Kierkegaard, S. v Boothe, S.A. as trustee of the composition of Kierkegaard

[1993] FCA 1026

/O& 9 3

JUDGMENT No. ........ ........ .. I ........ ....

IN THE FEDERAL COURT OF AUSTRALlA	1
1
NEW SOUTH WALES DISTRICT REGISTRY	) NX 50 of 1993
1
GENERAL DIVISION	1

Re:  SOREN KIERKEGAARD

Ex parte: STEPHEN ALAN BOOTHE AS T R U S T E E O F T H E COMPOSITION O F SOREN KIERKEGAARD

Respondent: SOREN KIERKEG

Coram:	Whitlam J
Place:	Sydney
Date:	16 December  1993

REASONS FOR JUDGMENT

This is an appllcation by Mr Stephen Boothe, the trustee of a compositlon entered into by a debtor, Mr Soren Kierkegaard. The appllcation is made under s 222(4) of the Bankruptcv Act 1966 ("the Act") for an order declaring the compositlon void. The ground upon which Mr Boothe relies is, in substance, that Mr Kierkegaard did not disclose in l-11s statement of affairs that a Mrs Emma Re~sch was one of his

creditors) or Part I11 (in relation to secured cred~tors) that Mrs Reisch was a creditor.

creditors.

Mr Kierkegaard's statement of affairs was slgned on 8 March 1993, the same

day as his authority under s 188(1) of the Act was executed. In h ~ s statement of

affalrs, Mr Kierkegaard did not state m elther Part I1 (in relation to unsecured

However, in Part V11 there is a statement m respect ot Mrs Reisch. There, in item 4,

the words "Particulars of my contingent liabilltles and any other llabllitles not specified in a previous Part of this Statement are :-" had been deleted, but the following words

had been inserted: "Mrs Emma Relsch of 1 Adam Street, Fairfield, NSW $80,000.00.

Matter in (SIC)	undecided at this pomt!'
Mr Boothe submits that Mrs Reisch was an unsecured creditor of Mr Kierkegaard as at 8 March 1993. Mrs 'Reisch has evidently not lodged a proof of	, .
debt, and Mr Boothe relies for evidence of Mrs Reisch's status as a creditor upon
'copies of documents forwarded by her solicitors' letters dated 26 May 1993 and 25 June 1993. These documents show that, by a "deed of indemnity" dated 19 January
1991, Mr Kierkegaard undertook to indemni'j Mrs Reisch against clalms by the
Commonwealth Bank in respect of a thlrd party mortgage she had given to secure
advances up to $60,000 to a company, the directors of which were Mr Kierkegaard and Mrs Reisch's son. The documents include copies of letters to the bank by and on behalf of Mr Kierkegaard and a letter to Mrs Reisch from Mr Gerkegaard.
respect of the security or a demand by Mrs Reisch on Mr Gerkegaard pursuant to However, none of these documents records a clalm by the bank on Mrs Reisch in
the deed of indemnity. Also Included amongst the documents is a copy of a summons evidently filed as an originating process m the Supreme Court of New South Wales on
19 March 1993 by Mrs Reisch against the bank, Mr Kierkegaard and her son. This
summons does not even allege that such a clalm or demand has been made. (The minutes of the creditors' meeting held on 8 April 1993 do not make it clear whether, even by that date, the bank had made any sort of clalm upon the security given by Mrs Relsch.)
None of thls material establishes that any claim has been made upon Mrs Reisch by the bank, in respect of whlch Mr Kierkegaard is presently obliged to pay her any amount of money. It could not be sald, in my view, that she 1s a person to
whom money was owing by Mr I(lerkegaard at 8 March 1993. The language of Part
I1 in the statement of affairs form plamly requlres a debtor to state amounts "owing"
to unsecured creditors. This accords, with the requirement of r 78(2)(a) of the Bankruptcy Rules that, in the form; the debtor state such particulars "in relat~on to
unsecured debts owed by the debtor." It follows that I do not accept the submission that Mrs Reisch was an unsecured cred~tor when Mr Kierkegaard signed his statement of affairs.

The failure to list Mrs Reisch as an unsecured creditor in Part I1 of the

statement of affairs meant (as I shall later explain) that she was not sent a notice of

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the meeting of Mr Kierkegaard's creditors under s 194(2) of the Act. However, even

if I am wrong and Mrs Reisch should have been shown as an unsecured creditor, s	194(2) was not contravened since Mrs Reisch had not been "stated by the debtor to
be creditor!'
In my view, the liability of Mr Kierkegaard is a "contingent liability" within the meaning of r 78(2)(e) and should be disclosed in Part V11 of his statement of affairs. The question remains, therefore, whether the statement in item 4 of that Part offends
s 222(4)(b) of the Act. It is also appropriate that, m that context, I say something about an allegat~on by Mr Boothe that Mr Klerkegaard undertook to glve Mrs Reisch notice of the meeting at whlch the composition was to be proposed and failed to do
SO.

Atfidavits made by Mr Boothe and a Mr John Green were read by the apphcant. Affidamts made by Mr Kierkegaard, his wlfe Mrs Gerkegaard, a Mr Bob McNally and a Mr Lusher were read by the respondent. Mr Boothe, Mr Green and

Mrs Kierkegaard were cross-examined. Mr Kierkegaard was overseas.

I regret to say that I found Mr Boothe to be a most unsatisfactory witness. He sat, uninvited, when taking the oath. Whilst givmg evidence, h ~ s manner was testy and his tone querulous. When cross-examined about the persons present when affidavits

verifying statement of afiairs were sworn, he volunteered the extraordinary statement that "it's an irrelevant event from my polnt of view" and, a little later, "it's not a significant event in my life!' Mr Boothe seemed throughout to be resentful of being cross-examined. He appeared obsessed with Mr Gerkegaard's having "deceived" hlm

the best of his ability any other events. Whether his manlfest indignation was feigned	about giving the notice to Mrs Relsch. Mr Boothe dld not seem to try and recall to
or genuine, I do not know, but I could perceive, at the end of the evidence, no cause for it.

The course of events was as follows. Mr McNally was a partner in the firm of

Hall Chadwick, chartered accountants. He was also a dlrector of the company that

employed Mr Gerkegaard. He suggested to Mr fierkegaard that he contact Mr

Green, one of h ~ s partners Involved in insolvency work, and Mr Boothe, who was

employed in the firm's insolvency section.

Mr Kierkegaard saw Mr Boothe twice in February 1993 to discuss Part X of the Act. The second t~me he was accompanied by his wife, and they also saw Mr Green. Mr Boothe wanted to find out whether the Kierkegaards had separate or

joint assets and habihties. He was obviously frustrated that they "didn't know the

difference between a joint creditor and a separate credaor." At the second meeting Mr Kierkegaard told Mr Boothe about the deed of indemnity in favour of Mrs Reisch

and her mortgage to the bank. It was at thls meeting that it was decided to submit separate proposals for each of Mr and Mrs Qerkegaard and a joint proposal. This necessitated preparation of three statements of affairs.

Mr and Mrs Kierkegaard returned to the ottices of Hall Chadwick on 8 March

1993 and spent several hours there. They saw Mr Green, Mr Boothe and a Mr Paul

Kelly who was, accord~ng to Mr Boothe, an assistant "very inexperienced in

bankruptcy!' No doubt, these men were comlng and going during that time b ~ t with

their assistance the Kierkegaards completed the statements and proposals and, of course, the authorities under s 188(1) of the Act. I am quite satisfied that Mr fierkegaard completed Part I1 and Part V11 of his statement with the assistance and

advice of these three men. To the extent that Mr Boothe's confused and contradictory evidence suggests otherwise, I prefer to accept the evidence of Mrs Kierkegaard. The events obviously meant a lot to her, as they were not an everyday

experience. On the other hand, Mr Green could not readily recall events which were,

no doubt, not at all significant to him m h ~ s busy hie.

In his affidavit Mr Boothe says that he understood the entlre paragraph 4 of

Part V11 of Mr Kierkegaard's statement of affalrs, Including the handwriting, to have

been crossed out. This is nonsense. The handwritten words are plainly not crossed

out, and the second lot of inihals made by Mr Kierkegaard in a slightly indented position would make no sense except as his authentication of the insertion, not the

deletion. Most importantly, there 1s the uncontradicted evidence of Mr Kierkegaard

that, at the end of the meeting on this day, he gave his file concerning Mrs Reisch to
Mr Kelly.

Mr Boothe agreed that his first view was that Mrs Relsch was a "contingent creditor!' However, he was adamant that, as such, he considered her entitled to receive notice of the creditors' meeting. Mr Boothe's instructions to Mr Kelly were to "send a notice to all creditors, contingent, secured, lease and whatever!' He said that

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he did not know why Mr Kelly did not send Mrs Reisch notice of the meeting.

I think that it may readlly be inferred that Mr Keily did not send a notice to

Mrs Reisch because she was not stated to be a creditor in Mr Kierkegaard's statement

of affairs. Mr Kelly, no doubt, looked at the creditors shown in Part I1 of that statement. After all, the total amount of debt in that Part had been calculated by Mr Kelly and written there by him together with Mr fierkegaard's tax file number. The

notice of the meeting was dated 25 March 1993, the same day as Mr Boothe's report under s 189A of the Act which made no comment on the unsecured creditors

disclosed m Mr Kierkegaard's statement of affairs.

Just when (presumably after 25 March 1993) Mr Boothe came to alter his view, and to regard Mrs Reisch an unsecured creditor, is unclear. Mr Boothe first said that he thought it was when he received the Supreme Court summons, the mortgage and the deed of mdemnity, but they were obviously not received until 28 May 1993, well after the creditors' meetlng Later in cross-exammation, when asked

why he had not contacted Mrs Reisch in February 1993, Mr Boothe answered that Mr Kierkegaard had "indicated to me that she was a push-over, that she would vote in

favour of the composition." When pressed to the effect that such a conversation

could not have taken place in relation to a person whom he regarded at the time to be a contingent creditor with no right to vote, Mr Boothe said that the conversation

took place two days before the creditors meetmg, "on the Wednesday". In any event, Mr McNally confirmed that he had discussed with Mr Green and Mr Boothe the

question whether Mrs Reisch was a credltor or contingent creditor, and that this

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occurred on a date he could not recall after Mr Kierkegaard's statement of affairs was

completed.

The creditors' meeting was scheduled for Maundy Thursday, 8 Apr~l 1993. Mr

Kierkegaard returned from overseas on 6 April 1993. He went to the offices of Hall Chadwick without an appointment and saw Mr Green and Mr Boothe. Mr

Kierkegaard says that thls meetlng took place on Wednesday, 7 April. Mr Green and

Mr Boothe say it took place on 6 Aprll. Mr Boothe says the meeting lasted about five minutes. Mr Green and Mr Boothe say that the position of Mrs Reisch as an unsecured creditor was discussed. Mr Kierkegtlard denies that Mrs Reisch was

mentioned, but says that they discussed the notices sent to creditors and whether a

proxy had been received from a Mrs D~ckerson.

In cross-examination, Mr Green helpfully explained this confusion. He said that Mr Kierkegaard was informed that Mrs Reisch was an unsecured creditor and that she should be given notlce of the meetmg. However, the proxy form given to Mr Kierkegaard, with a request that he pass it on to Mrs Reisch, was in the name of Mrs

Dickerson. One would not need to go beyond that version to understand any

confusion on the part of Mr Gerkegaard, who was not at all familiar with requirements of Part X of the Act. Although I have not heard from Mr Kierkegaard, it is apparent to me that in this short conversation the participants were at cross-

purposes. Mr Green and Mr Boothe may have been under the impression that Mr

Kierkegaard had acceded to their request that Mrs Reisch be given notice but, in the

circumstances, it is hardly surprising that Mr Kierkegaard should not have appreciated

what it was he was being asked to do or its sign~ficance.

Mr Green chaired the meeting on 8 April 1993 when Mr Kerkegaard's creditors passed a special resolution to accept his composition. Mrs Reisch was not at the meeting, nor had she given a proxy. Her position as a possible creditor was discussed. However, Mr Green did not propose an adjournment.

Mrs Reisch's solicitor evidently spoke to Mr Boothe on 14 April 1993 and

wrote to him as follows:

"Our client instructs us that she 1s a credltor of Mr lerkegaard. We are also Instructed that our cllent rece~ved no notlficatlon of the Creditors' Meetmg whlch eventually approved the Part X Arrangement for Mr Kierkegaard. In the circumstances, we request that you send to us the Aftldavlt of Postage of the Notice of the Creditors' Meeting as soon as possible."

Mr Green and Mr Boothe then saw Mr McNally and told him they had a problem.

If there was a problem, it was not of Mr K~erkegaard's making. As I hope I

have made clear, I am not satisfied that Mr Klerkegaard omitted a mater~al particular

from the statement of affa~rs	on 8 March 1993 or Included an Incorrect and material
particular m that statement.	Indeed, it seems to me that the only source of

information about Mrs Reisch, which was made available to Mr Boothe prior to the

meeting on 8 April 1993, was Mr herkegaard. This was evidently sufficient information for Mr Boothe to form the view that Mrs Reisch was an unsecured

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cred~tor. If he held that vlew, it was up to hlm as the prospective trustee to see that she was notified of the meeting or that the meetlng was, if necessary, adjourned. Mr Boothe did not do this. H e did not even seek out Mr Kierkegaard to ask h ~ m to

notify Mrs Reisch, but merely took advantage of the unscheduled meet~ng initiated by

Mr Kierkegaard. No criticism whatsoever can, in my aew, attach to Mr herkegaard's

fallure to contact Mrs Relsch after the conversation at Hall Chadwick on the eve of

the creditors' meeting.

Mrs Reisch was represented at the hearing before me, as was the

Commonwealth Bank. Neither person adduced any evidence. There is no evidence

that Mrs Reisch is an unsecured creditor of Mr Kierkegaard.

The ground m S 224(4)(b) has not been made out. I propose to dismiss the

application. The matter may be l~sted at a date convenient to the parties to
determine the appropriate orders.

I cerllfy that t h ~ s and the preceding nlne pages are a true copy of the Reasons for Judgment hereln of the Honourable Mr Justice AP. Wh~tlam.

Assoclate

Datc:  (6 ~ J - C ~ L L Z ~ W l q ~ ( 3

Appl~cant:	M. R. Aldndge of counscl instructed by Tcrnes & Saller
Respondent:	Mr P M Fordycc, sol~c~tor P. A. Sommerset & CO
Commonwealth Bank	MS Bernadette Lara, sol~c~tor
of Australia:	Abbott Tout Russell Kcnnedy
Emma Reisch:	Mr Chrlstophcr D'Cotta, sollcltor
Schwe~xr &  CO
Date of heanng'	14 September 1993
Date of judgment	16 December 1993