Re Kevin Graeme Blake Ex Parte Kebroc Home Developments Pty Ltd

[1980] FCA 208

Bankruptcy - compositlon under Parr; X - C h a i r m a n ' s C e r t i f l c a t e

conc lus lve ( s .204 ) - m a t e r l a 1 p a r t i c u l a r s o m i t t e d f r o m r l e l t o r ' s

staterrent of a f f a ~ r s - i n i n t e r c s t s of c r e d i t o r s t o d e c l a r e

!

: compositlon vold (S. 222(5)) - so dcclarcd.

re : K E V I N GRAEME BLAKE (Debtor)

ex p a r t e	:	KEBROC HOME DEVELOPYCNTS PTY. LTD.
( I N LIQUIDATION) and C I T l C O R P
AUSTPALIA LIMITED (Appl icants )

and

K E V I N GRAEME BLAKE and VICTOR

RAYMOND DYE (Respszdznts ) .

C. A. Swceney, Z.

22nd May, 1 9 8 0 .

!

No. 219 of 1 9 7 9 Part S

l

Debtor

Ex parte : KEBROC IIOMC DEVCLGPIWKTS

PTY. LTD. (in liquldation)

and CITICORP AUSTRALIA

LlNITED Applicants

and

KEVIN GRAElilE BLAliE and

VICTOR PdIYMOND DYE Rcspondents.

REASONS FOR JUDGXENT

C. A, SWEENEY J.

2 2 May 1 9 8 0

In this application, the following orclcrs are

“l. That the Court declare the composition made by the

abovenamed debtor on the 12th day	of	October, 1 9 7 9
void on the grounds :

that the said composltlon 1 s not a

composltion withln the meanlng of the

definltion contalned In s . 1 8 7 of the

Act;

that the resolution acceptlng the

compositlon was not passed by the

requisite ma~ority in value;

that the resolutlon acccptlng the

composition was not passed	by a
majorlty in number;

that the respondent Dye as Chairman of

the meeting W A S wror,g 111 dlsallowlng

the vote of the appllcant Kebroc Honlf

Developments Pty. Ltd. (In Llquldatlon);

that the respondent Dye as Chairman of the rneetinq was wrong in dlsallowlng the votes of the Appllcant Citlcorp Australia

Llmitcd and that	o f Ford Credlt Australia
Limited:

2 .

t h a t t h e m e e t i n g a t w h l c h t h e composltion

r e f e r r e d t o was n o t advertised or

a l t e r n a t i v e l y a n y a d v e r t l s c m c n t s were n o t

lodqed wlthln	t h e	t l m e s p e c i f l e d	by	t h e
r u l e s ;

t h a t	t h e d c t k o r o m l t t e d m a t e r i a l p a r t l c u l a r s
from	h i s S t a t e m e n t o f A f f a i r s l n t h a t it d l d

n o t i n c l u d e t h e sum of $27,603.42 owlng t o

Kebroc Home Developments Pty. Ltd. (In

L iqu ida t ion ) as a debt due by the deb to r .

2 . A l t e r n a t i v e l y t o 1, t h a t h e c o m p o s l t i o n o f t h c

d e b t o r h t e d t h e 1 2 t h d a y of October , 1979 be set

a s i d e on t h e g r o u n d t h a t t h c terms of same a r e

un reasonab le o r on the g round tha t t hcy a re no t

c a l c u l a t e d t o b e n e f i t t h e c r e d i t o r s g e n e r a l l y . "

I n their n o t i c e of l n t e n t l o n t o opposc t h c

a p p l i c a t i o n , t h e r e s p o n d e n t s r e l i e d upon the fo l lowlng grounds :-

" l . There i s no doubt t h a t the composi t ion of the

D e b t o r ( i n r e s p e c t o f t h e f u l l terms of whlch

t h e R e s p o n d e n t s s h a l l r e l y a t t h e h e a r l n g o f

t h i s A p p l i c a t i o n upon t h e C e r t l f i c a t e t h a t

r e s o l u t i o n s p a s s e d d a t e d the 15th day of October,

1 9 7 9 a n d f i l e d h e r e l n ) was accepted by a s p e c i a l

r e s o l u t i o n of a meet ing of the creditors o f t h e

debtor under Sec t ion 2 0 4 of the Bankruptcy A c t ,

1 9 6 6 . F u r t h e r , i n v i e w o f t h e a t t e n d a n c e a t t h e

! m e e t i n g o f t h e c r e d i t o r s o f t h e d e b t o r h e l d on

the 12 th day of October , 1 9 7 9 (In respec t of whlch

mee t ing the Responden t s sha l l r e ly upon the Mlnutes

the reo f t o be produced by t h e Chalrman of the

meeting, the abovenamed Vlctor Raymond Dye) , the

R e s p o n d e n t s a r e e n t l t l e d t3 t h e r e l l e f a g a i n s t

s tr ict compliance wlth sub-sect lon (3) of Sec t ion

1 9 4 o f t h e s a i d Act a t fo rced by sub- sec t ion ( 4 ) of

t h a t S e c t l o n .

2 . There i s n o s u c h o m i s s i o n f r o m t h e d e b t o r ' s

S t a t emen t d f Af fa l r s as i s r e f e r r e d t o i n s u b - s e c t l o n

(4) of Sec t ion 2 2 2 o f t h e said A c t . The p o s s i b l l i t y

of a c la im by Kebroc Home Developments Pty. Ltd. was

a d v e r t e d t o by t h e d e b t o r b o t h i n h l s S t a t e m e n t of

A f f a l r s a n d I n t h e surrmary of t h a t S t a t e m e n t o f

A f f a i r s c i r c u l a t e d a t t h e s a l d m e e t l n g . ,

I

3 . F u r t h e r a n d i n t h e a l t e r n a t i v e , i f ( w h l c h 1s n o t

admi t t ed ) t he re i s a doubt such a5 is r e f e r r e d t G I n

sub-sec t lon (1) of t h e s a l d S e c t l o n 2 2 2 o ra l t ena t lve ly

i f (whlch 1s also no t admi t t ed ) t h e deb to r oml t t cd a

m a t e r i a l p a r t l c u l a r s u c h as 15 r e f e r r e d t o i n sch-

s e c t i o n ( 4 ) o f t h e saic? Scc t lon 2 2 2 , t h i s f1onourahl.e

Cour t ough t no t t o	be	s a t i s f l e d t h a t	~t	would	be	i n
- . / 3

3 .

the lnterests of thc credltors of the debtor

to declare the said composition void on the

grounds that the debtor has no a s s e t s and

has procured the full amount pald to the

trustee of the cor,q>osltlon from menbers of

his family for the purposes of the c o r ~ p o s ~ t ~ o n

and, should the compositlon be deckrrci vold,

the creditors sf the debtors would be conside~r~t,Ly

worse off flnancially than if the composltlon

dere to stand.

4 . Slmllarly, this Honourable Court ought not c bc

satisfied that the terms of the sald composltion

are unreasonable or are not calculated to benefit

the credltors generally or that the compositlon

ought to be set aside for any other reason."

The applicants' flrst ground was that "the

said composition is not a compositlon with~n the meaning of tkk

definition contained in s.187 of the Bankruptcy Act 1966." T k - i

definition reads as follows :-

'"composition' means an arrangement (not Deing an

arrangement entered into for the purposes of a

proclaimed 1aw)by which the credltors of a debtor -

(a) agree to accept payment of the debts due

to them by instalments; or

(b) agree to accept, in full satisfactlon of

i	the debts due to them, less than the full amount of those debts, whether In the
form of money or other property and whether
by instalments Gr otherwise."

It was submitted on behalf o the applicant that as the si:cc:~l

resolution pdssed at the creditors' meetlng did not include t!lc

words "in full satisfaction of the debts due to them" it d l d nor

amount to a composition within the Iieaning of the sectlnn. That

special resolutlon began with the words - "that the following

composition of the debtor be accepted" and then s t ollt its

terms in detail. The Shorter Oxford Enqllsh Dictionary glves as

a meaning of "composltion" the followlng - "a compoundin3 for

some claim or liability; speciflcally, an agreement by which a

creditor accepts part	of a debt in satlsfactlon from an insolvent
debtor".

It is wise to include In the terms of a

compositionunder Part X of the Act the words "In full batlsfaction

of the debts due the creditors". Howcver, I hzvc no r:oIJlbt thqt

the meaning of the word "composltion" in the context ~n wt'lch 111

. . /<

4 .

was used In a special resolutlon at a creditors' :wct?.nq called

under Part X was that It was a proposal to t h c cre&tors

offered In full satisfaction of the debts oweci to them. It

was so understood by all at the meetlng, as wils revealed by

the mlnutcs: Fad it been merely an offer oE $5000. and not

in full satlsfaction, the applicants would plalnly	1121.~) voted
in tavour of It.

The appllcants contended that cach of thcr!

and Ford Credit Australia Llmlted were wrongly cicnleci thc

right to vote at the meeting, and that, if they had been permitted to vote, thc special resolutlon accepting the compositlon could not have been passed.

Section 200 of the Bankruptcy Act 1966 provldes

as follows :-

A credltor may vote elther In person or by

his attorney or by a proxy appoln'icci in

writing by the credltor or his attorney.

A proxy may be appolnted to vote on all

matters arlsing at thc meetlng or cn

partlcular matters specified In the

instrument of appolntment.

A person clalming to be the proxy of e

creditor is not entltled to vote as proxy

(otherw~se than jn respect of the election

of a chalrman of the meetlnc;) unless the

instrument by which he 1s appolnterl has

been lodged with the chairman.

A persor. claiming to be the attorncy of a

creditor is not entitled to vote as attorney

(otherwise than in respect of the clection

of a chaifman of the meetlng) unless -

(a) the instrument by which he is

appointed has been produced	to
the chairman: or

(b) the chalrman is otherwlse atisfied

that he IS the duly authorized

attorney of thc creditor.

The Collecticn ?!anagcr of thc applicant

Citicorp Australia Limltcd attcndcd the mcetinc; on Its bchalf.

He did not have	a €ormal proxy to vote at the meetins but he
contended -

. . /5

5.

"

I was authorlsed then and m authorlsad

i	now by vlrtue of my posltlon as Collectlon Manaqer of the said Cltlcorp to artend any
creditors' meetings and to vote on that
company' S behalf. 'I

The Recovcry Co-ordinator of l'ord Credit

Australia Llmlted slmllarly did not produce a proxy but it

was contended that he was "the duly authorlzcd attorney of

the creditor" wlthin the meanlng of s.200 ( 4 ) (b).

Both gentlemen voted against the proposed

Conposition but the chairman ruled them votes out of order because neither of them produced a proxy. It was conceded

on behalf of the respcndents that the chaiman &< not ap'2roacl:

the question of deciding then entltlement to vvtc in a

correct manner, in that he merely relied upon their failure

to produce proxies and did not seek to satiszy himself that

they were the duly authorlzed attorneys of the creditors.

The vote of the liquidator of the flrst

I	named applicant against the composition was ruled	out of
!

order by the chairman on the expressed ground that he could

not determine the amount for which he should have been

voting. The question of the amount of thls debt wlll be

discussed later.

Had the three Votes been recorded ayalnst the resolutlon, it would not have commanded a majority in number of the creditors present personally, by attorney or

by proxy at the meetirq and so could not have becn 2assed as

a special resolutlon (see s.5).

. ./G

6 .

Ground 1 ( v i ) o f t he app l l can t s ' g round?

was no t p re s sed . 7'112 answer of the respondent to t h e r a t t e r s

r a i s e d I n sub-paragraphs (l), (~.l) , ( l i i ) , (iv) and ( 7 7 ) was

t o t e n d e r i n evidence a c e r t l f l c a t e s i g n c d hy t h e ckaj.rl;an of

the meet ing , t h e respondent Dye, t h a t t h e s p e c l a l r e s o l u t l o n

set o u t i n t h e c e r t i f l c a t e was passed.

S . 225 of the A c t p r o v i d e s t h a t such

c e r t i f i c a t e , s i g n e d I n accordance with s .204 1 s " i n t h e

absence o f f r aud , conc lus lve ev ldepce tha t t he r c so lu t lon

s p e c i f i e d i n t h e c e r t i f i c a t e was duly passed a t t h e m e c t l n q . "

S .204(7 ) p rov ides a s follows "-

I' ( 7 . ) Where t h e c r e d l t o r s p a s s a s p c c l a l

r e s o l u t l o n o r a r e s o l u t i o n u n d e r t h i s

s e c t i o n ,	t h e c h a l r m a n o f t h e	meet lq
s h a l l -

(a ) f o r t h w l t h s l g n a C e r t i f i c a t e t o

t h a t e f f e c t i n a c c o r d a n c e wlth

the p rescr ibed form; and

(b) f o r t h w i t h cause t h e c e r t i f i c a t e

t o b e f i l e d i n t h e o f f l c e o f

t h e Registrar. 'I

I n re Thompson (1936) 9 .&BC 231. Lukin J.

had t o c o n s i d e r t h e e f f e c t o f s . l 6 2 ( 2 ) of the Rankruptcq Act

1 9 2 4 which xas I n t he fo l lowing terms :-

" A c e r t i f i c a t e o f t h e r e so lu t ion , i n t h e

prescr lbed form, s lgned by the chalrman,

s h a l l be f i l e d I n t h e C o u r t n e a r e s t t o

the p lace where the meet ing 1 s h e l d ,

or i n such other Court as 1 s p r e s c r i b e d ,

and s h a l l , i n t h e a b s e n c e o f f r a u d , b e

c o n c l u l L w e e v l d e n c e t h a t t h e m e e t i n g

was duly convened and held, and the

r e so lu t ion du ly pas sed . "

l .

I

c o v e r s a l l the e s s c n t l a l s t o a v a l l d ail6 r c g u l z r

---

P e r f o r m a x c -5- p r e s c r l b c d d u t i e s in convcrllng

and holdlns the meet ins and L2ulv Da>slna t n c

~ ... .,

r e s o i u t l o n s t h e r e a t .

The F e d e r a l P a r l i a n e n t wems t o have contemplatco

t h a t t h e c h a l r m a n of a mcctlng should dcterr;,ine any

questions as to the proper performance and compllzncf

w i th t h c terms of t h e s t a t u t e up t o and Lncludlng the

p a s s l n g o f t h e r e s o l u t i o n anc! a c c o r d i n g l y d l r e c t c c

t h a t h l s ce r t i f ica te of 111s d e t c r n l n a t l o n I n rccjarL2

there to should be conclus ive . Perhaps the u s e o f thc

cerm ' p h m n S n c i e ' would have been more conducive to

a proper and l e g a l performance o f t h c d u t l e s and

compl i ance wi th the s t a tu to ry cond i t ions p re sc r lbed

and would have enabled the Court t o correct t h e

cha i rman ' s dec ls lon where obvious ly wrong.

I t seeps t o me t h a t t h e r e i s n c o e t t l n q p a s t t h e

word 'conclusive.' 'Concluslve ' on the au thor : t les

means, I th ink , vha t it 1s genera l ly -unders tood to mean -.

'Anything whlch 1 s d u l y p r e s c r l b e d a s ' c o n c l u s l v c

evldence ' of a f a c t , i s abso lu te ev ldence of s u c h - f a c t ,

as w e l l c r l m l n a l l y a s c i v i l l y , f o r a m u r p o s e s f o r t?ic-h

It is so made evldence ( R v. Levi (1865) 34 Td.7.V.C. 173).'

The phrase 1s a l s o u s e d i n Its l a r g e sense I n s.51

English Companies Act, 186?, qUn t h e d e c l a r a t i o n by a

chairman of t h e r e s u l t o f a v o t l n g a t a meetlng (3 ry i im i r

Coal Co. (1877) W . N . ? 5 ) , and such dec l a ra t lon cmno t Le

chal lenged by c o n t r a d l c t o r y e v l d e n c e ( p e r J a m s L . J . :R

R e Gold Co. (1879) 48 L.J. Ch. a t p.2E6); per Cozens-

Hardy J. I n R e Hadle igh Cas t le Co. (1900) 2 C n . 419:

St rouds Jud ic l a l D ic t lona ry ; and see k n o t v. Gnlted

African Lands L t d . (1901) 1 Ch. p.518 dt 523, I n r e C o l c !

Coy. 4 8 L . J . Ch.281."

R e Thompson' ( sup ra ) was c i t e d w i t h approval by

Ri ley J. i n R e Venetoul l s (1976) 13 ALR G25 a t 6 2 7 , \rho F,CC:C~I

a r e f e r e n c e t o Kerr v. John t!ottram L t d . (1940) c h . G57 a t G G C ,

-

i n which It was h e l d t h a t a n a r t lc le of a s s o c l a t i o n p:-o-~lz;aq

t h a t t h e m i n u t e s of any meet lng , I f purpor t lnq t o be s l g r ~ d tj:

the chairman, should he "conclus lve ev ldcnce wl thout any

i f u r t h e r p r o 0 5 of t h e facts t h e r e l n s t a t e d " rendcrcd lnach1zL;l!;le

evidence p r o p o s e d t o b e c a l l e d i n c o n s i s t e n t w i t h s u c h r r ~ n : ~ t c s .

!

. . / c

R .

In R e Venetoulis (supra) Rilcy J. ha6 t 3 cons ldc r

a submission t h a t a speclal rc-:olt : t ion had becn pasq~'ii by a

c rcd l to r s ' mee t ing on 8 September 1 9 7 6 , c a l l e d undt?-- P a r t X

requiring t h e d e b t o r t o e x e c u t e a deed of arrangement.. Thc

chairman of that meet ing s igned a c e r t l f i c a t e on the day of

t he mee t lng , in w h i c h h e m l s t a k e n l y c e r t l f l e d t h a t t h e r e l c l ~ a n t

reso lu t ion had been passed as a " r e so lu t lon" and no t a s a

" s p e c i a l r e s o l u t i o n " a n d so he had not complled wlth s . 2 0 4 ( 7 ) .

I h s I I o n o u r a c c o r d i n g l y h e l d t h a t t h e c e r t i f l c a t e WAS t h e r e f o r e

ine f f ec t ive fo r t he pu rposes o f s .225 (2 ) and wen t	on	t o	say
( a t p.627) :-

!

A t t h e a d j o u r n e d h e a r i n g o f t h i s a p p l l c a t l o n ,

on 2 1 O c t o b e r , c o u n s e l f o r t h e p e t i t l o n l n g c r c d l t o r

having on 29 Sep tember r a i sed ques t loas a s to

whe the r - the meeCing had becn duly held and the

s p e c i a l r e s o l u t i o n d u l y p a s s e d , counsel for t l Skbtor ~

va l i an t ly p roduced a l a t e r c e r t i f l c a t e s i g n e d by t h e

chairman. I t was da ted 30 September ,and cer txf lcd

t h a t t h e r e l e v a n t r e s o l u t i o n h a d been passed as a

s p e c i a l r e s o l u t i o n . B u t it cannot be mamtalned

t h a t t h a t l a te r c e r t i f i c a t e meets thc requl rements

o f s . 2 2 5 ( 2 ) . I t was not s lgned In accordance wi th

s . 2 0 4 , because it was n o t s i g n e d ' f o r t h w l t h ' as

r e q u i r e d by s . 2 0 4 ( 7 ) - t h a t is, a s s o o n a s p o s s i b l e

i n t h e c l r c u m s t a n c e s , t h e n a t u r e of t h e a c t t o be

done be ing taken in to account : 37 mlstury 3rd e?., 103;

Measures v. McFadyen ( 1 9 1 0 ) 11 CLR 723 a t 736;

Samecn v. Abeyewickrema (1963) AC 597 a t (109; (1963)

3 A l l ER 382; Hill lngdon London BC v C u t l e r ( 1 9 6 6 )

1 QB'121; ( 1 9 6 7 ) 2 A l l ER 361. The chalrman had

demons t r a t ed tha t It would have b e e n p o s s i b l e t o

s i g n a p r o p e r c e r t i f i c a t e on 8 September."

I n t h e p r e s e n t case t h e c h a i r m a n ' s c e r t i f i c a t e

i n re la t ion t o a meet ing held on Frlday 1 2 October 1 9 7 9 was

signed on Monday 15 October. In my o p i n l o n , t h e c e r t i f i c a t e

was s igned " fo r thwi th" wi th in the mean ing of S. 204 ( 7 ) ,

bea r ing i n mind t h e c l r c u m s t a n c e s t h a t t h e m e e t i n q was heid

i n E x h i b i t i o n S t r e e t , MelLourrle on a Fr iday acd the typed

certif icate was s igned on the following Monday by t h e c h a l r n a n ,

who was a c c u r a t e l y d e s c r i b e d i n t h e c e r t i f i c a t e as "of 36

Whitchorse Road, Mitcham", an outer suburb of Melbourne.

9 .

l

Under s.195 oi t h c A c t t h e clel;tor 1 s rcqu1rc.d ‘?c

s u b m i t t o the credi tors a t t h c ~ r meetin? a state;nc.:lc I n : ‘ ~ -3C:?c .

v e r i f i e d by s t a t u t o r y d e c l a r a t l o n , of r . 3 S af:z:rs. ScD-c,Cctiol-l

( 2 ) p r o v 1 6 e s t h a t -

i

!

‘I ( 2 . ) The s t a t e m n t of t n c debtor’s a f f a l r s

s h a l l s p e c l f y hls assets and IlnSllltler

and s h a l l l n c l u r l c -

(a)	i n respect of e a c h asse t -
p a r t i c u l a r s c € t h e asset , 1r.cluEln.;

Its estimates va lue :

(b )	I n r e s p e c t of e a c h 11ablllt:f -
p a r t i c u l a r s of t h e l i a b l l l t y . i n c l u d 1 r q
whe the r l t 1s s e c G r 4 or liot: and
(c)	I n r e s p e c t of any l l a b l l l t * ; t11at 1 s
s e c u r e d - particulars of the s c c u r 1 t . J . ”

?

?

1 0 .

In the statement of affalrs, dated 11 October, 1 9 7 9 ,

Kebroc was shown as a debtor to the estalx In the amour.t of

$ 1 1 , 9 9 3 and the amount likely to bc recouped frcm it wa5

shown as "Nil".

By lcttcr dated 1 2 Septerrber, 1 9 7 9 , the sollcltor for

Kebroc had written to the debtor in the following terms :-

-

I act on behalf of Kebroc I l m e Developments

Pty. Ltd. (In Llauidation) and have becn instructed

to claim from you the sum of $ 3 7 , 1 8 0 . 4 2 . Of that

sum, the sum of $ 1 , 6 0 3 . 4 2 is the balance of your

loan account. Thc sum of $ 6 , 0 0 0 . 0 0 wlth respect to

a swimming pool whlch you have charged agalnst the

company In llquldatlon but It is 111 fact your own

private expense, and the sum of $29,577 is the

amount of purported payment on retirementwhich was

paid to Mr. O'Connor. Thlt purported payment	17aS
It is suggested, unreasonzble in all the circumstances.

Please note that unless the sum of $37,180.42

is paid to me within twenty-one days, I have been

lnstructed to institute legal proceedlngs for

recoxvxy. I'

At the hearing of this application it was conceded

on behalf of the applicants that the statement of affairs

would have complied with the statuce If it had included the

substance of this letter as a claim made	by Kebroc against
the debtor.

The picture of the financial relationshlp between

Kebroc and the debtor Qhich was glven In the statement of

affalrs was that the company owed hlm $ 1 1 , 9 9 3 , that it was

not listed as a creditor of the debtor but there was sald to be a clalm agalnst him from its liquidator for an unstated amount.

. . /l1

I am satisfied that the appllc;,nt has estdbllshcd

the ground that the debtor omltted material partlculars irom

the statement of affalrs. I accept thc cvicience that the

debtor owed Kebroc the amount of $1,603.42 shown in hls loan

account in its records. I am satlsfied that a further sum

of $6,000 was pald by Kebroc on behalf of the debtor in

respect of the building of a swimming pool at the debtor's

private residence in 1977. It 1s not ncccssary to determlnc

precisely what portion of that sum was repaid by thc dcbtor.

I am satisfied that It was not repald In full and I rc~ect

the debtor's claim that the payments In rcspect of the

swimmlng pool were made as part of his remuneration.

I accept the evidence given by the liquidator

that "according to the cheque book of the appllcant company a

cheque In the sum of $29,577.00 was drawn on the 1st rcbruary,

1978, in favour of one R. H. O'Connor, who up to that date

was a director and a shareholder of half the Issued capltal

of the applicant company. The sum purports to have been pald

by way of retirement benefits, however, the sald R. H. O'Connor

was only employed by Kebroc for 2 period of 2% (two and a half)

years. The debtor Blake admitted to me that, out of that sun,

$20,000.00 represents conslderatlon which was pald hy the

applicant company for the transfer of the shares by the said

R. H. O'Connor to the debtor Blake." I an satisfled that the

debtor made that admlsslon and that it represented the truth

of the matter.

The debt qwed to the debtor by Kebroc fo r $11,993

was sald by the debtor to be in respect of unpald salary. There

was no minute ln the company's records of any resoluticn that

he be paid a salary whlch would lustlfy any such claim and no

evidence was proffered to show any express agreement by he

company to do so. The circumstances proved in evldencc? do not

warrant the implicatlon of any agreement by Kcbroc to make

further payments to the debtor in respect of salary. If I were

dealing with a clalm by the debtor agalnst Kebroc for unpaid

salary I would be bound to say that It had not ken substantlated.

12.

The statement of affairs should have shov;:~ chat

the debtor had made a claim agalnst Kebroc ln respcct of

unpnd salary and that Kebroc had made the claims agalnst hl;. whlch were set out In its sollcitor's letter. Thc plcCure

which would have beer. thus revealed would have been rnarkcdly

dlfferent from that disclosed In the	s atc!mcnt as presented
to the meeting.

The accuracy of the debtor's statement of

affalrs, verified by statutory declaration, 1 s fundxlcntal

to the consideration by the crcchtors at the meetlnq of the

questlons which fall for thelr decision. I am s a t l s f ~ e d that

the applicant has made our ground l.(vii) of Its appllcatlon.

Section 2 2 2 ( 5 ) provldes that the Court shall n o c

make an order declaring a composition void on such a ground

uciess it is satisfied that it would be in the interests of

the creditors to do so.

At the meeting, votes in favour of the resolutlon

to accept the composltion were cast on behalf of four creditors.

whose debts were accepted by the chairman as totallinq 2 4 ? , 2 2 4 .

Citicorp Limited sought to vote in respect of a debt of $ 7 , 7 5 7

and Ford Credit Limited in respect of a debt of $1,173. A v o t e

was cast against the resolution on behalf of Brick L Fipe

Limited by its proxy, the chairman of the meetlng, in respect of a debt of $4,405, because the company had expressed Its

proxy to vote in favour of the proposed compositlonto ksublect

to the debtor's enterrng into an arrangement to make further

weekly contributions to hls creditors. MO such arranaeinent

was proposed by the debtor. In my oplnion, the chalrman

construed the proxy correctly and voted in accordance wlth It.

. ./l3

13.

I n a n a i f l d < % v l t , swor11 on 5 Deccmbcr 1 9 7 9 , kha t

co rnpay ' s credlt manager depo;;tlcl that lC had a l w a y s t fcn hl:;

i n t e n t l o n and t h a t of the compclny t h a t rl compocitlon v!wrehy

the debtor provided a t o t a l o f $ 5 , 0 0 0 would be accep tab le

and had he been able t:o a t t cnd the mee t lng in pe r son h e would

have voted In favour of the composl t lon. 131s a f f l d a v l t

con tmued -

"My employer remalns of the v i ew tha t t he compos i t l cn

o f t h e debtor (whcreby t h e t c t a l sum of $5,000.00 1 s

d l s t r l b u t e d t o t h e deb to r ' s unsecured c rec l l t o r s ) LS

an ar rangcFent favourable to t h e d e b t o r ' s c r e d l t o r s

g e n e r a l l y a n d c e r t a l n l y t o my cmployer."

The ques t ion remain ing is whether the Court choulrl

b e s a t i s f i e d t h a t it would be i n t h e i n t e r e s t s of the cre2l tor .c .

t o make a n o r d e r d e c l a r i n g t h e c o m p o s l t l o n v o l d . I t i s trlx t h a t

the composi t lon w i l l p rovide the c r e d i t o r s w l t h a div16end of

a few c e n t s I n t h e d o l l a r , e s t i m a t e d by t h e s o l l c i t o r for the

respondents as be ing 4 or 5 cen t s , and It has been urged that

even t h i s i s b e t t e r t h a n n o t h i n g . However, it i s n o t c l e a r

1

t h a t t h e c r e d i t o r s w i l l r ece ive no th ing i f t he compos jC~on be

dec la red vo ld . The c o n t e n t i o n t h a t t h e y would r e c e i v e n o t h i n s

depends upon t h e acceptance of t h e d e b t o r ' s e v i d e n c e , ir step

! which I would n o t f e e l ~ u s t i f i e d i n t a k l n g .

It may b e t h a t , i f the composl t ion be d e c l a r e d void,

t h e r e w i l l ' be a meet lng of c red l tors . conducted I n accordance

wi th the requi rements of the A c t , a t which they wil l be a b l e

t o base any decis lon whlch they make upon t h e c o n s i d e r a t i o n of

an accu ra t e s t a t emen t of t h e d e b t c r ' s a f f a i r s . A t such a meetir.9,

if t h e f o u r creditors Vho v o t e d i n f a v o u r of t h e s p e c l a l

r e s o l u t i o n f o r a composi t lon did so again, and were ~ o l n e d by

B r i c k and Pipe L i m l t e d , and C l t i c o r p and Ford Credl t Lml ted

a g a i n v o t e d a g a i n s t It and Kebroc were admit ted t o v o t e I n an

amount of $4,175 or more, it was corrmon g roupd tha t any spec la l

r e s o l u t i o n would be lost . I t has not been necessary i n t h e

p r e s e n t case t o d e c i d e t h e p r e c i s e amount owed by t h e d e b t o r t o

! Kebroc but on the balance of p r o b a b i l i t l e s I c o n s i d e r t h a t It

was in excess of $4,175. I a m s a t l s f l e d t h a t it vollld [)e In

the i n t e r e s t s of t h e c r e d l t o r s t o d e c l a r e t h e c o m p o s i t i o n 17c:d.

. ./l<

Accordingly, it is n o t n e c e s s a r y t o c o n s l d e r t h e

a p p l l c a t l o n t h a t t h e c o m p o s l t l o n be set a s l d c on the ground

t h a t I t s terms a re un reasonab le or on t h c g r o u n d t h a t t h e y

are n o t c a l c u l a t e d t o b e n e f l t t h e c r e d l t o r s g e n e r a l l y .

The o r d e r of the Cour t 1s -

-

1. t h a t t h e c o m p o s i t i o n of t h e d e b t o r d a t e d

12 October 1 9 7 9 be dcclareci t o be r o l d .

2. t h a t t h e c o s t s o f t h e a p p l i c a n t s of ar,d

i n c i d e n t a l t o t h e a p p l i c a t l o n b e t a x e d

and paid by the r e sponden t s ,