Wilson v Official Trustee in Bankruptcy

REASONS FOR JUDGMENT 1 On 23 April 1996, Ernest Arthur Wilson was made bankrupt by an order of this Court. On 7 May 1992 a proof of debt was lodged in the bankruptcy on behalf of the second respondent, the NSW Bookmakers Co-operative Society Limited ("the Society"). That proof of debt claimed a sum of $11,700.00 The particulars furnished in the attachment to the proof of debt were as follows: "Judgment obtained in proceedings No 2164 of 1981 in the District Court of New South Wales at Newcastle by William Andrew Dederer for the sum of $9,750.00 with interest of $1,950.00 which judgment debt was assigned to NSW Bookmakers Co-operative Society Limited on 1 January 1986." For reasons that will appear below the date of that assignment appears to be erroneous. The trustee admitted the proof of debt. 2 Mr Wilson recently died. Prior to his death, however, an application was brought under section 99 of the Bankruptcy Act 1966 (Cth)for an order that the proof of debt be expunged. To deal with the contentions that have been advanced on behalf of the bankrupt's estate it is necessary to recount some of the circumstances that led to the alleged indebtedness. 3 On 4 June 1982, judgment was entered against Mr Wilson in favour of Mr Andrew Dederer in the District Court at Newcastle in the sum of $11,100.00 and costs of $225.00. The certificate of judgment dated 26 October 1982 records that on 8 March 1982 $1,350.00 had been paid in respect of the judgment. That seems somewhat curious since the judgment is said to have been entered on 4 June 1982. The judgment arose out of wagering transactions alleged to have been entered into between Messrs Wilson and Dederer. 4 Mr Dederer was apparently a registered bookmaker and claimed the amount allegedly owing was the result of a wager placed with him by Mr Wilson that was lost. There was apparently a dispute as to whether or not the wager was in fact placed as alleged. That matter appears to have been resolved one way or another in the District Court proceedings. 5 It appears that Mr Dederer himself got into financial difficulties. He was a member of the Society and one of the arrangements which existed between members of the Society and the Society was that the Society, in effect, guaranteed payment of debts of its members incurred as a result of bookmaking activities. It appears that the Society made payments on behalf of Mr Dederer as a result of which Mr Dederer became indebted to the Society. 6 On 30 April 1985 a deed was entered into between Mr Dederer and the Society. The deed recited that the Society had obtained judgment against Mr Dederer in the sum of $76,369.74, that a bankruptcy petition had been presented to the Court by the Society and that the debtor had proposed an arrangement to the Society for payment of his indebtedness. By the deed, Mr Dederer agreed to pay instalments of the debt and the Society agreed to seek leave to withdraw its petition. 7 A further instrument bearing the date 30 April 1985 is in evidence. That instrument is expressed to be a deed of assignment between Mr Dederer as assignor and the Society as assignee. The deed evidences assignment by Mr Dederer to the Society of all of Mr Dederer's right, title and interest in the several debts set out in the schedule: "absolutely to call in collect and compel payment thereof and out of the moneys to be so realised in the first place to pay the costs charges and expenses incurred in realisation and in the next place to retain and apply a reduction of moneys then due by the assignor to the assignee." One of the debts described in the schedule was as follows: "Richard Wilson $9,975.00 together with interest from 19.8.82" 8 The reference to August 1982 appears to be a mistake. That date appears to have no relevance to the arrangements between Mr Dederer and Mr Wilson. It may be that it can be explained by reference to another date in the same schedule. 9 On 11 June 1985 the solicitors for the Society, Marshall Marks Dezarnaulds & Jones, wrote to Mr Wilson. The letter was addressed to him at 240 Main Street, Wolli, 2462. It is common ground that that was not the address of Mr Wilson at the time. His address was apparently 140 Main Street, Wolli. By the letter the solicitors relevantly said as follows: "We act on behalf of NSW Bookmakers Co-Operative Society Limited. Our client has been advised by Mr W. A. Dederer that you are indebted to him in the sum of $11,692.00 together with interest payable pursuant to a court judgment. Such debt has been assigned to our client and we now enclose a notice signed by Mr Dederer in respect of same." 10 There was enclosed with that letter a document in the following terms: "NOTICE To: Ernest Arthur Wilson, I, William Andrew Dederer hereby give you notice that by an assignment dated 30th April, 1985 I have assigned absolutely to the NSW Bookmakers Co-Operative Society Limited a debt or some [sic] of $11,692.00 plus interest due and owing by you to me and I require you to pay the same to the N.S.W. Bookmakers Co-Operative Society Limited accordingly. DATED this 30th day of April, 1985. [Signed: W.A. Dederer.]" 11 There is evidence before me from Mr Wilson, in the form of an affidavit sworn before his death, in which he denied ever having received the letter and the notice. There is also evidence before me that the letter was never returned to the sender. In the view which I have formed it is unnecessary for me to make a firm finding as to whether or not the letter was ever received by Mr Wilson. 12 Following the making of the sequestration order on 23 April 1986, Mr Wilson was apparently served with a bankruptcy notice dated 7 March 1986 issued on behalf of the Society. It appears that the Society thereafter became aware of the earlier sequestration order and on 10 July 1986 the Society's solicitors wrote to the Official Receiver's office saying as follows: "RE: ERNEST ARTHUR WILSON - NO. 426 OF 1986 DEDERER AND N.S.W. BOOKMAERS CO-OPERATIVE SOCIETY LIMITED We act in connection with the recovery of moneys due by the abovenamed debtor pursuant to a judgment of the District Court of New South Wales made on 8th September, 1983 in favour of Andrew Dederer. A Proof of Debt will, in due course, be lodged in the bankruptcy. In the meantime, we should be pleased if you would note the interest of our client and advise us if it is anticipated that a dividend will be paid in the bankruptcy. We look forward to hearing from you at your earliest convenience." 13 By letter of 28 July 1986, the Official Receiver's office acknowledged the communication from the Society's solicitors, noted their interest, and said that it appeared that a dividend would be paid to creditors at a later date. 14 On 15 July 1988, the Official Receiver dispatched communications to prospective creditors of Mr Wilson. Communications were sent both to the Society and to Mr Dederer care of the Society's solicitors. The notice was expressed to be "notice to creditors of intention to declare dividend", and was relevantly in the following terms: "It appears that you may be a creditor of the estate but you have not lodged any proof of debt. If you wish your debt to be considered for inclusion in this dividend you must lodge your proof of debt with me on or before 12 AUGUST 1988." The notice specified the address for return of completed proofs of debt. 15 On 11 August 1988, the Society's solicitors wrote to the Official Receiver referring to the notice of intention to declare a dividend in the Estate of Mr Wilson and enclosed a proof of debt "on behalf of our client". The heading was "NSW Bookmakers Co-operative Society Limited - Ernest Arthur Wilson". Enclosed with that letter was a proof of debt dated 8 August 1988. The proof of debt was in the name of Andrew Dederer, care of the Society's solicitors. It was signed by one Ian Buxton. The proof of debt claimed a sum of $16,494.57 "in accordance with the particulars specified in the judgment annexed hereto". The particulars in the proof of debt for the nature of the debt were left blank. The copy of the proof of debt that is in evidence does not have a judgment attached. 16 On 16 August 1988, the Official Receiver wrote to Mr Wilson enclosing amongst other things copy of the proof of debt lodged in the name of Andrew Dederer. The letter contained the following: "Would you also provide me with your comments in respect of the proof of debt lodged by Mr. Dederer, as I noted that this creditor is not disclosed in your statement of affairs." 17 In a draft affidavit prepared by Mr Wilson prior to his death, which was admitted without objection, Mr Wilson said that shortly after receiving the letter from the Official Trustee, he located Mr Dederer at the races and had a conversation as follows: WILSON: "Andy, I want to talk to you about the proof of debt you have put in against me." DEDERER: "Dick, I can't talk to you now but I am going to Sydney Airport to-morrow [sic] as I am going overseas. I am importing furniture. I will talk to you there." 18 Subsequently Mr Wilson met Mr Dederer, and a further conversation took place as follows: WILSON: "Andy, you know I do not owe you this money, I would have said if that had been the horse I backed. I have been betting with you for years." DEDERER: "I'm in debt myself, the NSW Bookmakers Co-Operative has got a judgment against me." WILSON: "I don't know if you put the wrong horse down as a bet I had by accident or on purpose. I don't care as I can not be sure. I told you from the start I won't be paying you as I do not owe what you have claimed and I have paid what I owed as I said I would." DEDERER: "Dick, I may have made a mistake and I will send the trustee a letter and withdraw the claim." 19 On 17 January 1989, the Official Receiver received an undated communication purportedly signed by Mr Dederer saying as follows: "I Andy Dederer make no further claim on the Estate of Ernest Arthur Wilson. The claim of $16,496 has been settled." At the foot of the proof of debt dated 8 August 1988, the notation in handwriting "withdrawn" appears. 20 On 23 April 1989, Mr Wilson was discharged from bankruptcy. However, the administration of his estate continued. There was litigation between Mr Wilson and the Official Trustee, the details of which, as I apprehend the situation, are not presently relevant except insofar as they may explain why the next relevant event in the narrative was in 1992. 21 On 10 April 1992, the trustee forwarded a further notice to creditors of his intention to declare a dividend. In particular, a copy of the notice was sent to the Society care of its solicitors. It was in the following form: "Take notice that the Official Receiver… intends to declare a dividend in this matter. It appears you may be a creditor of the estate but you have not lodged any proof of debt. If you wish your debt to be considered for inclusion in this dividend you must lodge your proof of debt on or before the 8th May 1992." 22 On 7 May 1992, the Society's solicitors wrote to the Official Receiver referring to the notice to creditors of intention to declare dividend and enclosing a proof of debt "on behalf of our client, NSW Bookmakers Co-operative Society Limited". The proof of debt enclosed was that to which I have already made reference. 23 On 12 May 1992, the Official Receiver wrote to the Society's solicitors referring to the proof and saying as follows: "This debt was not disclosed by the bankrupt in his statement of affairs. Accordingly, I request that you kindly substantiate your client's claim by providing copies of the judgment and assignment referred to in the statement of account." 24 The Society's solicitors responded on 13 May 1992 saying that they "would be in touch with you soon regarding the documents requested". However it was not until 21 August 1992 that the Society's solicitors wrote to the Official Receiver enclosing the following documents: · Certificate of Judgment in proceedings 2164 of 1981 in the District Court of NSW; · Copy of the Deed of Assignment dated 30 April 1985; and · Copy of the Notice of Assignment alleged to have been given to Mr Wilson.