IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE STATE ) No NB 2172 of 1993 OF NEW SOUTH WALES ) RE: LESLIE ROSS BURTON of 25 Overett Avenue Kemps Creek in the State of New South Wales EX PARTE: HUGH JENNER WILY Applicant/First Cross-Respondent BRANDOWN PTY LIMITED ACN 003 830 304 First Respondent NJW CONTRACTORS PTY LIMITED ACN 000 730 192 Second Respondent/Cross-Claimant PATRICK JAMES HALLINAN MAX DAVID RODGERS and GEORGE FRANK RODGERS Third Respondent/ Second Cross-Respondent AND EX PARTE: LESLIE ROSS BURTON Applicant HUGH JENNER WILY Respondent Coram: Davies J Date: 26 July 1995 Place: Sydney CORRIGENDA Amendments to the Reasons for Judgment delivered on 26 July 1995:- 1. Page 40 - 5th line from bottom of page - laser printer error - should read "declare them to be void through some irregularity if the deed complied substantially .." 2. Page 46, last paragraph, 2nd line. The word "noted" should be "voted". 3. Page 56, 2nd last line. The sum "$4,000" should be "$5,000". 4. Page 79, Order 2, third line. The word "the" appears twice. Delete second "the". 5. Order 3 on page 79. The name "Brandown Pty Ltd" is to be substituted for the name "NJW Contractors Pty Ltd". Associate to Justice Davies 2 August 1995 C A T C H W O R D S BANKRUPTCY - application for declaration that a settlement of property of the bankrupt was void as against trustee in bankrutpcy - whether settlement was made within the period of 2 years before the commencement of the bankruptcy - transfer dated as executed before the commencement of the period - whether transfer made in good faith and for valuable consideration - nominal consideration given for asset which had substantial value - operation of s.120 Bankruptcy Act. BANKRUPTCY - annulment - Court must be satisfied that sequestration order ought not to have been made and that the order ought to be anulled - bankrupt was insolvent at the time of the making of the sequestration order - factors relevant to exercise of discretion under s.153B Bankruptcy Act - no point of principle raised - affairs of the bankrupt and associated companies involved inadequate documentation, fabrication of debts and disposition of assets without good faith - public interest and interest of creditors that the affairs of the bankrupt be managed by a trustee - operation of s.153B Bankruptcy Act. BANKRUPTCY - application that trustee in bankruptcy should be removed - whether trustee had acted independently in the best interests of creditors - actions taken by the trustee were reasonable in the circumstances - factors relevant to exercise of discretion under s.179 Bankruptcy Act. Bankruptcy Act 1966 (Cth) - ss.120, 153B, 179, 306 Barton v Official Receiver (1986) 161 CLR 74 Chirigakis v Deputy Commissioner of Taxation (1986) 68 ALR 527 In Re La Rosa; Ex parte Norgard v Rocom Pty Ltd (1990) 21 FCR 270 Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71 Miller v Bondi Securities (Beazley J, unreported, 2 September 1994) Pollack v Deputy Federal Commissioner of Taxation (1994) 94 ATC 4148 Re Curry; Ex parte Goldsea Pty Ltd (1992) 40 FCR 32 Re Donovan; Ex parte ANZ Banking Group Ltd (1972) 20 FLR 50 Re Sarina; Ex parte Council of the Shire of Wollondilly (1980) 43 FLR 163 Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 Re Williams (1986) 13 FLR 10 State Bank of New South Wales v Geeport Developments Pt Limited (1991) 5 BPR 11,947 RE: LESLIE ROSS BURTON; EX PARTE HUGH JENNER WILY & ORS and EX PARTE; LESLIE ROSS BURTON and HUGH JENNER WILY NB 2172 of 1993 Davies J. 26 July 1995 Sydney IN THE FEDERAL COURT OF AUSTRALIA ) GENERAL DIVISION ) BANKRUPTCY DISTRICT OF THE STATE ) No NB 2172 of 1993 OF NEW SOUTH WALES ) RE: LESLIE ROSS BURTON of 25 Overett Avenue Kemps Creek in the State of New South Wales EX PARTE: HUGH JENNER WILY Applicant/First Cross-Respondent BRANDOWN PTY LIMITED ACN 003 830 304 First Respondent NJW CONTRACTORS PTY LIMITED ACN 000 730 192 Second Respondent/Cross-Claimant PATRICK JAMES HALLINAN MAX DAVID RODGERS and GEORGE FRANK RODGERS Third Respondent/ Second Cross-Respondent AND EX PARTE: LESLIE ROSS BURTON Applicant HUGH JENNER WILY Respondent Coram: Davies J Date: 26 July 1995 Place: Sydney MINUTES OF ORDER THE COURT DECLARES: 1. That, by virtue of s.120 (1) of the Bankruptcy Act 1966 (Cth), the transfer by the bankrupt, Leslie Ross Burton, of 2 shares in Brandown Pty Ltd to NJW Contractors Pty Ltd is void as against the trustee of the bankrupt estate. THE COURT ORDERS THAT:- 2. The application to annul the bankruptcy and to remove Mr N J Wily as trustee of the bankrupt estate be dismissed. 3. The records of NJW Contractors Pty Ltd be rectified so as to record Mr H J Wily in his capacity as trustee of the bankrupt estate of Leslie Ross Burton as the holder of the shares. 4. The cross-claim on behalf of NJW Contractors Pty Limited against the first respondent and the third respondents be dismissed. 5. Costs be reserved and that the parties bring in within 21 days short minutes of the orders as to costs which are proposed. 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 ) No NB 2172 of 1993 OF NEW SOUTH WALES ) RE: LESLIE ROSS BURTON of 25 Overett Avenue Kemps Creek in the State of New South Wales EX PARTE: HUGH JENNER WILY Applicant/First Cross-Respondent BRANDOWN PTY LIMITED ACN 003 830 304 First Respondent NJW CONTRACTORS PTY LIMITED ACN 000 730 192 Second Respondent/Cross-Claimant PATRICK JAMES HALLINAN MAX DAVID RODGERS and GEORGE FRANK RODGERS Third Respondent/ Second Cross-Respondent AND EX PARTE: LESLIE ROSS BURTON Applicant HUGH JENNER WILY Respondent Coram: Davies J Date: 26 July 1995 Place: Sydney REASONS FOR JUDGMENT THE ISSUES The first application ("the Brandown application") is brought by Hugh Jenner Wily, the trustee of the bankrupt estate of Leslie Ross Burton, whose estate was sequestrated on 8 July 1993. The application, which was lodged in the Court on 17 December 1993, seeks a declaration that, by virtue of s.120(1) of the Bankruptcy Act 1966 (Cth), a transfer of two shares in the capital of Brandown Pty Limited ("Brandown") from Mr Burton to NJW Contractors Pty Limited ("NJW") is void as against Mr Wily, trustee of the bankrupt estate. The application seeks an order that the register of members of Brandown be rectified so as to record Mr Wily, in his capacity as trustee of Mr Burton's estate, as the holder of the shares. Section 120(1) of the Bankruptcy Act provides: 120(1) A settlement of property, whether made before or after the commencement of this Act, not being: (a) a settlement made before and in consideration of marriage, or made in favour of a purchaser or encumbrancer in good faith and for valuable consideration; or (b) a settlement made on or for the spouse or children of the settlor of property that has accrued to the settlor after marriage in right of the spouse of the settlor; is, if the settlor becomes a bankrupt and the settlement came into operation after, or within 2 years before, the commencement of the bankruptcy, void as against the trustee in the bankruptcy. A cross-claim was filed on 17 August 1994 on behalf of NJW claiming relief against Brandown and the respondents Patrick James Hallinan, Max David Rodgers and George Frank Rodgers. During the course of the hearing, counsel for NJW indicated that the cross-claim would not be pursued. It will therefore be dismissed. A cross-claim brought by NJW against a solicitor, Mr George Kekatos, was filed on 17 August 1994. The transcript does not make it clear whether that cross-claim was served. In any event the cross-claim forms no part of the current proceedings. The second application ("the annulment application") which is brought by the bankrupt, Leslie Ross Burton, seeks an order that the order that the estate be sequestrated, made on 8 July 1993, be set aside or alternatively that the bankruptcy be annulled under s.153B of the Bankruptcy Act. The application seeks a further order that the trustee, Hugh Jenner Wily, be removed as trustee of the bankrupt estate. Orders originally sought with respect to an alleged breach by Mr Wily of his fiduciary duties owed to Mr Burton and to his wife, Marie Leslie Burton, have not been pursued. Section 153B of the Bankruptcy Act provides:- "If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Registrar, the Court may make an order annulling the bankruptcy." Section 179(1) of the Bankruptcy Act provides: "The Court may, on the application of the Registrar, the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:- (a) remove the trustee from office; and (b) make such order as it thinks proper." Although it was agreed by counsel that the evidence given in relation to both applications would be taken into account in the determination of each, the hearing of the Brandown application was heard first and I shall deal with it first in these reasons. The annulment application must however be determined first for, if the sequestration order is set aside or the bankruptcy is annulled, Mr Wily's title to claim under s.120(1) of the Bankruptcy Act will cease. THE WITNESSES Before entering into a discussion of the issues, it is convenient for me to say something about the witnesses. During the second half of the 1980's and in the early years of the 1990's, Mr Burton was a business man involved in the activities of many businesses, particularly those concerned with trucking or transport, tipping and the production and transport of concrete. Mr Burton carried on one or more businesses personally, he carried on one or more businesses in partnership with another or others, and he was involved in businesses carried on by companies. In his dealings, Mr Burton did not always clearly distinguish between one entity and another or between one business and another. Many businesses had the same address and moneys received or on hand appear to have been used by Mr Burton as he thought it expedient. During the course of the bankruptcy and of proceedings in the bankruptcy, relevant books of account have not been produced either to the trustee or to the Court. I do not mention these matters by way of criticism of Mr Burton but simply to emphasise that there was laxity in the conduct of the affairs with which Mr Burton was concerned. There was such a lack of records and verifiable information that it has been most difficult for the trustee and for the Court to form firm views as to the extent of Mr Burton's estate and of the debts due to creditors. This has been the position even on very minor matters. Mr George Kekatos was, until late 1993, the solicitor for Mr Burton and for his companies. Mr Kekatos' approach to accounts and to legal affairs was similar to that of Mr Burton. On 22 December 1994, the Legal Services Tribunal ordered, without opposition from Mr Kekatos, that his name be removed from the role of solicitors in New South Wales. In the course of its determination the Tribunal said:- "The evidence before this Tribunal shows clearly that on numerous occasions the solicitor, without lawful authority, deposited trust money into his general or office account, retained moneys in his general account that were trust moneys, failed to account for moneys held in trust, failed to hold trust moneys exclusively for the use of a particular client, failed to disburse moneys as directed by the particular client, drew moneys in respect of professional costs without having rendered a Bill of Costs and without authority of the particular client, failed to keep proper records as required by law and failed to comply with the clear obligations placed upon solicitors under the general law and under the said sections of the Legal Profession Act and the said Regulations made thereunder." I adopt that description as a convenient summary of the manner in which Mr Kekatos conducted affairs in his practice. It accords with the impression I gained from evidence given in the current proceeding. Needless to say, Mr Burton and Mr Kekatos were prepared to cooperate together to fabricate or arrange affairs to Mr Burton's advantage. An example is the statement of affairs which was put to the meeting of creditors held in 1993. In his cross-examination, Mr Burton agreed that certain of the alleged debts set out in the statement in respect of which claims were made at the meeting of creditors, were fabricated. Inevitably, I approach the evidence of both Mr Burton and Mr Kekatos with caution and place much less weight upon their oral evidence than upon the probabilities which arise from the events which occurred. Indeed, I do not propose to discuss all the evidence given by both of them. Their credit is not sufficiently high for that. That is not to say, however, that I totally reject their evidence. In these applications, as in the application of Hugh Jenner Wily against White Constructions, Belgravia Investments and E E Emmett & Son ("the White Constructions case") (judgment delivered on 30 May 1994) in which I accepted the substance of the evidence given by Mr Burton, there are aspects of the evidence given by each of Mr Burton and Mr Kekatos which seem to me probably to be correct. The evidence of other witnesses also suffers from some deficiencies. Mr Patrick Hallinan has signed so many inconsistent documents and inserted so many incorrect dates that it is clear that he is not a person who gives much attention to formalities and detail. Mr Max Rodgers and Mr George Rodgers are also not persons concerned with detail. Thus, their understanding of the basis on which they took up shares in Brandown appears inconsistent in one important aspect with the formal shareholders' agreement which Mr Kekatos prepared and which they executed after reading it and after taking advice from their own solicitor. Mr Canavan, the accountant, was not good on matters of detail and there are many aspects of the accounts and of the other documents and returns which he prepared which cannot be relied on. Moreover, all the principal witnesses, other than Mr Canavan, have some reason for bias. Mr Burton is of course the bankrupt and it is his bankruptcy and his affairs which are at issue. Mr Wily's handling of the bankrupt estate and his dealings with Mr Burton are under challenge. Mr Kekatos is displeased with Mr Burton because, in late 1993, a solicitor advising Mr Burton's wife drew the attention of the Law Society to aspects of Mr Kekatos' trust account. That led to an investigation in which Mr Burton lodged complaints. Ultimately, Mr Kekatos was struck off because of his handling of the affairs of clients including Mr Burton. Mr Hallinan and Max & George Rodgers are not necessarily at odds with Mr Burton; but the trustee has arranged with them that, if he obtains title to the two Brandown shares, he will, subject to the approval of a meeting of creditors, sell the shares to them at a price which has been agreed. They therefore have a financial interest in the outcome of the proceedings. In the light of all these matters, I rely heavily on the events which occurred and on the probabilities as they seem to me to arise from those events and such of the surrounding circumstances as have been proved. THE BRANDOWN APPLICATION Brandown, which commenced business in 1989, purchased a valuable property ("the Kemp's Creek quarry") which had been used as a clay quarry and was suitable for use as a tip. The precise value of the property is not relevant but it was purchased in 1989 for $1m and Mr Wily considers it now to have a value of over $3m. At issue in these proceedings is the ownership of the two shares in Brandown which constitute one-third of the issued capital of the company. The precise value of the shares is not important. I am satisfied, however, from the accounts and the valuations which are in evidence, that the shares have a substantial value. In 1989, Mr Burton and Mr Patrick Hallinan were involved in businesses concerned, inter alia, with trucking, transport and tipping. Mr Hallinan and Mr Burton had several common interests, including the affairs of NJW. Max Rodgers and George Rodgers were cousins of Mr Hallinan and knew Mr Burton. Mr Burton and Mr Hallinan both had interests in family discretionary trusts. The trustee of the Ross Burton family trust was Ross Burton Pty Limited. The trustee of Mr Hallinan's family trust was Tranteret Pty Ltd ("Tranteret"). NJW was a private company in which, in 1989, the shareholding was as follows:- HALLINAN James P (Deceased) 5 Ord. Shares HALLINAN Kathleen J (Deceased) 1 Ord. Share HALLINAN Patrick J 3 Ord. Shares BURTON Norman A 3 Ord. Shares BURTON Marie June 3 Ord. Shares BURTON Leslie Ross 3 Ord. Shares BURTON Mark Arthur 3 Ord. Shares 21 It will be seen that the Burton family held 12 shares and that the Hallinan family held 9 shares. Norman A. Burton and Marie June Burton were Mr Burton's parents and Mark Arthur Burton was his brother. The Allotment of the Brandown Shares NJW had for many years carried on the business of quarrying clay from a number of properties including the Kemp's Creek quarry. Mr Burton and Mr Hallinan operated a haulage business and trucked the extracted clay to customers. NJW ceased business in 1988 and, since 1984, had obtained most of its clay from a site other than the Kemp's Creek quarry. Mr Burton and Mr Hallinan realised that the Kemp's Creek quarry had potential. They were involved, inter alia, in the business of dumping, building and construction waste. Their tipping fees were substantial. They estimated that, if they could use the Kemp's Creek quarry for tipping, the saving of the tipping fees would counteract the interest payable on the purchase of the property. It could be seen, moreover, that the property had potential for sub-division once filled. It was ascertained that the owner of the quarry was prepared to sell the property for $1m. On 17 April 1989, Mr Burton and Mr Hallinan entered into a deed of option to acquire the property. The option was exercisable on or before 12 June 1989 and the purchase price was $1 million. The fee payable for the option was $20,000. Mr Hallinan paid $10,000 of the option fee and Mr Burton arranged for the payment of the other $10,000 by a company, Barotac Pty Ltd. By a subsequent deed dated 7 June 1989, the exercise date of the option was extended to 31 July 1989. Brandown, which had been incorporated on 28 June 1989, was acquired and a return to the Companies and Securities Commission showed that Mr Burton and Mr Hallinan were appointed directors on 7 July 1989 and that Mr Hallinan was appointed secretary. Max & George Rodgers agreed to contribute $300,000 for a one-third interest in Brandown. On 28 June, Max Rodgers paid Mr Burton $10,000 and George Rodgers paid Mr Hallinan $10,000. There is an issue which cannot be resolved in these proceedings as to whether the arrangement was that the Rodgers should put in $300,000 as capital for their one-third share or whether, as consideration for obtaining a one-third interest, they agreed to lend $300,000 to Brandown. Accounts of Brandown have at different times recorded both versions of the arrangement. I merely note the existence of the dispute and the fact that the shareholders' agreement which was subsequently executed by Mr Burton, Mr Hallinan and Max & George Rodgers contemplated that $300,000 would be contributed as equity capital. I am satisfied that the first schedule to the agreement was attached to it when executed. This schedule showed that the capital was to be $300,000 and that the shares were to be held as to 2 by Mr Hallinan, as to 2 by Mr Burton and as to 2 by Max and George Rodgers. Clause 5(b) of the agreement provided: "From the date of commencement of this Deed the shareholders shall be deemed to have contributed to the capital of the company and shall be entitled to the share of the same in the proportions (of their shareholding being the proportions specified in Item 6 of the First Schedule)." On 31 July 1989, the option to purchase was exercised, and $80,000, the balance of the ten percent deposit, was paid. Brandown entered into a contract to purchase the land for the price of $1M. The $80,000 came from the funds of Max and George Rodgers. Settlement was to take place within 5 weeks of the date of the agreement which was 31 July 1989. Brandown did not complete in time and a notice to complete was served on 5 September 1989. On 18 September 1989, Esanda Finance advised that it had approved an advance to Brandown of $700,000 to enable it to purchase the property. Security documents were prepared, including agreements of guarantee and indemnity given by Mr Burton, Mr Hallinan and the two Rodgers. Settlement occurred on 2 September 1989, the balance of the $300,000 provided by the Rodgers and the $700,000 provided by Esanda Finance being sufficient to enable Brandown to meet the purchase price. Incidental expenses such as stamp duty, legal fees and so forth were met from other funds which were made available, including $21,896.40 from Ross Burton Pty Ltd. Mr Kekatos prepared a draft shareholders' agreement as between Mr Burton, Mr Hallinan and George and Max Rodgers. On 26 September 1989, Mr Kekatos advised the vendor's solicitors that the Rodgers had been appointed directors of Brandown. On 23 November 1989, Farrugia & Co, solicitors for the Rodgers, requested some minor amendments to the draft agreement. On 4 December 1989, Mr Kekatos wrote to Farrugia & Co to say that the amendments requested were acceptable and asked if Farrugia & Co would make the appropriate amendments and have the deed executed. On 12 December 1989, Farrugia & Co wrote enclosing the executed amended deed. On 8 May 1990, Mr Kekatos forwarded to Farrugia & Co a copy of the duly executed shareholders' agreement. The agreement is consistent with the steps that were taken in relation to Brandown. Brandown had been formed with two redeemable preference shares. These were redeemed on 7 July 1989 and, on that day, one fully paid $1 share was allotted to each of Mr Burton and Mr Hallinan. A return of allotment subsequently prepared by the solicitor, Mr Kekatos, and signed by Mr Hallinan, showing a further allotment of one share to each of Mr Burton, Mr Hallinan, Max Rodgers and George Rodgers, described the allotment as having occurred on 30 July 1989. That return was not lodged. Share certificates and minutes recording the allotments were prepared by Mr Kekatos. The date or dates when he did so is uncertain but, as I shall later mention, they were probably prepared in early 1992. I am satisfied that the establishment of Brandown and the purchase of the property was a venture which was commenced by Mr Burton and Mr Hallinan. For the venture, they did not use any of their existing companies or businesses. Capital had to be raised. Max and George Rodgers agreed to put in $300,000 and the remainder of the necessary funds had to be obtained from a finance company. I am satisfied that Mr Burton, Mr Hallinan and Max and George Rodgers joined together in a venture, as their shareholders' agreement demonstrates. The six shares were allotted to the individuals, Mr Burton, Mr Hallinan and Max and George Rodgers. That was what the four venturers agreed upon and that was what they intended. At the hearing of this matter, a good deal of time was taken up with an examination as to who were the shareholders in Brandown and what interest they held. The evidence was confused because, after the first meetings of Brandown, when shareholders other than Mr Burton and Mr Hallinan were in control, no formal directors' meetings were held and no adequate minutes were drawn up at the time. Moreover, Mr Kekatos did not complete his writing up of the records of Brandown, as he ought to have done. The accountant for the company, Mr A.J. Canavan, did not understand the position and, in his early accounts, showed a share capital of $4. Late in 1991 and during 1992, Mr Canavan took steps to complete and lodge the returns that ought to have been lodged with the Australian Securities Commission. However, Mr Canavan had no personal knowledge of the matter and many of his documents did not accurately record the events which had occurred. Although time was taken at the hearing in an attempt to sort out the basic facts, in the end it was accepted by all counsel that, in 1989, two shares were allotted to Mr Burton, two shares to Mr Hallinan and one share each to Max Rodgers and to George Rodgers. And it is not in dispute that this occurred in accordance with the agreement reached between them. It was submitted, however, by counsel for NJW, that NJW was at all times the beneficial owner of Mr Burton's one-third interest in Brandown. Counsel's submission was based first upon the evidence of Mr Ross Burton. Mr Burton gave evidence that, in the middle of 1989, he instructed Mr Kekatos to arrange for the allotment of two shares in Brandown to NJW, two to Tranteret and one each to the Rodgers. He gave oral evidence that he did not read the shareholders' agreement which he executed and was unaware that it provided for the issue of shares to himself and Mr Hallinan. I reject this evidence, which in any event was inconsistent with his affidavit on this point, and I accept the evidence of Mr Kekatos, of Mr Hallinan, of Max & George Rodgers and of Mr Canavan that NJW was not mentioned in relation to Brandown during 1989. Such written evidence as there is supports this conclusion. Thus, receipts issued by Mr Kekatos record the name on his file as "Burton Ross, Hallinan Pat". There is no written material of 1989 which mentions NJW as having an interest in the Kemp's Creek quarry. The letters emanating from Esanda made no mention of NJW. Notes of the Commercial Finance Manager of Esanda, dated 12 September 1989, made no mention of NJW but, under the heading "Directors/Shareholders", made mention of Ross Burton Pty Ltd and of its claimed net assets of $5,119,300. A letter from Mr Kekatos to Mr Hallinan of 14 June 1989, said:- "... we suggest that a Shelf Company be organized in which you and Mr Burton and your partners hold equal shareholdings and the nominee company be used as the vehicle with which to exercise the option and purchase the land." The conclusion may be drawn that Mr Kekatos was instructed to proceed accordingly, for that is what occurred. Moreover, I am satisfied that NJW was not, in 1989, a suitable holder of the Brandown shares. Nine of the 21 shares were held by the Hallinan family. There was a dispute between Mr Hallinan and the woman who had been his father's defacto wife and to whom his father had left his shares. Mr Norman Burton and his wife had separated and there were later matrimonial proceedings in which Mr Norman Burton did not disclose his shares in NJW. Until arrangements could be made to reorganise the shareholding to Mr Burton's satisfaction, NJW was quite unsuitable to be a holder of his one-third interest in the Kemp's Creek venture. NJW, which had ceased actively to trade, had been placed in liquidation on 19 June 1989. After application was made to the Supreme Court of New South Wales, an order was made on 24 August 1989 setting aside the liquidation. The order, however, was not then advised to the Companies and Securities Commission and NJW continued to be shown as being subject to a winding up until the records were altered in the middle of 1993. It may be noted that Mr Kekatos' instructions on this matter came principally from Mr Hallinan, not Mr Burton. In 1989, the trustee of Mr Burton's family trust, Ross Burton Pty Limited, would have been a suitable recipient of Mr Burton's shares. In fact, however, the agreement which was reached between Mr Burton, Mr Hallinan and Max & George Rodgers was that set out in the shareholders' agreement. The new company, Brandown, was acquired for the purpose of the venture and the four individuals were its shareholders. The first shares issued to Mr Burton and Mr Hallinan were issued in July 1989. The forms of application for the allotment of the shares were prepared in the names of Mr Burton and Mr Hallinan. Mr Hallinan signed his form but the form of application in Mr Burton's name was left unsigned. In any event, that first allotment was to Mr Burton and Mr Hallinan. Share certificates were issued accordingly and a return of the allotment was lodged. The records of Brandown subsequently recorded an allotment of one share each to Mr Hallinan, Mr Burton, Max Rodgers and George Rodgers. This accorded with the shareholders' agreement. Counsel for NJW relied upon the evidence of Mr Norman Burton. Mr Norman Burton gave evidence as to the connection which he and others concerned with NJW had had with the property over many years. Mr Norman Burton inferred that it would have been in breach of the duties which Mr Hallinan and Mr Ross Burton owed to NJW as its directors to acquire the land otherwise than in the interests of NJW. I need not deal with this evidence in detail. I am satisfied that, when the property became available for purchase, NJW was not in a position to make the purchase. The purchase price was $1 million. This involved the raising of funds and the undertaking of liabilities. To effect the acquisition, the new entity, Brandown, was established, the Rodgers were persuaded to invest in the project and ultimately Esanda Finance agreed to lend $700,000. Guarantees were given by Mr Ross Burton, Mr Hallinan and by the two Rodgers. This was not a project which NJW could have undertaken, to which it was able to contribute, or in which it had any interest. In his oral evidence, Mr Norman Burton went so far as to say that he thought that NJW had purchased the Kemp's Creek quarry and that it had been in its name ever since. This evidence is illustrative of the fact that Mr Norman Burton's memory is now quite unreliable. Indeed, when cross-examined on the 25th October 1994, he could not recall how his affidavit of 30 August 1994 had come to be drafted or where he had been when he had signed and sworn it. I think it is probable that, in 1989, Mr Norman Burton was kept generally aware of the steps taken to purchase the property and of the arrangements that were made. Evidence of Mr Norman Burton that I accept is that, as from the end of 1988, NJW essentially ceased operations and it was not until 1992 that it was revived. Mr Norman Burton recalled that, when it was revived in about June or July 1992, NJW had few assets. In reliance upon the evidence of Mr Norman Burton and of Mr Ross Burton, counsel for NJW submitted that Mr Burton, as a fiduciary, was bound to hold his shares in Brandown for the benefit of NJW. Reliance was placed upon the remarks of Viscount Sankey in Regal (Hastings) Ltd v Gulliver [1967] 2 AC 134 at 137 that:- "The general rule of equity is that no one who has duties of a fiduciary nature to perform is allowed to enter into engagements in which he has or can have a personal interest conflicting with the interests of those whom he is bound to protect." But, in 1989, NJW had no interest in the land which Mr Burton was bound to protect. NJW had no funds and no prospect of acquiring the property. I am satisfied that the steps which Mr Burton took were taken with the knowledge of other members of his family and that they approved of what he was doing. The property had special potential for Mr Burton and Mr Hallinan because of their involvement in the disposal of waste. NJW was not in that business. For these reasons, I am satisfied that Mr Ross Burton was the beneficial owner of the two shares in Brandown which were allotted to him. Mr Burton's Financial Problems The year ended 30 June 1990 was a year of establishment for Brandown. Environmental permits had to be obtained and the property had to be prepared for use as a tip. For the year ended 30 June 1990, the accounts prepared by Mr Canavan showed a trading loss of $60,072, which was more than offset by an upwards revaluation of the Kemp's Creek quarry to a value of $1,200,000. In the year ended 30 June 1991, the income had increased to $479,478, resulting in an operating loss of $16,678. For the year ended 30 June 1992, Mr Canavan's accounts showed operating revenue of $1,514,109.68, resulting in an operating profit for the year of $140,849.96. In the year ended 30 June 1993, income rose to $3,323,512 and operating profit before tax was $278,163. As these accounts disclose, the affairs of Brandown prospered. Particularly was this so from a time in 1992 when a competitor withdrew from the disposal of waste. I should add, moreover, that I doubt that the accounts disclose the complete picture. The evidence does not disclose what occurred with respect to the tipping fees which were to be saved by the purchase. And, in his oral evidence, Mr Hallinan spoke of fees and benefits which were paid to the four shareholders or to bodies with which they were connected. The 1993 accounts disclose expenditure of $783,763 for cartage and $332,217 for salaries. I assume that the four shareholders or their entities, which in Mr Hallinan's case was Tranteret, benefited from such payments. Mr Hallinan said in his evidence that, as far as he could recall, no such cheques were paid to NJW until after 1 July 1992. Mr Burton's personal financial problems emerged in about the middle of 1991. Mr Burton had given personal guarantees in support of many of the companies with which he was involved. On 2 August 1991, the Deputy Commissioner of Taxation made a demand on Ross Burton Pty Limited for $161,947. On 20 September 1991, E.E. Emmett & Sons Pty Limited obtained a judgment in the Supreme Court against Mr Burton for $418,805.54. On 14 November 1991, Australian Cement & Lime Pty Limited, which had issued a bankruptcy notice directed to Mr Burton, obtained an order for substituted service of the notice. On 20 November 1991, the Deputy Commissioner of Taxation made a demand on Ross Burton Pty Limited for $241,116. On 13 December 1991, Blue Circle Southern Cement Limited obtained judgment against Mr & Mrs Burton and a Mr Nagle for $292,988. On 4 March 1992, Blue Circle Southern Cement Limited issued a bankruptcy notice directed to Mr Burton claiming $244,878. On the same day, Repco Auto Parts Pty Limited instituted proceedings against Tri City Concrete Pty Limited claiming $705.88 and E. E. Emmett & Sons obtained judgment against Mr Burton at the District Court for $57,082.10. On 5 March 1992, the Commissioner of Taxation issued a summons against Blue & White Mini Crete Pty Limited. On 11 March 1992, Boral Resources (NSW) Limited served notice of demand against Telecorp Pty Limited claiming $234,416.78. On 17 March 1992, Mr Burton was served with the bankruptcy notice taken out by Blue Circle Southern Cement Limited. On 3 April 1992, Belgravia Investments Pty Limited made a demand for $1,015,378 against Mr Burton, Tri Star Pre Mix Concrete Pty Limited and Waste 2000 Pty Limited. On 22 April 1992, Blue Circle Southern Cement Pty Limited lodged a creditor's petition seeking the sequestration of Mr Burton's estate. On 24 April 1992, Boral Resources (NSW) Pty Limited, obtained judgment against Mr Burton and Tri Star Pre Mix Concrete Pty Limited in the sum of $430,455. On 26 May 1992, Shell Co of Australia Ltd commenced proceedings against Ross Burton Pty Limited claiming the sum of $150,448. Mr Burton and Mr Kekatos saw a Mr Gavin Thomas, an insolvency consultant, on 13 May 1992 and 3 June 1992. On 12 June 1992, E.E. Emmett & Sons Pty Limited obtained a bankruptcy notice directed against Mr Burton. On 18 June 1992, an order for substituted service of the bankruptcy petition of Blue Circle Southern Pty Limited was made. On 8 July 1992, Belgravia Investments Pty Limited instituted proceedings in the Supreme Court claiming $1,037,017 against Mr & Mrs Burton and six other defendants. On 14 July 1992, Blue Circle Southern Cement Pty Limited, which in June 1992 had agreed to a compromise of the debt due to it and to payment by instalments, sought leave to withdraw from its petition against Mr Burton. Australian Cement & Lime Pty Limited applied to be substituted as creditor. On 27 July 1992, Australian Cement & Lime Pty Limited agreed to accept $50,000 in satisfaction of its claims and, on 27 August 1992, withdrew its application to be substituted as a creditor. On 16 July 1992, Tri Star Pre Mix Concrete Pty Ltd was ordered to be wound up. Boral Resources Limited applied to be substituted as petitioning creditor in Mr Burton's bankruptcy. That application came on on 18 September 1992 but was stood over to 9 October and, on that day, was stood over to 10 November. On 21 September 1992, Mr Burton applied to set aside the bankruptcy notice served by E.E. Emmett & Sons Pty Ltd. On 10 November 1992, Boral Resources Limited withdrew its application to be substituted as a creditor and Shell Co of Australia Ltd applied to be substituted as a creditor. The petition was stood over until 8 February 1993. On 10 December 1992, Amatek Ltd trading as Rocla Concrete obtained judgment against Mr Burton and David Nagle for $30,745.81. On 21 December 1992, Belgravia obtained a judgment against Mr Burton and others in the sum of $1,105,495. I need not detail the events of 1993, which will be considered in more detail in the annulment application. Ultimately, Mr Burton's estate was sequestrated on 8 July 1993, the petitioning creditor being E.E. Emmett & Sons Pty Ltd, L.W. Emmett & A.B. Emmett. The two year period will therefore run back to 8 July 1991. Transfer - Date of Transfer - Good Faith - Valuable Consideration It is not now in dispute that the share transfer, which was dated 1 August 1989, was executed during the two year period. The date of execution is important only from the point of view of good faith and valuable consideration. In his evidence, Mr Burton put the date of execution as being late 1991. The share transfer itself is dated 1 August 1989 but it is clear that it was not then signed. Despite Mr Kekatos' evidence to the contrary, I am satisfied that the transfer was completed in his office and that the date had his approval. By late 1991, Mr Burton had it in mind that his two shares in Brandown should be transferred to another entity. By then, Ross Burton Pty Limited, as well as Mr Burton himself, had financial problems. The first demand served was directed to it. And its financial problems were serious. On 3 May 1993, Ross Burton Pty Limited, which had changed its name to Locpat Pty Limited, was placed in liquidation on the petition of a creditor. Accordingly, in late 1991, it would have seemed to Mr Burton that the trustee of his family trust was not a suitable recipient for the Brandown shares. On the other hand, NJW was dormant and was solvent save for a relatively small claim that was made against it by Wearn Industries Pty Ltd in respect of a matter arising out of the allocation of rates. This matter was resolved by settlement and by payment in the first half of 1992. In late 1991 and during the first half of 1992, Max & George Rodgers were concerned to see that the records of Brandown were put in order. They and Mr Hallinan put pressure upon Mr Canavan to achieve this. He, for his part, sought to obtain the existing records from Mr Kekatos. Mr Kekatos refused to hand them over, stating that he did not have instructions from Mr Burton to do so. In my opinion, the likely reason for the delay which occurred was that it had not been finally settled, as between Mr Burton and Mr Kekatos, that NJW would be the recipient of the Brandown shares. The shareholding of NJW had not by then been reorganised. On 22 November 1991, Mr Canavan wrote to Mr Hallinan with respect to the shares that had been allotted "effectively to yourself, Ross Burton, Max Rodgers and George Rodgers" requesting Mr Hallinan to "Please let us know in whose name these shares are to be held." Mr Canavan gave evidence that he was subsequently informed by Mr Kekatos that Mr Burton's shares were held by Ross Burton Pty Limited and Mr Hallinan's by Tranteret. On 12 December 1991, Mr Canavan wrote to Mr Burton, Mr Hallinan and Max and George Rodgers setting out his understanding that the original two shares had been allocated, one to Ross Burton Pty Limited and the other to Tranteret and that there had been a subsequent issue of shares, one to Ross Burton Pty Limited, one to Tranteret, one to Max Rodgers and one to George Rodgers. Mr Canavan asked for confirmation that this was so. That confirmation, of course, was not forthcoming. Following this letter, Mr Canavan was informed by Mr Burton by phone that the shares were to be held by NJW, not Ross Burton Pty Limited. George Rodgers gave evidence that, in about April 1992, he attended at the office of Mr Kekatos and signed documents required to put the affairs of Brandown in order. A share certificate in the name of George Rodgers contains the signature of Mr Rodgers as shareholder and the signatures of Mr Hallinan and Mr Rodgers to the affixing of Brandown's seal. A share certificate in the name of Max Rodgers has the signatures of Mr Hallinan and of Mr George Rodgers to the affixing of the seal but it was not signed by Max Rodgers. Those documents may well have been signed in about April 1992. The share transfers from Mr Burton to NJW and from Mr Hallinan to Tranteret and the share certificates reflecting these transfers were typed on a typewriter which left an additional mark against each comma. So also was a return of the allotment of one share each to Mr Burton, Mr Hallinan and Max & George Rodgers, which Mr Kekatos said in his evidence he prepared about 26 September 1989. On that return of allotment is the stamp of Kekatos & Associates which would not have been used after 6 April 1992. Moreover, the return of allotment is a return to the Companies and Securities Commission. This may seem to indicate that all these documents were typed as early as September 1989. However, I think it is improbable that this was so. The four share certificates giving effect to the allotment were also typed on the typewriter. Mr George Rodgers said that he and Mr Hallinan signed these share certificates in about April 1992. I think it is likely that all these documents were prepared by Mr Kekatos in early 1992, including the share transfers from Mr Burton to NJW and from Mr Hallinan to Tranteret. Mr Kekatos did not produce the transfers for signature in April 1992. Although Mr Hallinan's signature appears on the return of the allotment of the 4 shares and on the share certificates giving effect thereto, his signature does not appear on the transfers to NJW and Tranteret or on the corresponding share certificates. On 6 April 1992, Mr Kekatos' firm moved its offices. An amended shareholders' agreement as between NJW, Tranteret and Max & George Rodgers, which Mr Kekatos prepared, had the new address on its back sheet. I think it is likely that Mr Kekatos would have preferred to have the agreement of Max & George Rodgers to what was occurring before any transfer was executed. There is a diary note of 15 April 1992 made by Mr Farrugia, the solicitor for Max & George Rodgers, which indicated that the Rodgers were considering whether they could or should stop Mr Burton and Mr Hallinan transferring their shares in Brandown to "father and wife/trust respectively". According to Mr Burton's evidence, it was in about June 1992 that Max & George Rodgers declined to sign the new agreement. There was some complaint about it, apart from the identity of the shareholders. According to Mr Canavan's evidence, he had a discussion with Mr Kekatos in about June 1992 in which he advised Mr Kekatos that, if the share transfers preceded the date when the company purchased the Kemp's Creek quarry, then no significant stamp duty problems would arise. On 1 July 1992, Mr Canavan's secretary sent a fax seeking the date in 1989 of the share transfers from Mr Burton to NJW and from Mr Hallinan to Tranteret. Apparently, there was no response. On 3 July 1992, Mr Canavan prepared the annual return for Brandown for the 1990 year and other returns. Those returns were signed by Mr Hallinan and were lodged with the Australian Securities Commission on 9 July. In the 1990 annual return, which was dated 15 November 1991 and was signed by Mr Hallinan, Mr Canavan recorded the shareholding as 2 shares held by NJW, 2 by Tranteret and 1 by each of the Rodgers. A similar return for the 1991 year, dated 20 July 1992, was lodged on 24 July 1992. I consider these returns to be important, not so much for what they purport to say but for the fact that they constituted an acceptance, at least by Mr Hallinan, of the transfer of Mr Burton's shares to NJW. Mr Hallinan was the manager of the affairs of Brandown in the sense that, if instructions did not come from a meeting of the four shareholders, the manager took his instructions from Mr Hallinan. Moreover, it was Mr Hallinan who signed all necessary documents of Brandown such as returns. Mr Hallinan was also a member and director of NJW. Accordingly, his treatment of NJW as the shareholder constitutes a recognition of the change. It is important to determine when the other shareholders accepted NJW as a shareholder of Brandown. The subject transfer was signed by Mr Burton and the seal of NJW was affixed. But no person's signature accompanied the sealing and there was no meeting of the directors or shareholders of NJW accepting it. Nor was there any meeting of the directors of Brandown approving of the transfer in accordance with the Articles of Association. Article 2(a) restricted the right to transfer. And there was some resistance to the step. The shares were not offered first to the existing shareholders as the shareholders' agreement required. By July 1992, matters had proceeded to the stage where there was sufficient acceptance of the new position for Mr Canavan to prepare annual returns showing NJW and Tranteret as shareholders and for Mr Hallinan to sign those returns. Moreover, at some date thereafter, cheques for fees, cartage etc were drawn in NJW's favour. Thus, by July 1992 or shortly thereafter, it became accepted that NJW was the entity which held the two shares which originally had been allotted to Mr Burton. In July 1992, Mr Burton, who was not in fact an officer of NJW, signed annual returns for NJW for the 1987, 1988 & 1989 years which Mr Canavan had prepared. This is an indication that Mr Burton was then taking over the handling of the affairs of NJW. The fact that returns for subsequent years were not then signed and lodged is an indication that, even then, the shareholding of NJW was not arranged as Mr Burton desired it to be. By October 1992, Mr Kekatos had completed the documentation for Brandown to the extent that there existed the share transfer to NJW, minutes of a meeting of directors approving of the transfer, a share certificate recording NJW as the shareholder and an entry in the share register which showed NJW as the shareholder. Some of these documents, in themselves, could be ineffective in law for no directors' meeting was held and the seals of Brandown and NJW were placed on the documents without authority and without the signatures of appropriate officers of the respective companies. But, as I have said, by this time, all relevant parties appear to have accepted the position. And returns had been lodged which showed NJW as the shareholder. No court would treat the effect of the documentation as a mere nullity. It seems probable that the share transfer to NJW had not been signed by early July 1992 for no definite information to this effect was given to Mr Canavan. It was about that time that Mr Hallinan signed a form of allotment of shares which showed Tranteret as the allottee of one share and NJW as the allottee of one share in Brandown. Minutes of a meeting approving the transfer to NJW, which were prepared by Mr Canavan but were not signed, showed the meeting as occurring on 30 July 1989, whereas the transfer is dated 1 August 1989. Mr L. Clarke, former general manager of Brandown, gave evidence that, when he started work for the company in June 1992, Mr Hallinan told him in the presence of Mr Burton and George & Max Rodgers that Mr Hallinan's family trust owned one-third of Brandown, that NJW owned one-third and each of the Rodgers had one-sixth each. However, I do not draw the conclusion from this that the share transfer had been executed at that time. Had the documentation actually been conclusive, Mr Canavan would surely have been aware of it. Moreover, in the minutes drawn up by Mr Clarke to record that meeting of 25 June 1992, the shareholders were shown as Mr Hallinan, Mr Burton and Max & George Rodgers. Counsel for NJW has relied upon balance sheets prepared for NJW for the years ended 30 June 1990 and for subsequent years. Those balance sheets recorded the two Brandown shares as an asset of NJW. However, I place no weight upon them. They were prepared by accountants, J. Kekatos & Associates, at a time after the transfer had been executed. During the 1990, 1991 and 1992 years of income, NJW had no records which contained any reference to the Brandown shares. It is impossible to pinpoint the date when the share transfer was actually signed by Mr Burton. However, there are three documents which contain Mr Burton's signature and not Mr Hallinan's. They are the transfer to NJW, the share certificate giving effect to the transfer and the minutes which Mr Kekatos prepared of the purported meeting of 1 August 1989 approving of the share transfer. When those documents were signed, Mr Hallinan must have been absent. Mr Hallinan's transfer to Tranteret and the share certificate recording the transfer to Tranteret of the same date were not signed by anyone. In my opinion, it is probable that, at some stage during July to October 1992, and most likely in early October, for the reason I shall hereafter mention, Mr Kekatos completed the documentation and had Mr Burton sign the transfer to NJW, the resulting share certificate and the minutes. According to Mr Burton's evidence, the seal of NJW, which was placed on the transfer and which incorporates the company's number, was obtained by Mr Kekatos during 1992. NJW remained dormant until about July 1992 when Mr Burton commenced to use it for his own purposes. However, Mr Hallinan had had a long association with Mr Burton and I am of the opinion that, during Mr Burton's financial problems of 1992, Mr Hallinan would have been prepared to assist him. I believe that such a relationship continues even now, though each is pursuing his own interests in the present proceedings. At some stage, it was decided in the Burton family that the shares in NJW should be held by Mr Norman Burton and his daughter, Mrs Rosslyn Fullagar. At some point of time, probably in April 1993, Mr Ross Burton, his mother Mrs Marie Burton and his son, Mr Mark Burton, transferred their shares to Mrs Fullagar. Mr Burton's transfer to Mrs Fullagar is dated 1 July 1990 but it was not drawn up or executed until much later than that. The concern which Mr Hallinan had over the shares which his father had left by will had been resolved. In April 1993, Mrs Fullagar signed a return of change of office holders showing her appointment as director and secretary on 1 July 1990 and the retirement of Mrs Marie Burton as director. That was lodged in April 1993. On the same day, there was lodged a return of allotment of shares, said to have occurred on 1 July 1990, allotting 42,991 shares to Mr Hallinan, 28,994 shares to Mr Norman Burton and 27,994 shares to Mrs Fullagar. Mr Hallinan and Mr Ross Burton inferred in their evidence that this return had no validity and should be ignored. It is unnecessary for me to express any view about it, other than the date, which was clearly incorrect. Perhaps a purpose of the purported allotment was to swamp the shareholding in case Mr Ross Burton was made bankrupt and the trustee should claim one-seventh of the shareholding of NJW. Mr Hallinan retired as a director of NJW in the middle of 1993. In the records of NJW there is a written resignation signed by Mr Hallinan and dated 7 June 1993. I assume that at some time Mr Hallinan came to an understanding with Mr Burton that NJW would be treated solely as a Burton company. That course was inevitable once Mr Hallinan had accepted that Mr Burton's shares should be transferred to NJW. However, it does not appear that Mr Hallinan actually relinquished his interest in the company until the middle of 1993. Indeed, the return of allotment signed by Mrs Fullagar is a strong indication to the contrary. The records of NJW also contain a transfer dated 7 July 1993 by Mr Hallinan of 43,000 shares for the consideration of $1. The transferee is left blank. By August 1992, Mr Burton had encountered a need to use his Brandown shares as security. On 25 and 26 August 1992, there was correspondence between Mr Kekatos and Corrs Chambers Westgarth with respect to a proposed settlement with Belgravia Investments Pty Limited. Mr Kekatos wrote stating that NJW was the owner of the Brandown shares. Corrs sought particulars of the title to the Kemp's Creek quarry and a copy of any joint venture agreement between the shareholders. Mr Kekatos forwarded the title particulars but advised that there was no joint venture agreement. On 15 October 1992, NJW gave a charge over its assets to Pioneer Concrete (NSW) Pty Limited. Among the assets specifically mentioned were the shares in Brandown. That charge was registered on 27 November 1992. In my opinion, it is likely that Mr Kekatos attended to the completion of the transfer of the shares in Brandown from Mr Burton to NJW, that is to say to the share certificate and to the minutes approving the transfer, shortly before this charge was executed. In July 1992, Mr Burton had signed the annual returns of NJW for the 1987, 1988 and 1989 years. From a time shortly after July 1992, he commenced to use NJW as the company which conducted the affairs in which he was involved, notwithstanding that he was not a director of NJW. It was NJW which offered, in March 1993, to pay $400,000 to the creditors of Mr Burton should they accept that sum as a compromise. On 15 April 1993, Mr Kekatos wrote to Inghams Enterprises Pty Limited to say that NJW was to take over the business of Iraglen Pty Limited and that Mr Ross Burton would be employed as manager. All these facts lead me to conclude that there was a transfer of the Brandown shares from Mr Burton to NJW, which was executed and became effective during the period from 1 July 1992 until the end of October 1992, most probably in early October 1992. The difference in dates is of no significance. Indeed, I am satisfied that s.120(1) of the Bankruptcy Act would operate to avoid the disposition whether it occurred in late 1991 as Mr Burton alleged, or at the time which I consider to be probable. It is not in dispute that the disposition was a settlement for the purposes of s.120(1) of the Bankruptcy Act. The shares were transferred to NJW to be held and used for the future benefit of members of the Burton family. There was the necessary element of contemplated retention of the property transferred. It is sufficient for me to refer to the discussion by French J of the concept of "settlement" in In Re La Rosa; ex parte Norgard v Rocom Pty Ltd (1990) 21 FCR 270. The issue is whether the disposition was made in favour of a purchaser in good faith and for valuable consideration. In my opinion, it is quite clear that the transfer was not made in favour of a purchaser for valuable consideration. There was no bargain as between Mr Burton and NJW. Indeed, NJW did not even execute the transfer, although Mr Kekatos placed the company's seal on it. Mr Burton was not a director of NJW and had no discussion about the transfer with any of the directors, save Mr Hallinan. The evidence does not suggest that there was ever any negotiation as to sale and purchase between them. The $2.00 consideration mentioned in the transfer was illusory. It was a mere nominal figure which was never paid. Yet the shareholding was a valuable one, whether in 1991 or 1992. In Barton v Official Receiver (1986) 161 CLR 75, Gibbs CJ, Mason, Wilson & Dawson JJ said at 86:- "A beneficiary under a settlement is not a purchaser within the meaning of the section unless he has given such valuable consideration as is sufficient in all the circumstances to make him a `buyer' in a commercial sense of the interest passing to him under the settlement. ....... We would therefore accept Sir Robert Megarry's formulation and endorse the Full Court's ruling that a `purchaser ... for valuable consideration' within the meaning of s.120(1) of the Act is one who has given consideration for his purchase which has a real and substantial value, and not one which is merely nominal or trivial or colourable': In re Abbott [1983] Ch., at p.57." Counsel for NJW has submitted that I should accept Mr Burton's evidence that he considered, in 1991, that $1.00 was the value of each of the shares. In fact, his oral evidence was merely that, had Mr Kekatos put the shares in the name of NJW when Brandown was formed, their value then would have been $1 each. Counsel sought to interest me in looking at the accounts of Brandown with a view to concluding that, in 1991, the shareholding had little value. However, the Kemp's Creek property was a valuable property which produced profits from the tipping operation and which showed even greater potential as its subdivision into residential or rural land became feasible. I am satisfied that the shares were valuable and were disposed of for no return. The value of the shares is illustrated by the use which NJW made of them from August 1992 onwards as security for its dealings. The Kemp's Creek quarry has gone from strength to strength and the ultimate end of the process will be the development of the land for residential or small-acre allotments. This is a property which has great potential, especially at a time when the space available for waste disposal appeared to be contracting. The sum of $2.00, which was no doubt adopted as an amateurish way to avoid stamp duty, was quite out of proportion to the value which the shares actually had when transferred. And this was so whether the transfer occurred in 1992 or in late 1991. Moreover, I am satisfied that the transfer to NJW was effected with the purpose of protecting the shares from the claims of Mr Burton's creditors. Mr Burton has given evidence as to how he expected to deal with each of the financial problems which arose. Most of the debts arose under guarantees. Evidence has been given about assets over which creditors hold securities and of the value of claims against the principal debtors and other guarantors. I shall deal with this in greater detail when I come to deal with the annulment application. However, I am of the view that events had turned against Mr Burton so that, by late 1991, he was insolvent in the sense that he was unable to pay his debts as they fell due. Indeed, the first bankruptcy notice against him issued in late 1991. It may well be that, when matters have gone their full course, when all securities have been realised, when moneys have come in from principal debtors and other guarantors and when a number of creditors have accepted settlements, the fact will be that few if any of Mr Burton's debts will remain. But, he was insolvent in 1991 and remains so. The value of the claims against him, for the purposes of bankruptcy, still amounts to several million dollars. In my opinion, by the time Ross Burton Pty Limited found itself, in August 1991, unable to pay moneys due to the Commissioner of Taxation, because Mr Burton could not arrange the payment, Mr Burton was in a position where he was unable to pay his debts as they fell due. Whether the transfer occurred and became effective in late 1991, which was not the case, or between July and October 1992, as in my opinion it did, the transfer was signed so as to remove the shares from the likely claims by creditors. Any other conclusion is highly improbable. I mention this point, not because s.121 is relied upon, which is not the case, but because the matter is relevant to several aspects of the issues arising under s.120(1). Mr Canavan, in his evidence, said that he advised Mr Burton that the shares be transferred to a company for taxation and like reasons. I do not accept that evidence as the transfer was not to the trustee of the family discretionary trust, Ross Burton Pty Limited. I do not think that there are any taxation reasons which, in 1991 or 1992, would have justified the transfer of the shares from Mr Burton personally to a company which was not a trustee. In any event, tax was not a driving feature of the transfer. Brandown never paid a dividend. The funds and benefits which might have been profit went to the shareholders in other ways. Thus, the application of the trustee must, subject to the decision made on the second application, be successful. The cross-claim, which was not pursued, must be dismissed. THE ANNULMENT APPLICATION Mr Burton seeks an order of the Court annulling his bankruptcy or, alternatively, an order removing Mr Wily as his trustee in bankruptcy. Relevant sections of the Act provide:- "37(1) Subject to subsection (2), the Court may rescind, vary or discharge an order made by it under this Act or may suspend the operation of such an order. 37(2) The Court does not have power to rescind or discharge, or to suspend the operation of: (a) a sequestration order; or (b) an order for the administration of the estate of a deceased person under Part XI." "153B If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Registrar, the Court may make an order annulling the bankruptcy." It follows from the provisions of ss.37 and 153B of the Act that the sequestration order may not be annulled unless the Court is satisfied that it ought not to have been made and that the Court is of the opinion that, in the exercise of its discretion, the order ought to be annulled. Re Williams (1968) 13 FLR 10 at 23; Miller v Bondi Securities (Beazley J, unreported, 2 September 1994); Pollack v Deputy Federal Commissioner of Taxation (1994) 94 ATC 4148 at 4153-5. Many of the issues raised in this present proceeding have been raised before on Mr Burton's behalf, or could have been raised by his counsel. Some of the matters were raised before Einfeld J when he made the sequestration order. Others, such as the propriety of the Stafford Quarries settlement and Mr Wily's rulings on entitlement to vote at a creditors' meeting, were considered in the application which sought the Court's approval of that settlement. Estoppel is not relied upon by counsel for Mr Wily but it is said nevertheless that the failure to raise the issues, or to succeed on the issues, at an early stage of the bankruptcy, is a significant factor to be taken into account in the exercise of the Court's discretion. The sequestration order of 8 July 1993 was made on the petition of E.E. Emmett & Sons Pty Limited ("Emmett") on the ground of non-compliance with a special resolution of creditors, made at a Part X meeting held on 5 April 1993. The resolution which was authorised by s.204(1) of the Act, was that Mr Burton present a debtor's petition within 7 days. Under s.40(1)(l)(ii) of the Act, a failure to present a debtor's petition within the time specified in such a resolution is an act of bankruptcy. The petition had been lodged on 28 April 1993 but was adjourned at Mr Burton's request on a number of occasions. During the currency of the sequestration proceedings, Mr Wily was, on 25 May 1993, on Emmett's application, appointed receiver of Mr Burton's assets. THE PART X MEETING It has been submitted by counsel for Mr Burton that the form of authority given by Mr Burton to his solicitor, Mr Kekatos, to call a Part X meeting was not effective for the purposes of Part X. This was because Mr Kekatos was aware that Mr Burton's statements of affairs were dated 19 March 1993, that the proposals were dated 18 March 1993 and that these documents were not given to Mr Kekatos within 10 days before signing the authority dated 9 March 1993, as was required by s.188(2) of the Act. Nevertheless, within the time frame specified in s.188(2)(c), Mr Kekatos, the solicitor who called the meeting, was fully aware of the details of Mr Burton's affairs and of the proposals which were to be put to the creditors. The preparation and the dating of the documents were matters left to Mr Kekatos. It was further submitted that there had been a breach or breaches of s.194 of the Act. That section requires that the meeting be held not earlier than 14 days after notices of meeting have been forwarded to creditors. Section 194(4) provides that, if the provisions of the section are contravened, the meeting is incompetent to act unless the Court, on the application of a creditor or the controlling trustee or solicitor, declares that the contravention is to be disregarded. Counsel for Mr Burton relied upon the fact that notice of the meeting was not given to a creditor, Shell Australia, until four days before the meeting. This is a trivial matter as it does not appear that Shell Co. was prejudiced. The Part X documents were not sent to at least five creditors, NJW, Brandown, Pat Hallinan Holdings, Australian Machinery and Stafford Quarries at least 14 days prior to the meeting. The letters to them are dated 24 March. In respect of these creditors, I draw the conclusion that they were all creditors friendly to Mr Burton and that any delay that occurred resulted from a delay in deciding how they should vote at the meeting. The forms of proxy which were completed by these creditors were identical in their content. Emmett also received inadequate notice. However, it was the petitioning creditor and opposed annulment. It was further submitted that Mr Burton's statements of affairs were not verified before an attesting witness as required by r.78(1) and Form 10. Mr Burton gave evidence that he signed the forms in blank and returned the blank forms to Mr Kekatos. Mr Kekatos gave evidence that they were completed and sworn in his presence. I do not think I need resolve this conflict. Mr Burton may have left the content of his statements of affairs to the devisement of Mr Kekatos. But if that be so, that is not a sufficient ground for annulling a bankruptcy which is beneficial to creditors. In comparison with the interests of the creditors in a bankruptcy administration, these matters as trivial. They were all within the control of Mr Burton and his solicitor. If any validating order is required, such as an order under s.194(4), the Court would make it. The general principle stated in s.306 of the Act is that defects and irregularities will not invalidate a step taken in bankruptcy unless substantive injustice has been caused thereby and that injustice cannot be remedied by an order of the Court. See, eg. Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71. The principle with respect to compositions, assignments and arrangements is that the Court will not declare them to be void through some irregularity if the deed complied substantially with the requirements of the Act. Moreover, the Court will not make an order declaring such a deed to be void unless the Court is satisfied that it would be in the interests of creditors to do so. See s.222(2) and (5) and s.236(2) Bankruptcy Act. In the present case, the Court must keep in mind these basic principles of the Act. In Re Curry; Ex parte Goldsea Pty Ltd (1992) 40 FCR 32, Spender J dismissed a petition which relied upon an alleged act of bankruptcy being the failure to file a debtor's petition as required by a resolution of a meeting of creditors. His Honour did so because, when the authority under s.188 was signed, the solicitor had not given his written consent to the calling of the meeting or received a statement of affairs. However, in that case the issue was raised at the hearing of the petition. His Honour considered that the Court did not have a discretion about the matter, as it does in the present case. It should be noted moreover, that Spender J cited without dissent from the judgment in Re Donovan; Ex parte ANZ Banking Group Ltd (1972) 20 FLR 50 where Sweeney J held that an act of bankruptcy is committed under s.40(1)(i) whether or not the authority becomes "effective for the purposes of Part X". Of more substance is the submission by counsel for Mr Burton that, although Mr Burton and his wife each gave to Mr Kekatos an authority to call a Part X meeting, a joint meeting was called for which there was no authority. In my opinion, there was no error in the calling of or the conduct of the meeting in this regard. The greater part of the debts as disclosed in the statements of affairs and as claimed in the proofs of debt, were debts for which Mr & Mrs Burton were jointly liable. In addition, Mr Burton had separate debts for which he was solely liable. The meeting of creditors was properly conducted. There was first an objection by one of the creditors to Mr Kekatos as presiding at the meeting. It was resolved that Mr Wily be President. Mr Wily then turned to the proofs of debt. He did not reject any of the proofs but he pointed out that some were not supported by evidence. There was a spirited discussion amongst the participants at the meeting. The minutes of the meeting record, for example:- "Mr Chapman summarised his client's views by saying that Burton's Statement of Affairs was unreliable and incomplete as to his total assets. He said that although this statement was sworn by Burton and his creditors were expected to rely on it, it was not possible to do so. He said that all the issues in relation to companies with which Burton was involved, and in relation to who his genuine creditors were, were not clear. He recommended that Burton should file a debtors petition for bankruptcy. Mr Emmett agreed with this conclusion." The creditors and their values were as follows:- JOINT ESTATE OF L.R. & M.L. BURTON Esanda Finance Corporation Ltd 181,658.49 Belgravia Investments Pty Limited 1,105,495.40 Westpac Banking Corp. 695,239.15 Stafford Quarries Pty Ltd 2,800,000.00 Australia Machinery Equipment Sales Pty Ltd 400,000.00 Pat Hallinan Haulage Pty Limited 415,000.00 N.J.W. Contractors Pty Limited 850,000.00 Brandown Pty Limited 360,000.00 George Kekatos 350,000.00 $7,157,393.04 ESTATE OF L.R. BURTON Dr E. Yeung 100,000.00 Shell Company of Australia Limited 51,176.29 L. Emmett 97,145.41 Amgrow Pty Ltd 33,000.00 Westpac Banking Corp. 695,239.15 Belgravia Investments Pty Limited 1,105,495.40 $ 2,082,056.25 Mr Wily put to the meeting the composition in respect of the joint debts. The minutes record:- "The President invited the meeting to initially propose a motion in respect of the joint estate `that the creditors of Leslie Ross Burton and Marie Leslie Burton accept a Composition under Part X of the Bankruptcy Act to receive the sum of $402,000 payable immediately upon acceptance of the Composition in full and final settlement of all debts owing to them'." A vote was taken of the creditors claiming in respect of the joint debts. The vote failed as only 74.84% of creditors (by value) voted in favour of the composition. The voting was as follows:- "FOR Esanda Finance Corporation Ltd Stafford Quarries Pty Ltd Australia Machinery Equipment Sales Pty Ltd Pat Hallinan Haulage Pty Limited N.J.W. Contractors Pty Limited Brandown Pty Limited George Kekatos AGAINST Belgravia Investments Pty Limited Westpac Banking Corporation" I accept the evidence of both Mr Wily and Mr Kekatos that they had expected the resolution to pass, though that is not to say that Mr Wily had made any calculation as to what the voting would be. In relation to the other composition proposal, that made by Mr Burton in respect of his separate estate, Mr Wily indicated that this would fail based upon the proxies lodged and upon the intentions expressed at the meeting by Mr Burton's separate creditors. Mr Wily did not put the matter to a formal vote but there was no dissent from his ruling. Mr Wily then sought a resolution:- "that Leslie Ross Burton and Marie Leslie Burton each be required to present debtors' petitions within seven days" The motion was proposed by Mr Lord of Belgravia and seconded by Mr Stafford of Stafford Quarries. Seven creditors voted in favour of the motion, the total value of their debts being $6,280,495.40. One creditor, Westpac Banking Corporation, which had proved for $695,239.15, voted against the resolution. Esanda Finance Corporation Ltd abstained from voting. The resolution was accordingly carried by 87.75% of the creditors (by value). The creditors voting in favour of the resolution were principally the creditors friendly to Mr Burton mentioned earlier, namely Stafford Quarries, Australian Machinery, Pat Hallinan Haulage, NJW, Brandown and Mr Kekatos. Belgravia was the other creditor to vote in favour of the resolution. The reason why the creditors who were friendly to Mr Burton voted in favour of the resolution that he present a petition was, in my opinion, that it had been agreed, or Mr Kekatos had decided and the creditors went along with his view, that that was the preferable course of action. It was in mind that, as soon as it could be arranged, another proposal would be put to creditors under s.73 of the Act with the intent that the creditors would then pass a resolution in favour of a composition and that the bankruptcy would come to an end. I shall later refer to this point in more detail. I see no error in the manner in which the meeting of creditors was held and no injustice to Mr Burton which arises out of the results of the meeting. Mr Burton alleged in his evidence that the minutes of the meeting did not correctly record the voting on the special resolution. He said that NJW and Brandown would not have voted for his bankruptcy and that he did not see Mr Hallinan who had proxies for NJW, Brandown and Pat Hallinan Haulage, vote in favour. However, there was no dissent from Mr Wily's ruling and the issue was not raised by Mr Burton at the time of the bankruptcy proceedings, notwithstanding that he had several conferences with his counsel over the period. Nor have any of the proxy holders given evidence that their votes were incorrectly recorded. I accept the minutes in preference to Mr Burton's evidence. Counsel for Mr Burton has submitted that the resolution was invalid as s.57 of the Act permits joint debtors to present a petition jointly against themselves. However, the resolution conformed with s.204(1)(d). Section 57 of the Act permits but does not require joint debtors to present a joint petition. It was submitted by counsel for Mr Burton that the distinct voting requirements were not explained to the creditors and that the separate identities of the meetings were blurred and at times lost. However, whatever may have been the position as to Mrs Burton, I am satisfied that the debts on which the voting turned were debts of Mr Burton and that no mistake was made in the voting so far as he was concerned. It is to be recalled that Mr Burton had signed two proposals to be put to the meeting. One was a proposal by Mr & Mrs Burton for the compromise of their joint debts, the other was a proposal by Mr Burton for the compromise of his separate debts. These proposals were formulated by Mr Burton and Mr Kekatos, not Mr Wily. And Mr Kekatos was the solicitor who called the meeting to consider these proposals. In the circumstances, I see no element of impropriety or injustice in Mr Wily's putting first to the meeting the proposal for the compromise of the joint debts and his turning then to the proposal for the compromise of the separate debts. That was what had been intended by the proposals. As both motions failed, there was no element of confusion about the matter so far as Mr Burton was concerned. All the creditors who voted in favour of the resolution that the debtors present their own petitions were his creditors, or claimed to be so. Certainly, resolutions should have been put separately, one with respect to Mr Burton and one with respect to Mrs Burton. But there was no prejudice to Mr Burton as a result of the procedure that was adopted. Dr Yeung, the Shell Co, Emmett and Amgrow are not recorded as having noted on the resolution that the debtors present their petition. However, their votes would have made no difference to the result. Furthermore, they all appear to have been hostile to Mr Burton. Emmett and Amgrow expressly oppose the annulment of his bankruptcy. None of the matters to which I have referred was raised before Einfeld J, who on 8 July 1993 made the sequestration order. Mr Burton was then represented by Mr Chris Hogg of counsel. Mr Hogg was not given instructions by Mr Kekatos concerning any problem as to the conduct of the creditors' meeting, nor was he informed by Mr Burton that there had been any problem. This undoubtedly was because, at the time, Mr Kekatos and Mr Burton were satisfied that the conduct of the meeting had been proper. What has gone astray, so far as they were concerned, was that the proofs of debt lodged by the creditors supporting the composition had not quite reached the required percentage. Mr Hogg sought to have the petition adjourned. He challenged Westpac's debt and he submitted that Mr Wily should not be the trustee. Einfeld J rejected those submissions. Some of the claims made by the friendly creditors appear to have been unfounded. The claims made by NJW and Brandown were subsequently rejected by Mr Wily and it is not now suggested that there was any foundation for them. The claim made by Stafford Quarries under a guarantee, for over $2m, was withdrawn in writing on 1 November 1993. Australian Machinery was also a Stafford company and its claim appears to have been unfounded. Mr Burton said in evidence that the Stafford Quarries' claim was "a complete fabrication" and that at the time of the meeting he "knew it was false". Mr Burton gave evidence that documents had been created to make it appear there was a debt due to Australian Machinery. Mr Burton said that documentation had been created by Mr Kekatos so as to "stack" the Part X meeting. Mr Burton gave this evidence, inter alia:- "You know there is evidence in these proceedings that you believed that you signed that documentation so that you could stack a Part X meeting?---Yes, I believe I said that, yes. And that was the conversation you had in late 1992?---There were various conversations but I believe that would be part of it, yes. You were discussing with Mr Kekatos in late 1992, stacking as Part X meeting?---Mr Kekatos was discussing it - yes, we were both discussing it. He put it to me on the Belgravia matter after the Belgravia - after he consented to the $1 million he said, we can deal with a thing called a Part X. ... You were intending to deceive all of your creditors in relation to that debt, the Australian Machinery Equipment Sales debt?---That was the proposition that Kekatos had put to me." Mr Burton said in evidence that the NJW debt was also a fabrication which Mr Kekatos had put together. Mr Kekatos, for his part, had inserted $250,000 in the statement of affairs as to the debt due to him, yet he lodged his unsupported proof of debt for $350,000 and voted for that sum. But for the fabrication of debts, the composition would have been soundly, not narrowly defeated, for the two main creditors, Belgravia and Westpac, voted against it. It was the voting of the friendly creditors, some of whose debts had been fabricated, which caused the special resolution that each of the debtors present a petition within 7 days to be passed. Mr Burton cannot be heard to complain about this. Proxies had been sent out to the friendly creditors on 24 March. The proxies provided for an affirmative vote as to the presentation of petitions if the composition failed. The proxies were executed accordingly and the votes followed accordingly. For these reasons, I am not satisfied that there was any matter concerning the calling of or the conduct of the creditors' meeting on 5 April 1993 which should lead the Court in its discretion to set aside the sequestration order, made as it was at a time when Mr Burton had a solicitor attending to his affairs and when he was represented by Counsel. GEORGE KEKATOS The next matter put by counsel for Mr Burton was the serious allegation that Mr Kekatos had secretly planned to bankrupt Mr Burton so as to conceal Mr Kekatos' misappropriations of moneys of Mr Burton and of Mr Burton's companies. It was submitted that Mr Kekatos' plan included bringing about procedural defects in relation to the Part X meeting so that, if the proposed compromise succeeded, it could be invalidated, thus keeping the prospect of bankruptcy alive. Allegations to this effect were denied by Mr Kekatos in his evidence. I do not find it necessary to determine whether there was any misappropriation. I assume, however, that some irregularities may have occurred. The evidence shows that Mr Kekatos' veracity is unreliable, that he was prepared to create documents and to have documents dated and signed so as to evidence transactions that had never occurred. On 22 December 1994, after investigation by Jean Sayers on behalf of the Law Society, Mr Kekatos' name was struck from the roll of solicitors. However, in my opinion, the probabilities of the case weigh heavily against the submissions. The problems with Mr Kekatos' trust account did not concern the affairs of Mr Burton and his companies alone, or even principally. In February and March 1993, Mr Kekatos was not facing a major problem with respect to Mr Burton and his companies with which Mr Kekatos had to deal. Mr Burton was not threatening Mr Kekatos and had made no claim upon him. After the creditors' meeting in April 1993 and until September 1993, Mr Burton continued to employ Mr Kekatos as his solicitor and to place reliance on him. By February 1993, Mr Burton appreciated that he could not settle all his debts. Mr Kekatos gave this evidence, which I accept, as to his instructions from Mr Burton:- "Go forward where?---Well, if we couldn't settle with Belgravia it was to go to a Part X. He did not tell you that on 12 February, did he? There were specific discussions for a very long time about his financial problems, as to who was the call the meeting, etcetera, and the documentation. We may not have been instructed to call Mr Wily but he was the person I had in mind at the time. How do you explain the fact that in your affidavit you swore that it was on 19 February after you returned from seeing Belgravia that he gave you the instructions concerning a Part X?---That's when he formally decided to throw in the towel and go a Part X because we couldn't settle with Belgravia in Melbourne. That's why we went to Melbourne." It appears that Mr Kekatos worked hard to achieve a Part X composition and that he very nearly succeeded. To achieve the result, false claims were made and claims were inflated. I have already mentioned details of this. I am satisfied that Mr Kekatos organised the group other than Esanda which voted in favour of the composition and was active in, and very nearly successful in, achieving the successful passing of a Part X composition. The idea of a s.73 composition, that is to say a composition after bankruptcy, had been put forward, even promoted, by Mr Wily at the conference on 25 February 1993. Mr Wily gave this evidence:- "Yes. So are you suggesting that they left that meeting with no advice from you as to what course of action should be taken?---They went away to consider what I had to say, consider whether they would follow a Part X course or, I believe, even consider the possibility of going bankrupt and the subsequent section 73 scheme." Mr Burton said in evidence: "Well, does it not sound inconsistent for you then to go and see Mr Wily and not discuss Part X in the meeting until the very end?---Well, Mr Wily suggested I go bankrupt and we could get me out on a section 73. That was his - that was his suggestion that I go bankrupt, stay in bankruptcy for seven or eight months and then do a section 73. That was his suggestion and that was what he wanted me to do and I wouldn't agree to that." It is not necessary to determine exactly what was said. I am satisfied that, after the conference, Mr Kekatos considered it to be in the best interests of his client, Mr Burton, that, if the Part X composition failed, Mr Burton should become bankrupt and should then seek a s.73 composition. I am satisfied that it was for this reason that Mr Kekatos delayed sending out the notices including the proxy forms to the 5 friendly creditors. When, probably after discussing the matter with other persons, he was satisfied that that was the course to be pursued, he sent out notices of the meeting to the friendly creditors including proxy forms filled out in favour of an affirmative vote for bankruptcy if the composition failed. The proxy forms were completed accordingly. Mr Kekatos gave evidence that Mr Stafford filled out the Stafford Quarries proxy form. That may be so, but he and Mr Kekatos would have consulted in relation to it. It would seem that Mr Burton himself did not approve of the passing of a resolution that he present a petition. His subsequent actions suggest that he did not wish to be made bankrupt. Nevertheless, I am satisfied that, in this matter, Mr Kekatos considered himself to be acting in the best interests of his client. The probabilities are, indeed, that Mr Kekatos realised that Mr Burton was hopelessly insolvent and that Mr Burton's best answer to his debts was a Part X or a s.73 composition. It was to this end that Mr Kekatos and Mr Burton had, for some months, been engaged in the fabrication of debts. Counsel for Mr Burton submitted that Mr Kekatos failed to advise Mr Burton that there was a risk that a resolution might be passed that the debtors present their petitions. I cannot draw any conclusions about the conversations between them. However, I am satisfied that this was one of the matters mentioned at the meeting on 25 February. It should be noted, moreover, that the proxy form filled out by Mr Kekatos went to Mr Burton's daughter, Mrs Fullagar, and to Mr Hallinan. Mr Kekatos did not keep the forms confidential to himself. They were available to Mr Burton to read and may have been read by him. It should also be noted that Mr Kekatos continued to pursue a Part X or s.73 proposal from June until September, when his instructions were terminated. He and Mr Burton consulted Gavin Thomas and a Mr Chapman during this period and attempts were made to formulate an acceptable proposal. The possibility of a further proposal was indeed one of the matters which Mr Hogg relied upon when opposing the making of the sequestration order. Counsel for Mr Burton submitted that Mr Hogg was not fully briefed by Mr Kekatos and that he had not been able adequately to represent Mr Burton. However, Mr Hogg was a counsel who had had considerable experience in insolvency matters. He was briefed in the bankruptcy and in the receivership proceedings and also in proceedings which had been brought in the Supreme Court against Mr Burton by Belgravia and by Emmett. Mr Hogg had had a number of conferences with Mr Burton and many appearances on his behalf. In June 1989, Mr Hogg advised that Mr Burton should consult Gavin Thomas. If there were any omissions in the instructions given to Mr Hogg, I am satisfied that the omissions were not deliberately made to harm Mr Burton and that Mr Kekatos briefed Mr Hogg in the expectation that he would act in the best interests of Mr Burton. Mr Burton had confidence in Mr Hogg and he continued to be Mr Burton's counsel even when Mr Kekatos' retainer was withdrawn. It was not Mr Kekatos who brought about the financial problems of Mr Burton and his companies. Those problems arose because of difficulties which the Burton companies encountered at that time. Mr Kekatos attempted to overcome them by "stacking" the Part X meeting and hoped to do likewise with a s.73 composition. There is only one other matter which I should mention specifically. It was submitted by counsel for Mr Burton that Mr Kekatos had received a cheque for $25,000 which should have been used to satisfy the debt due to Shell Co. and that Mr Kekatos applied that sum to other purposes. I do not have sufficient information to enable me, judicially, to decide that issue. If Shell Co. had been paid off, it would not have attended the meeting. It did attend but did not vote on the composition or on the resolution that the debtors should present their petitions. There was also a complaint that Mr Kekatos provided Mr Wily with information as to Mr Burton's affairs, including handing over relevant files and that he thereby breached legal professional privilege. I need not discuss for the purpose of these proceedings to what extent the privilege remained with Mr Burton or vested in his trustee. Mr Kekatos was an examinable person. Mr Wily sought production of his files and they were provided. If there is truly a complaint about that, it is a matter outside the scope of the present proceeding. MR H.J. WILY Another challenge to the sequestration order comes from the allegations made with respect to Mr Wily's actions. These allegations were also made in support of the application for the removal of Mr Wily as trustee of Mr Burton's estate. Mr Burton preferred his advisers to arrange his affairs to his benefit, even if this meant fabricating transactions and "stacking" meetings etc. It was no doubt a shock to him that, when the composition failed at the creditors' meeting of 5 April 1993, Mr Wily should proceed to the resolution that the debtors should present their own petitions. Mr Burton was further annoyed that Mr Wily should demonstrate his independence when he was appointed receiver and should seek to take control of the assets which Mr Burton had disclosed in his statement of affairs, the Toyota 4WD and the joint interest in the family home. Mr & Mrs Burton had arranged for the sale of the home to Urmar Pty Ltd for $280,000, the contract being dated 8 March 1993. Mr Wily placed a caveat on the property so that he could consider its value. It did not please Mr Burton that, when appointed trustee, Mr Wily should act in the interests of the creditors. Arising from Mr Burton's disappointment with Mr Wily, there were a large number of accusations made that Mr Wily wrongly failed to do something that he should have done or wrongly did something that he ought not to have done. I do not propose to discuss all the separate complaints made. Many were trivial and I am left with the overall impression that the attack upon Mr Wily has been due to his acting independently as the Court would expect a receiver and trustee to act. It was submitted that Mr Burton was Mr Wily's client, that Mr Wily gave advice to Mr Burton at a meeting of 25 February 1995 and that thereafter his office advised on the steps to be taken for the preparation of the Part X meeting. It was submitted that, in the circumstances, Mr Wily should not have signed a declaration before the creditors' meeting of 5 April 1993 or consented to being appointed the receiver of Mr Burton's estate or to being appointed by the Court as trustee of Mr Burton's bankrupt estate. Mr Wily signed, for example, a declaration on 5 April 1993 which stated that he had not "acted as accountant, or other professional adviser, for the debtor, or to a creditor". Mr Burton gave evidence that, at the meeting of 25 February 1993, Mr Wily advised him generally with respect to his affairs. However, I think it is unlikely that Mr Wily, whose specialty is insolvency, would have done so or would have been approached for such a purpose. There is no evidence that Mr Wily was briefed before the meeting with the documents which he would have required were he to advise on the relationship between Mr Burton and any particular creditor. Nor is it suggested that Mr Burton or Mr Kekatos took, after the meeting, any action in relation to Mr Burton's affairs other than the calling of the Part X meeting. I accept the evidence of Mr Wily, Mr Wily's assistant Mr D.W. Maher and Mr Kekatos that the conversation at the meeting centred around the nature and incidents of a Part X meeting and the possibility of a s.73 composition after bankruptcy. I am satisfied that Mr Wily gave only such advice as was appropriate for a person who might become the President of a creditors' meeting or the trustee of a composition with creditors or the trustee in bankruptcy. The meeting on 25 February took about 1 1/4 hours. This is consistent with a meeting of the type described by Mr Wily in his evidence. Mr Wily later charged $5000 for the meeting and the subsequent assistance which was given in relation to the creditors' meeting including, I assume, his attendance thereat. This sum is also consistent with Mr Wily's approach, being that of an expert in insolvency. Later $4000 was paid into the trust account of Mr Gavin Thomas in the expectation of a Part X meeting. I am satisfied that there was nothing said or done at the meeting of 25 February 1993 which would have made it improper for Mr Wily to have been President of the meeting of creditors in March 1993, the trustee of the composition had it been approved, the receiver of Mr Burton's estate or his trustee in bankruptcy. A letter of 30 April 1993 from Mr Wily's office described Mr Burton as a "client" but the letter dealt with funds which had been received and, in this context, the term was appropriate. There was a dispute between Mr Burton and Mr Wily as to whether Mr Burton said at the meeting that he did not wish to go bankrupt. Mr Wily denied that Mr Burton said that he was keen to avoid bankruptcy and gave evidence that all Mr Burton told him was that he wanted to put forward a Part X proposal. However, it is clear that Mr Burton wished to avoid bankruptcy, which is why advice was sought as to a Part X meeting. It is also clear that Mr Wily gave advice both as to a Part X composition and as to a s.73 composition after bankruptcy and that a s.73 composition was one option which Mr Burton and Mr Kekatos were to consider after the meeting. I do not accept that it was made clear to Mr Wily that Mr Burton wished to avoid bankruptcy at any cost. Mr Kekatos at least had it in mind that, if the Part X meeting did not vote for a composition, then there should be a bankruptcy and that a composition should be put to a meeting of creditors held under s.73. I do not see that there was any conflict arising when Mr Wily subsequently put to the Part X meeting the resolution that Mr & Mrs Burton should present their own petitions. That had been one of the options which had been discussed at the meeting of 25 February and it was an option which had been taken up by all the proxies lodged on behalf of the friendly creditors. The next matter that was raised was that, on 9 August 1993, Mr Wily received from the Court a certificate of trusteeship stating that Mrs Burton had been made bankrupt and that he was trustee of her estate. Subsequently, the Court informed Mr Wily that an error had been made, that Mrs Burton's estate had not been sequestrated and that the certificate in relation to her had been cancelled. It was submitted by counsel for Mr Burton that Mr Wily must have been aware, or at least put on enquiry, that an error had been made and that he had behaved wrongly in proceeding to write to Mrs Burton with a view to commencing to administer her estate. Evidence was also adduced from Mr Burton and from Mr Clarke that Mr Wily informed Mr Burton, "We've got your wife too". I am satisfied that whatever were the precise words said by Mr Wily, he made no spiteful or gloating comment. I am satisfied that he and his employees were originally unaware of the Court's error and that the steps that were taken in relation to Mrs Burton's estate were only the formal steps which ordinarily followed the receipt of a certificate of trusteeship from the Court. The next matter is that a creditors' meeting to consider a s.73 proposal was not called. A creditors' meeting was held on 2 September 1993 and was adjourned to 9 September 1993, when it was resolved that the trustee call a meeting under s.73. At the meeting of 9 September, Mr Wily referred to an amount of $211,000 which was owing by a company, White Constructions, to the "Tri Star Group". Mr Wily informed the meeting that, if the sum had been owing to Mr Burton personally, the $211,000 could be available to creditors under a s.73 proposal. Mr Wily explained that, if a s.73 meeting was called, the offer put to creditors could be for an amount of $60,000, the payment of which had been foreshadowed, and also any interest which the estate may have in the $211,000 owing by White Constructions. Subsequently, Mr Wily received a letter from Mr Clarke confirming that he was prepared to pay to the creditors of Mr Burton an amount of $60,000 if a proposal pursuant to s.73 of the Act was approved by the majority of his creditors. However, that matter was only a part of the proposal outlined to the creditors on 9 September 1993. Mr Burton was unwilling that the White Constructions debt should form a part of the composition. On 13 July 1993, Mr & Mrs Burton signed an agreement with Belgravia under which, inter alia, the White Construction's debt was to be collected and paid to Belgravia. In the litigation which concerned the White Constructions debt, Mr Burton gave evidence denying that the debt was due to him, and on 30 May 1994, I held that the sum was not payable to Mr Burton's estate but was payable to Belgravia which held a fixed and floating charge over Tri Star Pre Mix Concrete Pty Limited, one of Mr Burton's companies. The proposal foreshadowed by Mr Wily was therefore not progressed. No proposal was executed by Mr Burton. In September 1993, Mr Burton terminated Mr Kekatos' retainer and instructed Brown & Rouch. During October 1993, there was correspondence between Mr Wily and Brown & Rouch concerning a composition upon the basis of a payment of $60,000 and the assignment of the White Constructions' debt, but no formal proposal eventuated. Mr Wily wrote to Brown & Rouch on 1 November 1993 referring to a meeting with Mr Burton on 29 October and referring to an understanding between them that the s.73 meeting proposal would be held in abeyance pending full disclosure by Mr Burton of all his assets. On 19 November 1993, Mr Wily received a new statement of affairs from Mr Burton. On 23 November 1993, Mr Wily wrote to creditors stating, inter alia:- "Creditors will recall that at the last meeting of the creditors of Leslie Ross Burton it was agreed that a meeting be called to consider a Section 73 proposal of the debtor. In endeavouring to do so delays were experienced in obtaining the proposal from Mr Burton and his solicitor and during the interim, investigations revealed assets not previously disclosed. Mr Burton also changed his solicitor. It was agreed with Mr Burton's new solicitor that I would not call a Section 73 meeting until I had received Mr Burton's amended Statement of Affairs providing me with much needed information into Mr Burton's affairs. Subsequent to that correspondence I was advised by his then solicitor that he no longer acted for Mr Burton. The affairs of Mr Burton are extensive and complex and at this time there is insufficient information to fully progress this administration. Examinations need to be called on many of these matters to obtain the necessary information." In my opinion, the matter never progressed to the stage where a composition could responsibly be put to creditors. The $60,000 offered by Mr Clarke was far less than the $400,000 which had been offered by NJW at the meeting of March 1993. Much of it would have been taken up by the costs of the receivership and the administration in bankruptcy. Mr Wily had hopes of claiming the $211,000 due by White Constructions, but that claim was ultimately unsuccessful and Mr Burton was not prepared to support it. Mr Wily looked around for other assets and sought a further statement of affairs from Mr Burton. And he then examined a number of persons including Mr Burton and Mr Kekatos. But no firm proposal eventuated and no proposal was signed by Mr Burton. Another matter raised concerns a compromise made between Mr Wily and Stafford Quarries, which I approved on 8 April 1994 after dealing with issues which counsel for Mr Burton and NJW had raised. The position as between Mr Burton and Stafford Quarries was as complex as any matter which concerned Mr Burton and his companies. Mr Wily, as trustee, was not given access to any useful books of account. On 2 April 1992, Mr Burton had entered into an agreement under which he had transferred his shares in Erolfield Pty Limited ("Erolfield") to Stafford Quarries for $175,000. Fifty thousand dollars had been paid by Stafford Quarries under that agreement but the balance of $125,000 had not been paid and was still owing. Stafford Quarries claimed at the creditors' meeting of 5 April 1993 to be owed $2,800,000. This claim was supported by Mr Burton's statement of affairs. On 1 November 1993, Stafford Quarries wrote to Mr Wily acknowledging that the debts insofar as they were based on a guarantee were unenforceable. The letter concluded by stating that Stafford Quarries was analysing its accounts to see what moneys were due from Mr Burton. Stafford Quarries later made a claim for $273,265. On 4 November 1993, one of Mr Wily's assistants, Mr D.H. Sampson, wrote a report in which he stated that he had examined the statements and invoices of Stafford Quarries and that the amount due by Mr Burton appeared to be $88,000, while the balance was referrable to claims against organisations such as Picton Supermix and Tri Star, not Mr Burton. On 8 November 1993, Mr Wily, Mr Stafford and Stafford Quarries executed a deed whereby Stafford Quarries agreed to pay Mr Wily $30,000 and to give up all claims against Mr Burton's estate and whereby the estate gave up all claims against Stafford Quarries. The deed provided for the obtaining of the Court's approval. The settlement and deed were approved by the Court on 8 April 1994 after being approved by a meeting of creditors held on 21 December 1993. I do not think that I need deal with all the particular matters which have been raised by counsel for Mr Burton with respect to this matter. I am satisfied that Mr Wily acted properly and in the best interests of the creditors. The sum of $30,000 which he obtained on that compromise was an important sum for it enabled him to continue his enquiries into Mr Burton's affairs. Mr Wily has given evidence that he considered the settlement to be "a very fair arrangement" and that, "There was considerable confusion about the affairs of Mr Burton and just exactly who owed who what money." I accept Mr Wily's assessment of the situation as a reasonable one and that it was arrived at in the interests of creditors. It was submitted that Mr Wily should have rejected the proposed settlement with Stafford Quarries and should have accepted a written offer from Shantcove Pty Ltd, a company associated with Mr Clarke, to pay $50,000 for the assignment of the debt of $125,000 due by Stafford Quarries. A conditional offer of $65,000 was made on 5 November 1993, and on 18 November 1993, an unconditional offer of $50,000 was made, it being said "Shantcove Pty Ltd have arranged a bankers opinion to be faxed to your office this day in support of our capacity to perform". However, Mr Wily considered that he should reject the offer, which was indeed a strange one. The settlement arrived at with Stafford Quarries was a settlement of all claims on both sides. Having regard to the principle of mutual debts and credits set out in s.86 of the Act, it is doubtful that the debt due by Stafford Quarries could or should have been isolated from the other dealings in respect of which moneys were alleged to be due. Mr Wily could not even have been sure that the claims made for approximately $2,000,000 under a guarantee, would not be pursued. It has been submitted by counsel for Mr Burton that Mr Wily misled the Court and creditors in that the deed which was submitted to the Court and to creditors for approval, recited that the security for the debt of $125,000 was a lien over the shares in Erolfield, whereas the true position was that the security was over shares in Stafford Quarries. The confusion may have arisen from the fact that the executed agreement of 2 April 1992 under which the Erolfield shares were transferred, referred to security over shares in Stafford Quarries whereas a copy of the agreement which is in evidence shows the name of Stafford Quarries crossed out and the name of Erolfield written in in Mr Kekatos' handwriting. It would have been logical for the transferred shares to be specific security for the purchase price. In any event, the security was not a significant matter in the approval of the deed of settlement. Stafford Quarries itself was in financial difficulties at the time. The important point is that Mr Wily did not realise that the deed that was submitted to the Court contained any error in the statement of the security and, although the resolution of the creditors' meeting was challenged on behalf of Mr Burton and NJW, no issue was raised as to this matter. The next complaint made was that Mr Wily relied upon the matters put to him by Mr Kekatos after Mr Burton had terminated Mr Kekatos' retainer and had engaged other solicitors. The submissions put in this respect were as follows:- "Burton terminated Kekatos' retainer in early October 1993 and reported him to the Law Society for misappropriation and failure to account for moneys. Kekatos promptly suggested to the trustee that he should subpoena him for all Burton's files, the trustee requested and received them and thereafter Kekatos gave the trustee full co-operation in informing him of Burton's affairs. Wily conducted no investigation of Burton's serious complaints against Kekatos and continued to admit Kekatos to vote at creditors' meetings for the full amount of his claims without question - in contrast to his attitude to some other creditors such as NJW. No questions were asked of Kekatos about these matters at the public examination in May 1994 (Sampson T877-881). It is submitted that in all the circumstances Wily displayed an inappropriately partial attitude to Kekatos, one which looks like it was influenced by the assistance which Kekatos was giving him." However, I do not consider that Mr Wily was partial towards Mr Kekatos. One of Mr Wily's problems was that he could not obtain any useful accounts which disclosed Mr Burton's affairs and he was unable to obtain from Mr Burton any reliable statement as to his affairs and that of his companies. It is understandable that Mr Wily would have wished to obtain the files of Mr Kekatos and any information which Mr Kekatos was prepared to give. It does not seem to me that any action taken by Mr Wily in relation to the information provided by Mr Kekatos was taken in breach of Mr Wily's duty as trustee of Mr Burton's bankrupt estate. In particular, I reject the contention that Mr Wily was not entitled to examine the files of Mr Kekatos. Such an examination was a power conferred on Mr Wily as trustee in bankruptcy of Mr Burton's affairs. It was submitted that Mr Kekatos was not questioned in detail at his examination as to his claim to be owed $350,000 for legal fees and as to the defalcations and irregularities which Mr Burton alleged. However, the examination took place at a time when Mr Wily was seeking to ascertain what assets might be recoverable for the benefit of the estate. Mr Wily has not yet called for formal proofs of debt, and has not indicated that he accepts that any sum is due to Mr Kekatos. If Mr Kekatos lodges a formal proof, Mr Wily will no doubt examine it thoroughly and will make further inquiries of the Law Society and of Jean Sayers. At the present time, the position is that Mr Wily has been informed by Jean Sayers that the amount of the irregularities concerning Mr Burton affairs would be less than the outstanding sums billed by Mr Kekatos to Mr Burton. Mr Wily could not have been expected at an early stage to examine rigorously the possible claims of creditors. His funds were limited. Mr Burton did not make available moneys or realisable assets which would have enabled Mr Wily to fund detailed investigations into all the many facets of Mr Burton's complex affairs. Another matter which was raised concerned a Toyota four-wheel drive vehicle. This vehicle was disclosed as an asset by Mr Burton in his March 1993 statement of affairs. It was proffered by Mr Burton to his creditors in the proposal put forward for the composition of his separate estate. Mr Wily, when appointed receiver, understandably claimed the vehicle. Thereafter, Mr A.P. Fullagar, who is the husband of Mr Burton's daughter, Mrs Ros Fullagar, claimed that, at all material times, the vehicle was his. Subsequently, a written agreement between Mr Fullagar and his then employer Ross Burton Pty Ltd with respect to the vehicle was produced. In September 1993, Mr Fullagar's solicitors located and forwarded to Mr Wily an invoice which showed the original purchaser of the vehicle to be Ross Burton Pty Ltd. The owners book and registration papers have not yet been produced. I cannot see that there was anything done by Mr Wily as receiver or as trustee of Mr Burton's estate which was inconsistent with his duty to collect the assets of the bankrupt for the benefit of the bankrupt's creditors. Certainly, it was not until September that the invoice was produced to Mr Wily. Counsel for Mr Burton also submitted that Mr Wily acted improperly in seeking to recover two greyhounds which Mr Burton described as "family pets" and which were not disclosed by Mr Burton in his statement of affairs. Mr Wily eventually sold the dogs to Mr Burton or Mrs Fullagar for $3,000. The evidence before me suggests that the greyhounds had a value for breeding or racing and that Mr Burton had been a successful owner of racing dogs. I am satisfied that the action taken by Mr Wily was appropriate. INSOLVENCY I turn now to the state of Mr Burton's indebtedness. On the figures available to Mr Wily, the indebtedness owed or claimed at the time of the trial was $5,396,087 as follows:- Westpac $2,900,000 Belgravia $1,105,495 Emmett $ 400,000 Kekatos $ 350,000 Independent Cement & Lime $ 341,137 Dr. E. Yeung $ 100,000 Aust. Tax Office $ 53,136 Amatek $ 30,745 CBFC Leasing $ 34,946 Shell Australia $ 65,000 Iraglen Pty Ltd $ 15,628 It was nevertheless contended on behalf of Mr Burton that, should the bankruptcy be annulled, he would be "in the black". It was not in dispute that the issue of solvency is relevant to the exercise of the Court's discretion. Under s.52(2) of the Act, a court may, notwithstanding that the petitioner's debt is outstanding, refuse to make a sequestration order if satisfied that the debtor "is able to pay his debts". This is normally taken to refer to a debtor's ability to pay his debts as they fall due or at least "to pay immediately in the sense of a reasonable time". Re Sarina; Ex parte Council of the Shire of Wollondilly (1980) 43 FLR 163 at 165 which was affirmed by the Full Court [1980] 32 ALR 596. WESTPAC A large debt is owed to Westpac and proof was given at the trial that the amount outstanding, principally under guarantees, was $2,968,294. I think that no purpose would be served by my discussing all the details of the Westpac debt. At the time of the trial, that was approximately the amount owing. As Westpac settles with the principal debtors whose debts are supported by Mr Burton's guarantees and as Westpac exercises its rights under securities given by the principal debtors and others, the sum will be reduced. Counsel for Mr Burton pointed to a valuation of $19m in 1992 for one property which was a security for a debt. The witness who gave evidence on behalf of Westpac, Mr S.G. McIntyre, said that in the view of the bank, the realisable value of that security was nil. No purpose would be served by my attempting to place a value on that security, or for that matter on any other of the securities held by Westpac. The evidence is quite insufficient to enable me to form a considered view. The position at the time of trial was that Mr Burton was indebted to Westpac to the extent of $2,968,294 or thereabouts and was unable to pay any part of that sum. Westpac is not required to value its securities save those provided by Mr Burton. The only such security is the family home, which has a value of $300,000 but is jointly owned. Counsel for Mr Burton submitted that, if Westpac pressed its claim against Mr Burton, Mr Burton would be entitled to be subrogated to its securities. Reference was made to State Bank of New South Wales v Geeport Developments Pty Limited (1991) 5 BPR 11,947. However, Mr Burton could not rely on the principle of subrogation until he had paid the debt, which he is unable to do. At the time of the trial, it appeared that Westpac and Stafford Quarries were close to settling the position as between themselves and that the settlement would include what was known as the Kerstanne debt, which was a debt guaranteed by Mr Burton. If settlement occurs, the moneys due by Mr Burton to Westpac will dramatically diminish. Nevertheless, there will still be sums of substance due by Mr Burton to Westpac. I need not deal with the submissions put forward by counsel for Mr Burton to the effect that Westpac failed to apply its security realisation account in reduction of the overall debt and allowed interest to accumulate on the greater sum or with his submission that Mr Wily's lodgment of a caveat stopped the sale of the home of Mr & Mrs Burton and prevented the purchase price being received by Westpac and applied in reduction of Westpac's security realisation account. Matters such as these do not show that Mr Burton is not a debtor to Westpac in a very substantial sum. BELGRAVIA Belgravia lodged a proof of debt for $1,105,495. Counsel for Mr Burton relied first upon a deed dated 16 July 1993 made between Belgravia and Mr & Mrs Burton which required Mr & Mrs Burton to take a number of steps including the payment to Belgravia of $150,000 together with the recovery of debts called "the White debt" and "the ICM debt". Under the deed, Belgravia agreed not to seek a sequestration order against the estate of Mr or Mrs Burton and agreed to vote at a meeting of creditors of Mr Burton as directed by Mr Norman Burton. Those conditions were preceded by a recital that Belgravia proposed to accept as an accord in satisfaction of its judgment debt the sum of $850,000 together with interest at the rate of 10% per annum, the $850,000 apparently the total of the $150,000 specified in the deed the amounts of the White debt and the ICM debt. It is not shown in the events which happened, that there was any accord and satisfaction as proposed and certainly the deed did not constitute a release of Mr Burton from the judgment debt. Mr Burton was, in any event, a bankrupt at the time the agreement was executed. Subsequently, there were further negotiations between Mr Burton and Mr Lord of Belgravia. A deed was prepared for execution by NJW and Belgravia which, inter alia, was to release Mr Burton from all claims which Belgravia made against him. The draft deed recited, inter alia, that Belgravia disputed that NJW and Mr & Mrs Burton were released from the debts owing by them or that the obligations under the July agreement had been complied with. At the time of the trial, that agreement had not been executed though Mr Burton still hoped that it would be. At the time of the trial, Belgravia's judgment debt for a little over $1m was still substantially outstanding. EMMETT There was on 3 August 1993, a complicated agreement entered into between Emmett and NJW. This recited, inter alia, that Emmett had entered judgment against Mr Burton in the sum of $420,537.54 on 20 September 1991 and that, on 4 March 1992, had entered a further judgment against Mr Burton in the sum of $57,082.10. The deed provided for the payment by NJW to Emmett of $50,000 by certain instalments. Clause 2 of the deed provided that, in consideration thereof, Emmett assigned to NJW its right, title and interest in the judgment debts provided that, NJW would pay to Emmett in reduction of the judgment debts any amount which it recovered from the debtor in excess of $100,000. The agreement provided in clause 3, that Emmett would not thereafter take legal proceedings to enforce payment by Mr Burton of the judgment debt and would not vote at any meeting of Mr Burton's creditors provided that "this deed shall not be construed as a release by Emmett of its rights against Burton ...". I would not conclude from the deed without further explanation that Mr Burton was released thereby. On its face, the agreement specified that Mr Burton was not released. Mr Burton indeed was not a party to it. KEKATOS The next matter which arises is the sum claimed by Mr Kekatos. It would take a great deal of investigation to ascertain whether there was in fact any sum due by Mr Burton to Mr Kekatos or by Mr Kekatos to Mr Burton. The information before the Court does not permit any judicial conclusions to be drawn about the matter. SHELL CO Shell Co. claims $65,000. This is the unpaid balance of a judgment for $440,000 obtained by Shell against Mr Burton in 1992. Mr Burton alleges that he gave Mr Kekatos two cheques, one for $25,000 and the other for $15,000 to pay Shell Co. which Mr Kekatos misappropriated. However that may be, it is no answer to Shell's claim for $65,000. In February 1993, there were negotiations between Mr Burton and Mr Kekatos on the one hand, and officers of Shell on the other. Twenty five thousand dollars was offered by Mr Burton in settlement of the amount owing. Shell sought $32,500. Subsequently, Shell informed Mr Kekatos that $25,000 was acceptable. Mr Burton gave Mr Kekatos a cheque for $25,000. At a later date, Mr Kekatos endorsed it and paid it into the joint account of his wife and himself. I do not propose to come to a view as to whether there was or was not any misappropriation of funds. Mr Kekatos in his evidence denied it, saying that the cheque for $25,000 was for fees due. For present purposes, it is sufficient that there was no settlement with Shell. Later, in July 1993, Shell informed Mr Kekatos that it would settle the debt for $10,000. According to some evidence before the Court, Mr Kekatos told Mr Burton that Shell wanted $15,000 to settle and a member of Burton's family gave Mr Kekatos a bank cheque for $15,000 payable to Shell. Mr Kekatos negotiated the bank cheque for $15,000 and paid it into his own account. Counsel for Mr Burton said that by reason of these matters the opportunity to settle Shell's claim was lost by Mr Kekatos' dishonesty. That may be so, but Shell's debt is still outstanding. Counsel submitted that Mr Burton would be entitled to obtain an indemnity from the Law Society's Fidelity Fund for the amount of the Shell debt. Again, that may or may not be so. A final accounting as between Mr Burton and Mr Kekatos has not been undertaken. Counsel for Mr Burton has made a calculation that there should be a credit in Mr Burton's favour of the order of $500,000. The difficulty with that submission is that it relies upon counsel's calculation, which in turn relies upon the acceptance in full of Mr Burton's evidence and contentions. The issues as between Mr Burton and Mr Kekatos have yet to be resolved. INDEPENDENT CEMENT & LIME The next matter that was raised was the debt due to Independent Cement & Lime. The claim of Independent Cement & Lime was for $341,137 due under a judgment entered by default in proceedings under s.592 of the Corporations Law against both Mr Burton and his wife. Recently, Mrs Burton has had the judgment against her set aside; but Mr Wily has not taken the step of applying to set aside the judgment against Mr Burton. In her affidavit in support of the application to set aside, Mrs Burton alleged that she had retired as a director before the company's debts were incurred. This ground would not apply to Mr. Burton. Mr Burton has given evidence that, in March 1994, Independent Cement & Lime agreed to settle the debt for $45,000. However, the solicitor for Independent Cement & Lime has deposed that, although a deed was then prepared, no agreement was reached and the deed was not executed. It does not seem to me that Mr Wily can be criticised for not involving the estate in litigation with Independent Cement & Lime. Mr Burton's affairs tend to be complex and confused. DR E YEUNG Dr E. Yeung has made a claim of $100,000 against Mr Burton. This debt was disclosed by Mr Burton in each of his statements of affairs. Mr Burton now says that he has a cross-claim against Dr Yeung which would reduce the debt to nil. However, the present position is that the debt from Mr Burton to Dr Yeung has been admitted whilst any cross-claim has neither been specified in any statement of affairs by Mr Burton as a net asset nor pursued. It was also submitted by counsel for Mr Burton that Dr Yeung was a co-guarantor of the Stafford Quarries debt and that Mr Burton would be able to set off against this claim by Dr Yeung any moneys he or his estate might pay to Stafford Quarries debt. That may be so, but no payment has been made to Stafford Quarries. Mutual unspecified debts have been released. AUSTRALIAN TAXATION OFFICE There is a debt due to the Australian Taxation Office in the sum of $53,136. The point put on behalf of Mr Burton was that, if the bankruptcy was annulled, this debt could be offset against tax losses. However, a debt due for income tax assessed in one or more years is not capable of being off-set by an entitlement to claim in other years deductions for past losses. Counsel for Mr Burton also submitted that, if the bankruptcy were annulled, Mr Burton would be able to settle and resolve this debt. That may be so, but the debt is due and owing. AMATEK There is an amount of $30,745 owing to Amatek. The case put for Mr Burton was that this debt should have been paid out of moneys received by Mr Kekatos from a sale which occurred in 1992. I need not go into the facts of this matter as I have already expressed my view on the claims of misappropriation by Mr Kekatos. CBFC LEASING CBFC Leasing has claimed $34,946 under guarantees. The guarantees were not produced during the hearing of the present proceedings. Mr Burton gave evidence that he could not recall giving any relevant guarantees except one in relation to a sum of $3,959.63. This is clearly a matter in which the claim has been made and, in due course, it will need to be resolved by the trustee of Mr Burton's estate. IRAGLEN A claim has been made by Iraglen for $15,628. This is in the same position. The information before the Court does not enable the Court to make a judicial determination as to whether or not any sum is due. INSOLVENCY The overall position, however, is that Mr Burton is clearly insolvent in the sense that there are substantial judgment debts or admitted debts which he is unable to pay. All that can really be said in his favour about the matter is that the debts will tend to resolve themselves over a period as settlements are made by the principal debtors with the creditors and as securities held by the creditors are sold. The many matters raised on behalf of Mr Burton in support of the contention that he is not insolvent and would be able to settle with his creditors if the bankruptcy was annulled, of themselves provide strong grounds why Mr Burton's affairs should be resolved by a trustee in bankruptcy. The precise state of Mr Kekatos' liabilities has not been determined. Mr Wily has not called for proofs of debt although proofs have been lodged for the purposes of creditors' meetings. When and if Mr Wily receives moneys which will enable a distribution to creditors, he will make a formal call for proofs of debt and formal proofs will be lodged and Mr Wily will rule upon them. But that is a matter for the future. For these reasons the grounds propounded to support the application and the removal of Mr Wily as trustee and receiver fail. They provide no significant reason for the making of the orders. DISCRETION There are, indeed, overwhelming reasons why the Court should not exercise its discretion to make an order as sought. When Mr Burton's estate was sequestrated, his debts amounted to $6m or thereabouts and his assets were negligible. He had for several years conducted the affairs of companies as if they were his affairs. He used companies' moneys as his own. He appears to have kept totally inadequate records. In any event, he has failed to disclose useful records. He has continuously sought to settle large debts by the payment of trifling amounts. On his own admission, he has fabricated debts with a view to affecting the voting at a Part X meeting. He has disclosed no useful assets or income. His most valuable asset, the Brandown shares, was disposed of to a family company for a nominal amount. It is in the public interest, as well as in the interest of creditors, that the affairs of such a person be investigated in bankruptcy. The present is a case similar to that of Chiragakis v Deputy Commissioner of Taxation (1986) 68 ALR 527 where at 535 Lockhart J, with whom Fisher & Davies JJ agreed, said that the circumstances "all point to the conclusion that this is a proper case for the exposure of the appellant's affairs to the processes of compulsory examination and other machinery of the Act in a formal bankruptcy administration." Mr Burton now seeks an annulment, an effect of which would be that the assets such as the Brandown shares would not be available to creditors. He seeks this at a very late stage on the excuse that it was not until mid-1994 that he was informed that there were grounds for seeking annulment. Yet the matters upon which he now relies were all known to Mr Burton and his solicitor Mr Kekatos. During 1993, Mr Burton was in constant touch with his legal advisers, Mr Kekatos, Mr Hogg and Messrs Brown & Rouch. He had other advisers such as Gavin Thomas and Mr Chapman. Throughout 1994, Mr Burton had legal advisers assisting him. It is far too late, after all the litigation that has eventuated, now to seek an annulment. The bankruptcy is being conducted in the interests of creditors and with some success. It would not be in the interests of creditors to annul the bankruptcy. No creditor supports the orders sought. Several have expressed opposition to the making of any order of annulment. And the creditors, both at the Part X meeting and by the appointment of Mr Wily as receiver and trustee, have expressed their confidence in him. Mr Wily has been assiduous in seeking to locate assets for the benefit of creditors. In addition to the Brandown application, Mr Wily was concerned with the White Constructions application and the application concerning Locpat Pty Ltd and Urmar Pty Ltd, trustees of the Ross Burton Family Trust. Creditors will benefit from these proceedings. It appears to me that Mr Wily has conducted himself entirely as a trustee should. I have not dealt with all the discretionary matters upon which counsel for Mr Wily relied. Neither, for that matter, have I dealt with all the points that counsel for Mr Burton raised. There comes a time when points raised, though they may be valid in themselves, are mere trivia. That situation occurred in these proceedings. It follows that the application for annulment and the removal of Mr Wily as receiver and trustee should be dismissed. It was agreed by counsel that costs should be reserved. The orders of the Court will be: 1. The application to annul the bankruptcy and to remove Mr N J Wily as trustee of the bankrupt estate is dismissed. 2. The Court declares that, by virtue of s.120 (1) of the Bankruptcy Act 1966 (Cth), the transfer by the bankrupt, Leslie Ross Burton, of 2 shares in Brandown Pty Ltd to NJW Contractors Pty Ltd is void as against the the trustee of the bankrupt estate. 3. The Court orders that the records of NJW Contractors Pty Ltd be rectified so as to record Mr H J Wily in his capacity as trustee of the bankrupt estate of Leslie Ross Burton as the holder of the shares. 4. The Court orders that costs be reserved and that the parties bring in within 21 days short minutes of the orders as to costs which are proposed. 5. The cross-claim on behalf of NJW Contractors Pty Limited against the first respondent and the third respondents be dismissed. I certify that this and the 79 preceding pages are a true copy of the reasons for judgment herein of the Honourable Justice Davies. Associate: Date: 26 July 1995 Counsel for Leslie Ross Burton: P.M. Biscoe QC M.B. Evans Solicitors for Leslie Ross Burton: T.P. Boyle & Associates Counsel for Hugh Jenner Wily: M.F. Holmes QC Mr J.K. Chippindall Solicitors for Hugh Jenner Wily: Aitken & Magney Counsel for Brandown Pty Limited: J. Gleeson Solicitors for Brandown Pty Limited: Doherty Partners Counsel for NJW Contractors P.M. Biscoe QC Pty Limited: M.B. Evans Solicitors for NJW Contractors Pty Limited: T.P. Boyle & Associates Counsel for P.J. Hallinan, M.D. Rodgers and G.F. Rodgers: J. Gleeson Solicitors for P.J. Hallinan, M.D. Rodgers and G.F. Rodgers: Norton Smith & Co. Dates of hearing: 21/10/94 24/10 - 27/10/94 31/10 - 2/11/94 30/1 - 3/2/95 10/2/95 Date of judgment: 26 July 1995