Wilde, W.J. v Spratt, J.K - [1986] FCA 629

Re: WILSON JOSEPH WILDE and ERNEST GEORGE HARRIS
And: JANELLE KAYE SPRATT; P. & S. DECO QUARRIES PTY. LTD.; ROBERT WILLIAM
PEACH and JOHN ROBERT REES
No. G 82 of 1986
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA

GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE SOUTHERN DISTRICT OF THE STATE OF QUEENSLAND
Fisher J.
Lockhart J.
Spender J.

CATCHWORDS

Bankruptcy - Compromise of action by trustee - no permission of creditors or leave of Court to compromise obtained - operation of sub-s. 135(4) Bankruptcy Act - meaning of "good faith" in para. 135(4)(b) - whether "without notice" in para. 135(4)(b) requires absence of knowledge of legal requirement that permission or leave to compromise be obtained.

Bankruptcy Act 1966 (Cth): sub-ss. 58(3), 314(2), 135(1), 135(4)

HEARING

BRISBANE

#DATE 24:12:1986

ORDER

The appeal be dismissed.

The appellants pay the costs of the respondents of this appeal.

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

JUDGE1

The courts have had occasion before to consider the meaning of the expressions "in good faith" and "without notice" in various contexts. In this appeal from a judgment of a single Judge of this Court (Pincus J.) the meaning of the expressions arises for consideration in the context of para. 135(4)(b) of the Bankruptcy Act 1966 ("the Act"). Section 135, so far as is relevant, provides:

"135(1) The trustee may, with the permission of the creditors granted by resolution passed at a general meeting or of the committee of inspection or with the leave of the Court, do all or any of the following things:-

(a) sell, by private contract, any property of the bankrupt having a value exceeding $20,000 or such greater amount as is prescribed for the purposes of s. 134;

. . .

(f) make a compromise in respect of any debt exceeding $20,000 or such greater amount as is prescribed for the purposes of section 134 claimed to be due to the bankrupt, or any claim exceeding $20,000 or such greater amount as is prescribed for the purposes of section 134 by the bankrupt;

(g) make a compromise with a creditor or a person claiming to be a creditor in respect of a debt provable, or claimed to be provable, in the bankruptcy and claimed to exceed $20,000 or such greater amount as is prescribed for the purposes of section 134;

. . .

(4) The failure by a trustee to obtain the permission or leave required by sub-section

(1) in relation to a transaction by the trustee does not affect the validity of the transaction if -

(a) the transaction was for valuable consideration; and

(b) the person with whom it took place acted in good faith and without notice of the failure to obtain the permission or leave."

It is necessary to state the relevant facts for a proper understanding of the questions involved in this appeal. On 19 February 1979 Timothy John Spratt and his wife, Janelle Kaye Spratt (the first…

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 629
Decision Date: 24 DECEMBER 1986

CaseChat Overview and Summary

The case of Wilde v Spratt involved a dispute related to bankruptcy proceedings. The appellants, Wilde, sought to compromise an action with the respondents, Spratt, without obtaining the necessary permissions from creditors or leave from the Court as stipulated by the Bankruptcy Act. The matter was brought before the court to determine the validity of the compromise under section 135(4) of the Act, particularly focusing on the interpretation of "good faith" in paragraph 135(4)(b) and the requirement of "without notice" in the same provision.

The court was required to decide whether the term "without notice" in paragraph 135(4)(b) of the Bankruptcy Act necessitates complete ignorance of the legal requirement to obtain permission or leave to compromise. The central issue was whether the appellants acted in good faith when they entered into the compromise without the requisite permissions, and if their lack of knowledge about the necessity of such permissions or leave could be considered as acting "without notice."

In delivering the judgment, the court held that the term "without notice" in paragraph 135(4)(b) does not imply an absence of knowledge about the legal requirement to obtain permissions or leave to compromise. Instead, the court interpreted "without notice" to mean that the compromise was not compromised by the knowledge of the requirement itself, but rather by the awareness of the fact that such a compromise was being attempted. The court found that the appellants had acted in good faith, as they were not aware of the specific legal requirement but were nonetheless proceeding with the compromise in a manner they believed to be valid.

The appeal was dismissed, and the appellants were ordered to pay the costs of the respondents for this appeal. The final orders were made in accordance with Order 36 of the Federal Court Rules.

Orders

Orders of the court

The appeal be dismissed.

The appellants pay the costs of the respondents of this appeal.

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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