Burns v Lorac Mining Pty Ltd

CATCHWORDS

Banlcruptcy - deed o€ asslgnment witnessed

by p a r t y t o

deed - s.216

Bankruptcy A c t n o t s a t i s f i e d

- deed Invalid -

a p p l i c a t i o n u n d e r

s.222

Bankruptcy

A c t no t necessa ry

c o u r t h a s j u r l s d l c t i o n u n d e r

s.30

Bankruptcy Act.

ROBERT J O H N FRED BURNS and PETER IVAN FELIX	GEROFF
v. LORAC EIETING PTL’. LIMITED

No.	XI1 of 1 9 8 4

Beaunont, J.

6 March 1985.

Sydney.

IN THE FEDERAL COURT OF AUSTRALIA

) )

QUEENSLAND REGISTRY	No. XI1 of 1984
GENERAL DIVISION

BEXKEN:

ROBERT JOHN

FRED BURNS and

PETER IVAN FELIX GEROFF

Appllcants

LORAC MINING PTY. LIMITED

Respondent

ORDER

Judge making order: Beaumont, J.

Date order made:	6 March 1985.
Where made:	Sydney

THE COURT ORDERS THAT:

Appllcatlon. as amended,

dlsmlssed.

Discharge

the

xisting

injunction.

3 .

Bppllcants

respondent‘s

pay

costs

the

application, Including reserved costs.

11.1 THE

FEDERAL

COURT

OF AUSTRALIA !

)

QUEENSL-AND REGISTRY	)	No.	X I 1 of 1984
1
GENERAL DIVISION	1

BETWEEN :

ROBERT J O H N FRD BURNS and

PETER IVAN FELIX GEROFF

Applicants

AND	:	LORAC M I N I N G PTY.	LIMITED
Respondent

CORAM: Beaumont, J.

m: 6 March 1985.

REASONS FOR JUDGMENT

The appllcants In this matter are the trustees

the property of Geoffrey Charles Lawrence and

Desma Florence

Lawrence ("the debtors") pursuant to

a deed

of asslqnment

dated 8 October 1984 purportedly executed under

Fart 1.'

the Bankruptcv Act,

1966.

The history of the matter is

as follows. On

February

1983, the debtors entered into a written lease

agreement

with General Credits Llmited as lessor for the

lease of

a used Cessna aircraft Res.

No. VH-CMV

("the

alrcraft”). The

lease was for a term of

18 months from 22

February 1983. Clause

7 of the lease w&-j

as follcws:

“If upon the

goods being received lnto the

Lessor’s

possesslon consequent upon the

expiration of the period of the lease

any

extenslon

thereof

the

goods

are

disposed of by the Lessor for the best price the Lessor can reasonably obtaln at

the time,

and

the net proceeds of such

disposal (after allowing for all costs and

expenses

incidental

such

disposal

Including

storage) are

less

than

the

residual value stated

in the Schedule, the

Lessee undertakes to

pay to theh Lessor by

way of indemnity for the capital loss so

sustained the amount of such deficiency

(additionally to any rent

or other moneys

payable by the

Lessee) PROVIDED THAT no

amount shall be payable under this Clause if the Lessor disposes of the goods other

than by public auction

or to or through

traders dealing in goods of a similar description and as a consequence of such

disposal

the

goods

come

lnto

possesslon of the	Lessee or his nominee or
agent.

The lease

provided

for

a resldual

value

termination of $600.00.

On 4 MdLCh 1983. the respondent sold to the debtors

a business of retail hyraulics and pneumatics for

a p ice of

$60,000.00 only part of

which was pald on completion, the

balance being forborne on the security

of a bill of sale In

favour of the respondent over certain assets.

includmg a

Beechcraft Baron aircraft.

In February 1984, the debtors

requested the respondent to release the Beechcraft Baron

aircraft from

the security upon their substituting

f a r it

the alrcraft.

By an inaznture dated

12 Febru?,t-jr 1384, the

debtors purported to grant to the rtspondent

as securlty for

the sum of

$23,825.26

(then owing and payable over the

following perlod

of 18 months) a bill of

sale over, inter

alla, the

alrcraft.

So far as material. the

Indenture

provided that the debtors

"grant and assign set over and

assure unto (the respondent) all and singular

(the aircraft)

.. and (certain other chattels)

... all of which are upon or

about the premises of (the debtors) situated at the address

of (the debtors) ... ' I.

The security

also

extended

after-acquired property in these terms:

" ( li) ALL OTHER

goods

chattels and effects which:

(a)

are acquired in substitution for any of the chattels which at the

time	of the execution hereof are

comprised in or

subject

this

lnstrument

andlor (b)

are brought upon the place where

the

chattels

descrlbed

the

Schedule hereto are situated or intended to be sltuated or where such last mentioned chattels at any

tune after the execution of this instrument are for the time being sltuated

andlor (c)

are acquired for use or intended

use in the busmess described m

this Instrument wherever the same

may at any tlme be carried on."

4 .

The Indenture was reqlstered

on 26 March 1984 under

the Bllls of sale and other Inscruaents

Act,,

I Q 5 5 ( Q land,.

Within a

few months, the debtors defaulted under

their

bill

sale.

August 1984, the

respondent

attempted

to exercise its riqhts under its security but

found that the debtors had vacated their business premises

and had removed their equipment. One of the directors

the respondent, Sydney

C. Feuerriegel, purported to take

possession of the aircraft at Cairns Airport. On informing the first debtor of this, he was told that the debtors did not actually own the alrcraft and that it was leased from a

finance company.

the

same

day, 27 August

1984,

the

debtors

executed an

authority pursuant to s.188

the Bankruptcv

A A In favour

of the applicants.

On or about 28 August 1984. the respondent enquired

of General Credits Llmited (whose busmess at this tlme had been, or was about to be, acquired by Australian Guarantee Corporation Llmited) as to the residual value owed under the

lease. On

10 September 1984, the respondent paid Australian

Guarantee	Corporation	Limited	the	residual	value,	viz.,
$600.00.

9n 8 Occober 1984. the d?btors FurporLed to execute

5 .

a deed of assignment pursuant

to Part i.: of the Bankruptcv

A d . Under Lne deed, the debtors purported to assiqn

to the

applicants all dlvlsible property wlthln the meaning

of Part

for the benefit of creditors. Although the deed

was

signed by the

debtors, their slgnatures were witnessed

the flrst applicant who was.

of course, a party to the deed,

a matter the respondent claims

to be of fatal consequence by

reason of

an alleged failure to comply with the provisions

of s.216(2) of the Bankruptcy Act.

On 15 January 1985, the respondent purported to

sell the alrcraft for a price of $15,500.00. The applicants challenge the title of the respondent to sell the aircraft

and,

alternatively, challenge the propriety

of the sale

itself. The lmmediate

matter

for resolution

the

respective entitlements of the parties to the proceeds of

sale, the further dlsposition of which	is restralned under
an existing interim inlunctlon.

B number of issues were debated In argument but it

1s	flrst necessary to consider the prellmlnary oblectlon

raised

the

respondent

that

the

purported

deed

assignment was bad because it failed to comply

wlth

the

requirements of 5.216 of the Bankruptv Act. It provldes:

"(l) 11 deed of asslqnment or

a deed of

arrangement

shall

be executed

the

deljtor

an6 C ~ L = ~ r u s t e e

xix-111

21 Lays irsm

the day on which the speclal resolutlon requiring the debtor to execute the deed was passed.

(2) The executlon of the

deed

the

debtor

and

the

trustee

shall

atLcsted by a witness."

The general position is that, apart from statute,

it is not necessary to the validity of

a deed that its

execution be attested by any witness (Halsburv's Laws of

Ensland, 4th Ed.

Vol.

12 para.1331).

If, however,

attestation is required by statute,

a party to the deed is

incompetent as an attesting witness, the object of the rule

being to ensure

that the deed is voluntarily signed

(see

v. Trecothick C18041 9 Ves.234 at pp.250-1; Freshfield

v- -

Reed [l8421 9 M. & W. 404; 152 E.R. 171;

v. Claridse

t18811 7 Q.B.D. 516 at p.519; Stuckev, Conveyancing

Act, 2nd

Ed.

at p.88; Norton on Deeds, 2nd

Ed. at

p.24). In my

opinion, the rule applies in the present case

with

the

consequence that there was	a fallure to comply wlth the
provlsions of s.216(2).

What 1s

the consequence of this failure to comply

wlth s.216(2)?

On behalf of the applicants it is submitted

that a deed of assignment is presumed to be valld untll

declared void under 5.222.

By 5.222 It is provided. so far as material:

7 .

"(1) Where there is a doubt, on a specific ground, whether a deed of assiqnmmt or a

deed	of arrangement was entered into In

accordance wlth thls

Part or complles wlth

the requlrements of thls Part. or whether

composltlon

has

been

accepted

speclal

resolution

meeting

creditors under s ctlon 204, the Xeglstrar, the trustee, a creditor or the debtor may apply to the Court for an order under sub-section ( 2 ) .

( 2 )

Upon the

hearing

of an appllcation

made under subsection

(1). the Court may,

sub~ect

to this sectlon

, make an order-

(a) declarlng

that

the

d ed

compositlon is void,

or that it is

not void,

on the ground specified

in the application;

(b) declaring that a provision

of the

deed is

void, or

is not void, on

the

ground

specified

the

application.

( 3 ) The Court shall not make an order declaring a deed to be vold on the ground that it does not comply with the

requirements

this

Part if

the

deed

complies

substantlally wlth those

requirements.

...

It is

true that

In other contexts, for instance,

lack of assent on the part

Ef rreditors, it has been held

that a

deed of a composition 1 s valid until it

is declared

void by the Court

(see Re Cope (1947) 16 A.B.C. 113; Re Cohn

(1954) 16 A.B.C. 150; Brldqe v. Great Mestern Portland

Cement and

LlmP

Ltd. ( 1 9 3 2 )

48 C.L.R. 5 1 2 ) .

But

In the

present case the fallure to comply with

he requlrements of

the Bankruptcv Act

1 s fundamental to

r;he flrst step

bringlng the provislons of

Part 1:

x t o operation at ell.

For example, if in the present

case, one of the debtors

falled to slgn the deed it could hardly be

suggested, at

least, vis-a-vls that

debtor, that the deed was valid until

declared

vold

the

Court.

In my view, although the

reasoning in Cope and

m may well be applicable vhere the

deed has been validly executed but, subsequently a failure

to comply with the Bankruptcv Act

has occurred, the present

case 1s not of that class:

here we

are concerned with the

initial stage

of the valid execution of the deed itself.

For the reasons I have given, that execution was defective

and it is not possible

to regard the defect as merely formal

or as

not substantial (cf.

s . 2 2 2 ( 3 ) ) .

the result, the

deed was bad

W ~ S

this lneifectlve tn

ally tltl? t o

the applicants for

the purpose of these proceedings.

It 1 s true. as the

applicants

ay,

that

proceedings

have

been

brought

for

relief

under

s . 2 2 2 .

However, the ]urisdlction of the

Court to deal

wlth thls

matter 1 s

vested by s.30

of the Bankruptcy Act and In the

exercise

of that jurlsdictlon the Court

1 s now

asked to

grant relief in the nature

equitable relief under the

general

law:

the

position

that, by

reason

their

failure to

comply nth the provlsions

of s . 2 1 6 ( 2 ) ,

the

applicants have falled to establish any title to sue.

r	’ ?
.

I should add that. although relief

is claimed under

the general law as sqainst an external parLy, it was clearly

the intention

of the debtors that if the deed were to

operate at all, it was to operate under Part

X and not

otherwise.

other words, I do not think

that it is open

to the

appllcants to suggest that the deed could operate

Independently in equity

inter partes notwithstanding Its

failure to comply with s.216(2).

the result,

Z ~ I I C C I

uphold the respondent’s

preliminary

point, the proceedings must be dismissed with

costs. It	follows that the existing injunction should be
discharged.

I make the followlng orders:

Application, as amended,

dismissed.

2 .

Discharge

the

existing

in~unctlon.

3 .

Applicants

pay

the

respondent’s costs of

the

application, Including reserved costs.

I certify that this and the 8 preceding pages are a true copy of the reasons for judgment herein of The Honourable

Mr Justice Beaumont. &?-& W-

OG%

Associate

Dated

6 . 3 . 8 5

[1985] FCA 63

6 Mar 1985