Radin v Commonwealth Bank of Australia - [1999] FCA 748

FEDERAL COURT OF AUSTRALIA
Radin v Commonwealth Bank of Australia [1999] FCA 748
BANKRUPTCY – Part X deed of arrangement – application for review of trustee’s decision to allow secured creditor (“Bank”) to vote at a creditors’ meeting on a special resolution extending time for compliance with the deed – whether Bank had represented to applicant that it would not vote at the meeting – whether Bank an unsecured creditor – Bank’s entitlement to estimate the value of its security – whether ground of review of trustee’s decision that true value of security exceeded Bank’s estimate – whether deed can be varied by special resolution – termination of deed of arrangement – whether sequestration order should be made – stay of sequestration order.
Bankruptcy Act 1966 (Cth) s37, 52(3), 90, 91, 178, 198(5), (6), 201, 207, 233(1), (2), 235, 236
Federal Court Rules O 52 r 17
Pretorius v Daltons Carpet Tiles Pty Ltd (1984) 1 FCR 346, referred to
Re Jones and Harvey (1963) 18 ABC 247, followed
Re Clonan (1963) 20 ABC 245, followed
Policy Nominees Pty Ltd (Provisional Liquidator Appointed) v McDougall (Ryan, Whitlam and Marshall JJ, 16 October 1997, unreported), referred to
Zantiotis v Andrew (No 2) (1988) 80 ALR 299, followed
Coleman v Lazy Days Investments Pty Ltd (1994) 55 FCR 297, followed
MICHAEL RADIN v PETER DAVID RODGERS & ANOR
MICHAEL RADIN v COMMONWEALTH BANK OF AUSTRALIA v & ANOR
COMMONWEALTH BANK OF AUSTRALIA & ANOR v STEFANOVIC & ORS
NX 57 OF 1994
NG 695 OF 1995
NG 632 OF 1996
LINDGREN J
7 JUNE 1999
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NX 57 OF 1994

IN THE MATTER OF MICHAEL RADIN

BETWEEN:

MICHAEL RADIN
Applicant

AND:

PETER DAVID RODGERS
First Respondent

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
Second Respondent

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 695 OF 1995

BETWEEN:

MICHAEL RADIN
Applicant

AND
AND

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First Respondent

MARTIN RUSSELL BROWN
Second Respondent

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 632 OF 1996

BETWEEN:

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First Applicant

MARTIN RUSSELL BROWN
Second Applicant

AND:

LILY STEFANOVIC
First Respondent

SNEZANA MIKI MILICEVIC
Second Respondent

MICHAEL RADIN
Third Respondent

SUSAN McTEGG
Fourth Respondent

DENNIS IAN HILL
Fifth Respondent

JUDGE:

LINDGREN J

DATE:

7 JUNE 1999

PLACE:

SYDNEY

THE COURT ORDERS THAT:
1.All three proceedings be stood over to 9 June 1999 at 9.00 am for the making of orders, including orders as to costs.
2.The Commonwealth Bank of Australia bring in short minutes of the orders (including orders as to costs) and declaration to be made in the three proceedings.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NX 57 OF 1994

IN THE MATTER OF MICHAEL RADIN

BETWEEN:

MICHAEL RADIN
Applicant

AND:

PETER DAVID RODGERS
First Respondent

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
Second Respondent

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 695 OF 1995

BETWEEN:

MICHAEL RADIN
Applicant

AND
AND

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First Respondent

MARTIN RUSSELL BROWN
Second Respondent

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

NG 632 OF 1996

BETWEEN:

COMMONWEALTH BANK OF AUSTRALIA (ACN 123 123 124)
First Applicant

MARTIN RUSSELL BROWN
Second Applicant

AND:

LILY STEFANOVIC
First Respondent

SNEZANA MIKI MILICEVIC
Second Respondent

MICHAEL RADIN
Third Respondent

SUSAN McTEGG
Fourth Respondent

DENNIS IAN HILL
Fifth Respondent

JUDGE:

LINDGREN J

DATE:

7 JUNE 1999

PLACE:

SYDNEY

REASONS FOR JUDGMENT
INTRODUCTION

On 22 August 1996 Sheppard J ordered that these three proceedings be heard together and that, so far as relevant, evidence in each be evidence in the others. As a result of consent orders made more recently, the matters have been heard in two stages. But those recent orders will be better understood if I first outline the background facts.
CHRONOLOGICAL OUTLINE OF BACKGROUND FACTS
On 3 November 1988 Michael Radin (“Mr Radin”), who was then a solicitor, executed a “Bill of Sale and Equitable Mortgage” over the legal practice which he then carried on under the name “Radin & Associates” (“the Practice”) in favour of the Commonwealth Bank of Australia (“the Bank”), (“the Bill of Sale”). On 11 September 1992, on the application of the Law Society of New South Wales pursuant to s 92 of the Legal Profession Act1987 (NSW), the Supreme Court of New South Wales appointed Jean Sayer, Chartered Accountant, receiver of property held by Mr Radin in accordance with Pt 8 of that Act. In substance, the appointment was in respect of Mr Radin’s trust account which is not of present concern.
On 8 January 1993, pursuant to the Bill of Sale, the Bank appointed Martin Russell Brown of Coopers & Lybrand (“Mr Brown”) receiver of the property the subject of the Bill of Sale.
By a Deed of Sale and Consent dated 5 March 1993 (“the Deed of Sale”) Mr Radin sold the Practice to Ms Stefanovic and Ms Milicevic, the first and second respondents respectively to proceeding NG 632 of 1996 (“the Purchasers”). At this stage it is convenient to note some features of the Deed of Sale.
Mr Radin had sold the Practice earlier on 18 September 1992 to Susan McTegg. She had conducted the Practice as principal from that date to 6 October 1992 when, apparently, she and Mr Radin agreed to treat their agreement as rescinded. On 6 October 1992 Mr Radin agreed to sell the Practice to Dennis Ian Hill but apparently that agreement did not proceed. On 2 November 1992 Mr Radin entered into a second agreement for the sale of the Practice to Mr Hill. On 29 January 1993 the two men agreed to treat that second agreement as rescinded, although Mr Hill had conducted the Practice as principal from 6 October 1992 to 2 November 1992 and from 2 November 1992 to 29 January 1993. Ms McTegg and Mr Hill, although respectively the fourth and fifth respondents to proceeding NG 632 of 1996, have submitted to such orders as the Court may make, save as to costs.
The Bank, Mr Brown, Ms McTegg and Mr Hill joined in the Deed of Sale to consent to the sale of the Practice by Mr Radin to the Purchasers.
The Deed of Sale had to address some difficult issues. In particular, the drafter had to distinguish between money already payable or yet to become payable by clients for work done by Mr Radin which would be subject to the Bank’s Bill of Sale and therefore to Mr Brown’s receivership on the one hand, and money to become payable for work to be done by the Purchasers which would not be subject to that security or to that receivership on the other hand.
The expression “the Practice” was defined in the Deed of Sale to include the goodwill of the Practice, the “Plant and Equipment” (chattels listed in a schedule), the “Radin Work in Progress” and such interests (if any) as Mr Radin might have or might acquire in the “Third Party Work in Progress”, but not to include the “Radin Debts”, “the Mortgages” (defined to mean the mortgages and securities securing moneys due to Mr Radin) or any moneys paid or payable pursuant to the Mortgages. Only the Practice was sold. Accordingly, the Radin Work in Progress was sold but the Radin Debts were not sold.
The notion of “Third Party Work in Progress” was defined to mean work done by or on behalf of various persons other than Mr Radin between 11 September 1992 and the date of the Deed of Sale, 5 March 1993, for which that “Third Party” would have been entitled to bill if he or she had been at any relevant time a duly qualified solicitor entitled to practise as such. The Third Party Work in Progress is not of present importance.
I turn now to the Radin Debts. These may be conceived of as debts arising from work performed or disbursements made by Mr Radin in respect of matters already completed by the date of the Deed of Sale. The expression “Radin Debts” was defined to mean:
“a)the money value of the entitlement of the Vendor [Mr Radin] (or the entitlement which if he had continued to practise as a solicitor the Vendor would have had) to render a bill of costs to recover professional fees for work carried out by him or by his employees in respect of Completed Matters;
b)the money value of disbursements incurred and paid by the Vendor in any matter conducted by the Practice (including matters referred to in a Current Matters Schedule) and which, had he continued to practise as a solicitor the Vendor would have been entitled to recover from the client concerned but which have not at the date of this Deed been included in any bill of costs rendered to the client concerned;
c)all amounts due to the Vendor in respect of bills of costs rendered by the Practice prior to 18 September 1992 [the date of the first sale of the Practice by Mr Radin (to Ms McTegg)]
d)any other amount which is presently or may in the future fall due to the Vendor as a result of any agreement made or arrangement entered into by the Vendor with the person liable to pay such amount at any time prior to the date of this Deed
e) all amounts which are or might fall due under the Mortgages” (emphasis supplied)
The expression “Completed Matters” was defined to mean:
“matters in respect of which the Vendor held instructions to act prior to the date of this Deed and in respect of which:
(a) a Payment Event has occurred at the date of this Deed; or
(b)the substance of the work which the Vendor was retained to carry out or perform has been carried out or performed prior to the date of this Deed;
And as at the date of this Deed the solicitor having the conduct of the matter is or would be entitled to render a final memorandum of costs and disbursements.” (emphasis supplied)
The expression “Payment Event” was defined to mean any of certain described events which, generally speaking, would give rise to a right of recovery from the client.
The expression “Current Matters Schedule” appeared in the definition of “Radin Debts” set out above as well as in the definition of “Radin Work in Progress”. The expression “Radin Work in Progress” was defined to mean:
“ ... with respect to any matter or matters described or referred to in a Current Matters Schedule, work carried out by the Vendor or his employees prior to 18 September 1992 in respect of which the Vendor is (or, had he continued to practise as a solicitor would have become) entitled to render a bill of costs but does not include any asset or entitlement of the Vendor which falls within the definition of Radin Debts.” (emphasis supplied)
Clearly, both the Bank (and Mr Brown) and the Purchasers had an interest in ensuring that the fees to be charged and recovered by the Purchasers in respect of current matters were appropriately divided up as between the Radin Work in Progress and the work done by the Purchasers.
Finally, the expression “Current Matters Schedule” was defined to refer to a schedule in the form of Schedule C to the Deed of Sale or such other form as might be agreed. The Deed of Sale provided for the Purchasers, within thirty days of its date, to prepare and serve on Mr Radin and the Bank’s nominee (who, until the Bank nominated someone else in writing to Mr Radin and the Purchasers, was the receiver, Mr Brown) a Current Matters Schedule which was to include certain categories of information about those matters being conducted in the Practice which included a component of Radin Work in Progress. The Deed also obliged the Purchasers to serve an updated Current Matters Schedule every three calendar months, commencing three calendar months from the date of service of the first Current Matters Schedule. The Purchasers warranted that each Current Matters Schedule would contain a full and complete listing of all matters which contained a component of the Radin Work in Progress.
The present three proceedings have been concerned with two broad areas of dispute. The first is between the Bank and Mr Radin and relates to the Radin Debts. Mr Brown, was to be faced with several difficulties in recovering the Radin Debts. One problem arose from lawyer-client privilege: the existence of this privilege of the client would constitute an impediment to Mr Brown’s having access to many, if not all, of the very numerous office files of Mr Radin. Another difficulty was that Mr Radin alone was familiar with his clients and their files. Mr Brown and Mr Radin were to enter into an arrangement in August 1993 pursuant to which Mr Radin was to receive a percentage of recoveries in return for his assisting in the recovery process. It is this arrangement and a later purported termination of it by Mr Brown that constitutes one of the areas of dispute. That is a dispute between Mr Radin of the one part and the Bank and Mr Brown of the other. Another aspect of the dispute between those parties relates to a deed of arrangement entered into on 15 July 1994 between Mr Radin and Peter David Rodgers of Love & Rodgers, Chartered Accountants, as trustee for Mr Radin’s unsecured creditors (“the Deed of Arrangement”). More particularly this aspect of the dispute relates to Mr Rodgers’ decision at a meeting of the creditors on 17 May 1995 to allow the Bank to vote as an unsecured creditor to the extent of a certain amount. Mr Radin was seeking his unsecured creditors’ indulgence in the form of an extension of time for compliance by him with the terms of the Deed of Arrangement and in consequence of the Bank’s voting against the proposal, that indulgence was not granted.
It is convenient to conceive of the issues relating to the August 1993 arrangement and the Deed of Arrangement as “the Radin issues”. Distinct from them are issues concerning the Bank’s allegation that the Purchasers have defaulted in their obligation to supply Current Matters Schedules as required by the Deed of Sale. As will be noted later, I am no longer required to resolve the “non-Radin issues”.
I return to the chronological account of events. In August 1993 an arrangement was entered into between Mr Brown as receiver and Mr Radin (I will use the general term “arrangement” without indicating any view on the issues which I am called upon to determine). There was a series of telephone conversations and two letters. Certain aspects of the arrangement made are common ground. Mr Brown consented to Mr Radin’s proceeding with the realisation of the Radin Debts through Ms Milicevic trading as “Radin & Associates” who would act as solicitor for Mr Radin for the purpose. Ms Milicevic was to report and to account to Mr Brown on a weekly basis. The funds received by Ms Milicevic were to be deposited in the first instance in the trust account of “Radin & Associates” and, after payment of Ms Milicevic’s collection fees, 40 per cent was to be paid out to Mr Radin for his efforts and the remaining 60 per cent to Mr Brown as the Bank’s nominee. Included in Mr Radin’s 40 per cent were all payments for disbursements in relation to collection, such as collection charges, service and search fees and barristers’ fees; that is, those costs of collection were to be borne by Mr Radin out of his 40 per cent.
There are several issues relating to the terms of this arrangement. These include the issues whether an agreement was concluded at all; whether, if one was, it was terminable at will by either party; and whether, if there was an agreement which was not terminable at will, nonetheless the Bank was entitled to terminate it for wrongful repudiation by Mr Radin. The Bank submits that the issue of terminability, although raised, was never resolved, with the result that the parties were never ad idem.
It appears that for the time being at least, Mr Radin did assist in the collections and 40 per cent of net recoveries were paid to him.
On 6 May 1994, Mr Radin executed an authority under s 188 of the Bankruptcy Act 1966 (Cth) (“the Act”) authorising Ms Milicevic to call a meeting of his creditors for the purpose of bringing his affairs under Part X of the Act. On 25 May 1994, Ms Milicevic gave notice to the creditors that a meeting of them was to be held at the office of Love & Rodgers, Chartered Accountants, on 9 June 1994. The arrangement proposed was that Mr Radin execute a deed of arrangement under which all his assignable property be assigned to a trustee and that he pay out his unsecured creditors in full within two years. In her letter to creditors dated 25 May 1994, Ms Milicevic referred to the 40 per cent entitlement of Mr Radin under his arrangement with Mr Brown and said, in effect, that the amount on which the 40 per cent would be calculated was $7,200,000 and that 40 per cent of this amount would enable Mr Radin to pay his unsecured creditors in full. Another aspect of the proposed Part X arrangement was a release of Mr Radin from all debts, liabilities and claims if he met his obligations under the proposed deed.
The meeting of creditors on 9 June 1994 was adjourned to 24 June. On neither date did Mr Brown or any representative of the Bank “attend”. On 24 June, however, a Ms Horsnell from Coopers & Lybrand arrived late, delivered some documents and remained as an “observer” and not as a participant, in accordance with instructions that she had received from Mr Brown. Moreover, on that date, Mr Brown arrived just as the meeting was closing and announced that he was also present only as an “observer”.
On 24 June, a special resolution was passed unanimously that Mr Radin enter into a deed of arrangement encompassing the following terms:
“(a)The payment of monies recovered from Book debts, Mortgages, Advances over a period of two years with the debtor’s entitlement to obtain 40 % to pay the creditors 100 cents in the dollar.
(b)That sufficient funds needed to be generated to meet 25 % of the total creditors outstanding within nine (9) months of executing the Deed, 50 % of the outstanding creditors within eighteen (18) months of execution of the Deed, and the balance of the amount owing to creditors within two years of executing the Deed.”
The chairman of the meeting, Mr Rodgers of Love & Rodgers was appointed to be trustee of the proposed deed of arrangement.
On 15 July 1994, the Deed of Arrangement between Mr Radin and Mr Rodgers was entered into. Clause 2 was as follows:
“2. Payment to Trustee
The Debtor covenants with the Trustee that he shall procure payments to the Trustee sufficient to make payment of 100 cents in a dollar to all proven creditors over a period of two years. The payments will be made from monies recovered from Book Debts, Mortgages and Advances under the Debtor’s former practice with the Debtor’s entitlement to obtain 40% to pay creditors.
Payments to the Trustee should be sufficient to meet 25% of the total creditors outstanding within nine (9) months of the execution of this Deed [by 15 April 1995], 50% of outstanding creditors within eighteen (18) months of the execution of this Deed [by 15 January 1996], and the balance of the amount owing to creditors within two (2) years of the execution of this Deed [by 15 July 1996].”
In the last quarter of 1994, a Law Society disciplinary proceeding against Mr Radin was heard in the Supreme Court of New South Wales. Part of the Bank’s case is that at about the same time, Mr Radin ceased using his best endeavours towards collection of the Radin Debts and suggests that this probably resulted from his preoccupation with that proceeding.
On 4 January 1995 the Bank forwarded to Mr Rodgers a proof of debt in respect of a Commonwealth Bankcard debt of Mr Radin’s in a sum of $29,410.04.

The following day, 5 January, Mr Brown by letter to Ms Milicevic, purported to terminate the 60/40 arrangement of August 1993. The letter was in the nature of an instruction to Ms Milicevic to pay 100 per cent of all moneys received by her in respect of the Radin Debts to him, Mr Brown, and it revoked earlier instructions to her. On 18 January 1995 Ms Milicevic replied advising that Mr Radin had instructed her to continue paying 40 per cent to his creditors pursuant to the terms of his Part X arrangement. In view of the inconsistency of the instructions which she had received, she advised Mr Brown that she proposed to retain 40 per cent of each amount recovered in her trust account until she received agreed instructions, or, alternatively, until she was directed by court order how to deal with the money recovered. Ms Milicevic also advised that Mr Radin had instructed her to retain in her trust account all moneys allegedly due and payable to Mr Brown “under the contract”. She claimed that “pursuant to Trust Account Regulations applicable to solicitors in New South Wales” she was required to deal with the moneys at the direction of her client, Mr Radin, alone. She invited Mr Brown to obtain confirmation that this was so from the Trust Account Department of the Law Society of New South Wales. Her letter to Mr Brown concluded:
“Any client is able to amend, revoke or change any authorities given by that client at any time in relation to their trust account.”
The first instalment (25 per cent) under the Deed of Arrangement was not paid on 15 April 1995. On 28 April 1995, Mr Rodgers reported to Mr Radin’s creditors accordingly.
On 15 May 1995, in anticipation of the meeting of Mr Radin’s creditors to be held on 17 May 1995 referred to earlier, the Bank submitted to Mr Rodgers a proof of debt as a partially-secured creditor. This stated the total amount of indebtedness as $3,721,930.43 and the Bank’s estimate of the net value of its securities at $2,532,000. It therefore made claim for the Bank to prove as an unsecured creditor for the shortfall of $1,189,930.43. Mr Radin attacks the estimate of the net value of the securities of $2,532,000, contending that their true value was much greater and either that the Bank was not an unsecured creditor at all or that if it was, it was for a much lower figure than $1,189,930.43.
The meeting of Mr Radin’s creditors was held on 17 May 1995. Mr Rodgers accepted that the Bank was entitled to vote on the footing of its being an unsecured creditor to the extent of $1,189,930.43 (in addition, the Bank was permitted to vote in respect of the Bankcard debt of $29,410.04). Mr Radin advised those present that he had inspected the Bank’s proof of debt and could not understand how a value of only $507,000 had been placed on the Practice. A resolution was proposed as a special resolution:
“That a further period of six (6) months be given to Mr Radin to comply with the provisions of the Deed of Arrangement in regard to the initial payment under the Deed, that was due and payable by 15 April 1995.”
The further period of six months would expire on 15 October 1995. After the voting, Mr Rodgers advised that the resolution was not passed. Sixteen creditors voted in respect of a total indebtedness of $2,318,618.06. Twelve of them, whose debts totalled $886,924.76 or 38.25 per cent of the total, voted for the resolution, while four of them, whose debts totalled $1,431,693.30 or 61.75 per cent of the total, voted against it. The “four” included the Commonwealth Bankcard debt of $29,410.04 and the additional debt of $1,189,930.43 as two creditors. Without the Bank’s vote in respect of the additional debt, the remaining creditors voting against the resolution would have voted in respect of debts totalling only $241,762.87 and the resolution would have been passed as a special resolution. Mr Radin told those present that he would commence a proceeding in this Court seeking a determination that the Bank had not been entitled to vote (that is, in respect of the sum of $1,189,930.43). The Bank’s entitlement to vote in respect of the Bankcard debt was not in issue.
Mr Rodgers stated that a second proposed resolution of which creditors had been advised would need to be considered. This was a resolution terminating the Part X arrangement. However, he noted that this resolution would probably also fail in view of the voting pattern on the first resolution. If the same creditors with 61.75 per cent of the voting power supported the resolution and the same creditors with 38.25 per cent of the voting rights voted against it, the resolution would not be passed as a special resolution. The resolution was proposed and seconded and defeated in accordance with Mr Rodgers’ expectation.
Finally, Mr Rodgers advised that in view of the failure of both resolutions, he did not consider it appropriate to put a resolution to have Mr Radin present a debtor’s petition within seven days. The Bank’s representative agreed.
While the Bank seeks to support the decision of Mr Rodgers as chairman to admit it to vote in respect of the additional sum of $1,189,930, it submits that it was not possible under the Act for the Deed of Arrangement to be varied in the manner sought by Mr Radin and that on any reckoning the Bank was unsecured to such an extent that it would have been able to prevent the resolution in favour of an extension of time being passed as a special resolution.
On 17 July 1995, the first of the present three proceedings was commenced. This was the proceeding which is now NG 632 of 1996 in this Court. That proceeding was commenced in the Commercial Division of the Supreme Court of New South Wales as No 50129 of 1995. Apart from “plaintiff” and “defendant” nomenclature, the parties were the same as they now are. The relief sought has been amended in an application filed in this Court on 23 March 1999. The relief falls into two classes: that in paras 1 and 2 and that in paras 3, 4, 4A and 4B (the remaining paragraphs, 5, 6, 7 and 8, are not of present importance). By para 1, the Bank and Mr Brown seek a declaration that they are entitled to 60 per cent of the Radin Debts collected by the Purchasers from the time of the August 1993 arrangement down to the purported termination of that arrangement by Mr Brown on 5 January 1995 and to 100 per cent of those collected by them after that date. In para 2, they seek an order that the Purchasers make payment accordingly. Paragraphs 1 and 2 turn on the Radin issues.
Paragraphs 3, 4, 4A and 4B turned on the non-Radin issues and were directed to the rendering of an account by the Purchasers, the provision of information by them, and the taking of an account or the making of an enquiry or both under O 39 r 2 of the Court’s rules. I use the past tense because, on 7 April 1999 the non-Radin issues were resolved by the making of consent orders, including an order for dismissal of proceeding NG 632 of 1996 in so far as it sought the relief referred to in para 3, 4, 4A, 4B, 5, 6, 7 and 8 of the application.
On 24 July 1995 the second of the present three proceedings was commenced. On that date, Mr Radin filed his application in proceeding NX 57 of 1994 against Mr Rodgers as trustee of the Deed of Arrangement. By order made on 1 September 1995 the Bank was added as second respondent. By an amended application filed on 7 September 1995 Mr Radin seeks, pursuant to s 178 of the Act, review of the decisions of Mr Rodgers on 17 May 1995 “to admit a proof of debt from and permit voting rights” to the Bank and “to admit a proof of debt from [the Bank] as an unsecured Creditor.” By a “cross application” filed on 5 September 1995 pursuant to former Bankruptcy Rule 102, the Bank seeks an order that the Deed of Arrangement be terminated pursuant to s 236 of the Act and a sequestration order against Mr Radin’s estate. Mr Rodgers has filed an appearance submitting to such order as the Court may make save as to costs. Proceeding NX 57 of 1994 raises only Radin issues.
On 7 September 1995, the third of the present proceedings was commenced. This is proceeding NG 695 of 1995 in which Mr Radin is the applicant and the Bank and Mr Brown are the respondents. By an amended application filed on 31 October 1995, Mr Radin seeks the following relief:
“1.A declaration that there subsists an agreement (‘the August 1993 agreement’) between the applicant the first respondent and the second respondent that the applicant is entitled during the subsistence of a Deed of Arrangement under the Bankruptcy Act 1966 entered into by him on 15 July 1994 (‘the Deed of Arrangement’) to receive 40% of the proceeds of certain debts recovered pursuant to a Deed of Sale and Consent between the applicant the first respondent the second respondent and other parties dated 5 March 1993 (‘the Deed of Sale’).
2.A declaration that the first respondent engaged in conduct that was misleading or deceptive or was likely to mislead or deceive contrary to §52 of the Trade Practices Act 1974 and/or §42 of the Fair Trading Act 1987 (NSW) as alleged in the applicant’s statement of claim in relation to his entering into the Deed of Sale the August 1993 agreement and the Deed of Arrangement.
3.A declaration that the first respondent is estopped from relying upon a notice given by it on or about 5 January 1995 (‘the notice’) under the Deed of Sale requiring the payment to it of 100% in lieu of 60% of certain moneys realised under the Deed of Sale.
4.A declaration that the applicant’s indebtedness to the first respondent did not in June 1994 and does not exceed the value of the security held by the first respondent for the said indebtedness.
5.An injunction restraining the first respondent and the second respondent from relying upon the notice or otherwise treating the August 1993 agreement as not subsisting.
6.An injunction restraining the first respondent from relying upon a proof of debt as an unsecured creditor lodged by the first respondent with the trustee of the Deed of Arrangement in respect of an unsecured debt allegedly owed by the applicant to the first respondent.
7.Damages for breach of contract misleading conduct and/or failing to meet representations.
8.Relief under §87 of the Trade Practices Act 1974 or §72 of the Fair Trading Act 1987 (NSW) in relation to the Deed of Sale and the August 1993 agreement.
Proceeding NG 695 also raises only Radin issues.
On 13 October 1995, consent orders were made in proceeding NG 632 of 1996 (at that time, proceeding 50129 of 1995 in the Supreme Court of New South Wales). These were directed to establishing a regime which would govern the collection and holding of money pending the final hearing and determination of the three proceedings. Of present relevance are paras 6, 6A, 8 and 10, which were as follows:
“6Orders that until the final determination of these proceedings or until further order the second defendant [Ms Milicevic] within 14 days of receiving the same pay and transfer all moneys that may after the date hereof be received by her pursuant to the Deed of Sale to the persons and in the proportions set forth in Order 5 hereof [these were 60 per cent to Mr Brown pursuant to the Deed of Sale and 40 per cent into an interest bearing deposit account at the National Australia Bank in the joint names of Ms Milicevic and Gerard Thomas Breen, the solicitor for the Bank and Mr Brown (“the Joint Account”)].
6AOrders that the second defendant [Ms Milicevic] receive out of the joint account such moneys as represent the reimbursement to her of proper disbursements incurred, or as may hereafter be incurred, by her from time to time in collecting the moneys dealt with unders [sic] Orders 5 and 6, provided however, that the second plaintiff [Mr Brown] approve such payment as truly representing the reimbrusement [sic] to her of such disbursements, and to this end, the second defendant [Ms Milicevic] may from time to time present to the second plaintiff [Mr Brown] claims for such reimbursements, and the second plaintiff [Mr Brown] shall make and communicate a decision on such claims within 14 days of notification of the claims and shall not unreasonably withhold his approval thereto and shall authorise such claims as he approves to be paid to her out of the joint account within 7 days after the date of his approval.
...
8Notes that
(a)in the Federal Court of Australia in proceedings No 57 of 1994 and in proceedings No 695 of 1995 (collectively ‘the Federal Court proceedings’) the third defendant [Mr Radin] seeks various orders;
(b)the third defendant [Mr Radin] proposes to raise in the Federal Court proceedings the issue of whether it is he or the second plaintiff [Mr Brown] who is entitled to receive the moneys in the joint account;
(c)the plaintiffs [the Bank and Mr Brown] have not consented to that issue being raised in the Federal Court proceedings and nothing herein contained shall be treated as constituting such consent; the second and third defendants [Ms Milicevic and Mr Radin] do not concede that the plaintiffs’ consent is necessary in order that that issue be raised or determined in the Federal Court proceedings;
(d)in the event that that issue is determined in the Federal Court proceedings then whether or not he she or it is a party to the Federal Court proceedings each of the plaintiffs [the Bank and Mr Brown] and of the second and third defendants [Ms Milicevic and Mr Radin] agrees that the Federal Court’s determination of that issue shall bind each of him her or it and that the moneys in the joint account including all interest accrued thereon shall be paid and transferred to the person determined by the Federal Court to be entitled to receive the same;
(e)in the event that that issue is not raised or is not determined in the Federal Court proceedings the plaintiffs [the Bank and Mr Brown] shall be entitled to continue to prosecute these proceedings and the plaintiffs [the Bank and Mr Brown] and the second defendant [Ms Milicevic] shall seek to have such amendments made as may be necessary to raise that issue for determination by this Court in these proceedings.
...
10.Orders that any party have liberty to apply on 3 days’ notice.”
On 15 July 1996 the two year period provided for under the Deed of Arrangement for payment of 100 cents in the dollar to Mr Radin’s unsecured creditors expired without any payment having been made by or on account of Mr Radin.
By consent, on 29 March 1999 I made the following orders:
“1.... that the orders made on 22 August, 1996 by Sheppard J to the effect that the abovementioned three proceedings be heard together, and that so far as the same may be relevant, the evidence in one by evidence in the others, be set aside.
2. ... that:
(a)proceedings NG 695 of 1995, proceedings NX 57 of 1994 and the questions raised in paragraphs 1 and 2 of the Application in proceedings NG 632 of 1996 be heard together, and that insofar as the same may be relevant, evidence in one by evidence in the other; and
(b)the hearing of the balance of the questions raised in proceedings NG 632 of 1996 commence after the completion of the hearing referred to in (a).”
Order 2(a) referred to the Radin issues and order 2(b) to the non-Radin issues. The hearing before me proceeded accordingly. On the Radin issues, Mr R G Forster SC with Mr R S Hollo of counsel appeared for the Bank and Mr Brown, Mr Radin appeared in person, and Mr M R Gracie of counsel appeared for the Purchasers who submitted to such order as the Court might make save as to costs. On the non-Radin issues there were the same appearances for the Bank and Mr Brown and for the Purchasers, while Mr Radin, who again appeared in person, submitted to such order as the Court might make save as to costs. As noted earlier, the non-Radin issues have disappeared as a result of a settlement.
THE RADIN ISSUES
Mr Radin’s case based on the August 1993 agreement is pleaded in his statement of claim filed on 31 October 1995. It pleads Mr Radin’s conduct of the Practice as a solicitor at all material times prior to 11 September 1992, the Bill of Sale, Mr Radin’s having given mortgages over real estate as further security for financial accommodation from the Bank, the appointment of Mr Brown as receiver, the Deed of Sale, Mr Radin’s having assisted in the collection of certain debts of the Practice and the Bank’s having made financial allowances to him to remunerate him for doing so.
Mr Radin next pleads that in the first half of 1993 he was pressed by creditors, particularly by the Australian Taxation Office, and entered into negotiations with the Bank to obtain funds to permit him to satisfy, or to come to terms with, his unsecured creditors. He then pleads the August 1993 arrangements as an oral agreement between himself and Mr Coutts, of Coopers & Lybrand, on behalf of Mr Brown and the Bank. The August 1993 agreement is pleaded as an agreement that in consideration of Mr Radin’s continuing to assist in the collection of the debts and using the funds to be allowed to him to satisfy or to come to terms with his unsecured creditors, the debts collected (after deduction of the Purchasers’ costs of collection) would be divided as to 60 percent to Mr Brown on behalf of the Bank and as to 40 per cent to Mr Radin.
The statement of claim pleads that after the making of the August 1993 agreement, the Purchasers, with Mr Radin’s assistance, continued to collect the debts and that after deduction of the Purchasers’ costs of collection, the amounts recovered were divided on the 60/40 basis and Mr Radin continued negotiations with his unsecured creditors to come to a composition with them.
The statement of claim then pleads the facts relating to the making of the Part X arrangement in mid-1994. It refers to the fact that in her notice dated 25 May 1994 of the meeting of creditors to be held on 9 June 1994, Ms Milicevic stated the substance of the August 1993 agreement and that the persons to whom the notice of meeting was given were informed that the source of the moneys available to Mr Radin to pay his creditors was the 40 per cent of net proceeds of debt recoveries received by him under that agreement. It pleads that a copy of the notice of meeting was given to the Bank and Mr Brown. After pleading the adjournment of the meeting from 9 to 24 June 1994 and the passing of the resolution by creditors on the latter date in favour of the deed, the statement of claim pleads that the Bank did not, before January 1995, lodge a proof of debt with Mr Rodgers as trustee.
In paragraphs 18 and 19 of the statement of claim, Mr Radin pleads that the Bank and Mr Brown at all material times knew that Mr Radin was proposing to enter into an arrangement with his creditors and that his only source of funds for that purpose was his 40 per cent share under the August 1993 agreement, yet the Bank and Mr Brown did nothing until January 1995 to suggest that the August 1993 agreement was not binding on them, or that either of them had a right to end it or to claim a right to more than 60 per cent of the debts collected, or that the Bank intended to exercise rights as an unsecured creditor in relation to any private arrangement between Mr Radin and his unsecured creditors.
The statement of claim pleads the Deed of Arrangement and the letter dated 5 January 1995 from Mr Brown purporting to terminate the August 1993 agreement and directing the Purchasers to pay 100 per cent of the debts recovered to Mr Brown. Mr Radin pleads that the writing of the letter was a breach of the August 1993 agreement.
The statement of claim then pleads the submission by the Bank to Mr Rodgers of the Bank’s proof of debt on 15 May 1995 for $1,189,930.43 and alleges that the Bank was not an unsecured creditor in that sum or at all, that Mr Radin had no indebtedness to the Bank on 15 May 1995 which exceeded the value of the securities held by the Bank and that the value of the securities on that day was in fact about $12,000,000.

The statement of claim next pleads the meeting of creditors on 17 May 1995 and that the proposed resolution for an extension of the time for the first payment under the Deed of Arrangement for six months would have been passed if Mr Rodgers had not allowed the Bank to vote.
Paragraphs 26 and 27 of the statement of claim are important. They plead the making of representations by the Bank and Mr Brown to Mr Radin which allegedly induced him to enter into, respectively, the Deed of Sale and the Deed of Arrangement. Paragraph 26 pleads a representation that if Mr Radin entered into the Deed of Sale, then so long as he continued to assist in the collection of the debts, the Bank and Mr Brown would allow or pay to him out of the debts collected, remuneration to recompense him for the time expended and work done by him in so doing. Paragraph 27 pleads two representations: first, that if Mr Radin entered into a private arrangement with his creditors such as that found in the Deed of Arrangement, they would continue, during its currency, to allow him to receive 40 per cent of the debts collected under the Deed of Sale after deduction of the Purchasers’ costs of collection; and, second, that the Bank would continue to look to its security for satisfaction of Mr Radin’s indebtedness to it and would not prove or vote as an unsecured creditor under the Deed of Arrangement.
Paragraph 28 pleads that these representations were untrue or were made without reasonable grounds (cf s 51A of the Trade Practices Act 1974 (Cth) and s 41 of the Fair Trading Act 1987 (NSW)) and that the Bank and Mr Brown engaged in misleading and deceptive conduct which induced Mr Radin to enter into the Deed of Sale and the Deed of Arrangement.
In the alternative, Mr Radin pleads that the Bank and Mr Brown are estopped from alleging that the August 1993 agreement is not binding on them, and, in the case of the Bank, from proving or voting as an unsecured creditor under the Deed of Arrangement, unilaterally terminating the August 1993 agreement, or alleging that Mr Brown’s letter of 5 January 1995 was effective to terminate the August 1993 agreement or to vary its terms so as to require the Purchasers to pay more than 60 per cent of the debts collected to the Bank or Mr Brown, or treating that letter as a notice validly given under clause 3.2 of the Deed of Sale. (Clause 3.2 authorised the Bank to give certain directions to the Purchasers.)
Mr Radin contends that by reason of the subsistence of the August 1993 agreement, the breach of contract constituted by the delivery of the letter of 5 January 1995, the misleading conduct and the estoppels, the Bank and Mr Brown should be restrained from alleging that the August 1993 agreement is not binding on them, and, in the case of the Bank, from proving or voting as an unsecured creditor under the Deed of Arrangement, unilaterally terminating the August 1993 agreement or alleging that the letter of 5 January 1995 was effective to terminate it or to vary its terms so as to require the Purchasers to pay more than 60 per cent of the debts collected to the Bank or to Mr Brown, or from treating that letter as a notice validly given under clause 3.2 of the Deed of Sale or under any other provision of the Deed of Sale.
The Bank denies that it made the representations alleged in paras 26 and 27 of the statement of claim and says that if any representation was made it was not misleading or deceptive and did not induce Mr Radin to act as he did.
So far as Mr Radin’s claim of breach of contract is concerned, the Bank says that there was no meeting of the minds in relation to the duration of the August 1993 agreement, and, in particular, that the terms of a letter from Mr Radin dated 12 August 1993 did not become a term of the contractual arrangement between the parties. The Bank submits that it did not agree to the contents of that letter becoming a term of the parties’ arrangement and that if the contents of the letter did become part of the arrangement, they did not provide for the duration of the August 1993 agreement but merely rejected the provision contained in Mr Brown’s earlier letter without substituting any specific duration other than a suggestion that the duration be agreed to by consent or be as determined by a court. According to the Bank’s submission, the result is that there was no binding agreement in the terms of the August 1993 agreement relied on by Mr Radin, but only an ad hoc arrangement terminable by either party at will. In so far as there was a meeting of minds, it is not established that the August 1993 agreement was to be of any particular duration; on the contrary, so it is said, it was terminable by either party at will, or, at its highest, on reasonable notice. If not, the Bank’s obligation to perform was subject to Mr Radin’s using his best endeavours to collect the Radin Debts, but from about August 1994 onwards he ceased to use his best endeavours to do so, thereby repudiating his obligations under the supposed agreement and entitling the Bank to terminate it which it did on 5 January 1995. Alternatively, the Bank submits that there was no consideration moving from Mr Radin in relation to the August 1993 agreement as he was already obliged to assist in the collection of the Radin Debts under clause 5.5 of the Deed of Sale. (By cl 5.5 Mr Radin undertook to render all reasonable assistance and to provide all available information to the Purchasers in connection with any billing or recovery work or action taken by them under cl 5.)
In the alternative, if Mr Radin establishes breach and an entitlement to damages, the Bank submits that he is entitled only to the sum standing to the credit of the Joint Account (apparently $134,665.74 as at 24 March 1999).
In the alternative, according to the Bank, any damages are liable to be offset against the judgment in its favour against Mr Radin in proceeding NG 437 of 1996. (The judgment given by me in proceeding NG 437 of 1996 on 12 November 1998, was for $5,123,119.93 and was entered on 20 November 1998.)
The Bank claims that it is not estopped by reason of any representation or other conduct from voting at the meeting of creditors on 17 May 1995.
The Bank submits that in any event, as a matter of law, it was not possible under the Act to amend the Deed of Arrangement so that even if the resolution had been passed as a special resolution, it would not have been effective. In particular, it would not have altered Mr Radin’s obligations under the Deed of Arrangement. Accordingly, any review of Mr Rodgers’s decision to permit the Bank to vote would be futile.
In the alternative, Mr Radin’s challenge to the exercise of Mr Rodgers’ discretion to permit the Bank to vote on 17 May 1995 on the ground that the value of the Bank’s securities exceeded the amount of the debt owed to it at that time by Mr Radin must fail. The reason is that as a matter of law, the allocation between the secured and unsecured portions of a creditor’s debt is a matter for the creditor and is not a matter upon which the chairman of the meeting or a trustee under a deed of arrangement is entitled to exercise judgment. For this reason, the allocation by the Bank between the secured and unsecured portions of its debt is not subject to a review by this Court under s 178 of the Act, or, if it is, Mr Rodgers’ decision was nonetheless correct.
In the alternative, the Bank submits that if the Court were to hold that it should have been permitted to vote only in respect of the excess of its total debt over the actual value of its securities, the value of the securities was such that the excess would still have been sufficient to prevent the resolution being passed as a special resolution.
Finally, the Bank submits that having regard to all the circumstances and in particular the fact that only some $9,500 was paid to Mr Rodgers for the benefit of Mr Radin’s creditors, the expiry on 15 July 1996 of the two-year term of the Deed of Arrangement, the judgment entered against Mr Radin in favour of the Bank in the earlier proceeding NG 437 of 1996, and the absence of any evidence establishing that Mr Radin has any realistic prospects of being able to contribute anything to his creditors, the Court should, in the exercise of its discretion, make an order pursuant to s 236(1) of the Act terminating the Deed of Arrangement and an order under s 236(3) for the sequestration of Mr Radin’s estate.
REASONING
The Bank filed and served written submissions dated 6 April 1999 on which it elaborated orally on the afternoon of the last day allotted for the hearing, 7 April 1999. On that day Mr Radin indicated that he was not in a position to make submissions and would need time to prepare written submissions. By consent, I directed that he file and serve his submissions by 28 April, that the Bank file and serve its submissions in reply by 12 May 1999 and that the proceeding be stood over to Friday 21 May at 9.15 am for oral elaboration on the written submissions if this should be required. Mr Radin did not file and serve submissions. My Associate wrote to him in this respect and he replied advising that he had “no further submissions to make on the substantive case, yet to be decided” and that owing to work commitments beyond his control he was unable to attend court on Friday 21 May. Accordingly, it has been necessary for me to give judgment without the benefit of Mr Radin’s submissions in response to the written submissions of the Bank.
I will deal with the issues generally in the sequence in which they were addressed in the Bank’s submissions.
1. The representation pleaded in para 26 of the statement of claim
Did the Bank and Mr Brown represent to Mr Radin that if he entered into the Deed of Sale, then so long as he continued to assist in the collection of the Radin Debts they would allow or pay him out of the amounts collected, remuneration to recompense him for the time expended and work done by him in so doing?
Mr Radin gave evidence that during the months over which the negotiation took place to sell the Practice, September 1992 to 5 March 1993, on numerous occasions Mr Brown said to him words to the following effect:
“Some provision for payment of monies will be made for you from the proceeds of the sale to cover your living expenses and to enable you to negotiate an arrangement to repay your various creditors.”
Mr Brown denied the allegation. He pointed out that he was not receiver during the earlier part of the period referred to, having been appointed on 8 January 1993. He gave evidence that between that date and 5 March 1993 he did have discussions with Mr Radin about his possible role under the agreement then being negotiated and said to him:
“I acknowledge that I need you to assist in the recovery of the debt and that you will expect to be paid for that.”
Mr Radin agreed that Mr Brown said words to that effect.
In my view, Mr Radin’s recollection attributes too much specificity to what Mr Brown said. It is inherently improbable that Mr Brown would, at the stage in question, have made a commitment of the kind attributed to him by Mr Radin. Moreover, the evidence to be considered next suggests otherwise.
Ms Milicevic, whose evidence was led by Mr Radin, gave affidavit evidence that during one of the meetings in which negotiations leading to the Deed of Sale took place, Mr Radin and Mr Brown conversed to the following effect:
Radin:“I am not happy that the Deed has no provision for any monies coming to me.”
Brown:“Look Michael, you can’t put that in the Deed, the Bank is already having difficulties with it all. I understand that some arrangement must be made in regard to your situation. Let’s get this out of the way and then you and I will sit down and negotiate what will be allowed to you.”
In cross-examination Mr Radin agreed that he had negotiations with Mr Brown to that effect.
I find that Mr Brown merely acknowledged that he would need Mr Radin’s assistance in the collection of the Radin Debts and that Mr Radin would have to be paid for any assistance provided, but that the question of the duration and the other terms of any retainer of Mr Radin and the basis and level of remuneration to be paid to him were reserved for further negotiation. I do not accept that Mr Brown represented that the Bank or Mr Brown would definitely retain and pay Mr Radin; rather, the most that can be said is that Mr Brown and Mr Radin contemplated that they would negotiate with a view to coming to some such arrangement.
In acknowledging that he would need Mr Radin’s assistance and that Mr Radin would have to be paid for assistance provided, Mr Brown did not say anything misleading or deceptive. Rather, he did no more than truthfully describe a “position” as he perceived it.
The representation pleaded in para 26 is not made out.
2. The representations pleaded in para 27 of the statement of claim
Paragraph 27 of the statement of claim pleads that prior to the Deed of Arrangement being entered into on 15 July 1994, the Bank and Mr Brown represented to Mr Radin that two things would happen if he entered into a composition with his creditors such as that into which he did in fact enter. These were:
(a)that the Bank and Mr Brown would, during the currency of the composition, allow Mr Radin to receive 40 per cent of the Radin Debts collected under the Deed of Sale after deduction of the Purchasers’ costs of collection; and
(b)that the Bank would continue to look only to its security and would not prove or vote as an unsecured creditor in such a composition.
In relation to representation (a), it should be recalled that the 60/40 arrangement was made in August 1993 – nearly a year before the Deed of Arrangement was entered into on 15 July 1994. The composition was far from being negotiated in August 1993. There is no evidence of any conversation just before the meeting of creditors in June 1994 in which Mr Brown or any officer of the Bank represented to Mr Radin that the existing 60/40 arrangement would remain in place for the duration of the then contemplated composition.
It is true that in her notice to creditors Ms Milicevic referred to Mr Radin’s 40 per cent of the net proceeds of debt recoveries as the source of funding from which Mr Radin intended or hoped to pay his unsecured creditors and that the Bank knew that she was so informing them yet took no steps to warn them or Mr Radin that in its view the 60/40 arrangement was terminable at will. But the Bank was not obliged to take such steps. No doubt its stance was that for so long as Mr Radin’s efforts procured recoveries, it would continue to pay him 40 per cent and, so far as it knew, the unsecured creditors understood that to be the position.
Indeed, there is some evidence that the creditors at the meeting on 24 June 1994 did understand the position correctly. The minutes of the meeting include this:
“Mr Paltos [representing a creditor] advised that he had received information from the Commonwealth Bank which indicated that both the Receiver and the Commonwealth Bank needed Radin to assist in the realisation of his assets.”
That is, the undertaking was that the 60/40 arrangement would remain on foot for as long as the Bank perceived it to be in its interests for it to remain on foot and for the time being at least, the Bank and the receiver did, have that perception. Similarly, there is the exchange between Mr Paltos and Mr Radin discussed in para 96 below.
In my view the evidence does not establish the making of the representation pleaded in para 27(a). That is, I am not satisfied that the Bank or Mr Brown assured Mr Radin that if he would enter into the composition he would continue to have the stream of income referred to for the duration of that composition.
The Bank submits that representation (a) is inconsistent with Mr Radin’s own letter to Coopers & Lybrand of 12 August 1993, which asked that the 60/40 arrangement be terminable by the agreement of the parties, or, failing agreement, by court order. I do not accept this submission. First, the terms of the letter could have been overtaken by a later making of representation (a). Second, I do not think that the terms of the letter are inconsistent with representation (a), since Mr Radin would be entitled to withhold his own agreement to termination during the subsistence of the composition and a court would not order termination if to do so would be inconsistent with the supposed assurance.
But as I said, the evidence simply does not persuade me that representation (a) was made at all.
Nor do I think that representation (b) is made out. Mr Radin’s own evidence is to the contrary. On 27 May 1994, Ms Milicevic, as Mr Radin’s solicitor, wrote to Mr Brown’s office for the attention of Mr Coutts. The letter recorded that, in effect, Mr Coutts had indicated that the Bank’s security might be insufficient to cover its claimed debt. Ms Milicevic requested particulars, including the values which Mr Coutts attributed to the security properties and “a precise quantum of the deficiency in securities held”. Mr Radin testified that he advised Messrs Brown and Coutts that the Australian Taxation Office also needed to know whether the Bank would vote as an unsecured creditor and whether the Bank would or would not participate in the proposed Part X arrangement. He said that the reply he was given was:
“At the moment we have not decided whether we are going to vote at the forthcoming unsecured creditors meeting. The Bank does have a surplus of debt over and above your assets.”
Mr Radin requested particulars as Ms Milicevic had done on his behalf and Mr Brown replied:
“I am not prepared to give you these particulars and we may or may not turn up at the Part X meeting of unsecured creditors to vote.”
In cross-examination Mr Radin testified that Mr Brown told him that he (Mr Brown) was not prepared to tell Mr Radin whether or not the Bank would join in the proposed Part X arrangement. Later in cross-examination, Mr Radin agreed that he decided to press ahead at the creditors’ meeting knowing that he did not have the assurance that he had sought from Mr Brown.
For his part, Mr Brown insisted that he declined to tell Mr Radin what the Bank’s attitude would be to participation in the meeting of unsecured creditors and that he (Mr Brown) did not give Mr Radin an undertaking that the Bank would not participate.
Mr Brown said that he did not recall ever encouraging Mr Radin to enter into the Part X arrangement. He said in cross-examination:
“I was also all of the time that we were negotiating of the view that the 60/40 split only would subsist as long as you [the cross-examiner, Mr Radin] were providing co-operation for the recovery of the various assets. It was quite clear to me that you did not agree that I had the right to terminate that agreement at my will but I was certainly of that view.”
On 31 May 1994, Mr Brown replied to Ms Milicevic’s letter of 27 May, purporting to confirm his discussions with Mr Radin to the effect that the Bank would not provide him “at the moment” with details of its valuations of its securities. The letter continued:
“If the Bank determines to vote at the forthcoming Part X meeting then it will, of course, provide details of its claim and security to the Controlling Trustee. It is not appropriate the information be provided to any party prior to that meeting.”
All the evidence to which I have referred is against the making of representation (b). The evidence does not persuade me that the representation was made.
The Bank also submits that if I found that the representations were made, I should find that they did not induce Mr Radin to enter into the Deed of Arrangement and that on the evidence it was certain pending creditors’ petitions, particularly one by the Commissioner of Taxation, that did so. I do not find it necessary to deal with this submission.
3. The 60/40 arrangement – no meeting of minds

Two letters lie at the heart of the arrangement made in August 1993, although there were also telephone conversations between Mr Radin and Mr Brown’s assistant, Mr Coutts, to which I will return later.
On Wednesday 11 August 1993, Coopers & Lybrand (Mr Brown’s partner, Mr Sherlock signing on behalf of Mr Brown who was in Scotland at the time) wrote to Mr Radin relevantly as follows:
“I advise that until further notice I agree to you proceeding with the realisation of ‘Radin’ debts as defined in the Deed of Sale and Consent dated 5 March 1993 (‘the Deed’) as follows:-
1.Ms Miki Milicevic, trading as Radin and Associates, Solicitors will pursue collection of debts on your behalf. In doing so she will be bound by Clauses 5.1 to 5.5 of the Deed.
2.This letter serves as notice under Clause 3.2 of the Deed to vary the terms and conditions of payment to the CBA’s nominee until further notice.
3.Ms Milicevic will report to me on a weekly basis regarding the amounts realised for completed matters during the preceding week and account for those sums on a weekly basis.
4.All funds received for completed matters shall be deposited in the first instance to the trust account of Radin and Associates, Solicitors, where the agreed proportions will be disbursed to yourself and myself, as the CBA nominee.
5.All payments for disbursements in relation to the collection of debts such as costing charges, service and search fees and barristers fees will be met by you.
6.The proceeds of realised debts net of the fees of Ms Milicevic for collection will be shared on the proportion of 40% to yourself and 60% to me as the CBA’s nominee.” (emphasis supplied)
Mr Radin replied by letter dated Thursday 12 August (the reply was apparently not received in the office of Coopers & Lybrand until Monday 16 August, although they may have received a facsimile transmission of it earlier). It was as follows:
“I agree with the contents of the letter, with the exception that deals with the situation that you have the right to vary terminate or alter the agreement at any given time.
As I am incurring liability and giving good consideration in the recovery of the monies due to me, I am not prepared to agree to a situation which allows you the right at any time to unilaterally alter or terminate the agreement.
I suggest a situation be agreed to that any alteration is by consent of the parties, or if no agreement is possible the matter be determined by Court of Law.” (emphasis supplied)
The words in Coopers & Lybrand’s letter “I advise that until further notice I agree” would reserve to Mr Brown the right unilaterally to terminate the arrangement described in the letter. Mr Radin’s reply expressed agreement with all terms except that one. His letter was a rejection and counter-offer. The counter-offer proposed the same terms except for the right of Mr Brown to terminate. Instead, Mr Radin suggested that any alteration (this included a termination) should be “by consent of the parties, or if no agreement is possible ... be determined by Court of Law.” But an alteration “by consent of the parties” was always an inherent possibility and an alteration “by Court of Law” was always an inherent impossibility. A court has no jurisdiction to alter contractual obligations and contracting parties cannot by their agreement create such jurisdiction. The position would be no different if the parties agreed on the considerations which the court was to take into account and the principles that were to govern its decision-making.
Nothing happened later to resolve the absence of agreement over the duration of the 60/40 arrangement. Mr Radin relies on the fact that there was no written reply to his letter. In cross-examination, Mr Coutts said that he had never seen any reason to respond in writing because he and Mr Radin had taken their opposing positions in many telephone conversations and there was no point in writing.
I think it necessary to refer to the content of only some of the numerous subsequent oral communications between Mr Radin and Mr Coutts.
As early as 7 October 1993, Mr Brown wrote to Ms Milicevic noting that following the letter of 11 August 1993 to Mr Radin, Mr Radin had notified his office that he was not in agreement with certain aspects of the variation outlined in that letter and that the issue between him (Mr Brown) and Mr Radin “remained unresolved”.
In oral evidence in chief, Mr Radin volunteered that at one of the two meetings of his creditors in June 1994 Mr Paltos asked whether he (Mr Radin) had an assurance that the 60/40 arrangement would subsist throughout the course of the then proposed Deed of Arrangement and that he (Mr Radin) responded to the following effect:
“as far as I am concerned that is the case.”
In cross-examination Mr Radin was asked why he had said “as far as I am concerned” rather than give an unqualified positive answer. He explained that his reason was that “there was no one document” encompassing all the conditions. I think that the more likely explanation is that Mr Radin was conscious of the fact that he had not been able to obtain Mr Brown’s acceptance of his counter-offer.
I turn now to the telephone conversations between Mr Radin and Mr Coutts at about the time the 60/40 arrangement was made in August 1993. On the basis of the numerical sequence on the contemporaneous file notes of Mr Coutts, I find that the sequence of the conversations was as follows:
1.        (File note 8605): On Wednesday 11 August 1993 Mr Coutts and Mr Radin discussed a “deal” over a period from 12.00 pm to 1.05 pm at the end of which they arrived at the proportions 60 per cent and 40 per cent.
2.        (File note 8606): On Wednesday 11 August at 2.00 pm Mr Coutts discussed the matter with Tony Wright of Gordon & Johnston, solicitors, who had acted for Mr Brown in connection with the Deed of Sale. They discussed the 60/40 proposal. Mr Coutts’ note states:
“Agreed we would make it lie inside the framework of the contract.
We can always vary when MB [Martin Brown] returns.”
3.        (File note 8607): On Wednesday 11 August 1993 at 2.30 pm Mr Coutts telephoned Wayne Timms, a legal officer at the Bank and they discussed the 60/40 deal. Mr Timms said that he could not see any problem with it. [The file note is dated 10 August, but it was conceded in cross-examination that 11 August is the correct date.]
4.        (File note 8608): On Wednesday 11 August 1993 at 2.30 pm Mr Coutts telephoned Geoff James, a Bank officer, and discussed the 60/40 split. Mr Coutts’ note states:
“Agreed it was a case of 60% of something or 100% of nothing.”
On the same day, Mr Coutts telephoned Mathew Walsh, a solicitor acting for the Commissioner of Taxation, in relation to a proceeding brought by the Commissioner against Mr Radin. The note states:
“Tax avoiding full scale hearing, they will listen to everything he says. Adjourned to 31.8.93. Haven’t attempted to proceed so far.”
5.        Following the above conversations, Mr Sherlock, on behalf of Mr Brown, signed the Coopers & Lybrand letter dated 11 August 1993 to Mr Radin and it was delivered to Mr Radin by hand.
6.        (File note 8609): On Thursday 12 August 1993 at 11.00 am Mr Radin telephoned Mr Coutts. Mr Coutts’ note of the conversation reads:
“Has problem with our letter given that we can vary.
Told him we wouldn’t deal in any other way.”
That is, from the time Mr Radin first objected to Mr Brown’s having a right of termination, the impasse was exposed.
7.        Later on Thursday 12 August, Mr Radin sent his letter of that date to Coopers & Lybrand. As noted earlier, it may have been transmitted earlier by facsimile but it appears that the original was not received until Monday 16 August. Nothing turns on the time of receipt.
8.        (File note 8613): On Friday 13 August 1993 at 3.40 pm Mr Coutts spoke with Mr Radin. Mr Coutts’ note of the telephone conversation is as follows:
“Any matters where you have incurred liability we will honour deal or reimburse disbursements.
If revoke direction, ie to Miki [as to how the moneys were to be applied] only for matters where nothing incurred ... ”
9.        (File note 8618): On Tuesday 17 August 1993 at 2.15 pm Mr Coutts spoke with Mr Radin. Mr Coutts’ note states:
“Discussed variation to agreement which he requested.
He won’t agree to change as I suggested, but understood we want to be flexible.
Must try & see Tony [Sherlock] re this.”
I accept that the background to this and the immediately preceding conversation was Mr Radin’s concern arising from the fact that he might have incurred a liability, such as for disbursements, in connection with recovery of a particular Radin Debt. If it were possible for Mr Brown to terminate the arrangement out of hand, Mr Radin would be left bearing that liability without any right to be reimbursed for amounts expended or to be remunerated for work done by him. The solution raised was that cases where money had been expended on disbursements should be excluded from Mr Brown’s right of termination, either completely or unless disbursements were reimbursed by Mr Brown. This suggestion does not appear to have been pursued.
10. (File note 8623): On Wednesday 18 August 1993 at 11.00 am Mr Coutts and Mr Radin spoke. The relevant part of Mr Coutts’ file note is:
“12 month with option of 12 month net split 60:40.”
In sum, I think it clear that agreement was not reached on a way of meeting Mr Radin’s objection to Mr Brown’s enjoying a right of termination. In the result, the 60/40 split which the Bank in fact instructed Ms Milicevic to implement and which she did in fact implement was an arrangement to which the parties chose to adhere for the time being and which either party was free to abandon at will.
4. Bank’s alternative submission that it terminated the 60/40 arrangement for cause
The Bank submits that if, contrary to its primary submission, there was a 60/40 agreement for the duration of the currency of the Deed of Arrangement as pleaded by Mr Radin, it was an implied condition of the agreement that Mr Radin would use his best endeavours to assist in the collection of the Radin Debts. The Bank submits that he ceased to use his best endeavours in the second half of 1994 and that therefore Mr Brown was entitled to terminate the agreement for cause, namely, Mr Radin’s breach of condition, and that Mr Brown did in fact terminate the agreement by his letter dated 5 January 1995 to Mr Radin’s solicitors, Milicevic Solicitors. Both parties have treated that letter as a purported termination by Mr Brown – Mr Brown relies upon it as an acceptance of Mr Radin’s breach of condition or wrongful repudiation and Mr Radin relies upon it as a wrongful repudiation by Mr Brown.
I do not find it necessary to deal with the Bank’s present submission.
5. The Bank’s submission that there was no consideration moving from Mr Radin for the promise on which Mr Radin relies as part of the 60/40 arrangement because Mr Radin was already under a legal obligation to assist in the collections
I do not find it necessary to deal with this submission.
6. Mr Radin’s loss or damage
The Bank submits that if, contrary to its primary case, it was not entitled to terminate the 60/40 arrangement on 5 January 1995, in order to be entitled to any damages, Mr Radin would have to prove that but for the supposed wrongful repudiation by the Bank, the amount of the Radin Debts that would have been collected by the time of expiry of the Deed of Arrangement on 15 July 1996 would have been more than the amount standing to the credit of the Joint Account as at that date. The Deed of Arrangement dated 15 July 1994 between Mr Radin and Mr Rodgers provided that Mr Radin would pay 100 cents in the dollar to “all proven creditors over a period of two years” and that he would pay any balance outstanding to his creditors “within two (2) years of the execution of this Deed”. It is true that clause 8 of the Deed of Arrangement provides that the “Deed” was to terminate on the earliest of certain specified dates, none of which is 15 July 1996 (see para 114 below). But I construe Mr Radin’s pleading of “the currency of [the] composition” to refer to the two-year period expiring on 15 July 1996.
I do not find it necessary to deal with the Bank’s present submission.
7. Consequences of an award of damages to Mr Radin
The Bank submits that if Mr Radin obtains an award of damages, the amount should be set off against Mr Radin’s liability to the Bank under the judgment entered in its favour on 20 November 1998 in proceeding NG 437 of 1996 for $5,123,119.93.
I do not find it necessary to deal with this submission.
8. Estoppel
The Bank submits, contrary to Mr Radin’s submission, that it was not estopped from voting at the meeting of creditors on 17 May 1995. The evidence of both Mr Radin and Mr Brown was to the effect that prior to Mr Radin’s entering into the Deed of Arrangement, Mr Brown had advised him that the Bank had not determined its position in relation to participating. Mr Radin himself gave no evidence that Mr Brown or the Bank said to him that the Bank would not participate. Mr Radin did, however, put this matter to Mr Brown in cross-examination. Mr Brown replied that he did not give Mr Radin an undertaking that the Bank would not participate. In their affidavits, both Mr Brown and Mr Coutts contradicted affidavit evidence of Mr Radin that he (Mr Radin) had said to them that he agreed to pursue the Radin Debts and to incur disbursements and costs to that end, only on condition that he could offer his right to obtain 40 per cent of recoveries to his unsecured creditors.
I find that Mr Radin was not given either an assurance that the 40 per cent of recoveries would continue to be available to fund Mr Rodgers for the benefit of Mr Radin’s unsecured creditors, or an assurance that the Bank would not participate in the Part X arrangement.
9. Power to amend the Deed of Arrangement
Mr Radin challenges the decision of Mr Rodgers as chairman to allow the Bank to vote at the meeting of creditors on 17 May 1995. The Bank concedes that if it had not voted, the special resolution extending the period of the Deed of Arrangement would have been passed. But the Bank submits that as a matter of law it is not possible under the Act to amend a deed of arrangement. The Bank contrasts s 445A of the Corporations Law which provides that a deed of company arrangement may be varied by a resolution passed at a meeting of the company’s creditors convened under s 445F. It points out too that that power is a qualified one: the deed of company arrangement may be so varied “only if the variation is not materially different from a proposed variation set out in the notice of the meeting” (s 445A) and a creditor of the company may apply for, and the Court may make, an order cancelling the variation (s 445B).
Subsection 233(1) of the Act provides:
“A deed of arrangement that is entered into in accordance with this Part [Part X] and complies with the requirements of this Part is, upon being duly executed by the debtor and the trustee, binding on all the creditors of the debtor.”
Subsection 233(2) makes it incompetent for a creditor, so long as a deed remains in force, to present or to proceed with a creditor’s petition against the debtor in respect of a provable debt, or, except with the leave of the Court and on such terms as the Court imposes, to enforce any remedy against the property or person of the debtor in respect of a provable debt or to commence or take any fresh step in a legal proceeding in respect of a provable debt.
The Bank does not submit that Mr Rodgers did not duly call the meeting of creditors that was held on 17 May 1995 or that it would not have been possible, if a different procedure had been followed, for effect to have been given to the six-month extension desired.
In his notice of the creditors’ meeting to be held on 17 May 1995, Mr Rodgers included the following items on the agenda:
“10.To consider and if fit, allow the Debtor an extension of time to comply with the terms of the Deed of Arrangement;
11.Determine by Special Resolution whether to terminate the Deed of Arrangement of Michael Radin pursuant to Section 235 of the Bankruptcy Act.”
The sequence of these agenda items suggests that Mr Rodgers contemplated that if the extension of time were allowed, the termination resolution would fall away and that only if it were not allowed would the question of termination arise for consideration. The meeting was conducted accordingly. In fact, the resolution that was proposed and lost by reason of the Bank’s voting power was:
“That a further period of six (6) months be given to Mr Radin to comply with the provisions of the Deed of Arrangement in regard to the initial payment under the Deed, that was due and payable by 15 April 1995.”
It was after this resolution failed that the resolution for termination was voted upon and failed to be passed as a special resolution.
The Bank submits that ss 235 and 236 of the Act show that the procedure necessary to be followed was for the original Deed of Arrangement to be terminated and for a fresh deed of arrangement to be agreed to by the creditors. Sections 235 and 236(1) provided as follows:
“235    A deed of arrangement is terminated by:
(a)      (Omitted by No 12 of 1980, s 128.)
(b)the passing of a special resolution to that effect by a meeting of creditors called for the purpose;
(c)       an order of the Court to that effect under section 236; or
(d)the occurrence of any circumstances or event on the occurrence of which the deed provides that it is to terminate.
236(1) The Court may, upon application by the trustee, a creditor or the debtor, or, if the debtor has died, the person administering the estate of the debtor, if it is satisfied -
(a)that the debtor, or, if the debtor has died, the debtor or the person administering the estate of the debtor, has failed to carry out or comply with a provision of the deed of arrangement;
(b)that the deed of arrangement cannot be proceeded with without injustice or undue delay to the creditors, the debtor or, if the debtor has died, the estate of the debtor; or
(c)that for any other reason the deed of arrangement ought to be terminated;
make an order terminating the deed.”
The Deed of Arrangement did not, as contemplated by para (d) of s 235, provide that it was to terminate on the occurrence of “any circumstances or event”, other than the earliest to occur of “one of the events specified in section 235 (b), (c) or (d) of the Act” or “the execution by the Trustee of a certificate [that Mr Radin had complied with the Deed of Arrangement.]” As at 17 May 1995 and until terminated, the terms of the Deed of Arrangement remained binding on all Mr Radin’s creditors. Not only was a termination of the Deed of Arrangement a condition precedent to any revised arrangement, but also a fresh authority under s 188 would be necessary to authorise the calling of the meeting of creditors to consider the proposed new arrangement; see Pretorius v Daltons Carpet Tiles Pty Ltd (1984) 1 FCR 346.
In the result, I accept the Bank’s submission that in the absence of statutory provision permitting a variation, the only way to achieve the desired extension was for the Deed of Arrangement to be terminated in accordance with s 235 or s 236 and for a special resolution to be passed in favour of a new deed of arrangement at a meeting called pursuant to a fresh authority under s 188. Accordingly, I accept the Bank’s submission that even if the special resolution sought by Mr Radin had been passed on 17 May 1995, it would not have bound his creditors. It would not have bound even those voting for it: they would have done so on the fundamental mistaken assumption that under the Act it would bind all creditors.
Authority supports the conclusion that a variation of a deed of arrangement under Part X of the Act is ineffective. In Re Jones and Harvey (1963) 18 ABC 247 Paine J in the Court of Insolvency of South Australia advised the Registrar that no valid scheme of arrangement had been reached which was capable of being recorded in the Court under Part XI of the Bankruptcy Act1924 (Cth). At the time, s 161(a) of that Act required that there be an initial extraordinary resolution of creditors and a later confirmatory extraordinary resolution of creditors. The purported confirmatory resolution attached a form of scheme which introduced provisions additional to those that had been approved by the initial resolution. In holding that the later resolution did not “confirm” the earlier one, his Honour emphasised that the only way in which a debtor might obtain a release from his obligations was by reaching an agreement with each of his creditors or complying fully with the legislation.

More directly in point is the decision of the same Judge shortly afterwards in Re Clonan (1963) 20 ABC 245. In that case a scheme contained a provision that the creditors might, by extraordinary resolution at a meeting duly convened for that purpose with the consent of the debtors, “alter any of the terms and conditions of [the] scheme of arrangement.” His Honour upheld the Registrar’s challenge to the validity of this provision. He referred to his decision some eight months earlier in Re Jones and Harvey, above, and held that the provision was beyond power. His Honour characterised the case as one in which “a majority of creditors try to imperil either their own interests or those of the minority” – something which must not be allowed in the absence of distinct legislative authority. His Honour said:
“I can find no provision, express or by implication, of the Act which would allow the creditors, if I may use a colloquial and rather euphemistic expression, a second bite at the cherry.” (at 258)
The idea expressed in this passage was referred to with apparent approval by a Full Court of this Court recently in Policy Nominees Pty Ltd (Provisional Liquidator Appointed) v McDougall (Ryan Whitlam and Marshall JJ, 16 October 1997, unreported) at 12.
It follows that if Mr Rodgers erred in permitting the Bank to vote on 17 May 1995, his error is without relevant consequence because if the resolution had been passed as a special resolution, no creditor would have been bound by the six-month extension.
10. Allocation as between secured and unsecured portions of the Bank’s debt
In addition to submitting that the Bank was not entitled to vote as a result of the pre-meeting representations discussed earlier, Mr Radin’s submission, as I understand it, is that the true value of the Bank’s security exceeded the amount of that value as estimated by the Bank, with the result that the unsecured portion of the Bank’s debt was nil or at least was much less than the amount in respect of which the Bank was permitted to vote.
Section 178 of the Act provided:
“178 If the bankrupt, a creditor or any other person is affected by any 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.”
Mr Radin claims to be affected by the decision of Mr Rodgers as chairman of the meeting to permit the Bank to vote on 17 May 1995 in respect of $1,189,930.43 of unsecured indebtedness. For present purposes I will assume that an effective amendment of the Deed of Arrangement was a possibility (contrary to my conclusion above) and that s 178 applied to the decision which Mr Rodgers took as chairman of the meeting of creditors.
Subsections 198(5) and (6) of the Act which were in force as at 17 May 1995 dealt with a secured creditor’s right to vote and provided as follows:
“198(5) Except as provided by subsection (6), a secured creditor is not entitled to vote in respect of secured debt unless he surrenders his security.
(6) A secured creditor may, if he has furnished to the chairman, in writing, particulars of the security and of the value at which he estimates it, vote in respect of the balance (if any) of the secured debt after deducting the value at which he has estimated the security.” (emphasis supplied)
Also as at 17 May 1995, s 201 of the Act provided:
“201 Any question as to the right of a person to vote at a meeting under this Division, or as to the amount of the debt in respect of which a person is entitled to vote at such a meeting, shall be determined by the chairman, who may, if he thinks it necessary to do so, adjourn the meeting for a period, not exceeding 14 days, to enable him to investigate the matter.”
In my view, the terms of s 198(6) itself make clear that a secured creditor’s estimate of the value of its security is not to be called into question on the ground that the estimated value of the security does not accord with its “true” or “objective” value. The reason is simply that the subsection gives the secured creditor a right to vote in respect of the difference between the amount of the secured debt and the value which the secured creditor estimates to be the value of the security, not the difference between the amount of the secured debt and the objective value of the security.
The verb “estimates” was not defined in the Act. The following are two dictionary definitions of the infinitive form “to estimate”:
“estimate ... 3 Assign a value to; assess, appraise. 4 Form an opinion of; gauge. 5 Form a numerical estimate of or that; put at a specified number etc. by estimation; judge by estimation to be etc.” (The New Shorter Oxford English Dictionary)
“estimate ... –v.t. 1. to form an approximate judgment or opinion regarding the value, amount, size, weight, etc., of; calculate approximately. 2. to form an opinion of; judge. –v.i. 3. to submit approximate figures, as of the cost of work to be done.” (The Macquarie Dictionary)
Mr Radin’s submission, as I understand it, is not that the Bank did not estimate the value of its security in these senses but simply that its estimate was wrong.
It is clear beyond question that s 198(6) is addressed to a decision and act of the secured creditor, not an objective state of affairs. Provisions of the Act relating to a secured creditor’s right to prove as an unsecured creditor lend support to the view that the chairman of the meeting is not entitled to reject a secured creditor’s estimate merely on the ground that it does not correspond with the “true” or “objective” value of the creditor’s security. Sections 90 and 91 which were made applicable to deeds of arrangement by s 237(2), dealt with proof by a secured creditor of its debt. Subsection 90(4) provided that a secured creditor who has not realised or surrendered his or her security may “estimate” its value and prove for the balance due after deducting the value so estimated. Subsection 90(5) provided that such a secured creditor must state particulars of his or her security and the value at which he or she “estimates” it in his or her proof of debt. Then s 91 provided as follows:
“91(1) Where a secured creditor has lodged a proof of debt in respect of the balance due after deducting the estimated value of his security, the trustee may at any time redeem the security on payment to the creditor of the value at which it has been estimated by the creditor.
(2)      If the trustee is dissatisfied with the value at which a security has been estimated by a creditor, he may require the property comprised in the security to be offered for sale at such times and on such terms and conditions as are agreed on by the creditor and the trustee or, in default of agreement, as the Registrar directs.
(3)      If any such property is offered for sale by public auction, the creditor, or the trustee on behalf of the estate, is entitled to bid for, and purchase, the property.
(4)      The creditor may at any time, by notice in writing, require the trustee to elect whether he will, or will not, exercise his power of redeeming the security or of requiring it to be realized and if the trustee does not, within 3 months after receiving the notice, notify the creditor, in writing, that he elects to exercise the power:
(a)      he is not entitled to exercise it;
(b)subject to subsection (5) [not presently relevant], any equity of redemption or other interest in the property comprised in the security that is vested in the trustee vests in the creditor; and
(c)the amount of the creditor’s debt shall, for the purposes of this Division, be deemed to be reduced by the amount at which the creditor has estimated the value of the security.
........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ........ ...” (emphasis supplied)
Accordingly, the scheme which the Act laid down in respect of proof of debt was not that the trustee could challenge the secured creditor’s estimate by reference to the true or objective value of the security, but that the trustee was given the right to redeem the security at its value as estimated by the secured creditor or to require that the property the subject of the security be sold by public auction at which the trustee might bid.
But could an unsecured creditor underestimate the value of its security in order to increase its voting entitlement, but later estimate the value at a higher figure for the purposes of proof of debt? Section 207 addressed this possibility. That section provided that where a secured creditor has estimated the value of the security under s 198 for the purpose of voting, he or she is not entitled to estimate its value for the purpose of proof of debt at any other amount except with the approval of the Court, and that he or she must, upon written request by the trustee of the deed, surrender the security upon payment of the amount at which he or she estimated the value of the security for the purpose of voting. These provisions were subject to the Court’s approval of a different régime.
In sum, it is a matter for a secured creditor to estimate the value of his or her security for the purposes of voting. Subject only to the Court’s jurisdiction just mentioned, if the value is underestimated, the creditor, while enjoying greater voting power as an unsecured creditor, runs the risk that the trustee will compulsorily acquire the subject property at the amount of that low estimate or require that the property be sold by public auction. If the value is overestimated, the creditor will be permitted to vote as an unsecured creditor in respect of an amount which is unduly low.
It is not surprising that a secured creditor’s estimate of the value of his or her security cannot be called into question. After all, s 90 provides that a secured creditor is entitled to prove for the whole of his or her secured debt if he or she chooses to surrender the security for the benefit of creditors generally. In these circumstances, it is not obvious why a secured creditor should not be entitled to choose deliberately to underestimate the value of its security in order to increase its voting power: again, the disadvantage in this course is that the secured creditor can be required to surrender the security to the trustee at the underestimated value. However, this is a matter which I am not called upon to decide since Mr Radin’s case, as I understand it, is not that the Bank followed that course but the more modest one that the Bank’s estimate was simply less than the true value as a matter of objective fact.
It is difficult to understand how a chairman of the meeting of creditors could, as a practical matter, decide differently from the secured creditor even within the period of the fourteen day adjournment permitted by s 201. It is understandable that the chairman is required to check that the secured creditor has either surrendered his or her security or furnished to the chairman, in writing, particulars of the security and of the secured creditor’s estimate of its value. But beyond this, can it be suggested that the chairman is required to embark upon an inquiry, possibly lengthy and intricate, into the true value of the security for the purpose of determining voting rights at the meeting? In Zantiotis v Andrew (No 2) (1988) 80 ALR 299 at 302, Beaumont J said:
“The evident object of s 198 is to establish a simple, practical procedure to enable the chairman to determine who can vote and, if so, for what amount. Because of time constraints, it was no doubt thought undesirable that the chairman should have to enter upon an investigation into the technical questions which could well surround such an inquiry into whether a debt should be admitted to ‘proof’.”
His Honour considered that s 198 revealed a legislative intention to establish a code that, with certain defined exceptions, gave a creditor the right to vote notwithstanding that further investigation might reveal that his claim should not be admitted to “proof”.
Mr Radin’s challenge to the decision of Mr Rodgers as chairman of the meeting to permit the Bank to vote in respect of the additional unsecured indebtedness of $1,189,930.43 on the ground that the true value of the Bank’s security exceeded its estimated value fails.
11. The Bank’s submission that the value of its security was such that the unsecured portion of its debt was sufficient to prevent a special resolution for the six month extension being passed
The Bank submits that if, contrary to its submissions, it was possible to amend the Deed of Arrangement, and an inquiry into the Bank’s estimate of the value of its security is permissible, nonetheless, on the facts of the present case, the decision of Mr Rodgers in allowing the Bank to vote in respect of the sum of $1,189,930.43 should not be disturbed.
The Bank makes two alternative submissions in support of this result on which, as will appear, I do not find it necessary to reach a conclusion and refrain from doing so. The first submission is that if a secured creditor’s estimate of the value of its security is open to challenge at all, it could be open to challenge at most only on the basis that the estimate was not made in good faith or that it was not made on reasonable grounds.
In the present case the Bank valued its debt at $3,721,930.43 and this does not appear to have been disputed. It valued its security at $2,532,000 ($2,732,000 less realisation costs estimated at $200,000), leaving an unsecured balance of $1,189,930.43 in respect of which it was permitted to vote.
The Bank held as security mortgages over seven properties and the Bill of Sale. It had valuations of the real estate supporting a total estimated value of $2,225,000. Mr Radin put into evidence valuations by Robert T G Meredith of six of the seven properties as at late September/early October 1995 generally at somewhat higher figures (they totalled $2,570,000 as against the Bank’s $2,000,000 for the same six properties).
The value assigned by the Bank to the Practice was $507,000 - the figure should have been $504,000. There is some evidence supporting the sum of $504,000, in particular an affidavit of Roy Stone of the Bank’s Group Credit Policy and Control Department as to the low level of recoveries. Moreover, the value of the Practice would have to take into account the heavy dependence on personal connection.
At this point it becomes necessary to refer to two procedural matters.
Mr Radin sought to read an affidavit sworn 4 October 1995 of Bruce Dennis, a solicitor. This affidavit purported to contain expert opinion evidence directed to the true value of the Practice. I upheld the Bank’s objection to the whole of the affidavit. But I reserved leave to Mr Radin to seek to read a further affidavit of Mr Dennis. Pursuant to that leave, Mr Radin sought to read a further affidavit of Mr Dennis sworn 6 April 1999. Again the Bank objected. Even if the contents of the second affidavit were otherwise admissible, it did not, either alone or in combination with the earlier affidavit constitute evidence which could prove the value of the Practice. For that purpose, further evidence would be required. The trial was approaching its end. It seemed to me that if the result in the case were to depend on the value of the Practice, Mr Radin should not necessarily be shut out from having the opportunity of leading evidence in proper form on that subject. I informed the parties that if I should come to the view that the question of the true value of the Practice was to be decisive of the result in the case, I would not give judgment without first relisting the proceedings for the purpose of ruling on the second affidavit and, subject to submissions and as appropriate, establishing a régime for the filing and serving by Mr Radin of further affidavit evidence by Mr Dennis relevant to the value of the Practice.
The second procedural matter to which I referred is the absence of submissions for Mr Radin in response to the Bank’s submissions to which I have referred earlier. Accordingly, where I have referred to Mr Radin’s “submissions” or Mr Radin’s “case” I have been referring to my understanding of those matters derived from the pleadings, the nature of the evidence led and the submissions made by Mr Radin in the course of the hearing.
The above discussion allows me to return to the matter at hand. If Mr Radin had submitted that a secured creditor’s estimate of the value of its security for voting purposes must be made in good faith and on reasonable grounds (it is not obvious that the chairman of the meeting would be able to determine that these requirements were satisfied in the time available) and if he had submitted that the Bank’s estimate did not satisfy one or both of these requirements, expert opinion evidence of the true value of the Practice might have been relevant to those issues, although it would have been far from conclusive. In proceeding NG 695 of 1995 Mr Radin pleaded only that the true value of the Bank’s security exceeded the amount of the debt (there were no pleadings in proceeding NX 57 of 1994) and he did not, apart from the affidavits of Mr Dennis, attempt to lead any evidence which could arguably be supportive of that case. Since Mr Radin fails in the proceedings in any event it is not necessary for me to address the two hypothetical submissions just mentioned or, to that end, to rule on the admissibility of the contents of the second affidavit of Mr Dennis.
The Bank’s alternative submission is that on any reckoning, I should not be satisfied that the Bank was not entitled to vote to the extent necessary to prevent the special resolution from being passed. At the meeting on 17 May 1995, creditors to the extent of $886,924.76 voted for the resolution for the six-month extension while creditors to the extent of $1,431,693.30 voted against it. Those voting against it included the Bank at $1,189,930.43 (and “Commonwealth Bank Card Service” at $29,410.04). Accordingly, the non-Bank creditors (including Commonwealth Bank Card Service) voting against the resolution amounted to only $241,762.87. If the Bank had not voted in respect of the sum of $1,189,930.43, the resolution would have been passed as a special resolution with 78.58 per cent of the votes in support of it.
Let it be assumed that all creditors (including Commonwealth Bank Card Service) other than the Bank in respect of its $1,189,930.43 voted as they did. For what amount would the Bank have had to vote in order to prevent the passing of the resolution as a special resolution? Let that amount be “$X”. The total value of votes cast would then be $1,128,687.63 + $X. The value of the other creditors (including Commonwealth Bank Card Service) that voted against the resolution was, and would again be, $241,762.87. We know that $241,762.87 + $X must just exceed 25 per cent of all votes cast. That is:
$241,762.87 + $X must just exceed $1,128,687.63 + $X
------------------------------------------
4
Therefore, multiplying throughout by 4
$967,051.48 + $4X must just exceed $1,128,687.63 + $X
\ $967,051.48 + $3X must just exceed $1,128,687.63
\ $3X must just exceed $161,636.15
\ $X must just exceed $53,878.72
In order for the Bank not to be able to prevent the resolution being passed as a special resolution, the value of its security would have to exceed $3,721,930.43 - $53,878.72 = $3,668,051.71.
Mr Meredith, on whose evidence Mr Radin relies, valued the real estate the subject of six of the seven mortgages at a total of $2,570,000, some $570,000 more than the Bank’s valuation of $2,000,000 for the same six properties. If Mr Meredith’s figure, plus the amount of $225,000 being the Bank’s valuation for the property not valued by Mr Meredith (a total of $2,795,000), is deducted from the total amount of the Bank’s debt of $3,721,930.43, the balance remaining is $926,930.43. Ignoring the sum of $200,000 estimated by Mr Brown as the cost of realisation of the Bank’s securities, I would have to be satisfied that the value of the Practice exceeded $873,051.71 ($926,930.43 minus $53,878.72) in order for the Bank not to have sufficient unsecured debt to prevent the resolution from being passed as a special resolution.

Again, the question of expert opinion evidence relevant to the value of the Practice would then arise. For the reasons mentioned above, I do not find it necessary to pursue this matter further.
12. The capacity of Mr Radin to satisfy the Part X arrangement
The Bank submits that even if I were to conclude that the “extension of time resolution” should have been passed as a special resolution on 17 May 1995, the evidence does not establish that Mr Radin could have paid out his creditors within the extended period of the Part X arrangement. The Bank submits as follows:
“(a)the amount Mr Radin would have received by 15 October 1995 was the sum of $90,864;
(b)there is no evidence that there was any other sources [sic] of funds available to Mr Radin;
(c)up to 15 October 1995 only approximately $9,500 had been received by the Trustee;
(d)yet Radin needed to make payment to the Trustee by 15 October 1995 of 25 % of $1,328,245 even on the assumption that the Bank was not entitled to participate ie. a sum of $332,061;
(e)in any event, Mr Radin needed to make payment of the balance namely $946,184 by no later than 15 July 1996; and
(f)there is no evidence of any sources available to Mr Radin to pay this amount, either.”
I do not find it necessary to address the present submission.
13. Termination of the Deed of Arrangement and making of a sequestration order
The Bank submits that I should, pursuant to s 236(1), make an order terminating the Deed of Arrangement and, pursuant to s 236(3), make a sequestration order in respect of Mr Radin’s estate. I set out s 236(1) earlier. It specifies the matters of which I must be satisfied in order that the discretion to terminate the Deed of Arrangement be enlivened. These are that the debtor has failed to carry out or comply with a provision of the Deed of Arrangement (s 236(1)(a)), that the Deed of Arrangement cannot be proceeded with without injustice or undue delay to the creditors (s 236(1)(b)), or any other reason for which the Deed of Arrangement ought to be terminated (s 236(1)(c)). The first ground is satisfied because Mr Radin has paid only $9,500 to Mr Rodgers as trustee. So is the second ground: there would be injustice and undue delay to the creditors if the Deed of Arrangement were to remain on foot because Mr Radin would be protected from the ordinary processes of the law indefinitely without, so far as the evidence reveals, any benefit to his creditors. The period of two years provided for in the Deed of Arrangement has long since expired. It has not been “terminated” pursuant to its own clause 8 which, it will be recalled, provided that it was to “terminate” on the earliest date on which any of the following events occur:
(i) one of the events specified in s 235(b), (c) or (d) of the Act;
(ii)the execution by Mr Rodgers of a certificate of compliance by Mr Radin with his obligations under the Deed of Arrangement and the Act.
Subsection 236(2) provides that the Court is not make an order terminating a deed on the ground specified in s 236(1)(a) or (c) unless satisfied “that it would be in the interests of the creditors to do so”. I am so satisfied. There is no realistic prospect of Mr Radin’s obtaining funds with which to pay his creditors, yet payment of his creditors in full was that for which the Deed of Arrangement provided. The terms of the Deed of Arrangement have long since been overtaken by events. It is in the interests of the creditors that a trustee in bankruptcy be appointed and that the powers and rights of a trustee in bankruptcy be available in respect of Mr Radin’s estate.
In the absence of evidence establishing Mr Radin’s solvency, particularly in view of the Bank’s judgment against him for $5,123,119.93 plus costs and post-judgment interest and the property valuation evidence before me, I am satisfied that Mr Radin has no means of paying his creditors. It is desirable that the discipline of a trustee in bankruptcy be brought to bear on his insolvency.
Mr Radin informed me, when applying for an adjournment of the present hearing, that his appeal against my earlier judgment was to be heard during the May 1999 Full Court sittings. He asked that I adjourn the hearing of the present three proceedings on the ground, so it was submitted, that a sequestration order, if made, would have the effect of stultifying prosecution of the appeal. I indicated that I would not be giving judgment until after those sittings. I am now aware that the hearing of the appeal has been stood over to the next Full Court sittings In these circumstances, my Associate informed the Bank and Mr Radin, by letter dated 21 May 1999, that if I should conclude that a sequestration order ought to be made, I would stay all proceedings under the order for twenty one days pursuant to s 52(3) of the Act (see also s 37 of the Act, O 52 r 17 of the Federal Court Rules and Coleman v Lazy Days Investments Pty Ltd (1994) 55 FCR 297) and that if either party wished to object to that course, that party should apply by notice of motion to be filed by Friday 28 May, seeking an order that a different course by followed. Neither party so applied.
CONCLUSION
For the above reasons, there will be orders to the effect of those sought by the Bank in proceeding NX 57 of 1994 subject to the stay referred to above; and orders of dismissal of proceeding NG 695 of 1995 with costs; and a declaration and order in accordance with paras 1 and 2 respectively of the application in proceeding NG 632 of 1996.
Other orders may also need to be made. I will direct the Bank to bring in short minutes. In proceeding NX 57 of 1994 they will include orders that:
“1Deed of Arrangement dated 15 July 1994 between Michael Radin and Peter David Rodgers be terminated.
2.The estate of Michael Radin be sequestrated.
3.The operation of order 1 be suspended for 21 days from today’s date.
4.All proceedings under order 2 be stayed for 21 days from today’s date.”
There will also have to be an order or orders providing for the costs of that proceeding and an order or orders providing for the costs of proceeding NG 695 of 1995.

I certify that the preceding one hundred and fifty six (156) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Lindgren.
Associate:
Dated: 7 June 1999

Proceeding NX 57 of 1994
The applicant appeared on the hearing in person

The first respondent did not appear

Counsel for the second respondent Mr R G Forster SC and Mr R S Hollo

Solicitors for the second respondent: Abbott Tout

Proceeding NG 695 of 1995
The applicant appeared on the hearing in person

Counsel for the respondents: Mr R G Forster SC and Mr R S Hollo

Solicitors for the respondents: Abbott Tout

Proceeding NG 632 of 1996
Counsel for the applicants:
Mr R G Forster SC and Mr R S Hollo

Solicitors for the applicants: Abbott Tout

Counsel for the first and second respondents: Mr M R Gracie

Solicitors for the first and second respondents: Crisp & Associates

The third respondent appeared on the hearing in person

The fourth and fifth respondents did not appear

Date of Hearing: 29, 30, 31 March 1999, 1,7 April 1999

Date of Judgment: 7 June 1999

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NX 57 OF 1994

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 695 OF 1995

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	NG 632 OF 1996

JUDGE:	LINDGREN J
DATE:	7 JUNE 1999
PLACE:	SYDNEY

Proceeding NX 57 of 1994 The applicant appeared on the hearing in person
The first respondent did not appear
Counsel for the second respondent	Mr R G Forster SC and Mr R S Hollo
Solicitors for the second respondent:	Abbott Tout
Proceeding NG 695 of 1995 The applicant appeared on the hearing in person
Counsel for the respondents:	Mr R G Forster SC and Mr R S Hollo
Solicitors for the respondents:	Abbott Tout
Proceeding NG 632 of 1996 Counsel for the applicants:	Mr R G Forster SC and Mr R S Hollo
Solicitors for the applicants:	Abbott Tout
Counsel for the first and second respondents:	Mr M R Gracie
Solicitors for the first and second respondents:	Crisp & Associates

The third respondent appeared on the hearing in person
The fourth and fifth respondents did not appear
Date of Hearing:	29, 30, 31 March 1999, 1,7 April 1999
Date of Judgment:	7 June 1999