JUDGMENT No. mat 0) F4 esoooesens eneeccesenes NOT FOR DISTRIBUTION FEDERAL COURT OF AUSTRALIA NEW SOUTH WALES REGISTRY No. NB 2558 of 1993 GENERAL DIVISION BETWEEN: RE: ALAN JAMES CHAPMAN EX PARTE: GAVIN THOMAS Applicant GEORGE KEKATOS First Respondent JERRY KEKATOS Second Respondent THE AUSTRALIA AND NEW ZEALAND BANK Third Respondent RECEIVED ~2 DEC 1994 FEOERAL COURT OF AUSTRALIA PRINCIPAL REGISTAY CORAM: SACKVILLE J. PLACE: SYDNEY DATE: 25 NOVEMBER 1994 R NS FOR MENT HIS HONOUR: In this matter Mr Hogg appears on behalf of the applicant who is the trustee of the bankrupt estate of the fourth respondent, Mr Alan James Chapman. The other respondents to the application are George Kekatos and Jerry Kekatos who are, or at least were intended to be, sureties in a proposal made by the bankrupt to his creditors for a composition pursuant to s.73(1) of the -2- Bankruptey Act 1966. The third respondent is the ANZ Bank. The evidence indicates that the first and second respondents hold, or at least in the recent past, held an account in their own name together with the names of two other persons. Those other persons are identified in an annexure to an affidavit of Mr Chapman sworn 29 July 1994 which Mr Hogg has read as being Athanasios Kekatos and Roxani Kekatos. RECORDED : NOT TRANSCRIBED HIS HONOUR: Mr Hogg has put the case on this basis. On about 9 November 1994, the bankrupt made a proposal to the trustee. Under that proposal the bankrupt stated that the sum of $610,000 would be paid by him to the trustee on or before 17 November 1994. That amount was to pay creditors in full. The proposal under s.73 of the Bankruptcy Act 1966 (assuming that is what it was) was accompanied by a document headed "Irrevocable Authority", which appears to have been signed by each of the first and second respondents. That irrevocable authority undertakes to pay to the trustee an amount of $400,000 out of account number 833285257. The amount is stated to be paid to the trustee in his capacity as trustee of the bankrupt's estate, upon acceptance by the creditors of the s.73 proposal. The irrevocable authority also states that an amount of $200,000 is to be paid to the trustee within seven days for payment to the creditors upon acceptance of the 8.73 proposal by the creditors. The document also contains an undertaking not to -3- draw upon the account so as to reduce the balance below $400,000. Finally, it provides for delivery before 10 am on 10 November 1994 for the sum of $10,000. RECORDED : NOT TRANSCRIBED HIS HONOUR: There is evidence that an instruction was given by the trustee to his solicitor to send a copy of the irrevocable authority to the third respondent. Mr Hogg says, as | understand the position, that the effect of the proposal accompanied by the irrevocable authority was to create a charge or equitable interest in the trustee over the amount in the account. The evidence indicates that at least as at June 1994, the sum of over $445,000 was in the account. In order to make out the case, the trustee will need to establish at least the following. First that the irrevocable authority was effective, together with notification to the bank to create a charge or equitable interest over the moneys in the account. Secondly, that it was not open to the bankrupt to withdraw the proposal pursuant to s.73 prior to the acceptance, or purported acceptance by the creditors of that proposal. This issue arises because the bankrupt did purport to withdraw the proposal. He did this by a facsimile transmission that apparently reached the creditors' meeting just a few minutes before the creditors voted (as they did) to accept the proposal. Thirdly, that charge or equitable interest over the account in favour of the trustee was created by the irrevocable authority, notwithstanding that the account is in the -4- name, not only of the first and second respondents, but of the two other persons whom | have identified. Mr Hogg, when | pointed out that the account was held in the name of the other two persons, applied to join them as respondents on the application. | grant that application and | direct Mr Hogg's client to file an amended application including those two persons as fifth and sixth respondents. There are often questions that arise in dealing with these matters on an ex parte basis. | can see two particular difficulties confronting the trustee in this case. The first is that it is by no means clear that the bankrupt was not entitled to withdraw the proposal for a composition prior to its acceptance by the creditors. As | pointed out to Mr Hogg, the language of s.73(4) of the Bankruptcy Act 1966 rather suggests that there must be a proposal on foot before the creditors can accept it. However, at this stage of the proceedings, | think there is a serious issue to be argued. It may turn out, of course, that Mr Hogg's argument is not well founded. The second difficulty is that the irrevocable undertaking was signed only by two of the four persons in whose name the account is maintained. It may well be very difficult to demonstrate that Athanasios Kekatos and Roxani Kekatos are bound by the irrevocable authority executed by the first and second respondents. However, at this stage of the proceedings, it seems to me that the status quo should be preserved. An opportunity will be provided to the first and second respondents and to the two persons who are to be added as respondents as well as to the bank to argue whether the injunction that | am about to give ought to be maintained beyond a very short period. Indeed, it may well be that developments have occurred in the intervening period to reduce the amouni that is in the account. In the circumstances | make the following orders. | grant leave to the applicant for the application for interim relief to be heard instanter. | order that the third respondent, by itself, its servants and agents be restrained until 5 pm on Wednesday, 30 November 1994, from dealing with account number 83328527 standing in the names of Athanasios Kekatos, Roxani Kekatos, George Kekatos and Jerry Kekatos, in any way so as to reduce the credit balance of that account below the sum of $400,000, or such other amount as is in the account, being less than the sum of $400,000 at the time the orders are served. | give leave to the applicant to make short service of the application and the affidavits of Mr Beverly and Mr Thomas. | direct that service of the application and the affidavit that | have mentioned be effected upon the first, second and third respondents by no later than 12 noon on Monday, 28 November 1994. | direct that service be effected of the same docuemnts on the fourth respondent, Mr Chapman, the bankrupt, also by 12 noon on 28 November 1994. I give leave for service to be effected by facsimile transmission in the case of the first to fourth respondents. I direct that the applicant use its best endeavours to serve the fifth and sixth respondents by 12 noon on 28 November 1994. | direct that the documents to be served upon the respondents in accordance with the orders | have made include an amended application joining the fifth and sixth -6- respondents. | direct the applicant to file such an amended application by 5 pm today, 25 November 1994. RECORDED : NOT TRANSCRIBED HIS HONOUR: | have not made the order in paragraph 3 for the reasons that | have already given. RECORDED : NOT TRANSCRIBED HIS HONOUR: | will direct that in the documents that | have ordered to be served include a copy of the orders that | have made today. RECORDED : NOT TRANSCRIBED | certify that this and the preceding 5 pages are a true copy of the Reasons for Judgment of the Honourable Justice Sackville Associate: / Je. res , Dated: 2 December, 1994 Heard: 25 November, 1994 Place: Sydney Decision: 25 November, 1994 Appearances: Mr C. Hogg instructed by Simon Beverly & Associates, Solicitors, appeared for the Applicant.