JUDGMENT No. te Sz CATCHWORDS Bankruptcy - Part X - meeting of creditors - Chairman's decision on amount in relation to vote of creditor - decision objected to by debtor - debtor seeks declaratory relief - whether decision of Chairman examinable as a "matter" under Part X coming within cognizance of the Court. Bankruptcy Act 1966, ss.30, 82, 201. Re Amadio (1978) 46 F.L.R. 147, not followed. Re_ Levy; Ex parte Scholefield Goodman & Sons Ltd. (1980) 50 F.L.R. 99, followed. MICHAEL ANTHONY ZANTIOTIS (Applicant) v. WILLIAM EDWARD ANDREW (First Respondent) and KATY ZANTIOTIS (Second Respondent) No. W345 of 1987 Beaumont J. 18 December 1987 Sydney IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF No. W345 of 1987 THE STATE OF NEW SOUTH WALES AND wee ews swe Sw THE AUSTRALIAN CAPITAL TERRITORY MICHAEL ANTHONY ZANTIOTIS Applicant WILLIAM EDWARD ANDREW First Respondent KATY ZANTIOTIS Second Respondent COURT: BEAUMONT J. PLACE: SYDNEY DATE: 18 DECEMBER 1987 MINUTES OF ORDER THE COURT ORDERS: 1. Objection to competency overruled. 2. Order that the second respondent pay the applicant's costs of the objection to competency. 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 No. W345 of 1987 THE STATE OF NEW SOUTH WALES AND we ee SS SS DS THE AUSTRALIAN CAPITAL TERRITORY MICHAEL ANTHONY ZANTIOTIS Applicant WILLIAM EDWARD ANDREW First Respondent KATY ZANTIOTIS Second Respondent CORAM: BEAUMONT J PLACE: SYDNEY DATE: 18 DECEMBER 1987 REASONS FOR JUDGMENT (ON OBJECTION TO JURISDICTION) On 25 August 1987, the applicant, Mr. Zantiotis, executed an authority under s.188(1) of the Bankruptcy Act 1966 ("the Act") authorising a registered trustee, Mr. Andrew, the first respondent, to call a meeting of his creditors and to take control of his property. On 9 September 1987, a meeting of creditors was held. At the meeting, it was moved that Mr. Zantiotis execute a deed of assignment under Part X of the Act. Seventeen creditors, claiming to be owed a total of $485,651.00, voted in favour of the proposal. A number of creditors voted against it. The minutes of the 2. meeting record the following (Mr. Andrew was the chairman): "...Voting Against: ANZ Banking Group Limited J.J. Kannes K. Zantiotis Price Waterhouse State Bank of New South Wales The chairman informed the meeting he would not allow the votes of ANZ Banking Group Limited or T.J. Kannis as neither had lodged a proxy and that pursuant to the provisions of Section 201 he would admit Mrs. Katy Zantiotis for voting purposes as a creditor for $135,789 and the State Bank of New South Wales as a creditor for $36,213. The debtor indicated his dissent to the ruling of the chairman 1n respect of the voting rights of Mrs. Katy Zantiotis. The Chairman formally recorded the following votes against the motion which he declared lost as the required majority in value had not been obtained. K. Zantiotis 135,789 Price Waterhouse 14,501 State Bank of NSW. 36,213 $186,503 ADJOURNMENT OF MEETING: The Chairman informed the meeting there were now three alternatives available. First to adjourn the meeting to enable the debtor to reconsider his position and if thought fit submit a proposed composition for consideration by creditors. Secondly to move the debtor file a petition for bankruptcy. In that regard he pointed out he would have to consider the voting rights of those creditors who had given proxies with specific instructions. Finally to move the debtors property be no longer under the control of the Trustee. As the debtor indicated he would seek = an adjournment to consider the possibility of a Composition the Chairman as proxy for Diners Club Limited the meeting be adjourned until 11 am Wednesday 30th September, 1987. Carried Unanimously. 3. The meeting adjourned at 12.30 pm." By his amended application, Mr. Zantiotis seeks the following declarations and orders: (1) a declaration that Mr. Andrew incorrectly admitted Mrs. Zantiotis to vote for an amount of $135,789; (2) alternatively, a declaration that Mrs. Zantiotis' entitlement to vote was in the sum of $5,199.96 only; (3) a declaration that Mr. Zantiotis' creditors passed a motion to approve the deed of assignment; (4) orders that Mr. Zantiotis execute the deed and that Mr. Andrew be appointed trustee of Mr. Zantiotis'' assets. On behalf of Mr. Zantiotis, a number of submissions have been foreshadowed to support his claim for relief. They may be summarised as follows: (a) As to the sum of $12,556.57, this 18 not a debt or liability provable against Mr. Zantiotis' estate or property by virtue of the operation of s.82(1A)(a) of the Act because arrears of maintenance in respect of a period more than twelve months previously is involved (s.82(1A) is made applicable by $.231(2)); alternatively, only the sum of $5,199.96 is owing; (b) as to the sum of $55,000.00 being an amount claimed to be due and payable on 17 July 1988, this 1s an amount which is not provable by virtue of s.82(1A)(b); (c) as to the sum of $9,000.00, the value of this debt or liability cannot be fairly estimated and 1s deemed not 4. to be provable by virtue of s.82(6); (da) as to the sum of $55,522.64, being an amount owed in respect of a guarantee, liability for this amount is denied on a number of grounds. On behalf of Mrs. Zantiotis, 1t 1s contended that the chairman of the meeting of creditors had the sole power of determination of the question of the entitlement of Mrs. Zantiotis to vote at the meeting and of the amount of that entitlement; it followed, the argument runs, that the Court has no power to review that decision on appeal or otherwise so that the Court lacks jurisdiction to entertain the present application. On behalf of Mrs. Zantiotis, reliance is placed upon the decision of Rogerson J. in Re Amadio (1978) 46 F.L.R. 147. In that case, it was held that a debtor could not, in the absence of special circumstances, validly give more than one authority pursuant to Part X and that meetings held subsequent to a first meeting of creditors were invalid and resolutions purportedly passed at those meetings were also invalid. (See also Pretorius v. Daltons Carpet Tiles Pty. Ltd. (1984) 54 A.L.R. 743). Rogerson J. went on to add some observations as to the jurisdiction of the Court to determine the right of a creditor to vote at such a meeting. His Honour's observations were, strictly speaking, not necessary for his decision but his Honour expressed the view that the chairman had the sole power to determine the right of a creditor to vote. Rogerson 5. J. rejected a submission that s.30 of the Bankruptcy Act confers jurisdiction on the Court to review the chairman's decision. "30(1) (a) (b) Section 30(1) provides: [General powers] The Court - has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part X or Part Xl coming within the cognizance of the Court; and 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." Amadio's Case was considered by Bowen C.J. in Re Levy? Ex Parte Scholefield Goodman & Sons Ltd. (1980) 50 F.L.R. 99 at p.1l12. It was there held that the fact that a decision of a chairman made pursuant to s.201 of the Act 1s not subject to a statutory right of appeal does not mean that the Court is barred from examining whether such decision was properly made. Section 201 is as follows: "201. Any question as to the right of a person to vote at a meeting under this Division, or as to the amount of the debt 1n respect of which a person 1s entitled to vote at such a meeting, shall be determined by the chairman, who may, if he thinks 1t necessary to do so, adjourn the meeting for period, not exceeding 14 days, to enable him to investigate the matter." Bowen C.J. said at pp.112-113: a 'Section 201 1s designed to empower the chairman not to make a final ruling on a debt - that is for the trustee who will decide whether it is provable but to rule for the purposes of the meeting in a 6. summary way avoiding technicalities and delays (Re Spanney; Ex parte Holtzmann (1936) 38 W.A.L.R. 13). His decision 1s not made appealable by the Act (Re Amadio). This position may be contrasted with the position under the Bankruptcy Act 1924, as amended (see s.160(f) and s.169 of that Act). The policy revealed by s.201, particularly when read with s.225(2), appears to be to facilitate the efficient and final despatch of business in relation to a meeting of creditors under Pt X. On the other hand, s.201 does not expressly make the chairman's decision final and conclusive. No doubt if the court was seized of another matter in the course of which 1t was material to determine whether or not a person was a creditor entitled to vote at the meeting, the court would be able, indeed would be obliged, to determine the question, in order to exercise its Jurisdiction effectively and would not be bound by the chairman's decision (see s.30(1)). Thus, in the present case, while the application sought an order of sequestration it would have been necessary to determine whether the applicants were creditors and the court would not be bound by the chairman's decision. Since that relief is no longer sought the question is narrower. The orders sought in each case are that the applicants were creditors entitled to vote at the meeting on 20th June, 1980; a declaration that no special resolution was passed pursuant to s.204, and, an order that the deed of assignment is void. Each application in this respect appears to be based on s.222. Does 1t amount to anything more than a challenge to the chairman's decision? Is an application based on s.222 something "coming within the cognizance of the Court" so that the court has express power under s.30(1) to decide all questions? In asking for an order that the deed is void, the applications do, in my opinion, involve something more than a review of the chairman's decision. Furthermore, it appears to me that ss.222 and 30 do empower the court to deal with the matter.' In my opinion, s.30 confers jurisdiction upon the Court to hear and determine Mr. Zantiotis'' application. Section 30 has been liberally construed (see, for example, McIntosh v. Shashoua (1931) 46 C.L.R. 494 at p.520; Re Bayliss; Ex parte Official Trustee in Bankruptcy (1987) 73 7. A.L.R. 455). By s.30(1)(a), the Court 1s given full power to decide all questions, whether of law or of fact, in any matter under Part X coming within the cognizance of the Court; and, by s.30(1)(b), the Court is empowered to grant the relief considered to be necessary in this connection. In my view, the questions whether Mrs. Zantiotis had any right to vote and, 1£ so, in what amount are mixed questions of law and fact arising in a "matter" for the purposes of s.30(1)(a). Likewise, the question whether, as claimed, the creditors passed a resolution requiring Mr. Zantiotis to execute the deed, is a question of mixed law and fact for this purpose. That being so, the jurisdiction of the Court to entertain Mr. Zantiotis' application was attracted. Whether, as a matter of discretion or otherwise, the jurisdiction of the Court should be exercised here is a different and separate question which does not yet arise for decision. In Amadio, Rogerson J. thought that the private character attributed to arrangements under Part X indicated a legislative intention that the courts should not interfere in the proceedings at the meeting of creditors. His Honour said (at p.163): 'Even, then, if I am wrong 1n holding that the Act, by expressly entrusting to the chairman of the meeting of creditors the determination of the question of the right to vote, and, by making no specific provision for appeal against that determination, withholds from the court the power to interfere with that decision, unless perhaps the chairman has failed to investigate the matter, I am of the opinion that no "matter" of which the court has cognizance arises as a consequence of the chairman's determination until some positive action under Pt X affecting the legal rights of the parties has been taken. I refer again to Sheehan's case.' However, in Sheehan's Case, (1930) 2 A.B.C. 53 at p.56, as Rogerson J. had previously pointed out (at p.160) the question was different. It was there held that a meeting of creditors under Part XI of the 1924 Act was not a "proceeding" unless and until it became "fruitful" by resulting in the execution of a deed of assignment. The question there arose in the different context of an application for costs incurred in calling meetings of creditors. Under s.27(1) of that Act, the Court could award costs "[1]n any proceeding under this Act." It was held that the Court lacked jurisdiction to order payment of those costs. But it does not follow that there is in the present case no "matter" under Part X coming within the cognizance of the Court within the meaning of s.30(1)(a). With all respect, I cannot accept the analysis offered by Rogerson J. In my view, his Honour took an unduly restrictive approach to what is a "matter" under Part X coming within the cognizance of the Court for the purposes of s.30(1)(a). As Bowen C.J. pointed out in the passage cited from Levy (at pp.112-113), although there 1s no statutory right of appeal from the chairman's ruling on a debt, on the other hand, s.201 does not expressly make the chairman's decision final and conclusive. As the Chief Justice then said, circumstances may arise where the Court would he bound to determine the present type of question. But Rogerson J. seems to have held that s.201 should be construed as having, by 9. implication, made the chairman's decision final and conclusive and therefore unexaminable. In my view, there is no basis for making such an implication. I accept that there are obvious advantages in the chairman having the capacity to rule in a summary way, on a creditor's entitlement to vote in the ordinary course of events. But as the present case shows, sometimes difficult and technical questions of law can arise in connection with the entitlement of a creditor to vote and, if so, the value of his or her debt. In such a case, even if the chairman may seek legal advice on the question, it 1S appropriate that the Court grant suitable declaratory relief (cf. Sankey v. Whitlam (1978) 142 C.L.R. 1 at pp.20-25). This 21s not, of course, to say that the Court should be asked to rule on hypothetical or academic questions. This could not arise because a "matter" (in its accepted constitutional meaning) under Part X, would not extend to such questions. As has been said, questions of jurisdiction apart, it may be appropriate, as a matter of discretion, that the Court decline to grant declaratory or other relief where, for instance, the question raises no more than a straight-forward issue of fact. In such a situation, there may be much to be said for the view that, in the interests of expedition, the chairman's ruling should not be examined. But the present case is not of this character. Here, the issues which are 10. essentially legal in their nature, are suitable for judicial resolution. Indeed, Mr. Andrew asks the Court to determine the questions which now arise. Those guestions are real and not hypothetical: their determination may affect the legal result of the proceedings which took place at the meeting of creditors already held, or, alternatively, at any future meeting. Even if the questions which now arise were to be confined to a future meeting of creditors, this is not to say that they are hypothetical questions. What is in issue is the present entitlement of Mrs. Zantiotis to vote and, if so, the value of her vote. It follows, in my view, that the present application is a matter under Part X of which the Court has cognizance for the purposes of s.30(1)(a). Accordingly, 1t 1s within the jurisdiction of the Court. The objection to competency should be overruled, with costs. ll. I certify that ehis—andthe 7EV Go) preceding pages are a true copy of the Reasons for Judgment of his Honour Mr Justice Bea nt. ssociate: » 6 2 owesow Date: 18 December 1987 Counsel and Solicitors W. Haffenden instructed by for Applicants: Lawrence F. Tanna & Co. Counsel and Solicitors Appeared in person. for First Respondent: Counsel and Solicitors J.M. Boland (Solicitor) for Second Respondent: instructed by Michell, Sillar & Brown. Date of Hearing: 15 December 1987 Date Judgment Delivered: 18 December 1987