Howden v Cock - [1915] HCA 44

COCK AND OTHERS

RESPONDENTS.

ON APPEAL FROM THE SUPREME COURT OF Insolvency-Deed of assignment for benefit of creditors-Efect-Jurisdiction of

Court of Insolvency-Assignment by creditor of debt-Exercise of rights under deed-Voting-Purchase of debt by debtor-Validity-Insolvency Act 1890 (Vict.) (No. 1102), sec. 5-Insolvency Act 1897 (Vict.) (No. 1513), secs. 5, 74, 83. MELBOURNE,

Sec. 5 of the Insolvency Act 1897 (Vict.) provides that (1) Subject to the 20; June 8, provisions of this Act the Court" (of Insolvency) " shall have full power to decide all questions of priorities and all other questions whatsoever whether of law or fact which may arise in any case of insolvency coming within the cognizance of the Court or which the Court deems it expedient or necessary to decide for the purpose of doing complete justice or making a complete distribution of property in any such case." Sec. 83, SO far as material, provides with regard to deeds of arrangement, which under sec. 74 include assignments for the benefit of creditors, that "so far as the nature of the case will admit the trustee creditors and debtor respectively shall have the same functions powers rights duties obligations and liabilities and the Court" (of Insolvency) "shall have the same powers authority and jurisdiction as in the case of insolvency."

Held, by Griffith C.J., and Isaacs, Gavan Duffy and Rich JJ., that under sec. 83 and sec. 5 of the Insolvency Act 1897 the Court of Insolvency has in relation to deeds of assignment for the benefit of creditors power to decide all such questions of law or fact as a Court of equity charged with the administration of an estate could decide, including questions as to the validity of assignments by creditors of their debts and as to the effect of those assignments, if valid, upon the voting power to be exercised by creditors in pursuance of such deeds.

20 CLR 202

Semble, per Higgins J., that if the debtor were doing anything unfair to prevent the realization of his assigned property, the Court of Insolvency could check or punish him.

A debtor, who had a life interest in certain property, entered into a deed of assignment for the benefit of his creditors which was registered pursuant to the Insolvency Act 1897. The property assigned included the life interest, as to which it was provided that it should not be sold or disposed of by the trustee " except with the consent and by the direction of a three-fourths majority in number and value of the creditors and with the consent of the debtor or failing the consent of the debtor then under and subject to the approval of the Court." The "creditors" were defined by the deed as being the signatories to the schedule of creditors and all other creditors who should assent to the deed. Several of the creditors, sufficient in number to render it impossible without some of them to obtain a three-fourths majority in number of all the…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: Howden v Cock [1915] HCA 44
Case: [1915] HCA 44
Decision Date: 18 June 1915

CaseChat Overview and Summary

The appeal concerned a dispute arising from a deed of assignment for the benefit of creditors executed by Charles Matthew Germain Cock. The trustee of the deed, John McAllister Howden, sought orders from the Court of Insolvency to expunge certain proofs of debt and to restrain the debtor's mother, Emily Cock, and the debtor from using these proofs and from voting thereon, alleging that the assignments of debts to Mrs. Cock were invalid and intended to obstruct the realization of the assigned estate. The matter reached the High Court of Australia following decisions by the Court of Insolvency and the Supreme Court of Victoria, both of which found they lacked jurisdiction to grant the relief sought.

The central legal issues before the High Court were whether the Court of Insolvency possessed the jurisdiction to determine the validity of assignments of creditors' debts and their effect on voting rights under a deed of assignment, and, if so, whether the assignments in this case were valid and did not unlawfully hinder the trustee's administration of the estate. Specifically, the court had to consider the scope of the Court of Insolvency's powers under sections 5 and 83 of the Insolvency Act 1897 (Vict.) in relation to deeds of arrangement, and whether the debtor's actions in procuring assignments of debts to his mother, who was also a creditor, constituted a fraud on the deed or a breach of any implied obligations.

A majority of the High Court (Griffith C.J., Isaacs, Gavan Duffy, and Rich JJ.) held that the Court of Insolvency had jurisdiction, under sections 5 and 83 of the Insolvency Act 1897, to decide all questions of law and fact arising in relation to deeds of assignment, including the validity of assignments of debts and their impact on creditors' voting powers. The majority found that the right of creditors to receive dividends under the deed was assignable, and that Mrs. Cock was the beneficial owner of the assigned debts. They concluded that the assignments were lawful and not in derogation of the deed, and therefore the trustee was not entitled to the orders sought. Higgins J. expressed a dissenting view on the scope of the Court of Insolvency's power to expunge debts and on the interpretation of the debtor's actions.

The High Court, by majority, affirmed the decision of the Supreme Court of Victoria, albeit on different grounds. The appeal was dismissed, meaning the trustee's application for expungement of debts and injunctions was unsuccessful. The court determined that Mrs. Cock was the lawful beneficial owner of the assigned debts and that her exercise of rights derived from these assignments, even if motivated by a desire to benefit her son, did not invalidate the assignments or constitute a breach of the deed.

Orders