Spratt, Re T.J. Wilde, Ex Parte W.J. - [1986] FCA 33

Re: TIMOTHY JOHN SPRATT
Ex Parte: WILSON JOSEPH WILDE and ERNEST GEORGE HARRIS & ORS
And: JANELLE KAYE SPRATT and P. & S. DECO QUARRIES PTY. LTD. and ROBERT
WILLIAM PEACH and JOHN ROBERT REES
No. QLD E207 Of 1983
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND
Pincus J.

CATCHWORDS

Bankruptcy - claims by and against bankrupt - action in Supreme Court continued without leave - resultant compromise - whether compromise void - whether trustee deemed to have abandoned counterclaim - necessity for permission or leave under s. 135(1)(a) to sell property - how value of shares to be assessed for purposes of that par. - whether "compromise" falling within s. 135(1)(f) or (g) - whether trustee party to compromise - whether claim and counterclaim (both to be abandoned) set off against one another for purposes of s. 135(1)(f) and (g).

Bankruptcy Act, 1966 ss. 58(3); 60; 135(1); 135(4)

HEARING

BRISBANE

#DATE 19:2:1986

ORDER

THE COURT ORDERS THAT:

It be declared that on or about 28 February, 1985 the fourth respondent made a compromise within the meaning of s. 135(1)(f) of the Bankruptcy Act and made a compromise within the meaning of s. 135(1)(g) of the Bankruptcy Act in respect of action no. 2508 of 1981 pending in the Supreme Court of Queensland.

The costs of and incidental to the application to date be reserved.

The matter be adjourned for further hearing to a date to be fixed by the Registrar.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

JUDGE1

The trustees of the estate of Timothy John Spratt, a bankrupt, apply for declarations whose object is to prevent the third respondent, Mr. Peach, from continuing a certain action in the Supreme Court of Queensland. The purpose of that action is to obtain a decree of specific performance in respect of an agreement to transfer to Mr. Peach certain shares in the second respondent, which I shall simply call "the company".

The fourth respondent, Mr. Rees, was, until 27 June, 1985, the trustee of the estate and while holding that office, Mr. Rees agreed to sell the shares in question to the first respondent, Mrs. Janelle Spratt, or her nominee, for $15,000. Mr. Peach is the nominee. The applicants say that by reason of provisions of the Bankruptcy Act that agreement cannot be enforced.
Before Mr. Spratt became bankrupt (on 16 May, 1983), there was a number of actions on foot in the Supreme Court of Queensland concerning disputes with Mr. Peach. Although there is evidence before me concerning three Supreme Court cases, it seems necessary to refer only to one, namely no. 2508 of 1981, because it was as part of, or in connection with, a compromise of that action that the impugned agreement was made. The applicants apply on the assumption that it is necessary to come to this court for the relief to which…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [1986] FCA 33
Decision Date: 19 FEBRUARY 1986

CaseChat Overview and Summary

In the matter of Re T.J. Wilde, Ex Parte W.J. Spratt, the dispute involved the validity of a compromise made by a bankrupt and its implications under the Bankruptcy Act 1966 (Cth). The case was heard in the Federal Court of Australia. The primary issue was whether the compromise was void, and if the trustee was deemed to have abandoned a counterclaim as a result. Further, the court needed to determine the necessity for permission or leave under section 135(1)(a) of the Act to sell property, and how the value of shares should be assessed for this purpose.

The legal issues centred on the interpretation and application of sections 135(1)(f) and (1)(g) of the Bankruptcy Act. The court had to ascertain whether the compromise constituted a "compromise" within the meaning of these sections, and whether the trustee was a party to the compromise. Additionally, the court needed to decide if the claim and counterclaim, which were both to be abandoned, could be set off against one another for the purposes of these sections.

The Federal Court held that the compromise made on or about 28 February 1985 was indeed a compromise within the meanings of sections 135(1)(f) and (1)(g) of the Act in relation to the action pending in the Supreme Court of Queensland. The court determined that the compromise was valid and not void. It also concluded that the trustee was not deemed to have abandoned the counterclaim, and that there was no need for leave to sell the property under section 135(1)(a). The court further ruled that the value of the shares should be assessed according to the principles set out in the Act. The matter was adjourned for further hearing to allow for the entry of orders and the resolution of any remaining issues.

The court ordered that the compromise made by the fourth respondent on or about 28 February 1985 was valid and within the meanings of sections 135(1)(f) and (1)(g) of the Bankruptcy Act. The costs of the application to date were reserved, and the matter was adjourned for further hearing. The entry of orders was to be dealt with in accordance with Order 36 of the Federal Court Rules.

Orders

Orders of the court

THE COURT ORDERS THAT:

It be declared that on or about 28 February, 1985 the fourth respondent made a compromise within the meaning of s. 135(1)(f) of the Bankruptcy Act and made a compromise within the meaning of s. 135(1)(g) of the Bankruptcy Act in respect of action no. 2508 of 1981 pending in the Supreme Court of Queensland.

The costs of and incidental to the application to date be reserved.

The matter be adjourned for further hearing to a date to be fixed by the Registrar.

NOTE: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

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Ratio Decidendi

Legal Principle Established

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