Re Brian Forshaw and Eduard Christiaan Sent v Jeffrey Thomson [1992] FCA 50; (1992) 106 ALR 134 (19 February 1992)

FEDERAL COURT OF AUSTRALIA

Re: BRIAN FORSHAW and EDUARD CHRISTIAAN SENT
And: JEFFREY THOMSON
Nos. QLD X161 and 162 of 1991
FED No. 61
Bankruptcy - Injunction
[1992] FCA 50; (1992) 106 ALR 134

COURT

IN THE FEDERAL COURT OF AUSTRALIA
BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND
GENERAL DIVISION
Spender J.(1)

CATCHWORDS

Bankruptcy - meeting of creditors - right to vote - debt disputed - ruling by chairman - whether court competent to restrain chairman from permitting a creditor to vote - Bankruptcy Act 1966 ss. 30(1) and 201.

Injunction - balance of convenience against relief - purpose of Part X of Bankruptcy Act 1966.

Bankruptcy Act 1966 (Cth) ss. 30(1), 52(2), 154, 188, 190, 194, 197, 198, 201, 221 and 222.

Re Amadio (1978) 46 FLR 147

Re Levy; Ex parte Scholefield Goodman and Sons Ltd [1980] FCA 129; (1980) 50 FLR 99

Ex parte Ruffle; Re Dummelow (1973) 8 Ch App 997

Re Tregonning; Ex parte Friends' Provident Life Office [1983] FCA 261; (1983) 74 FLR 327

HEARING

BRISBANE
19:2:1992

Counsel for the applicant: Mr W. Sofronoff QC with Mr Eliadis

Instructed by: Q.D. George and Co.

Solicitors for the respondent: Thomson Redhead

ORDER

The application be dismissed, with costs to be taxed if not agreed.

On the usual undertaking as to damages, and on the undertaking of the applicant, by Senior Counsel, to prosecute a foreshadowed appeal with diligence.

The meeting of the creditors of the applicant appointed to resume on 20 February 1992 be adjourned to a date to be fixed, pending the determination of the foreshadowed appeal or earlier order.

Liberty to apply.
Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

DECISION

I have before me two applications filed on 12 February 1992, one on behalf of Brian Forshaw, and the other on behalf of Eduard Christiaan Sent. They are substantially the same and it is convenient if I deal with the position of Mr Sent primarily. There is no material difference in the material which affects the application of Mr Forshaw. I will refer to them as "the debtors".

2. In the application, each of them seeks an order from the Court that Jeffrey Thomson, as chairman of a meeting of the creditors of the applicant called in pursuance of authority under s. 188 of the Bankruptcy Act 1966 (the Act), be restrained from permitting First National Limited ('First National') to vote at the said meetings.

3. Each of the debtors signed an authority to Jeffrey Robert Thomson, a solicitor, to call a meeting of his creditors. The authority was signed on 13 November 1991 and filed on 19 November 1991.

4. On 13 November each of the debtors had sworn an affidavit verifying a statement of affairs. In that statement of affairs, in PART II under the heading "Unsecured Creditors", First National of 293 Queen Street, Brisbane is referred to, the amount of the debt set out against that creditor is $1,000,000, and the nature of the debt is said to be "Guarantee". The affidavits sworn by each of Mr Forshaw and Mr Sent is to the effect that the statement of affairs annexed to the affidavit is, to the best of his knowledge and belief, a true and complete statement of his affairs.

5. Mr Forshaw has filed an affidavit sworn on 19 February 1992 saying that at the time his statement of affairs was prepared with the assistance of an accountant from Messrs Hall Chadwick, he "was not aware of the difference between an 'unsecured creditor' and a 'contingent liability' or that such difference had a bearing on the entitlements of such creditors to vote at my meetings of creditors". He swears, on the basis of information and belief, that Mr Sent was also not aware of any such difference.

6. After the signing of the authority, a meeting of creditors of Mr Sent was convened on 29 November and was adjourned then to 19 December, to 5 January, then to 3 February, and to 14 February, then adjourned to 17 February, and a meeting of his creditors is appointed to be held tomorrow, 20 February. Mr Forshaw's position was that his initial meeting of creditors was on 20 December and that meeting has been adjourned and is to reconvene, also on tomorrow, 20 February.

7. Notwithstanding what is sworn to in the statement of affairs, both Mr Forshaw and Mr Sent say that while First National claims to be entitled as a creditor of each of the applicants to vote at the meetings, the guarantee which is the basis of the debt claimed by First National is void; that First National is estopped from enforcing the terms of the guarantee against each applicant, and that there is in fact no debt as First National alleges to be due.

8. An affidavit of Mr David Flemming was relied on, wherein he deposed that, notwithstanding that guarantees were given by Mr Sent and Mr Forshaw to secure the liabilities of Tabourne Pty Ltd, Mr O'Mahoney, an officer of First National, told Mr Flemming that if First National had to enter into possession of certain property assets and sell them as mortgagee in possession, it would cause First National great trouble and expense and crystallise far greater losses than would occur if they were sold by corporate entities associated with Mr Forshaw, Mr Sent and Mr Flemming.

9. Mr Flemming swears:

"Mr O'Mahoney told me that if the guarantors of the Tabourne
loan - Mr Forshaw, Mr Sent, Mr Stewart and myself - assisted
First National in selling the A.L. Stewart Group property
assets then First National would not call up those guarantees."

10. Later, he said that in a telephone conversation between Mr O'Mahoney and himself he informed Mr O'Mahoney that he was working very hard to sell the A.L. Stewart Group assets as he had promised he would and that he was incurring costs and expending considerable time and effort in doing this. He said:

"I told Mr O'Mahoney that the guarantors were unanimous in saying
that we did not want to be under a financial cloud. Mr
O'Mahoney told me that if the guarantors continued to assist
them in relation to the Louth action and the sell-down of
assets then they would not make a call on our guarantees. He
also told me that this agreement would not be documented."

And later:

"From the conduct and representations of both Mr Trevor Smith
and Mr O'Mahoney I formed the belief that no demands would
ever be made on the guarantors of the Tabourne loan if the
guarantors assisted First National in relation to the
prosecution of the Louth action and the sell-down of assets
of the A.L. Stewart Group."

11. He says further that on 3 August 1988 in the course of a meeting in Brisbane at which Mr Smith and Mr O'Mahoney, on behalf of First National, and Mr Flemming, Mr Stewart, Mr Forshaw and Mr Sent were present:

"I told Mr O'Mahoney that all of the guarantors of the
Tabourne loan were very concerned that we still had no
written acknowledgment in relation to the release of our
guarantees but were doing everything requested of us. Mr
Trevor Smith said that he understood our position but that
he could not make the decision to give us a written release.
He told me and I verily believed that he agreed that we had
co-operated with First National to date and that it seemed
likely that the Louth action would produce a substantial
claim. He told me that he would arrange a meeting with Mr
Russell Smith in Melbourne for all of the guarantors to
attend and that the matter of the written release of our
guarantees could be discussed there."

12. Mr Flemming says concerning a meeting on 19 August 1988 in Melbourne at which Mr Russell Smith, who was then the managing director of First National, was present:

"At this meeting Mr Stewart delivered a little speech and
said words to the effect 'you have everything I own now what
do you want, the blood out of my veins?' He also said 'I am
now very close to my retirement age, and I really need a
written assurance that you won't pursue me under the
guarantee'. Mr Russell Smith said these words: 'if you
continue to support us in the Louth action we will not
pursue you under the guarantees.' He also told us that we
would not receive this assurance in writing."

13. Based on the matters referred to by Mr Flemming, proceedings in the Federal Court, being Q28 and Q29 of 1992 were issued, the applications and the affidavit of Mr Flemming being filed on 10 February 1992; that is to say, between the holding of the meeting on 3 February and its adjournment to 14 February.

14. The demand by First National on Mr Forshaw and Mr Sent in respect of the sum of $8,649,691.10 was made on 11 December 1991.

15. The reason for the present application starts when the question of the entitlement of First National to vote as a creditor of Mr Forshaw and Mr Sent was the subject of controversy at the respective creditors' meetings. Mr Jeffrey Thomson (who had been elected by the creditors at the meeting as chairman) adjourned the matter so that he could consider quite voluminous material supplied concerning the entitlement of First National to vote as a creditor.

16. On 17 February 1992, Mr Thomson advised Mr Sent by letter:

"At the adjourned creditors meetings of the abovenamed on 3
February 1992, I resolved that the meetings be further
adjourned for a period of fourteen (14) days, to enable me
to consider certain further material to be lodged with me by
or on behalf of the abovenamed debtors, in relation to the
Proofs of Debt lodged by... ...First National Limited, and
make rulings as to the admissibility of the Proofs of Debt
of those creditors (including First National) for voting
purposes, pursuant to Part X of the Bankruptcy Act 1966."

17. He itemised in detail the material he has considered, and, so far as First National is concerned, he indicated to Mr Sent:

"In respect of the claim by First National Limited, on the
material provided to me by the debtor, I am not satisfied as
to the existence of a substantial defence to the claim and
accordingly, I rule that the Proof of Debt of First National
Limited be admitted for voting purposes in respect of the
Part X proposal of the debtor, Eduard Christiaan Sent for
the sum of $8,589,310.94."

18. A similar ruling was made concerning the claim affecting Mr Forshaw, and he was advised by letter dated 18 February in identical terms.

19. The proposal referred to in that communication is contained in draft deeds of arrangement. The proposal in the case of Mr Forshaw and in the case of Mr Sent is that the debtor pay to the trustee the sum of ten thousand dollars ($10,000) over twelve months, to be distributed on a pro-rata basis amongst the creditors of the debtor, as well as funds sufficient to pay the trustee's costs and remuneration.

20. This proposal has to be seen in the context of the debts which Mr Thomson is prepared to admit totalling $13,135,000.00.

21. Mr Walter Sofronoff QC, senior counsel for each of the debtors, made it plain that the orders sought were that Mr Thomson be restrained from permitting First National to vote at the said meetings, and no other order.

22. In particular it was not sought that First National be restrained from voting at the meetings, nor that Mr Thomson's decision as to the entitlement of First National to vote as a creditor of each of the applicants be set aside. The difficulty with what is sought becomes apparent when one considers in some detail the provisions of Part X of the Bankruptcy Act 1966 as they apply in these circumstances.

23. By s. 188, a debtor may, inter alia, sign an authority authorising a solicitor to call a meeting of his creditors. That was done by each of the debtors in this case. Pursuant to s. 188(2) the debtor is obliged, within 10 days before signing the authority, to give to the solicitor a statement of the debtor's affairs, and a statement indicating how the debtor proposes that his or her affairs be dealt with under this Part.

24. By s. 190(1), the solicitor is required to proceed to call a meeting of the debtor's creditors "in accordance with this Division." By s. 194, the meeting of creditors is required to be held not later than 35 days after the authority is signed by the debtor, and not earlier than 14 days after the notices to creditors are delivered or sent by post under s. 194(2).

25. Section 194(2) provides:

"The controlling trustee or solicitor calling the meeting
shall give to each person who is stated by the debtor to be
a creditor and whose business or residential address is
known to the trustee or solicitor notice of the meeting by
delivering or sending by post to that person a notice in
accordance with the prescribed form."

26. Section 197(1) provides:

"A meeting may, by resolution, be adjourned from time to
time."
And s. 198(1) and (2) provides:
"(1) Subject to this section, every creditor is entitled to
vote at a meeting under this Division.
(2) A creditor is not entitled to vote in respect of an
unliquidated or contingent debt or a debt the value of which
is not ascertained."

and s. 198(4):

"A creditor is not entitled to vote (otherwise than in respect
of the election of a chairman of the meeting), unless he has
made known to the chairman particulars of his debt. "

27. Section 201 is the central provision in these applications. It provides:

"Any question as to the right of a person to vote at a meeting
under this Division, or as to the amount of the debt in respect
of which a person is entitled to vote at such a meeting, shall
be determined by the chairman, who may, if he thinks it
necessary to do so, adjourn the meeting for a period, not
exceeding 14 days, to enable him to investigate the matter."

28. In the case of each of the applicants, the chairman did adjourn the meeting to enable him to investigate the matter and he concluded that First National was entitled to vote at each of the creditor's meetings. It is not suggested that he failed to consider the material in respect of that matter.

29. Section 222(1) and (2) provides:

"(1) Where there is a doubt, on a specific ground, whether a
deed of assignment or a deed of arrangement was entered into
in accordance with this Part or complies with the
requirements of this Part, or whether a composition has been
accepted by a special resolution of a meeting of creditors
under section 204, the Inspector-General, a person
authorised in writing by the Inspector-General, the
Registrar, the trustee, a creditor or the debtor may apply
to the Court for an order under subsection (2).
(2) Upon the hearing of an application made under subsection
(1), the Court may, subject to this section, make an order -
(a) declaring that the deed or composition is void, or
that it is not void, on the ground specified in the
application; or
(b) declaring that a provision of the deed is void, or is
not void, on the ground specified in the application."

30. Section 221(1) provides:

"Where -
(a) a debtor has failed, without sufficient cause, to
attend a meeting of creditors called under an
authority signed by him or her under section 188;
(aa) a debtor has contravened subsection 189(2);
(b) a debtor, having been required by a special resolution
of a meeting of creditors called in pursuance of such
an authority to execute a deed of assignment or a deed
of arrangement or to present a debtor's petition, has
failed, without sufficient cause, to execute the deed
within the time prescribed by this Act or to present
the debtor's petition within the time required by the
special resolution; or
(c) a meeting of creditors called in pursuance of such an
authority has not, within 4 months from the date for
which the meeting was called, passed one of the
special resolutions referred to in subsection 204(1),
the Court may, if it thinks fit, on the application of the
Inspector-General, a person authorised in writing by the
Inspector-General, a creditor or the controlling trustee,
forthwith make a sequestration order against the estate of
the debtor."

31. There is no express power contained in Part X or anywhere else in the Bankruptcy Act 1966 authorising the making of the orders sought by these applications. It was submitted on behalf of each debtor that the court had jurisdiction pursuant to the provisions of s. 30(1) which provides:

"The Court -
(a) has full power to decide all questions, whether of law
or of fact, in any case of bankruptcy or any matter
under Part X or Part XI coming within the cognizance
of the Court; and
(b) may make such orders (including declaratory orders and
orders granting injunctions or other equitable
remedies) as the Court considers necessary for the
purposes of carrying out or giving effect to this Act
in any such case or matter. "

32. It was submitted on behalf of First National that the court has no power to make the order sought under s. 30 of the Bankruptcy Act, it being submitted that the decision of the chairman of a meeting of creditors called under Part X of the Act, is not, prior to any positive decision at such a meeting, a matter capable of coming within the cognizance of the court.

33. It was said that the chairman's decision under s. 201 is final as far as the conduct of the meeting is concerned, and the court's powers arise after conclusion of the meeting either pursuant to s. 222 or s. 221, or perhaps s. 154 or s. 52(2).

34. On behalf of the applicants, it was submitted that the affidavit of Mr Flemming discloses that there are substantial defences to the debts alleged to be due to First National.

35. While it may be that a degree of scepticism might be entertained concerning the claim to an oral agreement releasing, inter alios, the debtors from the obligations of their guarantee, it is not possible to conclude that the claims to which Mr Flemming swears are unarguable.

36. If what is asserted by Mr Flemming is made out, no obligation pursuant to the guarantees is owed by either of the debtors to First National. Where a substantial defence on the merits is disclosed so that there is a doubt if there is any debt at all, the debt is contingent. In those circumstances, it was submitted that, pursuant to s. 198(2) of the Act, the creditor would not be entitled to vote.

37. In Re Levy; Ex parte Scholefield Goodman and Sons Ltd [1980] FCA 129; (1980) 50 FLR 99, Bowen C.J. was concerned with whether a debt was contingent. On the facts of the case, the Chief Justice was not able to discern any defence to the claims and, as a consequence, the debts were not contingent. However, he said at p 111:

"It is true that if a substantial defence on the merits had been
disclosed, this might have led to a different conclusion.
However, this would be because a substantial defence was
disclosed. It has been said that a debt is 'contingent' where
there is doubt if there will be any debt at all."

The Chief Justice referred to Ex parte Ruffle; Re Dummelow (1873) 8 Ch App 997, at p 1001, where Sir George Mellish L.J. said:

"The question really is, what is meant by an 'unliquidated debt'
in the 3rd sub-section. The fair construction of the clause
seems to me this: 'a contingent debt' refers to a case where
there is a doubt if there will be any debt at all; 'a debt, the
value of which is not ascertained,' means a debt the amount of
which cannot be estimated until the happening of some future
event; and 'an unliquidated debt' includes not only all cases of
damages to be ascertained by a jury, but beyond that, extends to
any debt where the creditor fairly admits that he cannot state
the amount. In that case there must be some further inquiry
before he can vote."

38. There are passages in the judgment of Bowen C.J. of direct relevance to the question raised in these applications. At page 112, his Honour said:

"Section 201 deals with admission and rejection of claims to
vote."

After setting out the section, he continued:

"Section 201 is designed to empower the chairman not to make
a final ruling on a debt - that is for the trustee who will
decide whether it is provable - but to rule for the purposes
of the meeting in a summary way avoiding technicalities and
delays. (Re Spanney; Ex parte Holtzmann (1936) 38 WALR
13). His decision is not made appealable by the Act (Re
Amadio (1978) 46 FLR 147). This position may be
contrasted with the position under the Bankruptcy Act 1924,
as amended (see s. 160(f) and s. 169 of that Act).
The policy revealed by s. 201, particularly when read with
s. 225(2), appears to be to facilitate the efficient and
final despatch of business in relation to a meeting of
creditors under Pt X.
On the other hand, s. 201 does not expressly make the
chairman's decision final and conclusive. No doubt if the
court was seized of another matter in the course of which it
was material to determine whether or not a person was a
creditor entitled to vote at the meeting, the court would be
able, indeed would be obliged, to determine the question, in
order to exercise its jurisdiction effectively and would not
be bound by the chairman's decision (see s. 30(1). Thus, in
the present case, while the application sought an order of
sequestration it would have been necessary to determine
whether the applicants were creditors and the court would
not be bound by the chairman's decision." (my underlining)

39. In Re Tregonning; Ex parte Friends' Provident Life Office [1983] FCA 261; (1983) 74 FLR 327, Fitzgerald J. was concerned with an application under s. 222. He held that in such proceedings the court is entitled to inquire and make a finding whether the applicant is a creditor of the debtor. In that case, he concluded that the applicant was a creditor of the debtor. At 331, his Honour said:

"Although the power to determine the rights of persons to
vote at meetings of creditors under Pt X and the amounts of
the debts in respect of which they are entitled to vote is
given by s. 201 of the Act to the chairman of the meeting
and s. 225 gives evidentiary effect to a certificate in
respect of the chairman's decision, the decision is not
entirely beyond question. Notwithstanding that there may
perhaps be room for argument based on the definition of
'special resolution' in the Act if it is applicable, it has
been accepted without question that a declaration such as is
sought in this case is appropriate if a creditor entitled to
vote was improperly excluded from voting when the vote, if
cast against the resolution, would have resulted in its
defeat: see Re Segal; Lensworth Finance Ltd v Segal and
Ward (1975) 45 FLR 85 at 91, 93 per Riley J.; Re Levy
(supra) at 115; Re Moloney; Ex parte Field [1981] FCA 33; (1981) 51 FLR
31 per Lockhart J. It seems that the exclusion of such a
creditor from the vote means that there has been no valid
special resolution and, accordingly, that the deed was not
'entered into in accordance' with Pt X: see section 222(1)."

40. If I were to accede to the application on behalf of the debtors, the consequence would be that First National would be precluded from voting on any resolution. Any such special resolution passed by the meeting would then be open to attack by First National on the basis that it had been improperly excluded from exercising a vote to which it was entitled. It was said by Mr Sofronoff QC that this provided an opportunity, in the totality of the circumstances, for First National to have its interests adequately protected.

41. It appears that it is the present intention of First National to vote against the deed of arrangement proposed by each of the debtors. The amount of the debt which has been admitted by the chairman would go a long way to determining the success or otherwise of any proposed resolution.

42. There is a degree of contingency or speculation about what might happen at the meeting tomorrow or at some later time. However, it was said on behalf of the applicant that if, as a result of the voting at that meeting, the debtors were compelled to petition for bankruptcy, they would suffer irreparable harm, for which damages would be an inadequate remedy. While s. 222 would provide some measure of recourse to the creditor should the applicant's claim that it is not properly a creditor be false, it was said that no similar protection would exist for the debtors.

43. Having regard in particular to s. 221 and the other sections to which I have earlier referred, it seems to me that the matter is not so unbalanced.

44. The matter, in my opinion, is concluded by the judgment of Rogerson J. in Re Amadio (1978) 46 FLR 147 (see also 24 ALR 455). In that case his Honour concluded that the Act, by expressly entrusting to the chairman of the meeting of creditors the determination of the right to vote, and, by making no specific provision for appeal against that determination withheld from the court the power to interfere with that decision unless perhaps the chairman had failed to investigate the matter.

45. His Honour was of the view that the court could not use s. 30(1) of the Act to become seized of a matter when no positive steps altering the legal rights of the parties had been taken. So long as no resolutions had been passed there was no matter of which the court had cognizance.

46. There are, of course, factual differences. In Re Amadio (supra), there were three different authorities in favour of two different solicitors, purporting to authorise them to hold three meetings, the third of which had not been held prior to the judgment of Rogerson J. The nature of the fear, however, which parallels the fears entertained by the debtors in the present case was expressed by his Honour at p 149 (p 459):

"...the debtor clearly hopes that a resolution that he
execute a deed of assignment would secure the necessary
majority if the vote of the company were to be excluded as a
result of a declaratory order or of an injunction."

At p 160 (p 469) his Honour said:

"Part X of the Act contains numerous instances of matters of
which the court is specifically given cognizance. If it had
been intended that a challenge of the chairman's decision
under s. 201 could be made to the court,it would have been
simple so to provide. But, unlike the 1924 Act where there
was such a provision, once a resolution had been passed by a
meeting of creditors, there is in the present Act an
alternative procedure, namely the chairman's power to
adjourn the meeting in order to investigate the matter of
the right to vote, a power which he was not specifically
given under the 1924 Act. I do not believe that Parliament
intended the decision of the chairman to be challengeable
unless perhaps there were special circumstances of the kind
referred to in Spanney's case (1936) 38 WALR 13, a
decision known to Parliament when it passed the Act. The
chairman on reaching his decision may make an error of law
which it is not in the ordinary case capable of being
appealed against. But if every decision of the chairman
were to be appealable there could be lengthy and possibly
unproductive delays, which could well be damaging to
creditors. The Act does, however, provide for the challenge
of the chairman's decision if it has been the cause of a
positive decision affecting legal rights which the debtor,
or a creditor, or the trustee objects to, in the execution
of a deed or the acceptance of a composition, pursuant to a
resolution under s. 249. There is, in such circumstances,
clearly a matter within the cognizance of the court (ss. 31
and 222), and, in determining that matter, the court can
take into account the question whether the chairman's
decision to allow a creditor to vote was correct: see, e.g.
Re Segal; Lensworth Finance Ltd v Segal (1975) 45 FLR 85
where the decision, under s. 201, of the chairman of a
meeting of creditors was declared to have been incorrect in
an application by a creditor that a composition be declared
void. No case has been cited to me, nor do I know of any,
where any court has used s. 30(1) to become seized of a
matter, even though no positive step altering the legal
rights of the parties has been taken. I observe that there
is a clear indication of a contrary attitude in the case of
Re Reynolds; Ex parte Horlock v Evans (1977) WAR 97
where the court declined to apply s. 30(1)(b) so as to
invest itself with powers to act in respect to the fixing of
remuneration of a controlling trustee, which, by s. 193,
falls to be determined by resolution of the creditors.
Counsel for the debtor urged that it would be a great
injustice to leave the debtor naked without the assistance
of the court when wrongfully admitted votes had or might
have deprived him of the opportunity to execute a deed of
assignment without sequestration, and that it would be a
'gaping hole in the legislation' if the court had no power
to 'assist'.
I think that the answer to this is to be found in the nature
of the arrangements under Pt X of the Act. "

47. His Honour noted at p 162 (p 470):

"A creditor may not vote at a meeting under Pt X if his debt is
unliquidated or contingent or if its value is not ascertained.
This rather arbitrary exclusion has been said, by Riley J. in
Segal's case (supra), to be intended to prevent false or
exaggerated claims being made, which might, if allowed by the
chairman, improperly affect the voting at the meeting of
creditors. Such debts are, however, provable in bankruptcy
under s. 82, because their authenticity can be adequately
investigated by official procedures. A creditor could thus be
prevented from voting at a meeting of creditors under Pt X, in
respect of a debt which he could prove in bankruptcy. That vote
might have been crucial in the question whether or not
proceedings in bankruptcy should be taken."

48. He said at p 162 (p 471):

"It is, in my view, entirely reasonable for the law to say
that the debtor must take as final the chairman's decision
as to who his creditors are, and in respect of what amount
they may vote, provided that the chairman has duly
investigated the matter. The chairman may be wrong even
after he has done so, but if positive action under Pt X to
which the debtor objects results in consequence of his wrong
decision, it can be corrected by the court. If nothing
positive results from the meeting of creditors, however, the
consequence will usually be that a creditor's petition will
proceed. Any questions at issue will then be determined,
but not by the chairman of a private meeting of creditors.
The full official machinery of the law will then come into
operation and can determine all relevant questions of law
and fact in the case of bankruptcy then coming within its
cognizance.
It is not the intention of the Act, in my view, to allow the
hearing of petitions to be delayed to allow appeals against
the chairman's decision as to, in the present case, whether
some entirely different creditor had the right to vote,
unless some action affecting the legal rights and position
of creditors or of the debtor has been taken."

49. Even if I were wrong in the conclusion that it is not competent for the Court at this stage to make the orders sought by each application, in my opinion, this is clearly a case where the balance of convenience is against the grant of injunctive relief. The time frame contemplated by Part X for the determination by creditors at the meetings held under Part X is summary.

50. It would be deleterious to the efficient administration of Part X of the Bankruptcy Act if a debtor or a creditor, dissatisfied by a decision by a chairman concerning the right claimed by that creditor to vote, could have the meeting disrupted, by applications to the court for either declaratory or injunctive relief. The delay and disruption implicit in the acceptance of such a state of affairs is contrary to the broad scheme of Part X.

51. For those reasons I decline to grant the relief sought in the application.

52. Each application is dismissed, with costs to be taxed if not agreed.

53. (Mr Sofronoff QC foreshadowed an appeal and submitted that in the absence of some order, either as sought in the notice of motion or an order having the effect of postponing the meeting until the foreshadowed appeal is determined, such an appeal would be nugatory.)

54. (After further discussion).

55. I direct that the creditor's meetings of Mr Forshaw and Mr Sent be adjourned, pending the determination of the foreshadowed appeal or earlier order.

56. I grant liberty to apply, lest there be any reason for one side or the other to bring it back, but apart from that, it will, one would expect, take a course constituted by the filing of notice of appeal, then with directions for the Registrar to settle the Appeal Book. While the undertaking has all the hallmarks of being worthless, do you offer an undertaking as to damages, and do you undertake on behalf of each of your applicants to prosecute the appeal with diligence?

57. (The respective undertakings were offered).