Re Szeitz, M. and anor - [1992] FCA 551

Re: MICHAEL SZEITZ and DONNA SZEITZ
Ex parte: COUNTRYWIDE BUILDING SOCIETY (IN LIQUIDATION)
And: DEAN ROYSTON McVEIGH
No. X 582 of 1991
FED No. 551
Bankruptcy - Equity

COURT

IN THE FEDERAL COURT OF AUSTRALIA

BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA
GENERAL DIVISION
Hill J.(1)

CATCHWORDS

Bankruptcy - composition - substantial creditor denied vote at meeting of creditors - whether court could go behind judgment debt to determine standing of judgment creditor to vote - whether composition to be declared void - whether guarantee executed by debtor in favour of applicant

Equity - whether party guilty of unconscionable conduct in obtaining guarantee

Bankruptcy Act 1966 (Cth) s222

Re Tregonning; Ex parte Friends' Provident Life Office (1983) 74 FLR 327 at 331, applied

Commercial Bank of Australia Ltd v Amadio (1983) 151 CLR 447 at 462, 474, applied

Re Williams; Ex parte the Official Trustee in Bankruptcy (Hill J, 21 August 1990, unreported), applied

HEARING

MELBOURNE

#DATE 2:7:1992

Counsel for the Applicant: P.G. Cawthorn

Instructed by: Molomby and Molomby

Solicitors for the Respondent: J.M. Smith and Emmerton

ORDER

THE COURT DECLARES THAT:

1. The composition entered into by Michael Szeitz on 29 January 1992 is void.

THE COURT FURTHER ORDERS THAT:

2. The matter be stood over until 3 August 1992 at 9.30am before Mr Justice Hill.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The Applicant, Countrywide Building Society (in liquidation) applies to the Court for an order declaring that a composition entered into by Mr Szeitz, under Part X of the Bankruptcy Act 1966 ("the Act") on 29 January 1992 is void. That composition was entered into by Mr Szeitz and his wife, who is also a party to the present proceedings. Alternatively, the applicant seeks an order setting aside the composition under s239 of the Act or an order under s242 of the Act terminating the composition. In respect of the order sought under s239 of the Act, the applicant seeks an extension of time for making the application.

By an amendment to the application made with leave at the commencement of the hearing, the applicant also challenges a decision of Mr McVeigh, the Controlling Trustee of the composition ("the Trustee") to exclude the applicant from voting at the meeting at which the resolution accepting the composition was purported to be passed.
Mr and Mrs Szeitz executed an authority pursuant to s188 of the Act on 10 December for the calling of a meeting of creditors to propose a composition under Part X. The Trustee having consented to act as trustee of the composition, a circular was forwarded to creditors bearing the date 2 January 1992 and calling a meeting for 15 January 1992. The proposed composition provided for Mr and Mrs Szeitz to pay to the Trustee $26,400 over a three year period by monthly installments. After subtracting the Trustee's fees and commission, the composition was estimated to give a return to unsecured creditors of approximately…

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.

Continue reading Re Szeitz, M. and anor

Details

AGLC: Re Szeitz, M. & anor; Ex Parte Countrywide Building Society [1992] FCA 551
Case: [1992] FCA 551
Decision Date: 02 JULY 1992

CaseChat Overview and Summary

The matter before the court involved a dispute regarding a bankruptcy composition involving Michael Szeitz and another party. The case required the court to address whether a substantial creditor, who was denied a vote at a meeting of creditors, could have its standing to vote challenged by examining the circumstances behind a judgment debt. Additionally, the court had to determine if the composition itself should be declared void and whether a guarantee executed by the debtor in favour of the applicant should be recognised.

The central legal issues were whether the court had the authority to look beyond a judgment debt to ascertain the standing of a creditor to vote and whether the composition should be annulled due to procedural irregularities. Another issue was whether the guarantee executed by the debtor was valid and should be upheld.

The court determined that it could indeed examine the circumstances behind a judgment debt to assess a creditor's eligibility to vote, thereby allowing it to go behind the judgment to decide the creditor's standing. Given the irregularities in the voting process, the court concluded that the composition was invalid. Regarding the guarantee, the court found it to be valid and enforceable. Consequently, the composition was declared void, and the matter was adjourned to allow for further proceedings.

The court made a final order declaring the composition entered into by Michael Szeitz on 29 January 1992 null and void. It also ordered the case to be rescheduled for 3 August 1992 at 9.30am before Mr Justice Hill, with the settlement and entry of orders governed by Order 36 of the Federal Court Rules.

Orders

Orders of the court

THE COURT DECLARES THAT:

1. The composition entered into by Michael Szeitz on 29 January 1992 is void.

THE COURT FURTHER ORDERS THAT:

2. The matter be stood over until 3 August 1992 at 9.30am before Mr Justice Hill.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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