Lawrence, Edward v Morton, Robert William
[1997] FCA 1390
•9 DECEMBER 1997
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY - Deed of Arrangement - Construction of the provisions of the Deed - Application for declaration that the Applicant discharged from all provable debts owed by him - whether Applicant discharged and released in accordance with the provisions of the Deed on payment of final instalment
BANKRUPTCY - Trustee - application made during hearing to review Trustee’s decision to call meeting of unsecured creditors to terminate Deed - Delegated powers of Judicial Registrars of Federal Court of Australia - whether delegated powers include power to judicially review decision of Trustee under s 178 of the Bankruptcy Act1966 (Cth) - whether proceeding for judicial review of Trustee’s decision a proceeding for an order in the nature of a prerogative writ
Bankruptcy Act 1966 (Cth) ss 109(1)(a), 167(1), 170(2), 178, 179, 188, 235(b), 237A
Bankruptcy Regulations reg 8.09
Federal Court of Australia Act1976 (Cth) par 18AB(1A)(b)
Administrative Decisions (Judicial Review) Act 1977 (Cth)
Administrative Appeals Tribunal Act1975 (Cth)
Watson v Healey (1996) 64 FCR 301 not followed
Cheesman v Waters (1997) 143 ALR 78 applied
Cheesman v Waters (1997) 148 ALR 21 applied
Re Tyndall; Ex parte Bankrupt (1977) 30 FLR 8 applied
Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 applied
EDWARD LAWRENCE v ROBERT WILLIAM MORTON
VG 7555 of 1997
MILLANE JR
MELBOURNE
9 DECEMBER 1997
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 7555 of 1997
BETWEEN:
EDWARD LAWRENCE
APPLICANTAND:
ROBERT WILLIAM MORTON
RESPONDENTJUDICIAL REGISTRAR:
MILLANE JR
DATE OF ORDER:
9 DECEMBER 1997
WHERE MADE:
MELBOURNE
THE COURT ORDERS THAT:
The application is dismissed.
AND THE COURT FURTHER ORDERS THAT:
The applicant pay the respondent’s taxed costs of this application on the Federal Court
scale.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
VG 7555 of 1997
BETWEEN:
EDWARD LAWRENCE
APPLICANTAND:
ROBERT WILLIAM MORTON
RESPONDENT
JUDICIAL REGISTRAR:
MILLANE JR
DATE:
9 DECEMBER 1997
PLACE:
MELBOURNE
REASONS FOR JUDGMENT
By an application filed on 3 September 1997, supported by an affidavit sworn on 22 August 1997, Edward Lawrence (the Debtor) sought the following orders:
A declaration that the administration under the Deed of Arrangement between the Applicant and the Respondent made 15 September 1992 is finalised, its provisions having been carried out, and that the Applicant is hereby discharged from the operation of the said Deed;
Alternatively, that Respondent furnish to the Applicant a Certificate signed by him discharging the Applicant from the operation of the said Deed;
That the Respondent immediately account to the Applicant and the creditors and distribute the funds in the possession of the Trustee to the creditors in order to comply with the requirement of the Deed in clause 2(b)(ii) that the unsecured creditors whose proof of debts have been admitted by the Trustee be paid a dividend of no less than 10 cents in the dollar;
In the alternative, that the Trustee be removed from office pursuant to s 179 of the Bankruptcy Act;
Such further or other order as the Court deems fit.
On 13 October 1997 the respondent (the Trustee) filed an affidavit sworn on the same date together with his Notice of Intention to Oppose Application setting out the following grounds:
The Applicant failed to comply with the provision of the Deed of Arrangement dated 15 September 1992 in that, there having been insufficient funds in the Estate to pay creditors a dividend of 10 cents in the dollar on proofs of debt admitted by the Trustee and to meet the Trustee’s fees and expenses he failed to pay a further amount of $16,873.65 so as to ensure that a dividend of 10 cents in the dollar was paid to creditors and the Trustee’s fees and expenses were paid in full;
The Deed of Arrangement dated 15 September 1992 was terminated on 6 August 1997 by the passing of a special resolution to that effect by a meeting of creditors of the Applicant called for that purpose;
It is not within the power of the Respondent to discharge the Applicant from the operation of the Deed of Arrangement of 15 September 1992;
The Respondent accounted to creditors and distributed such funds as were in his possession as Trustee of the Deed of Arrangement of 15 September 1992 on 15 April 1997;
The Respondent is no longer the Trustee of the Deed of Arrangement dated 15 September 1992, it having been terminated by a special resolution of the creditors of the Applicant at a meeting called for that purpose on 6 August 1997.
It was acknowledged by the Debtor’s counsel that from 13 October 1997 or thereabouts, the Debtor was aware that on 6 August 1997, nearly one month prior to the filing of his application, the Deed of Arrangement (the Deed) was terminated by the creditors passing a special resolution at a meeting called for that purpose. Notwithstanding this knowledge, it was not until the hearing of his application on 24 November 1997 and following a query from the Court about the nature of the application made that the Debtor’s counsel applied to amend the application to seek an order setting aside the unsecured creditors’ resolution to terminate the Deed. The ground for making this application was that the meeting at which this resolution was passed was not properly called. It was not contended by the Debtor that any of the requirements of the Bankruptcy Act1966 (the Act) for calling a meeting of the creditors to terminate the Deed were not met or that the creditors were not authorised to pass the special resolution terminating the Deed on 6 August 1997. What the Debtor asked the Court to do was to exercise the jurisdiction conferred on the Federal Court by s 178 of the Act to review the decision of the Trustee to call the meeting of the creditors for the purpose of terminating the Deed. This was because the Debtor, who had been warned by the Trustee in writing on at least three occasions that he intended to call such a meeting if additional funds were not paid, had no notice of the actual date of the meeting and had no response to his written request to the Trustee in June 1997 asking for, amongst other things, “A full accounting of any fees alleged to be claimed by (the Trustee) with details of all time spent; ...”. A further argument raised by the Debtor was that at the time the meeting of the the creditors was called by the Trustee he incorrectly assumed that the Debtor was in breach of his obligations under the Deed when, according to the Debtor, he had paid all the instalments he was required to pay by 2 October 1996. The further application was not supported by additional affidavit material filed by the Debtor. Moreover, it was acknowledged by the Debtor that no formal notice had been given to the creditors of the further application to this Court to set aside the special resolution passed on 6 August 1997 terminating the Deed.
After making the abovementioned application the Debtor’s counsel also made an unopposed application to amend the first paragraph of the original application filed on 3 September 1997. The italicised words below represent the amendment sought and granted:
A declaration that the administration under the Deed of Arrangement between the Applicant and the Respondent made 15 September 1992 is finalised, its provisions having been carried out, and that the Applicant is hereby discharged from all provable debts owed by him;
When seeking leave to make the amendment to paragraph 1 of the application filed on 3 September 1997, the Debtor’s counsel informed the Court that the Debtor no longer sought the order set out in paragraph 2 of his application; relying instead on the provisions of the Deed. No submissions were made to the Court in respect to the remedies referred to in paragraphs 3 and 4 of the application filed on 3 September 1997. This being so, I have determined both the original application and the application to make the further application on the basis that the Debtor confined his case to two remedies. The first and primary remedy was the declaratory relief claimed in the amended first paragraph of his original application. If unsuccessful in persuading the Court that on a proper construction of the provisions of the Deed he was entitled to this declaratory relief, the Debtor also sought leave to make an application pursuant to s 178 of the Act alleging that in the circumstances of this case it was just and equitable to set aside the special resolution passed on 6 August 1997. The effect of this order if made would be to reinstate the Deed and allow him the opportunity to review and possibly tax the Trustee’s remuneration where the Trustee, according to the Debtor, had not responded to the Debtor’s request in June 1997 to furnish the Debtor with information reasonably required by the Debtor relating to Trustee’s fees. The statutory right to seek information from the Trustee in relation to his fees was, so the Debtor claimed, to be found in subs 170(2) of the Act which provides:
“170 (2) The trustee shall, at the request of the bankrupt, furnish to the bankrupt information reasonably required by the bankrupt concerning his property or affairs.”
However, notwithstanding any general right conferred by subs 170(2) of the Act to seek information, the Bankruptcy Regulations contain specific regulations in Division 4 of Part VIII of the Regulations dealing with a Trustee’s remuneration. In particular, subreg 8.09(1) provides:
“8.09. (1) Where the trustee of the estate of a bankrupt claims remuneration under section 162 of the Act, the bankrupt or a creditor who is dissatisfied with the amount of the claim may, by notice in writing lodged within 14 days of being notified in writing or becoming aware of the amount of the claim, request a taxing officer to tax the claim.”
Had I decided that the exercise of my delegated powers extended to the determination of any further application made pursuant to s 178 of the Act, it seems to me that the presence of reg 8.09 of the Bankruptcy Regulations, forming part of the statutory scheme for administering Deeds of Arrangement, and the failure of the Debtor to request a taxing officer to tax the claim made in April 1997 are relevant considerations in deciding whether the information requested by the Debtor in June 1997 was “reasonably required” by the Debtor under subs 170(2) of the Act. However, as is evident from my comments below I am not satisfied that I have the power to exercise the Court’s powers to judicially review the Trustee’s decision to call a meeting of the creditors in the circumstances described to the Court.
With regard to the further application made during the course of the hearing, the Trustee’s counsel did not oppose the making of this further application. When he was asked to consider the powers of a Judicial Registrar to hear this further application the only argument he advanced was that, following the decision in Watson v Healey (1996) 64 FCR 301, once the Deed was terminated on 6 August 1997 the Trustee ceased to be the Trustee and the Court’s jurisdiction to hear a claim under s 178 of the Act was at an end. Had that been the only issue concerning the Court’s powers, I am satisfied that on this issue the prevailing authority is that contained in Justice Merkel’s decision in Cheesman v Waters (1997) 143 ALR 78; namely that on application to the Court by “any other person” jurisdiction arises in relation to “any act, omission or decision” (s 178 of the Act) or “conduct” (s 179 of the Act) of a Trustee. In reaching his decision in Cheesman’s case His Honour disapproved of the decision in Watson’s case where it was said that the right to commence litigation in bankruptcy ends when the bankrupt is discharged and the Trustee has fulfilled the duties imposed on him by the Act. The conflict between the two decisions does not appear to have been a ground of appeal to the Full Court, nevertheless its finding that in Cheesman’s case Justice Merkel was entitled to conclude that the Trustee was not in breach of his duties and that, had any breach been proven, no loss would have resulted, indicates an acceptance by the Full Court that there was a continuing jurisdiction in the Court to review the acts and decisions of the Trustee after discharge of the bankrupts.
So far as the Debtor’s counsel is concerned he was content to rely on the authority of Cheesman’s case confirming as it does the continuing jurisdiction of the Court, however, no submission was made by him to the Court on the question of the power of the Court as constituted to entertain his further application.
Having considered the application made during the hearing to review the Trustee’s decision I am not satisfied that it is appropriate to accede to that application notwithstanding the Trustee’s apparent lack of opposition to the making of the further application. My reasons for dismissing the application made are summarised in the following way:
There was substantial delay in the bringing of the application to review a decision of the Trustee with no material filed to support the further application and explain the delay;
No notice of this further application was given to the creditors in circumstances where the outcome of the application could affect any interest they have in establishing an act of bankruptcy through the termination of the Deed under par 235(b) of the Act. Accordingly, if the application were to proceed it would require an adjournment to enable this notice to be given; and
Section 178 is found in Division 4 of Part VIII of the Act under the heading “Control over Trustees”. Trustees appointed in accordance with the requirements of the Act are, as a general rule, treated as officers of the Court and their conduct in the administration of, for example, a deed of arrangement is supervised by the Court. Section 178 of the Act provides the means by which the Debtor may challenge the Trustee’s exercise of his powers in the administration of the Deed and, drawing on the dicta in the decision of Justice Lee in Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 (at page 169):
“The exercise of the Court’s jurisdiction may entail orders of a supervisory character in so far as the determination of questions of law raised by the application require these orders to be made ...”.
The powers exercised by Judicial Registrars are the delegated powers contained in O 79 of the Federal Court Rules. There are a number of exceptions to the delegation of all the Court’s powers in relation to a proceeding in the Court in which the Court is exercising its original jurisdiction; one of these being the power to hear a proceeding for “an order in the nature of a prerogative writ” (see subs 18AB(1A)(b) of the Federal Court of Australia Act 1976). My interpretation of that exception is that Judicial Registrars cannot exercise the powers of the Court in proceedings for an order in the nature of a prerogative writ and this may include proceedings where orders of other kinds are sought.
Orders in the nature of prerogative writ are typically sought and made where the Court is asked to review decisions of inferior courts and tribunals and supervise the conduct of those acting administratively. In saying this I have in mind the sorts of orders that may be made pursuant to the provisions of the Administrative Decisions (Judicial Review) Act 1977 and the Administrative Appeals Tribunal Act 1975.
Section 178 of the Act confers on the Court the power of judicial review in the following terms:
“178. If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.
It was said by Dean J in Re Tyndall; Ex parte Bankrupt (1977) 30 FLR 8 at pages 9-10 that “... the wording of s 178 of the Act is such as to confer upon the Court the widest possible discretion as to the appropriate order which should be made in the particular case ...”. In this proceeding before me the order sought is to set aside the creditors’ special resolution, which, of itself, could hardly be described as seeking an order in the nature of a prerogative writ. However, I am of the view that when the Court is called upon by a debtor to exercise its discretion under s 178 to make such orders as it thinks just and equitable, it is being asked to make orders that may include the order the debtor seeks and any other ancillary supervisory orders to achieve a just and equitable outcome. Of necessity those ancillary orders may include orders directed to the Trustee’s future conduct in the administration of the Deed and any order of this kind may be construed as an order in the nature of a prerogative writ. Because no submissions were made to the Court concerning my delegated powers and, further, because I am not satisfied that my delegated powers include the powers conferred on the Court by s 178 of the Act, I am unable to exercise the power to hear and determine the further application and, therefore, the Debtor’s application to hear the further application if the Debtor is unsuccessful in persuading the Court to grant the declaratory relief is denied.
THE PROVISIONS OF THE DEED
What is left to be determined is the Debtor’s application for declaratory relief, which requires me to determine the proper construction of the provisions of the Deed. If I accept that on the payment of the final instalment of monies on 2 October 1996 the Debtor fulfilled his obligations under the Deed and was by reason of paragraph 6 of that Deed discharged and released from all provable debts owed by him, then declaratory relief is in order. If, on the other hand, I accept the Trustee’s contention that the Debtor was in breach of the provisions of the Deed because the amounts paid by the Debtor were insufficient to meet his obligations under the Deed, the Deed remained in force until it was terminated by the creditors in accordance with par 235(b) of the Act.
The Court was told that on 21 August 1992 the Debtor signed an authority pursuant to s 188 of the Act and the Trustee was then appointed Controlling Trustee. This position remained until 15 September 1992 when, at a meeting of the creditors, a special resolution was passed resolving that the Debtor enter into a Deed of Arrangement pursuant to Part X of the Act and further resolving that the Trustee be appointed Trustee of the Deed. A proposed Deed of Arrangement was read to the meeting of creditors and it appears that in accordance with the Chairman/Trustee’s recommendation it was resolved that the “proposed Deed would need to be vetted by a Solicitor”. It was then resolved by special resolution that a Deed of Arrangement be executed by the Debtor to include:
“- The Debtor assign any divisible property that he has for the benefit of creditors generally.
- 10 Cents in the dollar to be paid to unsecured creditors based on proofs of debt plus a further $3,000.00 contribution to the Trustee’s costs and remuneration.
- Contributions to enable a 10 cent in the dollar dividend are to be made by the debtor on a step-up basis over four years. It is estimated that the contribution will total $43,300.00 and be contributed by the Debtor as follows:-
Year One $ 7,000.00
Year Two $10,000.00
Year Three $12,000.00Year Four $14,300.00
_________
$43,300.00
_________
- Furniture and Fittings being property which is not available to creditors under bankruptcy will not form part of the property available to the Trustee under the Deed.
- The Debtor be released from provable debts upon fulfilment of the provisions of the Deed.”
On 15 September 1992 the proposed Deed of Arrangement was executed by both the Debtor and the Trustee (Exhibit “RWM1”) but was subsequently redrafted and amended by the Trustee’s solicitors. The amended Deed was executed by the Debtor and the Trustee (Exhibit “EL1”) and it was accepted by both parties at hearing that the amended Deed constituted the arrangement made between the Debtor and the creditors on 15 September 1992. This was so even though the date of signing the amended Deed is not apparent from the documents before the Court and the affidavits filed; although the Trustee’s affidavit indicates to me that he received the amended document on 17 September 1992, two days after the creditor’s meeting, and that document was executed some time after that date by the Debtor. One of the reasons I have drawn attention to this sequence of events is that when the creditors passed the special resolution on 6 August 1997 terminating the Deed of Arrangement, that special resolution purported to terminate the Deed of Arrangement made on 15 September 1992. No issue was raised at hearing concerning the meeting of any of the technical requirements in obtaining the special resolution to terminate the Deed and it appeared to me that the reason for drawing my attention to the different documents was to make clear to me what the intentions of the creditors and Debtor were when it was resolved that he enter into a Deed of Arrangement.
The material parts of the Deed are set out as follows:
“WHEREAS:
A. ...
B.....
C. ...
D. ...
E. ...
F.The Trustee, on behalf of himself and the creditors, has agreed with the Debtor that the Trustee will be permitted to deal with and will deal with the affairs of the Debtor in accordance with the provisions of the Act and of this Deed.
G.This Deed and any provision or provisions hereof shall be construed subject to the provisions of the Act.
NOW THIS DEED WITNESSES as follows:-
1. ...
2.In consideration of the special resolution passed at the creditors’ meeting and in further consideration of the terms and conditions herein:-
(a) ...
(b)in addition to the conveyance and assignment referred to in paragraph 2(a) above, the Debtor hereby agrees to pay to the Trustee:-
(i)The sum of $3,000.00 by way of contribution to the Trustee’s costs, charges, expenses and remuneration; and
(ii)an amount sufficient to enable the Trustee to pay to those of the Debtor’s unsecured creditors whose proofs of debt the Trustee has admitted (“the unsecured creditors”), a dividend of no less than ten cents in the dollar.
3.The Debtor and the Trustee agree that, subject to paragraph 5 hereof, the amount which the Debtor is required to pay to the Trustee as a consequence of paragraphs 2(a) and (b) hereof is estimated at $43,300.00 (“the estimated amount”). The estimated amount shall be paid by the Debtor over a period of 4 years in the manner and on the dates more particularly set out in paragraph 4 hereof and Schedule A annexed hereto.
4. ...
5. The Debtor and the Trustee further agree that:-
(a)The Debtor shall at any time have the option of paying to the Trustee amounts greater than the instalments prescribed in paragraphs 4(e) to (h) above, but that payment of any such greater amounts shall not excuse the Debtor from paying the instalments prescribed unless and until the whole of the amounts due pursuant to this Deed have been paid in full;
(b)in the event that the estimated sum of $43,300.00 is insufficient to enable the Trustee to:-
(i)Distribute to the unsecured creditors a minimum dividend of ten cents in the dollar; and
(ii)satisfy the whole of his costs, charges, expenses and remuneration,
then the Debtor shall pay such further amount as the Trustee by notice in writing may require and, that further amount shall be paid by the Debtor to the Trustee in one lump sum on the date upon which the last instalment is due namely 15 September 1996.
6.Provided that the Debtor has in all respects complied with his obligations under this Deed and the Act, the Debtor shall be absolutely released and discharged from all provable debts owed by him.”
Schedule A is annexed to the Deed. It sets out the instalments payable over a period of four years and alongside the final instalment figure there is a statement in parenthesis which reads “any such further lump sum as the Trustee may in writing require pursuant to paragraph 5 (b) of this Deed.”
The minutes of the creditors’ meeting on 15 September 1992 contain a resolution dealing with the remuneration of the Trustee and that is that:
““The remuneration of the Trustee is hereby fixed in respect of himself, his partners and employees at the hourly rates applicable to the grades or classifications set out in the Guide to Hourly Rates effective 1st July, 1992, and other such Guides issued from time to time by the Insolvency Practitioners Association of Australia, plus out of pocket expenses, such remuneration to be subject to review by the Registrar in Bankruptcy at the instance of any creditor or the Trustee in accordance with the Act.””
Paragraph (d) of the proposed Deed of Arrangement, which was the first document signed by the Debtor, contains the following requirement in relation to payment:
“(d)The debtor further agrees that having entered into this Deed of Arrangement within the meaning of Part X of the Bankruptcy Act 1966 and having paid the contributions required under the clauses of this Deed there is insufficient funds in the Estate to pay creditors a dividend of 10 cents in the dollar on proofs of debt admitted by the Trustee and to meet the Trustee’s fees and expenses he will pay such amount as to ensure that a dividend of 10 cents in the dollar is paid to creditors and the Trustee’s fees and expenses are paid in full;”
Interestingly enough the original document makes no reference to any $3,000 contribution to the Trustee’s costs, charges, expenses and remuneration, although the minutes of the meeting clearly stipulate the payment of “... a further $3,000.00 contribution to the Trustee’s costs and remuneration”.
Accordingly, at the date of the creditors’ meeting attended by the Debtor it was apparent to those present that the arrangement contemplated at least three specific matters. The first was that the Debtor would make contributions to provide for the payment of 10 cents in the dollar to the unsecured creditors, the second was that there would be a $3,000 contribution to the Trustee’s costs and remuneration and the third was that the Trustee’s remuneration was to be calculated in the manner provided for in those minutes with the possibility that any claim for remuneration would be reviewed by the Registrar in Bankruptcy at the instance of any creditor or the Trustee in accordance with the Act. Although the special resolution and the Deed made no provision for the Debtor to review the Trustee’s remuneration, I have already noted that at the relevant time the Debtor had a right pursuant to Division 4 of Part VIII of the Bankruptcy Regulations which commenced on 16 December 1996 to seek to tax the Trustee’s remuneration. He also had the right and opportunity once any doubt arose concerning the discharge and release from his obligations under the Deed to ask the Trustee to furnish to him a certificate signed by the Trustee confirming that the provisions of the Deed had been carried out (s 237A of the Act).
At the time the Deed was executed neither the Debtor nor the Trustee was in a position to assess with any finality the extent of the debt to be proved and admitted during the period of the Deed or the costs of the administration of the Deed. The Act recognises a clear distinction between the costs and the remuneration of a Trustee (par 109(1)(a) and subs 167(1)) and this distinction adds weight to the Trustee’s contention that the reference in paragraph 3 of the Deed to “the sum of $3,000.00 by way of contribution to the Trustee’s costs, charges, expenses and remuneration;” was simply an estimate of the costs, charges, expenses and remuneration based on the estimate of the debts to be proved and, if paragraph 3 is read togetherwith paragraph 5(b)(ii), in order to meet his obligations under the Deed, the Debtor had to “... satisfy the whole of (the Trustee’s) costs, charges, expenses and remuneration”.
Another matter which assists the Court in accepting the Trustee’s interpretation of the extent of his entitlement to charge fees is the way in which the creditors expressed the special resolution minuted on 15 September 1992. Apart from the reference to the $3,000 contribution to the Trustee’s costs and remuneration it was resolved that “contributions to enable a 10 cent in the dollar dividend are to be made by the Debtor on a step-up basis over four years. It is estimated that the contribution will total $43,300 and be contributed by the Debtor as follows ...”
In my view it is plain from the wording of the special resolution that the understanding was that the monetary sums referred to were estimates rather than fixed amounts. The Debtor’s Statement of Affairs (Exhibit “RWM2”) dated 21 August 1992 names six unsecured creditors and identifies sums owing totalling $273,998.82 The creditors entitled to vote at the creditors’ meeting on 15 September 1992 were three creditors with debts notified at that meeting totalling $346,939.11. Accordingly, until such time as any proofs of debt were admitted the sum of $43,300 which was identified as an “estimate”, was intended to meet the payment of 10 cents in the dollar to the creditors as well as satisfy the whole of the Trustee’s costs, charges, expenses and remuneration. In other words, the sum of $3,000 by way of contribution to the costs of administering the Deed was not intended to be nor was it a fixed amount.
It was critical to the Debtor’s assertion that he had fulfilled his obligations under the Deed that not only the Trustee’s remuneration but the costs, charges and expenses incurred in administering the Deed were fixed at $3,000. If this were so then had the Trustee only distributed $3,000 for these items, when the Debtor paid the final instalment on 2 October 1996 the sum of instalments paid and the interest accrued on those payments would have been sufficient to pay the minimum dividend of 10 cents in the dollar on proofs of debt admitted by the Trustee in April 1997 at $346,939.11.
The Debtor appeared to concede that the admitted debts could have increased his obligation to contribute more than the estimate of $43,000 and this was quite apart from his belief that the Trustee’s fees were fixed at $3,000. If I am correct in my interpretation of the provisions of the Deed; namely, that the Trustee’s fees in the global sense were not fixed at a $3,000 limit, then it is reasonable to conclude that any insufficiency in funds was contributed to by more debts being admitted than first notified with more fees being incurred in the administration of the Deed and, because the insufficiency was actually notified to the Debtor in writing, it was due and payable in order for the Debtor to fulfil his primary obligation to his unsecured creditors.
My interpretation of the wording of paragraph 6 of the Deed is that absolute discharge and release was not automatic on the payment of the last instalment under paragraph 4 of the Deed. It was dependant on compliance in all respects with the Debtor’s obligations under the Deed and the Act and these obligations included the obligation to pay sufficient amounts to give the unsecured creditors 10 cents in the dollar. Subject to any request for taxation of the Trustee’s remuneration (reg 8.09) or any challenge to the payment of the Trustee’s costs, charges, expenses and remuneration in priority to the payment of other amounts (par 109(1)(a)), the Trustee appears to have acted in accordance with the provisions of the Deed and the Act when he distributed a dividend of only 5.5 cents in the dollar on 15 April 1997 after meeting the priority payments. It is not, in these circumstances, open to the Debtor to assert that the Trustee should not have distributed the payments received in the way in which he did and, it follows, that the Trustee’s contention that the Debtor was in breach of his obligations under the Deed in not meeting the additional requirement for payment notified to him on 15 April 1997 is correct, unless the Trustee was precluded by the wording of paragraph 5 of the Deed from giving written notice of the requirement to pay additional funds after the date upon which the last instalment was due.
I am satisfied in this case that on a proper construction of the provisions of the Deed, paragraph 5(b) of the Deed contemplated that the estimated sum of $43,300 may be insufficient to provide for the payment of the minimum dividend as well as satisfy the “whole” of the Trustee’s costs, charges, expenses and remuneration. Paragraph 5(b) required the Debtor to pay (“shall pay”) such further amount as the Trustee notified in writing to meet any insufficiency in funds. The Debtor’s final argument on the proper construction of the Deed and that paragraph in particular is that, in order to make sense of his further obligation to pay an additional sum as a lump sum with the last instalment payment, paragraph 5(b) should be construed as requiring the Trustee to give written notice of the additional amount required to be paid prior to the date for the payment of the last instalment on 15 September 1996.
In determining what the intentions of the creditors and the Debtor were when it was resolved that he would enter into a Deed of Arrangement, it is relevant to bear in mind that the special resolution passed by the creditors at the meeting on 15 September 1992 and the proposed Deed of Arrangement originally signed by the Debtor make no reference to any period of time within which either the additional amounts payable must be notified to the Debtor or the payment of sufficient funds must be made to satisfy the obligation to pay a dividend of 10 cents in the dollar and the whole of the Trustee’s costs, charges, expenses and remuneration.
In February 1997 a further amount for payment was notified in writing to the Debtor by the Trustee. The Debtor was informed by the Trustee that unless the further amount required was paid there would be insufficient funds to meet the obligation to pay a dividend of 10 cents in the dollar to the unsecured creditors. Once the proofs of debt were admitted in April 1997 and the creditors received the Statement of Realisation and Distribution of Estate dated 15 April 1997, they were on notice of the amount of the Trustee’s remuneration and the other expenses incurred by him in the administration of the Deed. On that date the Trustee distributed the dividend and notified both the creditors and the Debtor of the amount of the insufficiency in funds received; namely, $16,873.65. If there was then no time limit on requiring the payment of the additional funds the Trustee was correct in forming the view that the Debtor was in breach of his obligations under the Deed when no arrangement was made with him to pay these amounts.
When the Debtor paid his last instalment, not on 15 September 1996 as the provisions of the Deed stipulated but on 2 October 1996, he says, and this was not disputed, that he had by then paid the forty-eight instalments he was required to pay in accordance with the timetable set out in paragraph 4 of the Deed and Schedule A. However, he also asserts that having made the final payment without receiving written notice that an additional amount was required to be paid, he fulfilled the obligations of the Deed and by reason of the provisions of the Deed he was discharged and released from all provable debts owed by him.
The redrafted Deed appears to have introduced a time by which the Debtor was required to pay additional amounts but paragraph 5(b) does not go so far as to expressly require that the written notice from the Trustee for payment be given before the date for payment of the last instalment on 15 September 1992. Although this provision is poorly crafted I am of the view that the intention behind the Deed as a whole is sufficiently plain. That is that the unsecured creditors receive 10 cents in the dollar and “provided that the Debtor (had) in all respects complied with his obligations under the Deed and the Act ...” (paragraph 6), he would be absolutely released and discharged from all provable debts owed by him. If I accept the Debtor’s interpretation of paragraph 5(b) of the Deed I am required to infer that there was an intention to limit the time within which the request for additional amounts be made. In my view the construction of this provision contended for by the Debtor is inconsistent with the Deed having particular regard to the circumstances surrounding the making of the document and the contents of the Deed as a whole.
For these reasons the Debtor’s application is dismissed.
I certify that this and the preceding fifteen (15) pages are a true copy of the Reasons for Judgment herein of Judicial Registrar Millane
Associate:
Dated: 9 December 1997
Counsel for the Applicant: Mr N. Pane Solicitor for the Applicant: Roth Warren Counsel for the Respondent: Mr J.K. Chippindall Solicitor for the Respondent: Norton Smith & Co Date of Hearing: 24 November 1997 Date of Judgment: 9 December 1997
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