Huynh v Pascoe

FACTUAL DISPUTE 10 The only significant factual dispute which arose in this proceeding is whether the applicant handed a proof of debt in the bankrupt's estate to a staff member of the respondent shortly before the adjourned meeting of 30 November 2000. 11 It is not in dispute that the applicant received a partially completed proof of debt form from the respondent at the same time as he received the notice of the meeting to be held on 17 November 2000 at 12.00 noon. 12 The affidavit initially filed in support of the applicant in this proceeding was an affidavit sworn by Mario Cesare Bechelli ("Mr Bechelli"), solicitor, on 14 February 2001. That affidavit contains the following paragraph which was read without objection on the hearing of the application: "Annexed hereto and marked 'C' is a copy of a Proof of Debt which I am informed by Van Tri Huynh, and believe, was lodged by him with the respondent. The respondent has not rejected the Proof of Debt." 13 The document annexed to Mr Bechelli's affidavit and marked "C" is a partially completed proof of debt form. It identifies the bankrupt and gives her bankruptcy number and the date of her bankruptcy. It is not otherwise completed. I am satisfied that it is a copy of the proof of debt form which the respondent provided to the applicant and that, to the extent that the proof of debt form is completed, it was so completed in the office of the respondent before it was provided to the applicant. 14 Counsel for the applicant sought, and was granted, leave to expand on the evidence in chief of Mr Bechelli. He drew Mr Bechelli's attention to the above paragraph of his affidavit. The transcript then records the following: "Mr Fraser: How did the document which is annexure C - as annexed to your affidavit, come into your possession? The Witness: Well, the circumstances were that it was all done after I left MacLarens, that … Her Honour: So in the sense of ceased being employed there? The Witness: Ceased being employed by MacLarens - if I could give some background? The situation was that I - that affidavit was initially drafted by counsel. The draft was not something which I had briefed counsel to do and I saw it for the first time on the last day that I was employed by MacLarens and that was at about five o'clock that afternoon. Her Honour: Mr Bechelli, I think I should ask you whether the counsel of whom you speak is Mr Fraser? The Witness: No it's not. Her Honour: Thank you. The Witness: I was asked by one of the partners to have a look at it and if possible to swear the affidavit. I had a brief look at it on that day I had other matters to finish before finishing up at MacLarens. There were some errors in that affidavit and I told him that it would be necessary to change that affidavit and that I would have a look at it in the following week - make necessary amendments, which I did when I was up in Newcastle. I didn't have the benefit of a file when I made those amendments - I made certain - I assumed that certain statements were correct. I amended those which I knew were incorrect. I returned it to MacLarens and they then made the - engrossed the amendments, sent back the affidavit with the annexures for swearing. I didn't carefully go through those annexures at the time that I swore the affidavit and that's the circumstances in which it was done. Mr Fraser: All right. Her Honour: I wish to understand you, Mr Bechelli. Are you saying that paragraph 4 of your affidavit is not accurate? The Witness: It may not be accurate, your Honour. Her Honour: Well, are you able to say one way or the other whether it is accurate or not accurate? The Witness: Could I have another look at paragraph 4, your Honour? Her Honour: Yes. The Witness: I can't say that that is accurate, your Honour. Her Honour: Sorry, you are telling me that it is inaccurate? The Witness: Yes, your Honour. Her Honour: In what regard is it inaccurate, Mr Bechelli? The Witness: It's inaccurate in that I was not informed - I don't recall being informed by Mr Huynh that a proof of debt was lodged by him." 15 Mr Bechelli went on in his oral evidence in chief to say that he had no recollection of seeing a proof of debt in the bankrupt's estate completed by the applicant. Under cross-examination Mr Bechelli agreed with the suggestion that paragraph 4 of his affidavit "was inserted by the process of the drafting of the affidavit". I understand this answer to mean that Mr Bechelli neither drew himself, nor gave instructions for the drawing of, paragraph 4 of his affidavit. Rather paragraph 4 was drawn by someone else and Mr Bechelli swore to the truth of the contents of the affidavit without turning his mind to the accuracy of paragraph 4. 16 The first affidavit sworn by the applicant in this proceeding made reference to a proof of debt. However, the applicant acknowledged in his cross-examination that the reference was to a proof of debt filed by him in the bankrupt's bankrupt husband's estate. It appears that in about May of this year the respondent's solicitors raised with the applicant's solicitors the issue of whether the applicant claimed to have lodged a proof of debt in the bankrupt's estate. By letter dated 17 May 2001 the applicant's solicitors wrote to the respondent's solicitors in the following terms: "We refer to your letter of 15 May 2001. The Applicant does not intend to read paragraph 4 of the Affidavit of Mr Bechelli sworn 14 February 2001 and accepts that no proof of debt was lodged by him in this bankrupt estate. In those circumstances, would you kindly advise whether you still require the Applicant and Mr Bechelli for cross-examination." 17 By a second affidavit sworn on 21 May 2001, which incidentally was witnessed by the solicitor who signed the above letter, the applicant deposed as follows: "1. I am the applicant. 2. I refer to my affidavit sworn earlier in these proceedings. When I attended at Mr Pascoe's office on 30 November 2000, I first went into the reception area of his office and I gave to the receptionist and I said: 'My name is Van Tri Huynh. I am here for a meeting with Mr Pascoe. Would you please give him these documents." I then sat down in the reception area. Annexed and marked 'A' is a copy of a bundle of documents that I gave him. 3. I waited for about 10 minutes and then Mr Pascoe came into the reception area. He had the bundle of documents, which I had given to the receptionist, with him. He was looking through the bundle of documents as he came into the reception area and he gave them back to me and we then had the conversation set out in paragraph 4 of my earlier affidavit." 18 Included in the bundle of documents annexed to the applicant's second affidavit and marked "A" is a completed proof of debt in the bankrupt's estate. It shows the amount owing to the applicant as $149,000 and it is signed by the applicant and dated 28 November 2000. 19 Under cross-examination the applicant said that after the meeting of 30 November 2000 he went to see his solicitor and showed him the documents that had earlier been returned to him by the respondent. However he said that he had retained possession of the documents until the week of 21 May 2001 when he gave them to his solicitor. The applicant agreed that he had not photocopied the proof of debt form provided to him by Mr Pascoe so that after 28 November 2000 he had only had in his possession the completed proof of debt. When asked if he knew how his solicitors came to be in possession of the partially completed proof of debt form annexed to Mr Bechelli's affidavit, the applicant responded that he thought that they must have been in touch with the office of the respondent to obtain it. 20 Although the solicitor for the applicant who signed the letter dated 17 May 2001 and before whom the applicant swore his affidavit of 21 May 2001 was present in court throughout the hearing of this matter, he was not called to give evidence.

21 The respondent gave affidavit evidence that he did not recall either the applicant or his receptionist giving him a bundle of documents on 30 November 2000, he did not recall ever having seen a proof of debt lodged by the applicant in the bankrupt's estate and that, if he did receive a bundle of documents from a creditor, he would peruse the documents and retain in his possession any proof of debt that he identified among the documents. The respondent gave oral evidence of having sought, but failed, to identify the member of his staff who was on reception duty on 30 November 2000. He said that none of the three staff members who may have been on reception duty that day could say one way or the other whether she had seen the applicant on that day. He said that the applicant had visited the respondent's offices on a number of occasions. 22 In reaching a finding as to whether the applicant handed a proof of debt in the bankrupt's estate to a member of the respondent's staff on 30 November 2000, I attach significance to the failure of the applicant to call a solicitor from the law firm Maclarens to explain the circumstances in which the partially complete proof of debt form came first, into the possession of Maclarens, and secondly, to be annexed to Mr Bechelli's affidavit. I attach even more significance to the failure of the solicitor for the applicant who signed the letter of 17 May 2001, and also took the applicant's affidavit of 21 May 2001, to give evidence. As is mentioned above, it is plain that he was available to do so. 23 The evidence which was called in this case was sufficient to give rise to an inference that the proof of debt signed by the applicant was completed and signed by him on a date between 17 May 2001 (when his solicitors, presumably acting on his instructions, advised the respondent's solicitors that the applicant accepted that no proof of debt was lodged by him in the bankrupt's estate) and 21 May 2001 when the applicant swore the affidavit to which was annexed the completed and signed proof of debt. In the circumstances I am entitled to conclude, and I do conclude, that if the applicant's solicitor or solicitors (as the case may be) with knowledge of the matters referred to above had given evidence, his or their evidence would not have assisted the applicant by throwing doubt on the correctness of the above inference (Jones v Dunkel (1959) 101 CLR 298 per Kitto J at 308, Menzies J at 312 and Windeyer J at 319). I conclude on the balance of probabilities that the applicant did not hand a proof of debt in the bankrupt's estate to a member of the respondent's staff on 30 November 2000 or at any relevant time.

CONSIDERATION 24 It was not suggested by the respondent that the present application was not properly brought pursuant to s 178 of the Act. In Wilson v The Commonwealth [1999] FCA 219 I reviewed the authorities on the proper scope and purpose of s 178 of the Act. I do not consider it necessary to do so again. The present application is, in my view, appropriately brought under the section. 25 I therefore turn first to consider whether the respondent was correct in his determinations on 17 November and 30 November 2000 that no quorum was present at the meeting of creditors of the bankrupt's estate. Subsection 64N(2) of the Act, the terms of which are set out in [8] above, governs this issue. 26 Ultimately the applicant by his counsel accepted, as I understand it, that there was no quorum present at the meeting of 17 November 2000. There was at least one other creditor of the bankrupt's estate. The applicant did not suggest that at or before the meeting of 17 November 2000 he had provided to the trustee a proof of debt in the bankrupt's estate or otherwise given to him a statement in accordance with s 64D of the Act. The applicant argued, with some legitimacy as it seems to me, that the respondent must carry some responsibility for this as the notice of meeting dated 2 November 2000 did not contain the statement required by s 64D of the Act (see [8] above); nor did the respondent seek to overcome the deficiency in the notice by asking the applicant as the only creditor present at the meeting if he wished to give to the respondent a proof of debt. It was accepted by both parties before me that a completed proof of debt will constitute a written statement of the kind envisaged by s 64D of the Act (Re Burton; Burton & Ors v Wily [1994] 122 ALR 399). 27 Incidentally, I note that the respondent has deposed to the fact that the meeting of creditors of the bankrupt's husband's estate held on 17 November 2000 commenced at 12.10pm and lasted for approximately eight minutes and that the meeting of creditors of the bankrupt's estate commenced immediately thereafter. The respondent gave oral evidence that the first of the two meetings was the longer. From this I conclude that the meeting of creditors of the bankrupt's estate probably lasted less than eight minutes so that the meeting probably came to an end before 12.30pm. The significance in such circumstances of subs 64N(3) of the Act (see [8] above) was not debated before me and it is thus inappropriate for me to express a final view on it. However, it seems to me to be open to be argued that subs 64N(3) has the effect that a trustee may not determine earlier than thirty minutes after the time fixed for the meeting that a quorum is not present. Rather, the subsection has the effect that, if a quorum is not present within thirty minutes after the time fixed for the meeting, the meeting is adjourned at the expiration of the thirty minute period by operation of the subsection (as opposed to adjourned by the trustee) and the trustee is required to fix the time, date and place to which the meeting is adjourned. 28 The submission of the applicant that there was a quorum present at the adjourned meeting of 30 November 2000 was based upon the evidence of the applicant that he had provided to the respondent, immediately prior to the meeting, a proof of debt in the bankrupt's estate. The applicant argued that a "creditor who is entitled to vote" within the meaning of par 64N(2)(a) of the Act is a creditor who is entitled to vote by reason of subs 64ZA(4) of the Act (see [8] above). It is not in dispute that, as at 30 November 2000, no other creditor had provided to the respondent a proof of debt in the bankrupt's estate. In any event, the applicant was the only creditor participating in person, or by proxy or attorney, in the meeting. In these circumstances, the applicant argued, there was only one creditor of the bankrupt's estate who was entitled to vote (ie the applicant) with the consequence that a quorum was constituted by him participating in person and the presence in person of the trustee. 29 As is mentioned above, I have rejected the applicant's evidence concerning his proof of debt. On this basis, on the construction of subs 64N(2) for which he contended, his submission that there was a quorum present at the adjourned meeting of 30 November 2000 must fail. 30 However, it is appropriate to note that the respondent challenged the contention that a "creditor who is entitled to vote" within the meaning of subs 64N(2) of the Act is a creditor who is entitled to vote by reason of subs 64ZA(4) of the Act. The respondent contended, in effect, that par (a) of subs 64N(2) is concerned with the circumstance in which there is only one creditor of the relevant bankrupt estate. It was not clear what significance, if any, the qualifying words "who is entitled to vote" were suggested by the respondent to have. The respondent pointed out that subs 64ZA(1) gives a limited operation to s 64ZA. Section 64ZA applies to voting at an election under s 64P of a person to preside at a meeting and on any motion proposed at a meeting or an amendment proposed to such a motion. However, it is of significance, in my view, that subdivision D of Part IV of the Act does not allow for voting at a meeting of creditors for any purpose or purposes other than those identified in subs 64ZA(1). 31 Subsection 64N(2) provides for the constitution of a quorum in two different circumstances: where there is only one creditor who is entitled to vote (par (a)) and "otherwise" (par (b)). It is sufficient for present purposes to concentrate on par (a). It seems clear from the form of par (a) that the question of whether "there is only one creditor who is entitled to vote" is to be determined independently of the question of whether that creditor, or a proxy or attorney of that creditor, is participating in person or by telephone. It is only if there is only one creditor who is entitled to vote that subpars (i) and (ii) operate to constitute a quorum. That is, as a matter of logic, the fact of there being only one creditor who is entitled to vote is a matter to be determined ahead of, and independently of, the constitution of the quorum. 32 That does not mean, however, that s 64ZA of the Act has no relevance to the question of whether a person is a "creditor who is entitled to vote" within the meaning of subs 64N(2). Subsection 64N(2) is concerned with whether the meeting is one at which business may be transacted lawfully. The primary, although not the only, purpose of a meeting of creditors is the election of a person to preside at the meeting and the voting on relevant motions. This suggests, in my view, that the question of whether a person is a "creditor who is entitled to vote" within the meaning of subs 64N(2) is to be determined having regard to s 64ZA. There would be no point in subs 64N(2) providing for a quorum to be constituted in circumstances in which no vote could lawfully be taken during the course of the meeting. The requirement of personal participation in the meeting is addressed by subpar (i) and (ii) of par 64N(2)(a). I therefore conclude that a "creditor who is entitled to vote" within the meaning of subs 64N(2) is a creditor of the relevant bankrupt estate who would, if he or she chose to participate in the meeting, be entitled to vote at the meeting. That is, "a creditor who is entitled to vote" within the meaning of the subsection is a creditor of the relevant bankrupt estate who: (a) has given the trustee a statement in accordance with s 64D (subs 64ZA(6)); and (b) if he or she holds a security in respect of a debt, the debt or the total amount of the debts, exceeds the amount estimated by the creditor in the s 64D statement to be the value of the security (subs 64ZA(5)). 33 The above conclusion means that the question of whether "there is only one creditor who is entitled to vote" within the meaning of subs 64N(2) is to be determined by reference to the total body of creditors of the relevant estate, and not by reference only to those present at the meeting. However, only a creditor of the estate who satisfies the criteria (a) and (b) above is a "creditor who is entitled to vote" within the meaning of the subsection. It is for this reason, in my view, that s 64D of the Act mandates that the notice of the meeting of creditors is to state that each creditor must give to the trustee at or before the meeting a written statement setting out the matters identified in that section. The matters identified in the section are such that, if the creditor does give to the trustee such a written statement, he or she will be entitled to vote at the meeting of creditors.

CONCLUSION 34 In the circumstances which I am required to consider, I do not consider that it would be just and equitable for the Court to order the removal of the respondent as trustee of the bankrupt's estate. I am satisfied that there have been some irregularities in the respondent's management of the bankrupt's estate. However, I see no reason to conclude that these irregularities reflect more than a failure on the part of the respondent to pay careful attention to the requirements of Part IV of the Act. Indeed it was not suggested to the respondent in cross examination that his conduct was motivated by self interest or any other improper factor. 35 Further, I understand that since 30 November 2000 a further creditor of the bankrupt's estate has lodged a proof of debt with the respondent. It would seem that that creditor would now be "a creditor who is entitled to vote" within the meaning of subs 64N(2) of the Act, and thus a creditor who would now be entitled to participate in a meeting of creditors and cast a vote on any motion that might be proposed for the removal of the respondent as the trustee of the bankrupt's estate. 36 Perhaps most significantly, the applicant has failed to establish a matter of fact at the heart of his complaint against the respondent. Namely, that at one or other or both of the meetings of 17 November and 30 November 2000 a quorum was present. That is, he has failed to establish that had these meetings, or one of them, been conducted as required by the Act, a motion would have been carried for the removal of trustee as trustee of the bankrupt's estate. 37 The application will be dismissed. I will hear counsel on the question of costs.

ANCILLARY MATTER 38 The evidence given in the proceeding as to the circumstances surrounding the swearing and filing in the Court of the affidavit referred to in [12] above give rise to concern. Solicitors, like barristers, are officers of the courts in which they appear. In all of their dealings with the courts they carry a serious responsibility not to mislead whether deliberately or through carelessness. It could never be appropriate for any person, but even more emphatically it could never be appropriate for a legal practitioner, to swear to the truth of a matter without holding a positive belief as to its truth. Should a legal practitioner discover that in a document filed in a court he or she has inadvertently sworn to the truth of a matter which is not true, or which he or she does not know to be true, the legal practitioner comes under a duty immediately to correct the position. This is more than just an issue of appropriate frankness and honesty. Any loss of confidence by the courts in the integrity of legal practitioners will tend to undermine both the efficacy and the efficiency of the administration of justice. I certify that the preceding thirty-eight (38) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.