Re Eade, K.N. & Anor Ex parte Worrell, I

[1991] FCA 35

35 9

JUDGMENT NO. ..... / ....... ! , ,

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	1
BANKRUPTCY DISTRICT OF THE	) No. QX149 of 1988
STATE OF OUEENSLAND	) No. QX150 of 1988

RE :	KENNETH NORMAN EADE AND ANNE YAGANDA EADF;
EX PARTE:	IVOR WORRELL. THE TRUSTEE OF THE PROPERTY OF THE ABOVENAMED

(Applicant)

AND:  THE ABOVENAMED

(Respondents)

MINUTES OF ORDER

JUDGE MAKING ORDER:  PINCUS J .

DATE OF ORDER:	4 FEBRUARY 1991
WHERE MADE:	BRISBANE
THE COURT ORDERS THAT:

1.    The deed of arrangement entered into on 7 September 1988 be terminated.

2.   A sequestration order be made in respect of the estate of the debtor.

3.   The costs of and incidental to the application, including reserved costs of the applicant, be treated as if they were petitioning creditor's costs

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

under s.l09(l)(a) of the Bankru~tcv Act 1966.

IN THE FEDERAL COURT OF AUSTRALIA

= N E W DIVISION

BANKRUPTCY DISTRICT OF THE	)	No. QX149 of 1988
STATE OF OUEENSLAND	)	No. QX150 of 1988

KENNETH NORMAN EADE AND

ANNE YALANDA EADE

EX PARTE:  IVOR WORRELL, THE TRUSTEE OF THE PROPERTY
OF THE ABOVENAMED

(Applicant)

AND:  THE ABOVENAMED

(Respondents)

0 PINCUS J.

M: BRISBANE

DATE: 4 FEBRUARY 1991

REASONS FOR JUDGMENT

These are two applications under s.236 of the Bankru~tcv

1966 to set aside deeds of arrangement entered into by Mr. and M r . Eade on 7 September 1988.

The deeds were entered into in consequence of a meeting of creditors held on 7 September 1988.

At that meeting, a statement of affairs was produced which showed unsecured creditors in excess of $0.5 million. Mr. Eade told the meeting that he expected to earn "an extra $50,000 to $100,000 per annum from his consultancy business". Under the deed executed by Mr. Eade, he undertook to pay $3,125 per quarter for three years. Mrs. Eade executed a deed making the same promise. The applicant trustee, Mr. Worrell, made each application on 20

July 1990, supported by an affidavit setting out payments made up to the date of the affidavit; they totalled $17,750. Mr. Eade wrote to the trustee a letter dated 20 December 1989, blaming "a series of delayed settlements due to lack of suitable finance, high interest rates and seasonal problems" for non-compliance with the deed. Mr. Eade suggested that the payments under the deed should be varied downwards.

The letter also said that, with associates, "we are opening real estate offices in Sydney and Newcastle and have also negotiated a master agency with the M.L.C.". He mentioned other business interests which were expected to bring profits and said that "1990 should see us free of debt".

In an affidavit filed in answer to the application, Mr.

Eade said that his debts had been reduced by a sale of property for

'.	the sum of $330,000; the debts initially totalled $670,000. He said that within one month of the meeting of creditors, a company of which he was general manager ceased operating. He then obtained other employment - curiously enough "in respect of the creation of	a network of insolvency adv~ce centres" - but that position	terminated in September 1989. In February 1990, Mr. Eade says he
was injured in a fall from a ladder and that set him back quite a bit.
Mr. Eade's affidavit held out the promise that a chain of hair salons might get him out of trouble. He expected that the income from this source would be enough to pay out the amount due under the deeds.
At the first hearing of both applications, on 17 August 1990, Mr. Eade agreed that he would not oppose the termination of his deed if nothing were paid by the end of the year. To enable the possibility of the financial recovery for which Mr. Eade hoped to have every chance of becoming a reality, I adjourned the matter to today. Nothing further has been paid. A letter from Mr. Eade was tendered during the course of the hearing to the effect that it was intended to satisfy the obligations under the deed by creating a saleable asset. The letter suggested as an alternative that the deed be redrawn. Mrs. Eade has also given evidence in writing (Exhibit 3) pointing to the disadvantages of bankruptcy. I agree that bankruptcy would be disadvantageous to Mr. and Mrs. Eade. She also points out that the creditors do not seem very interested in the matter and I think that to be correct.
The ground under s.236(1) has been made out; that is, it has been shown that each of the debtors has falled to carry out the provisions of the deed, which gives a ground for termination. The
question is whether the applicant has shown that it would be "in the interests of the creditors to do so" within s.236(2).
Nothing has been paid under either deed since mid-1989. I do not discount the possibility that payments may be resumed in the future, but I should have thought that the creditors' chances
of recovering some money would be enhanced by bankruptcy. I do not
rate that chance highly.
One further factor to be taken into account is that, as I understand the applicant's position, he does not wish to be trustee in the bankruptcy; there will therefore be no private trustee. I do not say this by way of criticism of the applicant, but it is plain that some private trustees are charging very high fees indeed (much higher than solicitors' bankruptcy fees) so that the Eades' creditors will at least have the advantage of a cheaper trusteeship.
I therefore hold that the condition in s.236(2) is satisfied. I take into account in exercising the discretion given by s.236(1) that, in substance, the adjournment obtained last year was given on the understanding that if matters did not work out as expected, bankruptcy would not be opposed.
It will therefore be ordered in each case that the deed entered into on 7 September 1988 be terminated and that a sequestration order be made in respect of the estate of the debtor. I shall hear the parties, as to other orders.

I certify that this and the three preceding pages are a true copy of the reasons for judgment herein of his Honour Mr. Justice Pincus.

A~SZC iate +-

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