FEDERAL COURT OF AUSTRALIA

Bechrose Pty Ltd v Jefferson (Trustee) [1999] FCA 1153

BANKRUPTCY - review of trustee ruling to assign nominal value to vote of applicant at proposed creditor’s meeting held under s 73 - applicant is the assignee of mortgage to a financier from a company that bought property from the bankrupt in a transaction arguably void under ss 120 or 121 the Bankruptcy Act 1966 (Cth) and assignee of a personal guarantee by bankrupt to the financier - applicant not at arms’ length from the bankrupt - effect of s 64ZB(8) - approach to the valuation of debt on an assigned guarantee when value of consideration for the assignment not clear - effect of related mortgage on valuation of guarantee

Bankruptcy Act 1869 (Imp), s 31

Bankruptcy Act 1966 (Cth), ss 27, 64, 64D, 64Z, 64ZA, 64ZB, 73, 76A, 82, 120, 121, 178, Div 1 of Pt VI

Land Title Act 1994 (Qld)

Re Dingle; Westpac Banking Corp v Worrell (1993) 47 FCR 478 cited

Re Ebner; Ebner v Official Trustee in Bankruptcy (1999) 161 ALR 557 cited

Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 cited

Official Trustee in Bankruptcy v Baker (Full Court, Federal Court of Australia, 5 August 1995, unreported) cited

Re Dingle; Ex parte Westpac Banking Corporation v Worrell (Drummond J, 16 August 1993, unreported) cited

Staples v Milner (1998) 83 FCR 203 cited

Pyramid Building Society (In liq) v Terry (1997) 189 CLR 176 cited

Ex parte Llynvi Coal and Iron Company.  In re Hide (1871) LR 7 Ch 28 cited

Hardy v Fothergill (1888) 13 App Cas 351 cited

In re Blakeley, Ex parte Aachener Disconto Gesellschaft (1892) 9 Morr 173 cited

In re Houlder [1929] 1 Ch 205 cited

Re Amalgamated Investment and Property Co Ltd [1984] 3 All ER 272 cited

Re Hunter; ex parte Bank of New South Wales [1982] Qd R 131 cited

Re Burton; Burton v Wily (1994) 122 ALR 399 cited

IN THE MATTER OF JOHN ERNEST DUNWOODY (A BANKRUPT)

BECHROSE PTY LTD v PHILIP GREGORY JEFFERSON AND JAY ARSCOTT STEVENSON

Q 7131 OF 1999

DRUMMOND J

20 AUGUST 1999

SYDNEY (HEARD IN BRISBANE)

IN THE MATTER OF JOHN ERNEST DUNWOODY (A BANKRUPT)

THE COURT ORDERS THAT:

1.                  The application be dismissed.

2.                  The Official Trustee in Bankruptcy be joined as second respondent as from it becoming the trustee of the property of John Ernest Dunwoody, a bankrupt, on 9 August 1999.

3.                  The applicant pay the first respondents’ costs of and incidental to the application up to and including 8 August 1999.

4.                  The applicant pay the second respondent’s costs of and incidental to the application from and including 9 August 1999.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE MATTER OF JOHN ERNEST DUNWOODY (A BANKRUPT)

REASONS FOR JUDGMENT

1                     The applicant applies, under ss 27 and 178 the Bankruptcy Act 1966 (Cth), for the review of a ruling made by the bankrupt’s trustees that the applicant may only vote for the sum of $1 at the proposed meeting of creditors called by the bankrupt pursuant to s 73(2) of the Act.  The applicant claimed a declaration that the value in respect of which it is entitled to vote is $1,128,147 or, alternatively, $1,102,947.  It is the latter figure it now relies on.

2                     It is common ground that if the applicant succeeds in overturning the trustees’ ruling, its vote in favour of the bankrupt’s second proposal made pursuant to s 73 the Bankruptcy Act will ensure its acceptance.  It is also common ground that the applicant is a creditor of the bankrupt for the purposes of Div 6 of Pt IV the Bankruptcy Act.  The sole issue is the correctness of the trustees’ ruling as to the value they have ascribed to its vote.

3                     This Court’s jurisdiction to review the trustees’ determination of this issue arises under s 27 the Bankruptcy Act.  The Court is empowered by ss 30(1) and 178 to make such orders as it thinks just and equitable in exercising that jurisdiction.  See Re Dingle; Westpac Banking Corp v Worrell (1993) 47 FCR 478.  The Full Court there accepted that the principles applicable to whether the Court will intervene to review decisions made in connection with meetings of creditors under Pt X of the Act as to whether persons are creditors of the debtor and otherwise with respect to their entitlements to vote at those meetings are also applicable in relation to proceedings under Div 6 of Pt IV of the Act.  It will be “a fairly rare case” in which the Court will intervene.  See 47 FCR at 485.  That the fate of the bankrupt’s proposal is likely to be governed by the correctness of the determination of the trustee sought to be reviewed will generally be a necessary condition of the Court’s intervention:  ibid, at 485 - 486.  But that of itself is not sufficient to compel intervention:  the Court’s powers remain discretionary.

4                     At the hearing the parties handed up a Statement of Agreed Facts; each also relied on other material.  The trustees’ main affidavit incorporates three affidavits of Mr Jefferson, one of the trustees, filed in proceedings QG 7429 of 1998.  This action was instituted by Mr and Mrs Sherry, the petitioning creditors, against the trustees, the bankrupt and others in an attempt, ultimately unsuccessful, to facilitate recovery by them of their judgment debt.  The trustees also referred to the material filed in proceeding QG 7156 of 1998, an action commenced by them to set aside the sale by the bankrupt of a farm property.

5                     On 7 August 1998 a District Court judge delivered reasons upholding a claim by the Sherries for $81,140 damages against the bankrupt; on 1 September 1998 judgment against the bankrupt for that sum, plus costs to be taxed, was entered.  Costs were later taxed at $77,905.  This judgment debt was never paid.

6                     The Sherries are neighbours of the bankrupt.  A chronology listing the more significant events in the long running dispute between the bankrupt and the Sherries, which culminated in the judgment in their favour, together with the steps taken by the bankrupt to put his assets beyond their reach, is contained in par 12 of the affidavit of Mr Jefferson, filed on 16 November 1998 in the Sherries’ action QG 7429 of 1998.

7                     On 18 September 1998, the bankrupt entered into a contract for the sale of his cane farm to “Chelmscliff Pty Ltd … as Trustee for the Dunwoody Mackay Trust of … 133 Queen Street, Cleveland”.  This farm, called the Seaforth farm, consisted of one lot owned solely by the bankrupt, sold under the contract at a price of $956,000, and a second lot owned jointly by the bankrupt and a Mr Collier, sold under the contract at a price of $450,000.  The contract was completed a week later, on 25 September 1998.

8                     Australian Securities and Investments Commission records show that Chelmscliff was formed as a shelf company in July 1998; a Mr MD Hickman became sole director on 14 August 1998 and the company changed its registered office to “1st FL, 133 Queen Street, Cleveland”, Mr Hickman’s office, as from 2 September 1998.  Mr Jefferson describes Hickman as “a financial adviser to the bankrupt prior to bankruptcy” and refers to the bankrupt first speaking with him on 14 August 1998.

9                     The Dunwoody Mackay Trust was established by a Deed of Trust executed on 28 August 1998.  This records the creation of the trust by the payment by a Mr Gregory Whittaker as settlor of $10 to Chelmscliff as trustee on the trusts set out in the Deed.  The primary beneficiaries of this discretionary trust are the bankrupt and his spouse.  The appointor under this trust is Armgap Investments Pty Ltd.  It is described as “trustee for the Seaforth Superannuation Fund”, with its address as Mr Hickman’s firm, in the authority the bankrupt gave for the disbursement from the proceeds of the sale of his farm “of any funds received on behalf of the Fund”.

10                  A letter obtained by the trustees from the solicitors who acted for Chelmscliff in connection with its purchase of the bankrupt’s farm show that the purchase moneys of $1,406,000 paid by it were applied on settlement in accordance with the bankrupt’s directions, as to $128,794 and $666,622, to two of the bankrupt’s former mortgagees; to repayment to the bankrupt’s mother of a loan to it by her of $147,002; to repayment to Mr Collier of his loan to Chelmscliff of $96,234 and as to the remaining $367,346, to the Seaforth Superannuation Fund via Mr Hickman’s trust account.  The trustees have identified this last-mentioned sum as having been used by the Fund to purchase an annuity in Vanuatu on 30 September 1998.

11                  Chelmscliff raised the $1,406,000 purchase price it paid to the bankrupt and Mr Collier for the farm with loan moneys of $1,039,764 from Westpac Banking Corporation, the loans from the bankrupt’s mother of $147,002 and from Mr Collier of $96,234 already mentioned; the balance of $123,000 came from Factor Finance Facilities Pty Ltd, an associate of the company which provided the annuity purchased in Vanuatu by the Seaforth Superannuation Fund.

12                  The loan made by Westpac to Chelmscliff was secured by two mortgages granted by Chelmscliff over the lands comprising the Seaforth farm by a floating charge over its undertaking and by a guarantee that Chelmscliff would repay these loan moneys to Westpac given by the bankrupt personally.  This guarantee takes the form of a promise by the bankrupt to pay to the bank, on written demand and without deduction (cl 5) all moneys owed to the bank by Chelmscliff (cl 2).  By its terms, it imposes upon the bankrupt, as guarantor, “a principal and independent obligation” that makes the bankrupt liable to the bank as soon as Chelmscliff becomes liable to make any payment to the bank (cl 14).  The bank is entitled to enforce the guarantee independently of and before exercising any rights it may have under the mortgages granted to it by Chelmscliff and the bankrupt is not entitled to claim the benefit of those securities until all moneys owed to the bank by Chelmscliff are paid in full (cl 16).  These securities were delivered by Chelmscliff and the bankrupt to Westpac on settlement of the purchase by the former of the latter’s Seaforth farm on 25 September 1998.

13                  On 9 October 1998, Mr Dunwoody became bankrupt on his own petition.  As at that date, Chelmscliff was indebted to Westpac in the sum of $1,102,947.  His statement of affairs dated the same day discloses minimal assets, save for his interest in two insurance and superannuation policies, one said to have a surrender value of $3,000, the other, obviously the Vanuatu annuity, said to have a surrender value a month later of $360,000.  His statement lists liabilities owing to unsecured creditors totalling in excess of $575,000, which included the judgment debt of $81,140.  He gave, as the reason for his bankruptcy, his inability to pay this judgment debt.  He also stated that he was currently employed by “Chelmscliff” of “133 Queen Street, Cleveland”.

14                  The bankrupt’s first proposal under s 73 was made on 16 November 1998.  As summarised by the trustees, it involved:

(a)        payment to them of $20,000 by the bankrupt’s mother; and

(b)        the sale of the cane farm by Chelmscliff and the payment to the trustees of the proceeds of sale after deducting $1,455,950 paid by Chelmscliff as the price and stamp duty; all interest payable by Chelmscliff on that sum; its costs of marketing and selling the property and of continuing to operate it as a farm in the period to sale, together with some other expenses of Chelmscliff.

15                  In their report to creditors on this proposal, the trustees referred to further creditors of the bankrupt not disclosed in the statement of affairs, who include the bankrupt’s brother, Mr Kenneth Dunwoody, said to be owed $243,000, and Westpac Banking Corporation, owed $1,150,000 in respect of the guarantee given by the bankrupt for the borrowings by Chelmscliff to purchase the cane farm from him.  The trustees gave detailed reasons for recommending acceptance of this proposal on the ground that the dividend to creditors may be greater than the dividend if the bankruptcy were to continue.  This opinion was dependent upon the sale price achieved by Chelmscliff of the cane farm.

16                  This proposal was put to a meeting of creditors on 10 December 1998, but failed to obtain the support of the requisite 75% in value of creditors, 20 to the value of $387,600 voting in favour and 4 to the value of $148,167 voting against the proposal.  The bankruptcy therefore continued.

17                  A week later the trustees commenced action QG 7516 of 1998 to have the bankrupt’s sale of his interest in the farm to Chelmscliff declared void.  The trustees, in their report on the proposal, had expressed the opinion that there were strong grounds to seek to set aside, under s 120, “the transfer of the Seaforth property for the sum of $1,406,000 on 25 September 1998”.

18                  It was conceded by the applicant, for the purposes of argument only in this case, that the trustees had an arguable case that the bankrupt’s transfer of his interest in the cane farm to Chelmscliff was void against the trustees.  The transfer to Chelmscliff was promptly registered under the Land Title Act 1994 (Qld).  But the applicant acknowledges that that does not bar the trustees from obtaining the relief they are claiming in the proceedings they commenced in December 1998 to set aside the sale of the bankrupt’s cane farm to Chelmscliff under ss 120 and 121.  In that action, only the trustees have to date filed material.  In my opinion, that material establishes a strong case that the bankrupt’s transfer of his interest in the cane farm is void under s 120 the Bankruptcy Act as a transfer made by the bankrupt at a significant under-value and also void under s 121 as a transfer made for the main purpose of defeating the claims of his creditors, including the Sherries.  The case, particularly that based on s 121, is strengthened even further by other evidence available to the trustees, including the chronology of events, to which I refer in these reasons.

19                  Westpac quickly became unhappy with its loan arrangements with Chelmscliff, as a result of the action taken by the Sherries, including lodgment of a writ of execution and a caveat over the farm property.  On 19 November 1998, Westpac gave notice to Chelmscliff that it was in default under the finance arrangements made in September 1998 and that Westpac wanted repayment in full of all moneys advanced by it to Chelmscliff by no later than 28 February 1999, without prejudice to its right to take action in the meantime, should interest repayments not be paid on time.

20                  Westpac’s action led to the emergence of the applicant.  It was incorporated on 11 January 1999.  By 21 January, Mr Whittaker, the settlor of the Dunwoody Mackay Trust had become the applicant’s sole director.  Presumably it was he who authorised the action by the applicant, to which he refers in par 2 of his affidavit of 30 March 1999, “to put in place finance to acquire certain debts of Chelmscliff Pty Ltd and [the bankrupt] to Westpac”.  He says the need for refinancing of these debts due by Chelmscliff and the bankrupt to Westpac “came about because of certain breaches of the Securities … resulting in a demand by Westpac that its indebtedness be paid out”.

21                  Mr Biggs describes himself in his affidavit as a member of the firm of Bennett & Philp, the solicitors for the applicant.  He says that in about late January 1999, “I received instructions to commence negotiations with Westpac … towards obtaining an Assignment of certain securities held by Westpac over Chelmscliff Pty Ltd … in relation to Westpac’s dealings with Chelmscliff”.  In the letter of 22 January 1999 he wrote to Westpac, he identifies his instructions as coming from “Mr Michael Hickman and certain other entities”.  The letter contains an offer with respect to the refinancing of Westpac’s loan to Chelmscliff.

22                  It was this offer that led to Westpac assigning the Chelmscliff mortgages and the bankrupt’s guarantee to the applicant Bechrose, although neither Mr Biggs nor Mr Hickman were able to identify it as the intended assignee when Mr Biggs wrote on behalf of the latter (and others) to Westpac on 22 January 1999.

23                  The applicant took these assignments on 3 March 1999.  On settlement, bank cheques totalling $1,128,147 were delivered to Westpac by its solicitors, in exchange for the Chelmscliff mortgages, the mortgage debenture over its assets, the bankrupt’s guarantee and the benefit of the costs order obtained by Westpac against the Sherries in QG 7429/98.  Mr Whittaker states:

“In paying the said amount of $1,128,147.52 for the assignment and transfer of the Securities and the Costs Order the Applicant did not put a separate value upon each or any of them and probably would not have been able to do so if it tried.  All the Securities and the Costs Order taken together were important to the applicant and the said consideration was paid for assignment of them all.”

24                  Mr Whittaker made this statement after the trustees’ solicitor had, in correspondence with Bennett & Philp, raised the operation of s 64ZB(8) the Bankruptcy Act and whether the applicant could establish what was the consideration it gave for the assignment of the guarantee as matters of concern to the trustees in valuing its vote at the forthcoming meeting of the bankrupt’s creditors.  But it appears from Mr Looney’s written advices to Bennett & Philp that, prior to that, this issue had been flagged in oral discussions between counsel and solicitor as one needing attention, at least by the morning of 3 March 1999 and before completion of the agreement between the applicant and Westpac with respect to the transfer of the mortgages and the guarantee.

25                  The inference is strong that the applicant is not at arms’ length from the bankrupt, but became involved for the purpose of assisting the bankrupt in his endeavours to put his assets beyond the reach of his creditors and to achieve his early discharge from bankruptcy.

26                  On 2 February 1999, the trustees received the bankrupt’s second proposal for a composition and, on 10 March 1999, an amended proposal.

27                  This proposal provided for the payment to the trustees by the bankrupt’s mother of $250,000, to be applied in payment of the trustees’ costs and then for distribution among the bankrupt’s creditors.  The proposal involved waiver by the bankrupt’s mother, his brother, Peter Dunwoody, and Woodco Services Pty Ltd of any right to receive any dividend in the composition.  It also provided for the grant by Chelmscliff of an easement along the western boundary of the Seaforth farm in favour of the adjacent owners as a buffer zone between the two farms.

28                  The amended proposal makes it clear that the easement was for the benefit of the Sherries:  it provides for a more extensive buffer zone in favour of the Sherries than did the proposal of 2 February 1999 and an abandonment by the debtor of any claims he may have had at the date of becoming bankrupt against them.  It provides for the payment in the composition of a special dividend of $50,000 to the Sherries that is to rank in priority only after payment of the trustees’ costs of their administration of the bankrupt estate and of the composition; the Sherries are also to share pro rata with the other unsecured creditors in the balance of the moneys available in the composition.  The Sherries’ offer, made some time ago, to provide the trustee with $50,000 to pursue action with a view to recovering possible preference payments made by the bankrupt has not been made good.  It may be that the bankrupt has now resolved his longstanding differences with them.

29                  The amended proposal provides for a further creditor of the bankrupt, Mackay Demolitions (Mr Collier’s firm), to waive any claim to a dividend in the composition in respect of that part of the sum owing to it by the creditor not already assigned to another.  As part of this proposal, the applicant itself has agreed to waive its right to any dividend in the composition in respect of the debt it is claiming on the guarantee of over $1M.  All the waivers offered will reduce creditors’ claims made in the bankruptcy totalling $1,677,810 to creditors’ claims in respect of those proving in the composition to $359,044.

30                  The trustees, however, recommend against acceptance of this new proposal on the basis that if it is accepted, no creditor, except for the Sherries, will receive any dividend - the trustees’ own costs and expenses to date have, understandably, been substantial - whereas, if it is rejected, the trustees estimate that, on the assumption that the applicant is not entitled to prove in the bankruptcy, all creditors will receive a dividend of 14.05 cents in the dollar.  If this assumption is incorrect, a matter to which I will return, the entitlement of the applicant to participate in any distribution in the bankruptcy by reason of the guarantee for an amount equal to the whole of the moneys owing to it by Chelmscliff can be expected to reduce the likely dividend to creditors to a minuscule figure.

31                  In their report to creditors of 22 March 1999 on the amended proposal, the trustees also record receipt of an offer from an insurance company, in return for a premium payable from any funds recovered, to fund their legal costs of the voidance proceedings against Chelmscliff Pty Ltd, as well as the costs of conducting an examination under the Act concerning the transfer of the cane farm and other transactions, including the transfer of the $367,347 by the bankrupt to the Seaforth Superannuation Fund.  The trustees also state that they will seek funding from this insurance company in respect of proceedings to recover the payment into the Seaforth Superannuation Fund and the payments of $96,234 and $147,002 made to Mr Collier and the bankrupt’s mother respectively from the proceeds of his sale of his farm property to Chelmscliff; the trustee says he has legal advice confirming that the estate has good prospects of recovering these payments.

32                  In response to advice from Mr Hickman that the applicant intended, in reliance on the bankrupt’s assigned guarantee, to vote at the planned meeting of creditors called to consider the new proposal, the trustees sent to the applicant’s solicitors a proof of debt for completion.  On 12 March, the trustees received from the applicant’s solicitors a proof of debt in Form 8 claiming $1,100,000 as “Amount owing to Westpac … pursuant to Guarantee & Indemnity dated 24/9/98 which Guarantee & Indemnity was assigned to Bechrose Pty Ltd …”.  Those solicitors, on 18 March 1999, advised the trustees that Westpac had told them that “the amount of the debt outstanding as at 9 October 1998 was $1,102,947.47” and that the applicant would seek to amend its proof to claim that amount.

33                  On 23 March 1999, the solicitor for the trustees advised the applicant’s solicitors that the trustees had determined to admit the applicant as a creditor for voting purposes at the meeting of creditors and had estimated that “the value of the proof is the sum of $1.00”.

34                  At the hearing on 14 July 1999, the trustees justified their determination of the value of the applicant’s debt for the purpose of voting at the meeting of creditors on the following bases:

(1)        Section 64ZB(8) the Bankruptcy Act, on its true construction, is only applicable where a creditor, under an assigned debt, has acquired the assignment for an amount less than the value of the debt.  The applicant has not made any apportionment of the consideration of $1,128,147 paid by it to Westpac for the assignment to it of the Chelmscliff mortgage, the bankrupt’s guarantee and the benefit of the costs order and, for the reasons given in Mr Whittaker’s affidavit, will not make any such apportionment.  The applicant cannot therefore show that it has taken an assignment of the debt the subject of the guarantee for an amount less than the value of the debt, so s 64ZB(8) cannot apply to its valuation for voting purposes. Since s 64ZB(8) is inapplicable, the debt must be valued in accordance with Div 1 of Pt VI of the Act.

(2)        If the debt is valued in accordance with the provisions of Div 1 of Pt VI, the trustees are entitled to have regard to the fact that the applicant holds security in the form of the Chelmscliff mortgages for the same debt in respect of which the guarantee was given by the bankrupt.  The existence of the Chelmscliff security provides “other reason” within s 82(4) for the trustees to conclude that the debt under the guarantee does not bear “a certain value” within that sub-section.  Since, on the valuation evidence available to the trustee the Chelmscliff mortgages are likely to realise more than enough to cover the debt guaranteed by the bankrupt, the trustees contend they are entitled to value that debt, for voting purposes, at the nominal figure of $1.

(3)        Alternatively to (2), the trustees say they are entitled to rely on the opinion they had formed as to the voidability under ss 120 and 121 of the transfer by the bankrupt of the Seaforth farm to Chelmscliff; if that transfer is void against the trustees, Chelmscliff would hold the farm on trust for the trustee, subject always to the mortgages.  The applicant’s mortgages can thus be treated by the trustees as a security over property that is available to the trustees for division among the bankrupt’s creditors, ie, over property that is, subject only to those mortgages, property of the bankrupt.  The applicant is therefore now in the position of a person holding security over the property of the bankrupt and s 90 entitles the trustees to have regard to the value of the applicant’s security over the Chelmscliff lands - in view of the valuation evidence, more than sufficient to cover payment to the applicant of all moneys owing to the applicant by Chelmscliff - in arriving at the nominal value they gave to the applicant’s debt under the bankrupt’s guarantee, for voting purposes.

35                  It is convenient to deal with those arguments in reverse order.

36                  As to the third argument, there are difficulties in accepting the trustees’ theory that the effect of an order declaring void the transfer of the farm by the bankrupt to Chelmscliff is to make the farm the property of the bankrupt:  if the transfer is void as against the trustees, their only title to the farm will be on a trust for sale, to hold on trust for the estate of the bankrupt only so much of the proceeds of its realisation as may be necessary to ensure payment in full of the expenses of the administration and all unsecured debts, and to hold the likely surplus on trust for Chelmscliff.  See Re Ebner; Ebner v Official Trustee in Bankruptcy (1999) 161 ALR 557 at 574 - 575.  But in any event, s 90 only permits the trustee to bring into account the value of a security if the creditor is “A secured creditor” of the bankrupt.  This expression is defined in s 5(1) to mean “a person holding a mortgage, charge or lien on property of the debtor as a security for a debt due to him or her from the debtor”.  On no view is the applicant a “secured creditor” of the bankrupt.  The applicant holds the mortgages as security for a debt due to it, not from the debtor but from Chelmscliff.  Voidance of the transfer of the farm by the bankrupt to Chelmscliff by force of s 120 or s 121 cannot affect the character of that security as one granted by Chelmscliff to secure a debt owed by it, initially to Westpac and now to the applicant.  Although Chelmscliff may well have taken the farm from the bankrupt under a defeasible conveyance, it then took a title sufficient to enable it to give Westpac title to the mortgages that is good as against everyone, including the bankrupt’s trustees.  See ss 120(6) and 121(8); Official Trustee in Bankruptcy v Alvaro (1996) 66 FCR 372 at 426 and Official Trustee in Bankruptcy v Baker (Full Court, Federal Court of Australia, 5 August 1995, unreported).

37                  This argument must be rejected.

38                  As to the second argument, the trustees’ proposition that, in the absence of some special provision governing the valuation of debts for the purpose of voting at a creditor’s meeting, such value is to be arrived at by the application of the provisions of Div 1 of Pt VI of the Act is in accordance with what I said in Re Dingle; Ex parte Westpac Banking Corporation v Worrell (16 August 1993, unreported) at 10:

“… only a person who is in fact a creditor is entitled to vote at a meeting called pursuant to s 73(2) and, in my view, a person is a creditor within s 73 only if he has a debt provable under s 82.”

39                  On appeal, the Full Court noted the concession by counsel for the appellant of the correctness of this view:  see Re Dingle; Westpac Banking Corporation v Worrell (1993) 47 FCR 478 at 489.  See also Staples v Milner (1998) 83 FCR 203 at 209.

40                  But s 82(4)’s function is not to permit a creditor’s claims against third parties to be brought into account in valuing the creditor’s claim against the bankrupt.  Section 82(1) governs whether the bankrupt’s liability on the guarantee as at the date of bankruptcy is a provable debt; s 82(4) is ancillary to this provision, in so far as it operates only if there is a debt or liability provable in the bankruptcy, but which does not bear a certain value, and then only to require the trustee to make an estimate of its value.  See Pyramid Building Society (In liq) v Terry (1997) 189 CLR 176 at 190.  The policy of s 82, discernible from the provisions of that section, is that which has long underlain the bankruptcy law.  Of the similarly worded provisions of s 31 the Bankruptcy Act 1869 (Imp), it was said in Ex parte Llynvi Coal and Iron Company.  In re Hide (1871) LR 7 Ch 28 at 31:

“…  Every possible demand, every possible claim, every possible liability, except for personal torts, is to be the subject of proof in bankruptcy, and to be ascertained either by the Court itself or with the aid of a jury.  …”

41                  In Hardy v Fothergill (1888) 13 App Cas 351 at 367, it was said:

“… unless a judicial declaration has actually been made in the terms of that provision [the paragraph of s 31 equivalent to s 82(6) of the Commonwealth Act], the liability of the bankrupt under a contract, however extreme the difficulty of valuing that liability may be, must be deemed to be a debt provable in bankruptcy, …”

42                  This comment is of general application, subject only to the express exclusion of particular categories of liability by, eg, s 82(2), from the broad range of debts and liabilities that are provable in a bankruptcy.  (The reference in Hardy v Fothergill to a “contract” is explained by the fact that it was the value of a liability arising under a provision in an agreement for the assignment of a lease that was there in issue.)

43                  It is, I think, clear that the bankrupt’s liability on the guarantee as at the date of bankruptcy was both future and contingent, there being no suggestion that Westpac had made any demand on the bankrupt for payment of money then owed to it by Chelmscliff, as the principal debtor.  That liability plainly did not then bear “a certain value” within s 82(4).  This sub-section obliged the trustees, in valuing that debt for the purpose of voting at the creditors’ meeting, to estimate that value “however extreme the difficulty of valuing that liability may be”.

44                  In the ordinary case, a creditor with security from the principal debtor sufficient to satisfy the debt could be expected to enforce that security before seeking to enforce a guarantee.  But in estimating the value of the applicant’s debt under the guarantee, the trustees are not, I think, permitted to take into account the unrealised entitlement of the applicant to recover, by enforcing the Chelmscliff mortgages, payment of the moneys in respect of which the guarantee was given:  that would not be to value the bankrupt’s liability on the guarantee, which is all s 82(4) authorises, but to value the creditor’s rights under the mortgages.  The creditor’s rights against third parties in respect of a debt due to the creditor by the bankrupt are, as a general rule, irrelevant to the valuation of that debt for the purposes of the bankruptcy administration.

45                  But it appears to be a settled rule of bankruptcy law that where a creditor proves in the bankruptcy of a guarantor and (as here) the guarantor is only responsible for the amount in fact owing by the principal debtor, any payment by or on behalf of the principal debtor received by the creditor before proof must be taken into account by the trustees in valuing the creditor’s proof; a creditor claiming in a guarantor’s bankruptcy is not, however, obliged to bring into account, in reduction of the amount of the debt sought to be proved, payments received from the principal debtor after submission of proof, let alone an estimate of what it may be able to obtain by realising the principal debtor’s security.  This rule is subject only to the qualification that the creditor is not entitled to recover more than 100 cents in the dollar.  If the creditor who has proved in the guarantor’s bankruptcy ends up with more than 100 cents in the dollar, it must account to the bankrupt guarantor or, more accurately, to his trustee, for the excess.  See In re Blakeley, Ex parte Aachener Disconto Gesellschaft (1892) 9 Morr 173; In re Houlder [1929] 1 Ch 205 at 209 - 210; Re Amalgamated Investment and Property Co Ltd [1984] 3 All ER 272 at 287 - 292 and Re Hunter; ex parte Bank of New South Wales [1982] Qd R 131 and The Modern Contract of Guarantee, 3rd ed, O’Donovan & Phillips, pp 471 - 473.

46                  In Hunter, Wanstall CJ accepted that prima facie, by the terms of s 82, the debt provable in respect of a guarantee is that to which the bankrupt was subject at the date of the bankruptcy; however, he found justification for the rule in In re Blakeley in s 87 and in the form of proof of debt, then Form 15, prescribed pursuant to s 84, which required the creditor to swear to the sum in respect of which the bankrupt “still is justly and truly indebted to me”.  The currently prescribed form, Form 8, while not required to be verified on oath, requires the creditor to bring into account “payments in reduction of debt”.  I consider the rule in In re Blakeley remains applicable to the proof by a creditor in the bankruptcy of a guarantor.  Clause 20 of the guarantee, which provides that the bankrupt’s obligations under the guarantee continue after his bankruptcy, cannot, in my opinion, override the rule in In re Blakeley, given its statutory foundation.

47                  Here, the applicant is entitled by the terms of the guarantee to look to the bankrupt for payment in full of the moneys due to it by Chelmscliff.  By a letter dated 18 March 1999, the applicant demanded that he immediately pay the amount owing to Westpac at the date of his bankruptcy.  In valuing the applicant’s debt, the trustees were, for the reasons given, only entitled to take into account payments already then received by the applicant in respect of the mortgages.  Up to the date on which the trustees valued the guaranteed debt, the applicant had received nothing from Chelmscliff in respect of Chelmscliff’s debt.  When the trustees valued the applicant’s vote in March 1999, if they then valued it by reference to the value of the applicant’s proof of debt, there was nothing that the trustees could have brought into account to reduce the amount of the guarantee debt below the $1,102,947 for which the applicant submitted its proof to the trustees.

48                  I reject the trustees’ second argument also.

49                  Nevertheless, the trustees were not, in my opinion, in error in advising creditors in their report to them on the bankrupt’s second amended proposal that the dividend they could expect to receive, if the bankruptcy proceeded, was to be calculated ignoring the bankrupt’s liability on the guarantee to the applicant.  Even though the applicant is now entitled to lodge a proof in the bankruptcy for $1,102,947, it is unlikely that it will be entitled to payment of any dividend in the distribution of the bankrupt’s property.  Given the good prospects the trustees have of setting aside the transfer by the bankrupt to Chelmscliff, it can be expected that the trustees will proceed to sell that farm in the course of administering the bankrupt’s estate.  On such a sale, the trustees will be bound to pay, as a first charge on the proceeds, the whole of the moneys secured to the applicant by the mortgages granted by Chelmscliff.  In view of the valuation evidence as to the realisable value of the farm, the applicant will thus very likely receive 100 cents in the dollar in respect of the bankrupt’s liability to it under the assigned guarantee.  The applicant will not therefore be entitled to any dividend in the bankruptcy.

50                  As to their first argument, it is necessary to refer to the relevant provisions of the Bankruptcy Act 1966 (Cth).

51                  By s 73, where a bankrupt desires to make a proposal to his creditors for a composition in satisfaction of his debts, he must lodge with the trustee a proposal in writing setting out the terms of the proposed composition and the trustee must call a meeting of creditors for the purpose of deciding whether to accept or reject that proposal.  Section 76A applies the provisions of Div 5 of Pt IV of the Act, so far as they are capable of applying, and with the modifications set out in Sch 2 to the Bankruptcy Regulations (reg 4.19), to the meetings of creditors called under s 73.  There are no modifications of any present relevance.  Division 5 of Pt IV contains the following:

“SECTION 64D   STATEMENT BY CREDITOR AS TO AMOUNT OF DEBT

64D     The notice [of the s 73 meeting which the trustee must give to creditors pursuant to s 64A] must state that each creditor must give to the trustee at or before the meeting a written statement setting out:

(a)        the amount in respect of which the creditor claims that the bankrupt is indebted to the creditor; and

(aa)      if the creditor has been assigned a debt that the bankrupt owes to the creditor - the value of the consideration that the creditor gave for the assignment of the debt; and

(b)        if the meeting is the first meeting of the bankrupt’s creditors:

(i)         whether the creditor holds a security in respect of the debt and, if so, the value of the security as estimated by the creditor and the amount of the creditor’s debt after deducting that value; and

(ii)        brief particulars of the transaction and circumstances that gave rise to the debt.”

SECTION 64Z   DUTIES OF MINUTES SECRETARY

…

64Z(6)    … If a motion is passed or defeated on the voices, the minutes must record that fact and …

64Z(7)    … The minutes must record the value of each creditor’s debt and the total value of the debts of all the creditors.

64Z(8)    … If a poll is taken on a motion, the minutes must record:

(a)       the number and names of the creditors (if any) who voted in favour of the motion and the total value of their debts; and

…

64Z(9)    … A reference in this section to the value of a creditor’s debt is, if the creditor holds a security in respect of that debt, a reference to the value of that debt after deducting the value of the security as estimated by the creditor in the statement given by the creditor to the trustee under section 64D.

…

SECTION 64ZA   ENTITLEMENT TO VOTE

…

64ZA(5)     … If a creditor holds a security in respect of a debt, the creditor is not entitled to vote unless the debt, or the total amount of the debts, owed to the creditor exceeds the amount estimated by the creditor in the statement given to the trustee under section 64D to be the value of the security.

64ZA(6)     … A creditor who has failed to give to the trustee a statement in accordance with section 64D is not entitled to vote.

64ZA(7)     …

64ZA(8)     … The trustee may determine any question that arises as to the entitlement of a person to vote.

…

SECTION 64ZB   MANNER OF VOTING

…

64ZB(8)     … For the purpose of determining whether a motion proposed at the meeting is resolved, the value of a creditor who:

(a)        has been assigned a debt; and

(b)        is present at the meeting …; and

(c)        is voting on the motion;

is to be worked out by taking the value of the assigned debt to be equal to the value of the consideration that the creditor gave for the assignment of the debt.”

52                  All the above provisions were inserted by the amending Act of 1992, with the exception of s 64D(aa) and s 64ZB(8), both of which were inserted by the amending Act of 1996.

53                  While prima facie all creditors are entitled to vote at a meeting held pursuant to s 73 and the trustee, in valuing a creditor’s debt for the purpose of so voting, is to value the debt in accordance with the provisions of Div 1 of Pt VI of the Act, the entitlement of a creditor to vote at a s 73 meeting also depends on its giving the trustee the written statement prescribed by s 64D and, in valuing a creditor’s vote to be cast at such a meeting, the trustee must apply not only those provisions of Div 1 of Pt VI that are relevant to the particular creditor’s debt, but also ss 64ZA(5) and 64ZB(8).

54                  The Explanatory Memorandum explains the mischief that ss 64D(aa) and 64ZB(8) were designed to deal with, viz, the activities of persons favourably disposed towards a bankrupt in procuring, for only a fraction of their value, the assignment to them of debts due by the bankrupt to creditors and thereby obtaining control over voting at meetings of creditors, including those called by the bankrupt under s 73.  The stated object of these provisions is to ensure that a creditor claiming as assignee of a debt due by the bankrupt can vote at a meeting of creditors only for the amount of the consideration that he gave to the assigning creditor.  Given this, I can see no basis for putting the gloss on these provisions suggested by the trustees, viz, that s 64ZB(8) should be read as if prefaced by something along the following lines:  “Where a creditor has been assigned a debt for an amount which is less than the value of the debt …”.  The mischief intended to be cured by these amendments is met by giving s 64ZB(8) the ordinary meaning which the words bear.  So long as the value of the vote of a creditor taking by assignment is equal to the value of the consideration the creditor gave for the assignment, it matters not that that creditor gave consideration less, equal to or greater than the value of the original debt.

55                  I therefore reject the trustees’ argument that s 64ZB(8) has no application and they were entitled to value the applicant’s debt in reliance on s 82.

56                  The trustees, in written submissions delivered prior to the hearing on 14 July last, raised a further argument to the effect that if, contrary to their primary submission, s 64ZB(8) was applicable to the valuation of the applicant’s vote, the trustees’ attribution of a nominal value only to the debt under the guarantee was consistent with the evidence which showed that the monetary consideration paid by the applicant to Westpac for the assignments was paid solely as consideration for the transfer of the two mortgages.  Because of the approach to the case adopted by the applicant at the hearing on 14 July, neither it nor the trustees then pursued this particular point.  However, it was raised and argued on 12 August, when I invited the parties to make submissions on the possible application of ss 64ZB(8) and 64ZA(5) to the case.

57                  The applicant’s argument here is, in my opinion, well-founded.  The material before the Court shows that the applicant gave no consideration to Westpac for the transfer to it of the bankrupt’s guarantee.  The transfers of the two mortgages from Westpac to the applicant are in identical terms.  Each states:

“The transferor transfers to the transferee the estate and interest in the lot for the consideration and in the case of monetary consideration acknowledges receipt of the consideration.”

58                  The consideration is described in each as:

“Pursuant to a request in accordance with s 94 of the Property Law Act 1974 (Qld).”

59                  That provision confers on a mortgagor who is entitled to redeem a mortgage the power to require the mortgagee to transfer the mortgage to any third person as the mortgagor directs, instead of discharging it.  For a request by the mortgagor to be effective to invoke this provision, the mortgagor’s request must be “on the terms on which the mortgagee would be bound to discharge” the mortgage.  A mortgagor is only entitled as a general rule to insist upon the mortgagee discharging the mortgage on payment of all moneys secured by it.  That the requests made under s 94 by Chelmscliff to Westpac to transfer the mortgages to the applicant were accompanied by payment by the applicant to Westpac of the total amount secured by those mortgages is confirmed by Westpac’s letter of 2 March 1999 to Chelmscliff, provided by the applicant’s solicitors to the trustees.  It shows that $1,124,331 of the $1,128,147 paid by the applicant to Westpac on settlement of the assignment transaction on 3 March was the amount required to repay all the moneys secured by the mortgages; the balance of $3,816 was paid by the applicant in respect of certain of the bank’s legal costs of the assignment.  The consideration measurable in money terms given by the applicant for the transfer to it of the two mortgages was thus the sum of $1,124,331.  No part of the money consideration given by the applicant was paid in respect of the transfer to it of the guarantee.

60                  The transfer on settlement of the assignment transaction between the applicant and Westpac on 3 March of the mortgage debenture by Chelmscliff and the guarantee by the bankrupt was by deed, ie, a transfer that was effective without consideration.  Consistently with the proposition that the guarantee was transferred for nil consideration, this Deed of Transfer does not identify any consideration for its assignment to the applicant and cl 2 states:

“The Bank confirms that this transfer of the Bank’s interest in the Bank’s Securities [defined to comprise the mortgage debenture and the guarantee] is ancillary or incidental to the Form 1 transfers of the …”

two mortgages granted to Westpac by Chelmscliff.

61                  The applicant suggests that there is evidence pointing the other way, ie, that consideration was given by it for the transfer of the guarantee.

62                  Firstly, one of the documents executed in connection with the assignments of 3 March 1999 by Westpac to the applicant was a Deed of Acknowledgment by which Westpac acknowledged that it had provided financial accommodation to Chelmscliff and that it had security for repayment of that financial accommodation from Chelmscliff in the form of the two mortgages and the mortgage debenture and “further security for the repayment of the financial accommodation” by way of the guarantee provided by the bankrupt.  By cl 1(f) of this Deed, the bank acknowledged that “In exchange for a transfer of the Bank’s Securities [the mortgages, the mortgage debenture and the guarantee] the mortgagor [Chelmscliff] will be indebted to Bechrose for the amount of the debt outstanding under the Bank’s Securities”.  The Deed contains no reference to any payment made by Bechrose to Westpac for the transfer of any of those securities, although a substantial payment was made by it.  The Deed’s purpose is plainly enough to record that “in exchange for a transfer of the Bank’s Securities”, ie, the mortgages, the debenture and the guarantee, the bank will have no claim on Chelmscliff with respect to the financial accommodation it granted to Chelmscliff.  That is its sole object.  It does not purport to deal with or record what consideration Bechrose gave for the transfer of any of those securities.

63                  Secondly, the applicant relies upon the terms of the offer made by its solicitor on 22 January 1999 to Westpac as showing that the monetary payment ultimately made on 3 March was as consideration for, inter alia, transfer of the guarantee.  It relies particularly on cl 3:

“In exchange for the payout figure our client will take an assignment of all securities held by the bank against Chelmscliff Pty Ltd.  As far as we are aware these securities comprise a Mortgage Debenture over the assets of the company, a freehold mortgage and a Guarantee by John Ernest Dunwoody of the liabilities of Chelmscliff …”

64                  But this offer ante-dated the documentation by means of which the transfers, including that of the guarantee, were effected.  Paragraph 4 of the letter of offer, in fact, makes that offer expressly “subject to agreement between our clients and the bank as to the form of documentation required by each party”.  It is not in any way inconsistent with the transfer of the guarantee being for nil consideration.

65                  Finally, the applicant relies upon what Mr Whittaker has to say in his affidavit, to which I have already referred.  Mr Whittaker was not cross-examined, but his statement that the whole of the moneys were paid as much by way of consideration for transfer of the guarantee as for the mortgages is inconsistent with the documentation executed by his company by means of which that transfer was effected.  Mr Whittaker’s statement was made, moreover, after the transfer took place and after the significance of whether any consideration had been given for the assignment of the guarantee had been drawn to his attention.  Even though he was not cross-examined, the Court is not bound, in resolving the issue in dispute, viz, the amount of the consideration given by the applicant for the transfer of the guarantee, to accept his say-so in preference to his contemporaneous documentation.

66                  Even if it were the case that the evidence is such that it is not possible to identify a particular amount as the consideration given by the applicant for the assignment to it of the debt the subject of the guarantee, the trustees’ decision to value that particular debt at a nominal figure of $1 is still, in my opinion, well justified.

67                  Section 64ZB(8) permits a creditor by assignment to vote only for the value of the consideration it gave for the assigned debt owed by the bankrupt, and for that alone.  The sub-section does not confine the trustee, in working out the value of the debt of a creditor by assignment, to the value the creditor chooses to ascribe to that consideration in any statement it provides in accordance with s 64D(aa).  The position here is to be contrasted with s 64D(b), s 64Z(9) and s 64ZA(5) which, prima facie at least, fix the value for voting purposes of the debt of a creditor with security by reference to the estimate made by the creditor of the value of the security.  Both ss 64D(aa) and 64ZB(8) are directed not to what the creditor estimates as the value of the consideration the creditor gave for the assignment of the debt, but to something quite different, viz, “the value of the consideration that the creditor gave for the assignment”.

68                  The wording of the sub-section and the legislative intent, as mentioned in the Explanatory Memorandum, show that the value of this consideration is a matter for objective determination.  It may often be difficult in practice to challenge, as the relevant value, the amount of the consideration the creditor states it gave for the assignment of a particular debt.  But a creditor cannot control the value of the vote it is entitled to cast at meetings of creditors by what it claims to be the consideration for the assigned debt when the true position is that it in fact gave consideration of lesser value.  To allow the provision to operate in that way would be to subvert the object of the legislation.

69                  The applicant contends that it gave a single undivided consideration for the assignment to it of the debts secured by the mortgages and the mortgage debenture, the debt under the guarantee and the benefit of the costs order obtained by Westpac against the Sherries.  For the reasons given, there are good grounds for thinking that it adopted that position to ensure that the application of s 64ZB(8) to the valuation by the trustees of the applicant’s right to vote at the meeting would require that vote to be valued at the very large figure contended for by the applicant.

70                  But s 64ZB(8) does not require the trustees to stand impotent in the face of the applicant’s refusal to ascribe a value to the consideration it gave for the debt on the guarantee, as distinct from the consideration it gave for the debts under the mortgages and the benefit of the costs order.  It obliges the trustees to value the applicant’s vote by reference to the consideration it gave for the assignment to it of the debt on the guarantee, and that alone.

71                  The applicant was required by s 64D(aa) to provide that information in writing to the trustees at or prior to the creditor’s meeting.  It failed to do that.  Section 64ZA(6) accordingly disentitles the applicant, though undoubtedly a creditor of the bankrupt, to vote at the meeting of creditors in question.  Strictly, the trustees should have ruled that the applicant was not entitled to vote at the meeting.  Instead, they ascribed to the applicant’s entitlement to vote, which they accepted, a nominal value only.

72                  That the applicant has chosen, for its own purposes, not to apportion any part of the price of $1,128,147 it paid for the assignment of the guarantee, the mortgages and the benefit of the costs order, to the guarantee does not mean that the trustees here must act on the applicant’s statement that it paid that sum as much for the guarantee as it did for the mortgages.  It is clear that the two mortgages over the farm by themselves have a substantial value:  they secure payment to the holder of a sum in excess of $1M on property of sufficient value to ensure that that sum can be recouped if it becomes necessary to realise the security.  Further, the guarantee had little intrinsic value on 3 March 1999, when the applicant acquired it:  the guarantor had then been bankrupt for some time and the extent of his insolvency is apparent from the information available.  Given all this, the trustees would, in my opinion, act in breach of the duty cast on them by s 64ZB(8), read with s 64ZA(8), if they were to ascribe as the consideration for the guarantee the sum of $1,102,947 contended for by the applicant.  I think the trustees were entitled to conclude that the applicant can only fairly be regarded as having given nominal consideration for the assignment to it of debt on the guarantee.

73                  The debt owing by the bankrupt on the guarantee is a separate chose in action from the debts owing by Chelmscliff and secured by the mortgages.  That Westpac, if it had not assigned the guarantee, may have been entitled to vote in the bankruptcy for the full amount of the moneys due to it by Chelmscliff provides no reason for accepting that the applicant, as assignee of the guarantee, should have that same entitlement.  The submission by the applicant to the contrary assumes I think that an assignable chose in action, including a debt supported by a real security and a debt on a guarantee, has an unchangeable value fixed at that which the original creditor treated it as having.  Once it is recognised that an assignable chose in action can be tradeable only at a value much less than that originally ascribed to it, it can be seen that there is nothing startling in Westpac being entitled to vote in the bankruptcy on the guarantee at a certain figure and an assignee from Westpac being later entitled to vote in the same bankruptcy on the same guarantee for a much lower figure.  It is this very circumstance that provides the reason for the amendments that introduced s 64ZB(8) into the Act.

74                  The applicant is not entitled to a determination from the Court that it is entitled to vote for a value of $1,102,947.  The trustees were entitled to place a nominal value only on that vote. Even if the Court has power to remit the question of the value of the applicant’s entitlement to vote to the trustees for redetermination, I would not make such an order here:  the applicant claims the right to vote on a particular basis, but the trustees’ conclusion that it is not entitled to that right is correct.  There is no justification in these circumstances for the Court intervening.

75                  It is no doubt true, as was held in Re Burton; Burton v Wily (1994) 122 ALR 399 at 401, that a proof of debt lodged by the creditor can serve as a statement sufficient for the purposes of s 64D:  that statement does not have to be in any particular form.  But of course Re Burton does not suggest that, by lodging a proof of debt in Form 8 that contains none of the information required by s 64D(aa), the creditor must still be regarded as having complied with the requirements of s 64D.

76                  Another matter which I raised concerns the significant difference in the drafting of ss 64D(b), 64Z(a) and 64ZA(5) in Div 5 of Pt IV compared with s 90 in Div 1 of Pt VI, although all these provisions deal with creditors of a bankrupt who have security.  Section 90 permits a “secured creditor” to prove in a bankruptcy in accordance with the procedure there established.  It is plain from the definition of “secured creditor” in s 5(1) of the Act that the reference in s 90 is to a creditor holding security on property of the debtor as security for a debt due to that creditor by the debtor.  In contrast, those provisions of Div 5 of Pt IV that deal with creditors with security - ss 64D(b), 64Z(9) and 64ZA(5) - apply to a creditor who “hold (s) a security in respect of the debt” which the creditor claims the bankrupt owes the creditor, an expression capable of extending beyond securities given by the debtor over the debtor’s property.

77                  It may be, given the limited object of the legislation that inserted ss 64D(b), 64Z(a) and 64ZA(5) into the Act in 1992, identified in the relevant Explanatory Memorandum, and given also other indications in the 1992 amendments that fix the value of the vote of a creditor holding security by reference to the creditor’s estimate of the value of the security, that this difference in drafting was not intended to introduce into the provisions of Div 5 of Pt IV of the Act a concept wider than that of “secured creditor” found in Div 1 of Pt VI of the Act.  But in view of the conclusion I have reached as to the fate of the application, it is unnecessary to resolve this particular question.

78                  The application for review will be dismissed.

Associate:

Dated:              20 August 1999