Re Burlock, A.D. v Deputy Commissioner of Taxation of the Commonwealth of Australia
[1994] FCA 259
•10 MAY 1994
ALAN DOUGLAS BURLOCK v. DEPUTY COMMISSIONER OF TAXATION OF THE COMMONWEALTH OF
AUSTRALIA AND BARRY KEITH TAYLOR (as Trustee of the Deed of Arrangement of
Alan Douglas Burlock)
No. VG409 of 1993
FED No. 259/94
Number of pages - 13
Bankruptcy
(1994) 49 FCR 522
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
BLACK CJ, SWEENEY AND RYAN JJ
CATCHWORDS
Bankruptcy - Bankruptcy Act 1966, Part X - deed of arrangement involving, amongst other things, conditional releases - whether failure of controlling trustee to express an opinion in trustees report is a serious departure from requirements of Part X - whether s.222(2) confers a discretion to declare a deed void - considerations relevant in exercising discretion - discretion to make a sequestration order under s.222(7) - Rozenbes v Kronhill (1959) 95 CLR 407 and Re Morris (1981) FLR applied - sequestration order made.
Bankruptcy Act 1966: ss.222
HEARING
MELBOURNE
#DATE 10:5:1994
Counsel for the appellant: Mr A Chernov QC with
Ms J Davies
Solicitor for the appellant: D E Phillips
Counsel for the first respondent
Deputy Commissioner of Taxation: Mr G Nettle QC with
Mr M Crennan
Solicitors for the first respondent: Australian Government Solicitor
Counsel for the second respondent
Barry Keith Taylor: Mr P Bravender-Coyle
Solicitors for the second respondent: Madisons
ORDER
THE COURT ORDERS THAT:
1. The appeal of the debtor be dismissed.
There be an order of sequestration against the estate of the
debtor the act of bankruptcy being the signing by the debtor of an authority pursuant to s.188 of the Act on 18 May 1992.
The debtor pay the Commissioner's costs of the hearing at first
instance on the basis of a two-day hearing and his costs of the appeal, all such costs to be recoverable against the estate of the debtor in bankruptcy as if these orders had been made on a creditor's petition.
The Official Trustee in Bankruptcy be the trustee of the debtor's
estate in bankruptcy.
NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
JUDGE1
BLACK CJ, SWEENEY AND RYAN JJ The appellant debtor by authority dated 18 May 1992 authorized a registered trustee, Barry Keith Taylor, to call a meeting of his creditors and take control of his property. On the same day, the appellant furnished Taylor with a statement of his affairs, which showed liabilities of $2,947,463 and a deficiency of $2,922,887, and a proposal offering his creditors a deed of arrangement in the following terms:
" STATEMENT OF DEBTOR PURSUANT TO SECTION 188(2)(C) RE: ALAN DOUGLAS BURLOCK
I, ALAN DOUGLAS BURLOCK of 19 White Lodge Court Donvale, Victoria, 3111, whose occupation is Consultant in the State of Victoria propose to offer my creditors a Deed of Arrangement pursuant to Part X of the Bankruptcy Act 1966.
The terms of the Deed of Arrangement would be as follows:
1. That I covenant to pay to my Trustee the lump sum of $50,000 payable within 7 days of acceptance of the Deed of Arrangement by Creditors.
2. That I obtain Releases from:
(1) Helen Burlock
20 White Lodge Court
DONVALE VIC 3111
(2) Ron Burlock
28 Sweetland Avenue
MOOROOLBARK VIC 3138
(3) A Chizzoniti
42 Hedderwick Street
BALWYN VIC 3103
(4) Ken Dungey
6 Merry Street
RINGWOOD EAST VIC 3032
(5) G. Gym (Highpoint) Pty Ltd
Units 14 and 15
Highpoint Homemaker Centre
MARIBYRNONG VIC 3032
(6) Rudy Keleman
17th Floor
193 Domain Road
SOUTH YARRA VIC 3141
(7) Robert A Kingdon
267 Maroondah Highway
RINGWOOD VIC 3134
(8) M, M and R
Solicitors
22B Maroondah Highway
RINGWOOD VIC 3134
(9) Partnership Pacific Ltd
360 Collins Street
MELBOURNE VIC 3000
(10) Carolyne Shearer
Domain Park Apartments
Cnr Domain and Park Street
SOUTH YARRA VIC 3141
(11) Sitcom Pty Ltd
267 Maroondah Highway
RINGWOOD VIC 3134
(12) Sizzlers International Pty Ltd
267 Maroondah Highway
RINGWOOD VIC 3134
(13) Sterow Pty Ltd
PO Box 289
CANTERBURY VIC 3126
(14) J M Thompson
Wintles Road
LEONGATHA SOUTH VIC 3953
(15) Kay Tutton
7 Rumoly Drive
FOREST HILL VIC 3131
3. That I assign to my Trustee any monies received by me from legal action against:
1) Cynthia Davies re: vehicle accident (approx $1,906 less legal costs)
2) GRE Insurance Co. re: claim for carpet damage (approx $12,500 legal costs)
DATED this 18th day of May, 1992.
(Signed) A.D. Burlock ....
ALAN DOUGLAS BURLOCK "
The trustee later estimated that the return to creditors would be 0.54 cents in the dollar. A meeting of the debtor's creditors was held on 5 June 1992 and passed a special resolution requiring him to enter into a deed of arrangement in the terms which he had proposed. On the same day the debtor executed such a deed. Taylor was appointed trustee of the deed.
The respondent, the Deputy Commissioner of Taxation ("the Commissioner") subsequently applied for an order terminating the deed and a sequestration order against the appellant's estate. While the Commissioner's application was pending, Taylor sought to have the debtor examined under s.81 of the Act but that examination was adjourned by the Deputy Registrar on the application of the Commissioner". Taylor thereupon convened another meeting of creditors which was held on 19 October 1992. After considerable debate, a motion that the deed be terminated was lost.
On 1 July 1993 the Official Trustee in Bankruptcy was appointed as trustee of the deed in lieu of Taylor who had ceased to be a registered trustee.
The learned primary Judge first found that the Commissioner was a creditor of the appellant for the purposes of ss.222 and 236 of the Act. No challenge to that finding has been made on this appeal.
The Commissioner's first ground of attack under s.222 was Taylor's failure to state his opinion as required by s.189A of the Act. That section provides:
"189A(1) Within 14 days after consenting to exercise the powers conferred by an authority under section 188, a registered trustee shall prepare, and file in the office of the Registrar, a report in writing that complies with tis section.
189(2) The report shall:
(a) summarise and comment of the debtor's affairs".
(b) set out such other information relevant to those affairs as is available to the trustee and is necessary to give a true and fair view of those affairs.
189(3) The report shall state whether or not, in the trustee's opinion, it would be in the best interests of the debtor's creditors to deal under this Part with the debtor's affairs in the manner indicated in the statement given under subparagraph 188(2)(c)(ii)."
The learned primary Judge concluded that:
"The expression by the Trustee of the opinion called for by s.189A(3) is in my view an essential ingredient of the whole decision-making process contemplated by the Act."
His Honour then examined Taylor's report which concluded with the following paragraph:
"In the circumstances, Mr Burlock is attempting to provide creditors, a return which although quite small does represent a significant hardship upon him as he will be repaying the loan of $50,000 back to relatives over the next 3 years. Accordingly in the circumstances my recommendation or lack of same would carry no real weight and accordingly I invite creditors to carefully peruse the relevant material to assess the position which they wish to adopt. Certainly I do attach significance to the debtors desire to attempt to resolve matters with his creditors to the best of his ability."
After his Honour's examination of Taylor's report, he concluded:
"There can be no question that the trustee did not state whether or not, in his opinion, it would be in the best interests of the debtor's creditors to deal under Part X with the debtor's affairs in the manner indicated in the statement given under s.188(2)(c)(ii). In fact the trustee not only specifically avoided stating his opinion but on two occasions he qualified his remarks by the assumption that the statement of affairs was accurate and further drew attention to the fact that he had not had the opportunity to investigate the debtor's affairs. In these circumstances it is not surprising that a trustee of integrity would be unwilling to express an opinion and Taylor did no more or less than that. However, the statute required him to state his opinion. The creditors were entitled to have it but they did not receive it. In my opinion the trustee's report was deficient in a most material particular. It cannot be said that the report substantially complied with the statutory requirements in circumstances where perhaps the most crucial part of the report is absent. In my opinion the deed was not entered into in accordance with Part X of the Act and should be declared void on the ground that the trustee failed to state in his report whether or not in his opinion it would be in the best interests of the debtor's creditors to deal under Part X with the debtor's affairs in the manner proposed by the debtor."
The learned primary Judge then considered briefly a contention that the appellant debtor's statement of affairs contained a false statement. That examination canvassed a debt of $1,906 due to the appellant in respect of a motor vehicle collision as to which the debtor had not indicated that the extent of his own legal costs would probably reduce the net amount receivable by him. His Honour also considered a debt of $12,500 said to have been due from an insurance company for carpet damage as to which the debtor gave no indication that the insurance company had filed a counterclaim or intended to do so. His Honour did not regard the statement of affairs as deficient in either respect and indicated that, in the circumstances, he would not have declared the deed void on that ground.
Although it was unnecessary in the light of his conclusion that the deed should be declared void under s.222, his Honour then turned to consider an alternative claim for relief under s.236 of the Act. That claim was to the effect that it had been a term of the deed that releases would be obtained from 15 named creditors. The documents which were obtained were in the following standard form:
" RELEASE
PARTNERSHIP PACIFIC SECURITIES LIMITED OF 360 COLLINS STREET MELBOURNE
in the State of Victoria, hereby irrevocably covenant and undertake not to lodge Proof of Debt in the estate of ALAN D BURLOCK until such time as all unsecured creditors have been paid 100 cents in the dollar and until such time when such dividend (if any) will be payable the claim of PARTNERSHIP PACIFIC SECURITIES LIMITED is absolutely deferred."
In fact, as the evidence reveals, "releases" in that form had been obtained by the debtor from relevant debtors on various dates from the end of May 1992, and all had been obtained by the time of the meeting of 5 June 1992. Their prior existence and their form were not disclosed at the meeting.
The so-called releases in that form had been obtained at the suggestion of a member of Taylor's staff "so that the creditors who were releasing their claims would still be able to vote at the Part X meeting and subsequent creditors' meetings". His Honour concluded that the documents executed by the named creditors were not "releases" as that term would have been understood by the other creditors at the meeting of 5 June 1992. However, his Honour went on to indicate:
"Indeed, the fact that it was apparently the intention of the debtor and those advising him that there would not be a full release of the creditors' claims in order to preserve their voting rights confirms my view that the documents as signed were not intended to be, and did not operate as, releases of the creditors' respective claims against the debtor.
In my opinion the debtor failed to carry out or comply with a provision of the deed. Had it been necessary to consider whether the deed should be terminated by reason of the debtor's failure to carry out or comply with a term of the deed I would not have made such an order for the reasons first, that the "release" signed by the creditors in fact excluded them from participation in the distribution contemplated by the deed and second, that even if none of the "releasing" creditors had voted at either of the meetings of the creditors, the outcome of the voting would not have been affected. In the circumstances it would not have been in the interests of the creditors to terminate the deed."
Nor, as he indicated in his reasons, would his Honour have terminated the deed on any of the other grounds, or combinations of grounds, advanced by the Commissioner.
His Honour finally turned to consider whether a sequestration order should be made against the estate of the debtor. He concluded, in the exercise of his discretion, that he ought not to make such an order, saying at p.37 of his reasons:
"There does not seem to be any reason on the evidence advanced before the Court to suggest that the process of dealing with the debtor's estate pursuant to Part X has failed for any reason attributable to the debtor's own conduct. The debtor consulted a registered trustee on 17 March 1992; he worked with the trustee for two months before signing the authority pursuant to s.188; no complaint has been made as to the degree of co-operation given to trustee by the debtor in the examination of his affairs particularly in the period preceding the preparation of the trustee's report. It was the trustee's failure to fulfil his responsibility under s.189A(3) which has caused the deed to be held to be void.
Apart from instituting the present proceedings, the applicant took little part in the debtor's affairs prior to and during the meetings of creditors. The applicant issued a writ against the debtor in the Supreme Court of Victoria on 15 January 1992. Attempts were made to effect service over a considerable period but service was never effected. There is some suggestion that the applicant was of the view that the debtor was attempting to avoid service but if that were the case the sensible course would have been to seek an order for substituted service, but this was not done. The applicant attended both meetings but took no part in them except to vote against the debtor's proposal on 5 June 1992. The applicant's representative abstained from voting at the 19 October 1992 meeting.
There is no evidence that any creditor has obtained a judgment against the debtor nor that the debtor has committed any act of bankruptcy other than that constituted by signing the s.188 authority on 18 May 1992. No other creditor has supported the applicant in these proceedings. Although the amount claimed by the applicant is a substantial sum of money, it represents a very minor part of the debtor's total liabilities and although that fact in itself is not determinative of whether a sequestration order should be made, it is one factor of many to be weighed in the balance."
It was first contended on behalf of the appellant, that, assuming the requisite expression of opinion by Taylor had not been furnished as required by s.189A(3), the deed of arrangement was not thereby rendered void. It was, so the argument went, merely voidable by the exercise of a discretion under s.222.
The relevant sub-s. of s.222 provides:
"(1) Where there is a doubt, on a specific ground, whether a deed of assignment or a deed of arrangement was entered into in accordance with this Part or complies with the requirements of this Part, or whether a composition has been accepted by a special resolution of a meeting of creditors under section 204, the Inspector-General, a person authorised in writing by the Inspector-General, the Registrar,
the trustee, a creditor or the debtor may apply to the Court for an order under subsection (2).
(2) Upon the hearing of an application made under subsection
(1), the Court may, subject to this section, make an order:
(a) declaring that the deed or composition is void, or that it is not void, on the ground specified in the application; or
(b) declaring that a provision of the deed is void, or is not void, on the ground specified in the application.
(3) The Court shall not make an order declaring a deed to be void on the ground that it does not comply with the requirements of this Part if the deed complies substantially with those requirements.
(4) Where the Court, on the application of the Inspector-General, a person authorised in writing by the Inspector-General, the trustee or a creditor, is satisfied that the debtor:
(a) has given false or misleading information in answer to a question put to him with respect to any of his conduct or examinable affairs at the meeting of creditors at which the resolution requiring him to execute the deed or accepting the composition was passed; or
(b) has omitted a material particular from the statement of the debtor's affairs given under subsection 188(2) or included an incorrect and material particular in that statement;
the Court may make an order declaring the deed or composition to be void or declaring any provision of the deed or composition to be void.
(5) The Court shall not make an order declaring a deed or composition, or a provision of a deed or composition, to be void on a ground specified in subsection (4) unless it is satisfied that it would be in the interests of the creditors to do so.
(6) The Court shall not make an order under subsection (2) or
(4) unless the application for the order is made:
(a) in relation to a deed of assignment - before the final dividend has been paid under the deed;
(b) in relation to a deed of arrangement - before the terms of the deed have been carried out; or
(c) in relation to a composition - before the final payment has been made under the composition.
(7) The trustee or a creditor may include in an application under subsection (1) or (4) an application for a sequestration order against the estate of the debtor and if the Court, on the first-mentioned application, makes an order under subsection (2) or (4) declaring the deed or composition to which it relates to be void, it may, if it thinks fit, forthwith make the sequestration order sought."
Section 221(1) provides that "where there is a doubt, on a specific ground, whether a deed of assignment or a deed of arrangement was entered into in accordance with this Part or (emphasis added) complies with the requirements of this Part" an application may be made by, amongst others, a creditor to the Court under sub-section (2).
The specific ground on which the Commissioner relied to found his contention that the deed was not entered into in conformity with Part X was that the trustee's report to the creditors did not "state whether or not, in the trustee's opinion, it would be in the best interests of the creditors" to pass a special resolution under the Part, as required by s.189A(3).
The judgment below was based upon this ground that the deed was not entered into in accordance with Part X. No challenge had been made to the form of the deed itself. The terms of s.222(3) apply to a case where the ground relied upon is that the deed does not comply with the requirements of Part X and not to a case such as the present.
It is well established that s.222(2) confers a discretion on the Court to declare void a deed on the ground that it was not entered into in accordance with Part X or to refrain from doing so: see Musolino v. Sidiropoulos (1991) 101 ALR 235 at 243, 244; Re Williams; Ex parte Weaver (1980) 31 ALR 598 at 601. It is material to the exercise of that discretion to consider, as his Honour did, the nature and extent of the departure from the prescribed method of entry into the deed. It is clear from the tenor of the judgment that his Honour regarded the absence from the report of any expression of the trustee's opinion as a very serious departure from the requirements of Part X, so that it was not entered into in accordance with that Part.
In our opinion, he was clearly justified in coming to this conclusion. A controlling trustee has marked advantages over the general body of creditors. His position as controlling trustee gives him access to the business and financial records of the debtor (s.189(1)). The debtor is required to furnish him with such information with respect to any of the debtor's examinable affairs as the controlling trustee requires, and to comply with any directions given to him by the controlling trustee (s.189(2)). The debtor "shall not remove, dispose of or deal with any of his property except with the consent of the controlling trustee" (s.189(2)(a)).
Section 189A(1) requires the controlling trustee within 14 days after consenting to exercise the powers conferred by an authority under s.188 to prepare and file in the office of the Registrar a report in writing which complies with that section. Sub-section (3) provides that the report shall state whether or not in the trustee's opinion, it would be in the best interests of the debtor's creditors to resolve that the debtor enter into the proposed deed.
The controlling trustee may, with the consent in writing of the debtor, obtain such advice or assistance as he thinks necessary (see s.190(5A)).
The controlling trustee can explore the possibility that there may be antecedent transactions by the debtor which may be set aside, to the benefit of the creditors, in the course of the administration of his estate, if an order of sequestration were made. The trustee's expenses in carrying out his duties are paid out of the fund provided under the deed, whereas an individual creditor, already faced by a bad debt, will incur further expense in seeking to ascertain facts relevant to his decision as to how he should vote at the meeting, which will not be recoverable by him.
It is true that his Honour did not, as he did elsewhere in his reasons for judgment, expressly say that he exercised a discretion to declare the deed void. However, he did not say that the deed must be declared void, but made his order in accordance with the terms of sub-s.222(2), which he set out. That sub-section provides that the Court may make an order declaring a deed to be void, which is to be contrasted with the expression found elsewhere in the section (sub-ss 5 and 6) that the Court shall not make an order unless certain conditions are fulfilled.
In our opinion, the learned trial judge regarded himself as exercising a discretion and did so without error.
If, for any reason, it were necessary for this court to exercise the discretion for itself, it would declare the deed void. In exercising the discretion ourselves, we would take into account the advantages which a controlling trustee has over the general body of creditors, the importance to them of the written expression of the trustee's opinion, together with the facts relating to the so-called "releases". The creditors who entered into these documents did so before the meeting. The documents were designed to produce the result that the creditors executing them would retain the right to vote at the meeting upon a resolution in respect of which they no longer had any financial interest. The existence of the "releases" and their form were not disclosed to the general body of creditors. We could also take into account the trifling nature of the return to the creditors under the deed.
Reliance was placed upon the fact that, after persistent questioning by creditors at the meeting, the trustee eventually made an oral recommendation that the creditors vote in favour of the motion for the deed.
This was not, of course, a compliance with the requirement of the statute. It was of no value to creditors who had decided not to attend the meeting, or to those who had given proxies to vote in support of the resolution. As a discretionary factor, we regard it as having little weight in the circumstances of this case.
In our opinion, the appeal should be dismissed. In his cross-appeal, the Commissioner contends that the learned trial judge erred in law in declining to make an order of sequestration against the estate of the debtor as sought in the application.
We have formed the opinion that an error of law has been established. Under s.221(3) an application, such as the present, "shall for the purposes of this Act be deemed to be equivalent to the presentation of a creditor's petition against the debtor". Here, the Commissioner had an available debt to found a petition and there was an available act of bankruptcy. The Court thus had a discretion to make a sequestration order.
In Rozenbes v Kronhill (1959) 95 CLR 407 the High Court considered the provisions of s.56, the predecessor of s.52 of the Act. Dixon C.J, Webb and Fullagar J said (at p.414)
"In Cain v. Whyte (5), this Court expressed agreement with a judgment of the Supreme Court of Queensland (Henchman J) in which his Honour said: '...prima facie, on proof of the matters mentioned in s.56(2), the Court will proceed to make an order for sequestration, and ... it is for the debtor to show some cause overriding the interest of the public in the stopping of unremunerative trading, and the rights of individual creditors who are unable to get their debts paid to them as they become due. Something has to be put before the Court to outweigh those considerations before it can be said that sufficient cause is shown against the making of a sequestration order' (6) (7)." Their Honours also referred (at 419) to the prima facie legal right of a creditor to an order for sequestration.
It is true, as was pointed out in Re Morris; Ex parte Adamsi (1980) 48 FLR 341 at 352 that sub-s.222(9) provides that the provisions of sub-ss 52(1) and (2) do not apply in relation to an application made under sub-s.(9). In that case, however, it was also pointed out that by signing an authority under s.188 a debtor commits an act of bankruptcy and it was suggested that, by parity of reasoning, it is appropriate that, prima facie, the court should proceed to make an order of sequestration unless some cause is shown to outweigh the considerations noted in the judgment of the High Court. We confirm this conclusion as the contrary view would give rise to serious anomalies.
Speaking of the discretion conferred by s.222(7) of the Act, the learned trial judge said:
"The statute provides no guidance as to the circumstances in which this power should be exercised and accordingly I take the view that the power is entirely discretionary to be exercised according to the normal principles that apply to the exercise of a judicial discretion."
His Honour went on to deal with the circumstances of the case before him and expressed the opinion that "there was no reason to suggest the process of dealing with the debtor's estate pursuant to Part X had failed for any reason attributable to the debtor's own conduct" and concluded:
"It was the trustee's failure to fulfil his responsibility under s.189A(3) which caused the deed to be held to be void".
His Honour then referred to the passivity of the Commissioner in the events leading up to the meeting and at the meeting itself.
His Honour went on to say:
"There is no evidence that any creditor has obtained a judgment against the debtor nor that the debtor has committed any act of bankruptcy other than that constituted by signing the s.188 authority on 18 May 1992. No other creditor has supported the applicant in these proceedings. Although the amount claimed by the applicant is a substantial sum of money, it represents a very minor part of the debtor's total liabilities and although that fact in itself is not determinative of whether a sequestration order should be made, it is one factor of many to be weighed in the balance.
In my opinion this is not an appropriate case for the exercise of the Court's power pursuant to s.222(7) and I decline to make a sequestration order against the debtor's estate."
The Commissioner's debt exceeded $250,000.
Had his Honour's attention been drawn to the principles expressed in Rozenbes, in our opinion he would, at the outset of his consideration of the application for an order of sequestration, have held that, prima facie, he should proceed to make that order unless he were satisfied by the debtor that for some countervailing cause he should not do so.
His Honour's failure so to address the question in this way requires this Court to exercise the discretion itself. We are of the opinion that the debtor failed to show "other sufficient cause". He was hopelessly insolvent and the only offer made to his creditors was at its highest a trifling amount in relation to the size of his debts. By the time of the hearing before his Honour much of that amount had been consumed in costs and the debtor had incurred a further liability of $50,000 to his relatives.
We have noted the circumstances of the case which his Honour considered in deciding whether to make an order of sequestration, which are set out above. In our opinion, in exercising the discretion conferred by the Act ourselves, they do not amount to "other sufficient cause". There should be an order of sequestration against the estate of the debtor.
His Honour received written submissions on the question of costs and said:
"In the proceedings, the applicant, a creditor of the debtor, successfully sought to have a deed of arrangement executed by the debtor pursuant to Part X of the Bankruptcy Act 1966 (the Act) declared void, or alternatively terminated. The applicant also sought a sequestration order in the event that the deed was either declared void or terminated. The debtor disputed the applicant's standing as a creditor. In the result, I held that the applicant was a creditor and had standing to bring the application. I made an order declaring the deed void on the ground advanced by the applicant, namely by reason of the failure of the controlling trustee to comply with the obligation imposed by the Act to state, in his report pursuant to s.189A, his opinion as to whether or not it would be in the best interests of the debtor's creditors to deal under Part X with the debtor's affairs in the manner indicated in the debtors' statement under s.188(2)(c)(ii). In my reasons I dealt with the various bases on which the creditor sought, in the alternative, to have the deed terminated. It was not necessary to do so because those issues were irrelevant once the decision was reached that the deed should be declared void. However, all of the issues raised in the application had been argued in full and it was appropriate that I make findings in relation to them. My conclusion was that, had I not been of the view that the deed should be declared void, I would not have ordered that it be terminated; and for reasons set out in the judgment, I refused the application for a sequestration order. The trial of the application occupied two full days and about 1 hour 40 minutes on the third day. There was very extensive affidavit evidence accompanied by numerous documentary exhibits. Some of the evidence related solely to the alternative relief of termination sought by the applicant. It is not possible to quantify the proportion of the evidence applicable to tha ground as there was a considerable degree of overlap of the evidenciary material dealing with the two grounds. No additional evidence was adduced in relation to the application for sequestration and the argument on that issue occupied very little of the court's time. The debtor was unsuccessful in his attack on the applicant's standing, and on the major issue relating to the controlling trustee's obligation to express an opinion in his report. The trial of those issues would inevitably have occupied two court days. The issues relating to the application for termination on which the debtor would have succeeded if it had been the only issue, occupied some of the court's time and it is fair to say that but for the time spent on that issued the trial would have been concluded within two days.
In the circumstances, it is my opinion that in the exercise of my discretion to award costs, it is just and equitable for the applicant to have its costs of the application but that same should be taxed on the basis of a hearing which occupied two days. There should be no order for any costs incurred in relation to the written submission on costs.
There will be an order that the debtor pay the applicant's costs of the application to be taxed on the basis of a two day hearing."
We have considered the submissions of the parties on the questions of costs and note the advantages which the learned trial judge has over a Court hearing the case on appeal, especially when dealing with a variety of claims and issues.
The trustee did not appear at the trial and his submissions in the appeal related only to questions of costs. We do not think that we should disturb his Honour's orders as to the costs of the trial.
The Court orders that:
1. The appeal of the debtor be dismissed.
2. There be an order of sequestration against the estate of the debtor the act of bankruptcy being the signing by the debtor of an authority pursuant to s.188 of the Act on 18 May 1992.
3. The debtor pay the Commissioner's costs of the hearing at first instance on the basis of a two-day hearing and his costs of the appeal, all such costs to be recoverable against the estate of the debtor in bankruptcy as if these orders had been made on a creditor's petition.
4. The Official Trustee in Bankruptcy be the trustee of the debtor's estate in bankruptcy.
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