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

[1991] FCA 288

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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).
See also Re Williamson: E x ~arte Wearne; (1980) 43 F.L.R. 305
at 314; Re Beames: E x Darte Beneficial Finance Cor~oration
Ltd. (1985) 7 F.C.R. 216 at 229.
No creditor has been shown by evidence, or has appeared in this proceeding, to dissent from the making or the carrying out of the deed. The debtor entered into the deed in good faith, without a suspicion that it might be void or otherwise irregular. He made the payments required of him by the deed in the same state of mind. All that remains to be done is payment to the creditors in accordance with the provisions of the deed. In those circumstances I think that the appropriate exercise of the discretion conferred by s.222(2) is to make no declaration of the kind which the sub-
section authorises, but to dismiss the application. I certify that this and the 5 preceding pages are a true copy of the Reasons for Judgment o f the

Honourable	W.	Justice
Jenkinson.

Associate

Dated: 29 May, 1991

No.	2 7 1 of 1988X
Counsel for the Applicant Trustee :	Mr. J .S . Stevenson
Solicitors for the Applicant	Sly and Weigall
Trustee
Solicitor for the Debtor	Mr. B. Woollacott
Date of Hearing	1 0 April,  1 9 9 1