Re Dunn, William Robert Ex parte Andrew, William Edward

[1981] FCA 60

Re: WILLIAM RICHARD DUNN
Ex parte: WILLIAM EDWARD ANDREW (1981) 53 FLR 102
No. 93 of 1979/X
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Lockhart J.(1)

CATCHWORDS

Bankruptcy - Part X - application by Trustee of deed of assignment for declaration whether deed is void as it does not bear the seals of the parties - deed executed in New South Wales - New South Wales law deems deed to be sealed in certain circumstances - whether New South Wales law as lex loci contractus and proper law saves deed - discussion of s. 213 (2)

Bankruptcy Act, 1966 (Cth.) ss. 213, 222

Conveyancing Act, 1919 (N.S.W.) s. 38

Bankruptcy - Part X - Application for declaration - Whether deed void because not sealed - Deed executed in New South Wales - Whether New South Wales law deems deeds sealed in certain circumstances - Whether this law applied - Conveyancing Act, 1919 (N.S.W.), s. 38 - Bankruptcy Act 1966 (Cth), ss. 213, 222.

HEADNOTE

The applicant sought a declaration whether a deed of assignment under Pt X of the Bankruptcy Act 1966 was void because it was not sealed by either the debtor or the trustee. The deed was executed in New South Wales. The Conveyancing Act, 1919 (N.S.W.) provides that an instrument which is expressed to be a deed is deemed to be sealed.

Held, that the deed was not void. The Bankruptcy Act required that the deed be sealed. This requirement was satisfied by the deed being deemed to be sealed under New South Wales law, which was the relevant law governing formal validity for this purpose.

HEARING

Sydney, 1981, May 15, 22. #DATE 22:5:1981

APPLICATION.

Application for declaration whether a deed under Pt X of the Bankruptcy Act 1966 was void.

P.D. Urquhart, for the applicant.

Cur. adv. vult.

Solicitors for the applicant: Lobban McNally & Harney.

J.H. TELFER

ORDER

1. It be declared that the deed dated 18 May 1979 and made between William Richard Dunn as debtor and William James Hamilton as trustee being exhibit "A" in these proceedings is not void on the ground that it does not in fact bear the seal of either of the parties thereto.

2. The costs of the applicant of and incident to the application including reserved costs are to be paid out of the property of the debtor assigned under the said deed of assignment.

JUDGE1

This is an application by William Edward Andrew ("the applicant") pursuant to s. 222 (1) of the Bankruptcy Act 1966 ("the Act") for an order declaring whether an instrument purporting to be a deed of assignment under Part X of the Act, executed on 18 May 1979, between William Richard Dunn ("the debtor") and William James Hamilton ("the former trustee") is void on the ground that it was not sealed by either of the parties. In the event of the Court declaring the instrument to be void, the applicant seeks certain consequential orders for the purpose, in effect, of validating it.

The debtor was served with notice of these proceedings. He has not appeared; but his solicitors informed the solicitors for the applicant that the debtor has no objection to the making of any of the orders sought.

The facts may be briefly stated. On 27 April 1979 the debtor executed an authority, pursuant to s. 188, authorising the former trustee to call a meeting of his creditors for the purposes of Part X of the Act and to take over control of his property.

A meeting of creditors was held on 18 May 1979 where a special resolution was passed that the debtor be required to execute a deed of assignment under Part X of the Act; and ordinary resolutions were passed excluding the debtor's household property from the ambit of the deed and appointing the former trustee to be trustee thereunder.

On the same day, the document which is the source of the questions arising for determination in this case, was executed by the debtor and by the former trustee. It reads as follows:-
"BANKRUPTCY DISTRICT OF THE )
< )
STATE OF NEW SOUTH WALES )
No. 93 of 1979 X )
AND THE AUSTRALIAN CAPITAL )
TERRITORY )

DEED OF ASSIGNMENT

THIS DEED made the 18th day of May, One thousand nine hundred and seventy-nine in pursuance of Part X of the Bankruptcy Act, 1966 BETWEEN WILLIAM R. DUNN of 25 Wakeford Road, Strathfield in the State of New South Wales (hereinafter called "the Debtor") of the one part and WILLIAM JAMES HAMILTON of 1 York Street, Sydney in the said State, Registered Trustee of the other part (hereinafter called "the Trustee")

WITNESSETH that:-

(a) The Debtor conveys and assigns to the Trustee all of 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 that Act for the benefit of the Creditors of the Debtor and as to any surplus after paying in full the several debts and liabilities of the Debtor proved under this Deed, together with the costs charges and expenses of or incidental to the execution of the trusts of the Deed (including the remuneration and expenses of the Trustee) UPON TRUST for the Debtor his executors, administrators or assigns; and

(b) the Trustee accepts appointment as trustee of this Deed and the conveyance and assignment of the said property upon the trusts hereinbefore set out.

IN WITNESS whereof the parties have hereunto set their hands and seals.

SIGNED SEALED and DELIVERED by the said)

WILLIAM R. DUNN this day)

(sgd.) W.R. Dunn

May, 1979, in the presence of:- )

(sgd.) Indecipherable

SIGNED SEALED and DELIVERED by the said)

WILLIAM JAMES HAMILTON this day of) (sgd.) W.J.

May, 1979, in the presence of:- ) Hamilton

(sgd.) Indecipherable"

I shall refer to the document as "the deed of assignment"

On 25 March 1980 the former trustee resigned as trustee of the deed of assignment due to an unforeseen conflict of interests which had emerged during the course of his administration, and the applicant was appointed trustee in his place.

The debtor disclosed in his statement of affairs assets worth $11,537.00 and unsecured creditors of $240,937.00. The debtor's assets have been realised and the applicant is holding an amount of $4,707.51 for distribution among the creditors. There remains to be realised 21,626 fully paid 50[ shares held by the debtor in H. C. Sleigh Ltd. Bank of New South Wales claims to hold a security over the shares to secure a debt of $7,908.00. Six creditors have lodged proofs of debt under the deed of assignment.

It recently came to the attention of the applicant that there may be some doubt as to the validity of the deed of assignment because, although signed and attested, it was not in fact sealed by either party; and it was thought that in those circumstances the deed may fall foul of s. 213 (2) which provides that an instrument not under seal, executed by a debtor which, if it had been under seal, would have been a deed of assignment, is void. It was to remove this doubt that the application was made.

Section 213 provides as follows:-
"213. (1) Subject to this Part, a deed of assignment or a deed of arrangement executed by a debtor after the commencement of this Act is void unless -

(a) it is entered into in accordance with this Part; and

(b) it complies with the requirements of this Part.

(2) An instrument not under seal executed by a debtor after the commencement of this Act which, if it had been under seal, would have been a deed of assignment or a deed of arrangement is void.

(3) Subject to this Part, a composition made by a debtor after the commencement of this Act, not being a composition accepted by a special resolution of a meeting of creditors under section 204, is void.

(4) Nothing in this section affects the validity of a composition or scheme of arrangement under Division 6 of Part IV."

Section 213 (1) avoids a deed of assignment or a deed of arrangement unless it is entered into in accordance with or complies with the requirements of Part X. Thus, a deed of assignment or a deed of arrangement must be expressed to be entered into pursuant to Part X and must make provision for a person to be trustee of the deed (s. 214 (1) ); a deed of assignment must provide for the assignment of all the divisible property of the debtor for the benefit of his creditors and must be substantially in accordance with the form in the Fourth Schedule to the Act (s. 214 (2) ).

The form of the deed of assignment in the present case, which appears earlier, substantially follows the form in the Fourth Schedule, so I need not set out that form.

A deed of assignment or a deed of arrangement must be executed by the debtor and by the trustee within twenty-one days from the day on which the special resolution requiring the debtor to execute the deed was passed; and the execution of the deed by the debtor and by the trustee must be attested by a witness (s. 216). These are some of the requirements of Part X which, if not observed, may lead to a deed of assignment or a deed of arrangement being void.

A "deed of assignment" is defined by s. 187 (1) of the Act as:-
". . . means a deed by which a debtor assigns all his divisible property for the benefit of his creditors;"

Thus the definition of a "deed of assignment" says nothing as to what constitutes a deed as such; it assumes the existence of a deed under the general law and then defines a deed answering a particular description as a deed of assignment. Likewise in the case of a deed of arrangement.

A deed is a writing, sealed and delivered by the parties. Formerly it was not essential at law that a deed should be signed as well as sealed, except in certain cases; for example, a power was required to be under hand and seal (Norton on Deeds, 2nd. edn. p. 7; but see Blackstone's Commentaries 4th. edn. Book 11, Ch. 20 p. 258).

The necessity for sealing arose in ancient times when only the clergy and other learned persons could write, and some other means than writing was necessary for illiterate persons to authenticate a document; hence the custom arose of affixing their seals to a document. Sealing is essential; but anything may be used which makes a mark or an impression, even the end of a ruler, provided it is used with the intention of sealing, and the attestation appears to be regular: Norton on Deeds pp. 7-9; Sheppard's Touchstone 8th. edn. pp. 56-57.

"Delivery" is still essential to the validity of a deed; but any act done or word uttered which evidence the intention that the document is to operate as a deed, is sufficient: Norton on Deeds p. 13.

In New South Wales the Conveyancing Act 1919 enacted that every deed shall be signed as well as sealed and attested by one witness, not being a party to the deed: s. 38 (1). The requirement of signing removed any doubt as to whether it was essential. The requirement of attestation altered the law, as previously attestation, although usual, was not strictly necessary.

Sealing is still essential in New South Wales; but it is conclusively presumed if the instrument is expressed to be an indenture or a deed or to be sealed and it is proved to have been signed and attested as required by s. 38: s. 38 (3). Comparable provisions exist in Victoria (Property Law Act 1958 s. 73A); Queensland (Property Law Act 1974 s. 45 (2) ); South Australia (Law of Property Act 1936 s. 41 (4)); and the Australian Capital Territory (Conveyancing Ordinance 1951 s. 38 (3) ). In Western Australia (Property Law Act 1969 s. 9 (2)) and New Zealand (Property Law Act 1952 s. 4 (2) ) sealing is dispensed with except where the party to be bound is a corporation. No comparable provisions exist in the Conveyancing and Law of Property Act 1884 of Tasmania or the Law of Property Act 1925 of the United Kingdom.

I do not read s. 213 (2) as requiring that only an instrument actually sealed is a valid deed of assignment or a valid deed of arrangement. Part X requires that a deed of assignment or a deed of arrangement complies with the requirements of that Part including the requirement that the execution of the deed by the debtor and by the trustee shall be attested by a witness (s.216 (2) ); but those are specific requirements which must be fulfilled if a deed of assignment or a deed of arrangement is not to be void under Part X. Part X presumes the existence of a deed validly executed at law and then imposes specific requirements for the purposes of Part X. A deed may be validly executed at law if, in addition to other requirements, it is in fact sealed or presumed to be sealed by legislation such as the Conveyancing Act 1919 of New South Wales, s. 38 (3).

It would be strange indeed, if a section of the Act (s. 213 (2) ), which was enacted in Australian bankruptcy legislation for the first time in 1966, was to be read as imposing a requirement (in every case, the actual sealing of an instrument) which arose in very early times (soon after the Norman Conquest) to meet the special needs of illiterate persons, and which since 1919 has been progressively rendered unnecessary by modern legislation in most States of the Commonwealth of Australia, the Australian Capital Territory and New Zealand.

I would be loathe to construe the section in this way unless compelled to do so by plain and unequivocal language or manifest purpose.

The question is not without general importance as the affairs of many debtors have been and are being administered in Australia under deeds of assignment or deeds of arrangement under Part X. Although during my years at the Bar of New South Wales and since my appointment to the Bench I have seen many deeds of assignment and deeds of arrangement, I cannot recall one instance where the seal of any party was in fact affixed.

Section 213 is concerned to ensure that the only valid assignment by a debtor of all his divisible property for the benefit of his creditors, or the only valid arrangement of a debtor's affairs with a view to payment, in whole or in part, of his debts, are those made by a deed and, furthermore, by a deed entered into in accordance with and complying with the requirements of Part X.

Likewise, compositions made by a debtor are only valid if they are accepted by a special resolution of a meeting of creditors under s. 204 of the Act.

Exceptions are made in the case of schemes of arrangement or compositions under Division 6 of Part IV of the Act.

Recognising that debtors may seek to assign their property or enter into arrangements of their affairs otherwise than by deed, for example by instruments under hand, s. 213 (2) is intended to prevent such assignments from being effective. It is not a requirement that all deeds must in fact be sealed. Neither the language nor purpose of the section requires this. The sub-section does require that the instrument be sealed; but this may be either by actually bearing the seals of the parties or by a deeming provision of which the New South Wales Conveyancing Act 1919 is an example.

An instrument, executed in New South Wales, expressed to be a deed or to be sealed, which is signed and attested in accordance with s. 38 of the Conveyancing Act 1919 shall be deemed to be sealed. The deed of assignment in the present case is such an instrument. Its sealing is therefore presumed.

Thus the deed of assignment is formally valid according to the law of New South Wales. It is the lex loci contractus: see Clegg v. Levy (1812) 3 Camp. 166; Dicey Conflict of Laws 5th. edn. pp. 641-643; Van Grutten v. Digby (1862) 31 Beav. 561.

It is also the proper law: see Nygh Conflict of Laws in Australia 1968 edn. at p. 307.

I was referred by counsel for the applicant to an unreported judgment of the Federal Court of Bankruptcy delivered on 4 December 1974: Re J. H. McKillop; ex parte J. M. Walsh where the learned judge held that the document relied on in that case as a deed of assignment was avoided by s. 213 (2) as it did not bear the seal of either of the two parties and thus answered the description of "an instrument not under seal". At the time of that decision the Property Law Act 1958 of Victoria contained no provision comparable to s. 38 (3) of the Conveyancing Act 1919 of New South Wales. Victorian law was the relevant law. Section 73A of the Victorian Act, which is comparable to s. 38 (3) of the New South Wales Act, was not introduced into the Victorian Act until 1977. Thus, the decision is plainly distinguishable.

In the result, the deed of assignment does not fall within s. 213 (2) and is therefore not void.

Finally, the construction I have placed upon s. 213 (2) recognises the application of the lex loci contractus or the proper law as being determinative of the question whether the instrument has been duly executed as a deed.

I need not decide whether the relevant law is the lex loci contractus or the proper law, first because nothing turns on the point in the present case - New South Wales law is both the place where the deed of assignment was executed and the proper law - and second, because the point was not argued. But an anomalous situation arises where a deed is executed in Western Australia or the law of that State is the proper law, as the case may be. The Property Law Act 1969 of Western Australia (s. 9 (2) ) dispenses with the necessity of sealing in the case of a deed executed by a natural person. Thus, unless such a deed is in fact sealed, it will be caught by s. 213 (2). I draw this anomaly to the attention of the Australian Government so that consideration may be given to an appropriate amendment to s. 213 (2).

The Court orders that it be declared that the deed dated 18 May 1979 and made between William Richard Dunn as debtor and William James Hamilton as trustee being exhibit "A" in these proceedings is not void on the ground that it does not in fact bear the seal of either of the parties thereto.

The costs of the applicant of and incident to the application including reserved costs are to be paid out of the property of the debtor assigned under the said deed of assignment.