Re Cufari; Ex parte Commissioner of Taxation v Huppatz

[1992] FCA 113

Re: PASQUALE CUFARI and SILVANA CUFARI Ex Parte: DEPUTY COMMISSIONER OF
TAXATION OF THE COMMONWEALTH OF AUSTRALIA
And: JAMES HUPPATZ (as Trustee of the Deed of Composition of Pasquale and
Silvana Cufari)
Nos. 75 and 76 of 1991
FED No. 113
Bankruptcy
(1992) 34 FCR 544
(1992) 110 ALR 497

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE
OF SOUTH AUSTRALIA
Von Doussa J.(1)

CATCHWORDS

Bankruptcy - composition - application that the composition be declared void, set aside, or terminated - whether omission of material particular or inclusion of incorrect material particular in the statements of affairs - estimate of income tax on income earned but not yet assessed included in statements of affairs - amended assessments imposing large liability for taxation issued after the statements of affairs sent to creditors and before the meeting of creditors - creditors ignorant of the outstanding liability for income tax - whether it is in the interests of the creditors that the composition be declared void - whether time should be extended to file application to set aside the composition.

Bankruptcy Act 1966 ss.40(1), 82, 188, 189A, 194, 222, 239, 242, 243 Bankruptcy Rules, rr.84, 179(4)

HEARING

ADELAIDE

#DATE 12:3:1992

Counsel for the debtors : Mr I. J. Sampson

Solicitor for the debtors : Patsouris and Associates

Counsel for the applicant : Mr M. Crennan

Solicitor for the applicant : Australian Government Solicitor

ORDER

No.75 of 1991

1. The composition accepted by special resolution at a meeting of the creditors of Pasquale Cufari held on 2 August 1991 be declared void, pursuant to s.222 of the Bankruptcy Act 1966.

2. A sequestration order be made against the estate of Pasquale Cufari.

3. The costs of the applicant of and incidental to the application be taxed and paid from the assets of the estate of Pasquale Cufari in accordance with the provisions of the said Act.

4. The costs and expenses of the trustee, Mr Huppatz, of and incidental to the composition and this application be taxed and paid in accordance with the provisions of the Bankruptcy Act 1966.
   Date of commission of act of bankruptcy : 1 July 1991.
   No.76 of 1991
   1. The composition accepted by special resolution at a meeting of the creditors of Silvana Cufari held on 2 August 1991 be declared void, pursuant to s.222 of the Bankruptcy Act 1966.

5. A sequestration order be made against the estate of Silvana Cufari.

6. The costs of the applicant of and incidental to the application be taxed and paid from the assets of the estate of Silvana Cufari in accordance with the provisions of the said Act.

7. The costs and expenses of the trustee, Mr Huppatz, of and incidental to the composition and this application be taxed and paid in accordance with the provisions of the Bankruptcy Act 1966.
   Date of commission of act of bankruptcy : 1 July 1991.
   NOTE: Settlement and entry of order is dealt with in Bankruptcy Rule 124.8

JUDGE1

On 2 August 1991 at a meeting of creditors of Pasquale Cufari and

Silvana Cufari ("the debtors") a special resolution was passed by a majority in number and at least three-fourths in value of the creditors there present to accept a composition offered by the debtors. The Deputy Commissioner of Taxation ("the applicant"), by the amended application, seeks to have the composition set aside, declared void, or terminated, and sequestration orders made against the debtors.

1. On 1 July 1991 the debtors signed authorities pursuant to sub-s.188(1) of the Bankruptcy Act 1966 ("the Act") authorising a registered trustee, James Huppatz, to call meetings of their joint and separate creditors, and to take over the control of their property. On the same day each debtor gave the trustee a signed statement of affairs. The statements of affairs asserted that the debtors had unsecured creditors of their joint estate in the amount of $71,859, unsecured creditors of the separate estate of Pasquale Cufari in the amount of $308,302, and unsecured creditors of the separate estate of Silvana Cufari of $74,000. The debtors asserted that they had no joint or separate assets. The composition proposed was a lump sum payment by the debtors of $30,000 to be paid as to $15,000 on or before 31 May 1992 and as to the balance of $15,000 before 1 April 1993 to the trustee in full satisfaction of their joint and separate debts, such sum to be applied first in payment of the costs, charges and expenses of the trustee and then in a pro rata distribution equally to all joint and separate creditors.

2. The statements of affairs disclosed that the debtors had during the past five years carried on business in partnership as fruit growers.

3. Included amongst the unsecured creditors in the statement of affairs of Pasquale Cufari was the Australian Taxation Office to whom it was said $68,500 was due for "assessments" the date of which was not disclosed. In the statement of affairs of Silvana Cufari the sole unsecured creditor was said to be the Australian Tax Office to whom $74,000 was owing for income tax. The statement of affairs stated that this liability had been "contracted" in "1990/1991". As the statements of affairs were signed on 1 July 1991 the amount of $74,000 shown in Silvana Cufari's statement would appear to be an estimate of taxation, for which an assessment would later issue, for the year ended 30 June 1991. As a matter of fact the only outstanding assessments of taxation against the debtors as at 1 July 1991 were in the sum of $1,615.18 assessed against Pasquale Cufari and in the sum of $7,994.95 assessed against Silvana Cufari.

4. Meetings of creditors were duly called for 10.45 a.m. on Friday 2 August 1991 at Mildura in the State of Victoria, being close to the place of residence of the debtors. Although separate meetings of creditors were called for each of the debtors, a combined meeting occurred as most of the creditors claimed to be creditors of the joint estate. At the meeting, a controlling trustee's report on the estates of the debtors, which had been filed in the registry pursuant to s.189A, was tabled. The report disclosed that the debtors had been directors and shareholders of three companies. The debtors alleged that they had got into financial difficulties as a result of the activities of the companies, particularly one of them. That company had been engaged in the acquisition of real estate, subdivision, and the erection of units. The report disclosed that on or about 1 September 1990 sales of assets to Karcourt Pty Ltd, a company in which the parents of Pasquale Cufari were directors and shareholders, had taken place namely,
   

house property at Redcliffs from Pasquale Cufari for $400,000 a motel and units at Mildura from one of the companies for $150,000

a fruit block at Redcliffs from another of the companies for $100,000.

The report contained further information about the sales and the application of the purchase price to discharge debts due to a bank, and then continued:

"(d) The transfer of the property by P. Cufari may, in the event of bankruptcy or a Deed of Assignment be voidable under Section 120 of the Bankruptcy Act in that the consideration was inadequate.

However I suspect that it would be unlikely that a Court would set aside this transaction. In any event it must be remembered that the furniture is probably exempt property (not available to creditors in bankruptcy or a Deed of Assignment).

The transfer may be voidable under Section 121 of the Bankruptcy Act if it could be proven that there was intention to defeat or defraud the creditors. I have at this stage neither the power nor the opportunity to carry out sufficient investigation to enable me to form an opinion as to whether it is voidable.

(e) A Trustee in bankruptcy or a Deed of Assignment would have no right to interfere with the sales by the companies."

The controlling trustee's report concluded that:

"(a) The sum of $30,000 which will be made available to creditors if the Composition is accepted will not be available to creditors in a Deed of Assignment or Bankruptcy, although in bankruptcy the Trustee may be able to obtain contributions from the debtors future income.

(b) The debtors do not appear to have divisible property which would be available to creditors in a Deed of Assignment or a Bankruptcy. However, in a Deed of Assignment or a Bankruptcy the Trustee could investigate the transfer of the property of P. Cufari to Karcourt Pty. Ltd. and it may be that some funds could be recovered for the benefit of the creditors of P. Cufari."

1. The applicant was not represented at the meetings of creditors. Resolutions accepting the composition in the estate of each of the debtors were passed by twelve creditors admitted to vote in amounts totalling $185,304. Two creditors admitted to vote in amounts totalling $42,971 voted against the resolutions. The combined meeting also passed an ordinary resolution that the debtors "arrange for a guarantee of the payment of $30,000 and that if the guarantee is not provided within seven days the acceptance of the composition is void". All creditors present voted in favour of that resolution. A guarantee was subsequently given by Pasquale Cufari's father.

2. It has been established on the hearing of this application by affidavit evidence from an officer employed by the applicant that early in July 1991 the applicant completed audits of the affairs of the debtors. On 22 July 1991 amended assessments of income tax in respect of the financial years ended 30 June 1987, 1988 and 1989 were issued for an aggregate sum of $458,122.82 against Pasquale Cufari. On 30 July 1991 amended assessments of income tax for the same years were issued for an aggregate sum of $486.920.43 against Silvana Cufari. Upon the issue of these amended assessments, the amounts stated therein became debts due which would have been provable debts in relation to the composition if and when accepted at the meetings of creditors on 2 August: see Clyne and Anor v. Deputy Commissioner of Taxation and Anor (1981) 150 CLR 1 at 16-17. The creditors present at the meetings of creditors were not aware of these assessments.

3. On 20 August 1991 the amounts due under the amended assessments issued on 22 and 30 July 1991 respectively were reduced by credit assessments for each debtor for the financial year ended 30 June 1990. Following the issue of the further assessments the amount due to the applicant by Pasquale Cufari was $301,037.82 and by Silvana Cufari was for $315,997.93.

4. It is a matter of contention between the parties whether the evidence establishes that the debtors were aware of the amended assessments before the meeting of creditors. The applicant asserts that as a matter of probable inference they were aware of the amended assessments, or at least those issued in respect of Pasquale Cufari. The debtors contend that the probable inference is that they were not informed of the amended assessments until 5 August 1991, the day on which it is established they signed for registered postal items at Redcliffs in the State of Victoria.

5. The non-attendance of the applicant at the meetings of creditors was explained by the evidence of Mr Zafiriou. I accept his explanation. The investigation of the affairs of the debtors prior to the issue of the amended assessments in July 1991, were being conducted by the audit section of the Moonee Ponds branch of the Australian Taxation Office. The notices calling the meetings of creditors were first received by the Australian Taxation Office branch located at 350 Collins Street, Melbourne on 25 July 1991. The notices were redirected internally to the Victoria North branch of the Australian Taxation Office where Mr Zafiriou was employed. The recovery of the outstanding tax was under his supervision. He did not receive the notices until about 9.30a.m. on 2 August 1991. He immediately advised his manager of the notices, but it was their view that they could not arrange for anyone to attend the meeting on the applicant's behalf (there being some four hours travelling time involved between Melbourne and Mildura). Mr Zafiriou did not attempt to ring the controlling trustee as he realised that he would not be in his office in Adelaide, the address of which appeared on the notices of meeting. Mr Zafiriou did not attempt to ring the Grand Hotel in Mildura where the meeting of creditors was to be held.

6. Mr Zafiriou attempted to contact the controlling trustee by telephone on Saturday 3 August 1991, but did not succeed in communicating with him until Monday 5 August 1991. Mr Zafiriou was then informed that special resolutions had been passed accepting the composition. In that week Mr Zafiriou instructed the Australian Government Solicitor to act. On 20 August 1991 the minutes of the meeting of 2 August 1991 were received by Mr Zafiriou from the controlling trustee to whom a request had been made to supply them. On 2 September 1991 Mr Zafiriou received a circular to creditors advising of the acceptance of the composition.

7. The applicant filed an application seeking an order under s.239 of the Act to set aside the composition in the Victorian registry of this Court on 10 October 1991. It transpired that the composition had been filed in the Adelaide registry, and a few days elapsed before the proceedings were instituted in this registry.

8. Sub-section 239(2) provides that if the Court considers the terms of the composition are unreasonable or are not calculated to benefit the creditors generally or that for any other reason the composition ought to be set aside, the Court may order that it be set aside and, if it thinks fit, may forthwith make a sequestration order. It is provided by sub-s.239(1) that an application to Court for an order setting aside the composition on any of these grounds shall be made within 21 days from the date on which the special resolution accepting the composition was passed. That time limit expired on 23 August 1991, and the application was therefore filed almost seven weeks out of time.

9. Following directions hearings when the issues raised by affidavit material then on file were discussed, the application was amended so as to seek an order pursuant to s.33 of the Act extending time for compliance with sub-s.239(1), and to seek in the alternative, orders either under s.242 terminating the composition or under sub-s.222(4) declaring the composition to be void.

10. At trial, the primary argument presented by counsel for the applicant sought an order pursuant to sub-s.222(4). The secondary position contended for was that the composition should be set aside under s.239. Argument was not presented in support of the alternative claim under s.242. Section 222 in its application to compositions, and ss.239 and 242 deal with different situations. The sections are supplementary, not overlapping alternatives for relief. Section 222 has application where the composition does not comply with the provisions of Part X. Sub-section 239(1) has application where the formal requirements of Part X have been complied with but the composition ought to be set aside on one or other of the grounds contained in sub-s.239(2). Section 242 is concerned with the situation in which no objection is taken to the composition itself, but circumstances have arisen which satisfy the Court that the composition should be terminated: see Re Gye and Perkes; Ex Parte McIntyre; (1989) 89 ALR 460 per Hill J. at 476-477, Re Doukidis; Ex Parte Consolidated Constructions Pty Ltd, Toohey J. 26 June 1985, unreported, and Musolino and Anor v. Sidoropolous and Others (1991) 101 ALR 235 at 246.

11. In seeking to proceed under s.222 the applicant avoids the need to obtain an extension of time within which to commence the application. A time limit is provided in sub-s.222(6) in that an application must be made before the final payment has been made under the composition, but that event had not occurred in the present case. However an order under sub-s.222(4) will not be made unless the Court is satisfied that it is in the interests of the creditors to declare the composition void: sub-s.222(5). There is no requirement that the Court should be so satisfied before making an order under s.239.

12. Sub-section 222(4) reads:
    

"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."

1. It is not suggested by counsel for the applicant that the matter falls within para.222(4)(a) as the debtors did not answer questions at the meeting of creditors. It is contended that the matter falls under para.222(4)(b). The exercise of the power of the Court under that paragraph is strictly confined to cases where there has been an omission of a material particular, or the inclusion of an incorrect and material particular, in the statement of affairs given under sub-s.188(2). The statements of affairs were given by the debtors on 1 July 1991, and copies of those statements were sent out to the creditors with the notices of meeting on about 16 July 1991 in compliance with sub-s.194(2A). At that time none of the amended assessments of income tax had issued.

2. A particular is "material" within the meaning of para.222(4)(b) if it is a particular which would be relevant to and might be likely to affect the making of a decision by the creditors: Re Segal; Lensworth Finance Ltd v. Segal and Ward (1975) 9 ALR 154, Beard v. Prestige Baking Industries Pty Ltd and Anor (1981) 36 ALR 307 at 319 per Fox J., 336-7 per Lockhart J. and 342 per Sheppard J. The test is an objective one. The sub-section does not require that a mis-statement be made "knowingly". In Re Segal; Lensworth Finance Ltd v. Segal and Ward, Riley J. said at 157 that it is essential that the information contained in the statement of affairs be "full and correct: the creditors are entitled to all available information about the debtors' conduct, trade dealings, property (and) affairs before they make their decision".

3. In a bankruptcy, a liability to pay income tax imposed by an assessment issued after the date of the bankruptcy, is, in respect of income earned before the date of the bankruptcy, a liability which constitutes a provable debt. This follows from the wording of sub-s.82(1) of the Act which provides:
   

"Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he may become subject before his discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his bankruptcy".

However, it would appear that the position is different in relation to debts provable under a Part X composition. Sub-section 243(1) of the Act provides that s.82, among other sections, applies "with the prescribed modifications (if any)" in relation to a composition as if a sequestration order had been made against the debtor on the day on which the special resolution accepting the composition was passed, and the trustee of the composition were the trustee in the bankruptcy. Rule 84 of the Bankruptcy Rules prescribes modifications to s.82. Sub-section 82(1) is omitted, and the following sub-section substituted:

"(1) Subject to this Division, all debts and liabilities to which a bankrupt was subject at the date of bankruptcy are provable in his bankruptcy."

The provisions of sub-s.82(8) which define "liability" are also modified in their application to compositions. Regulation 84 substitutes a new definition of "liability". The modified definition excludes para.82(8)(b) and modifies para.82(8)(c) of the Act. As modified, "liability" in the case of a composition includes:

"(a) ...

(b) an express or implied engagement, agreement or undertaking to pay, or capable of resulting in the payment of, money or money's worth, whether the payment is -

(i) in respect of (an) amount - fixed or unliquidated; or

(ii) in respect of the manner of valuation - capable of being ascertained by fixed rules or only as a matter of opinion."

It may well be the case that moneys due and payable under an assessment of income tax which is issued after the passing of a special resolution accepting the composition in respect of income earned before the date of the special resolution is a debt payable under an implied agreement to pay: The State of Victoria v. Hansen (1960) VR 582, Federal Commissioner of Taxation v. Gosstray (1986) VR 876, and Thomas v. Deputy Commissioner of Taxation (Vic.) (1987) 80 ALR 70. However, that issue was not argued in the present case and it is unnecessary to decide the point as the liability for taxation upon which the applicant relies had arisen on the issue of the amended assessments on 22 July 1991 in the case of Pasquale Cufari and on 30 July 1991 in the case of Silvana Cufari. The aggregate amounts for which those amended assessments issued were debts due before the passing of the special resolution accepting the composition.

1. Even if liability for income tax arising on the issue of assessments after the acceptance of a composition are not debts provable in the composition, it is, in my opinion, necessary for a debtor in preparing a statement of affairs which makes a full and correct disclosure of information about his or her affairs to include an estimation of any liability for income tax which might arise before the acceptance of the composition. If a liability for income tax arising on the issue of an assessment after the composition is accepted is a debt provable in the composition, a fortiori, an estimate of prospective liability under assessments still to be issued in respect of income earned before the proposed composition to be considered by the creditors must be included in the statement of affairs. In the present case it appears that an attempt was made in each statement of affairs to estimate these liabilities, by including in the amount shown as the unsecured debts due to the Australian Taxation Office, income tax which would become payable on income received during the year ended 30 June 1991. But as matters turned out, those estimates proved wide of the mark by a very great degree.

2. The amended assessments issued on 22 July 1991 and 30 July 1991, as subsequently further amended and reduced by the amended assessments issued on 20 August 1991, had the effect of increasing the combined indebtedness of the debtors to the applicant from approximately 30% in value of the aggregate debts disclosed by the debtors in the statements of affairs to over 65%. Moreover, the increased liability for taxation would have the effect of watering down the dividend under the composition likely to be paid to unsecured creditors. Whereas the proposal constituted by the papers sent to creditors with the notice of meeting, and considered by them at the meeting, anticipated an eventual dividend of approximately 5.6 cents in the dollar (after allowing the anticipated fees of the trustee, disbursements and fees payable under rule 179(4)), the likely dividend would be reduced to approximately 2.6 cents in the dollar by the additional tax liabilities.

3. Had the creditors been informed about the extent of the outstanding liability for income tax for the years ended 30 June 1987, 1988 and 1989 many questions would have arisen as to the source of the income to which the tax liability corresponded, as to the whereabouts and disposal of that income, and as to the dissipation of assets. In my opinion the failure to include an estimate for income tax liability close to the actual liability later revealed amounted to an omission of a material particular from each of the statements of affairs. The estimated amount stated grossly underestimated actual liability. For the same reason, the statements of affairs also included "an incorrect and material particular" by including estimated figures which were far too low. In my opinion the applicant has established the requisite grounds in para.222(4)(b) so as to enliven the power of the Court to declare the composition to be void.

4. The question then arises whether the Court is satisfied that it would be in the interests of the creditors to declare the composition void: sub-s.222(5).

5. Counsel for the debtors argued that the Court should not be so satisfied. Counsel argued that the Court should form the view that no financial benefit would accrue to the creditors by declaring the composition void. The debtors assert that they have no assets at all. The composition involved borrowing $30,000 from a third party, and this guaranteed at least a small dividend to the creditors which could be lost if the composition did not proceed. Moreover, expenses involved in a bankruptcy and subsequent enquiry by way of examination of the debtors and others concerning dispositions of property prior to the bankruptcy would add greatly to the expense of the administration and deplete the assets available for distribution. The creditors present at the creditors' meeting were made aware of the possibility that there may have been transactions which could be avoided as settlements under s.120 or fraudulent dispositions under s.121 but had nevertheless voted in favour of the composition. These creditors should not have the assurance of at least a small dividend taken away. It was said that to suggest that the creditors would be better off if the estates of the debtors were administered in bankruptcy was to assert no more than a mere speculative possibility.

6. In Augustyn v. Putnin (1988) 83 ALR 514 Jenkinson J. at p 515 expressed the opinion that the satisfaction required by sub-s.222(5) is not limited to satisfaction that the making of the declaration will afford an economic advantage to creditors. His Honour considered that the words of the sub-section were apt to comprehend satisfaction that the making of the declaration will afford a prospect or possibility of economic advantage to creditors sufficient to justify the conclusion that it is in their interests to make the declaration. French J., at p 522, with whom Spender J. agreed, after referring to Re Williamson and Anor; Ex Parte Wearne and Others (1980) 31 ALR 598, Re Levy and Others; Ex Parte Scholefield Goodman and Sons Ltd (1980) 50 FLR 99, Re Beames; Ex Parte Beneficial Finance Corp. Ltd (1985) 7 FCR 216, Re Doukidis; Ex Parte Consolidated Constructions, supra; and Re Moulton; Ex Parte Beneficial Finance Corp. Ltd (Federal Court 20 December 1984, unreported) where the requirement of sub-s.222(5) had been discussed, concluded that "it is sufficient that there be a real possibility of financial benefit".

7. In the present case the amount likely to be paid under the composition is low. The payment of that amount is deferred and is to be paid in two instalments. The payment is not secured, although it is guaranteed by another person. There is the possibility that one or both instalments may not be made which would lead to the termination of the composition, perhaps as late as mid-1993. The extent of this possibility cannot be gauged but it is not one that can be put entirely to one side. The contingency that the composition may not be carried out, and the fact of deferred payment, reflect on the present value of the composition to creditors. The value of the composition to them is very little.

8. The amended assessments of income tax for the years ended 30 June 1987, 1988 and 1989 are subject to objection by the debtors, but the notices of objection do not argue that the debtors are not liable to any additional tax or penalties. The grounds contend that the amended assessments should be reduced. On any view of the facts questions remain as to the whereabouts and disposal of substantial income and assets in the years immediately preceding the composition. Furthermore, the apparently high income of the debtors in the past raises a question as to their ability to make contributions to a trustee in bankruptcy under sub-s.131(2) of the Act. In my opinion the evidence adduced by the applicant establishes a real possibility of financial benefit to the creditors if the affairs of the debtors are investigated through an administration in bankruptcy. Whilst it cannot be postulated that the creditors will necessarily be financially better off on an administration in bankruptcy the material before the Court satisfies me that it would be in the interests of the creditors that there be a full investigation of the debtors' affairs. I am satisfied that the requirement of sub-s.222(5) is met.

9. Counsel for the debtors further argues that even in the event that the Court is satisfied that the pre-requisites of sub.ss.222(4) and (5) are fulfilled, the Court in the exercise of its discretion, should not declare the compositions void. It is argued that as the applicant had notice of the creditors' meeting (although very short), and did not take steps to intervene by contacting the trustee and arranging for the meeting of creditors to be informed about the amount of income tax due from the debtors, or for the meeting to be adjourned to enable the applicant to be represented, the applicant should not now be allowed to complain that it "does not like" the composition. Proceedings in bankruptcy or under Part X involve the public interest as well as the direct financial interests of creditors: Chiragakis v. Deputy Commissioner of Taxation (1986) 68 ALR 527 at 534 per Lockhart J. with whom the other members of the Full Court agreed. The dispositions of property disclosed by the controlling trustee's report, as supplemented by the affidavit of the controlling trustee tendered as part of the debtors' case in opposition to the orders sought by the applicant, in my opinion call for enquiry as do the assertions of the debtors that they have no joint or separate assets notwithstanding their high income in recent years which attracted the amended assessments for income tax.

10. The explanation for the non-attendance of the applicant at the meeting of creditors shows that the non-attendance was not a matter of choice. Had the applicant been represented I am satisfied that the applicant would have voted against the acceptance of the composition, and the value of that vote would have resulted in the rejection of the composition. The applicant is the biggest creditor of the debtors and weight should be given to the opposition of the applicant to the compositions. In my opinion the discretion of the Court should be exercised in favour of declaring the compositions void.

11. If I am wrong in my view that the conditions of sub-s.222(4) are fulfilled, I am also of the opinion that the compositions should be set aside under s.239. The first question on the application under s.239 is whether time should be extended to permit the application to be made beyond the 21 day time limit prescribed. The power to make an order extending time is derived from para.33(1)(c) of the Act. It is conferred in broad terms and is not dependent upon proof of special circumstances although it is necessary for an applicant to satisfy the Court that in all the circumstances of the case an extension of time is just: Re Doukidis; Ex Parte Consolidated Constructions Pty Ltd, supra; and Raschilla v. Gulluni and Anor (1987) 14 FCR 57. The reasons which have led me to the conclusion that it would be in the interests of the creditors that the compositions be declared void and that the discretion to do so should be exercised in favour of the applicant lead also to the conclusion that it would be just in the circumstances to extend time. The extension of time sought is not great. No event occurred during the period of delay which would now bring about hardship to the debtors or the creditors if the late application under s.239 were permitted to proceed. In my opinion this is a proper case to extend time.

12. The fact that the actual assessments were not known to the creditors at the creditors' meeting is a compelling reason why the compositions ought to be set aside. The fact of the amended assessments for income tax was a highly material consideration. The creditors proceeded on a misapprehension of the facts. Even if the debtors were unaware at the time that the amended assessments had been issued, the fact remains that the creditors misapprehended the debtors' true financial position. Even if that misapprehension came about through the ignorance of the debtors in my opinion the compositions should nevertheless be set aside.

13. In the material before the Court the controlling trustee says he communicated with the Australian Taxation Office in Melbourne prior to preparing the controlling trustee's report, and was not informed that substantial amended assessments were about to be issued. The explanation probably lies in the fact that the controlling trustee spoke with an officer in the compliance branch whose concern was directed to outstanding tax returns that were required to be filed. But the determination whether a composition is one calculated to benefit the creditors generally, or whether there is any other reason why the composition ought to be set aside, does not turn upon the extent of enquiries made by a debtor or by the controlling trustee in preparing the material put before the creditors. The determination turns on the quality of the composition and on the accuracy of the information provided to the creditors.

14. However, the deliberate concealment by the debtors of information from the meeting of creditors, even if the concealment did not fall within the provisions of paras.222(4)(a) or (b), would be a consideration relevant to the exercise of the Court's discretion to set aside the composition if the requirements of sub-s.239(2) are otherwise fulfilled. In the present case the amended assessments in the case of Pasquale Cufari were issued on Monday 22 July 1991. The system of automatic data processing in force in the Australian Taxation Office at that time would ordinarily lead to the postage by ordinary mail of those assessments on the same day in Canberra, and in the ordinary course of post the assessments would have been received by Pasquale Cufari well before the date of the creditors' meeting. The amended assessments in relation to Silvana Pasquale however were not issued until Tuesday 30 July 1991. Although they were probably posted to her that day in Canberra it is quite possible that she did not receive them prior to Friday 2 August 1991. As a matter of probability I find that Pasquale Cufari had received the amended assessments issued on 22 July 1991, but that Silvana Cufari had not received the amended assessments in relation to her income, by the time of the creditors' meeting. As a matter of probability the documents received by the debtors by registered post on 5 August 1991 were not the assessments, but asset betterment statements and explanatory material on which the amended assessments were based. Although I find as a matter of probability that Pasquale Cufari was in possession of the amended assessments prior to the meeting of creditors, the fact of the amended assessments was not disclosed to the creditors or the controlling trustee. It must have been apparent to Pasquale Cufari that the amended assessments were most material to the benefit which creditors would receive from the proposed composition. The fact that he did not make disclosure of the amended assessments is an added factor in favour of the exercise of the discretion so as to declare the compositions void under s.222, or to set them aside under s.239. However, as I have indicated, I would exercise the discretion in the same way even if Pasquale Cufari had not been aware of the issue of his amended assessments when the creditors' meetings were held.

15. The information before the Court is that the debtors were hopelessly insolvent at the date of the special resolutions and remain so. In the circumstances sequestration orders as sought by the applicant should be made against each of the debtors pursuant to the provisions of s.222 of the Act, the date of the relevant act of bankruptcy being 1 July 1991, the date upon which the debtors signed authorities under s.188: see para.40(1)(i).

16. The orders of the Court will be that the composition accepted by special resolution at meetings of the creditors of Pasquale Cufari and Silvana Cufari on 2 August 1991 be declared void under s.222 of the Bankruptcy Act 1966, and that sequestration orders be made against each of them. The costs of the applicant of and incidental to this application shall be taxed and paid from the debtors' estates in accordance with provisions of the Bankruptcy Act. I will hear the parties as to the controlling trustee's costs.