Shergold, Re P. & Anor Innes, Ex Parte T.

[1986] FCA 464

Re: PAUL SHERGOLD and JUDY SHERGOLD
Ex parte: THOMAS GERALD McINNES and PAULINE MARIA McINNES
Nos. P321 of 1986 and W1105 of 1986
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Sheppard J.

CATCHWORDS

Bankruptcy - deed of arrangement entered into consequent upon resolution passed at meeting of creditors - proxies given to chairman of meeting and Controlling Trustee - Trustee holding only one proxy purporting to appoint another person chairman of meeting - whether appointment of chairman valid.

Bankruptcy Act 1966, s. 196

HEARING

SYDNEY

#DATE 16:10:1986

ORDER

The application to rescind the order made on 3 September 1986 be dismissed.

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

JUDGE1

Note: This judgment should be read in conjunction with the judgment of Sheppard J. in Re Shergold and Anor; ex parte McInnes and Anor (No. P321 of 1986) delivered on 3 September 1986.

This is an application to rescind an order made by me on 3 September last. The order was that the Deed of Arrangement entered into by the debtors on 30 May 1986 be set aside. Regrettably, due to the smallness of the estate of the debtors. I did not have the assistance of evidence from the debtors nor the trustee, who had been appointed trustee in the Deed of Arrangement. In the result, the facts that I had from the judgment creditors, and upon which I relied, were not completely accurate. This was not the fault of the judgment creditors nor their legal advisers. It was due to the absence from the proceedings before me of the judgment debtors and the trustee. That absence, as I have indicated in the earlier judgment, was understandable in the light of the very small amount which is involved in the estate.

1. However, I have now had placed before me in this application in which the judgment creditors, although served with it, do no appear, detailed evidence of what occurred at the meeting of creditors on 30 May 1986, when it was resolved that the Deed be entered into. The facts are that proxies were received from three creditors. These were proxies from Newstart 115 Pty Limited, which appointed the chairman of the meeting to be its proxy, Michael Boyce & Co. who also appointed the chairman of the meeting to be their proxy, and a firm Messrs. Nelson, Keane & Hemingway, who, by one of its partners, Mr. A.J. Lovat, appointed Mr. Gaigie to be its proxy. Although the judgment creditors had given a proxy, it was given in favour of a person who did not attend the adjourned meeting on 30 May. The creditors had instructed their proxy, a Mr. Baker, to vote against any motion that allowed the debtors to repay any amount less than 100 per cent of what was owing to them. By reason of the amount of their debt, the instructions in their proxy and the amount available to be distributed to creditors, it is clear that Mr. Baker's presence at the meeting would have resulted in the resolution that the debtors enter into a deed of arrangement not being passed.

2. Mr. Gaigie perceived the need for there to be two persons present at the meeting. Accordingly, he spoke to a Mr. Murphy, who is an employee of M.L.C. Insurance Limited and who has an office across the hall from Mr. Gaigie's office. Mr. Gaigie said to Mr. Murphy. "Do you mind coming in and chairing a meeting of the creditors of Paul and Judy Shergold." Mr. Murphy said, "No, I do not mind". Mr. Gaigie purported to exercise his proxy to appoint Mr. Murphy as chairman of the meeting. The meeting then proceeded.

3. Mr. Murphy, being the chairman and exercising the powers conferred by the proxies given by Newstart and Boyce & Company and Mr. Gaigie exercising the powers given by the proxy from Mr. Lovat, the question is whether the facts as they are now known make any difference to the outcome. The difficulty which confronts the judgment debtors, and which has been drawn to my attention by the solicitor for them, is found in s. 196 of the Act which provides that 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. Mr. Murphy had absolutely no connection with the matter at all until he was appointed chairman. For him to be appointed chairman there needed to be a meeting of the kind provided for in s. 196. There could be no such meeting unless there were two persons present who had authority to act, that is to say they needed to be either creditors or attorneys or proxies of creditors. So the same problem that arises in relation to s. 202, with which I dealt in the judgment previously delivered, applies in relation to s. 196. Mr. Murphy could not lawfully become entitled to exercise the proxies until he was appointed chairman. He could not be appointed chairman except at a meeting. The resolution to appoint him was invalid because at that time there was no chairman and proxies given to the chairman could have no place in the proceedings. The only relevant proxy was held by Mr. Gaigie who, until the chairman was appointed, was at the meeting alone. There was therefore, within the meaning of the section, no meeting and no valid appointment of the chairman. For that reason I am afraid the order previously made must stand and this application must be dismissed.

4. Because of certain things which have been said to me in the course of argument by the solicitor for the judgment debtors, I wish to make it clear that nothing that has happened in this matter reflects at all, in my opinion, upon the professional competence or good faith of Mr. Gaigie. I think he endeavoured to cope with a difficult situation in which there was a quite small estate. I have referred in the earlier judgment to the artificiality of the operation of s. 202. The same applies, in my opinion, to the operation of s. 196. Be that as it may, there is nothing that can be done about the matter. As I say, the order previously made must stand and the application to rescind it must be refused.