Bankruptcy Act (Cth) 1966: ss. 5, 27, 30, 190, 201.

Thompson Redhead

Solicitors for Second Respondent: J. Waters

Barker Gosling

The Court orders that:

1. Both appeals be dismissed.

2. The appellants pay the costs of the respondents of each appeal.

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

I have had the advantage of reading the reasons of Lockhart J. which led him to agree in the Court's order that each appeal be dismissed with costs and I agree with his Honour's reasons.

I have had the advantage of reading the reasons of Lockhart J. which led him to agree in the Court's order that each appeal be dismissed with costs. I agree with those reasons and would simply add that a judge of the Court, asked to adjourn the petitions already on foot against the debtors, might usefully refer to Field v. Commercial Banking Co. of Sydney Ltd [1978] FCA 46; (1978) 22 ALR 403.

On 6 March 1992 the Court heard and dismissed these two appeals

from the judgment of a single Judge of the Court (Spender J.), heard together by consent. The Court said that it would publish its reasons for judgment later. Two questions arise in the appeals. The first and primary question is whether the decision of the chairman of a meeting of creditors of a debtor called under Part X of the Bankruptcy Act 1966 ("the Act") pursuant to s. 190 admitting the claim of a creditor to vote at the meeting is examinable by the Court. The second question is whether, assuming the answer to the first question is in the affirmative, the learned primary Judge erred in the exercise of his discretion when refusing to grant an injunction restraining the chairman of the meeting from permitting the creditor to vote at it.

2. On 19 February 1992 Spender J. heard together two urgent applications, one by the appellant, Brian Forshaw, and the other by the appellant, Edward Christiaan Sent (to whom for convenience I shall refer together as "the debtors"). They raise the same issues.

3. In each application an order was sought from the Court that the respondent, Jeffrey Robert Thompson, as chairman of a meeting of creditors of each of the debtors, called in pursuance of authorities signed under s. 188 of the Act, be restrained from permitting the respondent, First National Limited ("First National") to vote at the meetings. On 13 November 1991 each of the debtors had signed an authority to Mr Thompson, a solicitor, to call a meeting of his creditors. After the authorities had been signed, a meeting of creditors of Mr Sent was convened by Mr Thompson on 29 November and was then adjourned by him to 19 December, 5 January, 3 February, 14 February, 17 February and then to 20 February (the day after Spender J. heard the applications). In the case of Mr Forshaw, the initial meeting of his creditors was held on 20 December 1991 and adjourned in due course to 20 February. The reason for those adjournments was to enable Mr Thompson to consider the question of the entitlement of certain creditors of the debtors to vote at the meetings under Part X of the Act including AGC (Advances) Limited, Australian Guarantee Corporation Limited and First National. In the statement of affairs filed by each of the debtors, AGC (Advances) Limited (there described as AGC Limited) was shown as an unsecured creditor in the sum of $18,174,680, the indebtedness said to arise pursuant to a guarantee. Australian Guarantee Corporation Limited was shown in the case of each debtor as a creditor in the sum of $159,058. First National was shown in each statement of affairs as a creditor in the sum of $1,000,000, the liability said to arise under a "guarantee".

4. The evidence is sparse as to what occurred at the various adjournments of the meetings of creditors of the debtors, but it appears that over the period of adjournments, Mr Thompson considered letters and other material which had been given to him by these three companies in support of their assertions that they were creditors of the debtors and entitled to vote at the meetings of creditors under Part X. Material was also submitted to Mr Thompson by the debtor and considered by him.

5. One of the letters before Mr Thompson for his consideration was dated 11 December 1991 from the solicitors for First National written to each of the debtors stating that they were instructed that Tabourne Pty Ltd ("Tabourne") had made default under the terms of a deed of May 1986 by failing to pay monies due and owing thereunder, that the amount due and owing by Tabourne to First National under the deed on 13 November 1991 was $8,649,691.10 and concluding as follows:

"We are therefore instructed to demand, and do

hereby demand that you forthwith pay to our

client the sum of $8,649,691.10 due and owing to

it pursuant to the terms of the said Loan

Agreement and your Guarantee as at 30 November 1991."

6. First National had made advances and granted financial accommodation to Tabourne in May 1986 pursuant to the deed executed in May 1986 between Tabourne, First National, certain other companies and each of the debtors. Tabourne was a member of a group of companies known as the "A.L. Stewart Group", the business of which was developing real estate and buying and selling new and used motor vehicles.

7. By letter dated 18 February 1992, one addressed to Mr Forshaw and the other to Mr Sent, Mr Thompson stated that he had considered the material lodged with him on behalf of the three creditors mentioned earlier and by the debtors. He said in each letter that he had concluded that the debt of AGC (Advances) Limited was contingent and therefore it should not be entitled to vote in respect of the Part X proposal of the debtors, that the claim by Australian Guarantee Corporation Limited should be admitted for voting purposes in the sum of $159,058 and that the claim by First National should be admitted for voting purposes in the sum of $8,589,310. The claims of certain other creditors were considered by Mr Thompson and he indicated his proposed rulings with respect to them for voting purposes in the same letters. The only creditor whose claim is relevant for the purposes of this case is First National.

8. For completeness, I should say that, not only the debtors, but their respective wives also, signed authorities pursuant to s. 188 authorising Mr Thompson to call a meeting of their respective creditors, but for reasons which are not relevant for present purposes the only meetings with which this case is concerned are those relating to the debtors.

9. Each of the debtors has proposed for consideration by his creditors a "deed of arrangement", whereby a registered trustee in bankruptcy shall be trustee under the deed, each debtor shall pay to the trustee $10,000 over twelve months to be distributed pro rata among the creditors and, in addition, sufficient funds to pay the costs and remuneration of the trustee. The statement of affairs of each of the debtors shows, in the case of Mr Forshaw, amounts owing to unsecured creditors in excess of $27m with assets valued at nil and therefore a total deficiency of the full amount of the claims of unsecured creditors. The statement of affairs of Mr Sent shows the amount owing to unsecured creditors and the total deficiency as $26,490,206, again with assets valued at nil. If the position of each debtor as revealed by the statement of affairs is substantially accurate it would follow that under the proposed schemes of arrangement, whereby each debtor makes available $10,000 for payment to his creditors, each creditor could expect to receive something in the order of 1/26th of 1 cent in the dollar.

10. At the hearing before the primary Judge, the case for the debtors was that their liability, if any, as guarantors arose pursuant to instruments of guarantee given by each of them to First National to secure the liabilities of Tabourne. The debtors asserted that the guarantees were void. They claimed, in the alternative, that First National was estopped from enforcing the guarantees against them and that there was no debt due.

11. An affidavit was sworn by a Mr D.B. Flemming in support of the application of the debtors before his Honour. They did not themselves swear affidavits in support of their case. Mr Flemming is described as a consultant "duly authorised by the applicants to make this affidavit on their behalf". He swore that, notwithstanding the guarantees given by the debtors to secure the liabilities of Tabourne to First National, a Mr O'Mahoney, an officer of First National, told him (Mr Flemming) that if First National entered into possession of certain assets (presumably of Tabourne or another member of the Stewart Group) and sold them as mortgagee in possession, it would cause First National:

"great trouble and expense and crystallise far

larger losses than would occur if they were sold

by the A.L. Stewart Group itself."

12. More than one conversation between Mr Flemming and Mr O'Mahoney is said to have taken place. Mr Flemming swore that in a later conversation:

"Mr O'Mahoney told me that if the guarantors

continued to assist them in relation to the

Louth action and the sell-down of assets then

they would not make a call on our guarantees.

He also told me that this agreement would not be

documented."

13. The reference to "the Louth action" is to a prospective action which members of the A.L. Stewart Group were considering against a firm of solicitors for damages for negligence in which the plaintiff would be Louth Pty Limited, the trustee of a trust which was developing a "high rise" building at Coolum (Louth Pty Limited being a member of the A.L. Stewart Group).

14. The primary Judge said of these assertions by the debtors:

"While it may be that a degree of scepticism

might be entertained concerning the claim to an

oral agreement releasing, inter alios, the

debtors from the obligations of their guarantee,

it is not possible to conclude that the claims

to which Mr Flemming swears are unarguable.

If what is asserted by Mr Flemming is made out,

no obligation pursuant to the guarantees is owed

by either of the debtors to First National.

Where a substantial defence on the merits is

disclosed so that there is a doubt if there is

any debt at all, the debt is contingent. In

those circumstances, it was submitted that,

pursuant to s. 198(2) of the Act, the creditor

would not be entitled to vote."

15. The primary Judge said in his ex tempore reasons for judgment given on 19 February 1992 that senior counsel for each of the debtors made it plain that the orders sought were that the chairman of the meeting, Mr Thompson, be restrained from permitting First National to vote at the meetings and that no other orders were sought. In particular it was not sought that First National be itself restrained from voting at the meetings or that Mr Thompson's decision as to the entitlement of First National to vote as a creditor of each of the debtors be set aside.

16. His Honour considered various sections of the Act and the judgment of Judge Rogerson of the Court of Insolvency of South Australia in Re Amadio (1978) 46 FLR 147 (also 24 ALR 455) and he held, obviously placing considerable reliance upon the judgment of Rogerson J., that it was not competent for the Court at this stage to make the orders sought by each debtor.

17. His Honour then said that, even if he were wrong in his conclusion that the Court was not competent to consider the applications, it was clearly a case where the balance of convenience favoured the refusal of the injunctive relief restraining the chairman of the meeting from allowing First National to vote at the meetings of creditors. His reasons for this conclusion were that:

"The time frame contemplated by Part X for the

determination by creditors at the meetings held

under Part X is summary.

It would be deleterious to the efficient

administration of Part X of the Bankruptcy Act

if a debtor or creditor, dissatisfied by a

decision by a chairman concerning the right

claimed by that creditor to vote, could have the

meeting disrupted, by applications to the Court

for either declaratory or injunctive relief.

The delay and disruption implicit in the

acceptance of such a state of affairs is

contrary to the broad scheme of Part X.

For those reasons I decline to grant the relief

sought in the application."

18. His Honour dismissed each application with costs. The debtors appealed from his Honour's judgment.

19. Whether the decision of the chairman of a meeting of creditors called pursuant to s. 190 of the Act admitting the claim of a creditor to vote at the meeting is examinable by the Court involves an analysis of the relevant provisions of the Act. The source of the Court's jurisdiction in bankruptcy is s. 27(1), which confers jurisdiction on a number of courts including the Federal Court. The word "bankruptcy" is defined in s. 5(1), in relation to jurisdiction or proceedings, as meaning "any jurisdiction or proceedings under or by virtue of this Act". Plainly this definition of "bankruptcy" includes the Court's jurisdiction over matters arising for determination under Part X of the Act: see Morris v Maroudas [1986] FCA 406; (1986) 12 FCR 346; and Re Hawkesford (1937) 10 ABC 26 per Lukin J. at 29 with respect to the similar definition in the Bankruptcy Act 1924 (Cth).

20. The powers of the Court in exercising its bankruptcy jurisdiction are conferred by numerous sections of the Act including those to be found in Part X of which s. 221 (empowering the Court to make a sequestration order against the estate of a debtor where the debtor fails to attend a meeting of creditors called pursuant to authority signed by him under s. 188 etc.) and s. 222 (which empowers the Court to declare a composition void) are examples. These specific instances of the conferral of powers upon the Court must not obscure the general conferral upon the Court by s. 27 of "jurisdiction in bankruptcy". If a matter answers the description of being "in bankruptcy" the Court may exercise jurisdiction in respect of it; and the width of this jurisdiction is exemplified by the wide definition of the term "bankruptcy" in s. 5(1).

21. A debtor may sign an authority pursuant to s. 188 authorising a registered trustee to call a meeting of his creditors and to take over the control of his property or authorising a solicitor to call a meeting of his creditors (but not, in that case, to take over the control of his property). In the present case each debtor signed an authority authorising his solicitor to call a meeting of his creditors. Pursuant to s. 188(2) the debtor is obliged, within ten days before signing the authority, to give to the solicitor a statement of his affairs and a statement indicating how he proposes that his affairs be dealt with under Part X.

22. Under s. 190(1) the solicitor or registered trustee is required to proceed to call a meeting of the debtor's creditors "in accordance with this Division". By s. 194(1) the meeting of creditors is required to be held not later than thirty-five days after the authority is signed by the debtor, and not earlier than fourteen days after the notices to creditors are delivered or sent by post under s. 194(2).

23. Section 194(2) provides that the controlling trustee or solicitor calling the meeting shall give notice of the meeting to each person who is stated by the debtor to be a creditor and whose address is known to the trustee or solicitor. Section 197(1) states that a meeting may by resolution be adjourned from time to time.

"(1) Subject to this section, every creditor is

entitled to vote at a meeting under this

division.

(2) A creditor is not entitled to vote in

respect of an unliquidated or contingent

debt or a debt the value of which is not

ascertained.

(3) ...

(4) A creditor is not entitled to vote

(otherwise than in respect of the election

of a chairman of the meeting), unless he

has made known to the chairman particulars

of his debt."

"Any question as to the right of a person to

vote at a meeting under this Division, or as to

the amount of the debt in respect of which a

person is entitled to vote at such a meeting,

shall be determined by the chairman, who may, if

he thinks it necessary to do so, adjourn the

meeting for a period, not exceeding 14 days, to

enable him to investigate the matter."

"Where -

(a) a debtor has failed, without sufficient

cause, to attend a meeting of creditors

called under an authority signed by him or

her under section 188;

(aa) a debtor has contravened subsection

189(2);

(b) a debtor, having been required by a

special resolution of a meeting of

creditors called in pursuance of such an

authority to execute a deed of assignment

or a deed of arrangement or to present a

debtor's petition, has failed, without

sufficient cause, to execute the deed

within the time prescribed by this Act or

to present the debtor's petition within

the time required by the special

resolution; or

(c) a meeting of creditors called in pursuance

of such an authority has not, within 4

months from the date for which the meeting

was called, passed one of the special

resolutions referred to in subsection

204(1),

the Court may, if it thinks fit, on the

application of the Inspector-General, a person

authorised in writing by the Inspector-General,

a creditor or the controlling trustee, forthwith

make a sequestration order against the estate of

the debtor."

"(1) Where there is a doubt, on a specific

ground, whether a deed of assignment or a deed

of arrangement was entered into in accordance

with this Part or complies with the requirements

of this Part, or whether a composition has been

accepted by a special resolution of a meeting of

creditors under section 204, the Inspector-General,

a person authorised in writing by the

Inspector-General, the Registrar, the trustee, a

creditor or the debtor may apply to the Court

for an order under subsection (2).

(2) Upon the hearing of an application made

under subsection (1), the Court may, subject to

this section, make an order -

(a) declaring that the deed or composition is

void, or that it is not void, on the

ground specified in the application; or

(b) declaring that a provision of the deed is

void, or is not void, on the ground

specified in the application."

27. Section 221(1) and 222(1) and (2) are examples of provisions of the Act which specifically empower the Court, in exercising its jurisdiction in bankruptcy conferred by s. 27, to make a summary sequestration order against the estate of the debtor (s. 221(1)) or to declare a deed or composition or provision of a deed of assignment or arrangement void (s. 222).

28. It is clear that the Court may, on hearing applications pursuant to either of those two provisions, determine whether a creditor was entitled to vote at the meeting convened pursuant to s. 190. But the absence of an express provision empowering the Court to determine at an earlier stage in the Part X process whether a creditor is entitled to vote, does not lead to the conclusion that the Court is without jurisdiction to determine that issue.

29. It was submitted on behalf of the respondents that s. 201 vests in the chairman of the meeting the power, to the exclusion of the Court, to determine all questions as to the right of a creditor to vote at a meeting under Division 2 of Part X.

30. Section 160(f) of the Bankruptcy Act 1924 (Cth), the precursor of s. 201, vested a power in the chairman similar to that conferred by s. 201, but s. 161(j) empowered the Court to settle a dispute as to the right of any person to be deemed a creditor or as to the amount of his debt, or the value of his security, and this has been held to empower the Court to review the chairman's decisions under s. 160(f): Re Hobbs, Ex parte Dutton (1938) 10 ABC 293.

31. Section 161(j) was omitted from the 1966 Act (though no light is shed on the reason for this by the Clyne Committee Report or the Second Reading Speeches with respect to the Bill which became the Bankruptcy Act 1966). However, it is correct to say that the deliberate absence of a specific power in the Court in the 1966 Act, akin to the old s. 161(j), supports the conclusion that the legislature intended that the chairman should in a summary way determine questions as to the right of a creditor to vote at a meeting under Division 2 of Part X and did not intend a general right of appeal to be available to any creditor or debtor aggrieved by the chairman's decision. The legislature obviously took this course because of its perception of the undesirability and disadvantage of undue delays occurring in meetings of creditors and its desire to ensure that such meetings were held and conducted in an orderly, efficient and summary way.

32. Whether s. 201 evinces a legislative intent to vest in the chairman of the meeting of creditors, to the exclusion of the Court, the power to determine all questions concerning the voting rights of creditors at meetings under Division 2 of Part X requires an analysis of the authorities, in particular four reported cases.

33. In Re Levy; Ex parte Scholefield Goodman and Sons Limited [1980] FCA 129; (1980) 50 FLR 99 Bowen C.J. said at 112:

"Section 201 is designed to empower the chairman

not to make a final ruling on a debt - that is

for the trustee who will decide whether it is

provable - but to rule for the purposes of the

meeting in a summary way avoiding technicalities

and delay (Re Spanney; Ex parte Holtzmann (1935)

38 WALR 13). His decision is not made

appealable by the Act (Re Amadio (1978) 24 ALR

455). This position may be contrasted with the

position under the Bankruptcy Act 1924, as

amended (see s. 160(f) and s. 169 of that Act).

The policy revealed by s. 201, particularly when

read with s. 225(2), appears to be to facilitate

the efficient and final dispatch of business in

relation to a meeting of creditors under Part X."

34. The reference by Bowen C.J. to s. 225(2) is to the provision that a certificate of the passing of a special resolution under s. 204 (that the debtor execute a deed of assignment or a deed of arrangement) signed in accordance with that section is prima facie evidence that the meeting was duly convened and held and that the special resolution specified in the certificate was duly passed at the meeting.

"On the other hand, s. 201 does not expressly

make the chairman's decision final and

conclusive. No doubt if the court was seized of

another matter in the course of which it was

material to determine whether or not a person

was a creditor entitled to vote at the meeting,

the court would be able, indeed would be

obliged, to determine the question, in order to

exercise its jurisdiction effectively and would

not be bound by the chairman's decision (see s.

30(1)). Thus, in the present case, while the

application sought an order of sequestration it

would have been necessary to determine whether

the applicants were creditors and the court

would not be bound by the chairman's decision.

Since that relief is no longer sought the

question is narrower. The orders sought in each

case are that the applicants were creditors

entitled to vote at the meeting on 20th June

1980; a declaration that no special resolution

was passed pursuant to s. 204, and, an order

that the deed of assignment is void. Each

application in this respect appears to be based

on s. 222. Does it amount to anything more than

a challenge to the chairman's decision? Is an

application based on s. 222 something 'coming

within the cognizance of the Court' so that the

court has express power under s. 30(1) to decide

all questions? In asking for an order that the

deed is void, the applications do, in my

opinion, involve something more than a review of

the chairman's decision. Furthermore, it

appears to me that ss. 222 and 30 do empower the

court to deal with the matter."

36. These passages from the judgment of Bowen C.J. were expressly approved and applied by Beaumont J. in Zantiotis v. Andrew [1987] FCA 473; (1987) 80 ALR 23 at 26.

37. In Zantiotis, a case which in material respects is the same as the present case, the debtor had executed an authority under s. 188(1) authorising a registered trustee to call a meeting of his creditors and to take control of his property. A meeting of creditors was held. At the meeting it was moved that the debtor execute a deed of assignment under Part X of the Act. Some creditors voted in favour of the proposal and others against it. The chairman informed the meeting that he would not allow the votes of certain of the creditors as neither had lodged a proxy, and that pursuant to the provisions of s. 201 he would admit certain other creditors for voting purposes in particular sums. The debtor indicated that he dissented from the ruling of the chairman in respect of the voting rights of one of the creditors. The meeting voted that it should adjourn to another date. In the meantime the debtor filed an application in this Court seeking declarations that the chairman incorrectly admitted a particular creditor to vote in a certain sum together with certain other declarations and orders.

38. Beaumont J., after approving and applying Re Levy, declined to follow the judgment of Judge Rogerson in Re Amadio and held that s. 30(1)(a) of the Act conferred jurisdiction upon the Court to hear and determine the application. His Honour overruled the objection to competency.

39. In Re Amadio the debtor applied for declarations that a creditor was not entitled to vote at certain meetings of his creditors under Part X. Judge Rogerson referred to Re Spanney; Ex parte Holtzmann (1936) 38 WALR 13 which was decided under s. 160(f) of the 1924 Act. His Honour observed that in Spanney the debtor had already executed an assignment under Part XI of the Act and the meeting of creditors had been called by the trustee to consider the question of a debtor's conduct under the assignment. He observed (at 157) that:

"The chairman rejected the claims of certain

persons claiming to be creditors and Dwyer J.

declined to interfere with the chairman's

decision.

It is not entirely clear from the report, but it

appears that the court might have been prepared

to interfere with the chairman's decision if it

had not been based on due consideration of the

facts which appeared or were notified at the

time."

"It is not disputed here that the chairman did give

consideration to the matter. Had he not done so,

I might have been prepared to re-examine

the question, on the authority of

Spanney's case. In that case, Dwyer J. makes no

reference to s. 25(1) of the 1924 Act, the

partial equivalent of s. 30(1) of the 1966 Act,

nor to s. 161(j) (under which the Court in Re

Hobbs; Ex parte Dutton (1938) 10 ABC 293)

reviewed the decision of a chairman of a meeting

of creditors under Part XI of the Act and

removed from the file the chairman's certificate

that the resolution had been passed). ..."

Judge Rogerson then found that in a "proper case" (adopting that expression from the authors of the Fifth Edition of McDonald, Henry and Meek Australian Bankruptcy Law and Practice at p 140 where they commented on s. 68 of the 1924 Act which is in terms very similar to s. 201 of the 1966 Act) the Court might intervene by reviewing the chairman's decision. His Honour said that "proper case" might be one in which the chairman had failed to give due consideration to the question before him.

"I do not believe that Parliament intended the

decision of the chairman to be challengeable

unless perhaps there were special circumstances

of the kind referred to in Spanney's case, a

decision known to Parliament when it passed the

Act. The chairman on reaching his decision may

make an error of law which it is not in the

ordinary case capable of being appealed against.

But if every decision of the chairman were to be

appealable there could be lengthy and possibly

unproductive delays, which could well be

damaging to creditors. The Act does, however,

provide for the challenge of the chairman's

decision if it has been the cause of a positive

decision affecting legal rights which the

debtor, or a creditor, or the trustee objects

to, in the execution of a deed or the acceptance

of a composition, pursuant to a resolution under

s. 249. There is, in such circumstances,

clearly a matter within the cognizance of the

court (ss. 31 and 222) and, in determining that

matter, the court can take into account the

question whether the chairman's decision to

allow a creditor to vote was correct. ... No

case has been cited to me, nor do I know of any

where any court has used s. 30(1) to become

seized of a matter, even though no positive step

altering the legal rights of the parties has

been taken. I observe that there is a clear

indication of a contrary attitude in the case of

Re Reynolds; Ex parte Horlock v Evans (1977) WAR

97 where the court declined to apply s. 30(1)(b)

so as to invest itself with powers to act in

respect to the fixing of a remuneration of a

controlling trustee, which, by s. 193, falls to

be determined by resolution of the creditors."

42. I agree with Beaumont J. in Zantiotis (at 27) that Judge Rogerson took an unduly restrictive approach to what is a "matter" under Part X. But it is significant that Judge Rogerson recognized, as the passage at 157 cited earlier demonstrates, that there are circumstances which may call for the Court's intervention in the s. 201 process, albeit in a limited number of cases, thus not reading s. 201 as indicating a legislative intent to completely oust the Court's jurisdiction.

43. The question of the court's jurisdiction under s. 27(1) was considered by a Full Court of this Court (Northrop, Toohey and Spender JJ.) in Morris v Maroudas. I need not relate the facts of that case as they are very different from those of the present case. I agree with the view expressed by all members of the Court that the source of the Court's jurisdiction in bankruptcy is to be found in s. 27(1), and that sections such as s. 30 relate to the powers which are conferred upon the Court when it exercises jurisdiction. It was there held by majority (Northrop J. dissenting) that jurisdiction in bankruptcy conferred by s. 27(1) included, in the case of a deed of assignment which had been executed under Part X of the Act, the right to hear and determine questions as to the existence of any provable debt within s. 82 of the Act, as modified by rule 82 of the Rules, and whether a debtor has been released from any such debt pursuant to s. 230(1) of the Act. The Court also held, by majority, that the jurisdiction subsisted notwithstanding the prior payment of a final dividend by the trustee and notwithstanding an earlier judgment of the State District Court awarding damages against the debtor in respect of the liability alleged by him in the Federal Court action to be a provable debt.

44. In my opinion s. 201 does not evince an intention by the legislature to exclude the court's jurisdiction to determine questions concerning the right of persons to vote at meetings of creditors under Division 2 of Part X. The section entrusts to the chairman the power to determine the right of a person to vote at a meeting of creditors under Division 2 of Part X and the amount of his debt to be taken into account for voting purposes. Although no right of appeal is granted against the chairman's decision, the section does not make his decision final and conclusive. The determination of the right of a creditor to vote may involve the consideration of a variety of circumstances including, as here, the question whether the creditor is a contingent creditor and therefore disqualified from voting by s. 198(2) or whether he is a creditor at all (also this case). The determination of these questions is certainly open to the chairman for the purposes of determining entitlement to vote at meetings, but his examination must necessarily be limited and not binding upon anybody otherwise than with respect to the entitlement to vote at the relevant meeting; he cannot determine substantive rights and liabilities involving the relationship of debtor and creditor.

45. Also, the language of s. 201 is not apt to oust the jurisdiction of the Court; it simply says that any question as to a person's right to vote at a meeting under Division 2 or as to the amount of the debt in respect of which he is entitled to vote at a meeting, shall be determined by the chairman. It is a provision which both empowers and requires the chairman to determine these questions, but it does not thereby deny the power to the Court.

46. I mentioned earlier that s. 198(2) disqualifies a creditor from voting in respect of a contingent debt. In my opinion there are circumstances where it would be appropriate for an interested person to ask the court to make a declaration as to whether a creditor is a contingent creditor for the purposes of determining his entitlement to vote.

47. A question arose in argument as to whether a "contingent debt" within the meaning of s. 198(2) was an expression intended to encompass a debt in respect of which there was a doubt if there was any debt at all. This view has its genesis in a passage from a brief judgment of Sir George Mellish L.J. in Ex parte Ruffle; In Re Dummelow (1873) 8 Ch App 997 where his Lordship said (at 1001) with respect to s. 16(3) of the Bankruptcy Act 1869 (Eng) (the equivalent of s. 198(2) of the 1966 Act):

"The fair construction of the clause seems to me

this: 'a contingent debt' refers to a case

where there is a doubt if there will be any debt

at all ..."

Bowen C.J. noted this reference in Re Levy at 111, but made no comment with respect to it, doubtless because it was not perceived by his Honour to be necessary to do this; though I detect nothing in the observation of Bowen C.J. which indicates approval of this passage; nor is anything to be found in the judgment of Sir W.M. James L.J. (the other member of the Court of Chancery Appeals in Ex parte Ruffle) to support the observation by Sir George Mellish, which was in any event obiter dicta. It is not entirely clear what Sir George Mellish meant by the words in the passage cited above. In one sense a contingent debt is accurately described in Sir George Mellish's words. A guarantee is an example of a contingent debt; it remains contingent until demand is made by the guarantor upon the debtor, and in that sense it cannot be said with certainty that there will be any debt due by the debtor to the guarantor until demand is made. Until then there is a doubt if there will be any debt at all. In other words it all depends on what Sir George Mellish meant in Re Ruffle. But if his Lordship meant that a contingent debt was any debt where there was simply a doubt as to whether a debt would be due in the sense that there may be a dispute about it, then I respectfully disagree with what his Lordship said, at least in the context of bankruptcy law. All debts and liabilities, present or future, certain or contingent to which a bankrupt was subject at the date of bankruptcy are provable in bankruptcy (s. 82(1)). A contingent debt for purposes of bankruptcy law has a well settled meaning and it certainly does not mean merely any debt which is in dispute.

48. The instances will be few where the Court's jurisdiction is attracted to determine whether a person is entitled to vote at a meeting under Division 2 before the stage is reached which calls for the application of ss. 221 or 222. But there are circumstances in which rights and liabilities may properly arise for determination by the Court involving the question of a creditor's right to vote at a meeting called pursuant to s. 190. It is not necessarily a question of reviewing the decision of the chairman because he may have not made any ruling at all on the question of the right to vote. It may be to his benefit that the Court rules on the entitlement of a person to vote before the chairman himself makes any determination with respect to it.

49. I should say at this stage that the chairman of the meeting in the present case has not in fact decided anything; but he has indicated by letter his intention to admit the claim of First National. He may of course change his mind before the adjourned meeting resumes. He has, however, considered the question of First National's right to vote and has indicated that he will allow it to vote. There is nothing before the Court to suggest that the chairman may change his attitude; and the parties to this proceeding, including the chairman, have treated his statement of intention as indicating the view he will take on the resumption of the meeting.

50. In this case it is accepted that First National intends to vote against the proposed arrangements of the debtors at their respective meetings, and that its vote will be crucial to the ultimate decision. The determination of whether First National is entitled to vote or is disqualified from voting as a contingent creditor raises an interesting question because it may be that its debt was contingent (leaving aside the question of whether it has agreed to totally discharge the debtors) until it made demand for repayment by letter of its solicitors of 11 December 1991. That was a date after the signing of the s. 188 authorities by each debtor and after the meeting of Mr Sent's creditors was convened on 29 November, but before its first adjourned date). The demand was made before the initial meeting of Mr Forshaw's creditors on 20 December 1991. Determination of that question must it seems to me be a question directly relating to the Part X proceeding and is therefore within the jurisdiction of the Court pursuant to s. 27. Whether it would be appropriate for the Court to exercise its powers to determine the matter is, of course, a different question.

51. Section 198 is a disqualifying provision. I do not suggest that the chairman cannot rule on questions to which s. 198 is directed when exercising his powers under s. 201, plainly he can. But it is a disqualifying provision and for it to be said that the Court cannot determine whether a creditor is so disqualified on the basis of his being a contingent creditor or not goes too far.

52. Thus far I have not examined s. 30 because it is an empowering provision and not one which confers jurisdiction upon the Court. Section 30 provides:

"(1) The Court -

(a) has full power to decide all questions,

whether of law or of fact, in any case of

bankruptcy or any matter under Part X or

Part XI coming within the cognizance of

the Court; and

(b) may make such orders (including

declaratory orders and orders granting

injunctions or other equitable remedies)

as the Court considers necessary for the

purposes of carrying out or giving effect

to this Act in any such case or matter."

53. As Beaumont J. observed in Zantiotis, s. 30 has been liberally construed and his Honour referred to certain of the numerous authorities in support of that proposition; I need not refer to them.

54. In my opinion the question whether First National has any right to vote at a meeting of creditors under Division 2 of Part X is not only within the Court's jurisdiction, but it is plainly a "question ... in any matter under Part X ... coming within the cognizance of the Court", and therefore empowers the Court under s. 30(1)(b) to grant the relief considered to be necessary in the particular case.

55. The Court's jurisdiction is conferred by s. 27(1) with respect to matters under the Act. A matter may arise under Part X concerning the rights of creditors to vote at meetings under Part X. To search for a section in Part X which in terms empowers the Court to consider the entitlement of creditors to vote at meetings misconceives the question of jurisdiction and confuses it with the question of power. Jurisdiction arises under s. 27(1) for the reasons mentioned earlier; the powers of the Court are to be found in s. 30, in addition, of course, to the Court's powers conferred upon it by the Federal Court of Australia Act 1976.

56. The primary Judge found that the Court had no jurisdiction to make the orders sought by the debtors; but his Honour was not referred by counsel to the decision of Beaumont J. in Zantiotis, though he was referred to Re Amadio. It is regrettable that his Honour was not referred to a decision of a Judge of this Court on the question which arises in this case. His Honour was called upon to deal with the application before him as a matter of urgency and he delivered an ex tempore judgment. Had his Honour been referred to Zantiotis it may have affected the conclusion which he reached with respect to jurisdiction.

57. It remains to consider whether his Honour erred in exercising his discretion against the grant of an injunction restraining the chairman of the meetings of creditors from permitting First National to vote.

58. The matter which his Honour regarded as important in exercising his discretion against the grant of injunctive relief was that the evident aim of the Act is that meetings held under Part X pursuant to s. 190 should be held expeditiously and without the disruption that would follow if a debtor or creditor, dissatisfied with the chairman's decision concerning the right claimed by a creditor to vote, could apply to the Court for declarations or injunctions. His Honour did not regard any of the facts established in the evidence before him as leading to the conclusion that he should interfere with the processes of the meeting.

59. I respectfully agree with his Honour that it is generally undesirable that there be undue delay in the convening and holding of meetings of creditors under Part X; and that, if there is to be a composition or arrangement or assignment of the debtor's property under Part X, the necessary steps must be taken to bring that result about as quickly as possible. Hence it is a fairly rare case in my opinion in which the Court would exercise the power which it has under s. 30 and intervene to determine whether a creditor is in truth a creditor or whether his debt is contingent or otherwise with respect to his entitlement to vote at meetings under Part X.

60. We were informed by counsel for the parties that the Deputy Commissioner of Taxation has presented petitions for sequestration of the estate of each of the debtors and that they are due to come before the Court for hearing in Melbourne in the near future. We inspected the two petitions and supporting documents with the consent of the parties. The Commissioner asserts in his petitions that he is an unsecured creditor of each debtor in very substantial sums (in each case over $1m), the debt being income tax together with interest. When the petitions come before the Court for hearing the presiding Judge may take one of a number of courses of action and I do not seek to suggest which course is appropriate. If sequestration orders are made, the entitlement of First National and any other creditors whose debts may be in dispute may be determined in the usual way by the trustee upon submission by the creditors of their proofs of debt. Thus the procedures laid down by the Act and the rules, for example, to determine whether First National is in truth a creditor of the debtors, may be invoked. If the presiding Judge decides to adjourn the petitions to await the outcome of the meetings of creditors under Part X he may do so if he thinks fit. However, if First National continues to oppose the proposed arrangements, it would seem on the facts before us (and this was accepted by counsel for the debtors) that bankruptcy will be inevitable.

61. A question of significance in relation to the exercise of discretion which, though not expressly stated, was doubtless present to the mind of the primary Judge, is that the debtors are hopelessly insolvent and their deficiency is very large. They assert that they have no assets whatever (and this may or may not be true, we do not know), yet there is in fact no one in control of their affairs except themselves. Faced with the extent of their insolvency and deficiency it is plainly desirable that their affairs be administered under the Act in an insolvent administration, whether it be under Part X or pursuant to the making of a sequestration order. The longer this moment is delayed the more undesirable it is.

62. I see no ground to interfere with the exercise by the primary Judge of his discretion; indeed, I agree that this is not a case in which to restrain the chairman of the meeting from allowing First National to vote at any adjourned meetings of creditors under Part X.

63. These are the reasons which led me to agree in the Court's order that each appeal be dismissed with costs.