Brott v Grey

Case [2000] FCA 1727

FEDERAL COURT OF AUSTRALIA

Brott v Grey [2000] FCA 1727

BANKRUPTCY - Application seeking to void, or terminate the deed of arrangement - what effect, if any, does the signing of two s 188 authorities have - whether the adjournment of the meeting was irregular - substantiation of creditor’s vote - whether any of the debts were statute barred - consideration of a “creditor” if debt statute barred - effect, if any, on voting for special resolution - nature of loan repayable on demand - discretion of the Court in considering whether to declare the deed void - consideration of possible sequestration and the effect on the creditor’s position.

Bankruptcy Act 1966 (Cth) - ss 188, 196, 201, 222

Musolino v Sidiropolous (1991) 101 ALR 235 Foll
Re  de Kantzow ex parte de Kantzow (1992) 35 FCR 74 Cited
Re Saheed;  Saheed v The Official Receiver (1993) 41 FCR 148 Cited
Hooper v Ewins (1997) 79 FCR 389 Cited

Re Venetoulis;  Ex parte Calsil Ltd (1976) 13 ALR 625 Cited
Re Palazzolo;  ex parte Discusso v Palazzolo [1991] FCA 408 Cited
Re Segal;  Lensworth Finance Ltd v Segal (1979) 9 ALR 154 Cited

Re McLean ex parte Friends Provident Life Office (1992) 36 FCR 502 Cited
Re Dingle;  Westpac v Worrell (1993) 47 FCR 478 Cited
Loeskow v Avokoh Irrigation Pty Ltd [1996] FCA 274 Cited
Re Levy ex parte Scholefield Goodman & Sons Ltd (1980) 50 FLR 99 Cited
Ogilvie v Adams [1981] VR 1041 Foll
Young v Queensland Trustees Limited (1958) 99 CLR 560 Cited

Stage Club Ltd v Millers Hotels Pty Ltd (1981) 150 CLR 535 Refd
Motor Terms Co Pty Ltd v Liberty Insurance Ltd(In Liquidation) (1967) 116 CLR 177 Foll
Re Devy;  Ex parte BBC Hardware Limited (1996) 67 FCR 355 Cited
Bridge v Great Western Portland Cement & Lime Ltd (1932) 48 CLR 522 Refd
Benzon, In re Bower v Chetwynd [1914] 2 Ch 68 Foll
Bowring-Hanbury’s Trustee v Bowring-Hanbury [1943] 1 Ch 104 Cited
Christensen v Davison [1971] QdR 208 Cited
Power v Kenny [1977] WAR 87 Cited
Cotterell v Price [1960] 1 WLR 1097 Cited

ISSAC ALEXANDER BROTT v MICHAEL JOHN GREY AND PAUL DESMOND SWEENEY
QG7286 OF 1998

COOPER J
BRISBANE
29 NOVEMBER 2000


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

QG7286 OF 1998

BETWEEN:

ISSAC ALEXANDER BROTT
APPLICANT

AND:

MICHAEL JOHN GREY
FIRST RESPONDENT

PAUL DESMOND SWEENEY
SECOND RESPONDENT

JUDGE:

COOPER J

DATE OF ORDER:

29 NOVEMBER 2000

WHERE MADE:

BRISBANE

THE COURT ORDERS THAT:

1.        The application be dismissed.

2.The applicant pay the respondents’ costs of and incidental to the application, including reserved costs, if any, to be taxed if not agreed.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY

QG7286 OF 1998

BETWEEN:

ISSAC ALEXANDER BROTT
APPLICANT

AND:

MICHAEL JOHN GREY
FIRST RESPONDENT

PAUL DESMOND SWEENEY
SECOND RESPONDENT

JUDGE:

COOPER J

DATE:

29 NOVEMBER 2000

PLACE:

BRISBANE

REASONS…

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AGLC
Brott v Grey [2000] FCA 1727
Case
[2000] FCA 1727
Decision Date

CaseChat Overview and Summary

The case of Brott v Grey involved the applicant challenging the validity of a deed executed by the debtor under the Corporations Law. The applicant argued that the debtor had not disclosed all relevant debts in his statement of affairs and that certain inaccuracies were present in the statement. The court was tasked with determining whether the debtor had complied with the statutory requirements and whether there was any doubt as to the validity of the deed.

The central legal issue was whether the debtor had fulfilled the statutory obligations under sections 188(2) and 222(1) of the Act, specifically regarding the disclosure of debts and the timing and location of creditor meetings. The court examined whether the debtor's failure to disclose certain debts and inaccuracies in the statement of affairs amounted to a material omission or error that could invalidate the deed. Additionally, the court had to assess if the meetings of creditors were conducted properly and if they were valid and effective.

The court found that the debtor had not complied with the statutory requirement to provide statements of his debts within the specified time and that there was no evidence of the solicitor's written consent to call the meeting, which is necessary for an effective authority. However, the court concluded that the meetings were not shams and that the special resolution taken by the creditors was valid. The court also determined that the onus of proof in such matters lies with the applicant and found that there was no evidence to substantiate the claims regarding the improper substantiation of creditors' debts.

In light of these findings, the court dismissed the application and ordered that the applicant pay the respondents' costs of and incidental to the application, including any reserved costs, to be taxed if not agreed.

Orders

Orders of the court

1. The application be dismissed.

2. The applicant pay the respondents’ costs of and incidental to the application, including reserved costs, if any, to be taxed if not agreed.

Note:

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

The applicant also contends that for the purposes of s 222(4)(b) of the Act the debtor omitted a material particular from his statement of affairs given under s 188(2) of the Act by failing to disclose debts due to members of the Victorian Bar. The applicant also contends that the debtor included an incorrect and material particular in the statement of affairs when:(a)He failed to spell the applicant’s name correctly;(b)He stated that the applicant’s address and the address of Terry P Murphy were “unknown”;(c)He inserted in column 5 of Part II of the statement under heading “Year when Contracted” in respect of debts of Howick, Wannon and Travel and that of the ANZ Bank the word “CURRENT” when the alleged debts were not contracted in 1992 but many years earlier.THE EVIDENCE The applicant read in support of his application the affidavits which he filed in the proceedings on 20 July 1998 and 30 November 1998, together with the exhibits to those affidavits, the affidavit of Tien Thuy Tran filed 18 March 1999 as to the conduct of the proceedings in the Supreme Court of Victoria between the debtor and Carew Counsel & Holmes, and the affidavit of the trustee under the deed, Paul Desmond Sweeney filed 24 December 1998. He also relied upon the oral evidence of Andrew Oliver Hewlett, a solicitor, including an affidavit of Mr Hewlett sworn in 1992 (Exhibit 1 in these proceedings), a bundle of documents bearing the name of Gordon and Jackson Barristers Clerks of Melbourne (Exhibit 2), a database search from the Information Division of the Australian Securities Commission in respect of the debtor generated 2 July 1998 (Exhibit 3) and an internal report of Mallesons Stephens Jacques, solicitors of Melbourne as to an inspection of some of the Carew, Counsel & Holmes files dated 14 June 1989 (Exhibit 4). The debtor relies upon an affidavit he filed on 2 March 2000 in the proceedings and the oral evidence which he gave on the hearing. The second respondent, Mr Sweeney the trustee, relies on his affidavit filed 24 December 1998 and the affidavit of Mr Rodgers, his solicitor, filed on 30 December 1998. The applicant produced two volumes of documents entitled “Court Book”. The volumes included the affidavits read on the hearing, other than the debtor’s affidavit, and other documents. The debtor was cross examined by reference to the contents of the volumes. However, they were not tendered and did not form part of the evidence before the Court.IS THERE A DOUBT FOR THE PURPOSES OF S 222(1) OF THE ACT?GROUNDS (A) AND (B) The authority signed by the debtor on 13 March 1992 was not an effective authority for the purposes of Part X of the Act. This follows because the debtor failed to give the statements required by s 188(2)(c) within the specified time: s 188(2). Additionally, there is no evidence that the solicitor consented in writing to call a meeting which is a necessary requirement for there to be an effective authority: s 188(2)(a). There being no effective authority in existence there was nothing to prevent the debtor signing another authority. Even if the first authority had been effective but simply had not been acted upon by the solicitor that would not prevent a second authority being given by the debtor and being acted upon as an effective authority for the purposes of Part X of the Act: Re de Kantzow ex parte de Kantzow (1992) 35 FCR 74 at 76; Re Saheed; Saheed v The Official Receiver (1993) 41 FCR 148 at 149 - 150; Hooper v Ewins (1997) 79 FCR 389 at 392.

Decision

Reasons for decision

COOPER J

Full text does not contain this section.

Ratio Decidendi

Legal Principle Established

Established by: COOPER J

The issue of the location of the meeting in Brisbane was raised by Mr Hewlett at the meeting on 11 May 1992. The minutes record :“DECLARATION OF TIME AND PLACE:Mr Hewlett representing Ian Dunlop advised that his client believed the meeting was not being held at a place convenient as the majority of creditors were in Victoria.The Chairman noted that Mr Dunlop was in fact represented at the meeting.Mr Jeffrey representing Wannon Holdings Pty Ltd advised that the meeting was being held at a time and place convenient to his client and the five other creditors he represents. He also noted that Mr Philp also held a number of proxies.The Chairman asked Mr Philp whether he had any comments as to the venue having regard to the fact that the held a number of proxies. Mr Philp advised that the venue was satisfactory as far as he was aware.The Chairman asked the meeting for a resolution in relation to the convenience of the meeting. The Chairman specifically asked Mr Hewlett whether or not he wanted to put a motion, but he declined to do so.There being no resolution, the Chairman declared that the meeting of creditors was being held at a time and place convenient to the majority in number of creditors, and accordingly allowed the meeting to proceed.” In my view, there is no evidence to support a finding that the meetings on 11 and 12 May 1992 were shams. The whole purpose of calling the meetings was that they were valid and effective in law and that the special resolution took effect so as to allow the debtor to avoid being made bankrupt in the proceedings brought against him by Mr Dunlop. As appears from the article in the Business Review Weekly, the applicant and Mr Dunlop were aware that that was the purpose of the meeting and that the meeting was to be held in Brisbane in the week following 5 May 1992. Further, the applicant by his proxy declined to seek a resolution of the creditors present on 11 May 1992 under s 196(2) of the Act. There is no doubt raised for the purposes of s 222(1) on this ground.WAS THE DEED ACCEPTED BY A SPECIAL RESOLUTION OF THE CREDITORS? The first ground raised by the applicant that the chairman allowed creditors to vote in favour of the special resolution without proper substantiation of their debts may be dealt with shortly. There is no evidence that the chairman failed to require proper substantiation by those creditors of their claims. The onus of proof in an application under s 222(2) is no different, in my view, to the onus which is borne by an applicant under s 222(4) of the Act; the onus of proof under s 222(4) is borne by the applicant: Re Segal; Lensworth Finance Ltd v Segal (1979) 9 ALR 154 at 158; Musolino v Sidiropolous at 245. A creditor may make known to the person who is elected chairman of the meeting of creditors particulars of the debt sufficient for the purposes of s 198(4) of the Act either before or at the meeting: Re Venetoulis at 630. So too, in my view, could that person investigate the creditor’s right to vote and the quantum of the debt, either before or at the meeting, or upon any adjournment for that purpose under the then s 201 of the Act.