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

[1990] FCA 609

JUDGMENT No. . LQ.? / .?!?-

IN TBE FEDERAL COURT OF AUSTRALIA ) No VX 23 of 1988

Y DIVISION

Y DISTRICT OF 1

THE STATE OF VICTORIq	)
Re: PETER SEAN BUCKLEY

Debtor

EX Parte: A . C . G00 DE & CO LTD

DAVID JOHN PRATT

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

- 2 NOV 1990 Bankruptcy Act 1966)

FEDERN. COURT OF

PRlNGIPU

Einfeld ;I Melbourne 30 March 199Q

This is an application by a creditor, A.C. Goode and Company Limited, of the debtor Peter Sean Buckley for an order declaring that the debtor's composition with his creditors at a meeting on 18 March 1990 (the composition was actually made by the debtor on 21 March 1990) is void, and for a sequestration order to be made against his estate.

property in Richmond.

The application is made under section 222(4) (b), it being alleged that in the statement of his affairs given to the meeting of creditors called to consider the proposed composition, the debtor omitted a material particular. The omission, which is not disputed, is that he failed to advise the creditors that he was the legal owner of a residential

The case has been met with the assertion that the omission was not material in that in fact the debtor had some two years prior to the meeting of creditors disposed of his interest in the property to his father. The debtor has not filed an affidavit in the proceedings nor has he attended court, but his father has sworn to some facts and given some evidence.

It is alleged that Mr Buckley senior purchased all of the interest of his son in the property for valuable consideration, and that he has continued to meet the outgoings on the property including the instalments on a mortgage to what was then the RESI Building Society.

The evidence also asserts that Mr Buckley senior has recently purported to exchange contracts for the sale of this property, signing the necessary documents for this purpose in his own name and signature, whereas the fact is that at no time has the legal ownership passed from the debtor to him because no transfer or other documentation has been registered.

based upon section 2 2 2 ( 5 ) which mandates the Court not to make

The second ground on which the application is defended is

an order of invalidity on any ground set out in subsection 4 "unless it is satisfied that it would be in the interests of the creditors to do so".

The debtor says that there is no evidence upon which the Court can be satisfied to this effect because Mr Buckley senior has a beneficial interest which equity at least would recognise, and that therefore the property would not be part of the debtor's assets and would not have been part of his assets at the time of the composition.

There was no evidence brought by the applicant and no cross- examination of Mr Buckley senior to suggest that the failure to include this property in the statement of affairs presented to the creditors at the meeting to consider the composition was brought about by fraud. References at the bar table to this effect were made during the course of today's hearing, but the applicant has declined my invitation that it seek an adjournment to bring evidence of those allegations and to re- open the hearing to permit them to be litigated. The applicant did seek leave to cross-examine Mr Buckley senior further on these matters during submissions in reply but this application was expressly not joined with an application for an adjournment to produce evidence on the subject.

of Mr Buckley senior on a number of bases, of which one was I declined the application for this further cross-examination

that it was much too late in the proceedings to change the nature of the case in the way outlined without any evidence being brought by the applicant to provide a basis for the assertions sought to be made. Another reason for the refusal to re-open cross-examination was because the debtor himself would have had no notice that it was to be alleged that he and his father were parties to a fraud on the creditors.

The debtor does not deserve a great deal of consideration in these proceedings in view of the fact that he is not here and has presented no evidence, but I think that an allegation of this seriousness deserves special care to ensure that justice is adequately done to him as well as to others.

A further reason for declining the application to cross-

examine further to raise these issues at this stage is that Mr Buckley senior is not a party to these proceedings, he has no representation, and therefore he has no opportunity to get advice as to how he should deal with these assertions. Nor is there anyone here to protect his interests in cross- examination of such far-reaching and possibly serious consequences.

Yet a further reason is that the other creditors are not represented and have no notice of this proposed change of tack. In fact this morning I exempted from the further need to attend, without objection, the solicitor for the trustee,

who before he left advised me that there was very little money left in the estate for distribution amongst creditors in any

event.

It is perfectly clear that if the creditors are entitled to the whole or a share of the proceeds of the Richmond property when it is sold, or even to a say in whether it ought to be allowed to be sold, they must first have notice of the events and must be in a position to assess to what extent, if at all, they would be benefited by taking position in relation to those matters.

Certainly on the face of it, and without my having examined the matter in any detail, a comparison between a distribution amongst creditors of what the solicitor for the trustee said would be of the order of $2,000 when compared to the possibility that there might be added something of the order of $40,000 from the sale of this property may well give rise to a view to be taken both by the trustee and by the creditors in this connection if they were aware of the facts.

If the only creditor of Peter Sean Buckley was the applicant, I would therefore be inclined to address this litigation differently than in the present circumstances. The decision of this applicant not to seek an adjournment to permit the making of what has been fairly loosely thrown around as an allegation of fraud, leads one to the suspicion that this applicant is concerned only for its own interests and not for

the interests of the creditors generally.

On the evidence before me, I am not in a position to say

definitively whether this property could have been available for distribution and division amongst creditors in the composition, but it is certainly a question open to be considered and on which views are entitled to be put before a final decision is made.

For these reasons it seems to me that this litigation cannot be concluded at this time. If the composition were declared void, that matter would merely have been dealt with in a fairly peripheral and summary way, leaving open the major issue which would still arise in relation to the affairs of

the debtor. If the application for a declaration of invalidity was refused, the case would still be open for applications by other creditors and possibly by other persons to determine the proper repository of the subject property or the proceeds of its sale.

Counsel for the debtor has correctly pointed out that I am not entitled in any event to invalidate a deed of composition unless satisfied that it would be in the interests of the creditors to do so. I find it very difficult to decide that it is in the interests of the creditors to declare thls composition void when I do not know what the interests of the creditors are, nor have I been addressed on the questlon of

whether they would be entitled to some or all of the proceeds of sale of this property, or of ownership of the property

itself via the controlling trustee.

I certainly have no idea at all whether the creditors would have voted for the proposed composition if they had known the relevant facts. I do not even know, for example, because the evidence does not reveal, whether the applicant, as one of the creditors who was present and presumably consented to the deed of composition, would itself have supported or voted for it if

it had known the relevant facts. The evidence brought simply
does not deal with the position one way or the other.

I do not think there is any doubt that it would have been a material particular for a properly drawn statement of affairs to have advised creditors that the debtor was the legal owner of the Richmond property, even if he accompanied his declaration to this effect with detailed information that he had disposed of his interest to his father in the circumstances he would there have had to set out. The evidence before me reveals that his father paid him $13,000 for this property, $8,000 of which was said to have been paid by cheque and $5,000 of which amounted to what was said to be a forgiving of previous debts of the debtor to his father. The creditors would at least have been interested in what the debtor had done with the $8,000 that his father had paid him in cash. Amongst many other things, they would undoubtedly have been interested in the nature and purpose of the transfer and why it had not been registered. They may well have put a rider on the composition and may well have given some instructions to the controlling trustee in this connection. I

simply do not know and therefore do not know at the moment whether the invalidating of the deed of composition would be in the interests of the creditors at all.

For these reasons, I propose to make the following orders and give the following directions:

1.	I adjourn the current application part heard and direct that the transcript be made available as soon as possible.
2.	I direct that the current application and affidavits be served on Mr Peter Buckley senior, or such solicitors or agents as he may advise, by not later than 4pm on Frlday 6 April, and that he be and be added as a further respondent to this application.
3.	I give leave to the applicant to amend its application as it may be advised.
4.	I direct that the respondent trustee draw to the notice

of the creditors by not later than 4pm on Wednesday 4

April, the affidavits filed in these proceedings and the	.
matters that have emerged in this hearing, including the transcript if it is available by that time, concerning the ownership, both legal and beneficial, actual or
application. The details should include the financial	claimed, of the property which is the subject of this
dealings and activities in relation thereto and its proposed sale, together with particulars of any allegations of fraud now intended to be made by the applicant.

6.   I direct that the respondent trustee call a meeting of the creditors to discuss the evidence in this matter and the steps they now wish to make by not later than Wednesday 18 April.

7 .    Mr Peter Buckley senior and any creditor or group of

creditors wishing to make or support an application in these proceedings are to file and serve an application and supporting affidavits or notice of support to any other application by not later than 4pm on Friday 20 April.

8.    The matter will be listed for directions before me at

9.30am on Tuesday 24 April, with a view to fixing the

further hearing of the matter in the period 30 April to 4

May.

9.    I order that the costs of the proceedings today be paid by the applicant.

10.	I order that details of these orders and directions be

given by the applicant's solicitors to the solicitor for the trustee by not later than 12 noon on Monday next, 2

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April. -.-

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