CATCHWORDS Bankruptcy Act 1966, s.154 - Order made annulling bankruptcy resulting from the acceptance by the Registrar of a petition described as a debtor's petition, lodged without the authority of the debtor and against his expressed wish by a person who had been his controlling trustee pursuant to a s.188 authority. IN THE ESTATE OF NORMAN JOHN WRAY APPLICANT: NORMAN JOHN WRAY RESPONDENTS: THE OFFICIAL RECEIVER AS TRUSTEE OF THE SAID ESTATE and DAVID HENRY SCOTT SWEENEY J. 19 December 1979 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION No, 807 of 1979 BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA In the Estate of Norman John Wray. Ex parte: NORMAN JOHN WRAY Respondents: THE OFFICIAL RECEIVER AS TRUSTEE OF THE SAID ESTATE and DAVID HENRY SCOTT REASONS FOR JUDGMENT C.A. Sweeney J. 19 December, 1979 By application dated 25 October 1979 Norman John Wray sought the following orders: ' "1. That the order bankrupting the said Norman John Wray be annulled pursuant to Section 154 of the Bankruptcy Act 1966. 2. An injunction postponing the sale by auction of the stock in trade of the said Norman John Wray until such time as a determination has been made in respect of the application set out in paragraph 1 hereof. 3. Such further or other order or orders, directions or declarations as this honourable Court shall deem meet." The application was listed for hearing on that day, when Mr Maginn of counsel appeared for the applicant and Mr Santospirito appeared for the Official Receiver and, by leave, for the Deputy Commissioner of Taxation who claimed to be a creditor in the amount of $29,206.06. 220 2/ The applicant filed an affidavit in support, in which he deposed: "1. 2. That I am the person referred to in these proceedings as the Debtor. That the facts stated herein which are within my personal knowledge are true and ali other facts are true to the best of my information and belief. That on the 24th day of October 1979 I was informed by Mr. John Watson of the Official Receiver's Office that I had been made bankrupt by my own petition. That as a result of the said bankruptcy an auction of all stock in trade by me has been ordered to be held at 11 a.m. on Friday 26th day of October 1979. The said auction is to be conducted by J.W. Styles and Son Pty. Ltd. of 280 Spencer Street Melbourne. Now produced and shown to me and marked with the letter "A" is what purports to be a catalogue of my stock in trade to be sold at the said auction. If the said auction takes place on Friday 26th day of October 1979 I verily believe that the true market value of the said stock will not be realised. That I am the sole proprietor of Rennoserve, registered business name which carries on business at 6 Varman Court Nunawading. On or about the 17th day of September 1979 I lost possession of the said premises as a result of a Writ of Possession issued out of the Supreme Court of Victoria. I was forced to discharge my nine employees immediately and to close down my trading operations. That on the 20th day of September I attended at the offices of Messrs. Scott and Lamb accountants and registered trustees pursuant to the Bankruptcy Act 1966, of 325 Warrigul Road Burwood. In the course of a conversation with Mr. Kenneth Lamb, I signed an authority pursuant to Section 188 of the Bankruptcy Act 1966. 8. That on or about 3rd day of October 1979 I then attended at the offices of Scott and Lamb and signed a number of documents including a statement of affairs, and debtors petition. I insisted that I did not wish to go into voluntary liquidation and I was advised by Mr. Scott that I was merely signing a list of creditors. 9. That on or about Tuesday 9th October 1979 a meeting of creditors was arranged at ' which I attended. I put a proposal to my creditors which was not accepted by the meeting. I insisted to the meeting that I would not go into voluntary liquidation as I was confident in any event that 1f I could not trade out of my financial difficulties I would be able to liquidate my business assets and I was confident there would be a surplus after discharging all creditors. This confidence was based upon and is based upon a detailed knowledge of the value and market value of all my business assets. 10. That I was in attendance at the meeting from start to finish and at no stage was a special resolution within the meaning of Section 5 of the Bankruptcy Act 1966 passed or put to the meeting. Now produced and shown to me and marked with the letter "B" is a photo copy of a Certificate signed by the Chairman of the said meeting and stating inter alia that: "the following resolutions were passed; 'that the debtor be required to file a debtors petition within seven days of the date of this meeting' ". 1l. That at no stage during the above proceedings or at any other time did I believe that I had signed a debtors petition, and at no time during these proceedings or at any other time did I authorise any person on my behalf to file a debtors petition with this Honourable Court. I have never at any material time filed a debtors petition or instructed anyone on my behalf to do so. 12. In the light of these presents I respectfully request that this lonourable Court grant me such relief as 1t may in all the circumstances deem meet and an particular to restrain the said auction sale, to give further directions as to the hearing of the issues raised herein and any necessary declaration or direction." oe A/ On the hearing of the application, Mr Maginn was granted leave to amend it to show that the grounds on which annulment was sought was that the petition ought not to have been presented and ought not to have been accepted by the Registrar; but conceded that there was no evidence to support the latter ground. Late in the day, the hearing was adjourned to 9.30 on the following morning, the day for which the auction had been advertised. When the hearing was resumed David Henry Scott was called by the applicant and said that he was the registered trustee named in the s.188 authority signed by the applicant. Early in the course of his evidence, Mr Santospirito announced that the Official Receiver and the Deputy Commissioner of Taxation did not wish to contend that the debtor's petition had been presented on behalf of the applicant. Mr Scott admitted that the applicant had not given him any instructions at any time to file a debtor's petition on his behalf, but, on the contrary,had insisted tHat he was not going to make himself bankrupt. He stated that he had followed a procedure of having the applicant sign a debtor's petition in case it was required. He agreed that in retrospect 1t was a very dangerous procedure. He appeared to consider that the debtor's petition had been included in the documents forwarded to the Registrar as a result of a mistake by a member of his staff. He conceded that he received a letter from the Registrar dated 12 October, which included the statement: "The above named became bankrupt on the 12th October 1979. You cease to be controlling trustee on that date". He agreed that receipt of that letter should have caused him to look to see whether he still held the debtor's petition but he did not do so. Mr Santospirito then indicated that, provided that the applicant proceeded with his application for annulment with all proper expedition, the Official Receiver was prepared to state that he would not proceed with the auction advertised to be held later that day or to conduct any other auction until the application for annulment had been heard and determined. Mr Maginn then stated that his client would so proceed with his application and it became unnecessary to make any order in relation to that aspect of the case. The hearing of the application for annulment was then adjourned until 14 November 1979. On that day Mr Maginn appeared for the applicant, Mr Burzacott as Acting Official Receiver and Mr Santospirito for the Deputy Commissioner of Taxation. The Acting Official Receiver did not oppose the making of an order of annulment. Being satisfied that the debtor's petition ought not to have been presented, I then made an order annulling the bankruptcy. . A debate took place on the subject of costs, during the course of which Mr Maginn sought leave to join Mr Scott as a party. He had been present throughout the hearing on that day. The hearing was adjourned to 5 December 1979 to permit the making of an application for leave to add him as a party. On that day Mr T. Irlicht appeared for Mr Scott and leave was granted that he be added as a respondent to the application. After hearing argument it was ordered as follows: 1. That the respondent, David Henry Scott, pay the costs of the applicant of and incidental to an application including the costs reserved on 25th and 26th October 1979, such costs to be taxed as between solicitor and client, if not agreed; 2. that the Official Receiver's costs of administering the estate which have been agreed between the applicant and Official Receiver at $1,669.63 be recovered from the estate by the Official Recelver; 12 6/ that the applicant recover from the respondent David Henry Scott the taxed costs of the Official Receiver in administering the estate of the respondent, such taxed costs not to include any costs which, in the opinion of the taxing officer, the respondent David Henry Scott, as controlling trustee, would have incurred in any event after 12 October 1979. Liberty was reserved to any party to apply. ee Si19 CATCIA OS Bankruptcy Act 1966, s.15° - Graer made annulling bankruptey resulting from the acceplance by tue Registrar of a petition €escriled av a debtor's petition, lodged sithout Lhe euthority of tne debtor and against his expressed wish by a pervon who had been Lis controlling trustee pursuant to a s.138 authorily. IN YUE DSTATL OF NORMAN JOUN WRAY APPLICANT: NORMAN JOHN Wray ROSPONOLENTS: THE OPPICLAL FCLIVNR aS TRUSTLE Cl THE SALD VGtalh and DAVID HENRY scolt SWEFREY J. 19 Lecember 1979 IN THE LLDERAL COULT OF AUSTCALTA GENCRAL DIVISION No, 807 of 15/9 BANK?ULUCY DISLPTCT OP TRL VICTOR a STATE O In the Fstate of Norman John Wray. Ex parte: NOTAN JOIN WaRey Respondents: THE OFPICtU G RECs Lvng AS TP USiTE OF APE BID nsi and HAVIN ULIRY SCOTT REASONS POR JUDGES C.A. Sweency J. 19 December, 1974 By application dated 25 Uctcber 1979 Norman John Wray sought the following orders: "l. That the order hankrupting the said Norman John Wray be annulled pursuant to Section 154 of the Bankruptcy Act 1566. 2. An injunction postponing the sale by auction of the stock in trade of the said Norman Jonn Wray until such time as a determination has been made in respect of the application set out an paragraph 1 hereot. 3. Such further or other order or orders, directions or declarations as this honourable Court shall Goom meot." The application was Jisted for hearing on that Gay, when Mr Maginn of counsel appeared for the applicant and Mr Santospiritlo appeared for te Offie1al Feceiver and, by leave, for the Deputy Commissioner of axation who claimed to be a creditor an the amount of 329,206.06. wee The applicant filed an aftidavit in suppert, in which he deposed: "T. That I am the perso. referred to in these proceedings «3 tue beptor. 2. That the facts stated herein wnich are within my personal ino, Ledge are truc and all other facts arc true to tie best of my anrormation ana halief. 3. What on the 24th day of OctcLer 1579 I was unformed my iir. John Watson or the Official Receiver's Orfice that £ had been made bankrupt by my own petition. 4. That as a result of the said bankrurtcy an auction of all stock in trade by me has been ordered to be held at 1] a.m. on Friday 26th day of Octcber 1979. 5. The said auction is to be conductcd by J.W. Styles and Son Ilty. Ltd. of 280 Spencer Street Melbuurne. Now produced and shown to me and marked with the letter "i" is what purports to be a catalogue or my ctteck tn trade tu be sold at the said auctzon. If the said auction tates vlace on Friday 26bu day of October 1979 T verily beliove that the true macket value of the said stock will not be realised. 6. That Iam the sole proprietor of Ronnoserve, reqistered business nar whicn carries on basiness at 6 Varaen Court Nunavading. On or about the 17th day of September 1979 1 Tost vosse+t107 of the said premises us a result of a Writ of Possession 19»,ued out of the Supreme Court of Vavtoria. T was tforcei to discharge my nine exployces amiedrately and to clcse down my trading cperations. 7. That on tne 20th day of September I attended at the offices of Messrs. Scott and Lanb accountant». and registered trustees, pursuant to the RPunkrugicy Act 1966, of 325 Warriyul Road Busvood. In the course of a ccunversation with Mr. Fenneth Limb, I sagvred an authority pursuart to Secrion 168 of the Ba.hiuptecy act 1966. 8. That on or avout rd dav of October LY7S T then attended at che otfaces of Ceutt and Lemb and saguned a number or documents gneluding a statumene of alfarrs, aud debtors petition. { ansisteda that Iocan not wish to gm into voluntary laquidaticon and I was advised by "i. Seot?. that I was merely signing a litt of creditors. 9. That on or about Yucsday ¢vch October 1979 a meeting of cre-iibois was ariangcad ul which IT attended. 21 put a prerosat to my creditors which was net accepted by the meeting. fo ano usted to the meetina that I would not yo inte voluntary liquidation as I was confident in any event that 1f T coulel not trade out of iny fanancial difficalvies L vould be erie to liquidate my busines? assets ani I confident there would Le a surplus a discharging a@il credstors. This con was based upon anc 1s based upen ae knowledge of the value an@ market ve all my business assats. 10. That T was an attendance at the meetin; from start to farist and at no stuye veo a special resolution within the Reaniny oF Section 5 of the Bonkruptcy Let 1668 passed or put to tae meeting. Now pro.acced and shown to me and marked wich the lewrex "B" as a photo cops oF a Certificates stenad by the Charrman ot ine said inseting and statang inter alia tnat: "the fSollouwinsy resolutions were assed; 'that the deblor be required to tile @ debtors petiteo within seven days of the date of this " meeting' ". Ll. 'That at no stage duriny the above proceedings or at any other tiie did L belseve thoi T had si¢ened a devtar. potstion, and at me tame during these proceedings ov ut ely other time did To anteorise any person on my behalf to fale a Cebrors petition wath chis HonouralLle Court. T have inver at any material time filed a debreocs petition or anstructed anyone on my benulo to ao so. , 12. in the Licht ot ties présurts TF renseottully request Lhac this Ueneurable Court such relaet as a7 nao in all the clruwmetunces Geom ment aud aun ote. ciculat to restiain che Ssiard avetrop cade, to give further airestoons ro Lhe is.ues rarer hore as to the herrin ( and any neeccssarL, eoebearatvae or dives tion. rie Oo a che see On the hearing of the application, Mr Miginn was granted leave to amend it to shov that tune grounds on whicn annulment was sought was that the 1 station ovghl not to have been presented an@ ought not to have been ac 'cpted by the Registrar; but conceded that there wae no eviderce to support the latter ground. Late in the day, the hearing was adyourned to 9.30 on the following morning, the day "or which the auction had been advertised. When the hearing was resumed navid Henry Scott was called by the applicant and said that he was the registered trustee named in the s.i88 anthority signed by the applicant. Early in the course of his evidunce, Mr Santospirito announced that the Official Recciver and the Deputy Courmissioner of Taxation did not wish to contend that the debtor's potition had been presented on behalf of the applicent. Mr Scott admitted that the applicant lad not given him any instructions at any time to file a debtor's petition on his behalf, but, on the contrary,had insisted thc uv tras not going to make himself bankrupt. He stated that }e haa followed a procedure of having the applicent sign a de}rur's petition in case it was reyuired. He agrecd that in retrospect at was a very dangerous proccdure. He appeared to consider that the debtor's petition had been ancluded in the dociurw:.ts forwarded to the Registrar as a result of a mistake Ly a remper of his staff. We conceded that he received a letter from the Registrar dated 12 October, which arcludcd the statecrant: "The above naned became bankrupt on the L2th October 1979. You cease to ke controlling trustee on that date". He agrecd that recespt of that lerter should nave caused nam to look to see whether be still held the aebtor's perstion bur he did not doe so. Mr Santospirato then wndreated that, Lrevidid that the applicant proceeded with his application For annulment with all proper expcdrtson, the Official Jeceiver was prepared to state that he would not proceed with the auction advertised to be neld later that day or to conduct any other auction until the application tor annulmert had been heard and Geterrined. Ur Vvaginn then stated that his client would so proceed witn his applicatzson and it became umnecessary to make any order in relation Lo that aspect of the case. The hearing of the aprlication fer annusient vas then adjourned until 14 November 1979, On that day Mr Mayginn appcaced tor the applicant, Mr Burzacott us Acting Official Pece1iver and Mc Santusvirito for the Deputy Commissioner of lausation. he Acting Officzral Receiver did not oppose the mak'ny or an order of annulrent. Being satisfied that the debtor's petition ought not to have been presented, I then made an order annulling the bankruptcy. A debate took place on th? sabject cf er sts, during the course of whach fir Maginn sougnt leave Lo join tir Scott us a party. He had been presert throughout the hearing on that day. The hearing was adjourned tu 5 lucember 1979 to permit the making of an application for leave tu add hin aus a party. On that day Mr T. Irlicht apreared for i Scott and leave was granted that he be «added as a responaint to "he application. After hearing arguvireant it was ordercd as rollovs: 1. That the respondent, Lavic Nenry feort, pay the costs cl Lhe applacant of and uneidental tou an application including the costs restrv do on 2Z5tn and 26un October 1979, sus costs Lo be tanod a3 betveen solrettor and vlzone, if not agzeed; 2. that tne Office! Recetver's costs of administerine th. estate "hich have bean antreed lets Line ae fican . and Otfieaal Pecsaver «at $1,069.62 bo reeevered from tbe. cslate "by the Gfticiel Recewvar; 3, that the apoliccnt reecver frem the resvondctnt favia henry Seoct the taned costs of the Offical Rece ver in aamaristeraoy the estate or the retpondent, such taxed costs not to incdnde any costs which, an the opinion of the taxing officer, the respondent David Henry fret, as controlling trustee, would nave incurred in any event after 12 October 1979, Liberty was reserved to any party to apply.