Equus Financial Services Ltd v Sabri, R

[1994] FCA 659

EQUUS FINANCIAL SERVICES LIMITED v. RHONDA SABRI AND TIM ARTHUR JONAS
No. VG535 of 1993
FED No. 659/94
Number of pages - 3
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
SWEENEY(1), JENKINSON(2) AND RYAN(1) JJ

CATCHWORDS

Bankruptcy - whether creditor should have been permitted to vote on a resolution for a Deed of Arrangement - whether trustee's report to creditors omitted information available to him which was necessary to give a true and fair view of debtor's affairs - whether debtor omitted a material particular from his Statement of Affairs - whether Deed of Arrangement void.

Bankruptcy Act 1966: ss188, 189A(3), 222.

Re Tregonning; Ex parte Friends' Provident Life (1983) 74 FCR 327
Re McLean; Ex parte Friends' Provident Life (1992) 36 FCR 502
Brick and Pipe Industries v Occidental Life (1992) 2 VR 272
Dobbs v National Park (1935) 53 CLR 643
Cufari; Ex parte Commissioner of Taxation (1992) 34 FCR 544
Augustyn v Putmin (1988) 83 ALR 514
Re Burlock (Unreported Vic VG 409 of 93, 10 May 1994)

HEARING

MELBOURNE, 8-9 June 1994
#DATE 15:9:1994

Counsel for the applicant: Mr Houghton

Solicitors for the applicant: Gadens Ridgeway

Counsel for the first respondent: Miss Davies

Solicitors for the first respondent: D E Phillips

Counsel for the second respondent: Mr Gardiner

Solicitors for the second respondnet: Cornwall Stodart

ORDER

THE COURT ORDERS THAT:

1. The appeal be allowed.

2. The order made on 30 November 1993 in the proceeding numbered VX496 of 1993 be set aside.

THE COURT DECLARES THAT:
On the ground specified in paragraphs 1 and 2 of the grounds specified in Amended Application dated 10 September 1993 in the proceeding numbered VX496 of 1993 the deed dated 20 April 1993 between the firstnamed respondent and the secondnamed respondent is void.

THE COURT FURTHER ORDERS THAT:
The respondents pay the appellant's costs (including reserved costs) of the appeal and of the proceeding numbered VX496 of 1993.
(Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.)

JUDGE1

SWEENEY AND RYAN JJ This is an appeal from orders of a single judge of the court dismissing an application by the appellant, Equus Financial Services Ltd ("Equus") to set aside a Deed of Arrangement entered into by the respondent Rhonda Sabri ("the debtor") on 20 April 1993. The second respondent to the appeal, Tim Arthur Jonas ("Mr Jonas") is the trustee under the Deed.

1. A similar application made by the debtor's husband was heard simultaneously both at first instance and on appeal. At first instance the trial judge, in dismissing the application, described the similarity between the cases as follows:
   

Although there was some slight variation in the value of the liabilities of the debtor and her husband and the differences were small and of insufficient moment to enable any distinction to be made between the two matters.

For the most part the debtor was a joint debtor with her husband. She was a joint party to the several agreements relied upon by the applicant as the basis for its claim to vote as a creditor in respect of the amount for which it was not permitted to vote. She was one of the parties to the settlement of the Supreme Court proceedings referred to in the reasons in (Mr Sabri's) application ... Apart from the calculations of percentages which appear in those reasons the only difference between the two cases is that the amount for which the applicant was permitted to vote at the meeting of 6 April 1993 was a liability due by the debtor's husband and not by her. In the debtor's case there was no liability in respect of which the applicant was admitted to vote. Nor had there been any bankruptcy petition presented against the debtor as was the case with her husband.

None of these slight differences has any bearing on the outcome of these proceedings. The findings and conclusions expressed in the other proceeding are equally applicable here and I adopt them without repeating them.

1. For the reasons given in Mr Sabri's case we are satisfied that Equus was at all material times a creditor of the debtor and entitled to vote at the meeting of creditors held on 6 April 1993 in respect of a debt in an amount which would have led to the failure of the special resolution requiring the debtor to execute the deed of arrangement and that the deed was not entered into in conformity with under Part X. It should be declared to be void.

2. The Court declares the deed to be void and orders that the respondents pay the appellant's costs of and incidental to the application and appeal, including reserved costs.

JUDGE2

JENKINSON J The first-named respondent to this appeal was indebted to the appellant jointly with James Lyfti Sabri, the first-named respondent to the appellant's appeal numbered VG534 of 1993. The appeals were heard together, as were the two proceedings which give rise to the appeals. In the appeal numbered VG534 of 1993 I have published my reasons for concluding that the joint and several indebtedness of Rhonda and James Sabri to the appellant in the sum of $893, 544.91 on 6 April 1993 entitled the appellant to vote upon a special resolution proposed at a meeting of Mr. Sabri's creditors held on that day. Those reasons also justify the conclusion that the joint and several indebtedness entitled the appellant to vote upon a special resolution proposed at a meeting of Mrs. Sabri's creditors held on the same day. The appellant's claim to vote in respect of that indebtedness was rejected at the meeting of Mrs. Sabri's creditors. If the claim had been allowed the special resolution would not have been passed. The deed dated 20 April 1993 between the first-named respondent and the second-named respondent executed in compliance with the special resolution was therefore not entered into in accordance with Part X of the Bankruptcy Act 1966. The circumstances relevant to the exercise of the discretionary power, conferred by s.222(2) of that Act and enlivened by the rejection of the applicant's claim to vote, to declare the deed void are not so different from the circumstances relevant to teh exercise of the same power in the other appeal as to justify any different conclusion. The relevant circumstances are rehearsed in the reasons of the members of teh court in teh other appeal, and need not be here repeated.

1. I would allow the appeal with costs in the appeal and in the proceeding, numbered VX496 of 1993, which gave rise to the appeal, and declare that on the ground stated in paragraphs 1 and 2 of the grounds specified in the Amended Application dated 10 September 1993 in that proceeding the deed is void.