Re Chapman, A.J. v Ex parte Thomas, G.

[1994] FCA 930

930 9 y

JUDGMENT No. ,.,.m~ -.-

NOT FOR DISTRIBUTION

FEDERAL COURT OF AUSTlWM

NEW SOUTH WALES REGISTRY	No. NB WS8 of 1993
GENERAL DMSION

B€IWEEN:

RE:

ALAN JAMES CHAPMAN

M PARTE:

GAVlN THOMAS

Applicant

GEORGE KEKATOS

First Respondent

JERRY KEKATOS

Second Res~ondent

THE AUSTRALIA AND NEW

ZEALAND BANK

Third Respondent

FEDERAL COURT OF

CORAM:	SACKVllLE J.	AUSTRALIA	PRINCIPAL
PLACE:	SYDNEY	REQISTRV
DATE:	25 NOVEMBER 1994

RFASONS FOR JUDGMFM

HIS HONOUR: In this matter Mr Hogg appears on behalf of the applicant who is

the trustee of the bankrupt estate of the fourth respondent, Mr Alan James

Chapman. The other respondents to the application are George Kekatos and Jerry

Kekatos who are, or at least were intended to be, sureties in a proposal made by the bankrupt to his creditors for a composition pursuant to s.73(1) of the

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Rankru~tcv Aa 1966. The third respondent is the ANZ Bank. The evidence

indicates that the first and second respondents hold, or at least in the recent past, held an account in their own name together with the names of two other persons.

Those other persons are identified in an annexure to an affidavit of Mr Chapman

sworn 29 July 1994 wh~ch Mr Hogg has read as bang Athanasios Kekatos and

Roxani Kekatos.

RECORDED : NOT TRANSCRIBED

HIS HONOUR: Mr Hogg has put the case on this basis. On about 9 November

1994, the bankrupt made a proposal to the trustee. Under that proposal the

bankrupt stated that the sum of $610,000 would be paid by him to the trustee on

or before 17 November 1994. That amount was to pay creditors in full. The

proposal under s.73 of the Bankru~tcv Act 1966 (assuming that is what it was) was

accompanied by a document headed "Irrevocable Authority", which appears to

have been signed by each of the first and second respondents. That ~rrevocable

authority undertakes to pay to the trustee an amount of $400,000 out of account

number 833285257. The amount is stated to be paid to the trustee in his capacity

as trustee of the bankrupt's estate, upon acceptance by the creditors of the s.73

proposal.

The irrevocable authority also states that an amount of $200,000 is to be paid to the trustee within seven days for payment to the creditors upon acceptance of the s.73 proposal by the creditors. The document also contains an undertaking not to

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draw upon the account so as to reduce the balance below $400,000. Finally, it

provides for delivery before 10 am on 10 November 1994 for the sum of $10,000.

RECORDED : NOT TRANSCRIBED

HIS HONOUR: There is evidence that an instruction was given by the trustee to

his solicitor to send a copy of the irrevocable authority to the third respondent.	Mr
Hogg says, as I understand the position, that the effect of the proposal accompanied by the irrevocable authority was to create a charge or equitable

interest in the trustee over the amount in the account. The evidence indicates that

at least as at June 1994, the sum of over $445,000 was in the account.

In order to make out the case, the trustee will need to establish at least the

following. First that the irrevocable authority was effective, together with notification

to the bank to create a charge or equitable interest over the moneys in the

account. Secondly, that it was not open to the bankrupt to withdraw the proposal pursuant to s.73 prior to the acceptance, or purported acceptance by the creditors

of that proposal. This issue arises because the bankrupt did purport to withdraw the proposal. He did this by a facsimile transmission that apparently reached the creditors' meeting just a few mlnutes before the creditors voted (as they did) to

accept the proposal.

Thirdly, that charge or equitable interest over the account in favour of the trustee

was created by the irrevocable authority, notwithstanding that the account IS in the

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name, not only of the first and second respondents, but of the two other persons

whom I have identified. Mr Hogg, when I pointed out that the account was held in

the name of the other two persons, applied to join them as respondents on the

application. I grant that application and I direct Mr Hogg's cllent to file an

amended application including those two persons as fifth and sixth respondents.

There are often questions that arise in dealing with these matters on an ex parte

basis. I can see two particular difficulties confronting the trustee in this case. The

first is that it is by no means clear that the bankrupt was not entitled to w~thdraw

the proposal for a composition prior to its acceptance by the creditors. As I

pointed out to Mr Hogg, the language of s.73(4) of the Bankru~tcv Act 1966 rather

suggests that there must be a proposal on foot before the creditors can accept it.

However, at this stage of the proceedings, I th~nk there IS a serious issue to be

argued. lt may turn out, of course, that Mr Hogg's argument is not well founded.

The second difficulty is that the irrevocable undertaking was signed only by two of the four persons in whose name the account is maintained. It may well be very diicult to demonstrate that Athanasios Kekatos and Roxani Kekatos are bound by

the irrevocable authority executed by the first and second respondents. However,

at this stage of the proceedings, it seems to me that the status quo should be

preserved. An opportunity will be provided to the first and second respondents

and to the two persons who are to be added as respondents as well as to the

bank to argue whether the injunction that I am about to glve ought to be

maintained beyond a very short period. Indeed, it may well be that developments

have occurred in the intervening period to reduce the amount that IS in the

account.

In the circumstances I make the following orders. I grant leave to the applicant for

the application for interim relief to be heard instanter. I order that the third

respondent, by itself, its servants and agents be restrained until 5 pm on standing in the names of Athanasios Kekatos, Roxani Kekatos, George Kekatos and Jerry Kekatos, in any way so as to reduce the credit balance of that account below the sum of $400,000, or such other amount as is in the account, being less than the sum of $400,000 at the time the orders are served.

I give leave to the applicant to make short service of the application and the

affidavits of Mr Beverly and Mr Thomas. I direct that service of the application and

the affidavit that I have mentioned be effected upon the first, second and third

respondents by no later than 12 noon on Monday, 28 November 1994.	1 direct that
service be effected of the same docuemnts on the fourth respondent, Mr

Chapman, the bankrupt, also by 12 noon on 28 November 1994. 1 give leave for

service to be effected by facsimile transmission in the case of the first to fourth

respondents.

I direct that the applicant use its best endeavours to serve the fifth and sixth

respondents by 12 noon on 28 November 1 994.

I direct that the documents to be served upon the respondents in accordance with

the orders I have made include an amended application joining the f i h and sixth

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respondents. I direct the applicant to file such an amended application by 5 pm

today, 25 November 1994.

RECORDED : NOT TRANSCRIBED

HIS HONOUR: I have not made the order in paragraph 3 for the reasons that I

have already given.

RECORDED : NOT TRANSCRIBED

HIS HONOUR: I will direct that in the documents that I have ordered to be served

include a copy of the orders that I have made today.

RECORDED : NOT TRANSCRIBED

I certify that this and the preceding 5 pages are a true copy of the Reasons for Judgment of the Honourable

Justice Sackville~ I

Associate: L& 4.

Dated: 2 December. 1994

Heard:	25 November, 1994
Place:	Sydney
Decision:	25 November. 1994
Appearances:	Mr C. Hogg instructed by Simon Beverly & Associates,
Solicitors, appeared for the Appl~cant.