Saheed v The Official Receiver

[1993] FCA 239

Re: MOHAMED NAUFAL SAHEED
And: THE OFFICIAL RECEIVER
Nos. VP1297 of 1992 and VX10 of 1993
FED No. 239
Number of pages - 3
Bankruptcy
(1993) 41 FCR 148

COURT

IN THE FEDERAL COURT OF AUSTRALIA

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

CATCHWORDS

Bankruptcy - arrangements with creditors without sequestration - authority by debtor to trustee - second authority to solicitor - whether valid.

Bankruptcy Act 1966 s.188, s.189, s.208.

Re De Kantzow; Ex parte De Kantzow (1992) 107 ALR 219

Re Amadio (1978) 46 FLR 147

Pretorius v Dalton Carpet Tiles Pty. Ltd. (1984) 54 ALR 743

HEARING

MELBOURNE, 17 March 1993

#DATE 17:3:1993

Counsel for the applicant: Mr T. Irlicht

Solicitors for the applicant: Irlicht and Broberg

Counsel for the respondent: Mr M. O'Brien

Solicitors for the respondent: Australian Government Solicitor

JUDGE1

GRAY J The point which arises in this matter is one which I perhaps would have preferred to reserve on and consider, but it is one that needs to be decided today. I therefore propose to do the best I can to decide it. It arises under s.188 of the Bankruptcy Act 1966. Sub-section (1) of that section provides relevantly as follows:

"A debtor who desires that his affairs be dealt with under this Part without his estate being sequestrated.....

may sign an authority in accordance with the prescribed form -

(e) authorising a registered trustee to call a meeting of his creditors and to take over the control of his property; or

(f) authorising a solicitor to call a meeting of his creditors."

In essence, the question is whether the disjunctive between paragraphs (e) and (f) in that provision is intended to make one exclusive of the other.

1. The facts may be recited briefly. On 24th July 1992, the debtor gave to a registered trustee an authority under Part X of the Act to call a meeting of his creditors and presumably to take over the control of his property. A meeting was held and adjourned on a number of occasions. It was finally conducted on 19th October 1992. The meeting failed to pass any special resolution accepting a composition proposed by the debtor, requiring the debtor to present a debtor's petition, or releasing the debtor's property from control under Division 2 of Part X of the Act. It passed a resolution with regard to the remuneration of the controlling trustee, but otherwise did not adjourn the meeting.

2. It appears fairly clear that the effect of that meeting was then spent and that the property of the debtor remained under the control of the registered trustee, unless and until it was released from that control under s.208 of the Act or by the occurrence of another of the events referred to in s.189(1).

3. Subsequently, the debtor gave a further authority to a solicitor to call a further meeting of creditors. It is the validity of that further authority which is in issue. The further meeting has been adjourned without any special resolution having been passed so far.

4. The argument has been largely concerned with the question of the effect of the decision of Lockhart J in Re De Kantzow; Ex parte De Kantzow (1992) 107 ALR 219. In that case, the debtor concerned had given an authority first to a solicitor and subsequently to a registered trustee. In issue was the validity of the second authority. Lockhart J. held that it was valid. At p 222, his Honour drew attention to the marked difference between an authority given by a debtor to a registered trustee and one to a solicitor. His Honour said:
   

"The authority to the solicitor is simply to call a meeting of his creditors. The solicitor is not given authority to

control the property of the debtor. No-one is in control of the debtor's property except himself during the currency of a s.188 authority to a solicitor to call a meeting.

When a registered trustee is appointed by a debtor to call a meeting of his creditors, the property of the debtor

automatically becomes subject to control under Div 2 of Pt X and continues to be so subject until one of the six events

specified in s.189(1) of the Act occurs. Unless and until

one of those events occurs the registered trustee continues to remain the registered trustee and to be in control of the debtor's property."

1. It should be noted that the order of events which occurred in De Kantzow's case is the reverse of that which occurred in the present case. Lockhart J held that the second authority was valid. In doing so, his Honour first distinguished the decision of Judge Rogerson in Re Amadio (1978) 46 FLR 147, which was to the effect that not more than one authority under Part X could be given. If that case were not distinguishable, Lockhart J disagreed with the conclusions of Judge Rogerson. Having had the benefit of extensive citation from Re Amadio and from De Kantzow's case, I am disposed to agree with the view that Lockhart J took.

2. I note that his Honour also considered the decision of the Full Court in Pretorius v Daltons Carpet Tiles Pty. Ltd. (1984) 54 ALR 743. In that case, a Full Court held that it was not possible to conduct more than one meeting under an authority given under Part X of the Act. Lockhart J was of the view, and I am also of the view, that that decision of the Full Court does not stand in the way of the giving of a second authority under s.188. It is true, as the Full Court said in Pretorius, at p 750, that it would be undesirable to permit a debtor to continue ad infinitum giving authorities and calling meetings in the hope that by a process of attrition or inconvenience or added expense the debtor would eventually achieve acceptance of a proposal. Any tendency to act in that manner could easily be stemmed. If there were a creditor's petition for bankruptcy, the Court would not be bound to adjourn such a petition to enable a further meeting to be held or a further authority to be given, but would be entitled to act upon a proper creditor's petition and make a sequestration order if the circumstances so required.

3. It is plain that, even though the property of the debtor in the present case remains under the control of the registered trustee, that control would be relinquished if one of the events referred to in s.189(1) of the Act were to occur. One such event is that found in para. (c) namely, that the creditors accept a composition under Division 2 of Part X. If such acceptance of a composition were to result from a meeting of the creditors held by the solicitor to whom the authority has been given, then the property would immediately be released from the control of the registered trustee and, if necessary, would be dealt with in the manner required by the composition. For that reason, I do not regard the fact that a registered trustee is currently in control of the debtor's property, pursuant to the first authority, as standing in the way of the granting of a second authority.

4. For those reasons, I am of the view that it was open to the debtor to give the second authority, which he gave to the solicitor, and that any meeting conducted in accordance with that authority will not be invalid by reason of the previous granting of an authority to a registered trustee.