Re Donnelly, W.J.

[1989] FCA 526

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	) QLD Pt X 200 of 1987
BANKRUPTCY DISTRICT OF THE SOUTHERN ) DISTRICT OF THE STATE OF QUEENSLAND )

RE: WENDY JOY DONNELLY

(aka WENDY JOY LEWTHWAITE)

Debtor

EX PARTE:  DEPUTY COMMISSIONER OF TAXATION

Applicant

AND :  WENDY JOY DONNELLY
(aka WENDY JOY LEWTHWAITE)

MINUTES OF ORDER

JUDGE NAKING ORDER:	PINCUS J.
DATE OF ORDER:	25 AUGUST 1989
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

AUSTRALIA

1.    the application be dismissed.

NOTE :  Settlement and entry of orders is dealt with in
Rule 124 of the Bankruptcy Rules.

-8SEPlrlF9 LI

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	) QLD Pt X 200 of 1987
BANKRUPTCY DISTRICT OF THE SOUTHERN	)
DISTRICT OF THE STATE OF QUEENSLAND	)

RE: WENDY JOY DONNELLY

?,aka WENDY JOY LEWTHWAITE)

Debtor

EX PARTE:  DEPUTY COMMISSIONER OF TAXATION

Applicant

AND :  WENDY JOY DONNELLY
laka WENDY JOY LEWTHWAITE)

Respondent

PINCUS J. 25 AUGUST 1989

EX TEMPORE REASONS FOR JUDGMENT

This is an application made by the Deputy Commissioner

of Taxation in respect of wendy Joy Donnelly, also known as Wendy

Joy Lewthwaite. The application seeks orders that a certain deed	of assignment be declared void under 6.222 of the Bankruptcy Act
1966 and that a sequestration order be made against the estate of the assignor.
The most immediately relevant dates are that the deed of assignment was executed on 8 October 1987 and that the application to the Court was made on 14 June 1989. The circumstances, broadly speaking, were that the applicant, being a very substantial creditor, received notice of the creditors' meeting in consequence of which the deed was executed, but the notice did not properly identify the debtor. The reason for that was that there was a mistake in the preparation of the notice, in that it had only one of the debtor's two alternative surnames on the first page and both names on the second page. Counsel for the Deputy Commissioner has suggested that the mistake may have had some design behind it and I can see that is a possibility. I do not think it necessary, however, to reach any conclusion about that; it would not be possible for me to find any deliberate dishonesty on the part of those concerned. MC Squire was called and that suggestion was not put to him.
The few creditors, small in value, who were at the meeting, voted in favour of the deed of assignment. One was executed, and a considerable period of time went by. The Deputy Commissioner applicant was, I think, put out by the circumstances by his receiving the somewhat deficient notice and not having an opportunity to have his say at the meeting. He has brought this application primarily, I should think, because he feels that, as
over the situation than he presently has. the only really substantial creditor, he should have more control
The material is fairly complex, but in the events which have happened it is unnecessary to analyse it in detail. The points taken fall into two groups. The first group relies upon what might be called technical matters, the second upon substantial matt9rs.

The technical matters fall within s.222(1). It is said

that there is doubt whether the deed of assignment was entered into in accordance with Part X and doubt whether it complies with the requirements of Part X. The Court is given power to declare such a deed void under s.222(2), but is not to do so if it is of opinion that the deed complies substantially with the requirements of the Part.

The first point which is taken is that the debtor's

sister, a practising solicitor, although a debt allegedly owing to her was voted at the meeting, was not in fact a creditor. The applicant relies for this on two facts: firstly, that the debtor did not assert that her sister was a creditor at the relevant time, and secondly that the evidence which the debtor has given, to say the least, throws doubt upon the existence of the debt.

There seems to me to be no doubt that the sister did substantial legal work on behalf of the debtor. The debtor's view of the matter was that this was done gratuitously, but human affairs being what they are, it is equally likely that it is assumed to be gratuitous on one side and not on the other. I

prepared to do so, despite the fact that the solicitor's affidavit	could not properly find the alleged debt did not exist, and am not
did not deal with the point. That is, it seems to me, that it would be rather artificial to say that the debtor, who is unrepresented and has conducted her case in the most disorganised way, has failed to rebut the applicant's case on this point. She (I think) believes that the money was not due, but she may be wrong and the solicitor seems to have thought it was due.
The result is that I am not satisfied that there are good grounds under A(a) and (b) of the amended particulars filed on the 25 August. I would add that the defect, if it be one, which is constituted by the uncertain nature of the relationship between the two sisters is not one of a kind which would ordinarily attract the exercise of the Court's discretion under 6.222(2).
The other point which is taken by counsel for the applicant under 6.222 seems to me to have more substance and has occasioned me more concern. Ground A(d) takes the point that the proxies were not in such a form as to permit the appointment of Mr N.G. Halligan as trustee, because he was a partner or employer of proxy holders. It appears to me, and I find, that there has been a breach of 6.199 of the Act in that respect, which gives rise to jurisdiction to declare the deed to be void under s.222(2).
I do not regard the deficiency, although I have described it as technical, as being one which should be lightly overlooked, but I propose to discuss the question of whether the deed should be set aside on that ground at the end of these reasons.
Having now dealt with all the grounds under A, subject to the question of the exercise of discretion to which I have just alluded, I move to B, which is omission of material particulars.
Section 222(4) gives the Court power to declare the deed void if it is satisfied that false or misleading information has been given in answer to a question, or that a material particular has been omitted from the statement of the debtor's affairs. The grounds which are taken by the applicant seem to me, to put it simply, to be in general made out. It is not necessary to deal with them all, however, because two groups of grounds are clearly of sufficient significance to fall within s.222(4) (b).
The first group has one member only and that is that the debtor failed to disclose that three months before the meeting, the Supreme Court of Queensland had made an order restraining disposition of the debtor's assets. As I see it, the disposition which was constituted by the deed of assignment was a breach of that order. If that be not so, nevertheless the possibility that it was a breach of the order was something which the creditors were entitled to take into account and it is claimed, correctly in my opinion, that the making of the order was a material particular.

The second group consists of matters set out in grounds

( e ) , (f), (g) and (h) of B of the particulars, and they relate to

undisclosed interests in securities over real property. This part of the case is very.complicated, but it is enough to say that there was a failure to disclose. I did not find the debtor's

account of her financial affairs particularly convincing. For example, the assertion she made that she purchased a massage parlour, innocent of its character, and then proceeded to run it for some time doqs not strike me as extremely plausible.

The applicant has therefore satisfied me that there is ground for declaring the deed void under s.222(4). The question which arises under B, however, is whether or not the Court is able to make an order, in view of s.222(5), which reads as follows:

"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 i t is satisfied that it would be in the interests of the creditors to do so."

The difficulty is to find a significant advantage to the creditors in setting the deed aside. One sort of advantage which may commonly be relied on is related to the problem of attacking pre-insolvency transactions. Here, there is a clear suggestion in the applicant's case that, in the months preceding the deed of assignment, transactions were entered into by the debtor which were designed to make it harder for the creditors, or a trustee,

for them, to get hold of property whch was rightfully hers.

To take an example, in the affidavit of Me Dyki, it is
said that in 1986 transactions were invested or lodged in

interest-bearing deposits which have disappeared, and Mr Dyki says

he does not know where the money has gone, and of course the	applicant would like to know that.
It may be that transactions of that sort, which took place shortly before the deed of assignment, might be attacked under 6.120 or 6.121. Section 121 has no time limit. Section 120 has two time limits: one of two years, and another of five years. Section 122 has, of course, a shorter time limit.
Mr Hack, for the applicant, has also referred me to the relation back provisions, which have limits of their own. The point, however, is that, whichever of these provisions one is looking at, the time limits will be more burdensome if the deed of assignment is set aside and a sequestration order made, than they would have been, if the deed of assignment dated October 1987 is let stand.
Paced with this difficulty, the applicant made, as I understood the argument, two submissions. One was that it did not matter very much because in any event the time limits were not going to present a problem. The second one was that the trustee might not be able to be relied on to chase pre-insolvency transactions.
As to the first point, I remain unconvinced that the problem of time limits is to be ignored. They commonly do create difficulties for trustees seeking to undo transactions. The tangled affairs of the debtor are such as to make it, in my view, quite possible that if the trustee is stimulated by funds, he may be minded to take proceedings to set aside transactions which occurred in 1986 or 1987, or perhaps even in 1985. The task of the trustee in doing so is inevitably more difficult if the
foundation date is a sequestration order made today on an application filed 14 June 1989.
As to the trustee, I have not seen anything in the papers to suggest that he has in any way behaved improperly. It was suggested on behalf of the applicant that some inference could be drawn against him, arising out of the circumstances of his appointment; I would have thought that there should be some more specific attack made on the trustee if, in effect, his unsuitability is to be used as a ground of contending that there is some advantage for the creditors in setting the deed aside. It is a point of a kind that needs to be taken in the evidence, and not put up by way of uncertain inference in the course of address.
The authorities on s.222(5) are not numerous, but I know of none, nor have I been referred to any by counsel, which deal with this particular point: that is, whether or not a substantial difference in date can be overriden by the possible advantage of having a new trustee.
What the section says, however, is that I must be satisfied - which I take it means positively satisfied - that it
would be in the interests of the creditors to set aside the deed.
I am far from satisfied that that is so, and, indeed, I see a risk
that if the deed is set aside, then the creditors will suffer a disadvantage.
Some reference is also made to the possibility that the debtor might not answer up fully, if examined. I have taken that into account, but that is not a special matter; it is an inherent difference between deeds of assignment and bankruptcy. That is, the fact that the debtor's obligation to answer on examination is less under a deed of assignment cannot be more than a peripheral matter.
The result is that I am not satisfied of the matters in s.222(5), and I decline to act under s.222(4).
The ultimate question, then is whether or not I should exercise my discretion under s.222(2) in favour of the applicant. The ground upon which I am asked to do so, namely the deficiency in the proxies, has produced the result that a trustee has been appointed who might not have been appointed otherwise. In this sort of situation, one might have expected that had the deficiencies in the proxies been noticed, a suitable trustee could, without any difficulty, have been obtained. The suitable trustee would have suffered, from the point of view of the present applicant, the same disadvantages as does the existing one, as a trustee in whose appointment he has had no say.
I am not of the opinion that under s.222(3) I should refuse to make an order on the ground that there is substantial compliance. It appears to me that the non-compliance with what is contemplated by 8.199 is of sufficient importance to make it wrong to hold that there has been substantial compliance. Nevertheless, the defect is not one of such magnitude as might be encountered in
other cases; it is not a deficiency of very great importance.
I would, however, have beep inclined to make an order under s.222(2) in favour of the applicant, but for a circumstance that seems to me to be of some importance, and that is the delay which has occurred. I am aware that the applicant and his colleagues have an extremely difficult and complex statute to administer; that ;they have many calls on their resources, and that
this matter was probably not high on their agenda. It might not have ever looked promising, as a means of augmenting the funds of the Commonwealth. Nevertheless, unless one takes the view that the Deputy Commissioner is a specially privileged creditor, it must go against him substantially that a period of over 18 months elapsed between the events of which complaint is made and the institution of proceedings in this court. No satisfactory explanation of the delay has been tendered, and the delay is such as to satisfy me that it would be wrong to exercise my discretion in favour of the applicant.
The result, therefore, is that while I hold that there was deficiency in the execution of the deed, and I hold that there were non-disclosures under s.222(4), I am not entitled to act on the latter, on these facts, and in my discretion I decline to act on the former.

The application will be dismissed.

:  re-tlfv that this and the fl8n.e preceding

r - -	,7-2	a true copy of the reasons for
1 , ' - .c,:	hcrein of His Honour

l :. Ju,iice Pincus //l! 1..

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