Re David Brian Sorensen & Anor v Ex Parte W.C. Pronger & Sons Ltd

[1985] FCA 70

Re: DAVID BRIAN SORENSEN and JENNIFER LOUISE CRABB
Ex Parte: W. C. PRONGER & SONS LTD
Nos. QLD Part X96 and X97 of 1983
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND
Spender J.

CATCHWORDS

Bankruptcy - Deeds of Assignment - application for declarations that deeds void - whether a statement of the separate affairs of the debtor submitted - discretion.

Bankruptcy Act 1966 ss.187A, 195, 222

Bankruptcy Rules, Rule 100E

HEARING

BRISBANE
#DATE 8:3:1985

ORDER

1. The application be dismissed.

2. There be no order as to costs.

JUDGE1

The applicant, W.C. Pronger and Sons Ltd seeks declarations that two Deeds of Assignment, one made by David Brian Sorensen as debtor and Peter Hoyt Chave Commins as trustee dated 21 November 1983, and the other made by Jennifer Louise Crabb as debtor and Peter Hoyt Chave Commins as trustee dated 21 November 1983, are void.

1. The ground of the application in each case is that the debtor did not submit a statement in writing verified by statutory declaration of his separate affairs in accordance with s.195(1A) of the Bankruptcy Act 1966 ("the Act") and the statement of joint affairs did not contain the matters required to be contained therein by s.195(2) of the Act.

2. The applicant seeks sequestration orders against the estate of each of the debtors.

3. The debtors traded under the firm name of "D.B. & J.L. Developments", and the applicant had been a creditor of the firm for $6481.81 since 26 May 1983. On 8 October 1983 the applicant obtained judgment in the District Court of Queensland against the debtors for that amount plus costs to be taxed.

4. On 21 November 1983, a meeting of the debtors' creditors was held at 162 Bottlebrush Avenue, Noosa Heads in Queensland. The only statement of affairs which was submitted to that meeting was a document headed "David Brian Sorensen and Jennifer Louise Crabb, trading as D.B. & J.L. Developments and Noosa Sun Coast Upholstery, Statement of Affairs as at 21 November 1983". That document had been signed by each of David Brian Sorensen and Jennifer Louise Crabb. In addition there were two separate statutory declarations. Miss Crabb's declaration states -
   
   

"I, JENNIFER LOUISE CRABB of Corsair Court, Corsair Crescent, Sunshine Beach, Queensland 4567, upholsterer, do solemnly and sincerely declare that the Statement of Affairs annexed to this statutory declaration and consisting of sheets numbered 1 to 7 (inclusive) contains to the best of my knowledge and belief, a true and complete statement of my affairs as at the Twenty-First day of November, 1983."

A statutory declaration by Mr Sorensen was in identical terms, save that his occupation was described as "Plumber".

1. At that meeting, creditors representing some $35,000 of the total debts of some $40,000 were represented. After considering the Statement of Affairs that I have described, the creditors considered the proposal that the debtors be required to execute Deeds of Assignment and unanimously resolved by a special resolution that
   
   

"David Brian Sorensen and Jennifer Louise Crabb execute Deeds of Assignment pursuant to Part X of the Bankruptcy Act and that those deeds be in accordance with those attached to and forming part of these minutes".

Each of those deeds recited that

"The debtor conveys and assigns to the Trustee all his divisible property within the meaning of Part X of the Bankruptcy Act 1966 UPON TRUST to deal with the same in accordance with Part X of the Act for the benefit of the creditors of the debtor. ..."

1. Part X of the Bankruptcy Act 1966 deals with arrangements with creditors without sequestration.
   
   

Section 187A(1) provides:

"The provisions of this Part apply, subject to such modifications and adaptions (if any) as are prescribed by the rules, in relation to joint debtors, whether partners or not."

This provision inserted by s.101 of the Bankruptcy Amendment Act 1980 is addressed to some of the difficulties referred to by White J. in Re: Forbes (1974) 24 F.L.R. 87. Sub-section 195(1) provides:

"The debtor shall, unless prevented by illness or other sufficient cause, attend the meeting and shall submit to the creditors at the meeting a statement in writing, verified by statutory declaration, of his affairs."

Rule 100E of the Bankruptcy Rules provides:

"The following modifications of Part X of the Act are prescribed for the purposes of section 187A of the Act:

...

(b) section 195 of the Act is modified by inserting after sub-section (1) the following sub-section:

'(1A) Joint debtors shall submit both a statement of their joint affairs and a statement of the separate affairs of each debtor'."

Sub-section 195(2) provides:

"The statement of the debtor's affairs shall specify his assets and liabilities and shall include -

(a) in respect of each asset - particulars of the asset, including its estimated value;

(b) in respect of each liability - particulars of the liability, including whether it is secured or not; and

(c) in respect of any liability that is secured - particulars of the security."

Section 222 provides:

"222(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 Registrar, the trustee, a creditor or the debtor may apply to the Court for an order under sub-section (2).

(2) Upon the hearing of an application made under sub-section (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."

1. The document submitted to the meeting on 21 November was one which, on its face, was a joint statement of affairs. In my view there has been a failure by each debtor to submit a statement of the separate affairs of that debtor. The Court, therefore, has power under sub-s. 222(2) to make the declarations sought.

2. However, the statutory declaration of each debtor asserts by implication that each of them had, as at 21 November 1983, no separate assets. In an affidavit by Jennifer Louise Crabb sworn on 6 July 1984 she states at paragraph 7:
   
   

"I respectfully request that the application by W.C. Pronger & Sons Ltd., be set aside as I believe that the preparation of a joint Statement of Affairs was accurate because we had at the 21st November, 1983 no separate assets or liabilities and because we have not omitted material particulars or included an incorrect and material particular in the Statement of Affairs and the Statement of Affairs was prepared to the best of our knowledge and belief."

Mr Sorensen has sworn an affidavit swearing to the correctness of the facts set out in Miss Crabb's affidavit.

1. There is no suggestion of misconduct or non-disclosure in the material before me and I am satisfied that no creditor has been misled. In particular, I am satisfied that the creditors at the meeting would not have acted differently had there been a statement of separate affairs of each debtor before the meeting. I believe it would not be in the interests of creditors to declare the deeds of assignment void. I am satisfied that pursuant to those deeds the affairs of the debtors are in sound hands and, on the material before me, I have no doubt that the usual duties of trustees in relation Part X Deeds of Assignment will be efficiently discharged.

2. The fetter imposed by sub-s. (5) of s.222 of the Act on the discretion given by the previous sub-section does not apply to the discretion which is given by sub-s. 222(2). In the exercising of that discretion, I am conviced that there would be no point in making the declarations sought for the reasons I have given. I therefore dismiss the applications.

3. The applicants having failed, the respondent should not be obliged to pay the costs of the applicants. The trustee will be entitled in the usual course of administration to his costs out of the assets of the debtors. As to whether the applicant should pay the costs of the trustee, I accept the correctness of its complaint and have in the exercise of discretion declined to grant its application. I think the appropriate order in all the circumstances is that there be no order as to costs.