Re Valerie Evelyn Curry Ex Parte: Goldsea Pty Ltd [1992] FCA 619; (1992) 40 FCR 32 (11 December 1992)

FEDERAL COURT OF AUSTRALIA

Re: VALERIE EVELYN CURRY
Ex parte: GOLDSEA PTY LTD
No. P Q1209 of 1992
FED No. 1030
Number of pages - 11
Bankruptcy
[1992] FCA 619; (1992) 40 FCR 32

COURT

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

CATCHWORDS

Bankruptcy - acts of bankruptcy - contested creditor's petition - judgment debt - act of bankruptcy constituted by failure to present debtor's petition within time specified by special resolution of creditors' meeting - authority to call meeting of creditors not effective for purposes of Part X - nature of relationship between trustee or solicitor to whom authority is given and debtor - whether acts of bankruptcy require an authority effective for purposes of Part X.

Bankruptcy Act 1966 ss. 40, 44, 188, 204, 221

Re Donovan; ex parte A.N.Z. Banking Group Ltd (1971-72) 20 FLR 50.

HEARING

BRISBANE
11:12:1992

Counsel for the petitioning creditor: Mr M. Kent

Instructed by: Phillips Fox

Counsel for the debtor: Mr A. Philp

Instructed by: Radcliff Lather and Buckland

ORDER

THE COURT ORDERS THAT:
1. Creditor's Petition No. 1209 of 1992 is dismissed.

2. The petitioning creditor pay the debtor's costs of opposing
the petition, including reserved costs, to be taxed if not
agreed.

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

DECISION

SPENDER J. This is a contested creditor's petition. The petitioning creditor, Goldsea Pty Ltd ('Goldsea'), asserts in the petition that Valerie Evelyn Curry is justly and truly indebted to it in the sum of $85,201.69 (eighty-five thousand two hundred and one dollars and sixty-nine cents), being moneys owing pursuant to a judgment obtained by Goldsea against Mrs Curry in the District Court at Brisbane on 26 April 1991.

2. The creditor's petition is not based on the usual act of bankruptcy of failure to comply with a bankruptcy notice, but alleges the act of bankruptcy constituted by s. 40(1) of the Bankruptcy Act 1966 ('the Act'), which provides:

" A debtor commits an act of bankruptcy in each of the
following cases:
...
(l) if, having been required by a special resolution of a
meeting of his creditors so called...to present a
debtor's petition, he fails, without sufficient cause:
...
(ii) to present a debtor's petition within the time
specified in the resolution;
as the case may be; "

3. Paragraph 4 of the amended creditor's petition alleges:

" Despite having been required by a special resolution of a
meeting of the creditors of the debtor held on 6 December,
1991 to present a Debtor's Petition within 7 days from the
day on which the special resolution was passed, the Debtor
has failed to present the said Debtor's Petition on or
before 13 December 1991. "

4. Section 40(5) provides:

" The act of bankruptcy specified in paragraph (1)(l) shall be
deemed to be committed on the day after the day on which the
period within which the deed is required to be executed by
the debtor or the period within which the petition is
required to be presented, as the case may be, expires. "
By s. 44(1):
" A creditor's petition shall not be presented against a
debtor unless:
...
(c) the act of bankruptcy on which the petition is founded
was committed within 6 months before the presentation
of the petition. "

5. The date of the act of bankruptcy which is alleged is 14 December 1991. The petition was presented on 15 May 1992.

6. As to proof of the act of bankruptcy relied on, Robert Anthony Sinnamon, a solicitor, says that on 6 December 1991 he attended a creditor's meeting of Valerie Evelyn Curry and says:

" At the said creditors (sic) meeting a special resolution was
passed requiring Valerie Evelyn Curry to present a Debtor's
Petition within 7 days from the day on which the resolution
was passed. "

7. There is an affidavit by Matthew James Lyons which swears to the same effect.

8. It is common ground that no debtor's petition was presented or has been presented by Mrs Curry either in the time referred to in the petition or at all.

9. On 12 June 1992 the debtor filed a notice of intention to oppose the petition of Goldsea. She claims she is not indebted to Goldsea as alleged in the petition. She disputes the validity of the act of bankruptcy relied on in paragraph 4 of the petition and in particular disputes the validity of the meeting of her creditors held on 6 December 1991 and the validity of the special resolution referred to in paragraph 4 of the petition.

10. As to the question of the validity of the debt, Goldsea obtained summary judgment against Mrs Curry in the amount of $85,201.69 in respect of rent, outgoings and interest payable by Mrs Curry to Goldsea in respect of her occupation of premises on the Gold Coast from 1 August 1989 to 31 December 1990. Mrs. Curry says that, acting on the advice of her then solicitor, she believed that she had no real defence to the petitioning creditor's claim, and as a consequence did not appear at the hearing and was unrepresented at that hearing.

11. On 24 June 1992 the debtor made application to the District Court in Brisbane to set aside the judgment of Goldsea obtained on 26 April 1991. That application was based on what the debtor asserted were pre-contractual representations made to her prior to her leasing premises in "The Oasis on Broadbeach". She also asserted that there were further representations during the currency of the lease which induced her to spend further sums in setting up a beauty clinic.

12. On 24 June 1992, Acting Judge Brabazon QC, ordered the judgment be set aside on certain terms and conditions including that the debtor pay to the creditor the sum of $10,000.00 on account of the creditor's costs within twenty-one days of 24 June 1992. The debtor failed to pay the sum of $10,000.00 to the creditor as required as a condition of the setting aside of the judgment. On 21 July 1992 the debtor made unsuccessful application to the Court of Appeal to obtain leave to appeal against the order of Acting Judge Brabazon QC

13. On 30 July 1992, Goldsea made application before Judge McMurdo to strike out the debtor's amended entry of appearance, defence and counterclaim which was filed immediately after the application to set aside on 24 June 1992. That application by Goldsea was successful, but the debtor was given a further period of time until 4 p.m. on 10 August 1992 to comply with the order of his Honour, Acting Judge Brabazon QC. The debtor failed to pay the sum of $10,000.00 to Goldsea before 4 p.m. on 10 August 1992.

14. As a consequence of these various applications, the position is that the judgment debt of 26 April 1991 is a subsisting judgment against the debtor, enforceable by execution against her. In my view Mrs Curry is justly and truly indebted to Goldsea in the amount of the judgment debt.

15. The other grounds of opposition, however, occasioned some difficulty.

16. Part X of the Bankruptcy Act makes provision whereby creditors can make arrangements with a debtor without a sequestration being necessary. That Part imposes certain requirements. By s. 188, a debtor, seeking that his or her affairs be dealt with under Part X, may sign an authority authorising, inter alios, a solicitor to call a meeting of his or her creditors. Section 188(2) relevantly provides:

" An authority signed by a debtor under this section is not
effective for the purposes of this Part unless -
(a) ...the solicitor named in it has consented, in
writing, to call the meeting of creditors, as the case
may be;
(b) the signature of the debtor to the authority and the
signature of the...solicitor to the consent are each
attested by a witness; and
(c) within 10 days before signing the authority, the
debtor gave to the...solicitor:
(i) a statement of the debtor's affairs; and
(ii) a statement indicating how the debtor proposes
that his or her affairs be dealt with under this
Part. "

17. It appears that the authority by Mrs Curry was signed by her on 19 November 1991 at Brisbane but the statement of her affairs was not given to the solicitor until 20 November 1991. The authority contains a consent by Douglas Macleod Beames, a solicitor, to call a meeting of creditors, but that consent is dated 24 November 1991. The notice of meeting is dated 19 November 1991, which predates the consent of Mr Beames to act pursuant to Part X.

18. It seems to me that the authority signed by Mrs Curry is not effective for the purposes of Part X, not only because of want of compliance with para. 188(2)(a) but also because the evidence establishes want of compliance with para. 188(2)(c).

19. The evidence generally on this aspect of the matter is less than complete and in particular I am unable to say whether the requirements of s. 194(2A) were complied with. There is nothing to suggest that the requirements of s. 203(1) requiring the chairman to cause minutes of the proceedings at the creditors' meeting to be prepared, has been complied with. No minutes have been filed, as required by s. 203(4).

20. Importantly for present purposes, s. 204(1) relevantly provides:

" The creditors may, at a meeting called in pursuance of an
authority under section 188, by special resolution -
...
(d) require the debtor to present a debtor's petition
within 7 days from the day on which the resolution was
passed. "

21. Section 204(7) requires the chairman of the meeting forthwith to sign a certificate where a resolution requiring a debtor to present a debtor's petition within seven days from the date on which the resolution was passed. No such certificate was filed in the office of the Registrar, as required by para. 204(7)(b).

22. It was submitted that a trustee or solicitor to whom an authority is given is in essence an agent of the debtor, and that the debtor should not therefore be entitled to rely on defaults by that trustee or solicitor of the statutory obligations imposed on them. I do not accept that the relationship is in any way one of agent and principal. The Act imposes obligations on a trustee or solicitor, which in my view are inconsistent with that trustee or solicitor being subject to direction or control by the debtor.

23. Section 221(1), in Part X of the Act, 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. "

24. The reference in para. 221(1)(b) to a meeting of creditors called "in pursuance of such an authority" is reference to an authority signed by the debtor under s. 188. An authority which fails to satisfy the requirements of s. 188(2) is, by that subsection, ineffective for the purposes of Part X of the Act. In my opinion, the discretionary power given to the Court pursuant to s. 221 is not enlivened when there is an authority which is by virtue of s. 188 ineffective for the purposes of Part X.

25. Nonetheless, it was submitted that the act of bankruptcy specified by para. 40(1)(l) does not require the existence of an effective authority under s. 188. Reliance is placed on the judgment of Sweeney J. in Re Donovan; ex parte A.N.Z. Banking Group Ltd (1971-72) 20 FLR 50. In that case Sweeney J. held that a debtor wishing to take the benefit of Part X of the Act may sign the form of authority prescribed by s. 188(1) of the Act and reserve the right thereafter to give instructions that it be dated and become effective at a subsequent time to be decided by him or her and communicated to those concerned so that it should then become an authority signed by him or her. His Honour held that a debtor who signed such an authority commits the act of bankruptcy prescribed by para. 40(1)(i) of the Act by so doing, whether the authority becomes "effective for the purposes of Part X" within the meaning of s. 188 or not. His Honour said at 65:

" Section 40 which makes the signing of an authority under s.
188 of an act of bankruptcy is in Pt IV, not Pt. X, of the
Act, and the section does not require that, in order to
constitute an act of bankruptcy, the authority signed must
be one which is, or becomes, effective for the purposes of
Pt. X. In my opinion, a debtor who signs an authority in
accordance with the appropriate form in the Third Schedule
commits an act of bankruptcy by doing so, whether the
authority becomes effective for the purposes of Pt. X,
within the meaning of s. 188(2), or not. "

26. Whether the petitioning creditor could have relied on such an act of bankruptcy in the present case is not presently relevant, because of the time limitations involved.

27. It was submitted, by parity of reasoning, that the act of bankruptcy constituted by para. 40(1)(l) did not require an authority which was effective for the purposes of Part X of the Act.

28. It is useful for present purposes to set out the acts of bankruptcy alleged in paras. 40(1)(i)-(m) inclusive:

" A debtor commits an act of bankruptcy in each of the
following cases:-
...
(i) if he signs an authority under section 188;
(j) if a meeting of his creditors is called in pursuance
of such an authority;
(k) if, without sufficient cause, he fails to attend a
meeting of his creditors called in pursuance of such
an authority;
(l) if, having been required by a special resolution of a
meeting of his creditors so called to execute a deed
of assignment or a deed of arrangement or to present a
debtor's petition, he fails, without sufficient cause
-
(i) to comply with the requirements of this Act as
to the execution of the deed by him; or
(ii) to present a debtor's petition within the time
specified in the resolution,
as the case may be;
(m) if a deed of assignment or a deed of arrangement
executed by him under Part X of a composition accepted
by a meeting of his creditors under that Part is
declared to be void by the Court or is terminated by
the Court or the creditors under that Part or such a
composition is set aside by the Court under that Part;
or
... "

29. Accepting pursuant to the judgment In re Donovan (supra) that the signing of an authority under s. 188, even if that authority be ineffective for the purposes of Part X of the Act, constitutes the act of bankruptcy specified in para. 40(1)(i), in my opinion, the acts of bankruptcy constituted by paras. 40(1)(j), (k), (l) and (m) require the existence of an authority which is effective for the purposes of Part X before the acts of bankruptcy constituted by those respective paragraphs are made out. In my opinion, there has to be as an essential precondition to the act of bankruptcy specified in para. 40(1)(1) a legally binding requirement on the debtor to file a debtor's petition within the time specified by the special resolution, and this then can only be if the authority given as to the calling of the meeting is effective for the purposes of Part X of the Act.

30. I am fortified in that conclusion by the fact that it produces no disconformity with s. 221(1) of the Act.

31. For these reasons I am not satisfied of the act of bankruptcy alleged in paragraph 4 of the amended creditor's petition. I dismiss the petition and the petitioning creditor should pay the debtor's costs of opposing the petition, including any reserved costs, to be taxed if not agreed.