Henderson and Ball v Spackman

[2003] FMCA 466

FEDERAL MAGISTRATES COURT OF AUSTRALIA

HENDERSON & BALL v SPACKMAN [2003] FMCA 466

BANKRUPTCY – application to annul composition under s.75(4) of the Bankruptcy Act 1966 – whether it is desirable that former bankrupt’s financial affairs be further investigated, or administered under the Bankruptcy Act 1966  – whether it is likely that creditors will receive a greater dividend if the former bankrupt is again made a bankrupt – no, or no effective attack on voting against rights of creditors – likelihood that similar composition will be accepted even if present composition annulled.

Bankruptcy Act 1966 (Cth) s.3, s.73(4), ss.75(4)(b)(iii) and (iv), s.120(1),

In the matter of Pruzanski [2000] FCA 151
Sweeney v Lind (2000) FMCA 11

Applicant: HENDERSON & BALL (a firm)

Respondent: STAN SPACKMAN

File No: MZ 459 of 2002

Delivered on: 31 October 2003

Delivered at: Melbourne

Hearing Date: 5 June 2002

Judgment of: Walters FM

REPRESENTATION

Counsel for the Applicant: Mr Stark

Solicitors for the Applicant: Henderson & Ball Solicitors

Counsel for the Respondent: Mr Galvin

Solicitors for the Respondent: Hutchinson Legal

ORDERS

1. The application filed 23 January 2002 be dismissed.

2. There be no order as to costs.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
MELBOURNE

MZ459 of 2002

HENDERSON & BALL (a firm)

Applicant

And

STAN SPACKMAN

Respondent

REASONS FOR JUDGMENT

Introduction

1. Henderson & Ball (“H&B”) is a firm of solicitors. Mr Spackman used to be a client of the firm.

2. Mr Spackman owed H&B over $16,000 in respect of outstanding professional fees. Because he did not pay this amount, H&B applied to bankrupt him.

3. A sequestration order was made against Mr Spackman in April 1998. H&B was the petitioning creditor, but there were other creditors as well.

4. Mr Spackman’s bankruptcy ended in January 2002 – following a meeting at which creditors cast the requisite votes in favour of accepting a composition put forward on Mr Spackman’s behalf.  H&B voted against the composition, and the firm now applies to this Court for orders annulling it.

5. This Court has power to annul the composition. It has a discretion whether or not to do so.[1] The relevant provision is section 75 of the Bankruptcy Act, 1966, and the only grounds relied upon by H&B are those contained in sections 75(4)(b)(iii) and (iv). The issues for determination, therefore, are as follows:

   a)whether it is desirable that Mr Spackman’s financial affairs be investigated and administered under the Bankruptcy Act; and/or

   b)whether it is likely that Mr Spackman’s creditors will receive a greater dividend if he is again made bankrupt.

   [1] See Sweeney v Lind (2000) FMCA 11

6. For the reasons that are set out in this Judgment, I have concluded that it is neither desirable nor necessary to further investigate Mr Spackman’s financial affairs. Further, and even if another investigation were to occur, it is unlikely that his creditors (including H&B) would be any better off.

Short History

1. A sequestration order was made against Mr Spackman’s estate on

   
   

   15 April 1988. The order was made by a Registrar of the…