Re Nichols, P.J - [1990] FCA 711

JUDGMENT No. .c).!.! .... :I...%!-

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IN THE FEDERAL COURT OF AUSTRALIA )

RE: PETER JOHN NICHOLS

CORAM: Burchett J.

PLACE: Sydney 18 DEC 1990

DATE : 3 December 1990 FEDERAL COURT OF

AUSTRALIA
PRINCIPAL

EX TEMPORE REASONS FOR JUDGMENT REGISTRY

BURCHETT J. :

In this matter, I have before me applications to set aside what is described as a deed of composition, and also to annul a bankruptcy on the footing that the sequestration order was made (on a creditor's petition) after the entry of the debtor into the deed. There is, too, an application, in the event that I set aside the deed, to make a sequestration order forthwith under the power which would then arise. Counsel, finally, as I understand their submissions, were agreed in submitting that if I came to that polnt, it would be open to me, as a matter of discretion, to decline to annul the bankruptcy. I could do so on the footing of futility, in that: I could hold I would, if I were to set it aside, immediately make a fresh sequestration order, either upon the creditor's petition or pursuant to the other power which I have mentioned.

First, I should say something about the deed, and about

the circumstances under which it came to be entered into. The deed of composition is executed by Mr Nichols, the debtor, and by the trustee, Mr Ward, who has since ceased be a trustee, so that the current trustee of the deed is the Official Trustee. The deed is dated 10 July 1989, and purports to be made in pursuance of Part X of the Bankruptcv Act 1966. The first clause provides that "the Trustee of this Composition shall be COLIN GEORGE WARD ... ." The second clause provides:

"m the Debtor pay into the Part X Estate an
amount calculated at 10C in the dollar of Creditors
[&l Claims admitted by the Trustee in the Estate.
Payments to be made by equal monthly instalments over a period of thirty (30) months, the first payment to be made one (1) month after the period of six (6) months from the date of this Deed."

The third clause then provides:

"m the Composition is based on the Chairman
rejecting the amount of $131,506.92 being the amount disputed by the Debtor in relation to the claim by the G.I.O. Holdings Limited in its Proof of Debt lodged in the sum of $144,007.70."

There follows a provision for the application of moneys to be received in the order prescribed by S. 109 of the Bankruptcy

1966, as if upon a bankruptcy, and a provision which reads

as follows:

"(T)his composition is made pursuant to Part X of
the Bankruptcy Act 1966."
The matter raised in cl. 3 was the subject of

considerable debate, apparently, at the meeting of creditors which led to the execution of the deed. At that meeting, the debtor denied he had signed the mortgage and, in particular, the guarantee…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

AGLC: Re Nichols, P.J [1990] FCA 711
Case: [1990] FCA 711
Decision Date: 3 Dec 1990

CaseChat Overview and Summary

In the Federal Court of Australia, the case of Re: Peter John Nichols involved applications to set aside a deed of composition and to annul a bankruptcy. The parties in the dispute were Peter John Nichols, the debtor, and G10 Holdings Limited, the creditor. The debtor had entered into a deed of composition with his trustee, Colin George Ward, on 10 July 1989. The composition was based on the rejection by the chairman of a significant claim by G10 Holdings Limited, which the debtor disputed. The legal issues before the court were whether the deed of composition was valid and whether the sequestration order made on a creditor's petition should be annulled.

The court held that the deed of composition was fundamentally flawed and unreasonable. The deed purported to exclude a significant debt from the composition without resolving the dispute over whether the debt was owed. This made the composition uncertain and unreasonable, as it did not provide for a fair sharing of available funds among creditors. The court found that the deed did not comply with the requirements of Part X of the Bankruptcy Act 1966 and was liable to be set aside. The sequestration order was also found to be one that ought not to have been made, given the invalidity of the deed.

In exercising its discretion under section 154 of the Bankruptcy Act 1966, the court decided to set aside the deed of composition and decline to annul the bankruptcy. The court reasoned that making a fresh sequestration order would be futile and unnecessary, as it would likely result in a similar outcome. The court also ordered that the costs of the applicant, G10 Holdings Limited, be paid out of the estate of the bankrupt.

Orders