CATCHWOPDS Bankruptcy - authority under s.188 of the Bankruptcy Act authorising the Trustee to call a creditors' meeting for the purposes of Part X of the Act - comvosition rejected and debtor requested to lodge own petition - no petition presented - further meeting of creditors held although no furth rs fom MD ey ruse "u authority under 5.188 of the Act obtained -— whether authorised to call second meeting under s.288 - creditors at second meeting accepted a composition ant rescindsa the request to the debtor to lodge his own petition ~ validity cf composition purportedly accepted at second mesting. Bankruptcy Act 1966 - ss.40, 188, 190, Z21, 222, 223 anc 227. ALEC KNAUFF PRETORIUS v. DALTONS CARPET TIRES PTY. LIMIT=D & ORS. No. G.12 of 1984 Smithers, Northrop and Beaumont, JJ. 31 May 1984 Melbourne. IN THE FEDERAL COURT OF AUSTRALIA QUEENSLAND DISTRICT REGISTRY ee ee GENERAL DIVISTON Q. Na. G12 of 1984 ON APPEAL FROM THE FEDERAL COURT OF SUSTRALTIA BETWEEN : ALEC KHAUFF PRETORIUS Appellant and DALTONS CARPET TILES PIY, LIMITED CARRICKS LIMTTED . DRISCOLL HOLDINGS PITY. LIMITED OPPICE EQUIPMENT INDUSTRY ASSCUTATION OF sJSTPALTA LIMITED WORMALD TNTESNATIONAL (AUST.) PRY. LIMITED LABOR BROACCASTING STATION PIV. LaciiTED and JOHN ROBERT REES Respondents ORDER Judges making order: Smithsrs, Northrop and Eee mont, Jd. Date order made: 31 May, 1984, Where made: Melbourne THE COURT OPPERS THAT the appeal is dismissed ~2th costs. IN THE FEDERAL COURT OF AUSTRALTA QUEENSLAND DISTRICT REGISTRY wwe GENERAL DIVISTON Q. No. Gi2 of 1984 ON APPEAL FROM THE FEDERAL COURT OF AUSTRALIA * BETWEEN : ALEC KNAUFF PRETORIUS and DALTONS CARPET TILES PTy. LIMITED CARPICKS LIMITED DRISCOLL HULEINGS PTY. LIMITED OFFICE ROULTEMENT TNDUSTRY ASSOCIATION OF AUSTRALIA LIMITED Pr WORMALD INTERNATIONSL (AUST. LIMIZED ) v. LABOR BROADCASTING STATION PTY. Lib JOHN ROBERT REES CORAM: Smithers, Northrop and Beaumont, JJ. DATED: 31 May 1984 PLACE: Melbourne STTED and Respondents REASONS FOR JUDGHENT THE COURT: This is an appeal by a Gebtor from orders made under the Bankruptcy Act, 1966 ("the Act") By the Federal Court constituted by a single judge, first, dertlaring thac a composition purportedly accepted br creditors of the appellant at a meeting held on 3 November 1983 was void; and secondly, making a sequestration order in resvect of the estate of the appellant. The circumstances surrounding the making of these orders, as found by the learned Judge,are not im dispute and are as follows. The appellant is and was, at all material times, insolvent. On 24 August 1983, he signeé an authority pursuant to s.188(1)(e) of the Act in the follcwing terms: "Porm 33a Rule 7&A (sic) The Bankruptcy Act 1966 Bankruptcy District of the ) , Southern District of the ) ) State of Queensland No.X7Z of 1983 AUTHORITY TO RECISTERED TSUSTEE TC CALL PROPERTY In pursuance of Section 188 cf th ptcy Act 1966, I, ALEC KHAUFF PRETORIU tion Organisor of 37 Sonython =tres isor. Qld. 4930 hereby suthorise oCHY BEES of C/- Hall Chaawick & Co. 24th City 3. Mutual Building, 307 Queen Street, Brisbane to call a meeting of my creditors for the purposes of Part X of that Act and to take over control of my property in ascordance with that Part." (emphasis added) The authority was in accordance with the provisions of s.188(1)(e)} which provides (inter alia) that a debtor, who desires that his affairs be dealt wwitk under Part X without his estate being sequestrated, "may sign an authority in accordance with the ysrescrited form eee authorising a2 registered trustee to call a mesting of his creditors and to take over control of -his a} H Qa perty ...". The authority was in the prescribed form, being in accordance with rule 74(1) and form 33A. As has been said, the appellant is. and at all material times has been, insolvent: mithough the appellant's statement of affairs dated 20 September 1983 disclosed assets not exceeding _ $9,000 in vaiue, it also disclosed creditors in the sum of $50,629.30, imcluding some of the respondents; and it would appear that the appellant has other unsecured creditors who were not disclosed in his statement of affairs. The learned Judge found that unsecured creditors are umlikely to receive any dividend from the appeliant's estate. 4. Pursuant to the authority signed under s.188(1), by notice dated 25 August, 1983, the trustee notified those creditors shown in the appellant's statement of affairs of a meeting to be held on 20 September 1983 in these terms: "NOTICE OF MEETING ALEC KNAUFF PRETORIUS ' ' TAKE NOTICE that Alex (Sic! Knautf Pretorius, Exhibition Organisor of 37 Bonythen Street, Windsor, Qld. has on the Twenty-Fourth day of August 1983 signed an Authority under Sub-Section 188(1) of the Bankruptcy Act 1966 authorising Jonn Robert Rees or Hall Chadwick & Cco., Chartered Accountants. 24th Floor, City Mutual Building, 207 Queen Street, Beisbane, Cueensland to cali a meeting of his creditors (and take over contreal of his property) and that, in pursuance to Section 194 of the Bankruptcy Act 1966. a meeting or the creditors of the abovenared DeStor be held at the office of Hall Chadwick & Co., 24th Fleor, City Mutual Building, 3537 Queen Street, Brisbane, Qid. on Tuesc2y, the Tventieth day of September, 1983 ar 11.00 o'clock in the forenoon. DATED this Twenty-Fiftth day of August 1983. John Robert Rees Controlling "rustee" (emphasis added) The notice of meeting was accompanied by a circular which stated, with reference to the meeting: "At the meeting creaitors mav, by special resoluticn, résolve one of the follawing:- 1. That the Lebtor's cronparcy he no subject to control under this divisica: "proceed 1) 2. Require the Debtoc to execute 2a Deed of Assignment or a Deed of Arrangement under this uact; 3. Accept a Composition; 4. Require the Debtor to present a Debtor's Petition within seven (7) days from the day on which the resolution was passed. It is the Debtor's intenticn to request that creditors accept a composition in full and final satisfaction cf his debts. The terms ef the composition and a Stacement of Affaircs of the Debtor twill be available at the meeting." . The meeting was called in accordance with Division of Part xX of the Act: s-190(1) obliges a trustee to to call a& meeting in accordance with Division", and s.194(1)(a) provides that the meeting shall be held not later than twenty eight days after the authority is signed by the debtor. 5.204(1) this As the circular sent by the trustee explairned, provides: "The creditors may, at a meeting called in pursuance of an authority under section 188, by special resolution—— (a} where the debtor's property is subject to control under this Division, resolve that the debtor's property be na longer subject to control under this Division; (b) eequire the debtor to execute 2 deed of assignment or a ¢eec of acrangemenct under this Part: (c) accept & compcesition; or 6. (d) require the debtor to present a debtor's petition within 7 days fron the day on which the resclution was passed." The meeting was attended by the representatives of eighteen unsecured creditors of the appellant. The meeting rejected the appelilant's proposal for a compcsition in full settlement and satisfaction cf his debts hut passed the . following resolution: "That the debtor be requested to lodge his ow petition in bankruptcy within seven (7) days of the passing of this resolution." In fact, the appellant did not prezant a petition in accordance with this resolution or at all. A number of consequences flowed from this failure: the appellant committed an act of banruptcy by virtue of s.40(1)(1) (21), upon which a bankruptcy petition could, af course, he founded; and by wirtue of 5.221(1) tb), the Court might, iz it thought fit, on the application of a crecitor or the controlling trustee, forthwith make a sequestration order against the estate of the appellant. However, no creditor sought to avail himself of any such relief at that stage. Instead of presenting a2 petition in accordance with the creditors' resolution, the appellant sent a circular to 7. "I will not petition for my own bankruptcy: such a step would bring no advantage to my creditors - everything I owned hes already gone (including the office furniture and equipment which had to be sent to the auction rooms after the decision taken by the creditors two days ago). In addition asa bankrupt my chances of getting a job asa journalist or public relations officer will be slim indeed, i.e. my ability to pay anytning (sic) to my creditors will he reduced. Tf none of my creditors bankrupts te within the nezt month I will thereafter ask the Trustee to call another meeting of editors or to reconsider my offer. That offer cannot be increased: it ius not possible tc squeeze blood out of a stone." On 18 October 1983, the tcustee sent a further notice to creditors in thes=2 terms: "NOTICE TO CREDITOPS RE: ALEX KNAUFF PRETORTUS Trading as Queenslana Exhibiticss 37 Bonython Street. Windsoc, Ota. As -you are aware on 24 August 1383 Mr. Pretorius signed an authority under Part X of the Bankruptcy Act 1966. A meecting of creditors was held on 20 September, 1983 at which the Debtor put forward a proposal for payment of $9,000 by instalments over a three (3) year pericd in full ana final satisfaction of his debts. The prerosal was rejected and the Bs: cequested to Tile his ow pet bankruptcy. D c ee "3 Bu i on The Debtor advises that he does nct intend ledging his ovm petition and further that he will shortiy be leaving Brisbane. He has requestes that another meeting be tallied to reconsider the ratter and to rut to creditors the follewing:- 8. l. The Debtor covenants to pay to the Trustee monthly payments of $250 ar 15 per cent of his nett after tax earnings, whichever is the greater, foc 36 months commencing 1 January 1984, plus the cash in hand held by the Controlling Trustee. 2. The Trustee of this Composition shail be a person nominated by creditors in pursuance of S204(IV) (sic) of the Bankruptcy act 1966. 3. The Trustee shall apply any monies received by him pursuant to this Composition in making vayments to cresitors in the order prescribed by $109 (sic) of the Bankruptcy Act 1966 in the same manner as if the Debtor had been made bankrupt on the date of the acceptance of this proposal. 4. This Composition is made oursuant to Part X of the Bankruptcy Act 1966. It would appear that in order to consider the propesal the resolution passed at the meeting on 20 September, 13983 must First he trithdrawn and a meeting has now been cailed tc consider the matter. A notice of meeting and proxy Torm for use at the meeting is enclosed." 'The enclosed notice of meeting was 1n these terms: "NOTICE OF MEETING ALEC RNAUFF PRETORTUS TAKE NOTICE that a meeting of the creditors of Alex (sic) Knautf Pretorius of 37 Bonython Street, Windsor, Qid., Exhibition Organiser, will be held at the office oF Hall Chadwick & Co., Chartered Accountants, 24th Floor, City Mutual Building, 307 Queen Street, Brisbane, on Thursday the Third day of November, 1923 at 11.00 o'cliock in the forenoon to consider a request by che Debtor to withdraw che previous motion for the Debtor to lodge his own petition in Bankruptcy and to reconsider Che Conmpositicn criginally sroposea by the Debtor." held on 9. Pursuant to the notice, a meeting of creditors was 3 November 1983. The meeting was attended by the representatives of seven unsecured creditors of appellant. The minutes of the meeting show that following resolutions were then passed: "RESCIND FORMER RESOLUTION: Moved: A.N.4. Banking Group Limited Seconded: McCullough & Robertson 'THAT the Resolution passed at the mescting of cYeditors held on 20 August 1983 reauesting the Debtor to lodge his own petition in bankruptcy within seven (7) cays be rescinded. ' . Carried ACCEPTANCE OF COMPOSITION: Moved: A.N.%. Banking Group Limited Seconded: McCullough & Robertson 'THAT the proposal of the Debtor for a Composition be accepted and the terns of the Composition being: 1. The Debtor covenants to pay to the Trustee monthly payments of $25@ or 15% of his nett after tax earnings, "nicnaevec is the greater, for 36 months ccmmencing 1 January, 1984, plus the cash in hand held by the Controlling Trustee. 2. Trustee of this Composition shaii bea person nominated by creditsrs in pursuance of S204(iv) {sic) of the Bankruptcy Act 1966. 3. The Trustee shall apply monies received by him pursuant to this Composition in making payments to cred2tors in the order prescribed BY $109 (sic) ar the Bankruptcy Act 1966 in the same manner as 1f the Debtor had been mace banzrupt on the cate of the acceptance cf this pecsosal. the the 10. 4. The Debtor undertakes not to engage in business of (sic) his own account in exhibition promotions for the period of the Composition. This restriction does not appty to the Debtor as an employee. 5. The Comcosition is made pursuant to Part X Gt the Rankruptcy Act 1966. CONTROLE TG TRUSTEES REMUNERATION: Moved: Office Equipment Industry Association Seconded: A.N.@. Banking Group Limited ion of the Controlliins Trustee "THAT remuner for the per set at 525 He Q fi ae since the 20 August 1983 be Carried. APPOINTS? OF TRUSTEE: Moved: Office Equioment Incustey Assrciation Seconded: A.N.@. Banking Group Limited to administer the Compos ition'..." By the amenéed application which was Gsealt with by the learned Judge, the fcespondents (ail of whom claim to be unsecured creditors of the Appellant and some of whom are admitted to be so and none of whom were presence at the meeting held on 3 November 1983) sought various forems of relief under the Act: first, an order pursuamt to s.222(2) that the composition purportedly accepted at the meeting held on 3 November 1983 he declared void on th= ground that the meeting was held in contravention of the provisions of Part X; secondly, that pursuant to s.222(7}), a sesquestraticn + th tate or the appellant; (by a cr order be made agains a ée w $.222(1) and (2), ju 6% » a fh iction is conferred «sien the Court 11. to declare void a composition not accepted Sy a special resolution of a meeting of creditors under s.204; by $.222(7), a creditor may include in an aprltication under $.222(1)} an application for a sequestration order against the estate of the debtor and, if the Court rakes an order under s.222(2) declaring the composition to be void, it may, if ut thinks f1t, forthwith make the sequestration order sought); thirdly, the respondents sougri, in the alternative, a sequestration order pursuant ts s.221{1)(b) the terms of which have been mentioned above. In essence, the respondents challenged tne sower of the m i! etang of 3 Wovember 1983 tea rescind th previous 0. a resolution and to accept a compositicn u "3 the ground that, as a matter of statutory construction, Part = contemplated that oniy one meeting could be called pursuant to an authority given under s.188 for this purpose and this ur meeting, held on 20 September 1983, had rejected the composition then proferred and had insteac required the appellant to present his own petition; so that, the only meeting that had power to deal with the matter had done so in a way which meant that no further meeting could purport to accept the composition later suggested by tre appellant. The learned Judge upheld the respondents' chatienge saying, in his reasons (at p.9): -.. the debtor faces the dilemma ths< unless the meeting oF 3 November 122? twas cailed ir i 12. pursuance of an authority under ¢.188 it could not approve the composition 50 as to make it binding on all his creditors and, if it was 30 called, it was sot callea within the time prescribed by paragraph 194¢1)(a). In my opinicn the composition pursortedly approved by the meeting on 3 November 1983 was not acceoted by a special resolution of a meeting of creditors under s.204 in that it was not accepted by a special resolution of a meeting of creditors called in pursuance of an authority under s.188 within the time limited by paragraph 194(1}4a)." . As has "been said, the learned Judge =hen made an order declaring void the composition purportedly accepted at the meeting held on 3 November 2983 and then made a sequestration order. A number of grounds of appeal have b2en argued by the appellant who now appears in person. At the hearing of the application, the fo wel oO pellant was sapresented by counsel and it seems that the only question argued before the learned Judge was the point of statutory construction just mentioned. This was the main point argued on the appeal by the appellant who submits that Part X permits more than one meeting to be held for the purpose of accepting a composition proposed by a debtor. The respomaents, on the other hand, contend that only ome meeting, and not a plurality of meetings, can be called pursuant to an authority given under s.188(1)(e). 13. The question of the competence of the meeting held on 3. November 1983 to do what it purported ts do is, of course, one of construction of the relevant tsxovisions of Part X against the background of the events whicn happened. As a matter of language, it is clear enough that 35.188(1)(e) contemplates the calling of a single meeting: it speaks of "qa meeting"; and the sangular is also employed in other provisions dealing with the same subject matcsr such as ss.194, 195, 196, 197, 198, 199, 200, 201, 2&2, 203, 204, 205, 206, 207, 208 and 221. It is true, as- the appeliant says, that by s.223(1)(a) the controlling trustee, but not a solicitor authorized to call a meeting of creditors under 35.188(1)(2), "may call such general meetings of the creditors as he considers necessary or desicable for the purpe=ss of this Part ...":3 in this regard, see the definition of "controlling trustee" in 5.187(1). However, in cur opinion, this provision is directed to the possible need for a meeting of creditors to consider, for exampi=. a matter arising out of the control being exercised over =he property of the debtor. This view is supported br the other provisions of s.223(1) empowering the trustee of a deed of assignment, a deed of arrangement or 2 compos=sion to call general "meetings". If anything, in our viewr, the use of the plural "meetings" in 5.223(1){(a) in marked contrast with the employment of the singular "a mesting" in s5.188(1)(e) tends against the appellant on nis argument. 14. Then the appellant invokes s.23(b of the Acts Interpretation Act 1901 and submits that, by reason of that provision, the reference to a meeting in the singular in s.188(1)(e) and subsequent sections should be read as including the plural. But it is clear that s.23(b) cannot so transform the language of s.188(1)(e) amd subsequent provisions if the context otherwise indicates (see Blue Metal Industries Ltd. v. Dilley £19703 A.C. 327; Burns v. Paterson (1969) 80 W.N. (Pt. 1) 560 at pp.564-5; Pearce, Statutory Interpretation in Australia, tnd Ed. at pp.109-110). In our opinion, the evident purresse or object of the legislation here doés indicate a contrary intention (cf. Acts Interpretation Act, 1901 s.15AA). In our view, the scheme provided by this Part of the Act contemplates that only one meeting of creditors may be called pursuant to an authority under s.188 for the pucpose of considering a composition proposed by their debtor, subject, of course, to the possibility that such a meeting may Ze adjourned pursuant to 5.197. In any event, 1n the presenr case, only one authority under s.188 was signed and it 2s clear fron its terms that it authorised only one meeting to be called (cf. Re Amadio (1978) 24 A.L.R. 455 at pp.461-=}. We find nothing offensive to the palicy of Part X in the conclusion we have reached as to its construction. On the contrary, wre think that such a result accords with the evident policy of the Act. In other wornts, we think 15. that it is possible to discern from the general structure of Part X a legislative intention that if a debtor cannot carry the meeting cf creditors summoned for the purpose of considering the composition he profers, then Ee should not be permitted to call meeting after meeting even ad infinitun in the hope that, by a process of attyition, Inccnvenience or added expense, he will eventually achieve =cceptance of his proposal. It is significant in this regard that the debtor is assumed to be insolvent: the soning of an authority under s.188 is an act of banxruptcy .s.40(1)(i)). It should not, therefore, be presumed that sesh a debtor should have the luxury of calling any number of meetings until he achieves his scurpose. This is not to say that the matter of the proposed composition need be immediately resolved: as hes been said, the meeting may be adiourned under s.i97. Furcter, even if the meeting cr creditors were to reject the composition proferred by the debtor, a sequestration orz=2r is by no means inevitable: the Court has a discretion ta refuse such an order ina proper case tcf. 5.206; see akso McDonald, Henry & Meek's Australian Bankruptcy Law and Practice (Firth Ed.) para. 1039). In any event, in our view, the learned Judge was corcect in holding that the meeting nella on 3 Mcvember 1982 was held outsidsa the time iimit providec in 5.194(1)(a), 16. namely not later than twenty eight days after the authority is signed by the debtor. The appellant sought to meet this problem by submitting that an authority givem under s.188 has a continuing operation which enables the time limits in s.194 to be fulfilled. But, in our view, the time limits imposed by s.194(1)(a) can only be extended, if at ail, by order made under s5.33(1)(c). » It follows, that the appellant fails on the main point thus argued. The appellant aiso sought to raise a number of independent Matters, seeking to attack the validity of the resolution passed at the meeting neld on 20 September 1983. Nocne of these matters was argued below and, in our view, should not be allowed to bs raisecé now. In anv event, we are not persuaded that there is any substance in them. The appeal is dismissed +7vith costs. I certify that this and the preceding 15 (fifteen} pages are a true copy of the Reasons for Judgment herein of the Court. a if : Ste foe Le ee ee Associate