JUDGMENT No, BIS 4. $7 ese IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA No. 338 of 1983 RE: PAUL ANTHONY LEWIS Bankrupt EX PARTE: PAUL ANTHONY LEWIS Applicant CORRIGENDA Amendment to the Reasons for Judgment of his Honour Justice French delivered 18 September 1987. Page 9 line 22, delete "$2,707.53 being" and insert oa "$2,687.53 representing". Page 9 line 23 after "1987" insert:- "In fact there appears to have been an error in calculation and the correct amount of interest would have been $2,707.53. Nothing however turns on that discrepancy for present purposes." Amendment to the Order of his Honour Justice French made 18 September 1987. Paragraph 2 line 2, delete "$1,274.74 "$1,272.74". Associate to ' Justice French Date: QT Duna i\U8F —_—* horn Sisle1 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA No. 338 of 1983 ee ww RE: PAUL ANTHONY LEWIS Bankrupt EX PARTE: PAUL ANTHONY LEWIS Applicant CORRIGENDA Amendment to the Reasons for Judgment of his Honour Justice French delivered 18 September 1987. Page 9 line 22, delete "$2,707.53 being""' and insert "$2,687.53 representing". Page 9 line 23 after "1987" insert:- "In fact there appears to have been an error in calculation and the correct amount of interest would have been $2,707.53. Nothing however turns on that discrepancy for present purposes." Amendment to the Order of his Honour Justice French made 18 September 1987. Paragraph 2 line 2, delete "$1,274.74" and insert "$1,272.74". Lien BUS FAS Beto VWdmika Gh Heise Associate to i Date: Qt Sueno \NSS Justice French \ -EATBSAL COURT OF wer em et a . 3 Lone ae meee eee = ee 7. , 0 c ae ee ; JUDGMENT No. SIDS 7 BQ BANKRUPTCY - composition after sequestration - application for approval - application for annulment of bankruptcy - composition terms requiring performance at date prior to approval - bankrupt in default - payments made out of time but before approval - interest earned on money held for payment under composition - power to approve composition - discretion to approve composition principles - power to order payment of accrued interest held - discretion to annul bankruptcy - no issue of public interest or commercial morality affecting annulment - composition approved - interest payment ordered - bankruptcy annulled. Bankruptcy Act 1966 ss.73, 74, 75 Irlicht: Assignments, Arrangements and Deeds of Compositions 2nd Ed. p.50 Williams and Muir Hunter on Bankruptcy 19th Ed. p.93 Hayes v Holland (1965) NSWR 1414 Burieton v Humfry (1755) Amb.256, 27 ER 170 Glentham Pty Ltd v Perth City Council (1986) WAR 205 Lucas v Martin (1888) 37 Ch.D. 597 Seymour v Coulson (1880) 5 OBD 359 Forbes and Son v Cantlon (1916) SALR 103 Re: Fryda (1964) 6 FLR 144 In Re Aylmer Ex parte: Bischoffscheim (1887) 19 QBD Peter Leopold Clyne (1978) 44 ABB 3902 Re Bottomley; Ex parte Bottomley (1893) 10 Mor. 29% ye "RECEIVED 2 1SEP 1987 FEDERAL COURT OF AUSTRALIA PRINCIPAL REGISTRY PAUL ANTHONY LEWIS PAUL ANTHONY LEWIS EX PARTE RE 338 OF 1983 NO. 18 SEPTEMBER 1987 FRENCH J. PERTH IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA No. 338 of 1983 RE: PAUL ANTHONY LEWIS Bankrupt EX PARTE: PAUL ANTHONY LEWIS Applicant MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 18 SEPTEMBER 1987 WHERE MADE: PERTH THE COURT ORDERS THAT: l. The composition proposed by the applicant and accepted by a meeting of his creditors held on 11 December 1986 1s approved. 2. The applicant do pay to the Official Trustee the sum of $1,274.74 which together with the sum of $2,687.53 already paid by way of interest be distributed in accordance with the terms of the composition and the priorities prescribed by law. > =e or, corintee se Re Ae a re ee EE eS en fo oe) a v 'i z eS) ce © [3 Le} ) a Le] ® 4 qt 0) 3 i c o a a w ® o 3 Q fa ~ DD uy ~ rd) 4 0 ne) i= wv 2. o oS a u og # x ec . r= Go Ss nN @ & ° ra 2 9 £ rs) E y c o © aoo4 3) 40 ar eS) ea v st ou aon Q et Ky " o o fo) 606 ra = a & my IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA No. 338 of 1983 RE: PAUL ANTHONY LEWIS Bankrupt CX PARTE: PAUL ANTHONY LEWIS Applicant CORAM: FRENCH J. 18 SEPTEMBER 1987 REASONS FOR JUDGMENT By a sequestration order made on 24 May 1983 Paul Anthony Lewis became bankrupt upon the petition of one of his creditors, Walter Nathan Rosman. Statutory discharge which would have occurred on 24 May 1986 was prevented by the lodgment on 7 August 1985 of an objection to discharge on the part of the Official Trustee. Mr Lewis now applies to the Court pursuant to s.74{(4) of the Bankruptcy Act for approval of a composition accepted by a special resolution passed at a meeting of his creditors held on 11 December 1986. He also seeks an order that his bankruptcy be annulled pursuant to sub-s.74(5). "rp wer ore re a . ay wre 2. The composition proposal as put to and accepted by the creditors was in the following terms:- "1. That payment of all the proper costs, charges and expenses of and incidental to the proceedings and all fees payable to the Official Trustee in Bankruptcy shall constitute a first charge on the moneys referred to in paragraph 3 hereof. 2. That payment of all priority debts directed to be so paid under the Act in the distribution of the property of a bankrupt shall constitute a second charge on the moneys referred to in paragraph 3 hereof. 3. That the Composition shall be paid on all proved debts from the following funds: (a) From all moneys in my estate held by the Official Trustee in the Common Investment Fund. (b) From the sum of $150,000 to be provided as set out in paragraph 4 hereof. 4. That the payment of the Composition be secured in the following manner: (1) The payment of $100,000 upon acceptance of the proposal. (2) The further sum of $50,000 to be paid within 21 days of acceptance of the proposal." Of 29 proofs of debt received by the Official Trustee, 25 have been admitted to rank for dividend for $1,793,703.00. One proof for a further $5,596.00 is unresolved. The assets of the bankrupt estate have yielded $9,714.00, ancluding contributions by Lewis himself of $3,400.00. tee ete ae ied Reale bene nomen y+ a9 ' Looe . Dotter gee ner eres, Boe eee <o~ ape wenn tt aol 3. If approved, the composition as proposed will yield a dividend of 8.268 cents in the dollar to creditors whose proofs of Gebt have been admitted. If the unresolved debt is admatted in full the dividend will reduce to 8.04 cents. Lewis and his family moved to Perth from New Zealand in May 1978. For 9 months he worked as a real estate agent. In January 1979 he became a director of a property development company. This involvement does not seem to have played any role in the bankruptcy. In July 1979 he formed a company, Latimer Holdings Pty Ltd, which was set up as trustee of his family trust. The company acquired two residential properties, one in Dalkeith and one in Swanbourne. He and his family lived in the Dalkeith house. In August 1979 he incorporated Ellerston Holdings Pty Ltd to conduct transactions relating to the ownership and Management of hotels and motels. The details of the transactions entered into by this company do not appear from the papers filed in this application. The residential properties bought by Latimer Holdings were sold prior to bankruptcy leaving shortfalls against the amounts advanced. These were secured by personal guarantee given sane . lee ate PTT tree pee eee ee are on lod 4. by Lewis. In the case of the Dalkeith home, the deficit was about $150,000. The amount of the shortfall on the Swanbourne property does not appear from the papers. Ellerston Holdings Pty Ltd was put into liquidation in April 1983. Lewis had given personal guarantees in respect of debts of that company. There will be no dividends payable to its unsecured creditors out of the company assets. In January 1981 Lewis went into a gold mining venture at Nullagine with a Mr R.P. Martin. They bought mining tenements for $415,000 and began treating gold tailings dumps. The venture failed to produce the amount of gold necessary to make it viable and terminated in June 1982. He incurred further liabilities in connection with a guarantee of rental payments on the lease of a commercial property at 19 Howard Street, Perth. It was a debt of $2,736.00 pursuant to the guarantee that grounded the bankruptcy notice which has led to the creditor's petition under which he was made a bankrupt. It is apparent from a perusal of the transcripts of his public examination that Lewis' transactions were many and complicated. The materials before the Court are not sufficient for a detailed understanding of them. 5. The Official Trustee accepts that the probable causes of his bankruptcy were:- 1. Unprofitable mining venture. 2. Loss on purchase of mining lease. 3. Liabilities arising under guarantees given as director of various companies. His report does not disclose how the loss on the purchase of the mining lease was incurred or the extent of any liability incurred by Lewis as a result thereof. The Bankrupt's Conduct In the report, it 1s alleged that Lewis' conduct since his bankruptcy has not been satisfactory. In February 1984 he sought the permission of the trustee to travel to the Seychelles Islands for 3 weeks on business for his then employer, Hughes Corporation Pty Ltd. His employer was to meet all expenses. The permission was granted although the trustee says that it was on the undertaking that he would pursue a debt owing to a company in which he had a 70% shareholding. The company, Cash and Carry (Wholesaler) Pty Ltd, was a general importer and food wholesaler in the Seychelles. sey tyne lee ee 6. In November 1984 the trustee was advised by Mr Bull Hughes of Hughes Corporation, that Lew1ls was promoting a casino being built by Hughes on the Seychelles. The promotion involved extensive overseas travel. He was present in Perth for his public examination in December 1984, at which 1t emerged that he anticipated a 5 vear involvement with the casino. He returned to the Seychelles and in May 1985 advised the trustee that he would return to Perth in the following month. However in June 1985 he indicated that he had decided to take up residence in the Seychelles and that he was now employed by "South African parties". It is this change of heart that appears to have inspired the allegation of unsatisfactory conduct. The allegation was not made with any precision in the trustee's report nor was it pursued on the hearing of the application. In the circumstances, I am not disposed to give it great weight. In adopting that view, I take into account that there seem to have been reasonable efforts to Maintain communications and that the composition reflects a recognition of the position of the creditors. I also note that the greater part of the debt owed to Cash and Carry (Wholesaler) Pty Ltd was recovered for the benefit of the bankrupt estate. roc or we se pe He, aoe crest 7. In January 1987 Lewis notified the trustee that he was employed as a manager by the Casino Des Seychelles Ltd on a salary of about $35,200.00. Mr E. Edelsson, one of his employers, has advanced him the funds needed to satisfy the composition and is to be repaid over what 1s described as "an undefined time" by periodic deductions from his earnings. The amount and frequency of these deductions is not specified. Implementation of the Composition There has been some difficulty associated with the implementation of the composition. According to its terms, the sum of $100,000.000 was to be paid upon acceptance of the proposal and $50,000.00 within 21 days thereafter. On 30 October 1986 Lewis' solicitor wrote to the Official Trustee stating that the funds, the subject of the proposal, were held on current account in the name of his firm at Geneva Finance Limited on an interest bearing deposit. He understood the interest rate to be 14.75% and that the money could be called upon on 7 days' notice. 8. The trustee wrote to the solicitor on 12 December advising acceptance of the composition and requesting payment in accordance with its terms. Also enclosed with the letter was a statement of income and assets for the year ended 30 June 1986 to be completed by Lewis and returned for inclusion in the trustee's report to the Court. The request for payment was not complied with. It appears that the solicitor took the view, for reasons not explained, that payment should be delayed until Lewis returned the completed statement. On 19 January 1987 and before the return of the statement, the solicitor received a telex from Edelsson requesting that the sum of $US50,000.00 ($A78,191.86) out of the funds forwarded for the composition be remitted to Hong Kong "as he had difficulties with foreign exchange and urgently required this sum to be paid to Hong Kong". The funds were to be replaced within a few days of the request. The solicitor informed the Official Trustee and took legal advice as to his own position. On that advice he complied with Edelsson's direction. He later received replacement funds which he paid to the trustee on 8 February 1987. The amount paid over was $99,876.17, which he said was "the total amount available". ? ie , tops s 4, <7 na ceoel cole dah ha Lenmar er edie " 9. On 4 May 1987 the trustee's~ solicitors wrote to Lewis' solicitor in the following terms:- "We refer to our letter to you of the 11 of February 1987 regarding the above. No reply has been received to our letter. The creditors of the estate are becoming most restive. The initial sum of $99,876.17 has been contributed and there still remains the sum of $50,123.83 to be paid. Further there 1s the question of interest at 14.75% since at least the 30 October 1986 payable on the balance outstanding. If no reply is received and if the balance of the moneys referred to are not paid within 5 days of the date of this letter then our client must proceed further. One of the options available to our client is to consider whether the breach of payment of the balance gives our client rights in respect of moneys already held." The solicitor interpreted this as a request for interest on the balance outstanding under the composition, namely $50,123.83. After receiving further money from Edelsson on 11 July, he paid to the trustee $50,123.83, being the balance of the principal outstanding and $2,707.53 being interest on that sum calculated for 67 days from 30 October 1986 to 6 January 1987. He felt the interest payment was justified as remittance of the second instalment due under the composition was late. In respect of interest that accrued on the sum of $100,000.00 while it was held in his account, the solicitor has since the commencement of these proceedings, obtained further ores Reo a ne 10. ztnstructions and has offered to pay a further sum of $1,272.74 to the trustee calculated as follows:- Amount due $150,000.00 Interest on $100,000 at 14.75% from 30/10/86 to 5/2/87 $ 3,960.27 $153,960.27 Less total sum paid $152,687.53 Balance to be remitted $ 1,272.74 The logic underlying this offer is not easy to follow. A more rational approach, having regard to the terms of the composition, would have been to calculate interest by reference to the dates upon which the payments were due and the delay in payment in each case. On this basis a rate of 14.75% interest on the sum of $100,000.00 over a period of 56 days, representing the delay in payment of that first instalment, would yield interest at $2,262.96. Interest on the sum of $50,000.00 delayed for 191 days calculated at the same rate would have yielded $3,858.20. On that basis the total interest payable would have been $6,121.16. The funds held by Lewis' solicitor and the periods for which they were held plainly did not generate sufficient interest to meet that amount. $100,000.00 if held continuously from 30 October 1986 to 5 February 1987 at 14.75%, would have yielded interest of $3,960.27. The $50,000.00 was evidently remitted ll. almost as soon as it was received but it was received by the solicitor long after it ought to have been paid. In practical terms, the interest paid and the additional interest now offered, appears to be all that is available from the interest earned on the funds paid to Lewis' solicitor. The trustee takes the view that even with this imperfect implementation the composition 1s for the benefit of the creditors. Of the creditors present at the meeting of 11 December, 8 representing debts of $1,173,838.00 voted in favour of the proposal, while 1 creditor for $169,548.00 voted against. Although all non-assenting creditors were served with notice of the application for approval of the composition, none have appeared before the Court to oppose it. I now turn to a consideration of the power of the Court to approve a composition in these circumstances and the principles governing its exercise. Statutory Framework A bankrupt may propose a composition to his or her creditors under s.73 of the Bankruptcy Act 1966:- yoy ee - porn 12. "73({1) Where a bankrupt desires to make a proposal to his creditors for - . (a) a composition in satisfaction of his debts; or (b) a scheme of arrangement of his affairs, he may lodge with the trustee a proposal in writing signed by him setting out the terms of the proposed composition or scheme of arrangement and particulars of any sureties or securities forming part of the proposal. (2) The trustee shall call a meeting of creditors and shall send to each creditor before the meeting a copy of the proposal accompanied by a report on it. (4) The creditors may, by special resolution, accept the proposal. Upon acceptance of the proposal the bankrupt may seek to have it approved by the Court under s.74 which in the parts relevant for present purposes provides:- "74(1) If a bankrupt's proposal for a composition or a scheme of arrangement 1s accepted by his creditors 1n accordance with section 73, the bankrupt or the trustee may apply to the Court for approval of the composition or scheme of arrangement. (2) The trustee shall give notice of the time appointed for hearing the application to each creditor who did not assent to the proposal. (3) The Court shall, upon the hearing of the application, hear - {a) a report by the trustee as to the terms of the composition or scheme of arrangement, and as to the conduct, trade dealings, property and affairs of the bankrupt; and ayes nee le 13. (b) any objections to the composition or scheme of arrangement made by or on behalf of a creditor. (4) The Court may approve, or refuse to approve, the composition or scheme of arrangement. (5) Where the Court approves a composition or scheme of arrangement under this section, 1t may make an order annulling the bankruptcy. The acceptance and approval of the composition are given their combined effect by s.75. That section also makes provision for cases where there is a failure to comply with the terms of the composition. In its relevant parts it provides:- "75(1) Subject to this section, a composition or scheme of arrangement accepted and approved in accordance with this Division is binding on all the creditors of the bankrupt so far as relates to provable debts due to them from the bankrupt. (3) The provisions of a composition or scheme of arrangement that has been accepted and approved in accordance with this Division may be enforced by the Court on application by a person interested, and disobedience of an order of the Court made on the application is a contempt of the Court and is punishable accordingly. (4) If - (a) default is made in any respect under such a composition or scheme of arrangement; or (b) it 1s made to appear to the Court that - (i) the composition or scheme of arrangement cannot be proceeded with without injustice or undue delay to the creditors or to the bankrupt; or ' omer says v8 eaner my 5 14. (ii) the approval of the Court was obtained by fraud, the Court may, 1£ 1t thinks fit, on application by the trustee or a creditor, annul the composition or scheme of arrangement. The Power to Approve the Composition The power of the Court to give the approval sought has to be considered in the light of two factors in the present case. The first is that when the time for application for approval was made to the Court, the time for performance of the terms of the composition had long expired. The application was filed on 24 June 1987. The composition as accepted by the creditors required the second and final payment under 1t to be made within 21 days of their resolution. The second factor going to power, 1s the failure by the bankrupt to comply with the composition according to those terms. As to the first the seat of the power conferred by sub-s.74(4) 1s to be found in the words "may approve or refuse to approve". 15. The approval relates to the terms of the composition, not its performance. It 1s the "terms of the composition" upon which the trustee 1s obliged to report under sub~-s.74(3). They must, taken together, answer the description of a composition in satisfaction of the bankrupt's debts (s.73(1)). The fact that some of the terms provide fur performance which antedates curial approval, does not mean that the proposal falls to answer that description. The word "approve" may operate in one statutory context upon acts already done. That is the way in which it was used in s.82(1) of the Landlord and Tenant (Amendment) Act 1948 (NSW) in relation to a lessor's approval of the grant of a sub-lease - Hayes v Holland (1965) NSWR 1414 at 1417 (Asprey J.), see also Burleton v Humfry (1755) Amb. 256, 27 ER 170 at 172 (Lord Hardwicke LC). In another statutory context the word may be limited to a prospective operation in the sense of "sanction that which is proposed" - Glentham Pty Ltd v Perth City Council (1986) WAR 205 Pp cham rey Ltda City at 207 (Burt CJ). The operation of the word must be determined according to the particular statutory setting 1n question. ef 16. An approval under sub-s. 74(4) can only be given after acceptance of the proposal by a majority in number and three quarters in value of the creditors. Its immediate effect is to bind all creditors to the composition "so far as it relates to provable debts due to them from the bankrupt" (s.75(1)). Unless and until approval 1s given, performance of all or any of the terms of the composition will not alter the respective rights and obligations of the bankrupt and his creditors. To say, however, that performance may be ineffective in that sense, is not to say that the composition cannot or must not be carried out. These observations should not be extended any further than is necessary in order to deal with the present case. Here there is nothing arising from the terms of this composition and the fact that it contemplates performance antedating approval which takes it outside the power conferred on the Court by sub-s.74(4). I am reinforced in this view by the fact that 1t is regarded as a perfectly proper condition of a composition that funds paid under 1t should be returned if the creditors refuse to Powe re 17. accept or the Court refuses to approve it - Irlicht: Assiqnments, Arrangements and Deeds of Compositions 2nd Ed. p.50. The second factor going to power, is that the terms of the composition as proposed have not been and can now never be precisely performed. This arises because the payments of both instalments due under the composition were substantially delayed. The only approval that the Court 1s empowered to give is of the composition as accepted by the creditors ~ Lucas v Martin (1888) 37 Ch. D. 597, 605 (Lord Halsbury LC) 607 (Cotton LJ), Williams and Muir Hunter on Bankruptcy 19th Ed. p. 93. The question here is whether there can be an approval of the terms of the composition as accepted although it has not been performed according to those terms. The Court would not approve a composition incapable of fulfilment in whole or in part. The subject matter of the approval being the terms of the composition, such a result would, however, follow strictly from an exercise of discretion, rather than an absence of power. Pepe we ese 18. There is nothing in the language of sub-s.74(4) which, on the face of it, so limits the Court's power that it 1s unable to approve a composition which cannot be performed because of a failure to pay money due under it by a specified date. Nor 18 there any basis for implying such a limitation on the power. Indeed s.75 of the Act, which provides for enforcement and default proceedings in relation to compositions, militates against any such implication. There 28 a power under' sub-s.75(4) to annul a composition which has not been carried out according to its terms, but the discretionary nature of that power makes it clear that the composition stands until annulled - cf: Seymour _v_ Coulson (1880) 5 QBD 359 at 365-367; Forbes and Son v Cantlon (1916) SALR 103. An order may be made by the Court under sub-s. 75(3) for the enforcement of a composition and disobedience of such an order is punishable as a contempt. The subsection contemplates the possibility of default and provides a remedy short of annulment. In my opinion and consistently with these provisions, the Court may approve a composition which provides for payments to be made by a certain date in advance of the approval and where such payments have been made at the time of application but outside the time contemplated by the composition. 19. In the circumstances and for the reasons outlined, I am of the opinion that the Court has the power to approve the composition in question. Discretion to Approve the Composition It is necessary 1n approving a composition that the Court be satisfied that the proposal 1s reasonable, is in accordance with the provisions of the Act and will benefit the creditors generally and to a greater extent than under the continuing administration of the bankruptcy - Re: Fryda (1964) 6 FLR 144 at 152 (Paine J.); In Re Aylmer Ex parte: Bischoffscheim (1887) 19 OBD 33. In this case I am satisfied on the evidence that each of these necessary conditions is made out. In approaching the exercise of the discretion generally I adopt, with respect, what was said by Deane J. in Re: Peter Leopold Clyne (1978) 44 ABB 3902 at 3901:- "Generally speaking, this court should be slow to refuse to approve a proposed composition or scheme of arrangement which has been duly approved by special resolution (i.e. by a majority in number and at least three quarters in value of those present, either personally or by attorney or proxy) at a properly convened meeting of creditors, in the absence of considerations which indicate the presence of one or more of the following factors: (12) That material was concealed from some or all of the creditors. = iii Mena hel 20. (ii) That some or all of the creditors were unaware of material considerations which could conceivably have lead them to take a different view to the view expressed in their voting on the proposed scheme. (1i2)That some or all of the creditors were not given a proper opportunity of considering or voting upon the proposed composition or scheme. (iv) That the provisions of the proposed composition or scheme are unreasonable or clearly not in the interests of the creditors. (v) That the provisions of the proposed composition or scheme unfairly favour some class or classes of creditors over another class or classes or some creditor or creditors over another creditor or other creditors. (vi) That some or all of the creditors voted in support of the proposed composition or scheme of arrangement by reason of dishonest or collateral purposes or objects. (v11)That the bankrupt has been guilty of such misconduct either leading to or in relation to the bankruptcy that, 1n all the circumstances including the period since the making of the sequestration order, it is necessary in the public interest to refuse to lend the sanction of the Court to the arrangement which he has reached with the ereditors, or that the circumstances of the matter are such as to make 1t necessary for the court to refuse its approval to the scheme for the reason that to give such approval would not be consistent with the general purposes of the Bankruptcy Act." There is nothing in this case to suggest that any of the creditors were not properly informed and were not given a proper opportunity to vote on the proposal. There 1s of course the residual discretion adverted to by Deane J. to refuse to approve a composition where it is in the public interest to do so having regard to any misconduct of the bankrupt or purposes of the Bankruptcy Act 1966 — Re Bottomley; Ex parte Bottomley (1893) 10 Mor. 262. perros poems Creal saamheman ie cchees bien' 21. Although the communication between Lewis and the trustee has been patchy and the amplementation of the composition tardy, I am not of the view that any public interest factor arises of such magnitude as to warrant refusing to approve it. Nor can it be said that there is anything about 1t which 1s inconsistent with the purposes of the Bankruptcy Act. In the circumstances I propose to approve the composition. The Question of Interest That approval does not resolve the question of interest, either that which has already been paid or that which Lewis' solicitor now offers to pay. Prima facie the creditors are entitled so far as practicable, to the full benefit of the composition upon which they voted. The significant delay in making the payments for which the composition provided has meant that they have been collectively deprived of the interest which could have been earned by that sum had it been paid on time. The bankrupt's solicitor holds funds which have accrued as interest on moneys payable under the composition. One sum of $2,687.53 has already been paid by way of interest. ape a nresreee + 22. There is no express power in the Court to condition its approval of a composition by a requirement for payment of interest. I assume without deciding that there is no such general power to be derived from the provisions of s.30 of the Bankruptcy Act 1966. The power it confers on the Court is necessarily incidental to the exercise of jurisdiction under the Act as appears from sub-s.30(1)(b) which provides:- "30(1) The Court - (b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter." In this case where interest has been earned on funds which were to have been paid by a certain time and were not so paid, it is, in my opinion, within the scope of sub-s.30(1)(b) to make orders relating to the disposition of that interest so that the gap between what the creditors voted for and what they will receive under the composition is reduced. In these circumstances I propose to order that the bankrupt pay to the Official Trustee the further sum of $1,272.74 and that that sum together with interest already paid be a eae t - H . s » re 23. distributed in accordance with the priorities prescribed by law and the terms of the composition. There is yet a short fall in that the interest which could properly have been earned had the moneys been paid over in accordance with the composition amounted to $6,121.16. No submissions have been made on that issue by the Official Trustee and quite apart from the question whether I have any general power under s.30 to order that further interest be paid, it would be Inappropriate to do so in the absence of argument. Annulment of Bankruptcy Lewis also seeks from the Court an order annulling the bankruptcy. Annulment is not an automatic consequence of approval of the composition:- ",..aS with an application for discharge, I have to consider not only the interests of the creditors and of the bankrupt but also the interests of the public and of commercial morality ... and take into account such conduct and affairs as have relation to the bankruptcy" - Re Groome (1977) 29 FLR 324 at 331 Riley J. The trustee's report indicates that there are no matters under s.150(6) which would provide sufficient reason for the refusal or suspension of an order of discharge. There is outstanding the trustee's allegation of unsatisfactory conduct on the part of the bankrupt after bankruptcy apparently by reason of his remaining in the Seychelles contrary to assurances given to ir teasdasinaumateneetiohel aieaiioes 2eyocun poe 24. the trustee. I have already indicated that I did not feel disposed to give great weight to this allegation. In any event, Lewis says he was given and accepted the opportunity of employment in the Seychelles. Given his lack of qualifications he would have had difficulty getting a job in Australia. It appears that but for the fact of this employment, the composition and its attendant benefits for the creditors would not have been possible. The tangled web of his dealings in Western Australia prior to his bankruptcy gives rise to the suspicion that he could well be viewed as having been rash and hazardous in his speculations. The trustee has however expressly disclaimed any such allegation and I make no finding adverse to Mr Lewis in that regard. In the circumstances I do not think that his taking up residence in the Seychelles should stand as a reason for refusing to annul the bankruptcy. There is no other element of public interest or commercial morality which will prevent an order for annulment being made in this case and I will make the order accordingly. yout om eso hu 25. I certify that the preceding twenty four (24) pages are a true copy of the Reasons for Judgment of His Honour Justice Prench. Associate: Belsexol. Wei So sate: 1% flayrnrbes 1987, Counsel for the Bankrupt: Mr H. Dembo Solicitors for the Bankrupt: Messrs. McAlwey & Hyland Mr R.G.S. Harrison appeared for the Official Trustee. Date of Hearing: 3 September 1987 Date of Judgment: 18 September 1987 +, e A gate et nets ee