Westgold Resources Nl v Atkins

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FEDERAL COURT OF AUSTRALIA

Westgold Resources NL v Atkins [2000] FCA 70

BANKRUPTCY – creditor’s petition – notice of intention to oppose - whether execution of deed of assignment by debtor duly approved by special resolution at a meeting of creditors – whether trustee erred in accepting a proxy at meeting of creditors – whether proxy invalidly executed – whether meeting called as adjourned meeting was a fresh meeting – whether fresh proxy required – whether sequestration order should be made against estate of debtor

Bankruptcy Act 1966 (Cth)
Corporations Law

Wilson v Commonwealth [1999] FCA 219 (12 March 1999)
Staples v Milner (1996) 83 FCR 203 at 206
Re Dingle; Westpac Banking Corp v Worrell (1993) 47 FCR 478
Re McLean; Ex parte Friends Provident Life Office (1992) 36 FCR 502
Bechrose Pty Ltd v Jefferson (Trustee) [1999] FCA 1153
Loeskow v Avokah Irrigation Pty Ltd

(Receiver and Manager appointed) FC No. 274/96
(7 November 1995)


Scadding v Lorant (1951) 3 HLR 418
Shaw v Tati Concessions Ltd [1913] 1 Ch 292 at 297
McLaren v Thompson [1917] 2 Ch 261
Neuschild v British Equatorial Oil [1925] 1 Ch 346
Jackson v Hamlyn [1953] 1 All ER 887
Re Moorgate Mercantile Holdings Ltd [1980] 1 All ER 40

WESTGOLD RESOURCES NL v COLIN ROSS ATKINS
W 7092 of 1999
COLIN ROSS ATKINS v CHARLES PHILIPPE LOUIS NILANT & ORS
W 7104 of 1999
WESTGOLD RESOURCES NL v COLIN ROSS ATKINS
W 7108 of 1999

R D NICHOLSON J
10 FEBRUARY 2000
PERTH


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W 7092 OF 1999

BETWEEN:

WESTGOLD RESOURCES NL
Applicant

AND:

COLIN ROSS ATKINS
Respondent

W 7104 Of 1999

BETWEEN

COLIN ROSS ATKINS
Applicant

AND

CHARLES PHILIPPE LOUIS NILANT
First Respondent

WESTGOLD RESOURCES NL
Second Respondent

W 7108 OF 1999

BETWEEN

WESTGOLD RESOURCES NL
Applicant

AND

COLIN ROSS ATKINS
Respondent

JUDGE:

R D NICHOLSON J

DATE OF ORDER:

10 FEBRUARY 2000

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

In matter W 7092 of 1999:

(1)A sequestration order be made against the estate of Colin Ross Atkins.

(2)The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

(3)The date of bankruptcy be noted as 7 May 1999.

In matter W 7104 of 1999:

(1)The amended application be dismissed.

(2)The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966(Cth).

In matter W 7108 of 1999:

(1)The application be dismissed.

(2)There be no order as to costs.

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


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W 7092 OF 1999

BETWEEN:

WESTGOLD RESOURCES NL
Applicant

AND:

COLIN ROSS ATKINS
Respondent

W 7104 Of 1999

BETWEEN

COLIN ROSS ATKINS
Applicant

AND

CHARLES PHILIPPE LOUIS NILANT
First Respondent

WESTGOLD RESOURCES NL
Second Respondent

W 7108 OF 1999

BETWEEN

WESTGOLD…

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Details
Case
[2000] FCA 70
Decision Date

CaseChat Overview and Summary

The case of Westgold Resources NL v Atkins involves the validity of a proxy lodged by Westgold prior to a meeting of creditors and the subsequent acceptance of this proxy by the trustee. The primary dispute concerns whether the proxy was valid for the meeting held on 25 June 1999, whether the proxy correctly appointed Mr. Paul Rainford to vote at this meeting, and whether the court should review the trustee's decision to accept Westgold's vote. The proceedings also examine whether a resolution approving the execution of a Deed of Assignment was validly passed and if the court should set aside any resolutions of creditors and make a sequestration order against the estate of Mr. Atkins.

The legal issues before the court included the validity of the proxy and the procedure for its execution according to the Corporations Law. Mr. Atkins contended that the proxy was not validly executed, which would render the trustee's decision to accept it erroneous. Another key issue was whether the court had jurisdiction to review the trustee's decision and whether it was appropriate to do so. The court needed to consider the impact of the trustee's decision on the outcome of the creditors' meeting and the potential for the court to intervene in the trustee's discretion.

The court found that the Trustee had the authority to review the decision to accept Westgold's proxy under Section 178 of the Bankruptcy Act. The court noted that the jurisdiction to review was discretionary and that the court would only intervene if the decision affected the outcome of the proposal. Regarding the validity of the proxy, the court determined that the proxy was validly executed according to the Corporations Law, dismissing Mr. Atkins's contention that the proxy was invalid because it did not comply with the specific requirements set out in the Corporations Law. Consequently, the court concluded that there was no error in the Trustee's decision to accept the proxy, and no review was warranted.

The final orders of the court included a sequestration order against the estate of Colin Ross Atkins, the dismissal of the amended application, and the dismissal of the application without costs in one instance. The court also addressed the costs associated with the proceedings, directing that they be paid from the estate of the debtor in accordance with the Bankruptcy Act 1966.

Orders

Orders of the court

In matter W 7092 of 1999:

(1) A sequestration order be made against the estate of Colin Ross Atkins.

(2) The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

(3) The date of bankruptcy be noted as 7 May 1999.

In matter W 7104 of 1999:

(1) The amended application be dismissed.

(2) The applicant creditor’s costs be taxed and paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).

In matter W 7108 of 1999:

(1) The application be dismissed.

(2) There be no order as to costs.

Background

Background to the litigation

Full text does not contain this section.

Evidence

Evidence Before The Court

It will be seen from this summary that each of these proceedings essentially concerns the same issues, namely:-“.whether a proxy lodged by Westgold prior to the meeting of creditors on 11 June 1999 was valid for the meeting of creditors held on 25 June 1999;.whether the proxy of Westgold validly appointed Mr Paul Rainford to vote at the meeting of creditors;.whether, as a matter of discretion, the Court should review the trustee’s decision to accept Westgold’s vote;.whether a resolution approving the execution of a Deed of Assignment was put and carried by the meeting of creditors held on 25 June 1999;.whether as a matter of discretion the Court should set aside any resolution of creditors and make a sequestration order against the estate of Mr Atkins.”Evidence In all three proceedings affidavits were accepted into evidence (subject to objections allowed). To some significant degree, there is an duplication of evidence between the proceedings. It was therefore accepted that evidence filed in any one of the matters was relevant evidence for the purpose of the other matters.Findings of fact The circumstances in which the issues arise are not in dispute, although the effect of them gives rise to contention. Those circumstances are as follows:On 19 February 1999, Westgold obtained judgment against Mr Atkins in the Supreme Court of Western Australia for $8,764,293.04.On 22 February 1999, in reliance upon this judgment, Westgold caused a bankruptcy notice to be issued to Mr Atkins, which was served on 26 February 1999.Mr Atkins filed an application for an extension of time to comply with the bankruptcy notice on 12 March 1999, which was dismissed on 7 May 1999.On 7 May 1999, immediately prior to the dismissal of the application for an extension of time, Mr Atkins signed an authority pursuant to s 188 of the Act appointing the Trustee as his trustee.First Circular and notice of creditor’s meeting On 28 May 1999, the Trustee forwarded to creditors of Mr Atkins, a circular together with a notice of meeting of a proposed Part X arrangement in Mr Atkin’s estate. This circular gave notice that a meeting of creditors was to be held on Friday, 11June 1999 at 10.00am. The purpose of the meeting was stated to be to consider a proposal made by Mr Atkins for dealing with his affairs. In the accompanying report by the Trustee the debtor’s proposal was described as follows:“(1)The net proceeds from the superannuation benefit be surrendered, and applied for the benefit of creditors. $95,551(2)The net proceeds from the sale of the Meekatharra property be applied, for the benefit of creditors, subject to the existing contract sale being terminated. $39,000$134,551(3)The deed is to operate as a release owing to all unsecured creditors from the date of creditors accepting the proposal.(4)The intention of the debtor is to convince certain creditors to prove for a lesser sum in order that other creditors may receive a larger dividend.” The circular to creditors also contained the following statement:“2. Representation at Meeting – by ProxyWhere a creditor wishes to appoint a person to represent the creditor at the meeting as the creditor’s proxy, the creditor must complete the proxy for a meeting of creditors (Form 7) and either:(i)Arrange for the proxy to give the completed form to the controlling trustee at the meeting; or(ii)Send the completed form to the controlling trustee with the complete Proof of Debt form referred to in (1) above. Lodgement with the controlling trustee by facsimile transmission is permissible.A proxy form (Form 7) is attached for completion in this respect.A proxy form will be deemed invalid by the president if it is not completed in full.If a creditor is a corporation, a proxy or power of attorney in favour of its personal representative must be:(a)given under corporate seal unless: -(i)the articles of association have delegated such authority; or(ii)the delegation of that authority has itself been established under seal, in which case it must be;(b)given under the terms of the articles or the duly delegated authority by the required persons.”

Decision

Reasons for decision

The submissions for both Westgold and Mr Atkins are agreed that the central allegations concern the resolutions at the creditors’ meeting on 25 June 1999. Mr Atkins alleges that Westgold’s proxy was invalid for that meeting of creditors and was erroneously accepted so that the vote on the Deed of Assignment proposal would have been passed as a special resolution: see ss 5 and 204(1)(b) of the Act. The central substantive issue is therefore whether the Trustee’s decision to accept the proxy to Westgold should be reviewed on the grounds the proxy was erroneously or unlawfully accepted.Jurisdiction to review Trustee’s decision It is not in dispute between the parties that the Court has jurisdiction to review a decision of the Trustee to allow Westgold to vote by the proxy. I accept the submission for Westgold that the discretion is one which arises pursuant to s 178 of the Act. That section reads:“178.If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.” For the Court to exercise this power of review it is not necessary that there is any allegation of error or misconduct by the trustee: Wilson v Commonwealth [1999] FCA 219 (12 March 1999). In Staples v Milner (1996) 83 FCR 203 at 206 Cooper J said this jurisdiction “is discretionary, is sourced in s 27 of the Act and given effect to by the exercise of the power conferred in ss 30 and 178 of the Act: Re Dingle; Westpac Banking Corp v Worrell (1993) 47 FCR 478 at 485. He continued:“The court will be reluctant to intervene in cases unless dissuaded the determination of the question of entitlement to vote did affect, or, depending on the view taken, would have affected, the fate of the proposal by producing a different result: Re Dingle; Wespac Banking Corp v Worrell at 485-486” It is for Mr Atkins, as the party seeking to challenge the decision of the Trustee, to establish the existence of an error by the Trustee: cf Re McLean; Ex parte Friends Provident Life Office (1992) 36 FCR 502.Whether proxy invalidly executed The first principal contention for Mr Atkins relating to the validity of the proxy is that it was not valid for the meeting on 25 June 1999 because it was not executed according to the requirements of the Corporations Law. This challenge was not raised at the creditors’ meeting on 25 June 1999. Subsection 127(1) of the Corporations Law provides that a company may execute a document without using a common seal if the document is signed by two directors or a director and company secretary or, in the case of a proprietary company, the director who is the sole director and sole company secretary. Subsection 127(2) provides that a company with a common seal may execute a document if the seal is affixed and the affixing of the seal is witnessed by two directors or a director and company secretary or a sole director in the case of a proprietary company. However, subs 127(4) provides that the section does not limit the ways in which a company may execute a document (including a Deed).

Ratio Decidendi

Legal Principle Established

Full text does not contain this section.