Re Lloyd, C.R.B. v Ex parte Palmerston Hospitals PL
[1994] FCA 533
•20 JULY 1994
RE: COLWYN ROBERT BARRY LLOYD
EX PARTE: PALMERSTON HOSPITALS PTY LTD
No. VP418 of 1994
FED No. 533/94
Number of pages - 4
Bankruptcy
COURT
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
HEEREY J
CATCHWORDS
Bankruptcy - resolution of majority of creditors for moratorium pending litigation - sole dissentient defendant to litigation brought by debtor - Bankruptcy Act s.206(1) - extent to which Court should interfere with creditors' decision
Bankruptcy Act s.206(1)
HEARING
MELBOURNE, 20 July 1994
#DATE 20:7:1994
The debtor appeared in person.
Counsel for the creditor: Mr P K Searle
Solicitor for the creditor: Tiller and Co
ORDER
The Court orders:
1. Adjourn the creditors' petition until the trustee has executed the
deed of arrangement being Exhibit "CRL5" to the Affidavit of Colwyn Robert Barry Lloyd sworn 19 July 1994 and the debtor files an affidavit verifying that deed so executed upon which the creditor's petition shall stand dismissed.
2. Order that the petitioning creditor pay the cost of the debtor's
application under s.206 of the Bankruptcy Act. Otherwise no order as to costs.
NOTE: Settlement and entry of orders is dealt with in Order 36 of
the Federal Court Rules
JUDGE1
HEEREY J The debtor applies under section 206(1) of the Bankruptcy Act for dismissal of the petition. That section provides:
"Where -
(a) a meeting of creditors has, in accordance with this Part, passed a special resolution requiring a debtor to execute a deed of assignment or a deed of arrangement under this Part; and
(b) a creditor's petition was presented against the debtor before the passing of the resolution or is presented against him after the passing of the resolution but before the deed has been duly executed, the Court may, upon application by the debtor, a creditor or a person nominated as trustee of the proposed deed, if it appears to the Court that it would be for the advantage of the creditors that the debtor's affairs be administered under the deed, adjourn the hearing of the petition for such period as it considers necessary to allow the deed to be executed and, if the deed is duly executed within that period, shall dismiss the petition."
The petitioning creditor, Palmerston Hospitals Pty Limited, is a company which I am satisfied on the evidence is effectively controlled by Mrs Joan Myerscough.
There is a background of extraordinary litigation between Mrs Myerscough and the debtor. Initially, on the initiative of Mrs Myerscough, the Law Institute of Victoria obtained ex parte an order of the Supreme Court that a receiver be appointed to the debtor's legal practice.
There followed very substantial litigation which resulted in a judgment by Beach J on 1 March 1991. In the course of that judgment his Honour made some damning findings in relation to Mrs Myerscough (referred to in the judgment as Ms Fanning). His Honour said:
"In my opinion Mr Lloyd has been the victim of a vindictive and evil woman who has deliberately set out to bring about his downfall. As a consequence of her false allegations Mr Lloyd has been subjected to enormous embarrassment, and I would believe he has suffered a not inconsiderable degree of financial loss. In my opinion Ms Fanning deliberately gave false evidence in relation to her dealings with Mr Lloyd, evidence designed to ensure that he was found guilty of theft of her moneys from his trust account."
And later on his Honour said:
"But it is only by close examination of her evidence that one has been able to demonstrate the falsity of the allegations she has made against Mr Lloyd and the perjury she has committed during the course of the hearing before me in an endeavour to blacken his reputation."
The allegation of perjury against Mrs Myerscough has come to the attention of the Director of Public Prosecutions and proceedings are in train which will result in her being presented before the Supreme Court. It also appeared that Mrs Myerscough pleaded guilty in the County Court to serious charges of fraud against the Commonwealth arising out of the conduct of a nursing home.
The debt on which the petition is founded arises out of some proceedings in the Family Court in which Mr Lloyd was involved as a solicitor, and Mrs Myerscough was also involved.
The proceedings were of a complex nature. Suffice it to say that Graham J of the Family Court took the view that Mr Lloyd, as solicitor, was responsible for wrongly and unreasonably advising the defence of a claim. His Honour ordered that Mr Lloyd pay the costs personally. They amounted to some $200,000.
Following upon the judgment of Beach J, Mr Lloyd and his wife in April 1992 commenced proceedings number 6405 of 1992 in the Supreme Court against Mrs Myerscough, a Mr Little, the Law Institute of Victoria and Gerard Peter Glennon. I am told that very substantial interlocutory proceedings have been virtually completed and there will be a directions hearing before Harper J on Friday of this week. Mr Lloyd will be seeking a speedy trial.
Mr Lloyd signed an authority under the Bankruptcy Act, and a meeting of his creditors was held. There were some formal defects, to which I need not refer, and a further meeting was held. The requisite majority in number and value of the creditors resolved to agree to Mr Lloyd entering into a deed of arrangement. He subsequently executed the deed on 14 July 1994.
The essence of the deed is that a moratorium is provided to Mr Lloyd while he pursues the Supreme Court action to which I have referred. He gives a charge in favour of a trustee for the benefit of his creditors over the benefits derived by judgment or settlement from that action.
The only creditor to vote against the deed was the petitioning creditor. The other creditors included the Australian Taxation Office, a number of major banks, Australian Guarantee Corporation, and a barrister, Mr Bruce Monotti, who was owed some $4500. All voted in favour of the deed of arrangement.
I have formed the view that it would be for the advantage of the creditors that the debtor's affairs be administered under that deed. It is clear that the decision of the majority of the creditors is not conclusive. Were that not so there would be no point in a provision such as s.206.
The decision of the majority of creditors was a commercial solution which was reasonably open. Not only that, but the decision of the creditors was made in the face of a misleading campaign by solicitors on behalf of the petitioning creditor who sought, in my view, to misrepresent the true position as to the Supreme Court proceeding.
It has been put to me on behalf of the petitioning creditor that the Supreme Court action is lacking in merit. In my opinion it is not incumbent on the debtor in the present setting to treat this application as a kind of summary judgment application and produce evidence to support the case made out in the Supreme Court action. The fact is that the case has been on foot for more than two years. There have been nine interlocutory applications of various kinds before Masters but no application for summary judgment has been made by the defendants.
Having regard to that delay it seems that any such application made now, with a trial reasonably imminent, would be doomed to failure.
I see no reason to interfere with a decision of creditors which was unanimous except for the petitioning creditor. Those creditors included very large and experienced commercial organisations whose ability to look after their own interests in a business-like way is not to be doubted.
I think there is an element of public interest in allowing the Supreme Court proceedings to go unimpeded, particularly having regard to the comments made by Beach J in the earlier proceeding, to which I have already referred. For those reasons, therefore, I uphold the debtor's application.
Once the deed is filed with a verifying affidavit there will be an order that the petition be dismissed, with no order as to costs, but I order that the petitioning creditor pay the debtor's costs of the application under s.206.
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