Pretorius, Alec Knauff v Daltons Carpet Tiles Pty Ltd

[1984] FCA 142

Re: ALEC KNAUFF PRETORIUS
And: DALTONS CARPET TILES PTY. LIMITED; CARRICKS LIMITED; DRISCOLL HOLDINGS
PTY. LIMITED; OFFICE EQUIPMENT INDUSTRY; ASSOCIATION OF AUSTRALIA LIMITED;
WORMALD INTERNATIONAL (AUST.) PTY. LIMITED; LABOR BROADCASTING STATION PTY.
LIMITED and JOHN ROBERT REES (1984) 1 FCR 346
No. Q G12 of 1984
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
Smithers(1), Northrop(2) and Beaumont(3) JJ.

CATCHWORDS

Bankruptcy - authority under s. 188 of the Bankruptcy Act authorising the Trustee to call a creditors' meeting for the purposes of Part X of the Act - composition rejected and debtor requested to lodge own petition - no petition presented - further meeting of creditors held although no further authority under s. 188 of the Act obtained - whether trustee authorised to call second meeting under s. 188 - creditors at second meeting accepted a composition and rescinded the request to the debtor to lodge his own petition - validity of composition purportedly accepted at second meeting.

Bankruptcy Act 1966 - ss. 40, 188, 190, 221, 222, 223 and 227.

Bankruptcy - Authority authorising trustee to call creditors meeting - Whether second meeting may be called - Bankruptcy Act 1966 (Cth), ss 40, 188, 190, 221, 222, 223 and 227.

HEADNOTE

The provisions of Pt X of the Bankruptcy Act 1966 (Cth) contemplate that only one meeting of creditors may be called pursuant to an authority under s. 188 for the purpose of considering a composition proposed by a debtor.

HEARING

Melbourne, 1984, April 18; May 31. #DATE 31:5:1984

APPEAL.

Appeal from judgment and orders of a single judge.

The appellant in person.

A.J. Williams, for the respondent.

Cur. adv. vult.

Solicitors for the respondent: Ellison Moschella & Co.

G.F.V.

ORDER

THE COURT ORDERS THAT the appeal is dismissed with costs.

Appeal dismissed with costs.

JUDGE1

This is an appeal by a debtor from orders made under the Bankruptcy Act, 1966 ("the Act") by the Federal Court constituted by a single judge, first, declaring that a composition purportedly accepted by creditors of the appellant at a meeting held on 3 November 1983 was void; and secondly, making a sequestration order in respect of the estate of the appellant.

1. The circumstances surrounding the making of these orders, as found by the learned Judge, are not in dispute and are as follows. The appellant is and was, at all material times, insolvent. On 24 August 1983, he signed an authority pursuant to s. 188(1)(e) of the Act in the following terms:
   
   

"Form 33A

Rule 74A (sic)

The Bankruptcy Act 1966

Bankruptcy District of the ) Southern District of the ) State of Queensland ) No. X72 of 1983

AUTHORITY TO REGISTERED TRUSTEE TO CALL MEETING OF CREDITORS AND TAKE OVER CONTROL OF PROPERTY

In pursuance of Section 188 of the Bankruptcy Act 1966, I, ALEC KNAUFF PRETORIUS Exhibition Organisor of 37 Bonython Street, Hindsor, Qld. 4030 hereby authorise JOHN ROBERT REES of C/- Hall Chadwick & Co. 24th Floor, City Mutual Building, 307 Queen Street, Brisbane to call a meeting of my creditors for the purposes of Part X of that Act and to take over control of my property in accordance with that Part." (emphasis added)

1. The authority was in accordance with the provisions of s. 188(1)(e) which provides (inter alia) that a debtor, who desires that his affairs be dealt with under Part X without his estate being sequestrated, "may sign an authority in accordance with the prescribed form . . . authorising a registered trustee to call a meeting of his creditors and to take over control of his property . . .". The authority was in the prescribed form, being in accordance with rule 74(1) and form 33A.

2. As has been said, the appellant is, and at all material times has been, insolvent: although the appellant's statement of affairs dated 20 September 1983 disclosed assets not exceeding $9,000 in value, it also disclosed creditors in the sum of $50,629.30, including some of the respondents; and it would appear that the appellant has other unsecured creditors who were not disclosed in his statement of affairs. The learned Judge found that unsecured creditors are unlikely to receive any dividend from the appellant's estate.

3. Pursuant to the authority signed under s. 188(1), by notice dated 25 August, 1983, the trustee notified those creditors shown in the appellant's statement of affairs of a meeting to be held on 20 September 1983 in these terms:
   
   

"NOTICE OF MEETING

ALEC KNAUFF PRETORIUS

TAKE NOTICE that Alex (sic) Knauff Pretorius, Exhibition Organisor of 37 Bonythan Street, Windsor, Qld. has on the Twenty-Fourth day of August 1983 signed an Authority under Sub-Section 188(1) of the Bankruptcy Act 1966 authorising John Robert Rees of Hall Chadwick & Co., Chartered Accountants, 24th Floor, City Mutual Building, 307 Queen Street, Brisbane, Queensland to call a meeting of his creditors (and take over control of his property) and that, in pursuance to Section 194 of the Bankruptcy Act 1966, a meeting of the creditors of the abovenamed Debtor be held at the office of Hall Chadwick & Co., 24th Floor, City Mutual Building, 307 Queen Street, Brisbane, Qld. on Tuesday, the Twentieth day of September, 1983 at 11.00 o'clock in the forenoon.

DATED this Twenty-Fifth day of August 1983.

John Robert Rees Controlling Trustee"

(emphasis added)

1. The notice of meeting was accompanied by a circular which stated, with reference to the meeting:
   
   

"At the meeting creditors may, by special resolution, resolve one of the following:-

1. That the Debtor's property be no longer subject to control under this division:

2. Require the Debtor to execute a Deed of Assignment or a Deed of Arrangement under this part;

3. Accept a Composition;

4. Require the Debtor to present a Debtor's Petition within seven (7) days from the day on which the resolution was passed.

It is the Debtor's intention to request that creditors accept a composition in full and final satisfaction of his debts. The terms of the composition and a Statement of Affairs of the Debtor will be available at the meeting."

1. The meeting was called in accordance with Division 2 of Part X of the Act: s. 190(1) obliges a trustee to "proceed to call a meeting in accordance with this Division", and s. 194(1)(a) provides that the meeting shall be held not later than twenty eight days after the authority is signed by the debtor.

2. As the circular sent by the trustee explained, s. 204(1) provides:
   
   

"The creditors may, at a meeting called in pursuance of an authority under section 188, by special resolution --

(a) where the debtor's property is subject to control under this Division, resolve that the debtor's property be no longer subject to control under this Division;

(b) require the debtor to execute a deed of assignment or a deed of arrangement under this Part;

(c) accept a composition; or

(d) require the debtor to present a debtor's petition within 7 days from the day on which the resolution was passed."

1. The meeting was attended by the representatives of eighteen unsecured creditors of the appellant. The meeting rejected the appellant's proposal for a composition in full settlement and satisfaction of his debts but passed the following resolution:
   
   

"That the debtor be requested to lodge his own petition in bankruptcy within seven (7) days of the passing of this resolution."

1. In fact, the appellant did not present a petition in accordance with this resolution or at all. A number of consequences flowed from this failure: the appellant committed an act of bankruptcy by virtue of s. 40(1)(1)(ii), upon which a bankruptcy petition could, of course, be founded; and by virtue of s. 221(1)(b), the Court might, if it thought fit, on the application of a creditor or the controlling trustee, forthwith make a sequestration order against the estate of the appellant. However, no creditor sought to avail himself of any such relief at that stage.

2. Instead of presenting a petition in accordance with the creditors' resolution, the appellant sent a circular to his creditors dated 22 September 1983 which, after referring to his financial difficulties and the meeting held on 20 September 1983, concluded:
   
   

"I will not petition for my own bankruptcy: such a step would bring no advantage to my creditors - everything I owned has already gone (including the office furniture and equipment which had to be sent to the auction rooms after the decision taken by the creditors two days ago). In addition as a bankrupt my chances of getting a job as a journalist or public relations officer will be slim indeed, i.e. my ability to pay anything (sic) to my creditors will be reduced.

If none of my creditors bankrupts me within the next month I will thereafter ask the Trustee to call another meeting of creditors to reconsider my offer. That offer cannot be increased: it is not possible to squeeze blood out of a stone."

1. On 18 October 1983, the trustee sent a further notice to creditors in these terms:
   
   

"NOTICE TO CREDITORS

RE: ALEX KNAUFF PRETORIUS Trading as Queensland Exhibitions 37 Bonython Street, Windsor, Qld.

As you are aware on 24 August 1983 Mr. Pretorius signed an authority under Part X of the Bankruptcy Act 1966. A meeting of creditors was held on 20 September, 1983 at which the Debtor put forward a proposal for payment of $9,000 by instalments over a three

(3) year period in full and final satisfaction of his debts.

The proposal was rejected and the Debtor was requested to file his own petition in bankruptcy.

The Debtor advises that he does not intend lodging his own petition and further that he will shortly be leaving Brisbane. He has requested that another meeting be called to reconsider the matter and to put to creditors the following:-

1. The Debtor covenants to pay to the Trustee monthly payments of $250 or 15 per cent of his nett after tax earnings, whichever is the greater, for 36 months commencing 1 January 1984, plus the cash in hand held by the Controlling Trustee.

2. The Trustee of this Composition shall be a person nominated by creditors in pursuance of S204(IV) (sic) of the Bankruptcy Act 1966.

3. The Trustee shall apply any monies received by him pursuant to this Composition in making payments to creditors in the order prescribed by S109 (sic) of the Bankruptcy Act 1966 in the same manner as if the Debtor had been made bankrupt on the date of the acceptance of this proposal.

4. This Composition is made pursuant to Part X of the Bankruptcy Act 1966.

It would appear that in order to consider the proposal the resolution passed at the meeting on 20 September, 1983 must first be withdrawn and a meeting has now been called to consider the matter. A notice of meeting and proxy form for use at the meeting is enclosed."

1. The enclosed notice of meeting was in these terms:
   
   

"NOTICE OF MEETING ALEC KNAUFF PRETORIUS

TAKE NOTICE that a meeting of the creditors of Alex (sic) Knauff Pretorius of 37 Bonython Street, Windsor, Qld., Exhibition Organiser, will be held at the office of Hall Chadwick & Co., Chartered Accountants, 24th Floor, City Mutual Building, 307 Queen Street, Brisbane, on Thursday the Third day of November, 1983 at 11.00 o'clock in the forenoon to consider a request by the Debtor to withdraw the previous motion for the Debtor to lodge his own petition in bankruptcy and to reconsider the Composition originally proposed by the Debtor."

1. Pursuant to the notice, a meeting of creditors was held on 3 November 1983. The meeting was attended by the representatives of seven unsecured creditors of the appellant. The minutes of the meeting show that the following resolutions were then passed:
   
   

"RESCIND FORMER RESOLUTION:

Moved: A.N.Z. Banking Group Limited Seconded: McCullough & Robertson

'THAT the Resolution passed at the meeting of creditors held on 20 August 1983 requesting the Debtor to lodge his own petition in bankruptcy within seven (7) days be rescinded.'

Carried

ACCEPTANCE OF COMPOSITION:

Moved: A.N.Z. Banking Group Limited Seconded: McCullough & Robertson

'THAT the proposal of the Debtor for a Composition be accepted and the terms of the Composition being:

1. The Debtor covenants to pay to the Trustee monthly payments of $250 or 15% of his nett after tax earnings, whichever is the greater, for 36 months commencing 1 January, 1984, plus the cash in hand held by the Controlling Trustee.

2. Trustee of this Composition shall be a person nominated by creditors in pursuance of S204(iv) (sic) of the Bankruptcy Act 1966.

3. The Trustee shall apply monies received by him pursuant to this Composition in making payments to creditors in the order prescribed by S109 (sic) of the Bankruptcy Act 1966 in the same manner as if the Debtor had been made bankrupt on the date of the acceptance of this proposal.

4. The Debtor undertakes not to engage in business of (sic) his own account in exhibition promotions for the period of the Composition. This restriction does not apply to the Debtor as an employee.

5. The Composition is made pursuant to Part X of the Bankruptcy Act 1966.

CONTROLLING TRUSTEES REMUNERATION:

Moved: Office Equipment Industry Association Seconded: A.N.Z. Banking Group Limited

'THAT remuneration of the Controlling Trustee for the period since the 20 August 1983 be set at $250.

Carried.

APPOINTMENT OF TRUSTEE:

Moved: Office Equipment Industry Association Seconded: A.N.Z. Banking Group Limited

'THAT John Robert Rees be appointed Trustee to administer the Composition' . . ."

1. By the amended application which was dealt with by the learned Judge, the respondents (all of whom claim to be unsecured creditors of the appellant and some of whom are admitted to be so and none of whom were present at the meeting held on 3 November 1983) sought various forms of relief under the Act: first, an order pursuant to s. 222(2) that the composition purportedly accepted at the meeting held on 3 November 1983 be declared void on the ground that the meeting was held in contravention of the provisions of Part X; secondly, that pursuant to s. 222(7), a sequestration order be made against the estate of the appellant; (by s. 222(1) and (2), jurisdiction is conferred upon the Court to declare void a composition not accepted by a special resolution of a meeting of creditors under s. 204; by s. 222(7), a creditor may include in an application under s. 222(1) an application for a sequestration order against the estate of the debtor and, if the Court makes an order under s. 222(2) declaring the composition to be void, it may, if it thinks fit, forthwith make the sequestration order sought); thirdly, the respondents sought, in the alternative, a sequestration order pursuant to s. 221(1)(b) the terms of which have been mentioned above.

2. In essence, the respondents challenged the power of the meeting of 3 November 1983 to rescind the previous resolution and to accept a composition upon the ground that, as a matter of statutory construction, Part X contemplated that only one meeting could be called pursuant to an authority given under s. 188 for this purpose and this meeting, held on 20 September 1983, had rejected the composition then proferred and had instead required the appellant to present his own petition; so that, the only meeting that had power to deal with the matter had done so in a way which meant that no further meeting could purport to accept the composition later suggested by the appellant. The learned Judge upheld the respondents' challenge saying, in his reasons (at p. 9):
   
   

" . . . the debtor faces the dilemma that unless the meeting of 3 November 1983 was called in pursuance of an authority under s. 188 it could not approve the composition so as to make it binding on all his creditors and, if it was so called, it was not called within the time prescribed by paragraph 194(1)(a).

In my opinion the composition purportedly approved by the meeting on 3 November 1983 was not accepted by a special resolution of a meeting of creditors under s. 204 in that it was not accepted by a special resolution of a meeting of creditors called in pursuance of an authority under s. 188 within the time limited by paragraph 194(1)(a)."

1. As has been said, the learned Judge then made an order declaring void the composition purportedly accepted at the meeting held on 3 November 1983 and then made a sequestration order.

2. A number of grounds of appeal have been argued by the appellant who now appears in person. At the hearing of the application, the appellant was represented by counsel and it seems that the only question argued before the learned Judge was the point of statutory construction just mentioned. This was the main point argued on the appeal by the appellant who submits that Part X permits more than one meeting to be held for the purpose of accepting a composition proposed by a debtor. The respondents, on the other hand, contend that only one meeting, and not a plurality of meetings, can be called pursuant to an authority given under s. 188(1)(e).

3. The question of the competence of the meeting held on 3 November 1983 to do what it purported to do is, of course, one of construction of the relevant provisions of Part X against the background of the events which happened. As a matter of language, it is clear enough that s. 188(1)(e) contemplates the calling of a single meeting: it speaks of "a meeting"; and the singular is also employed in other provisions dealing with the same subject matter such as ss. 194, 195, 196, 197, 198, 199, 200, 201, 202, 203, 204, 205, 206, 207, 208 and 221.

1. It is true, as the appellant says, that by s. 223(1)(a) the controlling trustee, but not a solicitor authorized to call a meeting of creditors under s.188(1)(f), "may call such general meetings of the creditors as he considers necessary or desirable for the purposes of this Part . . .": in this regard, see the definition of "controlling trustee" in s. 187(1). However, in our opinion, this provision is directed to the possible need for a meeting of creditors to consider, for example, a matter arising out of the control being exercised over the property of the debtor. This view is supported by the other provisions of s. 223(1) empowering the trustee of a deed of assignment, a deed of arrangement or a composition to call general "meetings". If anything, in our view, the use of the plural "meetings" in s. 223(1)(a) in marked contrast with the employment of the singular "a meeting" in s. 188(1)(e) tends against the appellant on his argument.

2. Then the appellant invokes s. 23(b) of the Acts Interpretation Act 1901 and submits that, by reason of that provision, the reference to a meeting in the singular in s. 188(1)(e) and subsequent sections should be read as including the plural. But it is clear that s. 23(b) cannot so transform the language of s. 188(1)(e) and subsequent provisions if the context otherwise indicates (see Blue Metal Industries Ltd. v. Dilley (1970) AC 827; Burns v. Paterson (1969) 80 WN (Pt. 1) 560 at pp 564-5; Pearce, Statutory Interpretation in Australia, 2nd Ed. at pp. 109-110). In our opinion, the evident purpose or object of the legislation here does indicate a contrary intention (cf. Acts Interpretation Act, 1901 s. 15AA). In our view, the scheme provided by this Part of the Act contemplates that only one meeting of creditors may be called pursuant to an authority under s. 188 for the purpose of considering a composition proposed by their debtor, subject, of course, to the possibility that such a meeting may be adjourned pursuant to s. 197. In any event, in the present case, only one authority under s. 188 was signed and it is clear from its terms that it authorised only one meeting to be called (cf. Re Amadio (1978) 24 ALR 455 at pp 461-3).

3. We find nothing offensive to the policy of Part X in the conclusion we have reached as to its construction. On the contrary, we think that such a result accords with the evident policy of the Act. In other words, we think that it is possible to discern from the general structure of Part X a legislative intention that if a debtor cannot carry the meeting of creditors summoned for the purpose of considering the composition he profers, then he should not be permitted to call meeting after meeting even ad infinitum in the hope that, by a process of attrition, inconvenience or added expense, he will eventually achieve acceptance of his proposal. It is significant in this regard that the debtor is assumed to be insolvent: the signing of an authority under s. 188 is an act of bankruptcy (s. 40(1)(i)). It should not, therefore, be presumed that such a debtor should have the luxury of calling any number of meetings until he achieves his purpose.

4. This is not to say that the matter of the proposed composition need be immediately resolved: as has been said, the meeting may be adjourned under s. 197. Further, even if the meeting of creditors were to reject the composition proferred by the debtor, a sequestration order is by no means inevitable: the Court has a discretion to refuse such an order in a proper case (cf. s. 206; see also McDonald, Henry & Meek's Australian Bankruptcy Law and Practice (Fifth Ed.) para. 1039).

5. In any event, in our view, the learned Judge was correct in holding that the meeting held on 3 November 1983 was held outside the time limit provided in s. 194(1)(a), namely not later than twenty eight days after the authority is signed by the debtor. The appellant sought to meet this problem by submitting that an authority given under s. 188 has a continuing operation which enables the time limits in s. 194 to be fulfilled. But, in our view, the time limits imposed by s. 194(1)(a) can only be extended, if at all, by order made under s. 33(1)(c).

6. It follows, that the appellant fails on the main point thus argued. The appellant also sought to raise a number of independent matters, seeking to attack the validity of the resolution passed at the meeting held on 20 September 1983. None of these matters was argued below and, in our view, should not be allowed to be raised now. In any event, we are not persuaded that there is any substance in them.

7. The appeal is dismissed with costs.