_LEDGMENT No, GB. BL. IN THE FEDERAL COURT NOT INTENDED FOR GENERAL DISTRIBUTION OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF ) ) GENERAL DIVISION ) ) ) ) WESTERN AUSTRALIA No. 138 of 1987 X RE: RICHARD LAURENCE SHENTON and DIANE MARGARET SHENTON EX PARTE: BERNARD PUTNIN AS TRUSTEE UNDER A COMPOSITION FOR RICHARD LAURENCE SHENTON AND DIANE MARGARET SHENTON Applicant RICHARD LAURENCE SHENTON and DIANE MARGARET SHENTON Respondents MINUTE OF ORDER JUDGE MAKING ORDER: FRENCH J. DATE OF ORDER: 3 DECEMBER 1987 WHERE MADE: PERTH THE COURT ORDERS THAT: The composition entered into by the debtors on 2° November 1987 is terminated. The debtors are within 24 hours to comply with their undertaking to sign authorities under s.188 of the Bankruptcy Act authorising the Trustee to call a further meeting of their creditors and to take over control of their property and copies of such undertakings are to be lodged with the Court. - 7 GEC 1987 FEDERAL COURT, OB AUSTRALIA PRINCIPAL REGISTRY wo Pay <i a en 2. The costs of the application to be paid out of the debtors' estates. There will be liberty to apply generally. Note: Settlement and entry of Orders is dealt with in Rule 124 of the Bankrupty Rules. cote eee ee creep oe _oTerre: « woes >: IN THE FEDERAL COURT ) NOT INTENDED FOR GENERAL DISTRIBUTION : OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT ) OF THE STATE OF ) ) WESTERN AUSTRALIA No. 138 of 1987 X RE: RICHARD LAURENCE SHENTON and DIANE MARGARET SHENTON EX PARTE: BERNARD PUTNIN as Trustee under a Composition for RICHARD LAURENCE SHENTON and DIANE MARGARET SHENTON Applicant RICHARD LAURENCE SHENTON and DIANE MARGARET SHENTON Respondents CORAM: FRENCH J. + 3 DECEMBER 1987 ie REASONS FOR JUDGMENT : On 2 November 1987 a meeting of the creditors of Richard m Laurence Shenton and Diane Margaret Shenton resolved to accept a composition in respect of their joint and separate estates. Its terms were as follows:- l. A payment of $2,100.00 to be made on 1 January 1988 or within 14 days thereof. 2. That the payment, with funds already held by the Controlling Trustee, be distributed to joint and several creditors on a pro rata basis. Mr B. Putnin, who had been authorised by the Shentons to act as their controlling trustee, was appointed by the meeting as Trustee of the composition. 2s The joint statement of affairs showed liabilities of $48,724.00 and assets of $200.00. The separate statement of Richard Laurence Shenton disclosed liabilities of $36,268.00 and nil assets. The separate liabilities of Diane Margaret Shenton came to $18,936.00 with assets of $2.00. LJ Since the composition was accepted by their creditors, previously undisclosed assets have come to light. According to the trustee his investigations have revealed that the Shentons, jointly or severally own, or otherwise have, beneficial interests in 3 horses, they being:- 1. Ramtha registered at the W.A. Turf Club in the joint names of the Shentons. 2. An unregistered Strawberry Roan Yearling Filly. 3. A Trotting Bay Mare. A company, which was the trustee for the Shenton Family Trust and of which Mrs Shenton was a director and Mr Shenton an employee, had carried on business as General Car Centre at 444 Albany Highway, Victoria Park. That company went into liquidation on 2 November 1987. According to the Trustee the real estate at Albany Highway had "belonged to" the Shentons as joint tenants. It is not clear from the papers whether the interest was freehold or leasehold. a in tell alate we are ee oe ee a ienert te A= _ 3. In any event, whatever interest they had in the premises was sold, yielding a net return of $24,539.00 uncluding an initial deposit of $2,000.00 and a cheque at settlement of $22,539.00 paid on 4 August 1987 by Westside Settlements. The money was used to repay a debt of about $10,000 to Target Auto Auctions and to acquire for about $8,000 some vehicles for resale. The Shentons retained the surplus of about $4,800.00 paid to them by Target Auto Auctions by cheque dated 5 August 1987. Mr Shenton said that he received $24,400.00 from the sale of all assets and the resale of the motor vehicles purchased from Target Auto Auctions. The sales were detailed in a schedule to his affidavit as follows:- l. Murray Street Wholesale Perth Gemini Sedan $ 3,000.00 26 Pioneer Car Sales Kenwick Holden Wagon; V.W. Coupe; Holden Commodore $12,000.00 3. Cash Target Auto Auctions $ 4,800.00 4. Danny Dean Autos Victoria Park Gemini Coupe $ 1,200.00 5. Brain Peter Mosman Park Paint Mercedes Sedan $ 2,000.00 6. Victoria Park Motor Co. Paint XB Falcon Van $ 400.00 7. Donnelly Ardross Corolla Sedan $ 1,000.00 TOTAL $24,400.00 4. The dates of the sales are not disclosed. He says that "during the same period" he incurred expenditure of $22,900.00. An undated list of expenses 1s also annexed to his affidavit and appears to relate largely to business expenses. The question of the ownership and disposal of an interest in a paint and panel shop at Unit 68, Robinson Street, Belmont was also raised. It appears that the Shentons had purported to give over ownership of their interest 1n these premises to a creditor, Mark Lane, to whom they owed $10,000.00. This transfer was never documented and the date of the purported disposition does not appear from the papers. An investigator, A.R. Pashley, who interviewed Mr Lane, was advised that he had never taken physical possession of the property which 1s still used by the Shentons. He evidently considers that ail its contents belong to them. Still in question, according to Pashley's affidavit, is the ownership of vehicles stored at the premises at Unit 68 Robinson Street and other locations which he does not specify. The trustee applies to the Court for orders in the following terms:- ~*% tows rr yee eae meee ear - fre neste oe eee oe wee awe ee "1, 5. That the Respondents pay into Court or into a Trust Account at the Australia and New Zealand Banking Group Limited in the name of B. Putnin as Trustee for Richard Laurence Shenton and Diane Margaret Shenton (the Shentons) the proceeds from the sale of the horses owned by the Shentons, namely: (i) ""Ramtha", as registered with the W.A. Turf Club in the joint names of the Shentons, (ii) An unregisterd Strawberry Roan Yearling Filly, and (iii)A Trotting Bay Mare should a sale arise between the date of Application and the passing of a Resolution by the Creditors in accordance with the orders sought from this Court or pending the making of such other Orders as the Court may make. That the Shentons be restrained from disposing of a vV.W. Camper Van, Reg. No. 6HK 201, currently registered in the name of the Shentons, pending further Orders from this Court. That the Applicant (a) call a further meeting of Creditors pursuant to Subsection 194{(1) of the Bankruptcy Act with a view to allow the Creditors to amend the terms of the Composition by: (i) auncluding in the Composition the proceeds from the sale of the said horses {ii) including in the Composition the proceeds from the sale of the said V.W. Camper Van, subject to clarification of ownership of the V.W. Camper Van and passing the necessary amendment to_ the Resolution passed on 2nd November 1987, such amendments being beneficial to the Creditors in general. Alternatively: (b) to reconvene the Subsection 194(1) meeting held on the 2nd day of November 1987, to effect the amendments sought. To pay out of the terms of realisation of the horses and the V.W. Camper Van the costs of the calling of such meetings. PRE me eemar serene way os a eee aedteadiit y dreniadiad mm ae 6 Pliunradner tehedaieere median arthnn ial =. 6. 5. Failing the Court granting the Orders sought under paragraph 3 that the Court grant an extension of time to 21st December 1987 in which a creditor may make application to the Court for the setting aside of the Composition entered into on 2nd November 1987. 6. Alternatively: i) That the Composition entered into by the Shentons on the 2nd day of November 1987 be terminated and ii) That the estates of the Shentons be sequestrated. 7. Such directions pursuant of Subsection 134(4) of the Bankruptcy Act or orders pursuant to Subsection 30(1) or such other Orders as the Court deems fit. 9. That the Costs of the Application be paid out of the Estates of the Respondents." On the adjourned hearing of the application the Trustee indicated that Mr Shenton may have a priority entitlement to wages due to him by the trustee company, which shortly prior to going into liquidation on 2 November made payments in excess of $25,000.00 which may be recoverable as preferences. If Mr Shenton's wages can be recovered, for the benefit of his estate, they would amount to about $22,000.00. The Trustee says that the debtors are co-operating with his investigations and that the creditors who attended and voted at the original meeting agree with the moves proposed by him. Mr Shenton says that he and his wife are prepared to enter into "any Part X arrangement which the creditors may accept or require us to enter into to give effect to the realisation of all our assets now established to be divisible among our creditors". meget Set at a ae ein rae eee 7. Mr Shenton has orally advised the Court that if the composition is terminated he will deliver signed authorities under s.188 to Mr Putnin. In explanation of the failure to disclose the existence of the horses, he said that they were considered valueless, and their omission from the statement of affairs was inadvertent. The joint statement of affairs disclosed some 6 unsecured creditors. There are 4 creditors listed in the separate estate of Mrs Shenton and 7 in the estate of Mr Shenton. Only 2 creditors attended at the meeting of 2 November 1987. While they were major creditors, it cannot be said that they represented the only significant debts owed by the Shentons. The question that now arises is as to the best course to be taken in the interests of the creditors and the public interest. In my opinion, the composition originally accepted was of negligible benefit to the creditors and was based upon an incomplete picture of the assets and business dealings of the debtors. I think the only proper course 1s to terminate the composition under the provisions of s.242 of the Act. I am r we ewe oe rf' i 8. satisfied 1n the circumstances, that the non-disclosure of assets and the yet to be resolved questions relating to the debtors' business dealings, including the possibility of recoverable preferential payments made by their trustee company, constitutes sufficient reason for the composition to be terminated. The question remains what order I should' make consequentially. I have seriously considered the desirability of sequestration orders in this case. I think it, however, sufficient for present purposes, if the Shentons sign fresh authorities under s.188 that will place their property under the control of the Trustee and enable the creditors to meet again to determine its ultimate disposition. I'will require that a copy of the s.188 notices signed by each of the debtors be placed on the Court file. The orders I will make, therefore, are:- 1. The composition entered into by the debtors on 2 November 1987 is terminated. 2. The debtors are within 24 hours to comply with their undertaking to sign authorities under s.188 of the Bankruptcy Act authorising the Trustee to call a further meeting of their creditors and to take over control of their property and copies of such undertakings are to be lodged with the Court. 3. The costs of the application to be paid out of the debtors' estates. 4. There will be liberty to apply generally. re Dee ee ee ee rt = re ae 9. I certify that the preceding eight (8) pages are a true copy of the Reasons for Judgment of His Honour Justice French. Associate: Deoireral SRK 3 Deconbes 1487. Date: The Trustee, Mr B. Putnin, appeared in person. Mr R. Shenton appeared in person. Date of Hearing: 2 December 1987 Date of Judgment: 3 December 1987 \ Be rence ete ene vy ~- wseeu, men tages