Re Mauro Gagliaroi v Ex Parte Michael Jaunay Mount

[1984] FCA 447

Re: MAURO GAGLIARDI
Ex Parte: MICHAEL JAUNAY MOUNT
No. G27 of 1984
Bankruptcy - Words and Phrases
57 ALR 718 / 5 FCR 52

COURT

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY
GENERAL DIVISION
Fox(1), Woodward(2) and Davies(3) JJ.

CATCHWORDS

BANKRUPTCY - Deed of assignment - Failure of chairman of meeting to sign ("forthwith") certificate as to passing of resolution - Failure of trustee to give notice of deed and file "forthwith" - Whether deed void - Whether time limit of "forthwith" can be extended - Whether a "defect or irregularity" under s.306 of Bankruptcy Act 1966.

Bankruptcy Act 1966 - ss.33(1)(c), 204, 213, 218, 222, 306.

Bankruptcy - Deed of assignment - Failure of chairman of meeting to sign "forthwith" certificate as to passing of resolution - Failure of trustee to give notice of deed and file "forthwith" - Whether deed void - Whether time can be extended - Whether failure a defect or irregularity - Bankruptcy Act 1966 (Cth), ss 33(1)(c), 204, 213, 218, 222 and 306.

Words and Phrases - "Forthwith" - Whether limitation of time - Bankruptcy Act 1966 (Cth), ss 204(7)(a) and (b), 218(1)(a)(ii).

HEADNOTE

Held: (1) The requirements of ss 204(7)(a) and (b) and 218(1)(a)(ii) respectively of the Bankruptcy Act 1966 that the chairman of a meeting of creditors "forthwith" sign and file a certificate of the passing of a special resolution, and advertise the execution of a deed under Pt X are requirements which contain a limitat ion of time which is capable of extension pursuant to s 33(1)(c).

(2) Failure to observe the requirements does not affect the validity of a deed under Pt X.

HEARING

Adelaide, 1984, September 7; December 14. #DATE 14:12:1984

APPEAL

Appeal from judgment and orders of St John J.

H. C. Williams QC and J. Taylor, for the appellant.

Having regard to the power of the court to extend time in s 33 and the treatment of irregularities in s 306 and steps which have been taken to notify creditors and the Registrar, it is submitted that the court should declare that the deed not be void under s 222. The issue decided by St John J. was that an act required by Pt X. of the Bankruptcy Act 1966 (Cth) to be done "forthwith" could not be the subject of an extension of time under s 33. His Honour would have been inclined to extend the time but for his decision that it was not possible. The appellant submits that the expression "forthwith" imports a requirement reflecting a concept of time and that an extension of time should be granted and that irrespective of the construction of "forthwith" the Deed in the circumstances should not be declared void under s 222 either in the exercise of a discretion or alternatively upon the basis that there has been sufficient compliance so as to allow s 306 to operate. (He referred to some factual matters.) There is a difference between the process of construing "forthwith" and the process of applying the effect of that construction to a particular set of circumstances. The appellant submits that "forthwith" is an adverb of time and not of manner and that the expression "forthwith" has been treated as a matter of practice as the fixing of time for the purposes of the rules of the court. Attention is directed to the distinction between the procedure for termination of a deed under s 236 and the declaratory procedure of s 222. It is submitted that a deed, although to some extent formally irregular, will be treated by the court as a valid deed and will not easily be set aside except for substantial reasons. Re Lehmann (1932) 5 ABC 216 at 223 It is submitted that in the application of s 306 the procedure of Pt X. will be treated as a "proceeding". Re Stark (1959) 18 ABC 103 at 105 and see ss 5 and 30. No substantial injustice would result by allowing the appeal. The approach of Re Muscovitch (1939) 1 Ch 694 as to the right of the court to extend a time limited by "forthwith" if non-compliance is not to be treated in the circumstances as an irregularity.

M. L. Robertson, for the respondent.

A deed of assignment is void unless it is entered into in accordance with Pt X. and it complies with Pt X. Section 204(7)(a) and (b) requires the chairman of the meeting to perform any acts therein specified forthwith and s 218(1)(a)(ii) requires the trustee to perform the acts therein specified forthwith. The word "forthwith" is used in both sections to mean "as soon as possible in the circumstances". Re Venetoulis; Ex parte Calsil Ltd (1976) 13 ALR 625 at 627; Re Levy; Ex parte Scholefield, Goodman & Sons Ltd (1981) 50 FLR 99 at 114 Section 33(1)(c) does not grant power to the court to extend time for the performance of an act where that act is required to be performed forthwith. Its language consigns the power to extend time to circumstances where the particular provision of the Act specifically identifies when the time is to commence and when it is to conclude. This construction is supported by the expression "extend before its expiration or . . . after its expiration" used in s 33(1)(c). By the use of that expression "forthwith" Parliament stipulated that the performance of the act referred to should be effected promptly. It would be inconsistent for Parliament on the one hand to emphasise the importance of prompt action and on the other to allow a general provision permitting the extension of time for performing the act to operate. As there is no power to extend the time for performance of the acts referred to, the deed of assignment is void pursuant to the provisions of s 213.

Cur adv vult

Solicitors for the appellant: Randle & Co.

Solicitors for the respondent: Ian Low & Partners.

GFV

ORDER

1. The appeal be upheld.

2. The orders of St. John J. be set aside.

3. The matter be remitted to a single judge of the Court to be dealt with according to law.

Appeal allowed

No order as to costs

JUDGE1

We are hearing an appeal from a decision of St. John J. in an application by Mr. Mount, who is the trustee appointed under a deed of assignment executed by the debtor, Mr. Gagliardi. The respondents are the Registrar in Bankruptcy for South Australia and South Australian Carpet Disposals Pty. Ltd. The latter appeared by counsel, who intimated that his client did not wish to put argument before the Court and sought and was granted leave to withdraw. There were before his Honour three applications. One, by Mr. Mount, was dated 18 April 1984, and he there sought a declaration that the deed be declared not void, and for an order extending times for filing and for publishing certain documents. One was by the Registrar dated 6 June 1984 for a declaration that the deed be declared void for failure to comply with the requirements of the Act concerning the time for filing one document and for publishing another, and on other grounds with which the learned judge did not find it necessary to deal. The third, dated 18 June 1984 was by a creditor, South Australian Carpet Disposals Pty. Ltd. which also sought a declaration that the deed be declared void, in part on the footing that the time requirements mentioned were not complied with, and asked that a sequestration order be made. The application by Mr. Mount was the subject of a notice of opposition by the Registrar dated 15 June in which he pleaded that the times could not be extended. Apparently it was accepted that if this were so, the deed should be declared void.

His Honour ordered that the deed (which had been amended) be declared void; that Mr. Mount pay the costs of the Registrar, the debtor, and South Australian Carpet Disposals Pty. Ltd.; that pending notification of the appointment of a new trustee, the property be held secure by Mr. Mount, and that the application for a sequestration order be adjourned generally, with liberty to restore. It is not apparent in which one or more of the proceedings these orders were made, but seemingly the declaration avoiding the deed was treated as relative to all proceedings.

The single question argued before us was whether the times limited by "forthwith" could be extended. This was treated before his Honour as a threshold question.

It is common ground that the trustee, as chairman of the meeting of creditors, failed "forthwith" to sign a certificate that the resolution had been passed, as required by s.204 (7)(a) of the Bankruptcy Act 1966, and had failed "forthwith" to cause the certificate to be filed (s.204(7)(b)). The meeting took place on 13 January 1984, but the certificate was not signed until 18 April. It was lodged in the Registry on that day, but was not accepted, as being out of time. The deed was executed by the debtor and the trustee on 31 January. Notice of its execution was not published "forthwith" as required by s.218(1)(a)(ii); but it was published on 21 April in a prescribed newspaper and on 8 May in the Gazette. It was not until 18 April that a copy of the deed and a copy of the statement of affairs were filed in the Registry, although twenty-one days after execution is the time prescribed by s.218(1)(b). The evidence of the trustee is that administration of the debtor's affairs under the deed had "otherwise" progressed normally and in accordance with the wishes of the majority of the debtor's creditors.

The application to extend time was made on 18 April, in reliance upon s.33(1)(c) of the Act. The merits of the application were not the subject of a decision by his Honour, but he held that where time was limited by "forthwith" there was no power to extend time, having in mind that no fixed or certain number of days, or fixed time, was prescribed. The difficulty seen to exist was the use of the indefinite "forthwith". His Honour did not give any formal reasons as to the view he took on this aspect, or on the question why an order should be made declaring the deed void. It would seem from a transcript of the argument before him that he was of the opinion that the making of that order (under s.222(2)) was a consequence of the acts mentioned being out of time, and of there being no power to extend time. He did express the view, at one stage, that if he could, he would have applied s.33(1)(c). The application in relation to s.218(1)(b), where the number of days is fixed, was not dealt with.

In agreement with Woodward J. and Davies J., I am of the view that the use of the adverb "forthwith" is not fatal to an extension of the time it denotes in a particular case being granted under s.33(1)(c). There seem to me to be two respects in which the question could in theory be relevant in this case. One is to excuse the trustee for failure to comply with the provisions of the Act which I have mentioned. The other is to escape a decision that the deed of assignment is void, or, conversely, to have the benefit of a declaration that it is not void. As to the first, the proceedings do not raise a question of the personal liability of the trustee, although it seems from the argument before his Honour that a principal purpose in the making of the application by the trustee is to avoid any personal liability. As to the second, failure to comply with the time requirements does not in my view go to the validity of the deed.

It would, I think, need the expression of a clear legislative intention before the failure of a trustee to do the specified acts in time would invalidate a solemn transaction between a debtor and his creditors. Under s.204(7) what is required of the trustee is that he sign a certificate of the passing of the special resolution, and cause it to be filed in the Registry. This is machinery. Immediacy is required, so that there may be notice to others searching the register, such as, for example, a creditor petitioning for a sequestration order. The failure to file promptly may have its consequences, and the trustee may well be ordered to pay the costs of an application or applications to unscramble the position. There is, however, no reason why his failure to act in time should make the deed void. The Registrar should have allowed the certificate to be filed, if it was otherwise in order, notwithstanding the lapse of time. Section 218(1)(a) is concerned with notice. The failure to give the notice to creditors required by s.218(1)(a)(i) could conceivably have serious results, but it is the trustee, if anyone, who has to suffer liability for the consequences of that failure (cf.ss.212, 212B of the Act).

Section 222 makes specific provision for declaring void deeds of assignment, and deeds of arrangement. It is I think apparent from the existence of this section, and its terms, that failure to satisfy time requirements such as those I have been discussing does not itself lead to a deed of assignment being void. Moreover, the words in sub-s. (1) "complies with the requirements of this Part" do not apply to such irregularities. A "doubt" to which the sub-section has reference is a doubt relating to the substantive matters with which Part X deals. There is not much scope for "doubt" whether something was done "forthwith" and virtually none when a specified number of days is involved; the doubt is not as to effect in law but whether something "was entered into in accordance with this Part or complies with the requirements of this Part". The remaining parts of the section show that the matters with which it is concerned relate to matters of substance, such as for example those affecting the convening of the meeting; the presentation of the statement of affairs; the passing of the resolution and the execution of the deed.

It is not necessary for me to discuss s.306, except to say that it is a saving and not an invalidating provision.

I would therefore allow the appeal, set aside the orders made by his Honour and remit the matters for further hearing by the learned judge or another judge of the Court. I would make no order as to costs.

JUDGE2

This appeal questions the effect of the appellant's failure to observe certain requirements of the Bankruptcy Act 1966 ('the Act') after he had chaired a meeting of the respondent debtor's creditors and been appointed trustee of a deed of assignment under Part X of the Act.

The relevant facts, which are not in dispute, can be conveniently tabulated in chronological sequence as follows:

1983

Dec 22 Notice of meeting of creditors.

1984

Jan 13 Meeting of creditors. Appellant appointed chairman. Resolutions passed requiring assignment under Part X of the Act and appointing appellant trustee of deed of assignment.

Jan 16 Estate put in funds.

Jan 18 Appellant instructs his clerk to prepare documents required under ss.204 and 218 of the Act.

Jan 20 Minutes of meeting (incorporating above resolutions) signed by appellant as chairman.

Jan 24 Minutes filed with Registrar in Bankruptcy.

Jan 31 Deed of assignment executed by respondent debtor and appellant.

Feb 6 Appellant signs certificate as to passing of special resolution.

Feb 10 Notice of execution of deed and circular letter posted by appellant to each creditor. Appellant instructs his clerk to file documents and arrange for advertising.

Mar 28 Appellant becomes aware that documents have not been filed. Apr 18 Documents lodged with Registrar who refuses to accept them for filing. Appellant applies to Federal Court.

Apr 21 Notice of execution of deed published in Adelaide Advertiser.

May 8 Same notice published in Australian Government Gazette.

July 3 Matter comes before St. John J.

There were three applications before St. John J. The first, by the present appellant, sought an order that the deed of assignment "be declared not void" pursuant to s.222(2) of the Act. In addition, or alternatively, orders were sought extending the time limited by

(a) s.204(7) of the Act for

(i) the signing by the appellant of the certificate as to passing of the special resolution, and

(ii) the filing of that certificate in the office of the Registrar, and

(b) s.218(1) of the Act for

(i) the notice of execution of the deed of assignment to be published in the Australian Government Gazette and an appropriate newspaper, and

(ii) a copy of the deed to be filed in the office of the Registrar.

The second application, by the Registrar in Bankruptcy, sought an order that the deed of assignment be declared void by reason of the failure to comply with three time limits imposed by the Act - these being the same time limits as the appellant sought to have extended and which are described in sub-paragraphs (a)(ii) and (b)(i) and (ii) above.

This application further sought orders that the deed be declared void on the additional grounds that it was not the subject of a valid special resolution in accordance with s.204(1)(b) of the Act and that there had been a failure to include certain items of property in the statement of affairs of the debtor filed for the purposes of s.195(2) of the Act. In the events which occurred these grounds were not dealt with by St. John J and are not before this Court.

The third application was by a creditor of the respondent, South Australian Carpet Disposals Pty. Ltd. It, in effect, repeated the application of the Registrar in Bankruptcy and sought also an order that the deed be declared void, pursuant to s.222(4)(a) of the Act, by reason of false information given on behalf of the debtor to the meeting of creditors. This application also sought a sequestration order pursuant to s.222(7) of the Act. This application also was not finally dealt with by St. John J and is not before this Court.

When the matter came before St. John J, his Honour, after hearing a brief argument, held that he had no power to extend the first three of the times as sought by the applicant and accordingly declared the deed of assignment void and made certain consequential orders. He adjourned the application for a sequestration order to enable a fresh meeting of creditors to be called and a fresh trustee appointed. In fact no such steps have been taken pending this appeal.

The relevant parts of those sections of the Act which set out the responsibilities of a person in the appellant's position and provide possible consequences of, and remedies for, default are as follows:

"s.33(1) The Court may -

. . . . .

(c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time."

"s.203(1) The chairman shall cause minutes of the proceedings at a meeting under this Division to be prepared and shall sign the minutes not later than 14 days after the date of the meeting.

(2) If the chairman dies without having signed the minutes or becomes incapable, whether through illness or other cause, of signing the minutes as required by sub-section (1), the controlling trustee or the solicitor who called the meeting, if he attended the meeting, or a creditor who attended the meeting may sign the minutes in place of the chairman.

. . . . .

(4) Where minutes of the proceedings at a meeting under this Division are prepared and signed in pursuance of this section, or a minute referred to in sub-section (3) is prepared and signed in pursuance of that sub-section, the controlling trustee, or the solicitor who called the meeting, shall, within 21 days after the day on which the meeting was held, cause a copy of the minutes or minute, as the case may be, to be filed in the office of the Registrar."

"s.204(1) The creditors may, at a meeting called in pursuance of an authority under section 188, by special resolution -

. . . . .

(b) require the debtor to execute a deed of assignment or a deed of arrangement under this Part . . . . ."

. . . . .

(7) Where the creditors pass a special resolution or a resolution under this section, the chairman of the meeting shall -

(a) forthwith sign a certificate to that effect in accordance with the prescribed form; and

(b) forthwith cause the certificate to be filed in the office of the Registrar.

(8) If the chairman dies without having performed his duties under sub-section (7), or fails to perform those duties, the trustee or the solicitor by whom the meeting was called, or the controlling trustee (if any), may sign and file, or file, as the case requires, the certificate referred to in that sub-section."

"s.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."

"s.216(1) A deed of assignment or a deed of arrangement shall be executed by the debtor and the trustee within 21 days from the day on which the special resolution requiring the debtor to execute the deed was passed.

(2) The execution of the deed by the debtor and by the trustee shall be attested by a witness."

"s.218(1) The trustee of a deed of assignment or a deed of arrangement entered into in pursuance of this Part shall-

(a) forthwith after the execution of the deed by the debtor and the trustee-

(i) give notice of that fact, in accordance with the rules, to each creditor of the debtor; and

(ii) cause notice of that fact, and of the nature of the deed, to be published in the Gazette and in such other manner, if any, as is prescribed; and

(b) within 21 days after the execution of the deed by the debtor and the trustee - file a copy of the deed and a copy of the statement of the debtor's affairs referred to in section 195 in the office of the Registrar."

"s.222(1) Where there is a doubt, on a specific ground, whether a deed of assignment or a deed of arrangement was entered into in accordance with this Part or complies with the requirements of this Part, or whether a composition has been accepted by a special resolution of a meeting of creditors under section 204, the Registrar, the trustee, a creditor or the debtor may apply to the Court for an order under sub-section (2).

(2) Upon the hearing of an application made under sub-section (1), the Court may, subject to this section, make an order-

(a) declaring that the deed or composition is void, or that it is not void, on the ground specified in the application; or

(b) declaring that a provision of the deed is void, or is not void, on the ground specified in the application.

(3) The Court shall not make an order declaring a deed to be void on the ground that it does not comply with the requirements of this Part if the deed complies substantially with those requirements."

(4) Where the Court, on the application of the trustee or a creditor, is satisfied that the debtor -

(a) has given false or misleading information in answer to a question put to him with respect to his conduct, trade dealings, property or affairs at the meeting of creditors at which the resolution requiring him to execute the deed or accepting the composition was passed; or

(b) has omitted a material particular from the statement of his affairs under section 195 or included an incorrect and material particular in that statement, the Court may make an order declaring the deed or composition to be void or declaring any provision of the deed or composition to be void.

. . . . .

(10) Where in the course of proceedings before the Court (other than proceedings by way of an application under sub-section (1), the Court becomes of the opinion that there is a doubt, on a particular ground, whether a deed of assignment or deed of arrangement was entered into in accordance with this Part or complies with the requirements of this Part, or whether a composition has been accepted by a special resolution of a meeting of creditors under section 204, and that it is desirable that the doubt be resolved, the Court may direct the Registrar to apply to the Court under sub-section (1) for an order under sub-section (2) in relation to the matter."

"s.306(1) Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on the ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court."

It is clear, from the facts stated above, that the appellant, as chairman of the meeting of creditors, and as trustee appointed by that meeting, has failed

(a) to "forthwith sign a certificate" of the special resolution passed, as required by s.204(7)(a) - the delay was 24 days,

(b) to "forthwith cause the certificate to be filed in the office of the Registrar", as required by s.204(7)(b) - the delay before filing was attempted was three months, and

(c) to "forthwith after the execution of the deed" of assignment cause notices to be published in the Gazette, as required by s.218(1)(a)(ii) - the delay was over three months.

The main question to be decided in this appeal is whether the Court has power, under s.33(1)(c) of the Act, to extend the time for performance of the delayed actions. That provision empowers the Court to "extend . . . . after its expiration, any time limited by this Act for doing an act . . ."

It was argued for the Registrar, and accepted by St. John J, that to require an act to be performed "forthwith" is not to "limit" the time for that act to be performed, because no precise time is expressed.

With respect, I do not believe that this is correct. If the legislature had chosen to fix a period of some days for these acts to be performed, there could have been no doubt about the power of the Court to extend the time. No doubt the draftsman of the provisions was conscious of the difficulties posed by weekends, public holidays and the exigencies of individual cases, in avoiding a fixed short period and choosing, instead, to require the acts to be performed "forthwith" in the sense of "as soon as possible in the circumstances, the nature of the act to be done being taken into account" (see Re Ventoulis; Ex p. Calsil Ltd. (1976) 13 ALR 625 at 627, and Re Levy; Ex p. Scholefield Goodman and Sons Ltd. (1980) 50 FLR 99 at 114).

In my view this amounts to a limitation of the time within which the relevant acts are to be performed. It is not a limitation which expires at a precise time, but it is nonetheless a clear and intelligible restriction on the time which may be taken to perform the acts in question. Within a short time the period allowed does expire. There seems to be no reason in language or in logic why this restriction should not be relaxed by extending it in a particular case. The extension could be for a fixed period or take the form of requiring the act to be performed "forthwith" after the date of the order or some other date.

This view I have taken of the power to extend time would be sufficient to determine the result of the present appeal. The matter should be remitted to St. John J or, if that is not convenient, to another judge of the Court for further consideration in the light of all relevant circumstances. Among those which the appellant has indicated he will rely upon are

(a) the duplication of the relevant information in the minutes of the meeting which were filed with the Registrar,

(b) the size of the estate,

(c) the notice in fact given to creditors, and

(d) the fact that the administration has proceeded.

The judge to whom the matter is referred will no doubt wish to consider the other questions raised by the Registrar in Bankruptcy and the creditor, if they are pressed, before determining how he should exercise his discretion in this matter. St. John J did not find it necessary to deal with them, but they are matters which, if established, could provide grounds for a declaration under s.222 of the Act that the deed was void. They fall squarely within the provisions of s.222 because they relate to the information supplied to the meeting of creditors which accepted the concept of a deed of assignment.

On the other hand, I believe that the default of a chairman of a meeting of creditors in failing to sign or file a certificate of the passing of a special resolution, as required by s.204(7) of the Act, does not raise a doubt as to whether a deed of assignment "was entered into in accordance with" Part X of the Act (see s.222). Even less does it raise a doubt as to whether the deed "complies with the requirements" of that part.

A challenge to the validity of the meeting, or to the proceedings at the meeting, or to the framing of the special resolution, or to the form of the deed or the circumstances of its signing, may all fall within the wording of s.222.

But a failure to certify the passing of the resolution or to file that certificate does not, in my opinion, raise any doubt as to the entering into of the deed. The purpose of the certificate - as a warning to interested parties as to what is happening - is illustrated by the following sections of the Act, ss.205, 205A and 206, which set out the notice which is to be taken, by sheriffs, court officers and the Court, of the passing of a special resolution.

Still less can it be said that the deed fails to comply with Part X because of a failure on the part of the trustee to advertise the execution of the deed. On the contrary, s.228(1) of the Act provides

"A deed of assignment that is entered into in accordance with this Part and complies with the requirements of this Part is, upon being duly executed by the debtor and the trustee, binding on all the creditors of the debtor."

This provision is the obverse of s.222 and underlines the immediate validity of a deed once it is properly executed.

The Act provides no explicit answer to the question which arises in this case as to what remedies are open, either to the trustee, the Registrar or other parties, when the trustee has been dilatory in carrying out his obligations to publicize, by filing with the Registrar and advertising, the entry by the debtor into a deed of assignment.

The only apparently relevant provision appears to be the very generally expressed s.306, which provides that a proceeding under the Act (which, in my view, would include entry into a deed of assignment under Part X), will not be invalidated by an irregularity (which, in my view, would include late signing, filing or advertising as in the present case) "unless the court . . . . is of opinion that substantial injustice has been caused" which cannot be remedied by the court.

It would be in accordance with the general spirit of the legislation that, when debtor and creditors have entered into a deed of assignment, their wishes should not be frustrated by the negligence of the trustee. On the other hand it is important that the fact that a deed of assignment has been entered into should be properly recorded and publicized.

In my opinion the appropriate course for a trustee to take, when it becomes apparent that he has failed to comply with the requirements of the Act presently under consideration, is to take immediate steps to correct his default. The Registrar should accept late filing of the certificate required by s.204(7)(b). If the trustee feels that it is necessary to obtain sanction for his late compliance with the Act's requirements, he can apply to the Registrar for an extension of time pursuant to s.33(2)(c) of the Act. Such an application will normally be granted, but if the Registrar, in all the circumstances of the case, determines that the time should not be extended, then the trustee may apply to the Court. In an appropriate case, the Registrar or the Court may require notice to be given to other parties if there is reason to believe that the irregularity may have led to an injustice within the meaning of s.306 of the Act. The sanction, so far as a neglectful trustee is concerned, will lie in the trouble and expense of making application for an extension of time.

The Court cannot but take a serious view of the delay of the trustee in the present case, which continued even after the default of his clerk came to his notice. It is necessary, through appropriate orders as to costs, to reflect the Court's view of these delays and to deter other trustees from taking such a relaxed view of their responsibilities. For this reason I would make no order as to the costs of the present appeal even though the trustee has been successful.

Since there are other challenges which may be made to the deed of assignment, which are not before this Court, I believe that the appropriate orders would be that the appeal be upheld, the orders of the Court be set aside, and the matter remitted to a single judge of the Court to be dealt with according to law. There should be no order as to costs.

JUDGE3

I have had the opportunity of reading the reasons for judgement prepared by Mr Justice Woodward. I agree with his Honour's view that the adverb "forthwith" in s.218(1) of the Bankruptcy Act 1966 (Cth) imports a limitation of time which may be extended by an order made under s.33.

I agree also with his Honour's view that a default by a trustee under s.218 is not a default which affects the question "whether a deed of assignment . . . 'was entered into in accordance with' Part X . . . (or) complies with the requirements of that Part" for the purposes of s.222(1). Accordingly, the failure by the trustee in the present instance did not affect the validity of the deed or of the assignment. Section 228(1) provides that :

"228.(1) A deed of assignment that is entered into in accordance with this Part and complies with the requirements of this Part is, upon being duly executed by the debtor and the trustee, binding on all the creditors of the debtor.",

and s.229(1) provides that :

"229.(1) Subject to this section, the due execution by a debtor of a deed of assignment that is entered into in accordance with this Part and complies with the requirements of this Part operates to vest in the trustee forthwith, upon the trusts and for the purposes of the deed, all the divisible property of the debtor."

These provisions operate upon the execution of the deed notwithstanding a trustee's subsequent default under s.218.

A deed of assignment which is entered into in accordance with Part X and which complies with the requirements of the Part is valid and effective and may not be terminated by the Court by reason of a subsequent default on the part of the trustee. The Court may declare a deed of assignment to be void under s.222 in the circumstances there provided but has no power, similar to the power which it has under s.236 to terminate a deed of arrangement for "any other reason", to terminate an assignment. In my opinion, s.306(1), which is a saving provision, does not invalidate an assignment or confer a power upon the Court to invalidate an assignment by virtue of a default under s.218.

In my opinion, a trustee who has failed to act forthwith, as required by s.218, should remedy his default as soon as the default is brought to his notice. If in doubt as to an appropriate course of action, he should seek directions from the Court. Nevertheless, the only sanction for a default by a trustee under s.218 is a proceeding or order against him in respect of his default. I would add that such default may also be relevant to the exercise of the Court's discretions under s.222(2) and (4) if the Court is called upon to exercise either of them.

I agree with the order proposed by Mr Justice Woodward and with his Honour's reasons for judgment, save as to the operation of s.306.