Buckley, P.S. v A.C. Goode and Company Ltd

[1990] FCA 556

JUDGMENT NO. ...ss6 .... 19 -

IN TRE FEDERAL COURT OF AUSTRALIA )	NO VX 23 of 1988
BANKRUPTCY DIVISION	1
BANKRUPTCY DISTRICT OF	)
THE STATE OF VICTORIA	1
Re: PETER SEAN BUCKLEY

Debtor

EX Parte: A.C. GOODE h CO LTD

Applicant

DAVID JORN PRATT

(As trustee of the Estate
of Peter Sean Buckley
under Part X of the

Bankruptcy Act 1966)

First Respondent
PETER BUCKLEY (SENIOR1

Second Respondent

Einfeld J Melbourne 3 Mav 1990

This application came before the Court originally on 30 March

1990 when after full evidence, arguments were raised for the

repeat them here.

first time by the applicant alleging fraud and other miscreances by the debtor and the second respondent. I therefore adjourned the proceedings heard and directed that various steps be taken to enable interested parties not before the Court to have notice of what was now being alleged and give them an opportunity to be heard, and to give existing parties an opportunity to place further evidence before the Court. An ex tempore judgment given on that occasion sets out the facts of the matter. It is therefore not necessary to

I

The matter resumed on 3 May 1990. There was a complete change of legal representation on all sides and the second respondent was by consent dismissed from the suit. The allegations of fraud and related matters were not pursued and the matter resumed at the point it should never have left.

As indicated in the earlier judgment, the application arises under section 222(4)(b) of the Bankruptcy Act. This provides:

Where the Court on the a p p l i c a t i o n o f the Inspector-

General, a person author ised i n w r i t i n g by t h e

Inspector-General, the t r u s t e e o r a c r e d i t o r , i s

s a t i s f i e d t h a t the deb tor -

( a )	......
( b )	has omi t ted a ma ter ia l par t i cu lar
from the s ta tement o f the debtor ' s
or inc luded an incorrect and mater ia l a f f a i r s given under subsec t ion 188(2)
p a r t i c u l a r i n t h a t s ta t emen t ,

the Court may make an order d e c l a r i n g the deed o f composition to be vo id , or dec lar ing any prov i s ion o f the deed or

composit ion t o be void .

Section 222(5) states: 

The Court s h a l l n o t make an order dec lar ing a deed

or composi t ion o r a prov i s ion o f a deed o r

composi t ion to be void on a ground s p e c i f i e d i n

subsec t ion ( 4 ) u n l e s s it i s s a t i s f i e d t h a t it would

be i n the i n t e r e s t s of the c r e d i t o r s t o do so.

The issues for determination in the matter are:

1.    Whether the debtor's failure to disclose the existence of the Richmond property in his statement of affairs to

creditors represented the omission of a material
particular

2.    Whether the invalidation of the debtor's composition with his creditors is in the interests of the creditors

3.   Whether grounds exist for the exercise of the Court's discretion in declaring the composition void and making a sequestration order

There is no dispute that the debtor's legal ownership of the Richmond property was not disclosed to creditors. Therefore the only real issue on this aspect is its materiality. I have no doubt at all that the omitted information was material and relevant to the statement of affairs. As I observed in my remarks on 30 March 1990, the creditors may well have been interested in and influenced by a full disclosure in relation to this property especially in view of the value of the property as against the small value of the rest of the

debtor's estate. Although I recognise that this has been

somewhat dissipated by legal costs incurred in and since the

composition, the creditors would clearly have been anxious to question the debtor and his father about the property. In the circumstances which I outlined on 30 March 1990, it is best if

I say nothing more on this matter at this time. It will

suffice to observe that the creditors may well have opted for an investigation of the debtor, in lieu of the proposed composition, and have required him to present his own petition for bankruptcy, if his ownership of this property had been disclosed.

As to the interests of the creditors, the authorities demonstrate that all the circumstances must be taken into account, including the real possibility of an economic advantage occurring to the creditors: see inter alia Auaustvn

v Putnin [l9891 83 ALR 514; Re Brown ex Darte Humes Ltd [l9871

74 ALR 611 in the first of which French J at 521 (Spender J

agreeing), and in the second of which Pincus J at 619 quote

with approval a dictum of Toohey J, when a member of this !

Court, in Re Doudikis, unreported 26 June 1985. Mr Buckley senior's claim to the ownership of this property in equity has many problems, not least the absence of "clean handsn in a number of respects which it would be better if I did not now

analyse in detail. In view of the steps towards sale which he I .

has taken, the creditors therefore possess a real chance of	B .
obtaining a solution to the dispute which will operate to	, .
their benefit.	i

r '

._

The discretionary considerations appropriate here appear to

L '

overlap into the issues arising under section 222(5) just	; r
1 .
discussed. In addition to the matters discussed in that connection, I also identify as a reason to exercise the	I .
, I
I I'
discretion in this case the fact that the arrangements made	. . ,
I
I ..
between the debtor and his father were both most unusual and	I
quite disturbing, such as to call for investigation by the	I
I . I
Official Trustee in Bankruptcy. The debtor's own general	1.
approach to these proceedings and his father's evidence as to his intentions in relation to the sale o f the property also give rise to serious public interest grounds for a full examination of the whole transaction.
It is true that there has been a very long and not very satisfactorily explained delay by the applicant for not acting before now and for only seeming to move when real property prices rose substantially. But if the composition is declared void and the sequestration order is made, a caveat can be lodged to protect any interest which Mr Buckley senior can establish. I do not think that the delay or the possible existence of a constructive trust of the property in favour of
Mr Buckley senior are reasons to deny the relief sought.
I therefore declare the composition void.	Section 2 2 2 ( 7 )
states :

The t r u s t e e or a c r e d i t o r may i n c l u d e i n a n

a p p l i c a t i o n under s u b s e c t i o n ( 1 ) or ( 4 ) a n

a p p l i c a t i o n f o r a s e q u e s t r a t i o n o r d e r a g a i n s t the

e s t a t e o f the d e b t o r and i f the Cour t , on the first-

ment ioned a p p l i c a t i o n , makes an o r d e r under

s u b s e c t i o n ( 2 ) or ( 4 ) d e c l a r i n g the deed or

compos i t ion t o which it r e l a t e s t o be v o i d , it may,

i f i t t h i n k s f i t , f o r t h w i t h make t h e s e q u e s t r a t i o n

o r d e r sought .

The Court will make a sequestration order in accordance with subsection (7) unless some sufficient cause is shown to outweigh the public interest and that of individual creditors who are unable to have their debts paid to them: Re Morris;

Ex varte Adams [l9801 48 FLR 341.

I make a sequestration order against the estate of the debtor.

The debtor is to pay half the applicant's costs.