betty jointly - whoever happened to be the creditor or creditors who benefited from the preferential payment. Either way the trustee's claim against Jamie for the payment of the sum of $10,000 must be dismissed.

the claim(s) against john and betty 28 The trustee has advanced his claims against John and Betty on a series of assumptions. On the material before me I have no way of knowing, as a matter of probability, whether those assumptions are accurate. Indeed, it is more likely than not that they are inaccurate. Bearing in mind that final settlement with respect to the sale of the real estate and the business did not occur until March 1999, the first assumption that the trustee made was that the partnership accounts as at 30 June 1998, over eight months earlier, accurately reflected the financial interests of each of the four partners at the date of settlement. The chances of that assumption being correct are extremely unlikely. For example, the sale price of the real estate and chattels was $472,587 whereas assets of a like description were shown in the balance sheet at $298,899 and $16,787 - a total of $315,686. I have had to say "assets of a like description" because there was no evidence that each item of plant, as listed in the depreciation schedule in the partnership accounts, was included in the sale. I do not know whether the trustee has made that assumption. The fact that a set of partnership accounts, as at March 1999, has not been prepared suggests, once more, that the trustee has assumed that no activity took place in the business in that intervening eight months. That would be most unlikely. The reference to future bookings and the commitment from John and Betty that they would give the purchasers seven days of their time, free of charge, to introduce the purchasers to customers and trade representatives indicates that the business was still operational. What then happened in that eight months? Which of the partners drew money out of the partnership? Which of the partners contributed money to the partnership? What happened to the partnership assets that were not included in the sale? There were small sums of cash on hand and in the bank as at 30 June 1998. There was also a reference to motor vehicles. What happened to them and what was their value as at the date of settlement? 29 These unanswered questions satisfy me that the amounts that the trustee has claimed from John and Betty are not accurate. In fact, having regard to the actual sale price, it might even be that an accurate set of partnership accounts as at the date of settlement might have shown that Wyndham's and Patricia's capital accounts were larger than the amounts shown in the accounts for 30 June 1998. But that is no answer to the trustee's inability to establish the correct amount that was owing by John and Betty to the bankrupt estates of Wyndham and Patricia. 30 The claims that the trustee has made are for liquidated sums of $44,903 and $44,712. It was not necessary, for the trustee to succeed, to prove that these were the exact amounts to which the bankrupt estates were entitled; the evidence may have established different figures and judgment might have been obtained in respect of those figures. But the evidence in the current proceedings does not achieve that object. There is an obvious case supporting the argument that John and Betty received more than their fair shares from the partnership assets but I do not know the amount of the excesses. 31 Wyndham, when making final submissions on behalf of his parents, attempted to make statements from the bar table to the effect that the financial accounts for the partnership for the year ended 30 June 1998 did not reflect the true position. It is true that accounting entries can only be evidence; they cannot of themselves affect the true nature of the transactions that they were intended to record: see Temples Wholesale Flower Supplies Pty Ltd v Commissioner of Taxation (1991) 29 FCR 93 at 100. But the documentary evidence that was placed before the Court by the parties did nothing to cause me to doubt the accuracy of the 1998 accounts and as John and Betty declined to give evidence I see no reason why I should not proceed to make my findings upon the premise that the 1998 accounts correctly recorded the financial circumstances of the four partners as at that date. 32 There was a huge increase in the sale price of the land and the chattels over their book values; that points, prima facie, to everyone's capital accounts being substantially more than the figures that were disclosed in the 30 June 1998 accounts. Several assets, such as motor vehicles, floor coverings, cash in the bank and disposition of profits (if any) in the period between the end of the financial year and the date of sale were not accounted for but even if Wyndham and Patricia were to have received the total value of those assets, they were of relatively insignificant sums when compared with the increase in values of the real estate and chattels. I have come to the conclusion that it is appropriate to find, on the balance of probabilities, that Wyndham's and Patricia's capital accounts, as at the date of the settlement, as a consequence of the sale of the real estate and business, were sums in excess of those shown to their credit in the 30 June 1998 accounts. On that basis, I am prepared to examine the financial transactions that have taken place between the bankrupts and John and Betty upon the premise that, as at settlement, the values of the capital accounts of Wyndham and Patricia in the partnership were not less than the sums standing to the credit of their respective accounts in the books of the partnership as at 30 June 1998.

The quantification of the claim 33 The confusion about the quantification of the trustee's claim against John and Betty has been exacerbated as a result of the trustee shifting his ground in correspondence with John. I have already referred to the claim for $89,615; then there was the claim for that amount plus the additional $40,000 with the offer to settle for $100,000. However, on 14 September 2001, yet a different claim was made. The solicitors for the trustee wrote John on that date claiming $59,615. The letter made the following points: · the whole of the net proceeds of the sale of the land and business, amounting to $197,535.59 had been paid to John and Betty; · the values of Wyndham's and Patricia's interests in the partnership were $44,903 and $44,712 respectively - a total of $89,615; · John and Betty had withdrawn $70,000 from their joint passbook account; · the $70,000 was deposited in the joint account of Wyndham and Patricia trading as "Historic Court Barn"; · "By reason of the Transfer you hold the remaining proceeds of $19,615 from the sale of the Business on trust for the Bankrupts" (emphasis added);

· on 7 May 1999, $40,000 was transferred from the "Historic Court Barn" account to the bankrupts' home loan account and on 7 June 1999, $40,000 was withdrawn from the "Home Loan" account and paid to John and Betty;

· the solicitors demanded, in the name of the trustee, payments of $19,615 and $40,000, a total of $59,615. 34 Subject to one important qualification, the approach that was set out in that letter seems more realistic than the trustee's claim for $89,615 and his subsequent allegation that the amount owing by John and Betty was not just $89,615 but that sum plus a further $40,000. The qualification is the entry in the settlement statement of: "amount payable to Australian Taxation Office $10,909.97." 35 No evidence was lead to explain why that amount was withheld from the proceeds of sale and on whose behalf it was paid to the ATO. However, there was evidence that Wyndham and Patricia were indebted to the ATO and that they did not have sufficient funds to discharge their debt. On the other hand, there was no evidence that John or Betty were indebted to the ATO. Once more, that was a subject that could have been the subject of investigation if the parties had been examined. On balance, I am prepared to infer that the sum of $10,909.97 was paid to the ATO on behalf of Wyndham and Patricia. That being the case, I quantify the trustee's claim against John and Betty in the sum of $48,705.03, being: · the amount claimed in the letter of 14 September 2001 from the trustee's solicitors $ 59,615.00 · less payment to ATO $ 10,909.97 $ 48,705.03 36 As the trustee has not proffered evidence to the contrary, I have proceeded upon the premise that the judgment is to be in favour of the joint estate of the bankrupt. In considering the trustee's claim for interest and costs, I have had regard to the following matters: · the trustee and his solicitors failed repeatedly to quantify the claim against Joan and Betty accurately; · in offering to comprise the claim by accepting $100,000, the trustee severely exaggerated the quantum of his claim; · the trustee did not attempt the preparation of a set of partnership accounts as at the date of the sale of the property and business; · the trustee did not use the facility of examinations on oath in an attempt to arrive at a correct statement of the financial affairs of the bankrupts and John and Betty. · the trustee failed in his claim for $10,000 against Jamie. 37 In the final analysis, the trustee failed in his claim against Jamie and only recovered $48,705 out of a maximum claim of $129,615 - or approximately thirty per cent of his claim against John and Betty. I am compelled to say that the trustee and his solicitors failed to prepare and present the trustee's claims with clarity. I do not include Mr Rochow in that criticism as he only came into the matter shortly before trial. This was not a complex matter. It could have been unravelled by the trustee relatively quickly and a set of partnership accounts, based on sale prices would have easily quantified the correct size of the trustee's claim. In all the circumstances, I decline to award any interest on the judgment debt. In view of the unsatisfactory manner in which this claim was prepared and presented, I consider that it would be appropriate to deny the trustee his costs. There will be an order accordingly. I certify that the preceding thirty-seven (37) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice O'Loughlin.

Associate: Dated: 11 December 2002 Counsel for the Applicant: Mr N Rochow

Solicitor for the Applicant: Purcell Lancione Cureton

Date of Hearing: 9 September 2002

Date of Judgment: 11 December 2002