ry Hy CATCHWORDS Bankruptcy - deed of arrangement entered into consequent upon resolution passed at meeting of creditors - proxies qiven to chairman of meeting and Controlling Trustee - Trustee holding onlv one proxv purporting to appoint another person chairman of meeting - whether appointment of chairman valid. Bankruptcy Act 19646, s. 196 RE_PAUL SHERGOLD & JUDY SHERGOLD,. EX PARTE THOMAS GERALD McINNES & PAULINE MARIA McINNES Nos. P321 of 1986 and W1105 of 1986 Coram: Sheppard J. Date : 16 October 1986 Place: Svdnev Note: This jiudament should be read in coniunction with the judament of Sheppard J. in Re Sheraold and Anor; ex parte McInnes and Anor (No. P321 of 1986) delivered on 3 September 1986. IN_THE FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY a) i) ) ) ) Nos. P321 of 1986 ) and W1105 of 1986 ) ) ) ) ) RE PAUL SHERGOLD & JUDY SHERGOLD EX_PARTE: THOMAS GERALD McINNES & PAULINE MARIA McINNES MINUTES OF ORDER JUDGE MAKING ORDER: Sheppard J. DATE OF ORDER : 16 October 198A WHERE MADE : Svdney THE COURT ORDERS THAT: The application to rescind the order made on 3 September 1986 be dismissed. NOTE: Settlement and entrv of orde of the Bankruptcy Rules. rs is dealt with in Rule 124 IN_THE FEDERAL COURT OF AUSTRALTA NEW SOUTH WALES DISTRICT REGISTRY GENERAL DIVISION Nos. P321 of 1986 BANKRUPTCY DISTRICT and W1105 of 1986 OF THE STATE OF NEW SOUTH WALES www er eryewwrvervrn AND THE AUSTRALIAN CAPITAL TERRITORY RE: PAUL SHERGOLD & JUDY SHERGOLD EX PARTE: THOMAS GERALD McINNES & PAULINE MARTA McINNES CORAM: SHEPPARD J. DATE : 16 OCTOBER 1986 REASONS FOR JUDGMENT HIS HONOUR: This is an application to rescind an order made bv me on 3 September last. The order was that the Deed of Arrangement entered into by the debtors on 30 Mav 1986 be set aside. Reqrettabliv. due to the smallness of the estate of the debtors. I did not have the assistance of evidence from the debtors nor the trustee, who had been appointed trustee in the Deed of Arrangement. In the result. the facts that I had from the judament creditors. and upon which I relied. were not completely accurate. This was not the fault of the iudament creditors nor their leqal advisers. It was due to the absence from the proceedings before me of the iudament debtors and the trustee. That absence, as TI have indicated in the earlier . 2. judament, was understandable in the light of the verv" smail amount which is involved in the estate. However. I have now had placed before me in this application in which the judament creditors. although served with it. do not appear, detailed evidence of what occurred at the meetina of creditors on 30 May 1986, when it was resolved that the Deed be entered into. The facts are that proxies were received from three creditors. These were proxies from Newstart 115 Ptv Limited, which appointed the chairman of the meeting to be its proxv, Michael Bovce & Co. who also appointed the chairman of the meeting to be their proxv., and a firm Messrs. Nelson. Keane & Heminawav, who. bv one of its partners. Mr. A.J. Lovat, appointed Mr. Gaiagie to be its proxv. Although the judgment creditors had aiven a proxv, it was aiven in favour of a person who did not attend the adjourned meetina on 30 Mav. The creditors had instructed their proxv. a Mr. Baker. to vote against anv motion that allowed the debtors to repav any amount less than 100 per cent of what was owing to them. Bv reason of the amount of their debt, the instructions in their proxy and the amount available to be distributed to creditors, it is clear that Mr. Baker's presence at the meeting would have resulted in the resolution that the debtors enter into a deed of arrangement not being passed, Mr. Gaiagie perceived the need for there to be two persons present at the meeting. Accordinalv., he spoke to a Mr. Murphy. ce who is an emplovee of M.L.C. Insurance Limited and who has an office across the hall from Mr. Gaiqgie's office. Mr. Gaigie said to Mr. Murphy. "Do vou mind coming in and chairing a meeting of the creditors of Paul and Judv Sherqgold." Mr. Murphy said. "No. IT do not mind". Mr. Gaiaie purported to exercise his proxv to appoint Mr. Murphv as chairman of the meeting. The meetina then proceeded. Mr. Murphy, beina the chairman and exercising the powers conferred by the proxies qiven bv Newstart and Bovce & Companv and Mr. Gaiaie exercising the powers qiven by the proxv from Mr. Lovat, the question is whether the facts as thev are now known make anv difference to the outcome. The difficultv which confronts the judament debtors. and which has been drawn to nv attention by the solicitor for them. is found in s. 196 of the Act which provides that the maioritv 1m number of the creditors present at the meeting in person, by attornev or bv proxy shall elect a chairman to preside at the meeting. Mr. Murphy had absolutely no connection with the matter at all until he was appointed chairman. For him to be appointed chairman there needed to be a meeting of the kind provided for in s. 196. There could be no such meetina unless there were two persons present who had authoritv to act, that is to say thev needed to be either creditors or attornevs or proxies of creditors. So the same problem that arises in relation to s. 202. with which I dealt in the jludament previouslv delivered, applies in relation to s. 196. Mr. Murphv could not lawfullv become entitled to exercise the 4. proxies until he was appointed chairman. He could not be appointed chairman except at a meetina. The resolution to appoint him was invalid because at that time there was no chairman and proxies aqiven to the chairman could have no place in the proceedings. The only relevant proxy was held by Mr. Gaigie who, until the chairman was appointed, was at the meeting alone. There was therefore, within the meanina of the section, no meeting and no valid appointment of the chairman. For that reason I am afraid the order previously made must stand and this application must be dismissed. Because of certain thinas which have been said to me in the course of araqument bv the solicitor for the iudament debtors, I Wish to make it clear that nothina that has happened in this matter reflects at all, in mv opinion, upon the professional competence or aqood faith of Mr. Gaiqie. I think he endeavoured to cope with a difficult situation in which there was a quite small estate. I have referred in the earlier iudament to the artificialitv of the operation of s. 202. The same applies. in my opinion, to the operation of sg. 196. Be that as it mav. there is nothing that can be done about the matter. As I. say. the order previously made must stand and the application to rescind it must be refused. {certify that this andthe S preceding Pages are a true copy of the reasons for Judgment herein of The Honourable Mr Justice Sheppard. / /. '\ _ Assoclate Dated "6 Oc7vébEXR /P86