Gye v McIntyre [1991] HCA 60

High Court of Australia Mason C.J., Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ. Gye v McIntyre [1991] HCA 60

ORDER Appeals dismissed with costs.

Cur. adv. vult.

The Court delivered the following written judgment:—

1991, March 1 Mason C.J., Brennan, Deane, Dawson, Toohey, Gaudron and McHugh JJ.

These two appeals, which were heard together, arise from one set of circumstances and give rise to a single issue concerning the operation of s. 86 (the set-off provision) of the Bankruptcy Act 1966 Cth ("the Act") in relation to a composition under Pt X of the Act. Each of the appellants entered into such a composition with his creditors. The issue in each appeal is whether the amount owing by the particular appellant to the respondent under a judgment — for money lent and interest — which was obtained before the date of the composition is to be set off under s. 86 against the amount owing by the respondent to that appellant under a judgment — for fraudulent misrepresentation — which was obtained after the date of the composition but in proceedings which were pending at that date. The parties have refrained from reproducing for the purposes of the appeals most of the material which was in evidence on the trial for the reason that they are agreed that, subject to specific supplementation, the facts in the context of which the above issue falls to be determined are sufficiently set out in the judgments in the courts below. The following summary of those facts has been largely extracted from the joint judgment of Gummow and von Doussa JJ. in the Full Court of the Federal Court: see McIntyre v. Gye & Perkes [1] .

1. (1990) 22 F.C.R. 260, at pp. 264-267.

The appellants, Mr. Gye and Mr. Perkes, were members of a syndicate of five persons who, in October 1980, entered into a contract to purchase a hotel freehold at Wilberforce, New South Wales, together with an adjoining property which was the site of a tourist attraction known as the "Australiana Pioneer Village". The vendor under the contract was Mawsons Hotels Pty. Ltd. ("the Company"). At the same time, the five purchasers entered into a contract to purchase some other land from either the Company or a related company. The total purchase price under the contracts was $1.25 million. The respondent, Mrs. McIntyre, was associated with the Company: she was the licensee of the hotel business and the tenant of the hotel property. She and her husband were involved in the negotiations between the Company and the purchasers and induced Gye and Perkes to enter into the contracts by fraudulent misrepresentations about the profitability and takings of the hotel business. Completion of the contracts was financed, in part, by a loan of $600,000 from the Company to the five purchasers secured by first mortgages of the properties. Second mortgages of the properties were given by the purchasers in favour of Mrs. McIntyre to secure a loan to them from her of $200,000. The principal of the loan from Mrs. McIntyre was applied by the purchasers towards payment of the purchase price under the contracts.