Bear v Official Receiver
65 CLR 3071941 - 1209A - HCA
(Decision by: McTiernan J)
Bear
v Official Receiver
Judges:
Rich J
Starke J
McTiernan JWilliams J
Subject References:
Bankruptcy
Scheme of arrangement
Summary order for sequestration
Annulment and rejection of scheme
Legislative References:
Bankruptcy Act 1924 - ss 52(1); 161
Acts Interpretation Act 1901 - s 36(1)
Judgment date: 9 December 1941
Sydney
Decision by:
McTiernan J
The appellant invoked the provisions of Part XI. of the Bankruptcy Act 1924-1933 in order to settle his affairs by a composition with his creditors. The making of a receiving order is not a preliminary step to the operation of this Part or to an adjudication in bankruptcy under the Act. A sequestration order was, without a petition, made in the course of the proceedings that were taken after the appellant resorted to these provisions. The order was consequent upon the rejection of the composition by the court under s. 161 (f). The circumstances in which the order was made need not be repeated. When an order is made rejecting or annulling a composition the debtor is deemed to commit an act of bankruptcy at the date of the order, provided a sequestration order is made within seven days from that date (s. 52 (l) (ii). Par. f of s. 161 does not confer power on the court to make a sequestration order when it rejects a composition. Par. h of this section, which gives power to the court to annul a composition, confers a special power on the court to make a sequestration order consequent upon the order of annulment. It says that the court may, if it thinks fit, forthwith make a sequestration order in regard to the estate of the debtor. Under these provisions the court clearly has jurisdiction to make a sequestration order without a petition. The power is expressly limited to the case where the court has made an order of annulment.
Par. i of s. 161 is relied upon as conferring power on the court to make the sequestration in the present case. This paragraph says: "If the composition or scheme is rejected or annulled, the order of rejection or annulment shall not take effect unless a sequestration order is made in pursuance of the last preceding paragraph" (that is, h), " or is obtained by or against the debtor within seven days from the date of the order or within such further time as the court allows." This paragraph does not in terms purport to confer power to make a sequestration order at all. It prescribes what is to be done in order to make an order of rejection or an order of annulment effective. The condition that a sequestration order be made pursuant to par. h can apply only to an order of annulment. The condition that the sequestration order be obtained by or against the debtor within the time prescribed is the only part of the paragraph which is capable of applying to an order of rejection. This condition may apply as well to an order of annulment where the court has not seen fit to exercise its discretion to make a sequestration order forthwith upon the annulment of the composition. The question then is: When the court makes an order of rejection, how is the order of sequestration to be made which is necessary to make the order of rejection effective? In the absence of any special provisions applying to that case the sequestration order is obtainable upon petition: See ss. 52 (l), 54, 55, 56.
In my opinion, whether there was a valid composition before the court or not, it had no power, not having made an order annulling the composition, to make a sequestration order except upon the petition of the debtor or of a creditor.
In my opinion the appeal should be allowed.