Mancuso v Licardy

[1992] FCA 943

9q3, "2-

JUDGMENT NO. ....... . ...... 0. ,.,n.

IN THE FEDERAL COURT OF AUSTRALIA)

NEW SOUTH WALES DISTRICT REGISTRY)	No NX 79 of 1992
GENERAL DIVISION	1

BETWEEN JEAN PIERRE MANCUSO AND

CAROLINE ANNETTE MANCUSQ

Applicant

AND RICHARD ANTBONY LICARDY

Respondent

10 DEC 1992

RP~I~UQPUL EX TEMPORE JUDC;MENT

EINFELD J SYDNEY 28 JULY 1992

This matter comes before the Court as an urgent application for leave to continue to prosecute proceedings commenced in the Common Law Division of the Supreme Court of New South Wales, between the applicants, Jean Pierre Mancuso and Caroline Annette Mancuso, and the respondent, Richard Anthony Licardy. The urgency is brought about by the fact that the action is apparently listed to commence tomorrow in that Court and at the present time the matter cannot proceed because the respondent is subject to Part X of the Bankruptcy Act being a debtor under what is called a deed of arrangement.

debtor agreed to a number of things. By clause 2 he agreed to

The so-called deed of arrangement is dated 15 June 1992 and followed upon a meeting of creditors of the debtor held on 25 May 1992. The creditors resolved by special resolution that the respondent be required to enter what was described as a deed of arrangement under Part X of the Act. In this deed the

convey and assign to his trustee all of his divisible property upon trust to deal with it in accordance with the deed. By clause 3 he agreed to pay to the trustee the sum of $39,000 in quarterly instalments for a three-year period commencing on 21 September 1992. He also agreed that 50 per cent of his taxable income above the threshold amount would 5e paid to the trustee in quarterly instalments from the same date with I I

certain adjustments. He also agreed to pay $5000 on account
of the trustee's remuneration.

The deed provided that the trustee was to "get in and realise the divisible property as soon as reasonably practicable". The trustee was bound by the deed to apply any moneys received by him in making payments under the deed in the order provided for by the Act as modified. Clause 9 of the deed provided that when and if the debtor complied with all his obligations under the deed, the trustee is to certify that the debtor has complied with the deed. The deed then provides that any surplus will return to the debtor.

The applicants before this Court who are the plaintiffs in the	Supreme Court argue that this is a deed of arrangement, as it
calls itself. The respondent, who is the debtor in the deed, says that although the deed is called a deed of arrangement, it is in fact the deed of assignment. The matter arises by reason of the different provisions of the Bankruptcy Act for deeds of assignment and deeds of arrangement. By section 228(2)(c) the Mancusos would not be able to proceed with their

Supreme Court action while the deed remains valid if it is a deed of assignment. On the other hand, by section 233(2) (b), if the deed is a deed of arrangement, the leave of the court may be given to permit the Supreme Court proceedings to continue to judgment. I have been advised that the trustee does not object, although he does not consent, to the order for leave to continue the Supreme Court proceedings.

In reality what this dispute amounts to is whether the action should proceed forthwith or whether for a period of something over three years during which the debtor is subject to the deed of assignment, it should be prevented from proceeding. Seeing that the debtor, who is a solicitor, has assigned all his property to the trustee, it would depend then on the surplus as to whether it would be worth taking the action. There may be no surplus from which he could pay any amount obtained in the Supreme Court action.

The action is basically an action for negligence.	There is in
debtor against all or some of the liability which might be existence a policy of insurance purporting to indemnify the	incurred in the Supreme Court proceedings. As the relevant
acts of negligence, in the sense of the relevant findings of fact, are yet to be pronounced, it is apparently not possible at present to determine whether the insurance cover of the debtor would embrace his liability. In any event, there is a
$6000 excess which the debtor will have to pay come what may.

It is not possible at this time of night, which is now 6.20 pm, to give my full reasons for the conclusions I have

formed but if requested I shall do so in due course. It will suffice to say that I have reached the clear opinion that this is in fact a deed of arrangement and not a deed of assignment.

I am fortified in my conclusions by the remarks of Sir Garfield Barwick in Gee v Schmutter [l9701 123 CLR 503. I will not delay now to read relevant passages of that judgment but it is clear from pages 508 to 511 that a deed of arrangement may well contain an assignment to a trustee of all the divisible property of the debtor. Moreover, if a deed, despite being called a deed of assignment, is outside the form provided for such deeds and makes provision for matters additional to the assignment of property to the trustee, it may especially be held to be a deed of arrangement. In my opinion this is such an occasion.

The Act and the rules provide that a deed of assignment must be in accordance with form 36A. This deed is not in this

determine that it was not a deed of assignment because the Act	form. By itself, that would not necessarily be enough to
provides in section 214 that it is sufficient if a deed is
substantially in accordance with that form despite the
provisions of rule 80 which seem to require precisely the form. However, this deed makes provision for far more than is envisaged by the form. In its inclusion of matters which could only be envisaged in a deed of arrangement and would not

normally be contemplated in a deed of assignment, the very nature of this deed seems clearly to demonstrate the creditors' intention that the debtor should enter into a deed of arrangement.

The question then arises as to whether leave should be granted. The facts in this case, which are admitted or not disputed, include that the debtor is covered by the policy of insurance to which I referred and that, for the purposes of the present proceedings at any rate, the insurer is indemnifying the debtor in respect of the claim concerned. In fact, it is the insurance company which is apparently providing the representation of the debtor in these proceedings.

The argument that leave ought not to be granted is put on two bases: firstly, that the deed of arrangement is "akin" to a deed of assignment whatever that submission might mean; secondly, that if leave is granted, the statutory regime set

up to allow the debtor to continue his affairs insulated from	debts to creditors would be seriously interfered with.
The Mancusos were not present at the creditors' meeting which resolved that the debtor enter the deed, and were not declared in the debtor's statement of affairs as creditors. This is explained by the fact that, because of the pending Supreme Court action, they were only provisional creditors at the time and the Act provides that such creditors do not receive a vote. On the other hand, it would seem quite unjust that, having brought proceedings in the Supreme Court and having waited so long for them to co%e to a hearing, they should be denied the right to go ahead with those proceedings without having been given the opportunity of participating in or, as far as I know, even been infor.:ed of the arrangement which the debtor sought to make with his creditors.
As I have said, the fact that the leave is not granted would not free the debtor from the action nor would it exclude or release the insurer from the indemnity. It would merely postpone the right of the Mancusos to pursue their action for several years. Having in nind that the Supreme Court is at present making a very concentr,-~ted effort to clear its backlog of cases, it would seem a stzange result for this Court to take a step which would now gostpone for several years the opportunity of the Supreme Cocrt to deal with one of its own long delayed cases.
It seems to me that the arqaient against leave has no true
proceed and no reason has been put as to why it is substance. It is clear th--t the applicants' action can
inconvenient to have it conticued to finality now. It does not seem to me that justice would in any way be done by denying the applicants, for several years, access to any damages they are able to prove merely because the debtor has entered into a deed of arrangenent to which they were not and were not invited to be a part.
I can see no discretionary reason at all for delaying the action any further and in my opinion the applicants should have the relief which they seek. I therefore grant leave to the applicants to continue to prosecute proceedings number 129923 of 1988 issued out of the Common Law Division of the New South Wales Supreme Court.
RECORDED NOT TRANSCRIBED
In view of the lateness of the hour tonight, I shall mark the case part heard to permit any other applications within these proceedings. I will formally fix the matter for directions in a couple of weeks time and the parties can tell me then what they want to do. If there are consent orders, they can be filed with the Court or my Associate can be notified that the directions hearing is not required.
RECORDED -- :  NOT TRANSCRIBED

..

I will fix the matter for directions at 9.30 am on Monday 10

August unless there is any inconvenience to anybody then.

Costs will be reserved until that hearing.

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