Re Spratt, T.J. v. Ex parte Wilde, W.J. & Ors [1986] FCA 235

Re Spratt, T.J. v. Ex parte Wilde, W.J. & Ors [1986] FCA 235

The compromise was for valuable consideration, there was no allegation of dishonesty, the respondents did not deliberately shut their eyes to the trustee's failure to obtain permission or leave, and notice of that failure required knowledge of the legal requirement to obtain permission or leave. Pursuit of the action in conscious breach of s.58(3) did not preclude good faith under s.135(4). The compromise was therefore saved by s.135(4) and was not invalidated by the absence of permission or leave under s.135(1).

Jurisdiction
Australia
Judgment Date
11 June 1986
Procedural Posture
Bankruptcy Application Concerning Validity of Compromise by Trustee / Further Hearing After Preliminary Judgment on Whether the Facts Fall Within S.135(4) of the Bankruptcy Act
Outcome
The respondents succeeded; the Court declared that the compromise was not invalidated by the fourth respondent's failure to obtain the permission or leave required by s.135(1) of the Bankruptcy Act.
Legal Topics
['compromise of Suit by Trustee' 'permission or Leave for Trustee Transactions' 'good Faith' 'notice of Failure to Obtain Permission or Leave' 'effect of Ignorance of Law']
['bankruptcy'] ['compromise of Suit by Trustee' 'permission or Leave for Trustee Transactions' 'good Faith' 'notice of Failure to Obtain Permission or Leave' 'effect of Ignorance of Law']

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Procedural Posture

Bankruptcy Application Concerning Validity of Compromise by Trustee / Further Hearing After Preliminary Judgment on Whether the Facts Fall Within S.135(4) of the Bankruptcy Act

Legal Issues

  1. 1 ['Whether a compromise made without the permission or leave required by s.135(1) of the Bankruptcy Act was saved by s.135(4).' 'Whether the respondents acted in good faith for the purposes of s.135(4)(b), notwithstanding pursuit of the action in breach of s.58(3)(b).' 'Whether the respondents had notice of the failure to obtain permission or leave when they knew the facts but were unaware of the legal requirement.']

Ratio Decidendi

The compromise was for valuable consideration, there was no allegation of dishonesty, the respondents did not deliberately shut their eyes to the trustee's failure to obtain permission or leave, and notice of that failure required knowledge of the legal requirement to obtain permission or leave. Pursuit of the action in conscious breach of s.58(3) did not preclude good faith under s.135(4). The compromise was therefore saved by s.135(4) and was not invalidated by the absence of permission or leave under s.135(1).

Court Disposition

The respondents succeeded; the Court declared that the compromise was not invalidated by the fourth respondent's failure to obtain the permission or leave required by s.135(1) of the Bankruptcy Act.

Orders

  • ['It be declared that the compromise made on or about 28 February 1985, to which the respondents were parties, is not invalidated by the failure of the fourth respondent to obtain the permission or leave required by s.135(1) of the Bankruptcy Act.']