Re: Taylor, Hugh Maxwell & Anor & Ex Parte:Century 21 Real Estate Corp v Taylor

[1997] FCA 618

FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - bar to application under s 222 to set aside deed of arrangement by virtue of terms of deed of arrangement having been carried out - meaning of s 222(6) - whether deed spent and s 236 also unavailable - whether application was preserved by outstanding contingency of a receipt which never materialized - effect of trustee’s certificate under s 237A.

Bankruptcy Act 1966, ss 222, 236, 237A

RE:  HUGH MAXWELL TAYLOR and ALBERT BRIAN TAYLOR; EX PARTE: CENTURY 21 REAL ESTATE CORPORATION V HUGH MAXWELL TAYLOR and ALBERT BRIAN TAYLOR

NX 85 of 1991

Burchett J
Sydney
30 June 1997

IN THE FEDERAL COURT OF AUSTRALIA	)
)
NEW SOUTH WALES DISTRICT REGISTRY	)  NX 85 of 1991
)
GENERAL DIVISION	)

RE:             

HUGH MAXWELL TAYLOR and ALBERT BRIAN TAYLOR
Debtors

  EX PARTE:  

  AND:

CENTURY 21 REAL ESTATE CORPORATION
Applicant

HUGH MAXWELL TAYLOR and ALBERT BRIAN TAYLOR
Respondents

JUDGE:	BURCHETT J
PLACE:	SYDNEY
DATED:	30 JUNE 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

The application be dismissed with costs.

Note:Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	)
BANKRUPTCY DISTRICT OF THE STATE	)   NX 85 of 1991
OF NEW SOUTH WALES	)

RE:

HUGH MAXWELL TAYLOR and ALBERT BRIAN TAYLOR
Debtors

  EX PARTE:  

  AND:

CENTURY 21 REAL ESTATE CORPORATION
Applicant

HUGH MAXWELL TAYLOR and ALBERT BRIAN TAYLOR
Respondents

JUDGE:	BURCHETT J
PLACE:	SYDNEY
DATED:	30 June 1997

REASONS FOR JUDGMENT

BURCHETT J

This is an application to set aside a deed of arrangement. It is brought under s 222 of the Bankruptcy Act 1966. Reliance is also placed on s 236. A preliminary point is raised on behalf the respondents. They say that s 222(6) applies to bar the application, so far as it relies on s 222, and that the deed is spent so far as the application relies on s 236.

To understand the point, which was argued on the basis that the facts I shall now state were agreed, it is necessary to appreciate some background matters.   It is also perhaps desirable that I should say straight away that there does not appear to be any authority which provides any real assistance on the particular question which was argued, although the decision of Toohey J in the unreported case of Re Doukidis given on 26 June 1985, and the decision of Gray J in Re Watkinson, also unreported, delivered 3 March 1986, do provide some general guidance. 

The relevant facts include that the debtors had interests in a company, Century 21 (South Pacific) Pty Limited, which went into liquidation.   In the deed of arrangement, it was provided by clause 2:

“The debtor conveys and assigns to the trustee all of the debtor's right/title and interest in and to the direct or indirect (by way of repayment of loans) benefit of any proceeds (‘the Litigation Proceeds’) arising  from  contemplated proceedings by Century 21 (South Pacific) Pty Limited (In Liquidation) against Century 21 Real Estate Corporation and/or any other parties arising from termination on 30 March 1990 of the Franchise Agreement between Century 21 (South Pacific) Pty Limited and Century 21 Real Estate Corporation UPON TRUST to divide the Litigation Proceeds amongst the Creditors pro rata their debt up to an amount which repays the Creditors in full.”

Additionally, there were various provisions of a kind quite often found in such deeds, and a provision for a very small payment to be made by the debtors.   Upon claims being admitted, the payment required being made by the debtors, and all other steps actually required of the Trustee having been performed, the Trustee gave a certificate under section 237A.   That was on 7 February 1992, the deed having been executed on 24 July 1991.   The present application was not brought until after approximately another two years.

A proceeding was in fact brought by the liquidator of the company mentioned in clause 2 of the deed.   That proceeding eventually came before me, and judgment was delivered on 21 March 1996, the title of the proceeding being Century 21 (South Pacific) Pty Limited (in Liquidation) v Century 21 Real Estate Corporation and Century 21 Australasia Pty Limited. The proceeding failed, so that no moneys were recovered thereby. There has been no appeal. The question debated by counsel is whether indeed s 222(6) applies.

Section 222(6) provides:

“The Court shall not make an order under subsection (2) or (4)” - these are the subsections actually providing for the making of orders in the case of an application brought under section 222 - “unless the application for the order is made:

(a)       in relation to a deed of assignment -  before the final dividend has     been paid under the deed;

(b)       in relation to a deed of arrangement - before the terms of the deed    have been carried out; or

(c)       in relation to a composition - before the final payment has been made         under the composition.”

The particularly relevant provision, of course, in the present case is that made by paragraph (b), which requires that the application now before me should have been brought before the terms of the deed had been carried out.

In my opinion, the section does apply.  All the terms of the deed were carried out by the parties to it, and particularly by the debtors and the trustee.  The circumstance that another party, the liquidator of the company, Century 21 (South Pacific) Pty Limited, was still waging litigation which could contingently have resulted in further moneys becoming available, does not alter the fact that nothing more actually remained to be done after the date of the certificate.  The possibility of receipt of further moneys, it is now known, did not materialise, since the proceeding brought by the liquidator was in due course dismissed.  I do not think the existence, in 1992, of that outstanding possibility was sufficient to prevent subs (6) operating in accordance with its literal terms.  The fact is that every provision of the deed, under which anything at all ever had to be done, was performed fully by the time the certificate was given.

Counsel recognised that the answer could hardly be different under s 236 from what it should be under s 222(6), and there was really no separate argument addressed to that provision. But I think I should add that it is indeed quite clear that, for the same reason, there is now, and was at the date of the proceeding, nothing to terminate under s 236.

For these reasons, I uphold the preliminary point taken by counsel for the respondents, and I dismiss the application with costs.

I certify that this and the preceding two (2) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Burchett

Associate:

Dated:            10 July 1997

Counsel for the Applicant:	Mr J.K. Chippindall
Solicitors for the Applicant:	Kemp Strang & Chippindall
Counsel for the Debtors:	Mr B. Debuse
Solicitors for the Debtors:	Robinson Creais
Date of Hearing:	30 June 1997