CATCHWORDS ADMINISTRATIVE LAW - committal proceedings - review of decision of maqistrate to commit - question of construction of documents not in itself fustification for intervenina. BANKRUPTCY -meetinag of creditors - statement of arfairs omitted certain assets - assets disclosed in "schedule" to statement - resolution that debtor 5 property "shown in statement of affairs" be disposed .of - deed of arrangement - convevance of "all debtor's property" to trustee - whether trustee was under a duty to realise asset not shown in statement of affairs but disclosed in schedule - construction of deed in liaht of resolutions and surrounding circumstances Administrative Deci3sions (Judicial Review) Act, 3.5 Bankruptcy Act Part X., 3.188, 3.1/4, 3.204(1)(b) BERNARD PUTNIN V DENIS JOHN REYNOLDS and PETER FRANCIS WHITE No. WAG 75 of 1984 MEYER MARTIN LEVIT v DENIS JOHN REYNOLDS and PETER FRANCIS WHITE No. WAG 76 of 1934 CORAM: Bowen. ¢.J.. Northrcp and Morlinag JJ. 13 December 1584 Perth IN THE FEDERAL CUURT OF AUSTRALIA Ft, lh te ty = ts WEETERN AUSTRALIA DIZTRIcT REGISTRY No. das GENERAL DIVISION BETWEEN : BERNARD FUTNIN Appellant - ana - DENTS JOHN REYNOLDS and PETER FRANCIS WHITE Resoondents QROER ZUDGES 3 Bowen ¢.J.. Northrorn and Moriing J. LATE JF GROCER 3 12 Desemper 19d: WHERE MADE 3 Ferth THE COURT VRDERS THAT. l. The appeal be dismissed. 2. The appellant to pay the respondents costs sf the appeal. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY Ns. WAG 75 sf 1984 GENERAL DIVISION BETWEEN : MEYER MARTIN LEVIT Apperlant - and - DENTS JOHN REYNOLDS and PETER FRANCIS WHITE Respondents URDER JUDCES . Bowen C.J.. Northrop and Morlinag J. DSTE OF CRDER : 12 December 1534 WHERE MADE : Pertn THE SOURT CROERS THAT: l. The agpp2al be aismissed. ae The appellant to pay the resrondenta' costs or the appeal. IN THE FEDERAL COURT OF AUSTRALIA WESTERN AUSTRALIA DISTRICT REGISTRY 3 DIVISION ewe wr No. WAG 75 of 1984 BETWEEN : BERNARD PUTNIN - Appellant - and - DENIS JOHN REYNOLDS and PETER FRANCIS WHITE Respondents No. WAG 76 of 1984 BETWEEN : MEYER MARTIN LEVITT Appellant - and - DENIS JOHN REYNOLDS and B. FRANCIS WHITE Respondents iC (eo) bl) = Bowen, C.J... Northrop and Morling JJ. 13 December 1984 EX TEMPORE REASONS FOR JUDGMENT BOWEN. C.J.: I will ask Morling J. to state his judgment. MORLING J.: These are two appeals from a decision of a judge of the Court dismissing applications by Bernard Putnin and 2. Meyer Levit in which each applicant sought an order of review in respect of a decision made by Mr D.J. Reynolds S.M. in committal proceedings that there was sufficient evidence to put them and Dr Joseph Levit upon their trial upon a charge that: "Between the 8th day of January 1980 and the 19th day of March 1982 at Perth. Bernard Putnin, Joseph Levit and Meyer Martin Levit conspired together to 'defraud the Commonwealth of Australia in its capacity as a creditor of the said Joseph Levit. The said Bernard Putnin. Joseph Levit and Meyer Martin Levit agreed together that the said Bernard Putnin as trustee under a deed of arrangement dated lith day of February 1980 made pursuant to the provisions of Part X of the Bankruptcy Act 1966 and executed by the said Joseph Levit would not get in and realise the A Class founders share held by the said Joseph Levit in Parktown Holdings Pty Ltd and distribute the proceeds thereof to the creditors of the said Joseph Levit contrary to Section 86(1)(e) of the Crimes Act 1914." An application by Dr Joseph Levit seeking a similar order of review was also before the learned primary judge. This application was also dismissed but no appeal has been brought from that decision. The applications were brought under 3.5 of the Administrative Decisions (Judicial Review) Act 1977 «""the Judicial Review Act") on the around that the decision of the learned maqistrate was a decision of an administrative character made under the Judiciary Act 1303. It was common ground before the learned judge. and on appeal. that the Court has jurisdiction to review the magistrate's decision. See Lamb v Moss (1983) 49 A.L.R. 533. 3. The charges against the appellants arose out of proceedings under Part X of the Bankruptcy Act 1966 involving Dr. Levit. On 30 January 1980 a meetina of Dr Levit's creditors. held pursuant to s.194 of the Bankruptcy Act, took place at the offices of Mr Putnin's firm. Putnin is a reqistered trustee in bankruptcy. At the meeting he, Putnin, introduced himself as "the controlling trustee" by reason of the authority given to him by Dr Levit pursuant to 3.188 of the Act. That section permits a debtor who desires that his affairs be dealt with under Part X. without his estate being sequestrated, to authorise a registered trustee to call a meeting of his creditors and to take control of his property. At the meeting on 30 January 1980 a statement of affairs was distributed to creditors in attendance. The statement of affairs was accompanied by the required statutory declaration by Dr Levit that it contained "to the best of my knowledge and belief. a true and complete statement of my affairs as at the 8th January, 1980". Although the statement or affairs was in a form indicating that it had been prepared by Putnin's firm. Putnin told the meeting that the fiqures in the statement had been provided by Dr Levit's accountants. The statement of affairs made no mention of a share in Parktown Holdinas Pty. Limited ("Parktown") owned by Dr Levit. Meyer Levit (the second appellant) was also at this meetina. 4. The meeting was adjourned to consider several resolutions. including resolutions that the debtor be requested to enter into a deed of arrangement, that his property as shown in the statement of affairs (save for his interest in his medical practice) be disposed of for the benefit of creditors and that the debtor make monthly contributions to the trustee for the benefit of his creditors. The adiourned meeting took place on 6 February 1980. At that meeting Putnin tabled two schedules prepared by Dr Levit's accountants and leqal representative. It was said that these schedules had been prepared to enable the creditors to more accurately determine Dr Levit's assets and commitments. une or the schedules was an estimate of income and expenditure or the medical practice. The other was headed "Estimated Valuation ot Assets". It referred to certain assets in the statement of affairs and provided a revised estimate of their value. It also made reference to two assets which had not been mentioned in the statement of affairs. Thev were set out in the schedule as follows: "Add (1) Interest by way of 1 share in 'Parktown Holdings Pty. Ltd' 310.000 ? (2) Interest. if any. in Levit Family Trust - 2" 5. It is only the interest in the share in Parktown that is relevant for the purpose of the committal proceedings. According to the minutes of the meeting of 6 February 1980 Putnin said that 1t had been difficult to evaluate the debtor's share in Parktown and that if the company was wound up or the share sold. the nett worth would be approximately 310.000. He said that the "other members of the shareholders" (gic) were members of the family. In answer to a question about Parktown Putnin said that the company was solvent and that, as it was a separate entity. it was not the concern of the creditors. At the meeting a special resolution in the following terms was carried: ",.ethat the debtor be requested to enter intoa Deed of Arrangement pursuant to Section 204(1)(b) ot the Bankruptcy Act, 1966". A further resolution was carried: "J... that the debtor's property as shown in the Statement of Afttairs. except his interest in the medical practice. be disposed of inan orderly manner for the benefit of the creditors." Following a discussion about the terms of the deed of arrangement a further resolution was passed which included the following: 6. "(d) That the Trustee realise the assets shown in the Statement of Affairs. excluding the debtor's interest in the medical practice. at the following values: - (1) Cash held in Solicitor's Trust Account, 380,000, less fees applicable. (ii) Surf Cat, boat and trailor to be sold by public auction. (111) Debtor's share in Serpentine Pastoral Company upon settlement. (iv) To sell the debtor's interest in 16 , Seymour Avenue, Dianella to Dr Pamela Levit at sworn valuation. (v) That a valuation of the property at 16 Seymour Avenue. Dianella. be obtained from a sworn valuer to be nominated by the President of the Australian Institute of Valuers Inc., Western Australian Division. 'vl) That the debtor's half share in the furniture at 16 Seymour Avenue. Dianella. be sold to Dr Pamela Levit for $10,000. (vil) That the debtor's interest in Parktown Holdings Pty. Ltd. be left for review at . the six monthly meeting." On 11 February 1980 Putnin issued a circular to creditors informing them that a deed of arrangement had been executed under the provisions of the Act. In compliance with the requirements of the Act he filed the statement of affairs in the office of the Registrar in Bankruptcy. The document as filed did not include the two schedules to which reference was made at the meeting on 6 February. The deed of arrangement executed by Dr Levit and Putnin on1l February contains a recital that pursuant to 8.204(1)(b) of the Bankruptcy Act Dr Levit was requested to enter into a deed of arrangement on certain terms. one of which was said to be: ""(a) That the Debtor shall convey and assian to the Trustee all his interest in any real or personal property with the exception of and the exclusion of his interest in the Medical Practice conducted by him at 23 Outram Street. West Perth. to be disposed of by the Trustee in an orderly manner for the benefit of the creditors." In fact the resolution that was passed did not require the debtor to convey and assign all his interest in property to the trustee, but referred to the property in the statement of affairs. However, the view would appear to be open that the recital reflects the intention of the two resolutions passed at the meeting on 6 February. By the terms of the deed of arrangement Dr Levit conveyed and assigned to his trustee all his interest in any real or personal property, save for his interest in his medical practice. upon trust for the benefit of his creditors. Pursuant to cl. 5S of the deed the trustee accepted the appointment and the assignment of property. Because of the importance of cl. 5 I set out the relevant part of it: "5S. The Trustee hereby accepts the appointment as Trustee of this Deed and the conveyance and assiaqnment of the real and personal property upon 8. the Trustee herein contained and it is hereby mutually agreed by the parties hereto and has been confirmed by the creditors present at the meeting hereinbefore recited that the Trustee shall {a) hold the said property of the Debtor in trust during the currency of this Deed of Arrangement in accordance with the terms hereof and subject to the further instructions of the creditors. (b) realise the assets shown in the Debtor''s Statement of Affairs excluding the Debtor's interest in the said Medical Practice upon such terms and conditions as agreed to by the creditors." There were many other facts proved before the learned magistrate, some of which are referred to in the Judgment under appeal. I shall not refer to them in any detail. There was a meeting ot creditors on 9 June 1980. but no reference was made to the share in Parktown at that meeting. There was a further meeting on 10 September 1980 at which Putnin reported that "all properties in the Deed had now been realised". A representative of the Deputy Commissioner of Taxation raised the question of Dr Levit's interest in Parktown and Putnin said, inter alia. that he had not really had "a good chance to look into the matter". At subsequent meetings of creditors further questions were asked of Putnin about the share in Parktown. The learned trial judge was of the view that Putnin knew a areat deal more about Dr Levit's interest in Parktown than his reported remarks at meetings of creditors would indicate. He also thought that Putnin failed to inform the meetings of what was taking place in reqard to the share. Neither of these conclusions was challenged on the hearing of 3. the appeal. It 1s only fair to say. however. that the events that followed after the execution of the deed were, on the approach taken in the arqument presented on behalf of the appellants. irrelevant. In his careful submissions senior counsel for Mr Levit arqued that the substance of the conspiracy alleged against his client was that he agreed with Putnin that Putnin would not get in and realise the share held by Dr Levit in Parktown and distribute the proceeds of that share to the creditors. He argued that such an alleqation was predicated upon the assumption that Putnin. as trustee under the deed of arrange- ment. had a duty to get in the asset, to realise it and to distribute its proceeds. He contended that the trustee was under no such duty. His arqument was that the source of the trustee's duties was to be found inthe resolution of the meeting of creditors held on 6 February. As I have already said a resolution was passed at that meeting that "the debtor's property as shown in the statement of affairs, except his interest in the medical practice. be disposed of in an orderly manner for the benefit of the creditors." The araqument proceeded upon the basis that since the share in Parktown was not mentioned in the statement of affairs the resolution was ineftective to impose any duty on the trustee to take any action in respect of the share. It was conceded. as I understood the argument, that the deed of arrangement in terms vested the share in the trustee. But it was arqued that, in 30 lo. providing, the deed went beyond the terms of the agreement between the debtor and the creditors reflected in the resolution passed at the meeting on 6 February. Counsel pointed out that it is not a requirement of a deed of arrangement that it provides for the assignment of all the debtor''s property to a trustee. Further, it was submitted that had Dr Levit intended to vest ail his property, including the share in Parktown, in the trustee it would have been preferable for him to enter into a deed of assignment as distinct from a deed of arrangement. since entry into a deed of agsianment would have released him from liability to his creditors: vide sub-s. 230(1) of the Bankruptcy Act. Entry into the deed of arrangement did not have this eftect - vide sub-s. 234(1). However, in the light of Dr Levit's desire to carry on his medical practice, entering into a deed of assianment would presumably not have been acceptable to him. It was further submitted that the reference to Dr Levit's interest in Parktown in para. (d)(vii) of the resolution dealing with the general terms of the deed of arranqement passed at the meeting on 6 February did not detract from the validity of the arqument. It was said that para. (d)(vii) was not predicated upon the basis that the trustee would sell the share. All that that paragraph did. so it was argued, was to leave in abeyance all questions as to what was to happen to the share. This being so. no duty to get in and it. realise the share was cast upon the trustee by virtue of that paragraph of the resolution. It was contended that it was not open to the creditors to seek to have the share got in and realised for their benefit. To do so, 30 it was arqued, would be to amend the scheme of arrangement. and this was not permissible. Re Clonan (1963) 20 A.B.C. 245 at 258 per Paine J., Re Boller (1964) 20 A.B.C. 231 at 233-235 per Nequs J. and Re Booth, Ex parte Currie & Richards Pty. Limited (1969) 15 F.L.R. 249 at 251 per Gibbs J. were relied upon. There is no doubt. as these cases show. that the creditors have no power to vary a scheme binding upon them under Part X of the Bankruptcy Act. Notwithstanding the arquments of counsel for the appellant. who arqued every matter that could be relied upon in support of the appeal, I do not think that it has been shown that the decision of the learned trial fudgde was erroneous. His Honour said: "The case against the applicants is that Dr Levit's share in Parktown Holdings vested in Mr Putnin under the deed of arrangement for it was part of the debtor's interest in real and personal property and it was part of the property that the creditors resolved should be vested in the trustee. While the share was not mentioned in the document entitled 'Statement of Affairs'. it is apparent trom what took place at the meeting on 6 February 1980 that the creditors intended the share to be included in their resolutions concerning the debtor's property. The case involves the further pro- positions that. on the proper construction of the resolutions, the share was to be vested in the trustee and that, on the proper construction of the 12. deed, it was 30 vested. On the proper construction of the resolutions and the deed. it was the duty of the trustee to realise the share though a decision as to the price at which or the manner in which that realisation would be effected remained to be decided by the creditors on the basis of information to be furnished by the trustee. Such a decision, it is said, would not constitute a variation of the scheme entered into under Part X of the Act. Thereafter the conduct of the applicants amounted to an agreement that Mr Putnin not get in and realise the share; to that end they attempted to persude the creditors that the share was of no value." His Honour held that there was sufficient evidence upon which the appellants might be convicted of the charge, and that theretore they were properly committed for trial. In my opinion that decision was plainly correct. It is true that in the statement of affairs as presented to the meeting on 30 January there was no reference to Dr Levit's interest in the share in Parktown. But it is clear that before the resolutions were passed at the meeting on 6 February his interest in the share had * been disclosed. Indeed, the purpose of presenting the schedule referring to the share and its possible value was to update the material contained in the statement of affairs. I have already referred to the fact that when the trustee produced the schedule he said that its purpose was "to enable the creditors to more accurately determine the debtor's assets and commitments ...". The share in Parktown was. shown as an addition to the assets previously disclosed in the statement of affairs. 13. By cl. 1 of the deed of arrangement Dr Levit conveyed and assigned to the trustee all his interests in any real or personal property in which he had any interest with the exclusion of his interest in the medical practice. The interest in the share in Parktown was thus assigned to the trustee. Having regard to the specific exclusion of the interest in the medical practice. it might have been expected that if it had been the intention to also exclude the interest in the share. appropriate words would have been used to produce that result. It would be open to a jury to conclude that the conveyance and assignment of all the debtor's interest in real or personal property was an effectuation of the intention of Dr Levit and the creditors after disclosure had been made of his interest in the share. It is true that cl. 1(5)(b) of the deed of arrangement might have been better expressed. But it should not be read in tsolation, either from cl. (5)(a) or the events surrounding and preceding the execution of the deed. By virtue of the deed the share became vested in the trustee and was to be held by him, subject to the further instructions of the creditors. Clause (5)(b) placed an obligation upon the trustee to realise the assets shown in the statement of atfairs (save the interest in the medical practice) upon terms and conditions agreed to by the creditors. But this obligation was not exhaustive of the trustee's duty to realise the assets having regard to his obligation to hold the property vested in him subiect to the further instructions of the creditors. 14, Moreover. having regard to the addition made at the meeting of 6 February to the list of Dr Levit's assets by the inclusion of the share in Parktown that list must have been treated by the parties to the deed as having been amended accordingly. The reference to the statement of affairs in para. (5)(b) of the deed was therefore a reference to the statement of affairs as so amended. It is siqnificant that in the resolution dealing with the general terms of the deed of arrangement passed at the meeting held on 6 February the debtor's interest in Parktown was treated as an asset which had been shown in the statement of affairs - see para. (d)(vii) of the resolution. It was contended that para. (d)(vii) could not have reflected any intention of the creditors that the share in Parktown should be sold, since sale of it would render it virtually valueless in the hands of the purchaser because of the special and unusual provisions of Parktown's articles of association. I do not think it is proper to attribute to the creditors any real appreciation of the problems which might have attended the finding ot a purchaser for the share. There was evidence before the magistrate which, if accepted. could lead to the conclusion that the creditors were kept substantially uninformed as to the value of the share in the debtor's hands and as to the possibility of finding a buyer for 1t at more than a nominal value. There is no doubt that the market tor the share would have been extremely limited. 15. Indeed, there may well have been only one purchaser of it at other than a nominal value, i.e. Dr Levit's wife. But that is not to say that she might not have been prepared to paya substantial price for it. if onlv to qet immediate control of the company rather than let the share remain reqistered in the name of her husband. But whatever the prospect of finding a buyer for the share, I think that cl. (d)(vii) of the resolution reflected the intention of the creditors that they would, at some future time. consider the realisation of the share since it was an asset which had been disclosed to them and which had been vested in the trustee for their benefit. During the course of arqument reference was made to some of the oral evidence given at the committal proceedings. In my opinion that evidence is equivocal and does not affect the conclusions that are open on the written evidence. For the above reasons [I am of the opinion that no error has been shown inthe decision of the learned primary judge and that the appeals should therefore be dismissed. This conclusion makes it unnecessary to consider whether this would have been an appropriate case for the Court, in the exercise of its discretion, to have granted the relief sought. In this case there may well have been powerful considerations militating against the granting of relief. The mere fact that 16. questions of construction of documents arise in committal proceedings, even if the questions be difficult, should not be seen as a justification in itself for the intervention by this Court in the ordinary criminal processes of the law. That is especially the case when the determination of questions of construction of documents may depend, in part, upon the circumstances in which the documents were brought into existence and the resolution of possible ambiguities by reference to extrinsic evidence. In the course of aiving these reasons I have, of necessity, expressed views on the proper construction of the resolution passed at the meeting held on 6 February and on some of the provisions of the deed of arrangement. Those views may stand in the way of acceptance of arguments which may be presented on behalf of the appellants at the trial, should they be indicted. This is unfortunate, but it is an inevitable consequence of the making of the application for an order of review of the decision of the learned magistrate to commit the appellants for trial. The appeals should be dismissed with costs. BOWEN, C.J.: I aaree. Icertify that this and the (5 preceding pages are a true copy of the reasons for judgment herein of the Court p I)t NORTHROP. J.: I aqree. Associate Dated 13, Decer te, 19%,