Re Wolkowski, L. v Ex parte Pratt, D.J

No judgment structure available for this case.

,. """......

JUDGMENT NO. 11% / 9/

- RE : LESZEK WOLKOWSKI
Debtor

EX PARTE: DAVID JOHN PRATT
The Trustee

CORAM:

Jenkinson J.

PLACE :

Melbourne

DATE :

29 May, 1991

.-

rEDERAL COURT OF

AUSTRALIA PRINCIPAL

REASONS FOR JUDGMENT

Application by the trustee of a deed of arrangement for an order under s.222(2) of the Bankruotcv Act 1966.

Relevant parts of s.222, which is in Part X of the

Act, are

" (1) Where there is a doubt, on a specific ground, whether a deed of assignment or a deed of arrangement was entered into in accordance with this Part or complies with the requirements of this Part, or whether a composition has been accepted by a special resolution of a meeting of creditors under section 204, the Inspector-General, a person authorised in writing by the Inspector-General, the Registrar, the trustee, a creditor or the debtor may apply to the Court for an order under subsection (2).

made under subsection (l), the Court may, (2) Upon the hearing of an application
subject to this section, make an order -

(a) declaring that the deed or
composition is void, or that it is not void, on the ground specified in the application; or

(b)

declaring that a provision of the deed is void, or is not void, on the ground specified in the application.

declaring a deed to be void on the ground that (3) The Court shall not make an order

it does not comply with the requirements of this Part if the deed complies substantially with those requirements.

before the Court (other than proceedings by way (10) Where in the course of proceedings

of an application under subsection ( l), the Court becomes of the opinion that there is a doubt, on a particular ground, whether a deed of assignment or deed of arrangement was entered into in accordance with this Part or complies with the requirements of this Part, or whether a composition has been accepted by a special resolution of a meeting of creditors under section 204, and that it is desirable that the doubt be resolved, the Court may direct the Registrar to apply to the Court under subsection (1) for an order under subsection (2) in relation to the matter."
A deed of arrangement executed by a debtor "is void

unless -

(a)

it is entered into in accordance with this Part; and

(b)

it complies with the requirements of this Part",

a provision of Part X declares : s.213(1).	Section 233(1)
provides :

"A deed of arrangement that is entered into in accordance with this Part and complies with the requirements of this Part is, upon being duly executed by the debtor and the trustee, binding on all the creditors of the debtor."

Section 204(1) authorizes creditors, by special resolution at a meeting called in pursuance of an authority conferred by their debtor in accordance with s.188, to require the debtor to execute a deed of arrangement under Part X and s .216 commands the debtor to comply with the requirement. Section 202(1) provides that at such a meeting "2 creditors, being creditors entitled to vote at the meeting, present personally, by attorney or by proxy, constitute a quorum". Section 196(1) provides:

"The majority in number of the creditors present at the meeting in person, by attorney or by proxy shall elect a chairman to preside at the meeting."

The meeting at which by special resolution the debtor was required to execute the deed of arrangement in this case was

attended by the proxy for one creditor. Another creditor had

forwarded to the meeting an instrument appointing the person

who should be chairman of the meeting its proxy. Before that person had been elected chairman he affected to vote as proxy in the election of himself as chairman. It was submitted by both parties to this application that that person was not entitled to vote as proxy in the election of a chairman because he did not at that time answer the description of the person appointed by the instrument of appointment. I accept that submission. It was further submitted that at the time when the election of a chairman took place a quorum was lacking. I accept that submission. It was submitted that no valid election of a chairman occurred at the meeting, that there was at no time during the meeting a quorum and that the purported resolution requiring the debtor to execute the deed was invalid. I accept those submissions. The conclusion follows, it was submitted, that the deed was not entered into in compliance with the requirements of Part X and is on that account void.

Section 306 of the Bankru~tcv Act 1966 provides:
(1) Proceedings under this Act are not
invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.
appointment of any person exerclsing, or ( 2 ) A defect or irregularity in the
purporting to exercise, a power or function under this Act or under a deed entered into
under this Act does not invalidate an act done
by him in good faith."

There was in my opinion no defect or irregularity in the appointment of the person who purported to exercise the function of the appointing creditor's proxy. He simply failed to answer the description in the instrument of appointment of the person appointed. Nor in my opinion was there a formal defect or irregularity in the "Proceedings under this Act" here in question. There being but one creditor present, there was held no "meeting" within the meaning of that word in Part

X : Re Sheraold: Ex D a r t e McInnes (1986) 68 A.L.R.

127.

It was submitted on behalf of the debtor that the court was precluded from declaring the deed to be void by sub- section 222(3). But the ground of invalidity here is not that there has been a failure of the deed to comply with a requirement of Part X, but rather that the deed was not entered into in accordance with that Part. The distinction between those two conceptions finds expression in ss. 222 (l), 222(10), 228(1) and 233(1).

In my opinion a discretion to abstain from making any declaration of a kind specified in paragraphs (a) and (b) of sub-section 222(2) is conferred on the court to which an application under s.222 (1) has been made and which has formed such an opinion on the question whether the deed or composition is void or whether a provision of the deed is void as would enable it to make such a declaration. The

restriction on the exercise of the power to make one of those

several kinds of declaration which is imposed by sub-section

222(3) does not in my opinion indicate a legislative intention that no discretion is conferred. It is, I think, no more than a restraint, pro tanto, on the exercise of a discretion conferred by the use of the word "may" in sub-section 222(2).

My conclusion that a discretion is available to abstain from making the declaration sought is confirmed by several unreported decisions of Northrop J. to the same effect : Re Dixon: E x Parte Pratt (No. 44 of 1988X; judgment 7

September 1989); Re M. Hill and H. Hill: E x Darte Pratt (No. 561 of 1987X; judgment 7 September 1989); Re Blacklev: E x parte Pratt (No. 561 of 1987X; judgment 7 September 1989).

Honourable	W.	Justice
Jenkinson.

(a)	it is entered into in accordance with this Part; and
(b)	it complies with the requirements of this Part",

[1991] FCA 288

29 May 1991