Re Levy, Sheila Ann & Ors Ex parte Scholefield Goodman & Sons Ltd & Anor v. Levy, Sheila Ann & Anor [1980] FCA 143

Federal Court of Australia|1980-10-22

Re Levy and Tollitt , "/p 5 a ¢ Federal Court of Australia

General Division (Bankruptcy) Nos. G106-109 of 1980

Please note that the Chief Judge wishes to amend his reasons for judgment in this matter in which judgment was

(JAMES ALLSOP) , Associate to the Chief Judge, Federal Court of Australia.

Law Br & Co 2901499 (MW foes ) cP hie pert - sama "th

eS TEDERAI, COURT OF AUSTRALIA, ay QUEEN'S SQUARF RSet SYDNEY 2000 7 November 1980. RE LEVY & TOLLITT Nos. 106-109 of 1980 NOTE

The reasons for judgment dated 22 October 1980 and certified as correct on 22 October 1980 which were previously circulated have been withdrawn. They have been replaced by the reasons for judgment enclosed, also dated 22 October 1980 but certified as correct on 6 November 1980.

certified on 22 October 1980 and keep only the second

Bankruptcy Act - Meeting under Part X - Whether debts unliquidated, contingent or unascertained - Chairman's decision rejecting creditor's right to vote - Whether examinable by Court - Whether certificate of Chairman as to passing of special resolution was signed and filed forthwith - Effect of certificate - Whether statement of affairs omitted Material particular or included any incorrect and material particular - Whether in interests of creditors to declare deed

SHEILA ANN LEVY; Ex parte SCHOLEFIELD GOODMAN & SONS LIMITED; SCHOLLFIELD GOODMAN (AUSTRALIA) PTY. LIMITED; and SHEILA ANN LEVY and BARRY NORMAN ASKEW

GERALD JACOB LEVY; Ex parte SCHOLEFIELD GOODMAN & SCNS LIMITED; SCHOLEFTELD GOODMAN (AUSTRALIA) PTY. LIMITED; ana GERALD JACOB LEVY and BARRY NORMAN ASKEW

BARBARA ANN TOLLITT;: Ex parte SCHOLEFIELD GOODMAN & SONS LIMITED; SCHOLEFIELD GOODMAN (AUSTRALIA) PTY. LIMITED; and BARBARA ANN TOLLITT and BARRY NORMAN ASKEW

PETER ISAAC TOLLITT; Ex parte SCHOLEFIELD GOODMAN & SONS LIMITED; SCHOLEFIELD GCODMAN (AUSTRALIA) PTY. LIMITED; and PETOER ISAAC TOLIITT and BARRY NORMAN ASKEW

Barry Norman Askew do forthwith give notice in writing of this order to each creditor of Sheila Ann Levy other than Scholefleld Goodman and Sons Limited and Scholefield Goodman (Australia) Pty. Limited.

Attention of the taxing officer is drawn to the fact that

although the four matters, 106-109 of 1980 were not

THE COURT DIRECTS that the taxing officer seek to ensure that

no costs are allowed for items which constitute unnecessary

) ) ) KRUPTCY DISTRICT OF TIik STATE ) No. 106 of 1980 ) ) ) )

LIMITED AND: SCHOLEFTIELD GCODMAN (AUSTRALIA) PTY. LIMITED Applicants AND: SHEITA ANN LEVY and BARRY NCRMULN ASKIW Respondents ORDER JUDGE MAKING ORDER: Bowen C.J. DATL OF ORDER: 22 October 1980. WHERE MADE: Sydney. THE COURT CREERS THAT: l. The deed of assignment executed by Shetla Ann Tevy on 20 June 1980 pe declared void. 2.

Shella Apn Levy do fuy to Schotefiela Goodman and Sons

Limited ard Schelefield Goodman (Australia) Pty. Limited

their costs of these proceedings inclu@ing reserved ccsts.

) ) ) ) BANKRUPTCY DISTRICT OF THR STATE ) ) ) ) AUSTRALIAN CAPITAL TERRITORY )

The deed of assignment executed by Gerald Jacob Levy on 20

Gerald Jacob Levy do pay to Scholefield Gooden and Sons

their costs of these preceedings including reserved costs.

Barry Norman Askew do forthwith give notice in writing of this order to each creditor of Gerald Jacob Jevy other than Scholefield Goodman and Sons Limited and Scholefield Goodman (Australia) Pty. Limited.

Attention of the taxing officer 1s drawn to the fact that

although the four matters, 106-109 of 1980 were not

THE COURT DIRECTS that the taxing officer seek to ensure that

no costs are allowed for items which constitute unnecessary

BANKRUPTCY DISTRICT OF THE STATE ) No. 102 of 1980 ) OF NEW SOUTH WALES AND THE ) ) AUSTRALIAN CAPITAL TERRITORY )

AND: SCHOLEPTIELD GOODMAN (AUSTRALTA) PTY. LIMTIED Applicants AND: BARBARA ANN TOLLITT and BARRY NORMAN ASKEW Respencents ORDER JUNGE MAKING ORDER: Bowen C.J. DATE OF OFPER: 22 October 1980. WHERE MADE: Sydney.

The deed of assignment executed by Barbara Ann Tollitt on

Barbara Ann Tollitt do pay to Schelefield@ Goodman anc Sons Liunated and fvholefielad Goodnan (Australia) Pry. Lirited

their costs of thesé proceedings including reservee costs.

Barry Norman Askew do forthwith give notice in writing of this order to each creditor of Barbara Ann Tollitt other

than Scholefield Goodman and Sons Limited anc Scholefield

Attention of the taxing officer is drawn to the fact that although the four matters, 106-109 of 1980 were not consolidated, they were heard together.

THE COURT DIRECTS that the taxing officer seek to ensure that

no costs are allowed for items which constitute unnecessary

their costs of these proceedings including reserved costs.

The deed of assignment executed by Peter Isaac Tollitt on

Peter Isaac Tollitt do pay to Scholefield Goodman and Sons

Barry Norman Askew do forthwith give notice in writing of this order to each creditor of Peter Isaac Tollitt other than Scholefield Goodman and Sons Limited and Scholefield

Attention of the taxing officer is drawn to the fact that although the four matters, 106-109 of 1980 were not consolidated, they were heard together.

THE COURT DIRECTS that the taxing officer seek to ensure that no costs are allowed for items which constitute unnecessary

BANKRUPTCY DISTRICT OF THE STATE Nos. 106-109 of 1980

LIMITED AND: SCHOLEFIELD GOODMAN (AUSTRALIA) PTY. LIMITED Applicants AND: SHEILA ANN LEVY and BARRY NORMAN ASKEW Respondents RE: GERALD JACOB LEVY Debtor

LIMITED AND: SCHOLEFIELD GOODMAN (AUSTRALIA) PTY. LIMITED Applicants AND: GERALD JACOB LEVY and BARRY

RE BARBARA ANN TOLLITT Debtor EX PARTE: SCHOLEFIELD GOODMAN & SONS LIMITED AND: SCHOLEFIELD GOODMAN (AUSTRALIA) PTY. LIMITED Applicants AND: BARBARA ANN TOLLITT and BARRY NORMAN ASKEW Respondents RE PETER ISAAC TOLLITT Debtor EX PARTE: SCHOLEFIELD GOODMAN & SONS LIMITED AND: SCHOLEFIELD GOODMAN (AUSTRALIA) PTY. LIMITED Applicants AND: PETER ISAAC TOLLITT and BARRY NORMAN ASKEW Respondents Coram: Bowen C.J. 22 October 1980. REASONS FOR JUDGMENT

-3- No. 106 of 1980 sought declarations and orders against Sheila

"1. A declaration that on the 20th June 1980, each of the applicants was a creditor entitled to vote at a meeting held on that day under Part X of the Bankruptcy Act 1966 following the signing by the debtor of an authority under Section 188 of the Bankruptcy Act 1966.

A declaration that at a meeting of creditors of the debtor called under Part X of the Act on 20th June 1980 no special resolution requiring the debtor to execute a Deed of Assignment was passed pursuant to Section 204 of the Bankruptcy Act 1966.

An Order that the Deed of Assignment executed by the debtor on 20th June 1980 is void.

An order that the estate of the debtor be sequestrated."

Both companies by their applications in Matters Nos. 107, 108 and 109 sought similar declarations and orders against Gerald Jacob Levy, Barbara Ann Tollitt and Peter Isaac Tollitt respectively.

Fach respondent filed a notice of appearance and notice of opposition which in summary sought a declaration that the deed of assignment of 20 June 1980 was valid and effective and an order dismissing the relevant application with costs.

Separate documents and affidavits were filed in each of

the four matters, but when the matter came on for hearing some

evidence was presented, which may have been regarded as primarily applicable to one or other of the proceedings. While it was not agreed that an order consolidating the matters be made, it was agreed that evidence tendered by any party should be treated as evidence in all four matters. The matters were argued together. For convenience, in these reasons for judgment I deal with all four matters.

At the outset Counsel for the applicants sought the orders and declarations in paragraphs 1 to 4 set forth above. The orders of sequestration were sought on the ground that the respondents had signed authorities under s.]88 of the Bankruptcy Act 1966 ("the Act") and also on the ground that a meeting of creditors had been called in pursuance of such authority (the Act, paras.40(1)(1) and (3)). Part way through the hearing Counsel for the applicants announced that they no longer wished to have the respondents made bankrupt and sought only the declarations and orders in paragraphs 1 to 3.

The main case for the applicants was that a meeting of creditors of each respondent under Part X of the Act was held on 20 June 1980 pursuant to an authority given by each respondent pursuant to _ s.188; that the Chairman of the meeting improperly refused to permit Scholefield Goodman (Aust) to vote; that Scholef1ield Goodman was given no notice of the meeting and that when it learned of the meeting and attended by its representative it was not allowed to vote; that in consequence the special resolution purporting to be

passed at each meeting pursuant to s.204 requiring the

~~5- respondent to execute a deed of assignment was ineffectual and invalid; and that the deed of assignment thereafter executed by each respondent ought in accordance with sub~~s.222(2) to be declared to be void. It was also claimed that each respondent had omitted a material particular from his or her statement of affairs in that he or she had farled to show Scholefield Goodman or Scholefield Goodman (Aust) as being creditors and had included an incorrect and material particular in the statement of affairs in that Scholefireld Goodman (Aust) had been described as being a contingent creditor in the sum of $188,431.85, this being incorrect in that Scholef1ield Goodman (Aust) was not at the time of the meeting a contingent creditor in the sum alleged or any sum and that the deed ought 1n accordance with sub-s.222(4) be declared void. The statement of affairs in the case of each respondent

"4. Particulars of any contingent and any other liabilities not specified in a previous Part of this statement are:

Scholefield Goodman (Australia) Pty. Limited $188,431.85."

For the respondents 1t was contended that the debt was contingent or at all events unascertained within the meaning of sub-s.198(2); that in any event the Chairman had the task under s.201 of deciding the right of the applicants to vote at each meeting; that he had performed this task and determined

determination was unappealable. It was also contended no notice was given to Scholefield Goodman because it was not included as a creditor in the statement of affairs and, indeed was not a creditor, and in any event it had become aware of the meeting and had sent a representative to attend. It was further contended that the statement of affairs was not incorrect in any particular and did not omit any particular, but that 1f it did nevertheless the Court should not make an order declaring the deed void but should hold in terms of sub-s .222(5) that it was not satisfied that it would be in the interests of creditors to do so.

It was further contended that the Chairman of the meeting had signed a certificate in accordance with sub-s.204(7) and this should lead me to conclude that the meeting was duly convened and held and that the special resolution was duly

passed at the meeting. Reference was made to sub-s.225(2).

The questions arising for determination in each case are:

Whether the applicants were at the time of the meeting on 20 June 1980 creditors.

If so, whether their debts were unliquidated, contingent or unascertained.

In any event, whether the decision of the Chairman rejecting the applicants' claim to vote at the meeting is,

Whether the certificate of the Chairman should in itself lead me to conclude that the meeting was duly convened and held and that the special resolution was duly passed.

If not, whether each of the meetings was duly called and held and the special resolution duly passed.

Whether the statement of affairs in terms of sub-s.222(4): (a) omitted any material particular; or (b) aincluded any incorrect and material particular.

%If so, whether in terms of sub-s.222(5) 1t would be in the interests of creditors to make an order declaring the deed

Before attempting to give my answers to these questions it

will be convenient to set forth the facts disclosed by the

Scholefield Goodman is a company incorporated in England having its registered office at 135 Edmund Street, Birmingham, England. It 1s registered as a foreign company in the State of New South Wales, 39-41 York Street, Sydney.

Scholefield Goodman (Aust) 1S a company incorporated in the State of New South Wales having its registered office at 39-41 York Street, Sydney. It 1S a wholly owned subsidiary of Scholefield Goodman.

Colmore Credits Pty. Limited 1s a company incorporated in New South Wales. It is also a wholly owned subsidiary of

8+ Jewel Fashions Pty. Limited ("Jewel Fashions") is a company incorporated in New South Wales having its registered office at Suite 150, Strand Arcade, George Street, Sydney. It

carried on business in ladies' fashion goods and junk

On 29 May 1975 Jewel Fashions executed in favour of Scholefield Goodman and Scholefield Goodman (Aust) an equitable charge over all its undertaking and assets both present and future including its uncalled capital. This was to secure the payment of moneys then owing or payable or as should thereafter become owing and payable. It was executed by the three companies, Scholefield Goodman executing by its attorney Scholefield Goodman (Aust). Power of attorney dated 13 August 1965 and supplementary power of attorney dated 13 November 1973 were in evidence. Also parties to the equitable charge, described as guarantors, were Gerald Jacob Levy, Sheila Ann Levy, Peter Tollitt and Barbara Ann Tollitt. The occupation of each was stated to be company director. The last clause of the equitable charge set forth the terms of their guarantee. The equitable charge was on 12 June 1975 registered No. 7270 in the register of charges kept by the Corporate Affairs Commission.

Prior to the giving of the equitable charge written guarantees had been given. On 30 April 1975 the four respondents executed a guarantee in favour of Scholefield Goodman (Aust). It was to be a continuing guarantee for all

the debts and liabilities of Jewel Fashions and to be

-9- independent of and additional to any other guarantee which Scholefield Goodman (Aust) then held or might thereafter obtain. On 5 May 1975 the four respondents executed a guarantee in favour of Scholefield Goodman in similar terms. According to the documents in evidence Jewel Fashions, over the signature of Mr. Tollitt, would sign a document headed "Request for Documentary Credit". Thais was a printed form with the name and address in England of Scholefield Goodman on the left side at the top and the name and address in New South Wales of Scholefield Goodman (Aust). It commenced "Dear fir, Will you please open on our behalf an 1rrevocable documentary credit in accordance with the following particulars.". Then followed the particulars of a purchase of goods by Jewel Fashions, giving the name and address of the supplier, the details of the goods, and the price. It then requested that "you draw on us at 120 days after fixed date in accordance with our arrangements." It went on to promise acceptance and payment of bills of exchange drawn by Scholefield Goodman/Scholefield Goodman (Aust) on them in connection with this credit. Bills of exchange in evidence showed that some bills were drawn by Scholefield Goodman and some by Scholefield Goodman (Aust). All were accepted by Jewel Fashions with the signature of Mr. Tollitt though apparently many were not paid. There 1s a suagestion in the evidence that Scholefield Goodman provided the credit and drew the bill in those cases where the goods were to be

10 - I have stated this procedure at some length because Mr. Tollitt swore in an affidavit read in the proceedings "that

Jewel Fashions Pty. Limited had no dealings with Scholefield

Goodman & Sons Limited of the United Kingdom". He was cross- examined upon this statement. It 1s sufficient here to say I do not accept his statement in his affidavit. It 1S simply

not true. However, it is fair to say that Scholefield Goodman adopted a low profile in Australia. They had no place of business and no bank account. If moneys were required to be paid here, they were paid for Scholefield Goodman by a wholly owned subsidiary, Colmore Credits Pty. Limited out of a bank account which 1t maintained. If moneys were to be received here they were received for Scholefield Goodman by Colmore Credits Pty. Limited and went into the bank account maintained by that company. The reason why Scholefield Goodman proceeded in this fashion, whether 1t was due to the provisions of the Double Tax Convention between Australia and Great Britain or to some other reason, did not appear from the evidence. But it did lead to some confusion not only in the minds of some who dealt with Scholefield Goodman but, on occasion, in the minds of officers of Scholefield Goodman (Aust), which held ats power of attorney in Australia. Thus, when Receivers were appointed of the property and undertaking of Jewel Fashions they wrote for details of indebtedness. Mr. Hagarty, Corporate Finance Manager of Scholef1ield Goodman (Aust), wrote in reply on 29 November 1979 enclosing a schedule of

indebtedness showing details of amounts due to Scholefield

Goodman (Aust) and to Colmore Credits Pty. Limited respectively. When Mr. Hagarty discovered his error he wrote on 4 December 1979 enclosing a schedule of indebtedness which showed the same amounts due to Scholefield Goodman (Aust) and Scholefield Goodman and asked that these be used to replace those previously forwarded. In spite of this element of confusion there does not appear to me on the evidence to be any doubt that Jewel Fashions had dealings with and were at Material times indebted both to Scholefield Goodman and to Scholefield Goodman (Aust).

On 24 September 1979 moneys were due and payable by Jewel Fashions to each of the applicants and were unpaid. Each of the applicants made demand in writing upon Jewel Fashions pursuant to the Deed of Equitable Charge dated 29 May 1975. Payment was not made in response to the demand. Notice of appointment of Ian Douglas Ferrier and Stephen Gower Baker as Receivers and Managers of the property charged by the Deed was then served upon Jewel Fashions and Messrs. Ferrier and Raker thereupon entered and took possession of that property.

A statement of affairs of Jewe] Fashions dated 10 October 1979 which was in evidence set forth that company's assets and liabilities as at 24 September 1979. It showed a total estimated realisable value of assets of $101,682, various liabilities and an estimated deficiency (subject to costs of

"Amounts owing and secured by debenture or floating charge over the company's assets to Scholefield Goodman (Australia) Pty. Lamited (see also Note 1) $171,265."

Note 1 contained the following: "The amount owing to Scholef1eld Goodman (Australia) Pty. Lamited 1s subject to clarification.

The Directors believe that the actual amount owed may be up to $20,000 less than claimed."

The statement of affairs was prepared by the Receivers. Both Mr. Tollitt and Mr. Levy were questioned in the witness box about the figures disclosed. Their evidence on this matter was somewhat evasive. My conclusion 1s that the figures disclosed represented the view of the respondents as directors of Jewel Fashions, which they conveyed to the Recelvers, as to the amount of indebtedness due at that time by Jewel Fashions.

Each of the guarantees signed on 30 April 1975 and 5 May 1975 contained a clause which provided (inter alia) for the giving of notice of demand in writing signed by solicitor and sent through the post postage prepaid addressed to the guarantor at the address set out therein and, where given by post, should be deemed to have been given on the day following that on which 1t was posted.

Notice of demand in respect of the amount due and payable

by Jewel Fashions was given to each of the respondents on 1

-13- November 1979 by the posting on 31 October 1979 in a prepaid envelope addressed to each debtor at the specified address of a notice of demand requiring payment within fourteen days.

At the hearing 1t was submitted on behalf of Mr. and Mrs. Tollitt that any debt due by them as quarantors was still contingent because no notice of demand had been properly given, on the ground that their address set out in the guarantee document was "2/5 Hampton Avenue, Darling Point N.S.W." whereas each prepaid envelope was addressed to them at "2/5 Hampden Avenue, Darling Point. 2027". Evidence was given that there was a Hampden Avenue in the area but no Hampton Avenue. It may be mentioned that the notation of the address in the guarantees of 30 April 1975 and 5 May 1975 appears to have been an error, which was corrected in the Deed of Equitable Charge of 29 May 1975 which was signed by Mr. and Mrs. Tollitt as guarantors. In this Deed their address was stated as "2/5 Hampden Avenue, Darling Point", which 1s where they were then living.

The submission involves the proposition that the notice of demand to be effective should have been sent to a non-existent address. I cannot accept the submission. It 1s not a matter of real substance having regard to the visual and phonetic similarity of the two addresses. In my opinion the notice of demand did in this respect fulfil the requirements of the form of guarantee. It was sent to the address set forth in the

guarantee with the misspelling corrected. The debts due by

14 - the guarantors became due and payable on 15 November 1979 when the fourteen days expired.

Mr. Tollitt gave evidence that his address was now Unit 3, No. 2 Ocean Street, North Bondi and that he had been residing there some four or five years. He claimed he had not received the demand posted on 31 October 1979. Mr. Levy gave evidence but did not say that he had not received the demand. Mrs. Tollitt and Mrs. Levy did not give evidence. If iat be material, I would say I am not satisfied Mr. Tollitt did not receive the demand. But 1t appears to me that the applicants duly made demand in the manner agreed and that even if Mr. Tollitt did not receive it, this would not affect the matter.

It was further submitted for the applicants that demand was made when the statement of claim was served upon each

respondent. But it is unnecessary to deal with this

It may also be noted that under the terms of the Deed of Equitable Charge the respondents were guarantors of the andebtedness of Jewel Fashions without the need for any demand. Their liability under the provisions of the Deed arose upon default being made by Jewel Fashions.

The respondents did not pay the applicants. on 13 February 1980 each of the applicants filed a statement of claim in the Supreme Court of New South Wales against the four respondents. The statement of claim filed by Scholefield Goodman set forth the principal sum due under each of the

guarantees as $69,994.08. That filed by Scholefield Goodman

15 - (Aust) set forth the principal sum due as $118,437.77. In each action an appearance was entered by all defendants on 19 March 1980. On 18 April a defence was entered by all defendants in each action which put in issue all the facts alleged in the statement of claim including the giving of the guarantees. In addition it was pleaded that the debt was due to a moneylender and the Moneylender's Act had not been complied with. It was also alleged that the "plaintiff 1s not entitled to institute these proceedings because the debt alleged 1s not now due and payable". No grounds appeared as to the basis of this last allegation. On 8 May 1980 the applicants filed in each action an application returnable on 9 June 1980 to strike out the defence of each respondent. One of the affidavits filed in support of each application verified a proclamation published in Government Gazette No. 165 of 31 December 1970 exempting the plaintiff from licensing

The applications came on for hearing before Master Sharpe and after successive adjournments were on 26 June 1980 stood over generally because of the execution by the respondents of deeds of assignment under Part X of the Act on 20 June 1980 and the operation of s.233.

On 27 May 1980 each of the respondents signed an authority ain accordance with s.188 of the Act to Barry Norman Askew to call a meeting of creditors for the purposes of Part X and to

16 - On 19 June 1980 each of the respondents made and verified

Liabilities $16,329 (ancluding $15,250 due to Mr. Sandow)

Liabilities $13,669 (including $12,600 due to Mr. Sandow)

Liabilities $13,124 (ancludang $12,600 due to Mr. Sandow)

It appears that Mr. Sandow is the father of Mrs. Tollitt and Mrs. Levy, who are sisters. In each statement of affairs as well as being shown as the major unsecured creditor, he is also shown as a secured creditor holding a registered bill of sale, which some evidence suggested was over furniture.

In each statement of affairs the following appears:

"Particulars of my contingent liabilities and any other liabilities not specified in a previous Part of this Statement are:

Scholefield Goodman (Australia) Pty. Limited $188,431.85."

Four meetings were called by Mr. Askew of the creditors of the four respondents respectively to be held on 20 June 1980. Each meeting was attended by Mr. McCoy, Managing Director of Scholefield Goodman (Aust) and agent in Australia for Scholefield Goodman and Mr. Kemp, Solicitor for the two companies. Proxies dated 19 June 1980 executed under seal by Scholefield Goodman (Aust) for itself and as attorney for Scholefield Goodman were presented prior to the meetings. The

attendance register in respect of the meeting of Mr. Tollitt's

creditors was in evidence. It was signed by Mr. McCoy as proxy for each of the applicants. It had written in the following: "Scholefield Goodman 69,994.08 As at 31/10/79 & Sons Ltd. plus interest accrulng and Scholefield Goodman 94,314.12 drafts maturing

~ 18 + The meeting of Mr. Tollitt's creditors began and Mr. Askew was elected Chairman. A special resolution was put and seconded that Mr. Tollitt enter into a deed of assignment pursuant to para.204(1)(b) of the Act. As to what then occurred I quote from the minutes of the meeting, which were

aun evidence. These were prepared and signed by Mr. Askew (see

"Before putting the motion, Mr. Askew pointed out that he had given careful consideration to the fact, that Scholefield Goodman and Sons Ltd., Scholefield Goodman (Australia) Ltd., were sworn in the Statement of Affairs by Mr. Tollitt as one debt of $188,431.00, and this was shown in Part 7 as Item 4 as a Contingent Liability. Mr. Askew then read Section 198(2) of the Act, pointing out that a Creditor is not entitled to vote in respect of an Unliquidated or Contingent Debt, or a Debt, the value of which 1s not ascertained. He pointed out that he had consulted the Legal Representative of Mr. Tollitt, and had been made aware of the fact that the Scholefield Goodman Companies had commenced litigation against Mr. Tollitt for recovery of the Debt, by way of guarantee which he had given in respect of a debt due by Jewel Fashions Pty. Ltd. (Receiver and Manager Appointed)(In Liquidation), and that this action had been contested. Mr. Askew further stated that he had been advised by the Solicitors, that the Receivers of Jewel Fashions Pty. Ltd., had written to Scholefield Goodman Companies on the 4th March, 1980, pointing out that the overall deficiency after finalisation of the Receivership and Liquidation may be in the vicinity of $83,000.00. The Legal Advisors for Mr. Tollitt further stated to Mr. Askew, that in their opinion, the claim against Mr. Tollitt may not succeed at Law. Mr. Askew further advised that he had then taken Counsels advice in relation to this debt, and in view of the position of the debt of the Scholefield Goodman Companies, as advised to him, by the Debtors, and as sworn in the Statement of Affairs, he did not propose to allow Scholefield Goodman (Australia) Ltd., or Scholefield Goodman and Sons Pty. Ltd., to vote at this meeting. Mr. Kemp, acting as advisor to Mr. McCoy, stated that his client was circularised on the list of Creditors as an Unsecured Creditor, and this had been attested in

19 + another place by the Debtor. Mr. Askew replied that the circularised list was prepared by his staff and not by the Debtor, and was not a sworn list. The sworn Statement of Affairs showed Mr. Kemp's client as a Contingent Creditor. Mr. Kemp stated that this was not a matter on which the Chairman of this meeting should rule, and Mr. Kemp foreshadowed that 1f the Chairman insisted on this ruling, then his

client would make an application to the Federal Court in Bankruptcy forthwith to have the Deed set aside."

Mr. Kemp protested without avail. Mr. McCoy sought to vote on behalf of the applicants against the motion but the Chairman Mr. Askew ruled the Applicants were not entitled to vote. It is clear that the vote of the applicants, if allowed to be cast, would have been decisive of any question put to the meeting. In the result the motion was carried. When that meeting closed Mr. Askew was asked if he proposed to exclude the applicants from the other three meetings in the same way as he had done for the first meeting. Mr. Askew said "yes". Mr. Kemp said in that event there seemed little point in remaining. He and Mr. McCoy then left.

Similar special resolutions for the execution of deeds of assignment were passed at each of the other three meetings. On 20 June 1980 each respondent executed a deed of assignment to Mr. Askew as trustee.

On 23 June 1980 Mr. Askew signed a certificate in respect of each respondent that at a meeting of creditors duly called and held on 20 June 1980 the following special resolution was

"THAT the Debtor be required to enter into a Deed of Assignment, pursuant to Section 204(1)(b) of the Bankruptcy Act, 1966.

THAT Mr. Barry Norman Askew be appointed Trustee pursuant to that Deed of Assignment."

On 23 July 1980 applications were made to this Court by Scholefield Goodman and Scholefield Goodman (Aust) against each of the debtors and Mr. Askew which have already been mentioned. It as these applications and the notices of opposition filed, which are before the Court. At first each debtor and Mr. Askew briefed the same counsel to oppose the applications. When it was pointed out that there was conflict between the position of Mr. Askew and the other respondents, Mr. Askew filed an affidavit submitting to such order as the Court might make save an order that he pay any costs of the proceedings personally. Thereafter, Mr. Askew took no active

Whether the applicants were at the time of the meeting on 20 June 1980 creditors of each of the

Each of the respondents was liable to Scholefield Goodman and to Scholefield Goodman (Aust) under his or her guarantee for the indebtedness of Jewel Fashions. Having regard to the up to date figures given in evidence, which make allowance for

amounts received between 31 October 1979 and 20 June 1980 from

21 - the Receivers and Managers of Jewel Fashions and also include interest and charges, I conclude that on 20 June 1980 the

indebtedness of the respondents to the applicants was as

follows: Scholefield Goodman S 66,086.53 Scholefield Goodman (Aust) $115,024.70

It 1s true that the claims of the applicants against the respondents were the subject of proceedings in the Supreme Court of New South Wales. It 1s perhaps unfortunate that those proceedings, due to the course of events, have not been brought to finality. As at is the guestion of liability has been litigated before me, and for the purpose of these proceedings I am obliged to reach a conclusion upon the question of liability. I feel bound to say that neither in the material contained in the Supreme Court proceedings, which 1s before me, nor in the other material presented on the hearing of these applications am I able to discern any defence

If so, whether their debts were unliquidated contingent or unascertained

In my opinion the debts claimed by the applicants are liquidated demands. They are not unliquidated.

IT am further of opinion that the debts are not contingent.

Notice of demand was given in pursuance of each guarantee on 1

22 - November 1979 by posting on 31 October 1979 requiring payment within fourteen days. By 15 November 1979 each of the debts had become due and payable by the guarantor. They were no longer contingent.

Some suggestion was made that because the claims were the subject of proceedings in the Supreme Court, which had not been finalised, they were both contingent and unascertained. This seems to me to masconceive the position. On the view I take of the facts the debts were due before the commencement of the proceedings in the Supreme Court. The proceedings in that Court were only a method provided by law for the enforcement of the debts. To bring those proceedings did not change the debts into contingent debts.

It 1s true, that if a substantial defence on the merits had been disclosed, this might have led to a different conclusion. However, this would be because a substantial defence was disclosed. It has been said that a debt is "contingent" where there 1s doubt if there will be any debt at

all (Ex parte Ruffle; In re Dummelow (1873) 8 Ch.App. 997 at

p.1001). However, I can discern no defence on the merits in those proceedings or in the material before me.

Are the debts unascertained? It was argued for the respondents that the amounts actually stated by the applicants to be the amounts due varied from time to time. Thus, in the register of attendance at the meeting on 20 June 1980 the debts were recorded by the applicants as being Scholefield

Goodman $69,994.08, Scholefield Goodman (Aust) $94,314.12.

In evidence, giving credit for amounts received from the Receivers and Managers of Jewel Fashions between 31 October 1979 and 20 June 1980, which had been overlooked, the figures were given as: Scholefield Goodman $66,086.53; Scholefield Goodman (Aust) $115,024.70. However, I do not consider that the making of a mistake by a creditor in stating the amount due in respect of recorded commercial transactions which have closed, necessarily leads to the conclusion that there 15 a debt but it 1s unascertained. The fact that the amount of a debt may not be agreed does not mean it 1s unascertained. Indeed, I consider that i1t 1s certain if it 1s capable of being rendered certain, and being certain, in this sense, 18 not "unascertained" within the meaning of sub-s.198(2) of the

In any event, whether the decision of the Chairman rejecting the applicants' claim to vote at the

meeting 1s, 1n the circumstances of this case, examinable

Under Part X of the Act a debtor, who desires to be dealt with under that Part without his estate being sequestrated, May sign an authority for a registered trustee or a solicitor to call a meeting of his creditors (s.188).

The consenting registered trustee or solicitor is obliged to call a meeting of creditors (s.190). He must give notice of the meeting to each person who is stated by the debtor to be a creditor (sub-s.194(2)) and must advertise the meeting in

a newspaper circulating when the meeting is to be held

24 - (sub-s.194(3)). The majority in number of creditors attending elect a chairman (sub-s.196({1)). Every creditor is entitled to vote unless his debt is unliguidated contingent or unascertained (sub-ss.198(1) and (2)). Section 201 deals with admission and rejection of claims

"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, 1f£ he thinks it necessary to do so, adjourn the meeting for a period, not exceeding fourteen days, to enable him to investigate the matter."

Section 201 1s 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 delays (Re Spanney; Ex parte Iloltzmann

(1935) 38 W.A.L.R. 13). Has decision is not made appealable by the Act (Re Amadio (1978) 24 A.L.R. 455). 'This position

may be contrasted with the position under the Bankruptcy Act

1924 as amended (see para.l160(f) and s.169 of that Act).

The policy revealed by s.201, particularly when read with sub-s.225(2), appears to be to facilitate the efficient and final despatch of business in relation to a meeting of creditors under Part X.

On the other hand, s.20l1 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 woulG not be bound by the Chairman's decision (see sub~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 1s no longer sought the question 1s narrower. The orders sought in each case are that the applicants were creditors entitled to vote at the meeting on 20 June 1980, a declaration that no special resolution was passed pursuant to s.204, and, an order that the deed of assignment 1s 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 sub-s..39(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, 1t appears to me that ss.222 and 30 do empower the Court to deal with the matter.

The question then arises whether the Court's function is to determine whether the Chairman's decision was correct

having regard to the material before him or whether it was

-~ 26 - correct having regard to the facts in evidence in the proceedings before the Court.

It 1s unnecessary to express a concluded view on this because on either basis I would conclude the Chairman was in error. Dealing first with the material before the Chairman, it appears to me his exercise of the power conferred upon him miscarried. There are various indications in the evidence that Mr. Askew regarded his function to be to act in the interests of the debtors, Mr. Sandow, an unsecured creditor who was the father of the two female respondents and father- in-law of the others, having placed him in funds. He did obtain legal advice but there 1s no evidence as to what facts were placed before the advisers and no detailed or reliable evidence of what was the basis of the advice given, which seems to have been to the effect that the debts were contingent. If a creditor wishes to vote he must make known to the Chairman particulars of his debt (sub-s.198(4); Re Venetoulis; Ex parte Calsil Limited (1976) 13 A.L.R.- 625). In the present case, Mr. Askew was given particulars. Once particulars. were supplied to him, because the size of the indebtedness involved made it crucial, he should in my view have made further inguiry beyond what he did in relation to the question whether the debts were contingent, exercising his power of adjourning the meeting if necessary.

If the matter should be determined on the basis of facts 1n evidence in the proceedings before the Court, then I am of opinion that on that basis the Chairman's decision to reject

Whether the certificate of the Chairman should in itself lead me to conclude that the meeting was duly

convened and held and that the special resolution was duly passed

"AR certificate of the passing of a special resolution under section 204 of this Act signed ain accordance with that section is evidence that prima facie the meeting was duly convened and held and that the special resolution specified in the certificate was duly passed at the meeting."

Under sub-s.204(7) where the creditors pass a _ special resolution under that section the Chairman of the meeting must forthwith sign a certificate to that effect in the prescribed form (rr.79 and 98; form 36) and forthwith cause it to be filed in the Office of the Registrar. The Shorter Oxford Dictionary 3rd Edn. Re-Set and with Revised Agenda gives the meaning of "forthwith" as "immediately, at once, without delay or interval". The certificates in the present case were neither signed nor filed immediately. However, the word "forthwith" when used in a statute may be affected by the context in which it appears (see the examples in Stroud's Judicial Dictionary 4th Edn. pp.1086 et seq). I am content to adopt the view expressed by Riley J. in Re Venetoulis; Ex parte Calsil Limited (supra, at p.627) that in sub-s.204(7) it means "as soon as possible in the circumstances, the nature of the act to be done being taken into account", In that case his Honour held that a certificate signed on 30 September in

respect of a meeting held on 8 September was not signed

28 - forthwith. This may be compared with In re Muscovitch; Ex parte Muscovitch (1939) Ch. 694 where it was held by the Court of Appeal that an appellant who had entered his appeal on 25

October did not comply with English Bankruptcy Rule 132 which

provided "a copy of the notice of appeal shall forthwith be

sent by the appellant to the Registrar of the Court appealed from" when he sent a copy on 28 October.

In the present case the meetings were held on 20 June; the certificates were signed on 23 June; and they were filed with the Registrar on 25 June. The 20 June was a Friday and 23 June a Monday. I consider each certificate signed on 23 June was, in the circumstances, signed "forthwith". I have more difficulty with the question of registration. No reason was given for the delay in failing. Can it be said the Chairman caused each certificate to be filed "forthwith"? The purpose of filing seems to be to place the certificate officially on record in the Bankruptcy Registry. It as important that this should be done as quickly as possible. Nevertheless, with some hesitation, I conclude also that each certificate was caused to be filed "forthwith" within the meaning of sub-s.204(7).

What then is the effect of the certificate? Prior to the amendment of s.225 by Act No. 12 of 1980, which came into force on 8 April 1980, sub-s.225(2) provided that such a certificate would be "conclusive evidence". This suggested the legislature intended the certificate to be evidence which

could not be controverted, even when the Court was exercising

29 - the powers conferred by s.222 supplemented by the powers

conferred by s.30 (see Re Venetoulis; Ex parte Calsil Limited

supra; ef. Re Davis; Ex parte Hammond (No.1) (1970) A.L.R.

838). As far back as 1936 LInkin J. commenting on the

corresponding provision in the Bankruptcy Act 1924 suggested

the use of the term "prima facie" would be preferable. This problem has been removed by the amendment of sub-s.225(2). This substituted the words "prima facie" for the words "in the absence of fraud, conclusive".

At a glance

Court

Decision date

Source

Judgment (433 paragraphs)