FEDERAL COURT OF AUSTRALIA Moran v Robertson [2012] FCA 371 Citation: Moran v Robertson [2012] FCA 371 Appeal from: Robertson v Moran [2011] FMCA 496 Parties: RUSTY JOHN MORAN AND ANOR v ALEXANDER ROBERTSON AND ANOR File number: NSD 1380 of 2011 Judge: FLICK J Date of judgment: 13 April 2012 Catchwords: BANKRUPTCY – application to have personal insolvency agreements set aside – terms of agreement unreasonable – derisory dividend payable to creditors – some creditors electing not to participate in distribution GUARANTEES – construed strictly in favour of guarantor PRACTICE AND PROCEDURE – filing of written submissions after hearing – submissions manifestly in excess of that contemplated TRUSTS – personal liability of trustee Legislation: Bankruptcy Act 1966 (Cth) ss 81, 116, 188, 222, 239 Bankruptcy Legislation Amendment Act 2004 (Cth) Federal Court of Australia Act 1976 (Cth) s 27 Cases cited: Agushi, Re; Ex parte Farrow Mortgage Services Pty Ltd (1992) 8 ACSR 549, considered Andrew Nicholas Emmett, Re; Ex parte Beneficial Finance Corporation Ltd (unreported, O'Loughlin J, 16 December 1991), considered Ankar Proprietary Ltd v National Westminster Finance (Australia) Limited (1987) 162 CLR 549, cited Beard v Prestige Baking Industries Pty Ltd (1981) 52 FLR 384, considered Brennan, Re; Ex parte Stokes (Australasia) Ltd (unreported, Morling J, 31 May 1988), considered Codrington, Re; Ex parte Don McKay Tourist & Charter Pty Ltd (unreported, Burchett J, 1 September 1989), considered Dingle, Re; Westpac Banking Corporation v Worrell (1993) 47 FCR 478, considered Eastman v Director of Public Prosecutions (ACT) [2003] HCA 28, 214 CLR 318, cited Frost v Sheahan as Trustee of the Bankrupt Estate of Allen Gordon Frost [2012] FCAFC 46, cited Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773, applied Khera v National Australia Bank Limited (1996) 71 FCR 133, considered Knight v Beyond Properties Pty Ltd [2007] FCAFC 170, 242 ALR 586, cited Lockett, Re; Ex parte Northern Equity Ltd (unreported, French J, 6 April 1992), considered Lords Holdings Pty Ltd v Brizzi [2004] NSWSC 371, considered Mills, Re; Ex parte Lloyd's (1997) 73 FCR 551, considered Osborne v Gangemi [2011] FCA 1252, considered Palazzolo v Ex parte Discusso (unreported, Neaves J, 19 July 1991), cited Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131, 220 ALR 211, cited Richards, Re; Ex parte Beneficial Finance Corporation Limited (unreported, Jackson J, 17 March 1986), considered Robertson v Moran [2011] FMCA 496, affirmed Tripodi, Re; Ex parte Col Johnson Pty Limited (unreported, Burchett J, 22 January 1987), considered Westpac Banking Corporation v Hingston (No 2) [2010] FCA 116, 117 ALD 552, considered O'Donovan, J and Phillips J C, Modern Contract of Guarantee (Lawbook Co., subscription service) Date of hearing: 2 March 2012 Place: Sydney Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 100 Counsel for the Appellants: Mr J Lockhart SC with Mr C Colquhoun Solicitor for the Appellants: David Begg & Associates Counsel for the Respondents: Mr G T Miller QC with Mr D C Eardley Solicitor for the Respondents: Watkins Tapsell Solicitors & Barristers IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 1380 of 2011 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: RUSTY JOHN MORAN First Appellant MATTHEW HOWARD PAUL DANIEL Second Appellant AND: ALEXANDER ROBERTSON First Respondent SPINITU PTY LIMITED (ACN 003 361 573) ON ITS OWN ACCOUNT AND AS TRUSTEE FOR THE ROBERTSON RETIREMENT FUND Second Respondent JUDGE: FLICK J DATE OF ORDER: 13 APRIL 2012 WHERE MADE: SYDNEY The court orders that: 1. The proceeding is stood over to 9.30 am on 26 April 2012 for the determination of final orders. Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. IN THE FEDERAL COURT OF AUSTRALIA NSW DISTRICT REGISTRY GENERAL DIVISION NSD 1380 of 2011 ON APPEAL FROM THE FEDERAL MAGISTRATES COURT OF AUSTRALIA BETWEEN: RUSTY JOHN MORAN First Appellant MATTHEW HOWARD PAUL DANIEL Second Appellant AND: ALEXANDER ROBERTSON First Respondent SPINITU PTY LIMITED (ACN 003 361 573) ON ITS OWN ACCOUNT AND AS TRUSTEE FOR THE ROBERTSON RETIREMENT FUND Second Respondent JUDGE: FLICK J DATE: 13 APRIL 2012 PLACE: SYDNEY REASONS FOR JUDGMENT 1 During the course of 2007 two sums of money (each a sum of $250,000) were lent to an investment company, Tailored Property Capital Pty Ltd ("Tailored Property Capital"). The monies were provided by Spinitu Pty Limited ("Spinitu"). The fact that Spinitu is sometimes referred to in the documents as "Spinutu" assumed no importance. Mr Robertson is a director and shareholder of Spinitu. The Appellants in the current proceeding, Messrs Rusty John Moran and Matthew Howard Paul Daniel, guaranteed the monies that had been advanced. 2 Tailored Property Capital encountered financial difficulties. In 2008 Spinitu and Mr Robertson commenced proceedings in the District Court of New South Wales seeking to recover the monies that had been lent. The defendants to those proceedings were Tailored Property Capital and Messrs Moran and Daniel. 3 Tailored Property Capital thereafter executed on 13 May 2009 a Deed of Company Arrangement; Messrs Moran and Daniel on 20 January 2010 each appointed Mr Adam Shepard as a controlling trustee pursuant to s 188 of the Bankruptcy Act 1966 (Cth). 4 On 21 January 2010 the District Court dismissed the proceeding as against Tailored Property Capital. The Court further vacated the hearing by reason of the appointment of Mr Shepard as the controlling trustee. 5 Meetings of creditors were held in February and March 2010. At the meetings held on 25 March 2010 the creditors of Messrs Moran and Daniel approved the entering into of personal insolvency agreements. Mr Moran's agreement provided for the payment of $45,000 to discharge debts of $3,884,957; Mr Daniel's agreement provided for the payment of $50,000 to discharge debts of $3,839,439. Those agreements were in fact entered into in April 2010. 6 Mr Robertson and Spinitu then commenced proceedings in the Federal Magistrates Court of Australia seeking (inter alia) an order pursuant to s 222(1)(d) of the Bankruptcy Act that the personal insolvency agreements be set aside. Alternatively, Mr Robertson relied upon s 222(5)(e). The agreements were set aside pursuant to s 222(1)(d): Robertson v Moran [2011] FMCA 496. Messrs Moran and Daniel now appeal to this Court. 7 The hearing in this Court took place on 2 March 2012. An application was made at the outset of that hearing on behalf of the Respondents to adduce further evidence. That application was opposed by the Appellants. But it was common ground that a decision as to whether this further evidence would be received could be reserved so that submissions in respect to the appeal could proceed. A further opportunity was extended to the parties to subsequently file "short submissions" on three discrete issues that had arisen. Submissions were provided – but those provided by the Respondents were far from "short". 8 Leave is granted to rely on the further evidence. The appeal is to be dismissed. Section 222 9 Section 222 is found within Part X of the Bankruptcy Act. Within that Part, Division 2 deals with the meeting of creditors and control of a debtor's property. Section 188 is one of the provisions within Division 2. Division 3 within Part X is headed "General Provisions" and s 222 is found within that Division. 10 Section 222 relevantly provides as follows: Setting aside on grounds of unreasonableness etc. (1) If a personal insolvency agreement is in force, the Court may, on application by: (a) the Inspector-General; or (b) the trustee; or (c) a creditor; make an order setting the agreement aside if the Court is satisfied that: (d) the terms of the agreement are unreasonable or are not calculated to benefit the creditors generally; or (e) for any other reason, the agreement ought to be set aside. … Ancillary orders (8) If the Court makes an order under subsection (1), (2) or (5), the Court may make such other orders as the Court thinks fit. (9) An order under subsection (8) may be an order directing a person to pay another person compensation of such amount as is specified in the order. This subsection does not limit subsection (8). Application for sequestration order (10) The trustee or a creditor may include in an application under subsection (1), (2) or (5) an application for a sequestration order against the estate of the debtor. If the Court, on the first-mentioned application, makes an order under this section setting the personal insolvency agreement aside, it may, if it thinks fit, immediately make the sequestration order sought. (11) The making of an application by the trustee or a creditor for a sequestration order under this section is taken, for the purposes of this Act, to be equivalent to the presentation of a creditor's petition against the debtor, but the provisions of subsection 43(1), sections 44 and 47, subsections 52(1) and (2) and Part XIA do not apply in relation to such an application. 11 For the purposes of s 222(1)(c), it was common ground that it was for the Court to determine whether a person is in fact "a creditor": Beard v Prestige Baking Industries Pty Ltd (1981) 52 FLR 384. Fox J there observed that: It is undoubtedly competent for the court to examine in close detail, definitively if necessary, whether a person claiming to be a creditor for the purposes of the section is one … : (1981) 52 FLR at 405. Lockhart J found it unnecessary "to determine the standard which must be satisfied by the respondent under s. 222 to establish that he has the necessary locus standi as a creditor": (1981) 52 FLR at 411. 12 It was also common ground that the Court, when resolving the question as to whether a person is "a creditor", must act on the materials before it and is not confined (for example) to that which was before the trustee: Re Dingle; Westpac Banking Corporation v Worrell (1993) 47 FCR 478. Wilcox, Ryan and Cooper JJ there observed: What must be proved on an application for review We also agree with Drummond J that, when the Court is called upon to determine whether a person is entitled to vote as a creditor, it must act on the material before it; it is not limited to the material before the trustee or chairman … Moreover, it is not sufficient that the creditor merely demonstrate a prima facie or arguable case: (1993) 47 FCR at 486. A little later their Honours concluded: … We think Drummond J was correct when he said that the issue that he had to determine, in order to grant the relief sought, was whether Westpac was in fact a creditor of the debtors in the amount claimed. The trustee's determination at the meeting gives rise to the case; but it is irrelevant to its resolution. The Court must decide, for itself, the question of Westpac's entitlement to vote; and it must do so on the material before it. Westpac must prove that the composition was void because the statutory requirements of the Bankruptcy Act have not been complied with; the necessary statutory majority having not been achieved because it was improperly denied a vote. In short, proof that Westpac was a creditor is an essential element to establish both its standing to bring the application and its entitlement to the relief sought: (1993) 47 FCR at 488. 13 Section 222 in its present form, it may further be noted, was introduced by way of amendment in 2004 by the Bankruptcy Legislation Amendment Act 2004 (Cth). The section is an amalgamation of the powers of the Court previously conferred by the former ss 222 and 239. Prior to its amendment, the former s 222 provided as follows: (1) Where there is a doubt, on a specific ground, whether a deed of assignment or a deed of arrangement was entered into in accordance with this Part or complies with the requirements of this Part, or whether a composition has been accepted by a special resolution of a meeting of creditors under section 204, the Inspector-General, the trustee, a creditor or the debtor may apply to the Court for an order under subsection (2). (2) Upon the hearing of an application made under subsection (1), the Court may, subject to this section, make an order: (a) declaring that the deed or composition is void, or that it is not void, on the ground specified in the application; or (b) declaring that a provision of the deed is void, or is not void, on the ground specified in the application. (3) The Court shall not make an order declaring a deed to be void on the ground that it does not comply with the requirements of this Part if the deed complies substantially with those requirements. (4) Where the Court, on the application of the Inspector-General, the trustee or a creditor, is satisfied that the debtor: (a) has given false or misleading information in answer to a question put to him or her with respect to any of his or her conduct or examinable affairs at the meeting of creditors at which the resolution requiring him or her to execute the deed or accepting the composition was passed; or (b) has omitted a material particular from the statement of the debtor's affairs given under subsection 188A or included an incorrect and material particular in that statement; the Court may make an order declaring the deed or composition to be void or declaring any provision of the deed or composition to be void. (5) The Court shall not make an order declaring a deed or composition, or a provision of a deed or composition, to be void on a ground specified in subsection (4) unless it is satisfied that it would be in the interests of the creditors to do so. (6) The Court shall not make an order under subsection (2) or (4) unless the application for the order is made: (a) in relation to a deed of assignment — before the final dividend has been paid under the deed; (b) in relation to a deed of arrangement — before the terms of the deed have been carried out; or (c) in relation to a composition — before the final payment has been made under the composition. (7) The trustee of a creditor may include in an application under subsection (1) or (4) an application for a sequestration order against the estate of the debtor and if the Court, on the first-mentioned application, makes an order under subsection (2) or (4) declaring the deed or composition to which it relates to be void, it may, if it thinks fit, forthwith make the sequestration order sought. (8) The Court may, if it thinks fit, dispense with service on the debtor of notice of an application by the trustee or a creditor under this section, either unconditionally or subject to conditions. (9) The making of an application by the trustee or a creditor for a sequestration order under this section shall, for the purposes of this Act, be deemed to be equivalent to the presentation of a creditor's petition against the debtor, but the provisions of subsection 43(1), sections 44 and 47, subsections 52(1) and (2) and Part XIA do not apply in relation to such an application. And the former s 239(2) provided as follows: If the Court, on such an application, considers that the terms of the composition are unreasonable or are not calculated to benefit the creditors generally or that for any other reason the composition ought to be set aside, it may make an order setting it aside and, if it thinks fit, may forthwith make the sequestration order sought. 14 Both the former s 239(2) and the current s 222(1)(d) direct attention to "the terms of" either "the composition" or "the agreement". 15 When addressing the terms of the former s 239 and the importance of consideration being given to "the terms of the composition", Lockhart and Hill JJ in Khera v National Australia Bank Limited (1996) 71 FCR 133 at 146 observed: Turning to s 239 concerning compositions. Although at first sight the grounds on which the Court may set aside a composition under s 239(2) are wide, upon closer examination they relate in my opinion to matters that concern the terms of the composition itself, that is to say facts which were in existence (whether known or not) at the time of the passing of the special resolution of creditors to accept the composition under Pt X. The Court may set aside the composition if it considers "that the terms of the composition are unreasonable". This plainly centres attention upon the terms of the composition itself. The Court may set aside a composition if the terms of the composition "are not calculated to benefit creditors generally". Again attention is centred upon the terms of the composition. Then follows the third ground "for any other reason the composition ought to be set aside". In our opinion this ground, despite the width of its language, is confined to circumstances which relate to the terms of the composition itself or the circumstances in which the composition came to be accepted by special resolution of the creditors. To an extent these grounds may overlap with the grounds on which the Court may declare a composition void under s 222. That does not militate against the construction of s 239(2) which appeals to us. Tamberlin J agreed: (1996) 71 FCR at 147. 16 After referring to the "overlap" between those matters previously set forth in s 239(2) and s 222, Merkel J in Re Mills; Ex parte Lloyd's (1997) 73 FCR 551 at 559 to 561 helpfully summarised as follows the factors that may inform the exercise of the discretionary power: In that regard a number of factors are relevant to the exercise of the power to declare a composition void under s 222 or to set it aside under s 239. The factors are: (a) Whether, after considering all the circumstances of the case, a greater opportunity to inquire into the debtor's affairs and a more comprehensive explanation by the debtor were called for … (b) If circumstances arise which "give cause for a suspicion" or to "arguable" causes of action which may benefit creditors then that can suffice to set aside the composition: see Mendelson at p 33. It is not necessary to establish that the creditors will be, or even are more likely to be, advantaged by bankruptcy rather than the composition. It is sufficient if bankruptcy will afford: "a prospect or possibility of economic advantage to creditors sufficient to justify the conclusion that it is in their interests to make the declaration." per Jenkinson J in Augustyn v Putnin (1988) 83 ALR 514 at 515. … (c) If the amount offered under the composition is little or trivial there may be no harm of any consequence to creditors for the composition to be set aside if other factors warrant that course … (d) A Court may be more disposed to set aside a composition if no payments to creditors have been made pursuant to the composition … (e) A composition passed, inter alia, on the basis of a report to creditors as to the debtor's financial affairs which is misleading will also be a relevant factor … These factors remain equally apposite to the exercise of the discretionary power now conferred by s 222 in its present form. 17 It is not understood that Merkel J in Re Mills was attempting to exhaustively set forth the factors to be taken into account or to indicate that any one or other of the factors mentioned would be conclusive as to the manner in which the power was to be exercised. To the list of factors summarised by His Honour may be added the following (to the extent that they are not already included within His Honour's summary), namely: whether creditors who have voted in favour of a proposed insolvency agreement have indicated that they would not participate in any distribution of assets and, to the extent that it is known, the reasons for their non-participation; and whether the controlling trustee recommends the acceptance or rejection of the proposed insolvency agreement and the factual basis for that recommendation. 18 Although it may thus be accepted that: consideration can be given to the amount payable pursuant to a personalised insolvency agreement as compared to the debt; it is equally well accepted, albeit less frequently mentioned, that: • such a consideration is but one of the factors to be taken into account. 19 When considering the terms of the former s 222(5) and the phrase "in the interests of the creditors", in Re Tripodi; Ex parte Col Johnson Pty Limited (unreported, 22 January 1987) Burchett J observed: … I think a broad view should be taken, and in a proper case it may be held that it is in the interests of creditors that there should be the full opportunity for inquiry which bankruptcy may entail, even though there is no assurance that inquiry will in fact uncover any further assets. But, as has been said, a mere speculative possibility is not in itself enough – the circumstances must raise an inference entitling the Court to conclude that the order would be in the interests of the creditors. 20 Courts have long had regard to the amount proposed by the composition compared to the amount of the debts owing: Westpac Banking Corporation v Hingston (No 2) [2010] FCA 1116 at [68] to [80], 117 ALD 552 at 563 to 565. Cowdroy J there referred with approval to previous decisions concerning s 239(2) as it existed prior to the 2004 amendments. 21 The first of those decisions considered by Cowdroy J was Re Richards; Ex parte Beneficial Finance Corporation Limited (unreported, 17 March 1986). Jackson J had there set aside a composition accepted by creditors. Part of His Honour's reasons was stated as follows: The amount offered pursuant to the composition in settlement of the debts is so trivial when compared to the total of the debts that in the circumstances of the particular case I would regard that fact alone as a sufficient "other reason" in terms of s.239(2) for setting the composition aside. I take that view because it seems to me that in a case where a debtor having gross assets amounting to only $2500.00 has been prepared to incur debts amounting to a hundred times that amount, the case is better dealt with by way of bankruptcy (thereby giving rise to such matters as public examination of the bankrupt and other persons under s.81) than pursuant to the rather more bland provisions of Part X dealing with compositions. The same comparison was likewise referred to by Morling J in Re Brennan; Ex parte Stokes (Australasia) Ltd (unreported, 31 May 1988) as follows: In a case where a debtor has incurred debts of such huge proportions relative to his assets there is much to be said for the proposition that it is in the public interest that there be a public examination of the bankrupt (and possibly other persons) under s.81 of the Bankruptcy Act. As noted by Cowdroy J, these observations by Morling J were subsequently adopted by Burchett J in Re Codrington; Ex parte Don McKay Tourist & Charter Pty Ltd (unreported, 1 September 1989) and by Neaves J in Palazzolo v Ex parte Discusso (unreported, 19 July 1991). In Re Codrington Burchett J observed: In Re Brennan Morling J. also drew attention to the circumstance that although the court should be cautious in overturning a decision reached by creditors approving a composition, the fact that the creditors who voted in favour of the resolution had some connection with the debtor "is not without significance". In the present case, it could not be said that all creditors who voted in favour of the resolution were connected with the debtor. However the overwhelming preponderance of debts represented at the meeting involved the debtor's mother and brother. Only one independent creditor had a representative present, and that creditor was owed a relatively small amount. Morling J., in summary of the factors which led him to set aside the composition there in question, referred to the small sum of money offered to creditors compared with the amount of the debts, the fact that the composition had not been implemented (in the present case only one payment has been made to the trustee), the relationship between the debtor and the creditors who voted in favour of the composition, the possibility that the creditors might do as well in bankruptcy as under the deed, and the prima facie right of the applicant to a sequestration order. Cowdroy J also referred with approval to the following observations of French J (as His Honour then was) in Re Lockett; Ex parte Northern Equity Ltd (unreported, 6 April 1992), namely: There is no doubt, however, that the fact that the composition yields a very small return to creditors is relevant in deciding whether it should be set aside under s.239. 22 The decision of Cowdroy J in the Westpac Banking Corporation case has more recently been applied by Bromberg J in Osborne v Gangemi [2011] FCA 1252 at [45]. Bromberg J there observed that a "… large number of decisions of this Court have come to the view that a composition ought to be set aside as unreasonable, where creditors are getting almost nothing from the composition in circumstances where investigative procedures available upon a bankruptcy to properly examine the debtors affairs, give some hope of a superior result". His Honour then set forth the terms of s 222 and continued as follows: [43] This very wide discretion ought to be exercised cautiously and always with the objectives of Pt X and the Bankruptcy Act as a whole in mind. Personal Insolvency Agreements provide a useful means of dealing with the personal insolvency of an individual where a genuine accommodation can be made with that individual's creditors. The will of creditors, when exercised reasonably and in the interests of all creditors generally, will usually provide a sure and safe path to achieving the best result out of a bad situation. The qualifications upon the Court's discretion found in s 222(1)(d) both reveal and reflect the Bankruptcy Act's intent that creditors generally, rather than some but not others, benefit from an agreed composition dealing with a debtor's insolvency. A practical, common sense approach should be adopted to the exercise of the discretion bearing in mind that what s 222(1) calls for is a global assessment of the kind that creditors are called upon to make when they themselves are considering the utility of a PIA. [44] In making their own considerations, reasonably minded creditors will assess the potential benefit of a proposed PIA against the alternative of the debtor's bankruptcy. A fundamental question will be whether and to what extent the composition on offer will likely be improved upon should the alternative of bankruptcy be insisted upon by the creditors. That assessment will be influenced by many factors but principal amongst them is likely to be the extent to which creditors may properly be satisfied that the proposal on offer reflects a fair and honest attempt by the debtor to address his or her debts. The extent to which creditors are able to know the true financial position of the debtor will be an important consideration, particularly if bankruptcy offers the potential for creditors to be put in a better position to know. The amount available for distribution under the proposed PIA is likely to be a very significant factor in the making of any reasonable assessment. The personal insolvency agreement entered into by Mr Gangemi was there set aside. 23 The comparatively modest – or derisory – amount that may be recovered pursuant to a personal insolvency agreement is thus a consideration which the Court has repeatedly relied on. Nevertheless, it is but one consideration to be taken into account. There may well, however, be circumstances in which informed creditors may consider it in their best interests to approve a personal insolvency agreement and accept comparatively little in return. 24 In respect to this latter proposition, it should be noted that the earlier decisions referred to by Cowdroy J in Westpac Banking Corporation were also reviewed by O'Loughlin J in Re Andrew Nicholas Emmett; Ex parte Beneficial Finance Corporation Ltd (unreported, 16 December 1991). After reviewing the authorities, His Honour there relevantly concluded: It seems to me that in each of these six cases there were factors, over and above the smallness of the dividend and the size of the debts, that caused the court to intervene. Even though there are examples of strong dicta to the effect that the smallness of the amount offered coupled with the amount of the debts might be sufficient, without more, to set aside the composition, it is significant that no case has been found where that has happened. I allow for the possibility that it could occur but I do not believe that this is the appropriate case … Although regard may be had to the amount proposed by the composition compared to the amount of the debts owing, it is thus but one of the considerations to be taken into account: Re Agushi; Ex parte Farrow Mortgage Services Pty Ltd (1992) 8 ACSR 549. Olney J there said: The case put by the applicants in support of these grounds is that the amount of the dividend likely to be returned to the creditors after payment of the costs of the trustee will be of the order of 0.019 of a cent in the dollar which is said to be so small as to be "derisory", which cannot be gainsaid. And it is cold comfort to the applicants that they may receive a dividend of this amount from the estate of each debtor. The alternative advocated on behalf of the applicants is that the debtors' estates should be administered in bankruptcy. The advantages of bankruptcy are said to lie in the capacity of a trustee in bankruptcy to investigate the affairs of a bankrupt and to obtain contributions from the debtor out of his income. Just what is unreasonable or unjust in any particular case will depend upon the factual context in which such a judgment comes to be made. Previous cases may help to provide some sort of guide but can never be decisive of the outcome in a case in which the facts and overall circumstances are not the same. For this reason I do not propose to canvass the various decisions to which reference was made in argument. The fact that a negligible dividend will result from the deeds of arrangement is a circumstance which may in some cases weigh heavily in favour of a claim that the terms of a deed are unreasonable and unjust. But unreasonableness, like justice, must be measured against available alternatives. They are not matters which can be judged in a vacuum: (1992) 8 ACSR at 560 to 561. His Honour went on to conclude as follows: The alternatives here are that if the debtors are made bankrupt, although the two contributions of $5000 would not be made, investigation by the trustee may reveal information that could result ultimately in a larger return to the creditors and further that the debtors could in appropriate circumstances be required to contribute out of their future earnings. The evidence does not suggest that either alternative is likely to be fruitful. In the case of Agushi, nothing has been shown to suggest that he has any particular earning capacity and no effort was made to cross-examine him on this or any other question. In the case of Calabro, although it is known that he is a qualified legal practitioner presently holding a certificate to practise as an employee solicitor and that he is employed as such, he was not cross-examined on his earning capacity nor upon his assertion that there is some uncertainty as to whether or not he would be able to continue to be so employed as a bankrupt. This is not something upon which any judgment can be made on the material before the court. And there is no material before the court from which it could be concluded that further investigation of the affairs of the debtors is either called for or may disclose information which could lead ultimately to a more substantial dividend to the creditors. The amount of the debtors' liabilities is very large by any measure, but the size of the debt does not necessarily point to dishonesty or improper conduct on their part nor to the need for administration of their estates in bankruptcy. At a time when major public and private institutions have suffered staggering unrecoverable losses, the debtors have been caught up in the general economic climate of the times. There is no reason to believe that a fuller investigation of their affairs would prove fruitful. Apart from the applicants, all other creditors are prepared to accept the result represented by the deeds of arrangement. This is not a case where a large creditor has used its voting power to oppress small creditors. And it is not without significance that one of the debtors supporting the debtors' proposals was a building society owed $4m. Once it is concluded that the proceedings at the meeting of creditors were valid, I do not think that the final outcome can be said to be either unreasonable or unjust. In any event, nothing has been put before the court that would justify a conclusion that it would be in the interests of the creditors generally to terminate the deeds. What the applicants are in effect saying is that it is unreasonable, unjust and not in the interests of the creditors generally to insist that they (the applicants) should be required to get their proxies right. This proposition only has to be stated to demonstrate that it is unsustainable. The Terms of the Loan Agreements 25 The loan of $500,000 was effected by two Deeds of Loan Agreement. 26 The first agreement is a Deed of Loan Agreement executed on 28 February 2007 whereby the first loan of $250,000 was advanced. That Deed identifies "the Lender" as the "party referred to in Item 2 in the Schedule". Item 2 provided in part as follows: Item 2: Name and Address of Lender Name: - Spinitu Pty Ltd Tailored Property Capital Pty Ltd was identified as "the Borrower". Messrs Moran and Daniel were identified as "the Guarantor". Both of those individuals signed the Deed. The "Corporate Lender" on the execution page of the Deed stated that it had been "[e]xecuted in accordance with Section 127 of the Corporations Act 2001 Cth by authority of the Board of Directors of Spinitu Pty Ltd …". 27 This loan agreement was terminated by a Deed of Termination made on 29 August 2007. That Deed stated that the parties were Spinitu Pty Ltd, "Alex Robertson as Trustee for the Alex Robertson Superannuation Fund of ____________", Tailored Property Capital Pty Ltd and Messrs Moran and Daniel. That Deed also set forth the recitals as follows (without alteration): WHEREAS A Spinitu Pty Ltd at the request of and on behalf of Robertson advanced loan funds to TPC pursuant to a Deed of Loan Agreement with TPC dated 28 February 2007 relating to loan advance funds on terms and conditions stated in the Loan Agreement of 28 February 2007. B The parties have agreed to the termination of the Deed of Loan Agreement dated 28 February 2007 on the condition that a New Loan Execution Deed, is entered into between Robertson, TPC and the Guarantors which includes new terms and conditions relating to the loan advance of 28 February 2007 simultaneous with this Deed of Termination. C The New Loan Execution Deed to be entered into between Robertson, TPC and the Guarantors is to include new terms relating to the initial loan advance made by Spinitu on behalf of Alex Robertson under the Loan Execution Deed of 28 February 2007. D The parties seek to record the termination of the Loan Agreement of 28 February 2007 and that a New Loan Execution Deed is to be entered into simultaneously with this Deed between the same parties (excluding Spinitu) with amended terms and conditions relating to the 2 loan advances made to date by Robertson to TPC. The Guarantors are to guarantee the performance of TPC under the New Loan Execution Deed. The execution page provided in relevant part that it had been "Signed Sealed and Delivered by Alex Robertson as Trustee for the Alex Robertson Superannuation Fund …". 28 The second of the two loan agreements was a further document titled Deed of Loan Agreement. "The Lender" was again identified as "the party referred to in Item 2 of the Schedule". But Item 2 no longer identified "The Lender" as Spinitu; Item 2 now identified "The Lender" as follows: Name: Alex Robertson as Trustee for the Alex Robertson Superannuation Fund Messrs Moran and Daniel were again identified as "the Guarantor". The execution page provided in part that it had been "Signed Sealed and Delivered by Alex Robertson As Trustee for the Alex Robertson Superannuation Fund …". The Schedule to this Deed identified the "Principal Amount" the subject of the Deed as being comprised of a "1st Advance" of $250,000 on 28 February 2007 and a "2nd Advance" of $250,000 on 29 August 2007. Clause 19 of the Deed set forth the terms of the guarantee, including cl. 19.2 which provided as follows: The Guarantor hereby unconditionally guarantees to the Lender the payment, when demanded from the Guarantor, of the sum advanced by the Lender to the Borrower … 29 By this series of agreements, Tailored Property Capital received initially $250,000 pursuant to the first Deed of Loan Agreement and, upon that Deed being terminated, a further $250,000 upon the execution of the second Deed of Loan Agreement. 30 In addition to the terms of the agreements, a number of factual matters were also common ground both in the proceeding before the Federal Magistrate and before this Court on appeal, namely: $500,000 was advanced to Tailored Property Capital; the initial $250,000 and the subsequent payment of $250,000 were made by Spinitu; and there never has been an "Alex Robertson Superannuation Fund". It was also common ground that: Spinitu is the trustee of the Robertson Retirement Fund, a self-managed superannuation fund; and Spinitu and Mr Robertson as trustee for the Robertson Retirement Fund in October 2008 brought proceedings against Tailored Property Capital and Messrs Moran and Daniel in the District Court in relation to the two Deeds of Loan Agreement. The Decision the Subject of Appeal 31 The first of the issues presented for resolution before the Federal Magistrate was whether or not Mr Robertson was "a creditor" for the purposes of s 222(1)(d). If he was not "a creditor" – and hence a person with standing to make an "application" – none of the other elements set forth in s 222 arose for consideration. 32 The Federal Magistrate concluded that Mr Robertson was "a creditor" as follows: [26] There is no reliable extrinsic evidence to explain why Mr Robertson was described in the two deeds dated 29 August 2007 by reference to a trust fund which did not exist and was never brought into existence. The lawyers who negotiated the drafting of the deeds have not given evidence, and neither their records of the drafting nor all of their written correspondence is in evidence. Mr Robertson is now an elderly person, and frankly conceded in his evidence that he has poor memories of the events in 2007 in relation to his instructions to his solicitor and execution of the documents. He said, and I accept, that he has no recollections of noticing or adverting to how precisely he was described as the Lender in the documents which he executed in August 2007. [27] The cross-examination of Mr Robertson opened up possibilities that the references to "as Trustee for the Alex Robertson Superannuation Fund" were a mistake on the part of everyone, and that the words were intended to refer to the existing trust fund known as the "Robertson Retirement Fund". However, I consider that this explanation is unlikely and do not accept it, in view of the accurate description of that fund and its trustee in the first deed of loan, and the accurate recitation and inclusion of Spinitu Pty Ltd as a party in the termination deed, by reason of its designation as the Lender under the first loan. [28] In my opinion, the probable explanation for Mr Robertson's extended description in the August 2007 documents is that, at the time that he agreed to make the second loan to assist Messrs Moran and Daniel's Kiama project, the authors of the documents were informed that Mr Robertson was contemplating the possibility of a restructure of his retirement fund arrangements, perhaps as a result of accounting advice or other reasons. There is no direct evidence of this, but in cross-examination Mr Robertson accepted that he might have been discussing with his accountant at that time the establishment of a new superannuation fund. [29] That such a fund was known to be inchoate when the August 2007 deeds were made and completed in relation to the Lender's obligations, might appear to be pointed to in the mysterious "of ______" in the description of Mr Robertson in the list of parties to the deed of termination. [30] More importantly, in my opinion the recitals to the contemporaneous deed of termination expressly explain Mr Robertson's description and inclusion as a party to the documents, by showing that the parties intended Mr Robertson in his personal legal capacity to be recognised as both the principal lender under the first deed of loan, and also the principal lender under the second deed of loan, at least unless or until some other entity came into existence as the trustee for a trust fund which might be established in the future with the name "Alex Robertson Superannuation Fund". [31] On this interpretation of the parties' intention, the current and future existence of that fund was not a matter upon which the signatories to the deed intended to condition any of their obligations. The deed of loan agreement and guarantee was clearly intended to take effect immediately, by placing a personal obligation on Mr Robertson to effect the promised loan, and by giving him the immediate benefit of the borrower's covenant for repayment and of the guarantors' covenants to indemnify him personally in relation to default by the borrower. So construed, the reference to a possible future trustee capacity attaching to Mr Robertson's rights under the deeds presents no present impediment to the enforcement of those rights by Mr Robertson in his personal capacity. [32] Such a construction is, in my opinion, entirely consistent with a recognised approach to the construction of commercial documents containing references to the possible future substitution of contracting parties or possible future changes to their capacities (cf Vickery v Woods (1952) 85 CLR 336 at 343, 348). On that construction of the parties' intentions, I do not accept that there is any "uncertainty" under principles of contract law affecting the second deed of loan, which prevents its enforcement by Mr Robertson. I do not accept that the Court should not now recognise him in law as "the Lender" under its terms, and as a "creditor" in relation to the unrequited obligations of the guarantors. This is not a transaction where a "narrow or pedantic approach is warranted", and the Court can, and should, discern the parties' intention in relation to Mr Robertson's rights and obligations on a construction of these commercial documents which prevents them being void for uncertainty of meaning (cf. Upper Hunter County District Council v Australian Chilling & Freezing Co Ltd (1968) 118 CLR 429 at 437). [33] The above construction is, in my opinion, confirmed by a consideration of the nature of the transaction and the surrounding "matrix of facts". These include the undoubted contemporaneous facts: that such a trust fund had not been established; that the second loan agreement was intended by Messrs Robertson, Moran and Daniel to take immediate effect according to its terms; that it was of no concern to Messrs Moran and Daniel as to how Mr Robertson procured the promised funds; and that the loan was intended to be, and was, executed immediately by the promised funds being urgently transferred to the borrower upon execution of the documents. [34] I have above noted the absence of other contemporaneous evidence bearing on the construction of the description of Mr Robertson in the two deeds. Mr Robertson's memories are now unreliable. Mr Moran gave no evidence directed at this issue, Mr Daniel gave no evidence whatsoever. Neither party called the lawyers involved in negotiating the terms of the documents. 33 The Federal Magistrate reached his conclusion by reference to the intention of the parties and by reference to "the surrounding 'matrix of facts'" and the contemporaneous evidence, including the correspondence between the parties. 34 The Appellants' Outline of Submissions contended that this reasoning of the Federal Magistrate exposed a number of errors, including the following: there was no evidence to support the "probable explanation" relied upon; there was no support to be found in the Recitals to the Deeds for the conclusion that "… the parties intended Mr Robertson in his personal legal capacity to be recognised as both principal lender under the First Loan Agreement, and also the principal lender under the Second Loan Agreement, 'at least unless or until some other entity came into existence …'"; and there was no basis for the finding as to "a possible future trustee capacity". Criticism is also made in the Appellants' submissions of the fact that the Federal Magistrate: "… did not grapple with the evidence that the entity which in fact advanced the funds to Tailored Property was Spinitu, the trustee for the Robertson Retirement Fund, rather than Mr Robertson". 35 With great respect to the Federal Magistrate, it is concluded that his reasons for decision do expose appellable error. It was not for the Federal Magistrate to embark upon a process of conjecture in an attempt to discern the "probable explanation" for the extended description given to Mr Robertson in the Deeds nor to consider what may happen in the future. His task was to resolve the description primarily by reference to the documents before him – primarily the two loan agreements. Even his reliance upon the oral evidence of Mr Robertson may be questioned. 36 An appeal to this Court, however, is an appeal in the nature of a re-hearing: Knight v Beyond Properties Pty Ltd [2007] FCAFC 170 at [20], 242 ALR 586 at 591. An appeal nevertheless remains a vehicle for the correction of error; an appeal does not lie simply to allow a party a "second go": Poulet Frais Pty Ltd v Silver Fox Company Pty Ltd [2005] FCAFC 131 at [45], 220 ALR 211 at 220 per Branson, Nicholson and Jacobson JJ (applied in Frost v Sheahan as Trustee of the Bankrupt Estate of Allen Gordon Frost [2012] FCAFC 46 at [14] to [15] per Finn, Cowdroy and Flick JJ). 37 Like the Federal Magistrate, it is nevertheless concluded that Mr Robertson was the lender and hence "a creditor" for the purposes of s 222(1)(c) of the Bankruptcy Act – albeit for different reasons. Robertson as "A Creditor" – The Terms of the Deeds 38 Notwithstanding the fact that Messrs Moran and Daniel accept that monies were advanced to Tailored Property Capital, Senior Counsel on their behalf again repeated the submission in this Court that Mr Robertson was not "a creditor" for the purposes of s 222(1)(c). The entity that advanced the monies was Spinitu – but no submissions, he noted, had been made that Spinitu was "a creditor". Nor was any Notice of Contention filed seeking to contend that Spinitu was "a creditor". The case for the Respondents, he emphasised, was that it was Mr Robertson and Mr Robertson alone who was "a creditor". 39 The relationship between the parties, it is considered, is to be resolved primarily by reference to: the first Deed of Loan Agreement executed on 28 February 2007; the Deed of Termination executed on 29 August 2007; and – most importantly: the second Deed of Loan Agreement executed on the same day as the Deed of Termination. Those documents relevantly address two separate but interrelated relationships – one being the relationship between the lender and the borrower; the second being the relationship between the lender and the guarantors. It is the second relationship which assumes central importance. 40 Insofar as the former relationship is concerned, it is concluded that Mr Robertson accepted a personal responsibility to lend monies to Tailored Property Capital. The addition of the phrase "as Trustee for the Alex Robertson Superannuation Fund" does not deny the personal liability of Mr Robertson. As observed by Palmer J in Lords Holdings Pty Ltd v Brizzi [2004] NSWSC 371: [32] It is an elementary principle of law that where a trustee in the course of the trust business contracts a debt, the debtor against whom the creditor may enforce the debt is the trustee. This is because a trust fund, in itself, has no legal personality capable of entering into a contract. Likewise, it is an elementary principle of trust law that a trustee who incurs liabilities to a third party in the course of the trust business remains liable to a third party after the trustee ceases to hold office as such, in the absence of a clear contractual provision between the trustee and the third party to the contrary. The retiring trustee who remains liable to the third party is, of course, entitled to indemnity out of the trust fund and may claim against the new trustee to obtain that indemnity. 41 Even had the roles been reversed such that it was Mr Robertson "as trustee" who was acting as guarantor, the conclusion would have been that Mr Robertson assumed a personal liability and could not confine his liability to the assets of the trust: Helvetic Investment Corporation Pty Ltd v Knight (1984) 9 ACLR 773. The manner of execution of the guarantee there signed by Mr Knight as guarantor was as follows: THE JOHN KNIGHT FAMILY TRUST J Knight Trustee The appeal was argued by Mr A M Gleeson QC (as he then was) for the appellant and Mr R P Meagher QC (as he then was) appeared for the respondent. In rejecting an argument that Mr Knight's liability was confined to the trust assets, Glass JA concluded: Mr AM Gleeson QC, counsel for the appellant, relied upon the following propositions: 1. A trustee who enters into a contract will normally incur unlimited personal liability unless by appropriate language or express stipulation such liability is restricted. 2. A mere description of the capacity in which he contracts as that of trustee is insufficient to exclude full personal liability. 3. Upon the proper construction of the guarantee no language could be found in it which sufficed to limit the normal unlimited liability of the contracting trustee. There is ample support for the first two propositions to be found in Lumsden v Buchanan (1865) 4 Macq 950; Muir v City of Glasgow Bank (1879) 4 App Cas 337 and Re Anderson; ex parte Alexander (1927) 27 SR (NSW) 296 and Mr Meagher QC, for the respondent, accepted them both. The controversy before us was whether upon the proper construction of the guarantee it evinced an intention as required by proposition 3 to limit the normal unlimited liability. Mr Meagher relied upon the description of the contracting party as "the John Knight Family Trust" and the execution of the guarantee by "the John Knight Family Trust" under which words were added the signature "J Knight Trustee". The description and execution were inserted by hand in the spaces made available in a printed document. According to the submission these additions constituted language no less apt for the purpose of restricting the trustee's liability than the words "as trustee only" (Gordon v Campbell Court Sess Ca. (2nd) 643), or "as trustee and not otherwise" (Re Robinson's Settlement [1912] 1 Ch 717). Such language went beyond a mere description of the capacity in which the trustee contracted and amounted to a stipulation that "the promise was backed by the trust ie by the assets of the trust". Mr Gleeson, however, disputed the efficacy of the words used for the purpose in hand and contended that they were at best equivocal. As such they were to be construed as against the trustee who not only proffered them but who also had the task of excluding the liability which he would ordinarily incur. In my opinion the words are not apt to have an exclusory effect and go no further than a description of the capacity in which Mr Knight contracted as guarantor. Language which asserts that Mr Knight executed the instrument because he was the trustee of the trust falls short of stipulating that he contracted only in that capacity. See also: Mahoney JA at 777 to 778. Samuels JA agreed with the reasons of Glass JA and the orders proposed by Mahoney JA at 775. 42 In the present proceeding, if attention is confined to the terms of the second Deed of Loan Agreement, it is manifestly clear that the parties to the Deed intended to exclude Spinitu as a party to the new agreement and intended that further monies were to be advanced. Notwithstanding the parties listed in Item 2 of the Schedule, Mr Robertson assumed a personal liability. The second Deed of Loan Agreement would thus be enforceable by Tailored Property Capital against Mr Robertson personally. On this approach, it was a matter of indifference to Tailored Property Capital where Mr Robertson sourced the monies being advanced. 43 Insofar as the latter relationship is concerned, separate questions arise as to the liability assumed by Messrs Moran and Daniel as guarantors. There is, with respect, considered to be no uncertainty as to what they were guaranteeing – namely, the repayment by Tailored Property Capital to "the Lender" of the monies advanced in the event of default. "The Lender", of course, was defined in Item 2 of the Schedule to the Deed as "Alex Robertson as Trustee for the Alex Robertson Superannuation Fund". Upon the conclusion being reached, however, that Mr Robertson assumed a personal liability to advance the monies, it is clear that it was that liability which was the subject of the guarantee. 44 It follows that Mr Robertson assumed a personal liability under the second Deed of Loan Agreement and could properly be characterised as "a creditor". It was his liability which had been guaranteed by Messrs Moran and Daniel. This construction of the second Deed of Loan Agreement is not diminished by the oral evidence of Mr Robertson. In his cross-examination he accepted that his reference to the "Alex Robertson Superannuation Fund" may have been a reference to the "Robertson Retirement Fund". But that evidence does not alter the conclusion reached regarding the construction of the Deed. 45 The addition of the words of description in Item 2 ("as Trustee for the Alex Robertson Superannuation Fund") of the Schedule do not render the guarantee so uncertain as to be unenforceable. They are not to be construed as delimiting or qualifying the capacity in which Mr Robertson executed the Deed. 46 The terms of a guarantee, it may be accepted, are to be construed strictly in favour of a guarantor: Ankar Proprietary Ltd v National Westminster Finance (Australia) Limited (1987) 162 CLR 549 at 561 per Mason ACJ, Wilson, Brennan and Dawson JJ. And it may further be accepted that uncertainty as to the terms of a guarantee may render a guarantee void. In their service on the Modern Contract of Guarantee, O'Donovan and Phillips summarise the position as follows: [2.1600] A guarantee, like any other contract, may be void because the terms of the guarantee are uncertain. The tendency, however, has been for the courts to interpret the guarantee with regard for the fact that it is a commercial document, and there are few cases where a guarantee has been held void on this basis. Thus, if the guarantee is given in consideration of further advances being made to the principal, there is no necessity to specify the details of the amount of the advances or the time at which they will be made. As has been seen, the guarantee will be enforceable as soon as a bona fide advance is made. It has been suggested that, where the expressed consideration is a promise to supply goods or make advances, rather than the actual supply or making of the advances, the agreement will be too indefinite in the absence of details being specified in the guarantee as to the type or amount of the goods or advances. However, it is thought unlikely that a court would today strike down a guarantee for this reason. Apart from the statement of consideration, the terms of the guarantee must be sufficiently certain, although extrinsic evidence is admissible to resolve any ambiguity in those terms: see [5.110]. Obvious mistakes can be cured even without a rectification order. Hence, the guarantee can be construed by supplying, omitting or correcting words to avoid absurdity or inconsistency. For example, the court can refer to special conditions which are incorporated in the principal contract to determine the scope of the guarantor's liability. However, the court cannot, under the guise of construing the guarantee, give it a meaning that is inconsistent with its clear terms. The relevant parties must be properly identified as well as the principal transactions to which the guarantee relates and the amount of the guarantor's liability. Reliance is placed, not surprisingly, by Messrs Moran and Daniel upon the proposition that the "… relevant parties must be properly identified". 47 Although the definition of "The Lender" in Item 2 of the Schedule to the second Deed of Loan Agreement may be the source of an argument as to uncertainty, it is ultimately concluded that it is not sufficient to render the guarantee void. Construed as a "commercial document", it is considered that there is no uncertainty if the Deed is construed as Messrs Moran and Daniel guaranteeing the personal liability assumed by Mr Robertson as "trustee". Whether or not the trust exists and whether or not it may have been erroneously described, and whatever may be the liability of Mr Robertson as trustee to the beneficiaries of any trust, Mr Robertson as trustee assumed a personal liability. 48 Messrs Moran and Daniel guaranteed the monies advanced and Mr Robertson was, accordingly, "a creditor". This conclusion, it is considered, best gives effect to a commercial document and the intention of the parties – as best as that intention can be discerned from the agreement itself. It is an intention which is only confirmed by the Deed of Termination which was executed on the same day as the second Deed of Loan Agreement. Notwithstanding the statement as to the parties to the Deed of Termination and its manner of execution, the recitals to the Deed simply refer (for example) to "a New Loan Execution Deed … entered into between Robertson, TPC and the Guarantors…". That simplicity of expression is not to be diminished by the process of construction now urged on behalf of Messrs Moran and Daniel, namely that "Robertson" is but a shorthand reference to Item 2 of the Schedule. 49 If attention can be more widely cast, although it is considered unnecessary to do so, reference may also be made (for example) to the following exchange between Ms Stenmark and Mr Moran during his cross-examination: Ms Stenmark: All your negotiations were with Alex Robertson, weren't they? - - - Yes, that's correct. Yes. And he was the man you went to to borrow the money? - - - Yes, that's correct. … And as far as you're concerned, he was the man who organised the money to get to your account; correct? - - - He and others. 50 Although concurrence cannot be expressed with the entirety of the reasoning of the Federal Magistrate, it is nevertheless concluded that he reached the right conclusion on this issue. 51 The rejection of this principal argument necessarily requires their remaining arguments advanced on behalf of Messrs Moran and Daniel – or at least some of them – to be addressed. The Test To Be Applied & THE Benefit to Creditors 52 Two separate further arguments advanced by Senior Counsel on behalf of Messrs Moran and Daniel were that the Federal Magistrate had erred in both: formulating the test under s 222(1)(d) of the Bankruptcy Act; and applying the test because there was no evidence of a real possibility of financial benefit to creditors by setting aside the personal insolvency agreement. 53 In Re Mills; Ex parte Lloyd's, Merkel J had referred (inter alia) to the fact that it is "not necessary to establish that the creditors will be, or even are more likely to be, advantaged by bankruptcy rather than the composition": 73 FCR at 560. His Honour there referred to authority supporting the view that it was "sufficient" if there was "a prospect or possibility of economic advantage to creditors sufficient to justify the conclusion that it is in their interests …" to set aside an agreement. 54 The written submissions advanced on behalf of Messrs Moran and Daniel contended with respect to the test to be applied that "… the Federal Magistrate approached s 222(1)(d) by holding that the Court may exercise its power to set aside a personal insolvency agreement merely because it was not satisfied that the making of a sequestration order would not result in additional benefit to creditors". Reference (in part) was made to the following observations of the Federal Magistrate: The JEG funds … [75] … I am not satisfied that the evidence relating to the JEG banking records, including the involvement of Mr Whiteley in its affairs, does not deserve further investigation by a trustee in bankruptcy, nor that any such investigation might not be productive of benefits to creditors. … The Hurstville project … [83] In short, the evidence discovered and presented to the court by Mr Robertson concerning Messrs Moran and Daniel's past and continuing involvement in the Hurstville project does not satisfy me that it holds no prospect of potential benefits to creditors generally if they were made bankrupt, whether by investigation of the transactions involved or by inducement of better offers to creditors. … The PIAs should be set aside and a sequestration order made … [96] Summarising my reasons: … (v) I am not at all satisfied that the evidence before me shows that there is no prospect that the investigations of a trustee in bankruptcy into the debtors' past and current business affairs will not produce additional benefits to creditors. … Messrs Moran and Daniel submitted – and the Respondents accepted – that the onus rests with the creditor bringing an application under s 222 to establish matters in support of such an application. These extracts, it was contended, exposed the Federal Magistrate reversing the onus of proof. The Federal Magistrate, the Appellants claim, impermissibly required Messrs Moran and Daniel to establish that there would be no additional benefit to creditors by the setting aside of the personal insolvency agreements. Having reversed the onus, it necessarily followed – so it was submitted – that the application of that test to the facts was equally flawed. 55 Other passages from the reasons for decision of the Federal Magistrate are expressed differently and may not expose the error now sought to be advanced on behalf of Messrs Moran and Daniel. Thus, for example, the Federal Magistrate also summarised part of his conclusions, again in paragraph [96], as follows: [96] Summarising my reasons: … (iii) There is a real possibility that a better financial return to creditors could accrue through a bankruptcy administration, if only by reason of Mr Daniel's obligations to contribute from his income at the Department of Planning, and by reason of Mr Moran's continuing management of the promising Hurstville venture. … On balance, however, it is concluded that the submissions now advanced on behalf of Messrs Moran and Daniel are to be accepted. The reasons for decision of the Federal Magistrate demonstrate that he wrongly imposed an onus upon Messrs Moran and Daniel to show that creditors would be better off with a personal insolvency agreement. 56 But, again, the present appeal is in the nature of a re-hearing. Once appellable error is discerned, it remains a matter for this Court to properly apply s 222(1)(d) to the facts. Although the Federal Magistrate has erred in the formulation of the test to be applied to the facts, it is again concluded that the Federal Magistrate reached the correct result – albeit for reasons now differently expressed. 57 The facts to which these further Grounds of Appeal were directed should thus be briefly mentioned. 58 Mr Adam Shepard, as the controlling Trustee of both Messrs Moran and Daniel, prepared reports and supplementary reports for the consideration of creditors in respect of both Messrs Moran and Daniel. The first reports were both dated 12 February 2010 and considered at meetings of creditors on 25 February 2010. The supplementary reports were prepared on 16 March 2010 and considered at further adjourned meetings of creditors held on 25 March 2010. 59 In respect to Mr Moran, Mr Shepard's February 2010 report contained the following table setting forth a comparison between the distribution expected in bankruptcy as opposed to a distribution should creditors accept the proposal for a personal insolvency agreement: Bankruptcy Part X – PIA Book value Est Realisable Value- Optimistic Est Realisable Value- Pessimistic Est Realisable Value Amount Available to Creditors Debtors $4,822 $4,822 – – Boat $4,000 $4,000 – – Antecedent Transactions Unknown – – Part X Composition $30,000 $8,822 – $30,000 Less: 3.5% Realisation Charge $308 – $1,050 $8,514 – $28,950 Less: Costs of Creditors Meeting $2,000 $2,000 $2,000 Less: Controlling Trustee's Remuneration $12,500 $12,500 $12,500 Less: Trustee's Remuneration $25,000 $15,000 $5,500 Less: Trustee's Disbursements $5,000 $2,500 $500 Estimated Funds Available for Distribution NIL NIL $8,450 Unsecured Creditors $5,705,826 $5,705,826 $5,705,826 Dividend rate (cents in the dollar) NIL NIL 0.15 60 Mr Shepard's report also referred in that report to the "time constraints" under which he had prepared his report and proceeded to make the following recommendation (without alteration): I consider that it would be in the creditors' interests for the creditors to reject the proposal for Personal Insolvency Agreement as I have not received sufficient information to determine the likely recoveries should the Debtor be made bankrupt. However, as stated above, creditors may adjourn the meeting to allow the Controlling Trustee to conduct further investigations and I highly recommend this course of action. The February 2010 meeting was adjourned to March. 61 At the adjourned meeting of creditors the supplementary report included an updated table comparing the dividend rate payable to creditors in the event of bankruptcy as opposed to a personal insolvency agreement. The updated dividend rate indicated an expected payment of 0.33 cents in the dollar if the creditors endorsed a personal insolvency agreement. Mr Shepard noted that some information had not been provided as at the date of his earlier February report. He thereafter proceeded in his supplementary report to address the information he had later obtained. It was presumably this further information which provided the basis for the updated expected dividend payment. 62 The supplementary report also recommended against acceptance of the proposed personal insolvency agreement. The supplementary report thus stated in part as follows (without alteration): 5 Statement by Controlling Trustee as to whether the interests of creditors would be better served by Bankruptcy or acceptance of the debtor's proposal At the meeting of creditors to be held on Thursday 25 March 2010, creditors will be asked to make a decision by passing a resolution with respect to the Debtor's future. I note should the Debtor be bankrupted, I estimate that a dividend would not be anticipated for unsecured creditors, subject to any recoveries from the Trustee's investigation. Should the proposed Personal Insolvency Agreement complete as proposed by the Debtor, unsecured creditors should receive a dividend of approximately 0.47 cents in the dollar dependent upon the extent of creditor claims. However, I note that the dividend rate is reduced to 0.33 cents in the dollar when taking into account my actual disbursements. I am not prepared to forgo my actual disbursements incurred in the administration. I consider that it would be in the creditors' interests for the creditors to reject the proposal for Personal Insolvency Agreement in that I have not received sufficient information and had time to satisfy my inquiries regarding the affairs of the Debtor. Notwithstanding this recommendation, at the adjourned meeting of creditors on 25 March 2010 there were 3,736,067 votes for (79.25%) and 962,236 votes against (20.48%) the motion that Mr Moran execute the personal insolvency agreement. These votes and the distribution of creditors were as follows (without alteration): $ % For Leslie & Jonathan Patterson 80,000 Mark Whitely 880,641 Vanessa Moran 880,880 B & E Archer 50,000 B & E Archer Superannuation 427,090 J & C Daniel 253,744 Treazure Pty Limited 398,231 Patterson Superannuation 200,000 Jill Moran 81,683 Tony & Janet Moran 144,504 Julie Fairclough 90,663 Moran MG Superannuation 70,631 David & Elissa Stonestreet 178,000 Total 3,736,067 79.52% Against Alex Robertson as trustee for the Alex Robertson Superannuation Trust 257,150 Spinutu Pty Limited as trustee for the Alex Robertson Superannuation Trust 257,150 Kingsway Group Limited 404,622 National Australia Bank 24,338 HSBC 5,007 Royal Tiles Pty Limited 13,969 Total 962,236 20.48% Mr Shepard's supplementary report stated that the following creditors had indicated that they would not participate in a distribution from the personal insolvency agreement pool of funds (without alteration): • Jeg Constructions No 2 Pty Limited • Moran MG Super • Vanessa Moran • Julie Fairclough • Jill Moran Ms Jill Moran is Mr Moran's mother, Ms Vanessa Moran is his wife and Ms Julie Fairclough is his sister. Mr Tony and Ms Janet Moran are his brother and sister-in-law. Moran MG Super is the sister's super fund. 63 In respect to Mr Daniel, Mr Shepard's February 2010 report also contained the following table setting forth a comparison between the distribution expected in bankruptcy as opposed to a distribution should creditors accept the proposal for a personal insolvency agreement: Bankruptcy Part X – PIA Book value Est Realisable Value- Optimistic Est Realisable Value- Pessimistic Est Realisable Value Amount Available to Creditors Debtors $13,800 $13,800 – – Shares – $7,133 $7,133 – Income Contributions – $71,442 $71,442 – Antecedent Transactions Unknown – – Part X Composition $35,000 $92,375 $78,555 $35,000 Less: 3.5% Realisation Charge $3,233 $2,749 $1,225 $89,142 $75,806 $33,775 Less: Costs of Creditors Meeting $2,000 $2,000 $2,000 Less: Controlling Trustee's Remuneration $12,500 $12,500 $12,500 Less: Trustee's Remuneration $50,000 $35,000 $5,500 Less: Trustee's Disbursements $5,000 $2,500 $500 Estimated Funds Available for Distribution $19,642 $23,806 $13,275 Unsecured Creditors $5,905,597 $5,905,597 $3,217,608 Dividend rate (cents in the dollar) 0.3 0.4 0.4 64 As with the report concerning Mr Moran, Mr Shepard's report with respect to Mr Daniel also referred to the "time constraints" within which he had prepared his report and proceeded to make the same recommendation made with respect to Mr Moran, namely to "reject the proposal" or adjourn the meeting. This meeting was also adjourned to March 2010. 65 At the adjourned meeting of creditors, the supplementary report relating to Mr Daniel also contained an updated table comparing the dividend rate payable to creditors in the event of bankruptcy as opposed to a personal insolvency agreement. The updated dividend rate stated an expected payment of 0.57 cents in the dollar if there was an agreement. As with Mr Moran, the supplementary report also addressed information which had been provided since the date of the earlier February 2010 report. The supplementary report further recommended that Mr Daniel's creditors reject the proposed personal insolvency agreement. The recommendation was expressed differently to that made in respect to Mr Moran: I consider that it would be in the creditors' interests for the creditors to reject the proposal for Personal Insolvency Agreement in that I have not received sufficient information and time to satisfy my inquiries regarding the affairs of the Debtor. Furthermore, the actual dividend rate after taking into account the disbursements is approximately the same under bankruptcy. 66 Again, and notwithstanding Mr Shepard's recommendation, at the adjourned meeting of creditors there were 3,488,643 votes for (77.74%) and 999,201 votes against (22.26%) the motion that Mr Daniel execute the personal insolvency agreement. These votes and the distribution of creditors was as follows (without alteration): $ % For Leslie & Jonathan Patterson 80,000 Mark Whitely 880,641 Vanessa Moran 880,880 B & E Archer 50,000 B & E Archer Superannuation 427,090 J & C Daniel 253,744 Treazure Pty Limited 398,231 Patterson Superannuation 200,000 Moran MG Superannuation 70,631 David & Elissa Stonestreet 178,000 ANZ 28,252 Citigroup 41,174 Total 3,488,643 77.74% Against Alex Robertson as trustee for the Alex Robertson Superannuation Trust 257,150 Spinutu Pty Limited as trustee for the Alex Robertson Superannuation Trust 257,150 Kingsway Group Limited 404,622 Westpac 80,279 Total 999,201 22.26% Mr Shepard's supplementary report dated 16 March 2010 stated that the following creditors had indicated that they would not participate in a distribution from the personal insolvency agreement pool of funds: • Leslie and Jack Patterson • J & C Daniel • Treazure Pty Limited • Patterson Super • Cope Street Pty Limited. Ms Leslie and Mr Jack Patterson are Mr Daniel's parents-in-law; J and C Daniel are his parents. Treazure Pty Limited is described as the "Parents Company" and "Patterson Super" as the "Parents in Law Trust Fund". Mr Daniel also declared that he was a former director of both JEG Constructions No 2 Pty Limited and Cope Street Pty Limited – JEG being a creditor of Mr Moran's. 67 If any question as to the identity of those creditors voting in favour of each of the personal insolvency agreements is presently left to one side, the fact is that at each of the creditors' meetings held in March 2010: information was placed before the creditors as to the monies available for distribution and the likely dividend payable to creditors in the event of a personal insolvency agreement or a bankruptcy; and an overwhelming percentage of creditors voted in favour of accepting those agreements. As a general proposition, it should be recalled that "… the court should be cautious in overturning a decision reached by creditors approving a composition …": Re Codrington, supra, per Burchett J. "The will of creditors", as correctly observed by Bromberg J in Osborne v Gangemi [2011] FCA 1252 at [43], "… when exercised reasonably and in the interests of all creditors generally, will usually provide a sure and safe path to achieving the best result out of a bad situation". 68 The conclusion of the Federal Magistrate obviously rejected the approach of the majority of the creditors. In doing so, it is contended on behalf of Messrs Moran and Daniel that the Federal Magistrate erred. The written submissions for present purposes filed on behalf of the Appellants relevantly focussed attention not only upon: the impermissible onus of proof imposed upon Messrs Moran and Daniel but also: the absence of evidence of a real possibility of a financial benefit to creditors, particularly as to the prospect of the creditors obtaining any benefit from the assets held by JEG Constructions No 2 Pty Limited ("JEG Constructions") and the Hurstville Unit Trust. Of present concern is the prospect of creditors obtaining perhaps a better dividend if the personal insolvency agreements were not accepted – as recommended by Mr Shepard. Submissions focussed upon whether assets may be available for distribution from either JEG Constructions or the Hurstville Unit Trust. 69 Each of these two potential sources of funds should be briefly addressed. 70 The 12 February 2010 report of Mr Shepard in respect to Mr Moran had noted that Mr Moran was a director of JEG Constructions. That report noted Mr Moran's assertion that it was "…unlikely [that] a recovery would be made from this company" and noted Mr Shepard's observation that "… due to the age of the financial statements I require further information to verify same". The supplementary report dated 16 March 2010 provided in part as follows: Company Involvement I have received Statutory Declarations and balance sheets produced from MYOB from the Debtor. I have noted inconsistencies between intercompany loan accounts presented in each companies balance sheet and negative total asset values which suggest the accounts are not as current and/or have not been prepared correctly. Furthermore, as discussed later in this report I have received two Statutory Declarations for JEG Construction No 2 Pty Limited which contain information that conflict with each other. The Debtor purports however that the other entries in the accounts are correct. Should the Debtor be made bankrupt, a Trustee would need to engage Liquidators in order to further investigate the companies' affairs and to potentially recover assets from the company. I note that the recovery costs associated with this course of action would be significant. I further note that recovery action and creditor funding is discussed further in section 3 of this report. Mr Shepard's supplementary report later returned to Mr Moran's statutory declaration signed on 23 February 2010 which set forth the assets of JEG Constructions as being $880,439 and liabilities of $1,059,161. A further statutory declaration was provided by Mr Moran on 16 March 2010. The supplementary report contained Mr Shepard's statement that "[d]ue to the late receipt of this information, I am unable to comment on the accuracy of either the Statutory Declarations or the accounts of the company and any potential recovery action against the company". The supplementary report also addressed the role of Earljest Pty Limited as the trustee of the Hurstville Unit Trust. The supplementary report stated Mr Shepard's view that Mr Moran was "… not a beneficiary of the trust". 71 Mr Shepard's 16 March 2010 report relating to Mr Daniel also dealt with JEG Constructions and the Hurstville Unit Trust. Mr Shepard again referred to the two statutory declarations provided by Mr Moran with respect to JEG Constructions and observed that the second declaration "… contains information conflicting with the previous Statutory Declaration". Addressing the Hurstville Unit Trust, Mr Shepard stated that "… due to the discretionary nature of the trust it is uncertain whether there would be a distribution from the trust. As such, the costs of litigation could outweigh the return to creditors should a Trustee in bankruptcy pursue same". 72 Before this Court, it was contended on behalf of Messrs Moran and Daniel that any payment which may ultimately flow to either of them from these two potential sources of funds would be a payment to a beneficiary of a discretionary trust. They had no interest in any asset which was capable of vesting in the bankrupt estate under s 116 of the Bankruptcy Act. Reliance was also placed upon the acceptance by Mr Shepard in cross-examination that "I think it would be very unlikely the trustee would … make a distribution to the debtor in bankruptcy". 73 Notwithstanding the nature of the discretionary trusts upon which Messrs Moran and Daniel relied and irrespective of either JEG Constructions or the Hurstville Unit Trust, it is nevertheless concluded that there is "a prospect or possibility of economic advantage to creditors" by reason of: the fact that the information available to Mr Shepard was manifestly not current and not properly prepared; and the fact that information exposed "inconsistencies between intercompany loan accounts" and that statutory declarations provided by Mr Moran contained "conflicting" information. Such facts in themselves, it is concluded, are sufficient to bring the case within s 222(1)(d). That conclusion is only reinforced by: the failure by both Mr Moran and Mr Daniel to provide a further Statement of Affairs subsequent to the sequestration orders made on 28 July 2011; and a further bank statement revealing $50,000 to the credit of Mr Moran – an amount not apparently known to Mr Shepard. The absence of current information and the "inconsistencies" and "conflicting" nature of the information given to Mr Shepard only serves to give rise to serious reservations as to the reliability of information that was available to Mr Shepard and being passed on to creditors. The "prospect or possibility" of further inquiries exposing further assets available to creditors cannot thus be discounted. The Creditors Voting for Acceptance? 74 It nevertheless remains the case that – upon the information provided and with the benefit of Mr Shepard's recommendations – a majority of creditors voted in favour of accepting the personal insolvency agreements proposed. 75 When considering the decisions taken, it should be recalled that: the updated reports prepared by Mr Shepard for both Messrs Moran and Daniel revealed at least a comparatively more favourable (albeit "modest") distribution in the event of the personal insolvency agreements being approved; and an assessment was made by Mr Shepard of the prospects of recovering assets in each of his reports. In many cases the assessment was that it was "unlikely a recovery would be made" from the source identified or that Mr Shepard "would not consider it cost effective to pursue action …". It would thus be difficult to conclude that a decision to accept the personal insolvency agreements was unfounded. 76 The manner in which creditors voted and the fact that some elected not to participate in the composition thereafter entered into, nevertheless remains relevant to a consideration of both: whether the facts fall within s 222(1)(d); and the manner in which the discretion conferred by s 222(1) is to be exercised. 77 When attention is focussed upon those creditors who had voted in favour of the personal insolvency agreements being approved, it was again emphasised on behalf of Messrs Moran and Daniel in this Court that: each of the related and special interest creditors were admitted to vote by Mr Shepard following legal advice received by him; there has been no subsequent challenge by Mr Robertson or any other person as to those creditors' entitlement to vote; and no other creditor has supported Mr Robertson's application to set aside the personal insolvency agreements. Those submissions may be accepted – but they are not decisive. 78 In the circumstances of the present appeal, it is concluded that the facts upon which the Court may be satisfied that "the terms of the agreement are unreasonable or are not calculated to benefit the creditors generally" within the meaning of and for the purposes of s 222(1)(d) extend to and include such further facts as: the recommendations made by the controlling trustee, Mr Shepard, not to accept the proposals that Messrs Moran and Daniel execute a personal insolvency agreement; the relationship that existed as between the debtors and some of the creditors; the fact that one or more of the creditors who had voted in favour of the personal insolvency agreements had elected not to prove or to take any part in the composition. In such circumstances it is further concluded desirable that: further investigations should be undertaken, including the possibility of examinations conducted pursuant to s 81 of the Bankruptcy Act. 79 When considering whether "the terms of [an] agreement" are "unreasonable", it is thus considered relevant to take into account not only the fact that creditors have voted in favour of a personal insolvency agreement – but also the fact that some of those who voted in that manner were a "related entity" within the meaning of and for the purposes of s 5 of the Bankruptcy Act. The fact that one or more of those "related entities" were prepared to not participate in a distribution of available funds is also a factor that may be taken into account. Those "related entities" may, for whatever reason, also be prepared to forego any further investigations by Mr Shepard. But the very fact of the relationship is a factor to be taken into account when considering whether the facts – taken cumulatively – fall within s 222(1)(d). 80 In placing reliance upon the fact that there was a relationship between a number of the creditors and Messrs Moran and Daniel, it is not considered necessary to form any view as to whether those relationships may have affected the manner in which those creditors voted. It is also not considered necessary to form a view as to whether one or more of those creditors were so affected by the relationship as to vote in a manner not consistent with their own commercial self-interest. It is sufficient to conclude that there was a relationship and a relationship of the kind set forth in Mr Shepard's reports. It is this fact, together with the other circumstances identified, that contribute to the conclusion that the facts fall within the reach of s 222(1)(d). 81 Some factors obviously point in favour of not setting aside the agreements; other factors point in the opposite direction. Taking all such factors into account, on balance it is concluded that the Court can be "satisfied" that the facts fall within s 222(1)(d). The Exercise of the Discretion — Miscellaneous Grounds 82 A final contention advanced on behalf of Messrs Moran and Daniel was that the Federal Magistrate had erred in the exercise of the Court's discretion conferred by s 222(1) and (10). In contending that there had been such an error, reliance is placed upon the errors separately addressed in the other Grounds of Appeal. Each ground has been considered but none lead to any different conclusion. 83 The state of satisfaction that "the terms of the agreement are unreasonable or are not calculated to benefit the creditors generally" enlivens the exercise of the discretion conferred by s 221(1). The mere fact that such a state of satisfaction is reached, however, does not of itself dictate that the agreements or either of them ought to be set aside – the state of satisfaction is but the condition precedent to the exercise of the discretion. 84 There can, however, be no necessary and complete separation of those facts which bring an application within s 222(1)(d) and those facts relevant to the exercise of the discretion. The payment (for example) of what has been termed a "derisory dividend" in some cases may be both a factor capable of bringing an application within s 222(1)(d) and be a factor indicating the merit of setting an agreement aside. 85 Even in the absence of either Mr Moran or Mr Daniel receiving any payment from either JEG Constructions or the Hurstville Unit Trust and the absence of any reason on the part of Mr Shepard to conduct further investigations in relation to those entities, it nevertheless remains appropriate to set the agreements aside. The Filing of Further Submissions 86 Brief reference should be made to the submissions filed on behalf of the Respondents subsequent to the conclusion of the oral hearing. 87 The hearing of the appeal was set down for 2 March 2012. Written submissions had been filed in advance on behalf of both the Appellants and the Respondents. 88 Senior Counsel on behalf of the Appellants concluded his oral submissions by about 11.30 am. Senior Counsel on behalf of the Respondents made short oral submissions but otherwise indicated that reliance was to be placed on the written submissions previously filed. His Junior Counsel was otherwise available to address those written submissions. There was considered to be no necessity to repeat orally that which had been stated in written submissions. 89 Three discrete issues had, however, emerged during the course of the hearing upon which further written submissions were potentially of assistance. Leave was thus given to file "short submissions" in respect to these issues. 90 The response of the Respondents was to file a further eleven pages of submissions together with annexures totalling in excess of 80 pages. The annexures, it is understood, included documents not previously contained within the Appeal Book. Whether the entirety of what was filed can be characterised as a "short submission" can be left to one side. It was certainly well in excess of that envisaged by the Court. 91 A balance must always be exercised to ensure that the Court receives the assistance thought desirable as opposed to the day set aside for a hearing being treated as but a preliminary skirmish with submissions being deferred to another date. It may well be easier for a party to discern what is of concern to the Court as a result of exchanges that occur during the course of oral submissions. But the time when those concerns are to be addressed is the time set aside for the hearing. If an opportunity or an indulgence is extended to a party to file "short submissions" after a hearing, that is an opportunity not to be abused. 92 Not without considerable justification, Senior Counsel on behalf of the Appellants took the opportunity to remind the Court of the following observations of McHugh J in Eastman v Director of Public Prosecutions (ACT) [2003] HCA 28, 214 CLR 318: [29] Parties to matters before the Court need to understand that, once a hearing in the Court has concluded, only in very exceptional circumstances, if at all, will the Court later give leave to a party to supplement submissions. Parties have a legal right to present their arguments at the hearing. If a new point arises at the hearing, the Court will usually give leave to the parties to file further written submissions within a short period of the hearing – ordinarily seven to fourteen days. But a party has no legal right to continue to put submissions to the Court after the hearing. In so far as the rules of natural justice require that a party be given an opportunity to put his or her case, that opportunity is given at the hearing. 93 These observations apply with equal force to proceedings conducted in this Court. The further submissions as filed subsequent to the hearing by the Respondents were manifestly in excess of that envisaged by either the Court or the Appellants. Submissions of such length should not have been filed. Conclusions 94 The appeal is to be dismissed. 95 It is concluded that Mr Roberston is "a creditor" for the purposes of s 222(1)(c) of the Bankruptcy Act 1966 (Cth) and that the facts fall within s 222(1)(d). 96 The discretion to set aside the personal insolvency agreements is properly to be exercised in favour of setting aside the two agreements. In exercising the discretion to set aside the two agreements, a further consideration which should be taken into account – and which has been taken into account – is the personal interest of both Mr Moran and Mr Daniel. Notwithstanding the certainty that the personal insolvency agreements provided to each of them, it is concluded that both agreements should be set aside. 97 The course whereby these conclusions have been reached is a far simpler and more confined route than that chosen by the Federal Magistrate. Although it is concluded, with respect, that the Federal Magistrate has erred in parts of the reasoning process he pursued, it should perhaps be further noted that other parts of his reasons address in commendable detail the facts giving rise to the present dispute. It is not at all self-evident that other parts of his reasoning process did not properly address the requirements imposed by s 222(1). It is perhaps because of this that he reached the correct conclusion on the facts. 98 The Application to adduce further evidence made on behalf of the Respondents at the outset of the hearing is to be acceded to. The power of the Court on appeal to receive additional evidence was not put in question: Federal Court of Australia Act 1976 (Cth) s 27. The absence of prejudice to the Appellants if such evidence was admitted was a factor taken into account in admitting the limited further evidence sought to be relied upon by the Respondents. 99 The parties are to serve short minutes of proposed orders to give effect to these reasons on or before 4.00 pm on 23 April 2012. It is considered that there is no reason why the normal rule as to costs should not apply such that the Appellants should be ordered to pay the costs of the Respondents. Whether those costs should also include the costs incurred by reason of the submissions filed subsequent to the hearing may require separate consideration. 100 The proceeding is stood over to 26 April 2012 with a view to then making final orders. Not without considerable hesitation, the parties may then make further "short submissions" in respect to any matter arising out of the present reasons for decision. I certify that the preceding one hundred (100) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Flick. Associate: Dated: 13 April 2012