FEDERAL COURT OF AUSTRALIA

BANKRUPTCY - termination of Deed of Arrangement - whether debtor failed to comply with Deed of Arrangement - whether injustice to creditors justifies termination.

Bankruptcy Act 1966 (Cth) s 236

Re:  John Leon Pollard; Ex parte Ivor Worrell

No QG7420 of 1997

Kiefel J

Brisbane

20 August 1997

MINUTES OF ORDER

THE COURT ORDERS THAT:

1.         The Deed of Arrangement made on 26 November 1996 be terminated. 

2.         The estate of John Leon Pollard be sequestrated and that Ivor Worrell and Morgan Gerard James Lane be appointed trustees. 

3.         The applicant’s costs of and incidental to the application be taxed and paid in accordance with the Bankruptcy Act.

4.         Costs will include the applicant’s costs of and incidental to the application, including any reserved costs be taxed and paid in accordance with the Bankruptcy Act.

Note:               Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules.

REASONS FOR JUDGMENT

On 26 November 1996 the debtor, John Leon Pollard, entered into a Deed of Arrangement with his creditors.  The applicant, Ivor Worrell, was appointed trustee.  Pursuant to its terms, the debtor was to pay the sum of $5000 per month by way of contributions until payment in full was achieved.  His statement of affairs disclosed debts in the order of $141,441 and assets of $85,250, although as I shall shortly observe, there is some doubt about the latter amount.

The trustee has received two payments of $5000 since that time, but no more, despite demands to that effect in February and March of this year.  The debtor is now in arrears pursuant to the deed of arrangement to the extent of some $30,000.  The most recent contact with him was on 27 June 1997 when he telephoned the trustee’s office to arrange an appointment.  At that time, he said he was close to selling his truck and expected to receive some $82,000 clear of his liability to the lessor.  He did not, however, attend the meeting organised and an inquiry of his financier revealed that he owed moneys under the lease in excess of the value of the truck and he is substantially in arrears under the lease agreement.

The trustee applies, pursuant to section 236 of the Bankruptcy Act 1966 (Cth), for orders terminating the Deed of Arrangement and sequestrating the debtor’s estate.  I am satisfied that the debtor has been served with the application and also made aware of the date of this hearing.  Section 236(1)(a) provides for termination in the event that a debtor has failed to comply with provisions of a Deed of Arrangement and paragraph (b) also has regard to the possibility of injustice to creditors.  In either case there is, I consider, ground for termination.

There is some doubt about just what assets the debtor has or the extent of them.  It seems to me, however, that his creditors have forborne for some time and that whatever he has available by way of assets ought to be made available to them.  I am, in these circumstances, satisfied that it is in the interests of creditors to make an order terminating the arrangement.  Section 236(5) deems the application made by the trustee equivalent to the presentation of a petition for an order for sequestration.

The orders I will make therefore are that the deed of arrangement made on 26 November 1996 be terminated, that the estate of John Leon Pollard be sequestrated and that Ivor Worrell and Morgan Gerard James Lane be appointed trustees.  I further order that the applicant’s costs of and incidental to the application, including any reserved costs, be taxed and paid in accordance with the Bankruptcy Act.

Associate:

Dated:              20 August 1997