FEDERAL COURT OF AUSTRALIA

Christou v Demandem Holdings Pty Ltd [2012] FCA 695

THE COURT ORDERS THAT:

1.    The appeal be dismissed.

2.    The appellant pay the respondents’ costs to be taxed, if not agreed.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

Summary

1    On 24 August 2011, the Federal Magistrates Court at Perth ordered that the estate of the appellant be sequestrated under the Bankruptcy Act 1966 (Cth).

2    The sequestration order followed a series of actions between the appellant and his former partners in an accounting practice and entities (which included the respondents) associated with each of them. The respondents’ creditors’ petition for the sequestration order relied on unpaid court costs ordered in their favour against the appellant in an earlier action in the Supreme Court of Western Australia.

3    The appellant opposed the bankruptcy petition on the basis that he was able to pay his debts and also because there was other sufficient cause for not making the sequestration order.

4    At the conclusion of the hearing of the creditors’ petition in the Federal Magistrates Court on 1 June 2011, the Federal Magistrate made orders that provided the appellant with the opportunity to pay into Court the amount in issue, namely $40,902.82 and the parties with the opportunity to file any further affidavit evidence concerning costs determinations in other court proceedings involving the parties. The appellant subsequently made the payment into Court on 27 June 2011 and the respondents filed a further affidavit of their paralegal, Ms Worthington, dealing with additional costs determinations on 28 June 2011.

5    In the light of the additional costs determinations information provided in Ms Worthington’s affidavit the Federal Magistrate formed the view, expressed in his judgment handed down on 24 August 2011, that the additional costs liabilities indicated that the appellant was not solvent and could not rebut a presumption of insolvency.

6    The Federal Magistrate was also not satisfied that there were appropriate reasons not to make the sequestration order, including by reference to another proceeding that the appellant had commenced in the Federal Court of Australia relating to the former accounting practice.

7    The appellant then appealed to the Federal Court of Australia against the sequestration order. In particular, the appellant was aggrieved that following the filing of Ms Worthington’s affidavit he did not have the opportunity to address the additional cost liability issues raised in it or to cross-examine Ms Worthington about them or to deal with them before any sequestration decision was made.

8    The Federal Court rejected the appellant’s appeal, finding:

(1)    The Federal Magistrates Court did not err in finding there was an additional costs liability owed by the appellant of $165,660.71 and in addition there were other liabilities which the appellant shared with the company associated with him.

(2)    The Federal Magistrates Court did not err in stating that the strike out of the appellant’s statement of claim in the Federal Court proceeding was not sufficient cause for the Court to decline to make the sequestration order.

(3)    The Federal Magistrates Court did not err in finding that the appellant had not established that he was able to pay his debts and in particular where the amount of the claimed debt had been paid into Court.

(4)    The Federal Magistrates Court did not err in finding there was no good reason to refrain from making the sequestration order.

appeal against making of sequestration order

9    On 24 August 2011, the Federal Magistrates Court of Australia at Perth ordered that the estate of the appellant, Mr Nick Christou, be sequestrated: see Demandem Holdings Pty Ltd v Christou [2011] FMCA 489.

10    The Court was satisfied that the appellant committed the act of bankruptcy alleged in the creditors’ petition filed by the respondents and as to other matters to which s 52(1) of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) requires proof.

11    The Court was not satisfied that the appellant had established that he was able to pay his debts or that there was any other reason for the Court to refrain from making a sequestration order.

12    The appellant had opposed the bankruptcy petition on the basis that he was able to pay his debts for the purposes of the Bankruptcy Act and also on the basis there was “other sufficient cause” for not making a sequestration order under s 52(2)(b) of the Bankruptcy Act.

13    The creditors’ petition stated that the appellant owed the respondents $27,600.62 based upon a judgment of the Supreme Court of Western Australia dated 28 March 2008 in proceeding number CIV 1788/2003, plus interest of $13,302.20 as set out in bankruptcy notice WA 136/2010, comprising a total of $40,902.82.

14    The hearing of the bankruptcy petition in the Federal Magistrates Court occurred on 1 June 2011 and had particular regard to affidavit and documentary material filed by the parties. Early on in the course of submissions at the hearing the Federal Magistrate, noting that about $40,000 was in issue, said to counsel for the appellant: “I gather he [the appellant] says he has the capacity to borrow”. Counsel for the appellant responded by stating that his client had some $20,000 in a bank account and shares worth about $15,000, and then said: “…he’s actually, leaving aside any other assets, quite liquid in respect of the amount in any event”. The Federal Magistrate then inquired of counsel as follows:

If he was invited to pay 40,000 into court, could he and would he?

The following exchange then occurred between counsel for the appellant and the Federal Magistrate:

[COUNSEL]:     The answer is he could. The proposition, as I understand it though, is if the 40,000 is paid, part of it comes back to him anyway. It may be in fact all of it comes back to him anyway. So it may be that a payment into the court would actually be counterproductive. It may be that if your Honour is minded to make some form of order, it would be there be time allowed to actually pay the amount directly to the creditor, so that the recovery of the $50,000 sum can be dealt with in that way.

His Honour:     Not necessarily. If hypothetically the amount claimed was paid into Court and I was satisfied on the issue of solvency, then in the ordinary course, the consequence would be that the petition would be dismissed on the basis of solvency and the money would be repaid to the debtor and it would then be a matter for the parties to work out how the matter was resolved.

[COUNSEL]:    Well, in that case, your Honour, yes. The answer is the payment could be made and on the basis you’ve discussed would probably be made into Court if required.

HIS HONOUR:    All right. Are you in a position this afternoon to take instructions as to whether an undertaking could be given to pay 40,000 into court within, say, 14 days?

[COUNSEL]:     I can certainly seek to get those instructions if I have five or 10 minutes, your Honour.

HIS HONOUR:     I will give you that opportunity after you have completed your submissions in chief.

15    Counsel for the appellant and counsel for the respondents then completed submissions following which the proceeding was adjourned briefly before counsel for the appellant advised the Court that he was instructed by his client that he was able to pay the money into Court, indicating “that 14 days is achievable in the likelihood, but 28 days is comfortably achievable”. The Federal Magistrate noted that the appellant’s “confidence obviously increases with time”. That suggested to his Honour that he did not have the cash “in his back pocket” but thinks he can obtain it within 28 days. The Federal Magistrate then ruled and ordered as follows:

I will note the undertaking of the debtor to pay into court the sum of $40,902.82 within 28 days. Within the same period I will give the parties the opportunity to file any further affidavit evidence, together with any further submissions relating to the matter which would include evidence and submissions in relation to other costs determinations and in relation to the issue of enforcement costs in respect of the deed. Subject to that, I will reserve judgment and my associate will let you know when judgment will be delivered.

16    The question of further evidence and submissions about other costs determinations and the issue of enforcement costs in respect of cl 2.2 of the deed referred to were matters that had arisen in the evidence before the Court on 1 June 2011 and emphasised in submissions, especially by counsel for the respondents. The Court was apprised of the taxation of costs appointment that had been set for 17 June 2011 in the Supreme Court of Western Australia.

17    Two things then happened. First, on 27 June 2011 the appellant paid into the Court $40,902.82. Second, on 28 June 2011 the respondents filed the affidavit of Ms Meredith Eva Worthington which dealt with the costs situation in relation to the various other proceedings in other courts, principally the Supreme Court of Western Australia in respect of which the appellant had the benefit of costs orders and was exposed to liability in respect of other costs orders. I will return below to the detail of the material and evidence provided in the affidavit of Ms Worthington.

18    In the light of the further evidence provided in Ms Worthington’s affidavit the Federal Magistrate, in his judgment delivered 24 August 2011, formed the view that, notwithstanding the payment in of the amount mentioned in the petition and bankruptcy notice, he was satisfied, as noted above, that the appellant had committed an act of bankruptcy and that he was not able to pay his debts and that there was no other reason to refrain from making a sequestration order.

19    The appellant now appeals against the sequestration order. In his appeal, the appellant is particularly aggrieved that the Federal Magistrate should have made the sequestration order without first giving him an opportunity to be heard in respect of the claimed additional costs liabilities mentioned in Ms Worthington’s affidavit or the opportunity to make further arrangements to discharge some or all of the liabilities mentioned.

20    The formal grounds of appeal as follows:

1.    The Federal Magistrates Court erred in finding that there was:

1.1    “an additional costs liability owed by Mr Christou [the appellant] of $165,660.71”; and

1.2    “in addition, other liabilities which Mr Christou [the appellant] shares with the company Corporate Systems Publishing Pty Ltd”.

2.    The Court erred in finding that as the most recent orders in Federal Court proceedings WAD 182 of 2010 were to strike out the appellant’s statement of claim, his claim did not constitute sufficient cause for the Court to decline to make a sequestration order.

3.    The Court erred in finding that the appellant had not established he is able to pay his debts and in particular where the amount of the claimed debt had been paid into Court.

4.    The Court erred in finding there was no good reason to refrain from making a sequestration order, in circumstances where the debt in the application before the Court at the trial was not in relation to the alleged liabilities referred to in ground 1.1 and 1.2 above.

Further background

21    Further to what is set out above by way of background to this appeal, the appellant was one of three partners in an accounting practice that included himself, Mr Lingard and Mr Joyce. The appellant has been in dispute with his former partners and entities associated with them (including the respondents) since 2001 and in litigation with them since 2003 in a number of courts including the Supreme Court of Western Australia, the Federal Magistrates Court and the Federal Court of Australia.

22    In proceeding CIV 1788/2003 in the Supreme Court of Western Australia, as explained in some detail at [12]-[13] of the judgment of the Court below, Beech J made a number of orders at the end of a lengthy hearing involving claims and cross claims between the three partners and companies or entities associated with them.

23    In that proceeding (Corporate Systems Publishing Pty Ltd v Lingard [No 4] [2008] WASC 21(S)) by order 10, Beech J ordered:

10.     The second plaintiff [the appellant] pay the sum of $150,000 to the fifth and sixth defendants [the respondents], together with interest thereon at 6% per annum from 20 August 2002 until judgment [in the amount of $50,523.29].

24    It was agreed in those proceedings that the respondents interest in the $150,000 arose out of a deed of assignment dated 13 June 2005, notice of which was given to the appellant. By cl 2.2 of that deed, the respondents agreed that they would hold one-third of the net proceeds of the “debt” of $150,000 “after deduction of all legal costs associated with the enforcement thereof” in trust for Corporate Systems Publishing Pty Ltd (CSP). It was also understood that CSP had assigned its rights in the one-third of the net proceeds to the appellant.

25    Justice Beech also made orders that another company, Stanton Partners Australasia Pty Ltd (SPA), pay to the appellant the sum of $122,399.38 plus interest, which Beech J calculated up to judgment in the sum of $42,212.70.

26    Justice Beech also made declarations in relation to the appellant’s entitlement to distributions of income under trusts controlled by the companies in respect of which Mr Lingard, Mr Joyce and the appellant were directors in the total amount of $747,954.19. While declarations were then made, no distributions of income have occurred and are unlikely to occur until such time the partnership has been wound up, something which Beech J ordered should happen but which I understand has not yet happened.

27    In an earlier related proceeding to this proceeding in the Federal Magistrates Court, Christou v Demandem Holdings Pty Ltd & Anor [2011] FMCA 36, Raphael FM was called upon to deal with the creditors’ petition of the current respondents claiming that the appellant as debtor owed them $40,902.82 – the same amount mentioned in the current creditors’ petition – made up of the balance of a judgment sum of $150,000 less the set-off available to the debtor of $122,399.38, plus interest on the balance of $13,202.20. The appellant resisted that bankruptcy notice on the ground that it was an overstatement of the amount due by him to his creditors and that the notice was an abuse of process.

28    Federal Magistrate Raphael, at [2], of that decision noted that he had earlier found (in Demandem Holdings Pty Ltd & Anor v Christou [2010] FMCA 494) that the debtor was entitled to set-off against the creditors an amount owed by the creditors’ assignor to the debtor and that the latest bankruptcy notice before him effectively allowed that. The appellant’s argument then was that other monies should be taken into account as they constituted equities that would enable a set-off under the Bankruptcy Act to be invoked.

29    Federal Magistrate Raphael then dealt with what he called “the first set-off”, noting the order of Beech J in order 10 that the appellant pay the sum of $150,000 together with interest to the respondents and the relevant assignment made of the debt in question to the respondents that enabled them to sue in respect of it under the deed of assignment. The appellant’s submissions before Raphael FM was, he said, based on the assumption that prior to the assignment of the chose in action, CSP was entitled to one-third of the judgment debt. However, at [8], Raphael FM considered the appellant had confused his entitlement to a third of the drawings and distributions of income of SPA with an entitlement to a third of the judgment debt. There was no direct relationship between the two. The appellant did not have an entitlement to one-third of the judgment debt prior to the assignment.

30    The further question was whether cl 2.2 of the deed of assignment formed the basis for a set-off. The Federal Magistrate found that even if the assignment did give rise to an obligation to create a trust in favour of CSP and so the appellant, he was of the view that this would not form the basis of a legal or equitable set-off because, for a legal set-off, both claims must be due and payable at the date of the action and a future or contingent debt would not support a legal set-off. His Honour considered that at both common law and in equity, the right to set-off depends upon proof of an actionable debt and the appellant had no legal or equitable right to enforce the contract until the net proceeds of the debt came into existence. The only way this could happen would be if the appellant first paid the outstanding judgment debt. So there was no entitlement to set-off.

31    The Federal Magistrate then further dealt with the question of doing substantial justice in the circumstances of the case, notwithstanding that there was no right to a set-off. His Honour noted, at [12], that in Food Channel Network Pty Ltd v Television Food Network GP (No 3) [2010] FCAFC 158 (Food Channel Network Pty Ltd), the Full Court had to deal with an application for repayment of costs paid in discharge of an order for costs, which order was set aside on an appeal. The paying party who was successful on the appeal argued that the orders of the Court on appeal should have included an order for the repayment and this could be corrected under the slip rule of the Federal Court Rules 1979 (Cth). The Full Court said, at [2] and [3]:

2    It is not necessary to determine whether orders sought by FCN may be made under the slip rule. That is because, even if the order sought by FCN is one which might be made under the slip rule, TFN is entitled to payment by FCN of $16,415.95 pursuant to a certificate of taxation in another matter in the Federal Court. TFN now accepts that FCN is entitled to reduce the amount payable to it by FCN under the certificate of taxation by the sum of $8,039.90.

3    In these circumstances, whether or not TFN is strictly entitled to set the sum of $8,039.90 off against FCN’s debt of $16,415.95, the Court’s discretion is broad enough to recognise that substantial justice is best done by leaving FCN indebted to TFN in the sum of $8,376.05, rather than to compel TFN to pursue FCN for the recovery amount of $16,415.95.

32    The appellant invited Raphael FM to exercise “discretion” in the same way in relation to the competing orders in this case. At [12], his Honour did not agree that the same exercise of discretion was appropriate. He said that after having regard to the equities between the parties, he was of the view there would be no unfairness in allowing the respondents to recover the outstanding debt without regard to the appellant’s claim for one-third of the net proceeds. He also noted it was not clear what was meant by the phrase “all legal costs associated with the enforcement thereof” in cl 2.2 of the deed and whether it includes the costs of the present proceedings and so there was no way for him to determine the sum of the net proceeds to which the appellant may be entitled.

33    For all of those reasons, he was not satisfied that there was a right of set-off in regard to what was called the “trust monies”.

34    The Federal Magistrate then dealt with what he called “the second set-off” noting that order 5 of Beech J in the Supreme Court proceedings, declared that the plaintiffs, including the appellant were entitled to a distribution of their respective shares of the income of SPA and another entity for the financial years 2003-2007 totalling $747,954.19. The appellant argued that these monies constituted a set-off against SPA and another entity at the time of the assignment to the current creditors and so were an equity in respect of which they were burdened.

35    His Honour had regard to the findings of the Court of Appeal, in the appeal against Beech J’s decision, in Corporate Systems Publishing Pty Ltd v Lingard [2009] WASCA 158 at [176]-[177], and considered that it established the respondents’ case. Justice Beech deliberately did not make orders entitling CSP to any sums certain and the Court of Appeal recognised that further litigation was necessary for all years after 2002. Thus, the Federal Magistrate concluded, at [16], that besides the declarations in order 5, the appellant had not advanced any other evidence to enable the Court to determine his cash entitlements from the income of SPA and the other entity and so he was unable to find there was any set-off available on account of those sums which was equal to or exceeded the amount claimed in the bankruptcy notice.

36    As part of this background it should be noted orders made by the Supreme Court for and against the appellant remained undisturbed.

the Federal Magistrate’s decision

37    Before the Federal Magistrate in the Court below, the dispute between the parties was not as to the validity of the bankruptcy notice or the creditors’ petition, but related to the grounds of opposition to the petition which involved claims of solvency and set-off made by the appellant.

38    The appellant again submitted that the Supreme Court judgment supporting the petition also established a liability of $122,399.38 net of interest. However, the Federal Magistrate noted the earlier judgment of Raphael FM, that the appellant’s right to be paid by the respondents did not come into existence until he had paid the debt due to them and so there was no right of set-off, with which he agreed.

39    The appellant submitted nonetheless that the Court had a discretion under s 52(2)(b) of the Bankruptcy Act to recognise that “substantial justice” is best done in a case such as his by reducing his indebtedness to reflect the net practical effect of the various orders of the Supreme Court. It was submitted that, as the respondents were required to pay him $50,000 on receipt of $150,000 from him, the established set-off of $122,399.38 more than accounted for the debt due to the respondents.

40    As to solvency the appellant claimed in the Court below that he held interest in the City Beach property jointly with his wife and that there was a valuation of that property of $2.4 million. The Federal Magistrate, at [8] of his judgment, noted, however, that this was not a correct factual assertion as the City Beach property was held by a trust and the appellant’s interest was as a beneficiary of that trust. He said that the evidence of the trust was insufficient to persuade him that the appellant would be able to access his equitable interest within a reasonable time.

41    As noted above, at the end of the hearing on 1 June 2011, the Federal Magistrate gave the appellant the opportunity to pay into Court the $40,902.82 claimed in the bankruptcy notice, within 28 days, which he did on 27 June 2011.

42    The Federal Magistrate also gave the parties the opportunity to file further evidence and submissions after the hearing of the matter including as to costs determinations. As a result, the affidavit of Ms Worthington made 28 June 2011 was filed on behalf of the respondents that day.

43    As noted above, the Federal Magistrate relied on Ms Worthington’s affidavit evidence and accepted there existed additional costs determinations of $165,660.71 against the appellant, as well as other liabilities which he shared with his company, CSP, arising out of other litigation.

44    Accordingly, his Honour held, at [11] of his judgment, that having regard to the “now crystallised further debts” that had been identified, and notwithstanding the payment into Court, the appellant had failed to demonstrate his solvency.

45    In broad summary, having regard to the findings of Beech J in the Supreme Court of Western Australia and the decision of Raphael FM discussed above, the Federal Magistrate considered that:

    the appellant was required to pay the amount of $150,000 to the respondents pursuant to Order 10 of the orders made by Beech J on 28 March 2008;

    pursuant to cl 2.2 of a deed of assignment entered into on 13 June 2005 between SPA and the respondents, the respondents as assignees, agreed they would hold one-third of the net proceeds of the $150,000 debt after deduction of all legal costs associated with the enforcement thereof in trust for CSP – the latter being a company associated with the appellant;

    that CSP had assigned its rights to one-third of the net proceeds of that debt to the appellant;

    clause 2.2 of the deed made clear that the appellant’s entitlement was limited to one-third of the “net proceeds” after deduction of all legal costs associated with the enforcement;

    the appellant had no legal or equitable right to enforce the obligation in cl 2.2 of the deed until the net proceeds of the debt came into existence and that the only way the appellant could come into possession of that right would be through first paying the outstanding debt;

    as a result, the appellant’s failure to pay the amount of $150,000 precluded him from being able to claim a legal or equitable set-off in respect of one-third of the net proceeds of the debt after the deduction of all legal costs associated with its enforcement;

    he was not persuaded that the appellant had established that he had a further set-off or other entitlement to monies from the respondents in circumstances where it would be unjust for the Court to make a sequestration order;

    he was also not satisfied that there were proper grounds for exercising a discretion under s 52(2)(b) of the Bankruptcy Act to decline to make a sequestration order.

ground 1

46    Ground 1.1: Ground 1.1 of the appeal is stated as follows:

1.    The Court erred in finding that there was:

1.1    “an additional costs liability owed by Mr Christou [the appellant] of $165,660.71”.

47    On behalf of the appellant it is argued that the findings of the Court below that there was an additional costs liability owed by the appellant of $165,660.71 was a finding not open on the evidence which was, materially, that the allocatur concerning costs had not been signed in respect of a bill of costs for $96,198.05 as of 28 June 2011 when Ms Worthington’s affidavit was made and filed.

48    The appellant says that this erroneous finding arose from reliance on evidence given to the Court after the hearing was complete and after the parties had closed their cases and without there being any cross-examination of the appellant on the additional costs issue and without the appellant being afforded any opportunity to cross-examine Ms Worthington on her affidavit.

49    The appellant says that while there is a discretionary power in a court to enable a case to be reopened, reopening must depend on the error or omission which it is sought to rectify: Smith v New South Wales Bar Association [1992] HCA 36; (1992) 176 CLR 256 at [27]-[28].

50    In effect, the appellant complains that he was denied natural justice or procedural fairness in having the proceeding determined on material that should not have been relied on by the Court, given that the parties had closed their cases, and in any event because the appellant had not been given the opportunity to comment on it.

51    In response, on behalf of the respondents, it is said that the evidence before the Court below upon which it based its finding was not simply that “the allocatur had not been signed in respect of a bill of costs for $96,198.05”. Rather, the relevant evidence was all that contained in Ms Worthington’s affidavit. The Court relied on that affidavit which disclosed the further facts, namely:

    The bill of costs of the respondents, which was drawn pursuant to para 8 of the orders of Beech J of 28 March 2008 in the Supreme Court of Western Australia, was taxed during the course of an appointment before Registrar Dixon in the Court on 16 June 2011 in an amount of $96,198.05.

    The appellant’s solicitor at that appointment requested the Registrar withhold the signing of the allocator.

    The Registrar ordered the appellant to file and serve any objection to the taxed bill of costs by 30 June 2011 failing which the allocatur would be signed without further notice.

52    The respondents emphasise that Ms Worthington’s affidavit was filed pursuant to the orders made by the Federal Magistrate on 1 June 2011 and that the Federal Magistrate also ordered that the judgment be “otherwise reserved”.

53    Accordingly, on behalf of the respondents it is said that the submissions made on behalf of the appellant fail to acknowledge the existence of these orders and as a consequence ignore their purpose and effect. Thus, the appellant’s submissions are misconstrued and based on a false premise. The respondents say the purpose of the orders made by the Federal Magistrate was to allow both parties the opportunity to file additional evidence and submissions pertaining to questions of costs determinations. The effect of the orders was to render it entirely unnecessary for either party to make any application to reopen its case so as to adduce evidence. Thus, the further submissions about the Court’s discretion in reopening the case are irrelevant. Further, the respondents say the making of the orders do not result in any prejudice to the appellant.

54    The respondents submit it was open to the appellant to file evidence and submissions which rebutted the evidence in Ms Worthington’s affidavit when he received it but no such evidence or submissions were filed and no application was made to cross-examine Ms Worthington on her affidavit. As a result, it cannot be said that the appellant was denied natural justice or procedural fairness.

55    Further, the respondents submit that the appellant does not point to any factual inaccuracy contained in Ms Worthington’s affidavit. In those circumstances in the absence of any evidence to the contrary the Federal Magistrate was entitled to find (at the time judgment was given after 30 June 2011), that on the evidence before the Court there was an additional cost liability owed by the appellant of $165,660.71 which included the taxed bill of costs of $96,198.05.

56    In submissions in reply, the appellant says that the evidence in Ms Worthington’s affidavit confirms that the allocatur was not signed in respect of the amount of $96,198.05 and that amount was not, and still is not, due and payable and so had not “crystallised” as stated by the Federal Magistrate in his reasons for judgment.

57    The appellant also says that the evidence of Ms Worthington confirms that allocaturs were signed in respect of the appellant’s costs of $9,750 and $3,607.37 being $13,357.37 in total.

58    The appellant says that even on the evidence filed as of 28 June 2011, the finding that the appellant had debts of $165,660.71 was in error and at least overstated by $109,555.40.

59    The appellant says that these amounts, if considered at all, required a consideration of the off-setting effect of the sum also paid into Court, before any finding could be made in respect of the amount of debt owed, as well as the appellant’s cash at bank of $20,116, share portfolio of $15,083 and his access to equity in the property at City Beach, which had a net value, as to a one-half interest, of $1.2 million.

60    The appellant says the amount of $40,902.82 paid into Court was for the balance of the judgment for $150,000 after off-setting the judgment owed to the appellant of $122,399.38. That amount, after set-off, was therefore $27,600.02. With interest the payment in amount was $40,902.82.

61    The appellant says the claim of the respondents for $150,000 requires payment to the appellant of $50,000 on receipt of the funds. The off-set of $122,399.38 has the practical consequence that the respondents will never receive $150,000 and in fact have, since 28 March 2008, had the benefit of $122,399.28, being more than the $100,000 that (taking into account a practical set-off) they are entitled to retain.

62    The appellant says that the appellant did not enter into any costs agreement in respect of the “legal costs associated with the enforcement” as provided for by cl 2.2 of the deed, and there is no obligation to pay costs beyond those recoverable on the relevant costs scale, pursuant to the orders made.

63    The appellant says, therefore, the net effect is that the appellant was and is entitled to receive $63,302.80 on payment of the $40,902.82 paid into Court on 27 June 2011.

64    In their oral submissions in response to these written reply submissions, the respondents’ counsel says that the schedule to the affidavit of Ms Worthington accurately summarises what had occurred in the taxation of costs in the Supreme Court of Western Australia before Registrar Dixon and that, in the first main action, the paying party to the bill of some $96,198.05 was a company associated with the appellant and the appellant was personally taxed and the Registrar directed any objection to be filed on behalf of the appellant by 30 June, otherwise the bill would be signed. As a matter of fact, no objection was received.

65    Thus the respondents say that Ms Worthington’s affidavit was filed on 28 June 2011 and spoke to the position as of that date. The decision of the Federal Magistrate was delivered on 24 August 2011. It was reasonable for the Federal Magistrate to assume, in the absence of any further advice on behalf of the appellant, that he had not lodged an objection and that the bill had not been taxed as outlined in Ms Worthington’s affidavit and that the allocatur would have been signed as proposed.

66    But counsel for the respondents also submits that even if one assumes in the appellant’s favour that there was an error as to the $96,198.05, the next four bills for which allocaturs were signed totalled in excess of $65,000 for which the appellant was either jointly liable or in the case of an agreed bill of $14,890.96 personally liable. So the learned Federal Magistrate was entitled on that evidence to see there was a significant further debt that was not challenged in excess of the debt the subject of the bankruptcy notice, that had accrued after the hearing and which remained unpaid. Further, and entirely separate to that, the unsuccessful application for leave to appeal to the High Court by the appellant and CSP resulted in a taxation signed on 18 June 2011 for $8,115.40.

67    To that point, counsel for the respondents submits, the additional debts arising by virtue of taxation amounted to well over $70,000 due and owing (assuming still an error in respect of the $96,198.05 earlier mentioned). Counsel submits that the fact is the appellant did nothing in respect of the payment of that certain amount. The respondents note it is said on the appellant’s behalf that he could have borrowed money if he had known his inaction would count against him. But they said the fact is he did nothing and did not pay those taxed costs. Counsel for the respondents submits that the fact that he did not borrow to pay those debts is illustrative of the Federal Magistrate’s assessment that the claimed beneficial equity interest in the property at City Beach was simply not available within any reasonable time.

68    I accept the submissions made on behalf of the respondents.

69    While at first glance it may seem unusual for evidence filed after a hearing to be relied upon to establish, in a bankruptcy case, further liabilities to support a conclusion that solvency has not been demonstrated, the particular factual circumstances in which the affidavit evidence of Ms Worthington came to be filed explains what happened. The fact is the Federal Magistrates Court understood at the hearing that there were costs then in the course of taxation. It expressly provided for further evidence and submissions in relation to “other costs determinations” to be filed after the hearing and that is exactly what then happened.

70    It was always open to the appellant, by his legal representatives, to file any answering affidavit material or to make submissions in relation to this plainly and obviously relevant additional costs issue, but he did not.

71    In all of those circumstances, the finding that was made by the Federal Magistrate was reasonably only open to him. It was reasonable to conclude that the additional costs liability was in the sum of $165,660.71. While the allocatur as to the $96,198.05 bill was not signed as at 28 June 2011, and the Federal Magistrate seems to have been in error strictly speaking as to this, the facts are that by 30 June 2011 the appellant had to notify the Registrar of the Supreme Court of any objections to the provisionally taxed bill of costs. There was no evidence that the appellant had notified objections and the appellant did not put on any evidence or submissions, as he might have, to counter the clear inference that the provisional costs assessment, after 30 June 2011 (when the Federal Magistrate made his decision), became final.

72    In any event, the evidence of additional costs determinations against the appellant, leaving aside the bill of costs that remained provisional as at 28 June 2011, provided sufficient evidence for the Federal Magistrate to form the solvency view that he formed.

73    There was no denial of natural justice or procedural fairness in the hearing and determination process in these particular circumstances. As noted, the appellant had the right and power to put on further evidence or submissions on the costs determinations issue but chose not to do so.

74    The affidavit of Ms Worthington provided evidence to the following effect:

    That on 16 June 2011, Registrar Dixon in the Supreme Court of Western Australia provisionally assessed with the consent of the parties, the bills of costs filed in the various Supreme Court proceedings involving the parties to the partnership and the entities associated with them, being CIV 1788 of 2003, CACV 36 of 2008, FUL 24 of 2004, COR 8 of 2004, CIV 1550 of 2009 and CIV 1936 of 2004.

    On “15 June 2011” Registrar Dixon notified the parties of his provisional assessment in CACV 36 of 2008, FUL 24 of 2004, COR 8 of 2004 and CIV 1550 of 2009. He did not provisionally assess the bills of costs in CIV 1788 of 2003 and CIV 1936 of 2004 (the reference to 15 June 2011 must be typographical mistake, given that it is the day before the taxation appointment mentioned above).

    The parties agreed the amount of costs owed by the paying party in respect of the provisionally assessed bills of costs.

    The parties also agreed for the amount of costs owed by the paying party in respect of the bill of costs of the current respondents, drawn pursuant to para 11 of the orders of Beech J of 28 March 2008 in CIV 1788 of 2003.

    The bill of costs of the present respondents drawn pursuant to para 8 of those orders of Beech J was taxed during the course of the appointment before Registrar Dixon on 16 June 2011 but the solicitor for the appellant requested Registrar Dixon to withhold signing the allocatur. Registrar Dixon ordered the appellant to file and serve any objection to the taxed bill by 30 June 2011, failing which the allocatur would be signed without further notice.

    The bill of costs in CIV 1936 of 2004 was adjourned sine die.

    In summary:

(1)    the appellant was liable to pay Mr Joyce and Mr Lingard and/or entities associated with them the amount of $165,660.71, subject to any objection received on or before 30 June 2011;

(2)    Mr Joyce and Mr Lingard and/or entities associated with them were liable to pay the appellant $13,357.37.

(3)    No order was made providing for set-offs of the amounts each owed the other.

    A further bill of costs was filed in the Federal Magistrates Court on 28 June 2011 in respect of proceeding PEG 187 of 2010 (before Federal Magistrate Raphael), pursuant to orders made 9 February 2011 in a total sum of $5,605.

    That the solicitors for the present respondents had provided a sealed certificate of taxation in proceeding P39 of 2009, between CSP and Keith Graeme Lingard requiring payment to the current respondents by the current appellant and/or CSP in the sum of $8,115.40, which sum remained outstanding as at the date of the affidavit.

75    In the light of this evidence, the Federal Magistrate made no appellable error. Whether the additional costs liability were $165,660.71 or $96,198.05 (as at 28 June 2011), when the other costs liabilities are taken into account the result is the same: they indicate the appellant lacked solvency, and was unable to meet his debts as and when they fell due.

76    Ground 1.1 fails.

77    Ground 1.2: Ground 1.2 of the appeal states:

1.    The Court erred in finding that there was:

1.2    “in addition, other liabilities which Mr Christou [the appellant] shares with the company Corporate Systems Publishing Pty Ltd”.

78    The appellant says the problem with reliance on Ms Worthington’s affidavit evidence without material having been put to the appellant or without her being cross-examined is further highlighted by the Federal Magistrate’s finding that “There are, in addition, other liabilities which Mr Christou [the appellant] shares with the company, Corporate Systems Publishing Pty Ltd”.

79    The appellant says the statutory demand issued 24 June 2011 provided CSP with 21 days to deal with the amount claimed.

80    The respondents contend that there is uncontested evidence in the affidavit of Ms Worthington at para 16-20 that was before the Federal Magistrate as to other liabilities which the appellant shared with CSP (with which he was related) arising out of other litigation, which supported the Federal Magistrate’s finding.

81    I accept the respondent’s submissions.

82    Even if one were to accept that CSP had 21 days to deal with the costs claimed in the bankruptcy notice, when taken with the evidence as a whole the Federal Magistrate was entitled to consider these costs were unlikely to be paid.

83    In any event, even if he were not so entitled and the Federal Magistrate were in error, this error would not result in his overall determination of costs liabilities being set aside. The appellant’s additional costs liabilities remained considerable and it appeared the appellant was unable to pay his debts as and when they fell due.

84    This ground fails.

ground 2

85    Ground 2 of the appeal states:

3.    The Court erred in finding that as the most recent orders in Federal Court proceedings WAD 182 of 2010 were to strike out the appellant’s statement of claim, his claim did not constitute sufficient cause for the Court to decline to make a sequestration order.

86    The appellant says he identified the Federal Court proceedings as well as the judgment of Beech J as matters in respect of which the discretion under s 52(2)(b) ought be considered.

87    The appellant says that if the respondents’ submission is that the Court is not entitled to look at all relevant circumstances in the exercise of that discretion, the submission does not deal with the position that the discretion is a broad one. The exercise of such a broad discretion enables the Court to ensure that substantial justice is done between the parties.

88    On behalf of the respondents, it is said that the appellant did not seek to rely on its claim before the Federal Court (Nick Christou v Stantons International Pty Ltd WAD 182 of 2010) as constituting “other sufficient cause” before the Federal Magistrates Court as a reason why the sequestration order ought not be made under s 52(2)(b) of the Bankruptcy Act. This proceeding does not involve the respondents.

89    The respondents note that on 27 April 2011 the appellant filed an amended notice of opposition upon which the creditors’ petition was opposed which confirmed that the appellant also sought to challenge the petition on the supplementary basis of “other sufficient cause”.

90    In that regard, the appellant swore an affidavit filed 27 April 2011 which deposed to the amounts contained in order 2 and order 10 of the orders of Beech J of 28 March 2008, being required to be set-off and alleged that the orders encompassed a further set-off which required the appellant to be paid $50,000 of the amount of $150,000 contained in order 10 (the second set-off).

91    Thus, the appellant alleged the second set-off constituted “other sufficient cause” – and not the Federal Court claim as such.

92    The respondents point out that in that context, the appellant argued that the authority of Totev v Sfar [2008] FCAFC 35; (2008) 247 ALR 180 (Totev v Sfar) at [87] provided support for the proposition that the discretion contained in s 52(2)(b) is a broad one and broad enough to recognise that substantial justice best be done by reducing the indebtedness of the appellant to reflect the alleged net effect of the orders.

93    The respondents draw attention to what the Federal Magistrate found, at [30], to the effect that while there is a broad discretion under s 52(2)(b), to the extent that the authorities may have application in respect of the appellant’s claim against the petitioning creditors in Federal Court proceedings, “the petitioning creditors note the most recent orders of McKerracher J made on 9 June 2011 strike out Mr Christou’s [the appellant’s] statement of claim for a third time”.

94    The respondents also note that the Federal Magistrate found that the presence of an actionable debt per se does not of itself establish pursuant to s 52(2)(a) that the appellant is able to pay his or her debts either at the date of the hearing of the petition or within a reasonable time. Further, the respondents say that Totev v Sfar, while recognising that the existence of a counter-claim enlivens the Court’s discretion, it was not a sufficient reason for the Court to decline to make a sequestration order even though it might constitute “other sufficient cause” in some circumstances.

95    The respondents thus say the primary court’s finding that there was no actionable debt owed to the appellant was made only in respect of the alleged second set-off as identified by his Honour and not with regard to the one-third share in the partnership.

96    I accept the respondents submissions. In doing so it is appropriate to have regard to how the Federal Magistrate dealt with the discretionary issues claimed to be relevant under s 52(2)(b) of the Bankruptcy Act. It is useful in this context simply to set out in detail what his Honour said at [23]-[32] of his judgment, as follows:

23.    Neither am I persuaded that there is any other reason for the Court to refrain from making a sequestration order. Mr Christou relies on the authority of Food Channel Network Pty Ltd v Television Food Network GP (No.3) in support of its proposition that the discretion provided by s.52(2)(b) of the Bankruptcy Act is broad enough to recognise that substantial justice is best done by reducing the indebtedness of the respondent.

24.    In that case Food Channel Network (FCN) sought an order for the repayment of $8,039.90 paid by it to Television Food Network GP (TFN) in discharge of an order for costs, which was later set aside on appeal, in circumstances where TFN was entitled to payment by FCN of $16,415.95 pursuant to a certificate of taxation.

25.    The Court considered that in those circumstances, whether or not TFN was strictly entitled to set-off the sum of $8,039.90 against FCN’s debt of $16,415.95, the Court’s discretion was broad enough to recognise that substantial justice was best done by leaving FCN indebted to TFN in the sum of $8,736.05, rather than to compel TFN to pursue FCN for the recovery amount of $16,415.95.

26.    Food Channel Network Pty Ltd v Television Food Network GP can be distinguished from the present case on the basis that it concerned two actionable debts, both of which were due and payable at the date of the action. I do not accept that the principle laid down in Food Channel Network Pty Ltd v Television Food Network GP extends to cases such as this where in the first instance there is no actionable debt due to Mr Christou but merely a contingent future debt.

27.    Even if the Court’s discretion does extend to taking account of non-actionable contingent debts, it does not follow that such a contingent debt provides “other sufficient cause” under s.52(2)(b) of the Bankruptcy Act so that a sequestration order should not be made.

28.    Mr Christou relies on the authority of Totev v Sfar & Anor (2008) 247 ALR 180 in submitting that the Court’s discretion under s.52(2)(b) is a broad one. In that case the Full Federal Court did not consider what range of circumstances might constitute “other sufficient cause” under the Bankruptcy Act, but instead concentrated on answering one specific question as to whether a counterclaim by a respondent debtor in other proceedings against an applicant creditor might enliven the Court’s discretion under s.52(2)(b).

29.    The Court recognised that while the discretion is enlivened in such circumstances, the existence of a counterclaim by a respondent debtor against a petitioning creditor has been held not to constitute sufficient reason for the Court to decline to make a sequestration order, even though it has been accepted that, in an appropriate case, such a claim might constitute “other sufficient cause”: Ling v Enrobook Pty Ltd (1997) 74 FCR 19 at [25]-[26]; ALR 400-2 and Re Schmidt; ex parte Anglewood Pty Ltd (1967) 13 FLR 111 at 115-117. The Court identified that the determination of such a question would depend upon an assessment of the particular facts in each case, considered in conjunction with the interests of the petitioning creditor.

30.    Mr Christou relies on Totev v Sfar only to the extent that it supports his proposition that the discretion afforded to the Court is a broad one under s.52(2)(b). However, to the extent that that authority may have application in respect of Mr Christou’s claim against the petitioning creditors in Federal Court proceedings WAD182 of 2010, the petitioning creditors note the most recent orders of McKerracher J made on 9 June 2011 strike out Mr Christou’s statement of claim for a third time.

31.    Whilst Totev v Sfar is authority for the proposition that the Court’s discretion under s.52(2)(b) is a broad one, like Food Channel Network Pty Ltd v Television Food Network GP, it provides no authority for Mr Christou’s contention that a non-actionable debt should be accepted as constituting “other sufficient cause” under the Bankruptcy Act so that a sequestration order ought not to be made.

32.    In my view, in circumstances where a debtor has substantial debts in addition to the debt identified in a creditor’s petition, and the contingent debt relied upon to resist a sequestration order is not actionable until such time as the debt due to the petitioning creditor is paid, and there is little likelihood of that debt being paid (even in bankruptcy) the Court should not accept the contingent debt as a reason not to make a sequestration order. That is the circumstance here.

97    This analysis bears out the respondents’ submissions, in my view, to the effect that the reference made to “no actionable debt” by his Honour had regard to the fact that the appellant was not entitled to be paid $50,000 (or such other sum as may be appropriate) until such time as he had paid the $150,000 to the respondents. In that sense, as his Honour said, there was “merely a contingent future debt”.

98    To the extent that the analysis of discretionary matters took into account the Federal Court proceedings WAD 182 of 2010, it is mentioned only in passing in [30]. The discussion there does not suggest that proceeding is in respect of a contingent future debt or that there is no arguable actionable debt. The point plainly being made by his Honour, having regard to the strike out of the statement of claim for a third time, is that the subject matter of that proceeding, that chose in action, as counsel on this appeal put it, would appear to have its own difficulties such that no real weight should be given to it in the exercise of discretion as to whether or not the sequestration order should be made.

99    The reference to a “non-actionable debt” in [31] in my view relates to the more general proposition that the non-actionable debt, the contingent future debt identified at [26], does not provide a sufficient cause not to make the sequestration order. That that view is correct is, in my view, confirmed by the summary view of the Federal Magistrate then set out in [32].

100    It should also be said that the “asset” of the Federal Court proceeding does not appear to have been expressly raised in the appellant’s objections before the Federal Magistrates Court and seems to have arisen more by way of mention and commented upon more by way of completeness by his Honour at [30]. Plainly, and reasonably in my view, his Honour accorded the appellant’s action in the Federal Court little weight in the circumstances in which it appears to have been raised and relied on. His Honour’s exercise of discretion in this regard was appropriate, and does not disclose any appellable error.

101    Ground 2 fails.

ground 3

102    Ground 3 of the appeal states:

4.    The Court erred in finding that the appellant had not established he is able to pay his debts and in particular where the amount of the claimed debt had been paid into Court.

103    The third ground of appeal is founded upon the consequences of the appellant responding to the “invitation” of the Federal Magistrate to make payment into Court of the amount due to the respondents. As noted above, an undertaking was given by the appellant on the day of the hearing to pay in the amount and the payment was made on 27 June 2011, within the time specified in the leave granted, as noted above.

104    On behalf of the appellant it is said that, on the basis of the payment into Court alone, the appellant established that he was solvent at the time of the hearing, which is the relevant time for determining solvency, as discussed in Turco & Co Pty Ltd v Pendella Holdings Pty Ltd; In the matter of Pendella Holdings Pty Ltd [2010] FCA 213 at [58], (Barker J).

105    The appellant says the amount paid into Court was the balance of the $150,000, with interest, the subject of the order of Beech J in the Supreme Court of Western Australia. Consequently, with such amount being paid, he was entitled to enforce his entitlement under those Supreme Court orders to the $50,000 due to him.

106    In response, the respondents note that there was an express order made by the Court below on 1 June 2011, which noted the undertaking of the appellant to pay the amount of $40,902.82 into Court within 28 days, that being the amount of the debt claimed. The sum was then paid.

107    The respondents say that s 52(2)(a) of the Bankruptcy Act relevantly provides that if the Court is satisfied by the debtor that he is able to pay his debts it may dismiss the petition.

108    The respondents say the payment in, made 27 days after the hearing, did not establish that he was able to pay his debts when they became payable or at the time the petition was heard, and that the Federal Magistrate was not required to consider the payment “on that basis alone” or in isolation of other evidence.

109    The respondents refer to International Alpaca Management Pty Ltd v Ensor [1999] FCA 72 at [19], where Katz J held that relevant considerations under s 52(2) would be whether the debtor also has the ability to pay debts becoming payable in the reasonably immediate future and whether the debtor has the ability to pay the debtor’s debts from the debtor’s own money.

110    Thus the respondents says the Federal Magistrate was quite correctly entitled to take into account the evidence in Ms Worthington’s affidavit as to the additional costs liabilities in finding whether, taking into account the payment into Court, the appellant had failed to demonstrate solvency.

111    The respondents say the appellant’s submission concerning the effect of the payment into Court as activating the right to recover $50,000 under the orders made by Beech J in the Supreme Court are not correct in that:

    The respondents have not been paid the amount of the debt claimed.

    Upon payment being made, the amount of the appellant’s actionable debt would be equal to one-third of the net proceeds of the amount of $150,000 in order 10 of the orders of Beech J after the deduction of all legal costs associated with the enforcement thereof.

    Until such payment is made, the appellant has no “actionable debt”.

112    I accept that having regard to the terms of the orders made by the Federal Magistrate on 1 June 2011 providing for the filing of further evidence going to costs determinations, that the payment in made pursuant to the undertaking given by the appellant did not automatically, as it were, prove the solvency or rebut the presumption of insolvency that operated against the appellant. It remained for the Court to consider the solvency issue on all the evidence before it, including, Ms Worthington’s affidavit filed 28 June 2011.

113    In some respects, it may seem unusual, the question of payment in having been raised by the Court early on in the course of submissions, that the payment in should not have counted for more, as the appellant obviously expected. But there is nothing, in my view, in the transcript relied on by the appellant, or in the circumstances overall, to suggest that the payment in was bound to produce a finding of solvency in favour of the appellant. The question of outstanding costs determinations plainly remained in the mix and it was clear that the payment in together with those costs liabilities would ultimately be weighed by the Federal Magistrate. In the end the Federal Magistrate was not satisfied as to solvency despite the payment in. I see no appellable error in the taking of the evidence or the payment in or the ultimate result as found.

114    As noted above in relation to the opening exchange between counsel for the appellant and the Federal Magistrate concerning the payment in, the issue arose very early on in the course of the submissions made by counsel for the appellant. His Honour identified the fact that $40,000 was in issue (in round terms) and that he understood the appellant was saying he had “the capacity to borrow”. To that counsel responded by pointing out what he had available to him by way of assets. It was then that the question of paying the amount the subject of the creditors’ petition into Court was raised and dealt with as identified above.

115    As I would understand it, and not unreasonably, the Federal Magistrate was simply putting it to counsel for the appellant that if he said he had the capacity to pay then why would he not pay the amount of $40,000 or so into Court as a demonstration of his capacity. By saying that, however, the Federal Magistrate was not saying that, the payment in having been made, the payment would necessarily rebut the presumption of insolvency or demonstrate solvency. Indeed, as noted above, his Honour made the point that:

If hypothetically the amount claimed was paid into court and I was satisfied on the issue of solvency, then in the ordinary course, the consequence would be that the petition would be dismissed on the basis of solvency…. (Emphasis added.)

The important point to note is that his Honour made it clear that he also needed to be “satisfied on the issue of solvency”.

116    Given that counsel for the parties then proceeded to deal with all of the various issues raised in opposition to the petition and his Honour finally made orders for the payment in and for the filing of further affidavit evidence and submissions on the question of costs determinations, it is clear that his Honour intended and the parties should have understood that he would make his final determination on the question of solvency in the light of all the evidence before the Court. His Honour’s approach to both the payment in and how he later accounted for it was, in my view, unexceptional and I detect no appellable error.

117    Ground 3 fails.

ground 4

118    Ground 4 of the appeal states:

5.    The Court erred in finding there was no good reason to refrain from making a sequestration order, in circumstances where the debt in the application before the Court at the trial was not in relation to the alleged liabilities referred to in ground 1.1 and 1.2 above.

119    The appellant says that the discretion provided by s 52(2)(b) of the Bankruptcy Act is a broad one, as noted in Totev v Sfar.

120    The appellant says the Federal Magistrates Court finding that “there is no actionable debt due to Mr Christou [the appellant]” is the basis upon which the Court concluded that the discretion was not available to the appellant.

121    The appellant says that, in circumstances where the relevant finding is inconsistent with the evidence of an actionable debt for $2,666,666 as his one-third share of the value of the partnership business, the discretion is and was available to the advantage of the appellant.

122    Thus, on behalf of the appellant, it is said that, in the context of off-setting claims, as discussed in Food Channel Network Pty Ltd, there is a broad discretion to do substantial justice as best one can, but that the Federal Magistrate failed to regard and apply the discretion available in this regard correctly.

123    The respondents submit that these submissions go beyond and are wholly inconsistent with ground 4 of the notice of appeal as expressed, namely:

4.    The Court erred in finding there was no good reason to refrain from making a sequestration order, in circumstances where the debt in the application before the Court at the trial was not in relation to the alleged liabilities referred to in ground 1.1 and 1.2 above.

124    The respondents say that in respect of the proposition advanced in the ground of appeal, the primary court was entitled to take into account the appellant’s other debts and liabilities when considering whether he was able to pay his debts under s 52(2)(a).

125    The respondents say there is nothing in the construction of that provision which precludes the Court from considering all of the appellant’s debts and liabilities and does not operate so as to confine it to considering the appellant’s capacity to pay only the debt upon which the petition was based.

126    In respect of the alternative submissions contained in its written submissions, the respondents repeat what they said in respect of the “actionable debt” issue under ground 2.

127    The appellant says the issues raised in the respondents’ submissions in respect of ground 4 are addressed above in relation to ground 1.1 and 2, and the payment in, save to provide the emphasis below in respect of s 52(2) of the Bankruptcy Act, namely:

a person is solvent if, and only if, the person is able to pay all the person’s debts as and when they fall due and payable. (Emphasis added.)

128    I accept, as I did above, the respondents’ submissions in relation to the actionable debt point under ground 2.

129    I consider the arguments of the appellant in its written submissions, as set out above, do in fact, as the respondents submit, go beyond ground 4 as expressed and should not now be entertained.

130    Ground 4 fails.

orders

131    The Court orders that:

1.    The appeal be dismissed.

2.    The appellant pay the respondents’ costs to be taxed, if not agreed.

Associate:

Dated:    29 June 2012