In the Matter of Moustafa El Moustafa Cobbs Hill (Tas) Meat Supplies Pty Ltd & Ors v Moustafa El Moustafa & Ors [1998] FCA 838

Procedural Posture

Application Under S 222 of the Bankruptcy Act 1966 (cth) to Declare a Composition Void, Alternatively Relying on Ss 239 and 242, and for Sequestration of the Debtor's Estate / Reasons After Unopposed Orders Declaring the Composition Void and Sequestrating the Estate; Question of Costs Payable by the Controlling Trustee Reserved and to Be Heard

Legal Issues

1. 1 ["Whether the debtor's composition accepted at a meeting of creditors on 4 August 1997 should be declared void under s 222(2) of the Bankruptcy Act 1966 (Cth)." "Whether Cobbs Hill should have been admitted to vote at the creditors' meeting on its alleged insolvent trading claim under s 588M of the Corporations Law." "Whether the alleged Ivanopoulos debt was sufficiently supported to justify voting rights at the creditors' meeting." "Whether the controlling trustee's report under s 189A adequately disclosed and commented on material matters including trust income, the Greenvale property mortgage, the Cobbs Hill claim, and the Ivanopoulos and Awad issues." 'Whether a solicitor acting as controlling trustee must act impartially and independently rather than as a partisan solicitor for the debtor.' 'Whether s 306B of the Bankruptcy Act 1966 (Cth) protected the controlling trustee from a costs order, including in respect of omissions in a s 189A report.']

Ratio Decidendi

The composition was declared void and the debtor's estate sequestrated because serious issues and suspicions surrounding its acceptance required further investigation and would not be investigated under the composition. The Cobbs Hill claim had not been properly investigated and Cobbs Hill should have been admitted to vote; the alleged Ivanopoulos debt and the Awad mortgage raised serious concerns; and the controlling trustee's report and conduct of the creditors' meeting were deficient. Section 306B did not immunise the controlling trustee from a costs order because it only protects good faith statements in specified reports by way of qualified privilege for defamation and, in any event,...

Court Disposition

The application to declare the composition void succeeded on an unopposed basis; the debtor's estate was sequestrated; the debtor was ordered to pay the applicants' costs from the estate; the controlling trustee's asserted s 306B immunity from costs was rejected and the question of any costs payable by him was...

Orders

• ['It is declared that the composition of Moustafa El Moustafa accepted at a meeting of creditors on 4 August 1997 be declared void pursuant to s 222(2) of the Bankruptcy Act 1966 (Cth).' 'The estate of the debtor be sequestrated.' "The debtor pay the costs of and incidental to the application and such costs be taxed...