Burton, L.R. v Wily, H.J

[1994] FCA 391

Re: LESLIE ROSS BURTON
LESLIE ROSS BURTON, NJW CONTRACTORS PTY LIMITED and URMAR PTY LTD v. HUGH
JENNER WILY
No. NB2172 of 1993
FED No. 391/94
Number of pages - 3
Bankruptcy
(1994) 122 ALR 399

COURT

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
BANKRUPTCY DIVISION
DAVIES J

CATCHWORDS

Bankruptcy - control over property of bankrupt - whether the entitlement to vote at a creditors' meeting is determined by the quantum of the debt - whether a proof of debt is a sufficient written statement for the purposes of the Bankruptcy Act 1966 (Cth), s.64D.

Bankruptcy Act 1966 (Cth) - s.64D, s.64ZA

HEARING

SYDNEY, 25 March 1994
#DATE 25:3:1994

Counsel for the 1st and 2nd Applicants: C. Hogg

Solicitors for the 1st, 2nd and 3rd Applicants: Simon Beverly and

Associates

Counsel for the Respondent: Mr J.K. Chippindall

Solicitors for the Respondent: Aitken and Magney

JUDGE1

DAVIES J This application brought on behalf of Leslie Ross Burton and NJW Contractors Pty Limited seeks an order of the Court declaring that certain proofs of debt were wrongly admitted by the trustee at a meeting of creditors held on 21 December 1993. The meeting was called pursuant to consent orders made by Mr Justice Sheppard early in December 1993. The notice which called the meeting was dated 3 December 1993 and it called a meeting for 21 December 1993. In accordance with s.64D of the Bankruptcy Act 1966 (Cth) ("the Act"), it gave notice that each creditor must give to the trustee at or before the meeting a written statement of debt setting out, so far as is relevant for present purposes, the amount in respect of which the creditor claimed that the bankrupt was indebted to the creditor.

1. Subsequently, such statements in the form of proofs of debt were submitted to the trustee, Mr H.J. Wily. It appears from the minutes of the meeting that Mr Wily had the proofs before him, that he read through the proofs, discussed the proofs with the persons present at the meeting and announced his conclusions as to whether or not each person lodging a proof ought to be admitted to vote as a creditor and of the amount for which the creditor would be entitled to vote. The discussion with the creditors on these matters went over some three pages of the minutes.

2. Mr C. Hogg, who is counsel for the debtor, seeks to challenge the resolutions passed at the meeting on several grounds. For the moment, the only issues that are before me for decision arise under s.64ZA of the Act, which provides inter alia:-
   

"(4) Subject to subsections (5) and (6), each creditor is

entitled to vote and has one vote.

...

(6) A creditor who has failed to give to the trustee a

statement in accordance with section 64D is not entitled to vote."

1. With respect to s.64ZA(4), Mr Hogg submitted that this subsection had the effect that a creditor was entitled to one vote only and that the extent of the debt was irrelevant. Such a reading of the Act would introduce an entirely new approach to meetings of creditors from that which has been traditional both in this country and in the United Kingdom for a very long time, namely, that the quantum of the debt counts both in ordinary resolutions and in special resolutions. Section 5(1) defines "resolution" as:-
   

"a resolution passed by a majority in value of the creditors present personally, by attorney or by proxy at a meeting of creditors and voting on the resolution"

so that value is brought into account in the determination of the resolution. A "special resolution" requires a resolution passed by a majority in number and at least three-fourths in value of the creditors present personally, by attorney or by proxy.

1. Mr Hogg submitted that the traditional approach to voting at a meeting of creditors was changed by s.64ZA(4). In my opinion, the subsection does not have that effect. The section is one of a number of provisions which were introduced by Act No. 9 of 1992, all of which deal with matters of procedure related to the holding of meetings of creditors. It appears to me that the general principles are not affected. An example appears in s.64Z, which requires that there be a minutes secretary to take minutes of the meeting. Subsection (4) provides that the minutes must record the precise words of each motion proposed at the meeting and of any amendment. Subsection (5) provides that, if a resolution or a special resolution is passed at the meeting, (a) the minutes secretary must prepare a certificate recording the precise words of the resolution or special resolution, (b) the President and the minutes secretary must each sign the certificate and, (c) the minute secretary must give the certificate to the trustee and (d) the trustee must file the certificate with the Registrar.

2. This section, perhaps in somewhat greater detail, gives effect to the principle which earlier was required by the law of this country and also in the United Kingdom, that resolutions passed at a meeting of creditors must be put down in writing and formally filed so that they are available to be inspected and acted upon.

3. Voting that takes place at a meeting of creditors is voting on a motion put to the meeting. If there is a resolution, then it is a resolution as defined in the Act and the value of the votes cast is taken into account.

4. It seems to me therefore that there was no error in the course adopted by the Trustee in the present case of listing the creditors by reference to the amounts of the debts and of recording those amounts in the minutes.

5. Mr Hogg also submitted that the proofs of debt were not statements for the purposes of section 64D; but in my opinion s.64D does not require any matter of technicality. It simply requires that there be a written statement given to the trustee before or at the meeting of the amount in respect of which the creditor claims that the bankrupt is indebted. The proofs of debt which were lodged satisfied that description and, in my opinion, it follows that the creditors who were admitted to vote were not disentitled for reason of non-compliance with s.64ZA(6).

6. For those reasons I am not satisfied, on the material to date, that there was any invalidity in the meeting that was held. However, there are other issues still to be resolved and we shall hereafter turn to consider those matters.