Peters, J.L. v NZI Securities Australia Ltd.

[1992] FCA 975

7s ",,?L

JUDGMENT No. .j.., .......

NOT SUITABLE FOR DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA	) )
VICTORIA DISTRICT REGISTRY	) VG 278 of 1992
1
GENERAL DIVISION	1

ON APPEU FROM A JUDGE OF THE FEDERAL COURT OF AUSTRALIA

BETWEEN:  JAMES LATHAM PETERS

Appellant

AND:  NZ1 SECURITIES AUSTRALIA LIMITED

Respondent

CORAM: Northrop, Spender and Burchett JJ.
PLACE: Melbourne

DATE : 16 October 1992

EX TEMPORE REASONS FOR JUDGMENT

BURCHETT J. (Delivering the first judgment at the
Northrop J.):

This is an unusual case. The appellant debtor signed an authority under S. 188 of the Bankru~tc~ Act 1966, authorizing a solicitor to call a meeting of his creditors. All the appropriate steps were taken to summon a meeting of creditors. At the meeting, a resolution was carried by the required majority, pursuant to which a Part X deed was executed.

purchase of a home. The respondent, which itself claimed to

There were, however, two problems. The debtor's father claimed to be a creditor, and he was sworn to be a creditor, in the debtor's statement of affairs, in the sum of $200,000 said to represent money lent to assist the debtor in the

be a creditor, objected that the father's status as a creditor was not established. It now contends that the moneys, which had undoubtedly been paid by the father in the previous calendar year, may have constituted a gift. The other problem relates to the respondent's own position. Despite having been given every opportunity to do so, it failed to make known to the chairman of the meeting the particulars of its debt (see S. 198(4)) nor, although it was a secured creditor, did it

,- . surrender its security (see S. 198(5)) nor take the course

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offered by S. 198(6). The solution of these problems, which

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- , was adopted by the chairman, was to make determinations under

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I	- ,7;5': 201 that the father was entitled to vote as a creditor in
, . .

' :	.;: .' respect of the debt claimed by him, and that the respondent
5 . .

"was not entitled to vote. As I have said, the resolution was *.

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.	-carried by the required majority of creditors.

Proceedings were instituted by the respondent, under

S. 222, in which an order was sought declaring the deed void.

The learned judge, before whom the matter came, held that the	respondent was rightly excluded from the vote, and no notice	of contention has been filed in respect of this finding. His
Honour also held that the father was wrongly permitted to vote, as "there was inadequate evidence that [he] was entitled to vote in respect of an alleged loan of $200,000." His Honour's judgment proceeds to reject allegations that false or misleading information was given by the debtor, and that the deed was defective. He then concluded:

"I declare the deed of arrangement void. As I understood the evidence, if both of these creditors had been excluded from voting, it would have meant the failure of the resolution. However, the parties are agreed that that is not the case and it is not relevant to the decision in any event."

The appellant raises a number of arguments. It is not necessary to deal with them all. One thing is clear. If the chairman had rejected the father's claim to be a creditor, the resolution would still have been carried by the required majority. I accept that this fact is not conclusive. In some cases, the wrongful admission of an alleged creditor, who took a particular stance towards a resolution, might have had a great in£ luence on the votes of others. Cf. Re Comoaction Systems Ptv Limited and the Companies Act [l9761 2 NSWLR 477 at 485. But nothing like that is suggested here, nor could it be suggested. Even if there were such a point raised, it would not be correct to say that the court could treat the actual effect of the particular creditor's vote, taken by itself, as "not relevant to the decision in any event". Where

would be likely to have influenced others, the relevance of	there is no suggestion the presence of the particular creditor
the effect of his own vote, and, in this case, of the fact that it could not have made any difference to whether the
resolution was carried, must be regarded as very clear. In
Seoal: Lensworth Finance Ltd v. Seoal and Ward (1975) 9 ALR
154 at 161, Riley J. said:

"If the meeting had in all other respects been properly conducted, and if the voting figures eventually arrived at by the chairman had been

beyond doubt arithmetically correct, the rejection of Ryan's vote would have made no practical difference: the resolution would have been passed by the necessary majorities even if his vote in respect of a debt of $39,000 had been counted as a vote against the motion to approve the composition. It would be wrong in those circumstances to declare the composition void or set it aside for that reason

alone. "

See also Re McLean: Ex Darte Friends' Provident Life Office (1992) 108 ALR 360 at 361. It follows that his Honour's discretion was exercised upon a wrong principle. In my opinion, the deed ought not to have been declared void.

The appellant also contends that the finding against his father's right to vote was wrong. Neither the appellant nor his father gave oral evidence before his Honour, so that this finding depends on the proper inferences to be drawn from the evidence, and not upon questions of credit. The only oral evidence on the point was glven by the chairman, whose credit was not questioned. He said that his firm acted in the transaction in relation to which the loan was claimed to have

been made. The effect of his evidence was that he knew the

arrangement to have been acknowledged, at the time, as one of

loan. The debtor swore in his statement of affairs that the debt was owed as a loan. What is said on the other side is that a question was raised, and the deStor claimed to be able to demonstrate the making of payments 0.' interest, but did not come forward to do so; that the fathe was aged 78, living alone, and had the one son, the d. -or; that the bank documents which were produced showed ?e payments of the

principal amount, but not of course its character; and that, in those circumstances, establishment of a loan required acceptable oral evidence in the case from the debtor himself, or from his father. Jones v. Dunkel (1959) 101 CLR 298 was referred to.

But the onus of showing the chairman should have

determined otherwise than he did was on the respondent:
McLean (supra); Forshaw v. Thompson (1992) 106 ALR 633;
Zantiotis v. Andrew fNo.21 (1988) 80 ALR 299. In the face of
the sworn statement of affairs, and the evidence of the
chairman, there is nothing to show the large sum certainly
paid was not the loan the chairman accepted it to be. I think
the appellant is entitled to succeed on this point also.

An attempt was made to argue, for the respondent, that the decision could be supported on other grounds, not taken by his Honour. In particular, there was some attack on the propriety of the chairman's conduct. Having regard to the

unchallenged findings of the trial judge, this submission	should not be entertained. In any case, giving full weight to
all the discretionary matters raised, the present is not a case in which it would be appropriate to declare void this deed, which in fact received the imprimatur of substantially in excess of the required majority of creditors.
NORTHROP J. :

I agree with the reasons given by M r Justice Burchett. I

have nothing further to add.

SPENDER J.:

I also agree.

NORTHROP J.:

In those circumstances, the following orders are made:

1.   The appeal be allowed with costs.

2.  The judgment appealed from be set aside and in lieu thereof it be ordered that the application be dismissed with costs, that is, the applicant to pay the taxed costs of the debtor.

I certify that this and the preceding five (5) pages

are a true copy of the Reasons for Judgment herein of Mr Justice Northrop, Mr Justice Spender and Mr

Justice Burchett. c>

Associate:  D , \ < c .\-C------

Date: 16 October 1992