Re Lentini, R.J. & Anor v Ex parte CSR Ltd T/A Readymix Group & Anor

[1993] FCA 746

7 4 6     93

JUDGMENT No. ........ ........ .. I ...... ,.,.,.

--	IN THE FEDERAL COURT OF AUSTRALIA )
BANKRUPTCY DIVISION l No. NX 98 of 1993
BANKRUPTCY DISTRICT OF THE STATE ) No. NX 99 of 1993
OF NEW SOUTH WALES 1

Re: ROSARIO JOSEPH LENTINI and
DOMINIC ANTHONY LENTINI
Debtors/Respondents

Ex parte: CSRLIMITEDT/AREADYMIX GROUP Petitioning Creditor/ Applicant

RECEIVED And: VANDA RUSSELL cXULD

Trustee

18 OCT 1993

FEDEFN. COURT OF'	AUSTRALIA
PRINCIPAL

EX TEMPORE JUDGMENT

EINFELD J SYDNEY 21 SEPTEMBER 1993

On 10 May 1993 John Edward Carmody, acting as solicitor for Dominic Anthony Lentini and Rosario Joseph Lentini (the debtors), issued notices to their creditors that a meeting of creditors was to be held on 27 May 1993 at an address in Pitt Street, Sydney, to consider debtors' proposal forthe composition oftheir debts. The notices of meeting were said to have been issued pursuant to an authority in favour of Vanda Russell Gould signed by the debtors under section 188(1) of the Bankruptcy Act on 29 April

circulars to the creditors and an explanation of the debtors'	notices of meeting, together with other documents including
proposal, were circulated to creditors butthe meeting was never held.
On 1 June 1993 duly executed section 188 authorities in favour of M r Carmody were executed by the debtors and in due course notices of meeting dated 9 June, together with a number of other documents including fresh consents of Gould to act as a trustee dated 28 May and declarations of relationships of the same date, were sent out to the creditors by Mr Carmody. The meeting was called for 28 June 1993. However, the notice of meeting stated -- and hereafter I speak of the singular even though notices were sent out in respect of both debtors -- that the authority which grounded the calling of the meeting had been executed in favour of Mr Gould, and had been signed on 29 April 1993 which was the date that had appeared in the earlier notice of meeting. When the notice was sent out to the creditors, there appears to have been included with it the section 188 authority of 1 June in favour of Mr Cannody, even though the notice of meeting quoted the date of the earlier unexecuted authority and
named Mr Gould as the authorised convenor of the meeting.
Section 194(l)(a) of the Bankruptcy Act provides that a meeting of creditors to be called in pursuance of a section 188 authority must be held not later than 35 days after the authority is signed by the debtor. The authority under which the meeting of 28 June was held was in fact signed less than 35 days prior to the meeting, although the much earlier April date quoted in the notice was considerably more than 35 days prior to the meeting. At the meeting on 28 June, compositions were agreed to by the
creditors, and the applicant who was the creditor petitioning for the debtors' bankruptcy now challenges and seeks to set aside the compositions on the grounds that the meeting was held pursuant to authorities which were never signed. Even if they had been signed, the signing was longer than 35 days prior to the meeting.
The applicant points out, quite rightly, that sub-section (4) of section 194 permits the Court to overlook contraventions of the other sub-sections of section 194 but not of sub-section (1). The applicant argues that the problems with the authorities prevented the meeting from taking place and invalidated everything that took place at the meeting. The respondents say that the errors both as to date and authorised convenor were typographical or technical, in that they came about as a consequence of the later notice of meeting having been copied from the earlier notice, and because its author, who was Mr Carmody, overlooked the errors.
Section 258 of the Act provides:

1993. It is now conceded that no such authority was ever given. At the time of the notices of meeting, namely on or about what appears to be 5 May 1993, M r Gould signed consents to act as trustee and also signed a declaration of relationships. The

S u b j e c t to t h i s A c t , u n l e s s the c o n t r a r y i s shown:

( a ) a m e e t i n g o f c r e d i t o r s o r o f a commit tee o f

i n s p e c t i o n	i n	r e s p e c t	o f	which	m i n u t e s	o f
proceed ings	have	been	s i g n e d	by	a	person

d e s c r i b i n g h i m s e l f a s , o r appear ing t o have been,

chairman o f the m e e t i n g s h a l l be	deemed	t o have
been d u l y convened and	h e l d ;	and

(b) a l l r e s o l u t i o n s passed o r proceed ings t a k e n a t

such a m e e t i n g s h a l l be deemed t o have been d u l y

passed o r t a k e n .

As a consequence of the duly signed minutes of the meeting of 28 June showing acceptance of the compositions, the debtors say that by the operation of section 258 the meeting should be deemed to have been duly convened and the resolutions for the compositions passed should be deemed to have been duly passed because the contrary has not been shown. The debtors also rely upon section 306 where what are called "proceedings under the Act" are not to be invalidated by formal defects or irregularities, which the debtors say these particular irregularities are, provided the Court is satisfiedthat no substantial injustice has been caused.

There is no doubt in my mind that no substantial injustice would be caused here by the validation of the meeting. The applicant creditor was present at the meeting. It should be presumed to have had, in the absence of any contrary evidence, all the documents sent out with the notice of meeting. The documents included the relevant section 188 authority on the basis of which the meeting was being called. It was dated 1 June. The discrepancy between its date and the date assigned to it in the

was looking at the documentation to check its validity. In fact	notice of meeting of 9 June would have been obvious to anyone who
according to the minutes, the applicant drew attention to at least one of the discrepancies and reserved its right to challenge the meeting and any special resolution passed. The minutes of the meetings also show that Mr Gould was unanimously elected Chairman of the meeting in the case of the second debtor and, the applicant having failed to have its own representative appointed Chairman of the first debtor's meeting, Mr Gould was elected unopposed as Chairman of that meeting.
Moreover, no argument was advanced to the Court of any substantial injustice to the applicant creditor or anyone else. The question raised and argued was whether section 306 can, as it were, be superimposed upon section 194, that is whether litigation arising out of meetings of creditors called pursuant to defective section 188 authorities or by erroneous notices of meeting are "proceedings under the Act" capable of cure. No decided authority has been referred to by counsel, and I proceed, therefore, on the basis that there is nothing in the cases which could assist, in the particular facts of this case, on whether this type of inter-relationship between the two sections exists.
"Proceedings" ordinarily would mean court proceedings, which the meeting and its prologues obviously were not. There is no doubt that on its face the notice does not comply with section 194(l)(a), but it seems to me clear that the errors were
typographical and not errors of substance. In the light of the
documents which went out with the notices of meeting, no one receiving the documents or present at the meeting could have been under any misapprehension that what was in view or under way was a meeting pursuant to a section 188 authority which itself postdated 29 April 1993. That is because the section 188 authority, Mr Gould's consent to act as trustee, and his declaration of relationships sent with the notice of meeting all postdated that date by a month or more, and because everything else that went out with the notices of meeting was directed towards events and documents which occurred well after 29 April.
In my view, the applicant and everyone else at the meeting would have assumed that the date 29 April 1993 and the naming of M r Gould as convenor of the meeting, to the extent that they noticed them at all, were in error, and were prepared to proceed on the basis of overlooking these inaccuracies. No injustice has been pointed to as having been suffered by anybody as a consequence of that error, and the only question the Court has to decide is whether this was a formal defect or irregularity covered by section 306. Unaided and apparently unconstrained by authority, I accept that it is. It seems to me that the intention of section 306 was to permit the Court to waive or validate, in proceedings which come before the Court, irregularities or defects in documents relevant to the proceedings which are of a formal character and do not cause substantial injustice to any party. These are such proceedings and documents.
occurred at the meetings, including the resolution for the In my opinion, nothing in the notices of meeting and nothing that
composition, has contradicted the deeming provisions of section
258. The debtors should therefore receive the benefit of that
section. The applications to set aside the compositions will be
dismissed.

[Discussion]

The applicant will pay the debtors' and trusteer. costs of the application to set aside the compositions.

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