CATCHWORDS Bankruptcy - Bankruptcy Act s.74(5) - application for annulment - court's discretion - interests of creditors - considerations of commerical morality and public interest - no conduct to warrant refusal. Bankruptcy Act 1966 s.74(5), (6) and (7) Re_ Groom Ex Parte Bankrupt (1979) 29 FLR 324 at 331 ' No. 119 of 1984 RE: MARK WALD EX PARTE: MAURICE HODGSON LYFORD AND RODNEY MICHAEL EVANS FRENCH J. PERTH 24 DECEMBER 1986 IN THE FEDERAL COURT ) OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT ) OF THE STATE OF ) ) WESTERN AUSTRALIA No. 119 of 1984 RE: MARX WALD Bankrupt EX PARTE: MAURICE HODGSON LYFORD and RODNEY MICHAEL EVANS Trustees Applicants MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 24 DECEMBER 1986 WHERE MADE: Perth THE COURT ORDERS THAT: The bankruptcy of the Bankrupt be and is hereby annulled, Note : Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA No. 119 of 1984 RE: MARX WALD Bankrupt EX PARTE: MAURICE HODGSON LYFORD and RODNEY MICHAEL EVANS Trustee Applicant CORAM : FRENCH J. 24 December 1986 REASONS FOR JUDGMENT On 8 December 1986 the registered trustee for the bankrupt estate of Marx Wald made application for the approval of a composition that had been accepted by the creditor by a special resolution passed at the meeting held on 11 September 1986. All creditors who did not attend that meeting were given notice of the application and asked for an indication as to whether they would oppose the approval of the composition. No such opposition was reported, and after considering the report of the trustee I approved the composition under sub~s.74(1) of the Bankruptcy Act 1966. On the same day as the application to approve the composition was heard an application was made for an order that the bankruptcy be annulled pursuant to sub-s. 74(5) of the act. I stood the question of annulment over 2. for decision as I wish to further consider the papers and relevant authorities before acceding to the application. Subsection 74(5) of the Bankruptcy Act provides that:- "Where the court approves a composition or scheme of arrangement under this section, it may make an order annulling the bankruptcy." The effect of such an order is set out in sub-ss. and (7) of s.74 which provide respectively:- "(6) Where a bankruptcy is annulled under this section, all sales and dispositions of property and payments duly made, and all acts done, by the trustee or any person acting under the authority of the trustee or the Court before the annulment shall be deemed to have been validly made or done but, subject to sub-section (7), the property of the bankrupt still vested in the trustee vests in such person as the Court appoints or, in default of such an appointment, reverts to the bankrupt for all his estate or interest in it, on such terms and subject to such conditions (if any) as the Court orders." And:- "(7) Where a law of the Commonwealth or of a State or Territory of the Commonwealth requires the transmission of property to be registered, any such property vested in the trustee at the time of the annulment of the bankruptcy, notwithstanding that it vests in equity in such person as the Court appoints or in the bankrupt, as the case may be, does not vest in that person or the bankrupt at law until the requirements of that law have been complied with." (6) 3. Annulment of a bankruptcy, as is apparent from the provisions of s.74, involves the exercise by the court of a discretion which is distinct from the discretion exercised when the court approves a bankrupt's proposal for a composition which has been accepted by his creditors. In considering an application for annulment the court is obliged to consider not only the interests of the creditors and the bankrupt but also the interests of the public and of commercial morality, which simply means common honesty, and take into account such conduct and affairs as have relation to the bankruptcy, see Re Groom ex parte Bankrupt (1979) 29 FLR 324 at 331. In this case there is no suggestion, on the material before me, of conduct prior to or during the bankruptcy which would in the public interest warrant the refusal of the order sought. The bankrupt is a married man aged 55 and has a family and three children aged 17, 19 and 21. He is a practising surgeon. The principal cause of bankruptcy appears to have been a large liability owed to the Australian Taxation Office. The trustees' report states that they are not aware that the conduct of the bankrupt, either prior to or since the date of bankruptcy, has been other than satisfactory. There being no suggestion of any relevant consideration of commercial morality or public interest to stand in the way of the application I propose to order that the bankruptcy be annulled. 4, I certify that the preceding three (3) pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice French. Llpeteth he kenor. Dated : 24 December 1986 Associate : Solicitors for the Bankrupt: Messrs. Pullinger Sanderson & Workman Solicitors for the Applicant: McPhee & Meyer Date of hearing: 8 December 1986