Re Paul Fletcher Moulton Ex Parte The Law Society of New South Wales

Re: PAUL FLETCHER MOULTON
Ex Parte: THE LAW SOCIETY OF NEW SOUTH WALES and BENEFICIAL FINANCE
CORPORATION LIMITED
No. W 122 of 1984
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Neaves J.

CATCHWORDS

Bankruptcy - Authority authorising trustee to call creditors' meeting for purposes of Part X of the Bankruptcy Act 1966 - Resolution accepting composition - Whether composition within definition in sub-section 187(1) of the Act - Whether resolution passed by requisite majority in value - Whether material particulars omitted from, or stated incorrectly in, statement of affairs - Composition declared void and summary sequestration order made.

Bankruptcy Act 1966, ss 156A, 160, 187, 188, 198, 201, 222, 239.

HEARING

SYDNEY

#DATE 20:12:1984

ORDER

1.Service on the debtor of the application dated 20 July 1984 of Beneficial Finance Corporation Limited be dispensed with.

2.The composition put to a meeting of the debtor's creditors held on 29 June 1984 be declared void.

3.A sequestration order is made against the estate of the debtor.

4.It be declared that the Official Trustee in Bankruptcy is the trustee of the estate of the debtor.

5. The costs of the applicants be taxed and paid out of the estate of the debtor as if they were the costs of a petitioning creditor.

6.The costs of the trustee appointed for the purposes of the composition at the meeting of creditors held on 29 June 1984 be taxed and paid out of the estate of the debtor.

JUDGE1

The Court has before it two applications which were heard together. The applicants are The Law Society of New South Wales ("the Law Society") and Beneficial Finance Corporation Limited ("Beneficial Finance"). Each application seeks an order setting aside a composition under Part X of the Bankruptcy Act 1966 ("the Act") between Paul Fletcher Moulton ("the debtor") and his creditors. The application by the Law Society also seeks a sequestration order against the estate of the debtor.

In seeking orders setting aside the composition the applications adopt the language of sub-section 239(1) of the Act. During the course of the hearing, however, it was submitted by counsel for the applicants that it would be more appropriate in the circumstances for an order to be made under section 222 of the Act declaring the composition void.
In support of the applications it was submitted that the resolution put to a meeting of the creditors of the debtor on 29 June 1984 that the composition be accepted was not passed by at least three-fourths in value of the creditors present personally, by attorney or by proxy at the meeting and voting on the resolution (sub-section 204(1)). Alternatively it was submitted that the debtor omitted material particulars from the statement of his affairs under section 195 of the Act or included incorrect and material particulars in that statement (see paragraph 222(4)(b)). A further alternative submission was that the composition should be set aside as not being in the best interests of the creditors.
On 7 June 1984 the debtor, pursuant to section 188 of the Act, signed an authority authorising Mr Kevin Richard Shirlaw, a registered trustee, to call a meeting of his creditors for the purposes of Part X of the Act and to take over the control of his property. Mr Shirlaw consented, in writing, to exercise the powers conferred by the authority and called a meeting of the debtor's creditors in accordance with Division 2 of Part X of the Act.
On the same day, 7 June 1984, the debtor swore an affidavit verifying an annexed statement of affairs in accordance with Form 11 in Schedule 1 to the Bankruptcy Rules. The debtor swore that the annexed statement of affairs contained to the best of his knowledge and belief a true and complete statement of his affairs as at 7 June 1984. The summary disclosed an amount of $355,276 owing to creditors (all being unsecured), assets of $250 (identified in Part V of the statement as cash at bank) and a deficiency of $355,026.
The statement of affairs disclosed the following unsecured creditors and the amounts of their respective debts -

Name Amount of Debt $ AGC Advances Limited 3,000 (A/C P1011031358)

Australia and New Zealand Banking 4,277 Group Limited: Gold Card A/C No. 3935 47225

Amona Furniture and Joinery Pty 1,192 Limited

Bergman and Reeve, Solicitors 1,272 Custom Credit Corporation 7,000 Limited

D and B Eastern Units Pty Limited 4,000 Diners Club Limited 515 Esanda Limited. A/C 13,492 No. 1-4354-18-Q-01678

Peter R Murphy and Co. 6,700 Law Society 35,000 Peters Nursery Pty Limited 413 Prompt Tax Returns 1,740 Carolyn C Simpson 675 Richard Stanton and Sons Pty Limited 1,194 Rogers and Co Pty Limited 3,645 Telecom Australia 1,599 Alexander R and Joy N Selman 15,465 Westpac Banking Corporation, 4,687 Bankcard

Westpac Banking Corporation 38,156 H. Rose 14,500 T E Hampson 20,000 S Franklin 26,000 Cartwright and Associates 754 William Glenn Stott and Nancye (No amount stated) Campbell Stott

E J Hopper 90,000 P R Moulton 60,000 $355,276

Paragraph 4 of Part VII of the prescribed form of statement of affairs requires particulars to be furnished of contingent liabilities and liabilities not specified in a previous part of the statement. Under that paragraph the debtor disclosed a number of personal guarantees as follows -

Beneficial Finance Corporation $480,000 Limited on account of Leymar Packaging Pty Limited

Gemma Muscat 25,000 Philomena Muscat 27,000 Joyce Gemma Begine (No amount stated)

In paragraph 5 of that Part of the statement the debtor disclosed as contingent assets not included in a previous part of the statement -

Right of indemnity from joint $480,000 guarantors to Beneficial Finance Corporation Limited

Right of indemnity from insurers 52,000

The statement of affairs also disclosed that the debtor had during the preceding five years carried on business in partnership as a solicitor.
The meeting of creditors took place on 29 June 1984. Mr B.H. Smith was elected chairman.
The minutes of the meeting, signed by the chairman, record those present at the meeting. Against the names of some of those present amounts of money are shown, presumably representing the amount claimed to be owing by the debtor to that person or to the creditor that the person represented. That part of the minutes reads -

Mr B H Smith - on behalf of the Controlling Trustee

Mr P F Moulton - Debtor

Mr K. Roberts - Debtor's accountant Mr D. Richardson - Norton Smith and Co Mrs Fisker (sic) - Representing the Law Society $63,950 Mr Dewick - Representing Rogers and Co Pty Limited 3,645 Mr T. Hampson - Representing himself 20,000 Mr I.S. Bowden - Representing D and B Eastern Units Pty Limited 4,000 Mr Nyham - Representing Beneficial Finance Corporation Limited Unknown Mr E Hopper - Representing himself 140,470 $232,065

The minutes further record that Mr B.H. Smith tabled the following proxies -

Name of Creditor In favour of Amount $ John F Moulton Kevin Roberts Nil Philip R Moulton Kevin Roberts 93,640 Paul G Riik Kevin Roberts 1,740 Amona Furniture Chairman 1,192 Peter R Murphy and CoChairman 6,700 Helene M Rose Chairman 14,500 Stephanie S Franklin Chairman 26,000 Glen W Scott David Richardson 13,600 Australia and New David Richardson 26,000 Zealand Banking

Group Limited

$183,372

According to the minutes the debtor then reported to the meeting upon the circumstances leading to his financial position, the debtor making available to those present a written statement as to those circumstances.
The statement revealed that the debtor had been admitted to practise as a solicitor of the Supreme Court of New South Wales in August 1962 and that between 1962 and 1980 he had built up a large conveyancing practice. It was also stated that between 1968 and 1975 he had purchased four grazing properties and built up a charolais cattle stud and an Arab horse stud. He was also involved in companies engaged in purchasing and developing properties in the Sydney metropolitan area. Following a disagreement with others involved, the debtor took over the assets and liabilities of certain of those companies. Difficulties arose in obtaining the necessary development approvals. At the same time he was sub-dividing and selling properties in Queensland. Many of his properties including those held in company names were financed by loans made to the debtor by persons for whom he was acting as a solicitor. The Law Society investigated the circumstances in which such loans were made and as a result the debtor commenced to dispose of approximately $1,200,000 worth of property. The Statutory Committee of the Law Society found that the debtor had acted improperly in obtaining the loans and imposed a fine of $1,000. On appeal the Court of Appeal in New South Wales ordered that the debtor's name be struck off the roll of solicitors: Law Society of New South Wales v. Moulton (1981) 2 NSWLR 736. The debtor said that at the time that his source of income thus ended abruptly he owed substantial debts including legal fees. He then sold his house. He further said that at that time he had several other investments which he expected would realise approximately $1,000,000 over a period of eighteen months but that that expectation had not been realised.
The debtor's statement of affairs was then tabled and the debtor answered questions put to him. After recording certain further discussion, the minutes record the following under the heading "Resolutions" -

"As no further discussion was required by the meeting, the following resolutions were put forward by the chairman.

SPECIAL RESOLUTION

'That the creditors of Paul Fletcher Moulton accept a composition under Part X of the Bankruptcy Act 1966, the terms of which are set out hereunder:-

a. The composition to be continued for a maximum period of four months from 29th June 1984 or as extended by creditors in general meeting.

b. That within 90 days of the date of the composition the Trustee receives from Mr J F Moulton cash in the sum of $16,500.

c. At the expiration of the 4 month period, or as extended by credtiors in general meeting, payments made to creditors are to be accepted as in full settlement of the claims of those creditors as at 29th June 1984.

d. The composition to terminate by the 4 month period, or subsequent period as extended by creditors, having elapsed.

e. The Trustee is given power to call a meeting of creditors as he considers necessary'.

Proposed by: Mr K Roberts Seconded by: Mr M E Hopper

Mr Nyham refrained from voting.

Mr Richardson and Mrs Fisker (sic) representing 3 creditors in number and $103,550 in value, voted against the resolution. The resolution was passed by the remaining 10 creditors entitled to vote and representing $311,887 in value.

ORDINARY RESOLUTIONS

1. 'That Mr Kevin Richard Shirlaw of 20th Floor, 68 Pitt Street, Sydney be appointed Trustee for the purposes of conducting the composition'.

Proposed by: Mr Hopper Seconded by: Mr Dewick

Messrs Nyham and Richardson and Mrs Fisker

(sic) refrained from voting.

The resolution was passed.

2. 'That remuneration to the Controlling Trustee be paid according to the current rates of the Insolvency Practitioners Association of Australia and that his expenses be paid'.

Proposed by: Mr Hopper Seconded by: Mr Dewick

Messrs Nyham and Richardson and Mrs Fisker

(sic) refrained from voting

The resolution was passed."

Although the meeting had been held on 29 June 1984, a certificate that the resolutions had been passed was not signed by the chairman of the meeting until 11 July 1984 and it was not filed in the office of the Registrar in Bankruptcy until 17 July 1984. No question was, however, raised whether the signing and filing was carried out "forthwith" after the passing of the resolutions as required by sub-section 204(7) of the Act.
On 20 July 1984 the two applications presently before the Court were filed. The application made by the Law Society and the supporting affidavit were served on the debtor on 24 August 1984. The debtor, however, did not appear at the hearing and was not represented. The application made by Beneficial Finance was not served on the debtor and the Court was asked to exercise the power conferred by sub-sections 222(8) and 239(3) and dispense with service on the debtor of notice of the application. As the other application was served on the debtor and the two applications raise substantially the same issues it is, in my opinion, appropriate to dispense with service on the debtor of the application made by Beneficial Finance and I so order.
Before considering the arguments that were advanced in support of the orders sought, some reference should be made to the terms of what was proposed as a composition between the debtor and his creditors under Part X of the Act. A composition for the purposes of Part X of the Act is defined in sub-section 187(1) to mean -

"an arrangement (not being an arrangement entered into for the purposes of a proclaimed law) by which the creditors of a debtor -

(a) agree to accept payment of the debts due to them by instalments; or

(b) agree to accept, in full satisfaction of the debts due to them, less than the full amount of those debts, whether in the form of money or other property and whether by instalments or otherwise."

The terms of the composition put to the meeting of creditors on 29 June 1984 envisage that the trustee would receive within 90 days of the date of the composition the sum of $16,500 in cash from Mr J.F. Moulton, a brother of the debtor, for distribution amongst the creditors. Although the minutes of the meeting record that Mr E.J. Hopper (a friend of the bankrupt and a creditor for $90,000) and Mr P.R. Moulton (a brother of the debtor and a creditor for $60,000) would stand aside their combined claims of $150,000 plus interest, there is no mention of this in the composition itself.
The composition is expressed to continue for a maximum period of four months from 29 June 1984 or such extended period as the creditors might agree upon in general meeting (clause a). At the expiration of thatperiod, or any agreed extension, the composition is to terminate (clause d). I was informed that the period of four months had not been extended by the creditors in general meeting so that, according to its terms, the composition had terminated prior to the hearing of the present applications. I was also informed that the sum of $16,500 had not been paid to the trustee though it was said that payment had been withheld pending the outcome of these proceedings.
I have grave doubts whether the composition is properly described as a composition within Part X of the Act and it may well be void on that account: Re Venetoulis; Ex parte Calsil Ltd. (1976) 13 ALR 625 at p 633. However, as the matter was not argued I shall not consider the point further but proceed on the basis that what was proposed was a composition within the meaning of Part X of the Act.
I turn then to a consideration of the question whether the resolution that the composition be accepted was passed by the requisite majority of creditors. The relevant parts of the minutes of the meeting have already been set out. By virtue of sub-section 225(4) of the Act, those minutes, which have been signed in accordance with section 203, are prima facie evidence of the proceedings at the meeting. The certificate of the passing of the special resolution to which reference has been made is also prima facie evidence that the special resolution was duly passed at the meeting (sub-section 225(1)).
The minutes record that three creditors representing $103,550 in value voted against the resolution. The inference may be drawn from what appears in the minutes that those creditors and the amounts of their respective debts were -

The Law Society $63,950 William Glen Stott and

Nancye Campbell Stott 13,600 Australia and New Zealand Banking Group Limited 26,000 $103,550

It may also be inferred from those minutes that the ten creditors representing $311,887 in value who are recorded as voting in favour of the resolution were the creditors other than those mentioned above whose names appear in the minutes as having been present personally, by attorney or by proxy. This may be demonstrated by adding the totals of $232,065 and $183,372 appearing in the parts of the minutes that record those present and the names of the creditors who had lodged proxies and substracting therefrom the amount of $103,550 referred to above. If those figures are accepted, the creditors voting in favour of the resolution would have represented in value 75.07 per centum of the value of the debts of all creditors present and voting at the meeting and the resolution would have been validly passed as a special resolution.

What took place at the meeting of creditors is also deposed to by Fay Anne Frischer in her affidavit sworn 19 July 1984. Mrs Frischer describes herself as the Recoveries Officer for the Fidelity Fund of the Law Society. She attended the meeting of creditors on 29 June 1984 on behalf of the Law Society. She says that, when the motion for acceptance of the composition was put to the meeting, four creditors whose debts totalled $108,881.97 voted against the resolution while creditors whose debts totalled $397,896 voted in favour. Mrs Frischer concludes from this that the resolution was not passed by at least three-fourths in value of the creditors voting on the resolution. This conclusion cannot, however, be supported. If the total value of the debts of the creditors voting on the resolution was $506,778 ($108,882 + $397,896), the creditors whose debts totalled $397,896 represented 78.5 per centum.

According to Mrs Frischer the debts totalling $397,896 included the debt of $90,000 due to Mr E.J. Hopper and the debt of $60,000 due to Mr P.R. Moulton as shown in the debtor's statement of affairs. The debtor, according to Mrs Frischer, informed the meeting that those debts carried interest, in the case of the debt due to Mr Hopper interest at the rate of 16 per centum per annum for three years, and in the case of the debt due to Mr P.P. Moulton interest at the rate of 14 per centum per annum also for three years. The chairman, she says, then increased the debts due to Mr Hopper and Mr P.R. Moulton by $42,000 and $25,000 respectively as representing such interest and, in consequence, increased the total monetary value of the creditors who had voted in favour of the resolution to $465,096. The latter figure represented at least three-fourths in value of the creditors voting on the resolution and, in consequence, the resolution was passed by the requisite majority.
To support the contention that the resolution had not been passed by the requisite majority in value, counsel for the applicants pointed to the amounts of interest which had been added to the debts of Mr Hopper and Mr P.R. Moulton as disclosed in the debtor's statement of affairs, contending that those amounts exceeded the amounts properly due. Thus, if one accepts that the principal sums due to Mr Hopper and Mr P.R. Moulton were $90,000 and $60,000 respectively, the figures shown in the minutes are explicable only on the basis that amounts of $50,470 and $33,640 were added by way of interest making the debts $140,470 and $93,640 respectively. Counsel submitted, however, that interest on a debt of $90,000 at 16 per centum per annum for three years amounted to $43,200 (cf, $42,000 referred to in Mrs Frischer's affidavit) not $50,470 as mentioned above, making the total indebtedness to Mr Hopper $133,200 and not $140,470 as shown in the minutes. Similarly, it was submitted that interest on the debt of $60,000 at 14 per centum per annum for three years (that being the rate that, according to Mrs Frischer's affidavit, the debtor nominated) amounted only to $25,200 making the total indebtedness to Mr P.R. Moulton $85,200 and not $93,640 as shown in the minutes. (Even if, it was said, the interest on Mr P.R. Moulton's debt is calculated at 16 per centum per annum on the basis that the minutes of the meeting record that rate in relation to that debt, the interest would amount to $28,800 and the total indebtedness to $88,800.) If the figures are adjusted accordingly, so it was submitted, the resolution was not passed by the requisite majority in value of the creditors present and voting at the meeting.
Section 201 of the Act deals with the admission and rejection of claims to vote. It provides -

"201. Any question as to the right of a person to vote at a meeting under this Division, or as to the amount of the debt in respect of which a person is entitled to vote at such a meeting, shall be determined by the chairman, who may, if he thinks it necessary to do so, adjourn the meeting for a period, not exceeding 14 days, to enable him to investigate the matter."

The minutes do not expressly record that the chairman made any determination as to the amount of the debt in respect of which either Mr Hopper or Mr P.R. Moulton was entitled to vote at the meeting. It may be inferred from the minutes that he did so determine in the amounts of $140,470 and $93,640 to which reference has been made. But even if such determinations were made, they are not unexaminable: Re Levy; Ex parte Scholefield Goodman and Sons Ltd. (1980) 50 FLR 99 at pp 112-3.
It became apparent during the course of the hearing that, on the material before the Court, it was impossible to reconcile the figures in the affidavit of Mrs Frischer with those set out in the minutes of the meeting. In those circumstances the parties who were represented before the Court conceded that, where there was a difference between the two sets of figures, those set out in the minutes of the meeting should be accepted.
In this connection I think it appropriate to say that no evidence was placed before the Court either from the chairman of the meeting or the trustee to explain the figures or to clarify what did in fact take place at the meeting. It is impossible to say whether the unsatisfactory position which has been disclosed arises from the manner in which the meeting was conducted or from deficiencies in recording in the minutes what took place. I cannot refrain from commenting, however, that, in my view, the Court was entitled to receive greater assistance than it did from the trustee in ascertaining the relevant facts.
In view of the unsatisfactory state of the material before me I am not prepared to make a positive finding that the resolution accepting the composition was not passed by the requisite majority in value of the creditors present at the meeting and voting on that resolution. However, it clearly follows from what I have said that, in terms of sub-section 222(1) of the Act, there is a very serious doubt whether the composition was accepted by a special resolution as required by section 204. Such a finding provides a sufficient basis for an order declaring the composition void: see sub-section 222(2).
The applicants also submitted that Beneficial Finance was a creditor entitled to vote at the meeting in respect of its debt of at least $489,000 but that it was wrongly prevented from doing so. The addition of its debt to the total value of creditors present and voting on the resolution as shown in the minutes of the meeting and to the total value of creditors voting against the resolution (that being the manner in which it would have voted) should have resulted, so it was submitted, in the resolution not being carried by the requisite majority in value.
Valentine Latkich, the Collection Manager of Beneficial Finance, in an affidavit sworn on 23 November 1984 and filed in these proceedings has deposed that a representative of the company attended the meeting of creditors on 29 June 1984 but that he was not permitted to vote, the chairman of the meeting stating that the claim by Beneficial Finance was in respect of a contingent liability only.
It was contended on behalf of Beneficial Finance that its representative should have been permitted to vote at the meeting as it was an actual, not a contingent, creditor of the debtor.
The claim of Beneficial Finance arises under two deeds of guarantee dated respectively 26 June 1981 and 5 April 1982. Under the earlier of those deeds the debtor, together with certain other persons, guaranteed to Beneficial Finance the due repayment of principal and interest in respect of a loan of $400,000 made by Beneficial Finance to Leymar Packaging Pty. Limited and secured by mortgage over certain land owned by that company. By clause 7 of the deed it was provided that the guarantees were to be principal obligations and were not to be treated as ancillary or collateral to any other obligations. By clause 10 the liability of the guarantors was not to be affected by any securities taken by Beneficial Finance from Leymar Packaging Pty. Limited. The second of the deeds provided for a further advance of $89,000 by Beneficial Finance to Leymar Packaging Pty. Limited, for the variation of the mortgage to cover the additional advance and for the obligations of the guarantors to extend to the increased amount and interest thereon.
The evidence also shows that following default by Leymar Packaging Pty. Limited and a demand upon the debtor and the other guarantors, Beneficial Finance commenced proceedings in the Supreme Court of New South Wales in November 1983 against Leymar Packaging Pty. Limited and the guarantors, including the debtor, to recover the sum of $489,000 together with interest thereon. The debtor filed a defence on 27 February 1984 in which he did not admit the allegations that Leymar Packaging Pty. Limited was in default or that the amount due to Beneficial Finance was $489,000 plus arrears of interest and in which he denied that he had been served with a notice pursuant to section 57(2)(b) of the Real Property Act, 1900 (N.S.W.) as amended. There is, however, nothing in the material before the Court to suggest that the debtor has a defence to the proceedings. In an affidavit sworn on 20 July 1984 Mr Latkich deposed that at the date of his affidavit the amount due and payable by the debtor to Beneficial Finance under the guarantee was in excess of the sum of $685,000.
I am satisfied on the material before me that at the date of the meeting Beneficial Finance was an actual creditor of the debtor and that it was not correct to describe that company as a contingent creditor or to determine on that ground that it was not entitled to vote at the meeting. There was, however, in my view another ground upon which it was proper to conclude that the company was not entitled to vote on the resolution to accept the composition. That ground is to be found in sub-section 198(4) of the Act which provides -

"(4) A creditor is not entitled to vote (otherwise than in respect of the election of a chairman of the meeting), unless he has made known to the chairman particulars of his debt."

It is clear that particulars of the debt said to be owing to Beneficial Finance had not been given to the chairman of the meeting. The minutes record the amount of the indebtedness to Beneficial Finance as "Unknown" and no evidence to show that that statement was inaccurate has been placed before the Court. Counsel for the company conceded during the hearing that the representative of the company was unable to state the precise amount of the debt because of the need to calculate the amount of interest payable and to ascertain the amount by which the debt was to be reduced by reason of the sale of the mortgaged property.
Although the concession does not mean that the debt was contingent or a debt the value of which was not ascertained in the sense in which that expression is used in sub-section 198(2) - see Re Levy; Ex parte Scholefield Goodman and Sons Ltd. (supra, pp 111-2), Beneficial Finance has not established to my satisfaction that it had complied with sub-section 198(4). The applicants' submission on this aspect of the matter is, therefore, rejected.
It remains to consider whether the debtor omitted material particulars from his statement of affairs or included therein material particulars that were incorrect.
The evidence establishes that in his statement of affairs the debtor failed to disclose the correct amount due to the Law Society. The statement of affairs put that debt at $35,000. At the meeting the Law Society's representative explained that the amount of the debt was in fact $63,947.62 (according to Mrs Frischer's affidavit) though the minutes of the meeting record both that amount and an amount of $63,950.
The evidence also establishes that in his statement of affairs the debtor failed to disclose an additional debt due to the Australia and New Zealand Banking Group Limited. A debt to that bank at its branch at Kangaroo Point, Queensland was shown in the statement of affairs at $4,277 and was described as a personal loan. The minutes of the meeting disclose that the bank claimed a debt of $26,000 due on a joint account of the debtor and his wife at its branch at Noosa Heads, Queensland. Mrs Frischer in her affidavit puts the additional debt at $27,334. The minutes record that at the meeting the debtor acknowledged his indebtedness to the bank but stated that he had understood the bank was claiming only against his wife.
The debtor's statement of affairs, although it disclosed that a debt was owing to William Glen Stott and Nancye Campbell Stott, did not disclose the amount of the debt. According to the minutes, a letter had been received by the chairman from the solicitors acting for Mr and Mrs Stott on 28 June 1984 in which the amount of the debt was stated to be $13,600. The debtor said that he had not included any amount in the statement of affairs as he was not then aware of the extent of his indebtedness to Mr and Mrs Stott.
It is also clear from a perusal of the original of the debtor's statement of affairs that he did not disclose therein that the debts owing to Mr Hopper and Mr P.R. Moulton had accrued interest amounting to some tens of thousands of dollars and were continuing to accrue interest at rates of 16 and 14 per centum per annum respectively.
Further, the debtor included incorrect particulars in the statement of affairs in relation to the substantial debt due to Beneficial Finance by referring to it as contingent only.
The applicants have established to my satisfaction that the debtor made material omissions from his statement of affairs and included therein information that was incorrect. It is not, I think, of significance in reaching a conclusion on that question to take into account what occurred at the meeting of creditors in relation to those matters: Re Morris; Ex parte Adams (1980) 48 FLR 341. What the Act requires is the submission by the debtor to all his creditors (not only those who attend the meeting) of a correct statement of his affairs. This the debtor failed to do. That the matters omitted or mistated were material is, I think, self evident.
For the reasons set out above I am satisfied that the composition should be set aside under sub-section 239(2) of the Act or declared void under sub-section 222(2) or sub-section 222(4). The more appropriate course is, I think, to declare the deed void. The Court may, however, only make such an order under sub-section 222(4) if it is satisfied that it would be in the interests of the creditors to do so.
It is convenient to consider together the question whether it is in the interests of the creditors to declare the deed void and the question whether a summary sequestration order should be made against the estate of the debtor pursuant to sub-section 222(7). There is ample material before the Court to justify the making of such an order. It is clear that the debtor is insolvent.
In this connection it may be noted that it was put to the creditors at the meeting on 29 June 1984 that the composition would result in the creditors receiving of the order of six cents in the dollar whereas they would receive nothing if the debtor's estate were sequestrated. Had the debt to Beneficial Finance been taken into account, the amount to be received under the composition would have been of the order of one cent to two cents in the dollar. Although it cannot, on the material before the Court, be postulated that the creditors will necessarily be financially better off if the debtor's affairs are administered in bankruptcy, the material before the Court as to the debtor's property, trade dealings and affairs makes plain that it would be in the interests of the creditors that there be a full investigation of the debtor's affairs which the making of a sequestration order will facilitate. I am satisfied that it is in the interests of the creditors as a whole that the composition be declared void and a sequestration order be made. I therefore, so order.
Sub-section 222(9) provides that the making of an application by the trustee or a creditor for a sequestration order under section 222 is, for the purpose of the Act, to be deemed to be equivalent to the presentation of a creditor's petition against the debtor but that the provisions of sub-section 43(1), sections 44 and 47, sub-sections 52(1) and (2) and Part XIA do not apply in relation to such an application. In Re Lees; Ex parte Young (unreported - 31 August 1984) I expressed the view that sub-section 52(1A), which limits the Court's power to make a sequestration order under sub-section 52(1), is inapplicable when the Court is exercising the power conferred by sub-section 222(7). I adhere to that view. I should perhaps add that, if, contrary to the view I have expressed, section 52(1A) is thought to be applicable, I am satisfied that the value of the property of the debtor that would be divisible amongst the creditors by virtue of section 116 if a sequestration order were to be made is less than $10,000.
Paragraph 156A(3)(a) provides that, where at the time when a debtor becomes bankrupt, a registered trustee has, under sub-section 156A(1), consented to act as the trustee of the estate of the debtor and the consent has not been revoked, the registered trustee becomes, at that time, by force of the sub-section, the trustee of the estate of the bankrupt. Section 160 provides that, if at any time there is no registered trustee who is the trustee of the estate of a bankrupt, the Official Trustee in Bankruptcy is, by force of that section, to be the trustee of the estate. In the present case no registered trustee has consented to act as the trustee of the estate of the debtor and in those circumstances the Official Trustee in Bankruptcy is, by force of section 160, the trustee of his estate.
In the circumstances of this case I am of opinion that it is appropriate to order that the costs of the Law Society and Beneficial Finance of the applications before the Court be taxed and paid out of the estate of the debtor as if they were the costs of a petitioning creditor. I also order that the costs of the trustee be paid out of the debtor's estate.

[1984] FCA 451

20 DECEMBER 1984