Re Neal, R

[1994] FCA 735

7 3 s q+

JUDGMENT No. ..,., ,,,,l . . ,

NOT FOR DISTRIBUTION

FEDERAL COURT OF AUSTRALIA	1
NEW SOUTH WALES DISTRICT REGISTRY	) No. NB 3538 of 1991
GENERAL DIVISION	)

RE: RICHARD NEAL

c o w :	SACKVILLE J.
PLACE :	SYDNEY
DATE :	4 OCTOBER 1994

REASONS FOR JUDGMENT

HIS HONOUR: In this matter an application is made to the Court by Mr Brien, who is trustee of the estate of Richard James Neal. The trustee, as I shall call him seeks the following orders:

1. That a scheme of arrangement made on 24 August 1992 between Mr Neal and his creditors under s.73 of the Bankruptcy Act

   1966 ("the Act") be annulled pursuant to s.75(4) of the

The facts are not in dispute. The sequence of events appears to be as follows:

Act.

2 .    That a sequestration order be made against the estate of Mr Neal .

3.   That the costs of this application be paid out of the estate of Mr Neal.

1.    On 26 November 1991 a sequestration order was made against the estate of Mr Neal and the trustee was appointed as trustee of Mr Neal's estate.

1. After certain correspondence a scheme of arrangement was entered into between Mr Neal and his creditors, pursuant to s -73 of the Act. Pursuant to that scheme of arrangement the bankrupt was to pay his creditors 8 cents in the dollar, involving total payment of approximately $46,000. These amounts were to be paid by monthly instalments on the 9th day of each successive month. The instalments were to begin at $1000 per month during the period 9 September 1992 to 9 May 1993. Thereafter they were to increase to $3000 per month from 9 June 1993, until the total amount was paid.

2. As at 9 August 1993 Mr Neal had defaulted on instalments of

$3000 that were due in June, July and August of 1993.

Those instalments remain outstanding.

4.    On 11 August 1993 the trustee wrote to Mr Neal advising of the failure to make the payments in respect of instalments due under the scheme of arrangement.

5 .    On 31 August 1993 Mr Neal responded advising that he could make no further payments. He stated his understanding that he might well be made bankrupt again as had been explained by telephone to him in the course of other conversations.

6.   At a meeting on 12 July 1994 Mr Neal's creditors passed a resolution to terminate the scheme of arrangement. The minutes of the meeting are in evidence.

In these circumstances it is clear that the terms of
S. 75(4)(a) of the Act have been satisfied. That section reads
as follows:

"If (a) default is made in any respect under such composition or scheme of arrangement the court may, if it thinks fit, on application by the trustee or a creditor, annul the composition or scheme of arrangement."

Mr Neal has pointed out that one effect of the annulment of the

scheme of arrangement and the making of a sequestration order (which is also sought by the trustee) is that he will be discharged from his bankruptcy later than would have been the

case had he not entered into the scheme of arrangement in the

first place. While this may be the result of what has occurred,

I do not think this is a ground for declining to make the order

sought by the trustee. It may be that in due course Mr Neal will be able to apply for an early discharge of his bankruptcy. However, this must depend upon circumstances prevailing at the time and the application of the statutory provisions relating to early discharge. The fact of the matter is that a scheme of arrangement was entered into and there has been default in its terms.

Accordingly, I propose to make the orders sought by the trustee.

I also propose, pursuant to section 75(6) of the Act, to make a

sequestration order. That subsection permits the court to do so forthwith where the scheme of arrangement has been annulled. Accordingly, I make the following orders:

1.	The scheme of arrangement made on 24 August 1992 and which is referred to in annexures E and F to the affidavit of Richard Campbell Brien sworn 30 August 1994 be annulled.
2 .	A sequestration order be made against the estate of Richard James Neal.
3.	The costs of this application be paid out of the estate of Richard James Neal wlth the priority provided for in the Bankruptcy Act 1966.

Those are the orders of the Court. I certify that this and the preceding 3

pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville.

1 -. L -

Associate:  C L. -c.c - I

,

Dated: 11 October, 1994

Heard:	4 October 1994
Place:	Sydney
Decision:	4 October 1994
Appearances:	Mr Bainy, instructed by Kemp Strang & Chippindall, Solicitors appeared for the Official Trustee in Bankruptcy
Mr Neal appeared in person.