JUDGMENT No. 160.7. 82.. CATCHWORDS BANKRUPTCY - Part X, Bankruptcy Act 1966 - Application to set aside compositions - debtors entered into maintenance agreements - whether agreements entered into to defraud creditors — omission of material particulars in statements of affairs - all relevant information before creditors Bankruptcy Act 1966 (Cth) ss.5, 120, 121, 123(6), 195, 204, (5), 239 Family Law Act 1975 (Cth) ss.4, 86 RE CHARLIE FELIX CARUANA, EX PARTE DEPUTY COMMISSIONER OF TAXATION W ° Part X RE FRANCIS CARUANA, EX PARTE DEPUTY COMMISSIONER OF TAXATION W339 of 1987 Part X RE MICHAEL FENECH, EX PARTE DEPUTY COMMISSIONER OF TAXATION WwW ° Part X Davies J. 23 December 1987 Sydney IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND wee eS SS THE AUSTRALIAN CAPITAL TERRITORY Nos. W338-340 of 1987 Part xX RE: CHARLIE FELIX CARUANA Debtor EX PARTE: DEPUTY COMMISSIONER OF TAXATION Applicant RE: FRANCIS CARUANA Debtor EX PARTE: DEPUTY COMMISSIONER OF TAXATION Applicant RE: MICHAEL FENECH Debtor EX PARTE: DEPUTY COMMISSIONER OF TAXATION Applicant CORAM: Davies J. DATE: 23 December 1987 PLACE: Sydney MINUTES OF ORDER THE COURT ORDERS THAT: 1. The application be dismissed. 2. The applicant pay the costs of the debtors. 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 Nos. W338-340 of 1987 Part X NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY RE: CHARLIE FELIX CARUANA Debtor EX PARTE: DEPUTY COMMISSIONER OF TAXATION Applicant RE: FRANCIS CARUANA Debtor BX PARTE: DEPUTY COMMISSIONER OF TAXATION Applicant RE: MICHAEL FENECH Debtor EX PARTE: DEPUTY COMMISSIONER OF TAXATION Applicant CORAM: Davies J. DATE: 23 December 1987 PLACE: Sydney REASONS FOR JUDGMENT This is an application to set aside compositions between each of the debtors and creditors entered into pursuant to Part X of the Bankruptcy Act 1966 (Cth) ("the Act") on 20 October 1987. Section 204 provides that the creditors may by special resolution accept a composition. Section 5(1) defines a special resolution as:- ++. a resolution passed by a majority in number and at least three-fourths in value of the creditors present personally, by attorney or by proxy at a meeting of creditors and voting on the resolution;" The application is made under ss. 222(4)(b) and (5) of the Act which read, inter alia:- "222(4) Where the Court, on the application of the trustee or a creditor, is satisfied that the debtor - (a)... (b) has omitted a material particular from the statement of his affairs under section 195 or included an incorrect and material particular in that statement, the Court may make an order declaring the deed or composition to be void or declaring any provision of the deed or composition to be void. 222(5) The Court shall not make an order declaring a deed or composition, or a provision of a deed or composition to be void on a ground specified in sub-section (4) unless it is satisfied that it would be in the interests of the creditors to do so." and s.239(1) and (2) of the Act which read, inter alia:- "239(1) A creditor may, within 21 days from the date on which the special resolution accepting a composition under this Part was passed, apply to the Court for an order setting aside the composition and may also apply for the making of a sequestration order against the estate of the debtor. 239(2) If the Court,on such an application, considers that the terms of the composition are unreasonable or are not calculated to benefit the creditors generally or that for any other reason the composition ought to be set aside, it may make an order setting it aside and, if it thinks fit, may forthwith make the sequestration order sought." 3. The debtors were directors of successful building companies but encountered financial difficulties when they became interested in a stud farm known as Roseneath Stud. On 27 June 1986, when the debtors perceived they were or might become insolvent, each entered into an agreement with his wife which provided that the husband transferred to his wife certain real estate which included the matrimonial home, his interest in the household furniture and effects, funds standing to the credit of bank accounts and building society accounts and shares held in the building companies. Each agreement recited inter alia:- "K. The Husband recognises and wishes to give substance and effect to his obligations both moral and legal to make adequate and proper provision for the accommodation welfare and maintenance of his Wife and dependant children and desires to preserve and protect his marriage and to protect and assist his family and to protect the rights of his dependant children and to promote their welfare." Each agreement was intended to be a maintenance agreement as defined in s.4(1) of the Family Law Act 1975 (Cth) which provides:- "maintenance agreement" means an agreement in writing made, whether before or after the commencement of this Act and whether within or outside Australia, between the parties to a marriage, being an agreement that makes provision with respect to financial matters, whether or not there are other parties to the agreement and whether or not it also makes provision with respect to other matters, and includes such an agreement that varies an earlier maintenance agreement;" The agreements were to be registered in the Family Court of Australia under s.86 of the Family Law Act 1975 (Cth) and were 4. so registered. Tranrfers of the real estate were executed by the debtors at the time of or shortly after the execution of the agreements, but were not lodged for registration as, although the agreements were lodged for stamping on or about 27 August 1986 and $21,500 was paid in respect thereof on 4 September 1986, stamp duty was not finally assessed and the final payment of $5,668.38 made until 11 December 1987. 1 assume that the other assets, shares, bank accounts etc were transferred immediately. The agreements were intended by the parties to be legally binding and to transfer to the wife each debtor's interest in all assets in which the debtor had a valuable equity. The solicitor of the debtors ensured that the wives received separate legal advice on the agreements and, after their execution, he accounted to them in respect of any dealing with the assets transferred. I assume that it was understood by the debtors and their wives, at the time of the execution of the agreements, that in that part of the Act which provides for the avoidance of transactions entered into in fraud of creditors (s.121) or not for value and in good faith (s.120) or for like reasons, s.123(6) provides:~ "123(6) Nothing in this Act invalidates, in any case where a debtor becomes a bankrupt, a conveyance, transfer, charge, disposition, assignment, payment or obligation executed, made or incurred by the debtor, before the day on which the debtor became a bankrupt, under or in pursuance of a maintenance agreement or maintenance order." Section 5(1) of the Act defines "maintenance agreement" as maintenance agreement' means a maintenance agreement, within the meaning of the Family Law Act 1975, that has been registered in or approved by a court in Australia or an external Territory or any other agreement with respect to the maintenance of a person that has been so registered or approved." More than 12 months later, on 7 August 1987, Mr A.W. Butterell, a Trustee, sent out notices convening for 25 August 1987 a meeting of the debtors' creditors. The notice included the following information:- "There is one other matter that needs to be brought before Creditors and that is the fact that on the 27th June, 1986 each of the Debtors entered into a Maintenance Agreement pursuant to the provisions of Section 86 of the Family Law Act 1975. Briefly, the Agreement for each debtor provides that any equity that the Debtors had in real estate, shares, cash funds or furniture and household effects was transferred to the wife of each debtor. I attach a summary prepared by the Debtors' Solicitor, Mr D.K.L. Raphael, of the circumstances and provisions of these Maintenance Agreements. I hold copies of the Agreements which will be tabled at the Creditors' meeting but which are available for inspection by Creditors upon request prior to the meeting." The notice was accompanied by a copy of a letter from the debtors' solicitor which read:- "We have been the solicitors acting for and advising Messrs F. & C. Caruana and M. Fenech since 1977. We are extremely familiar with their business affairs and the affairs of the companies with which they are associated both as directors and shareholders, although we did not act for them at the time when they first involved themselves with Mr Watson and the Roseneath Stud. We confirm as follows:- 1. (a) We take the view that debtors generally are entitled under the law, as presently existing, to make provision for their families in the event of becoming bankrupt. In our view, if a person has entered a Maintenance Agreement (as that term is derined in the Family Law Act of the Commonwealth) then the relation back provisions of the Bankruptcy Act ("the Act") do not operate against such a person and indeed are expressly excluded from so operating; see generally s.123(6) of the Act. (b) As a result of information sought in conference, we so advised our clients. As a result of that advice they instructed us to draft such Agreements. Their wives were advised on this matter by solicitors instructed and employed independently to this firm. Such Agreements were duly signed and lodged with the Commissioner of Stamp Duties and duly registered with the Family Court at Parramatta. Likewise transfers pursuant to those Agreements were signed. 2. By the terms of those Agreements, provision is made for the maintenance of the debtors' wives and children. A statement of the debtors' joint affairs which accompanied the notice disclosed joint debts totalling $11,396,489 and no assets other than $16,704 being wages and the like due to the debtors by companies in liquidation. The principal creditors listed were two banks. A perusal of the list of creditors suggests that most creditors were companies and persons of substance who would be likely to have business acumen. Prior to the meeting of 25 August, Mr Butterell ascertained that debts were owed by each of the debtors to the Australian Taxation Office and that these were not joint. Accordingly, he obtained from each debtor a separate statement of affairs. These separate statements were not different in substance from the joint statement though the minimal assets of each debtor were set out and the total sum due was slightly different in each case, for each was liable to the Australian Taxation Office in respect of a different amount. The total of the debts increased, as $1,338,000 in all was due to the Australian Taxation Office. The meeting of 25 August was well attended. A compromise was offered based upon the sale of some of the real estate the subject of the agreements of 27 June 1986.After discussion, including discussion as to the effect of the agreements of 27 June 1986 and of s.123(6) of the Act, the meeting was adjourned. Current valuations of the real estate, the subject of the agreements of 27 June 1986 were requested. During the adjournment, the Deputy Commissioner of Taxation and, I assume, other creditors, took advice on the matters in issue. At the resumed meeting on 20 October 1987, Mr Butterell presented a schedule showing that the current valuations of the debtors' interests in properties totalled $785,586. A compromise was negotiated to the effect that the debtors' would pay in all $600,000, of which $450,000 would be paid to the Trustee on 14 January 1988 and $150,000, to be secured by mortgage, would be paid within S years. There was considerable discussion. Any form of compromise was opposed by Mr R.H. South, who represented the Australian Taxation Office, and by a Mr R.L. Watson. Both had special interests for the assessments to tax on which the Australian Taxation Office relied were the subject of appeals to this Court and Mr Watson had had a long-standing dispute with the 8. debtors concerning Reseneath Stud and had had litigation with them. The compromise was moved by Deutsche Bank (A'Asia), the largest creditor and seconded by Westpac Banking Corporation, the second largest creditor. The following Creditors voted for the resolution:- Allied Feeds (Goodman Fielder Ind. Ltd) 387,343 Deutsche Bank (A'sia) 5,745,475 J.W. Walker & D.K.L. Raphael 5,500 Westpac Banking Corporation 3,476,180 Estate Late S.T. Wootton 40,000 Sanwa Australia Leasing Ltd 18,762 Metropolitan Oil Distributors (Sydney) Pty Ltd 2,105 F.E. Whiteman & Sons Pty Ltd 699 Medical & Commercial Finance Corpn. Ltd 54,993 E.F. & F. Vella Ltd 38,336 R.A. Dechniz & Associates 8,000 Nebrew Pty Ltd 165 P.W. Turk & Associates 307 Robin R.K. Baker 3,315 Indemnity Corporation Pty Ltd 6,543 Bloodhorse Magazine 60 Hunter Grain Pty Ltd 10,000 William Inglis & Son Ltd 125 18 Creditors with claims totalling $9,797,908 The following Creditors voted against the motion: C.R.H. Fieldhouse 17,004 R.L. Watson 100,000 Australian Taxation Office 1,338,000 Mr L. Cameron 18,864 Mr I. Lincoln 566 5 Creditors with claims totalling $1,474,434 Separate compositions in respect of each debtor as to $200,000, one third of the total, were then put to the vote and were carried by a like majority, well in excess of the majority required for a special resolution of creditors. This applicetion to set aside the compromise 1s made by the Deputy Commissioner of Taxation who opposed the compromise. No other creditor has joined in the application. Before turning to the grounds on which the application has been brought it is useful to comment upon the effect of the agreements of 27 June 1986 in the light of 8.123(6) of the Act. I do so with a view to "clearing the air" for a consideration of the grounds of the application. In Melsom v. Mullen and Ors (1985) F.L.Cc. 91-611, Brinsden J. was asked to declare an agreement between a debtor and his wife, registered under s.86 of the Family Law Act, void under s.89 of the Property Law Act 1969 (W.A.), a provision similar to s.37A of the Conveyancing Act 1919 (NSW) providing for the avoidance of transactions effected with a view to defrauding creditors. His Honour declined to do so holding that to do so would be inconsistent with s.123(6) of the Act, which prevailed by reason of s.109 of the Constitution. His Honour concluded:- "I am satisfied that as a matter of law the plaintiff is not in a position to challenge the provisions of the deed." Before me it was not argued that his Honour's view was incorrect. Mr B. Skinner, of counsel, who appeared for the Deputy Commissioner of Taxation, submitted however that the agreements of 27 June 1986 were a sham. I need not discuss 10. the principle of sham other than to refer to the discussion of the well known authorities by Hunt J. in Coppleson v. Federal Commissioner of Taxation (1981) 34 A.L.R. 377. Mr Skinner contended that, if the debtors were made bankrupt, answers given in their examinations in bankruptcy would enable application to be made to this Court to declare the agreements to be void as a sham. However, I see nothing in the present case to support that contention. The debtors intended to transfer the debtors' interests in the relevant assets to their wives. That was why the transactions were effected. Mr Skinner submitted that some of the recitals in the agreements were not real. I do not see that, though the recitals may not have disclosed the whole story. Even so, the agreements satisfied the description in s.4(1) of the Family Law Act of a maintenance agreement. In my opinion, no principle of sham or of fiscal or of financial nullity has application in the present case. Mc Skinner did not contend, no doubt as it was not a ground of application, that the agreements of 27 June 1986 were entered into with a view to defrauding the debtors' creditors. But, plainly, there is a possible argument that that was so. The facts are not dissimilar from those in Ex parte Russell, In Re Butterworth [1882] 19 Ch.D. 588, in which a successful businessman on entering a new trade transferred all his assets to his wife. At pp.598-9 Jessel M.R. said:- 11. "As regards the other point it 1s not absolutely necessary to decide it, but I think that the County Court Judge was right. The principle of Mackay v. Douglas Law Rep. 14 Eq.106, and that line of cases, is this, that a man is not entitled to go into a hazardous business, and immediately before doing so settle all his property voluntarily, the object being this: 'If I succeed in business, I make a fortune for myself. If I fail, I leave my creditors unpaid. They will bear the loss.' That is the very thing which the statute of Elizabeth was meant to prevent. The object of the settIor was to put his property out of the reach of his future creditors. He contemplated engaging in this new trade and he wanted to preserve his property from his future creditors. That cannot be done by a voluntary settlement. That is, to my mind, a clear and satisfactory principle. Now as I understand the evidence in this case, the baker did very well as a baker, and probably he may not have recollected the old proverb ne sutor ultra crepidam, When he went into business aS a grocer he was going into a business which it appears he did not understand, and it is obvious that the object was - (I am taking that as a fair inference -) to save his property for his wife and children in case the new business did not succeed. Well, that actually happened. The new business did not succeed; he lost money by it, and it probably brought him to bankruptcy. His object was, as I have said, to make himself safe against that eventuality, and, 1f that was his object, then I think the principle of Mackay v. Fougi as: Law Rep. 14 Eq. 106, applies and that the eed was void also under the statute of Elizabeth. But, as I have said before, it is not really necessary to decide this point, because I am clearly of opinion that the deed is void under the 9ist section of the Bankruptcy Act." At p.601, Lindley L.J. said:- "I am of the same opinion. It appears to me that the view taken by the County Court Judge was right, that this settlement was void under the statute of Elizabeth. I differ from the Chief Judge in the view which he took of the circumstances under which the settlement was executed. The settlement was executed by a baker, who had been a thriving and prosperous man. He had saved money. He could pay all his debts. Substantially, he had plenty of assets, but he was going to take a grocer's shop. He knew nothing of a grocer's business. He was perfectly aware that entering upon a business to which he had not been brought up was a risky thing, and, therefore, he made a settlement, settling 12. substantiallv the whole of his property upon his wife and children. What was that for? Obviously, not simply to benefit his wife and children, but to screen and protect them against the unknown risks of the new adventure. It appears to me that this is plainly within the principle of Mackay v. Douglas Law Rep. 14 Eq. 106, one of the most valuable decisions that we have on the statute of Elizabeth. On that short ground, I think that the settlement is plainly void." Mr D.G. Hill Q.C., senior counsel for the debtors, submitted that it would not matter whether the maintenance agreements had been entered into with a view to defrauding creditors. He pointed to the fact that s.123(6) overrides all the avoidance provisions in the Act, including s.121, the fraud section. However, I do not see the matter in quite that light. It presently appears to me that the Family Court of Australia would be entitled to conclude that a maintenance agreement entered into to defraud creditors or to evade the payment of tax was an abuse of its process 1f registered under s.86 of the Family Law Act, and should be struck off the register. Mr Hill submitted that the register was not a part of the process of the Family Court of Australia. However, my present view is that it is a facility provided by that Court, and, as such, within the ambit of the principles with respect to abuse of process. Moreover, I think it is beyond argument that, if this Court were satisfied that the creditors were prejudiced by reason of being confronted with a maintenance agreement which had been entered into in fraud of them, the Court would be entitled in its discretion to make an order under s.239 setting aside any 13. composition arrived at. This Court will be astute to protect Creditors against fraud, whatever its guise. Having made these comments, I should make 1t entirely clear that, in the present case, 1t has not been a ground of application that the agreements of 27 June 1986 were entered in fraud of creditors and I have not formed or attempted to form any view on that issue. Moreover, as the debtors acted upon the advice of their solicitor and as the solicitor relied upon the advice of silk (not Mr Hill) given in this or another matter, I am sure that whatever was done was done in good faith, and perhaps the composition arrived at itself demonstrates that. I can now turn to the grounds of the application. I omit reference to grounds which were not pressed at the hearing. The grounds are all directed to matters of a technical nature and relate to the statements of affairs which were lodged with Mr Butterell. Mr Skinner submitted that the Court requires stract compliance with the requirements of s.195 of the Act. He submitted that they must be fully complied with, otherwise the composition will be set aside under s.239. However, I do not understand the principles to be applied to be those enunciated by Mr Skinner. The grounds with which we are here concerned refer to the failure of the debtors to include material particulars on their statements of affairs and to one other matter of a like technical nature. In respect of all the grounds, I think the principle set out in s.222(5) should be applied, namely that the compromise be not set aside 14. unless it is in the interests of the creditors to do so. Lockhart J. said in Re Williamson;ex parte Wearne (1980) 43 F.L.R. 305 at 311-12:- "In exercising the power conferred by sub-s.(4) the court is to have regard to all relevant matters including the interests of creditors of the debtors and of the public: see Re Dolman: Ex parte Elder SmithGoldsbrough Mort Ltd (1967) I0 F.L-R. 3847." Section 195 of the Act provides, inter alia:- "195(1) The debtor shall, unless prevented by illness or other sufficient cause, attend the meeting and shall submit to the creditors at the meeting a statement in writing, verified by statutory declaration, of his affairs. 195(2) The statement of the debtor's affairs shall specify his assets and liabilities and shall include - (a) in respect of each asset - particulars of the asset, including its estimated value; (b) in respect of each liability - particulars of the liability, including whether it is secured or not; and {c) in respect of any liability that is secured - particulars of the security. 195(3) The debtor shall, at the meeting, answer, to the best of his knowledge and ability, all questions put to him by the controlling trustee or by a creditor with respect to his conduct, trade dealings, property and affairs. The effect of that provision was enunciated by Riley J. in Re Segal; Lensworth Finance Ltd v. Segal, (1975) 45 F.L.R. 85 at 88:- "The statement of affairs required by s.195 and the answers which the debtor is required by that section to give to questions put to him at the meeting provide the basic information on which the creditors decide which of the courses available to them under s.204(1) they should adopt. It is essential that that information should be full and correct: the creditors are entitled to all available information 15. about the dehtor's 'conduct, trade dealings, property (and) affairs' before they make their decision: compare s.222(4)(a). Bearing in mind the purpose of the statement of affairs I am of opinion that a particular is material within the meaning of $.222(4)(b) if it 1s a particular which would be relevant to and might be likely to affect the making of the decision of the creditors under s.204(1)." In Chiragakis v. Deputy Commissioner of Taxation (1986) 68 A.L.R. 527), Lockhart J., with whom Fisher and Davies JJ. agreed, said at pp.533-4:- "I reject the submission that the materiality of the omission is to be determined solely with reference to creditors who attended the meeting. Section 195, which is the relevant section, is in plain terms. It requires a debtor to submit to the creditors at the Pt X meeting a statement in writing, verified by a statutory declaration, of his affairs and it requires that the statement of the affairs shall specify the debtor's assets and liabilities and shall include certain particulars in respect of each asset and liability. That is a statutory obligation imposed upon a debtor to do precisely what the section requires. It is also a statutory requirement as to the contents of the statement of affairs and compliance is determined by objective considerations. It 18 not limited to the subjective question of its effect or likely effect upon creditors who happened to attend the meeting and no others." One defect alleged in the grounds of application was that, although each debtor prepared a separate statement of affairs and gave that statement to Mr Butterell, Mr Butterell distributed to the creditors only the joint statement of affairs and the front page or summary of each of the debtors separate statements of affairs, though he advised the creditors that the separate statements were available if they wished to inspect them. Mr Skinner contended that the separate statements of affairs were not "submitted" to the 16. creditors as s.195 re gjuires, and he contended that 5.239 rather than s.222 applies. In my opinion, by giving their separate statements of affairs to Mr Butterell and by his giving the summary thereof to the creditors together with an invitation to inspect the separate statements, there was a submission of the separate statements of affairs to the creditors. However, I must also observe that, in my opinion and I believe in Mr Butterell's opinion, the differences between the joint statement of affairs and the separate statements of affairs were immaterial in a practical sense to anything that the creditors had to consider. The joint and several debts so exceeded any property available to the creditors that the separate statements of affairs would not have affected the decision to be taken. Another ground was that the debtor, Charlie Felix Caruana, did not include either in the joint statement of affairs or in his separate statement of affairs a reference to his ownership of a property at Mt Druitt, Certificate of Title Volume 14745 Folio 18. This error apparently came about because the property was to have been but was not included in the properties which Mr Caruana transferred to his wife under the agreement of 27 June 1986. The omission occurred in the office of the solicitors. Now that the property has been found not to be within either the maintenance agreement or Caruana's statement of affairs, Mr Hill properly undertook on behalf of his client that the property will be transferred to 17. Mr Butterell for dis*ribution by him to the creditors in addition to the composition agreed upon. In that event, this matter provides no reason to set aside the composition. Another ground of application related to two properties which were owned by the debtors but which were the subject of securities to Deutsche Bank (A'Asia) and to Westpac Banking Corporation. I agree with Mr Skinner that the properties should have been included in the statements of affairs. However, it is clear that they would not have affected the composition. They had already been taken into account in the sum in respect of which each of the banks voted as an unsecured creditor. The defect in the statement of affairs is not one on which I would set aside the composition. Mr Skinner also relied upon the failure of the debtors to set out their entitlements as bare trustees to the Properties, the subject of the agreements of 27 June 1986. They had signed transfers of the properties but, as I have mentioned the transfers had not been registered. I agree with Mr Skinner that the statements of affairs were defective. Not only did they not state the situation as to title but they did not set out the general circumstances surrounding the properties and the dealings with them. However, that defect did not affect the composition for details of the real estate the subject of the agreements were given to the creditors even before the first meeting on 25 August 1987 and up to that date valuations were given to 18. the meeting on 20 October 1987. The creditors were fully informed of the facts of the matter, though not through the statements of affairs. In the present case, I am satisfied that, in one way or another, all relevant information was before the creditors and that the creditors were not misled or overborne by the debtors. It is not put that the composition was unfair to the creditors or that, at the present time, any of the vast majority in number and value of the creditors who voted for the composition is not entirely satisfied with it. The Deputy Commissioner of Taxation is not satisfied with the composition. However, there is no evidence that he was misled in a material way and it is not put that he has a special position which made the composition unreasonable so far as he is concerned. He knew what the facts were. He and the other creditors had a 2 months' adjournment of the meeting of creditors in which to form a view. Mr South on behalf of the Deputy Commissioner of Taxation opposes the composition and put the view that the the agreement could be set aside. Most creditors nevertheless supported the composition. None of the supporters of the composition has come to this Court to support the application. It has not been shown that the creditors would benefit from having the composition set aside. There is in evidence an affidavit of Mr A.A. Duffield, an officer of Deutsche Bank (A'Asia) who has deposed:- 19. "On behalf ot the Bank Mr Robert Dolk attended meetings held by the trustee of the debtors' estates, Mr A.W. Butterell, on the 25th August 1987 and an adjournment thereof on the 20th October 1987. I believe he heard the competing views of Mr Raphael and Mr South in relation to the setting aside of the maintenance agreements between the debtors and their wives. The Bank also took advice in regard thereto and concluded that the final composition proposed for each of the debtors was in the interests of the creditors generally and that it was reasonable in the circumstances." Mr Butterell has deposed:- "16. Taking into consideration all of the facts of the matter, I am still of the view that it is in the interest of Creditors generally to proceed with the separate Compositions because they will receive a substantial proportion of their dividend within, say, six weeks of the 14th January, 1988 with the balance of the contribution secured by mortgage. 17. In a sequestration I do not forsee that a dividend would be paid for at least two years, perhaps longer, and such dividend would only be paid if a Creditor or group of Creditors were prepared to advance considerable dollars to a fighting fund to allow the Trustee to initiate substantial legal action to have the Maintenance Agreements set aside and to examine the Debtors and their spouses. 18. Finally, the difference in the estimated dividend payable from a Bankrupt Estate compared with the Composition is reasonably insignificant." There is no evidence to the contrary. It has not even been shown that it would be useful to have the debtors examined in bankruptcy so that the relevant facts could be elucidated. The facts are known, though not their consequences. In these circumstances, I am of the opinion that the composition should not be set aside. In Re Segal: Lensworth 20. Finance v. Segal, cited above, at p.95, Riley J. cited as analogous reasoning a passage from the judgment of Lindley L.J. in Re English, Scottish & Australian Chartered Bank (1893) 3 Ch.385 at p.409 where his Lordship said:- "If the creditors are acting on sufficient information and with time to consider what they are about, and are acting honestly, they are, I apprehend, much better judges of what is to their commercial advantage than the Court can be. I do not say it 1s conclusive, because there might be some blot ina scheme which had passed that had been unobserved and which was pointed out later. While, therefore, I protest that we are not to register their decisions, but to see that they have been properly convened and have been properly consulted, and have considered the matter from a proper point of view, that is, with a view to the interests of the class to which they belong and are empowered to bind, the Court ought to be slow to differ from them. It should do so without hesitation if there is anything wrong; but it ought not to do so, in my judgment, unless something is brought to the attention of the Court to shew that there has been some material oversight or miscarriage." This is a case in which a creditor who opposed a composition is seeking to upset the composition by relying upon matters which were of little or no consequence so far as the composition was concerned. In my opinion, the vote of the statutory majority should prevail especially as, in this case, I have no reason to doubt that the creditors who supported the composition were capable of looking after their own affairs. It has not been established that the composition was unreasonable or not in the interests of the creditors, as a whole or so far as any particular creditor is concerned. 21. I have taken, into account the fact that the minutes of the meetings and the notes of the discussions which occurred thereof are full and accurate. I am left with the impression that Mr Butterell put the issues squarely to all the creditors and that they understood them. In all the circumstances I am not prepared to exercise the discretion conferred by ss.222 and 239 of the Act though grounds upon which the discretions could be exercised have been established. The application will therefore be dismissed with costs. I certify that this and the 20 preceding pages are a true copy of the Reasons for Judgment herein of The Honourable Mr Justice Davies. Associate: J G<Adks, Date: 23 December 1987 Counsel for the applicant: Mr B. Skinner Solicitors for the applicant: Australian Government Solicitor Counsel for the debtor; Mr D.G. Hill Q.c. with Mr A. Cramer-Roberts Solicitors for the debtor: J.W. Walker & D.K.L. Raphael Dates of hearing: 14-15 December 1987