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Decisions of the Superior Courts of New South Wales, 1788-1899

In re Hovenden [1850] NSWSupC 7 [insolvency, costs of administration]

insolvency, costs of administration

Supreme Court of New South Wales

Stephen C.J. and Therry J., March 1850

Source: Sydney Morning Herald, 14 March 1850, Supreme Court Collection, vol. 3, pp 68-69

IN THE INSOLVENCY OF THOMAS HOVENDEN.

On objections to the Plan of Distribution.

The following is the judgment of their Honors the Judges in this matter.

Before disposal of the objections taken to the plan of distribution in this case, it may be advisable to advert briefly to the circumstances of the insolvency, in order that we may better judge of the propriety of the steps taken to realize the assets of the insolvent estate.

We commence with the starting fact, that, at the first meeting of the creditors, held on the fourth of October, after Thomas Hovenden clandestinely absconded, it was ascertained that his liabilities, for which he had left no provision, amounted to about £20,000. The circumstances alone of his being so largely indebted in a mercantile community, to which the proceedings of the Insolvent Court had taught many salutary lessons of prudence against incautious confidence, certainly shows that he was an accomplished adept in the art of acquiring credit.

His proceedings throughout appear to have been managed with great skill and cunning, and on a scale proportionate to the magnitude of the fraud he appears to have contemplated perpetrating upon the body of his creditors: for in absconding from the colony, this insolvent took large property, not only in his own vessel, but had also at various times, shortly before his departure, shipped property in other vessels to different places to a large amount. Much of this property was distributed in the Will Watch, the Favorite, the Velocity, and the Dart. The goods shipped by the insolvent in three of these vessels had been sold by the insolvent's clerk to the insolvent's brother to the amount of £4302, for which the brother's promissory notes were taken---the amount at which they were taken showing that the goods purchased by the insolvent in Sydney, on three of four months' credit, were resold to his brother at invoice cost, with an extended credit of 12 and 18 months. The goods shipped by two if the vessels, the Dart and Christina, had been transhipped to Port Fairy. The Velocity and Favourite had not reached Melbourne before Mr. Campbell's visit to that port, but the bills of lading of the goods by them had been hypothecated with two merchants there for £1700.

Another branch of the insolvent's extensive operations was the fitting out of the brig Lord Hobart, with freight and passengers laid on for California , purchase by Mr. George Atkinson, his agent, with the insolvent's funds.

It is manifest that in all his plans the insolvent was supported by active agents, in the various places to which the goods have been consigned. This is shown by the fact of his having representatives or agents to act for him in the several places to which his goods were consigned,---by the circumstance also of the insolvent's clerk having received a letter from Sydney at Melbourne on the very day of Mr. Campbell's arriving there, informing him of the steps taken by the creditors in Sydney, and strictly enjoining him not to give up anything, and by the further circumstances of the extent of his correspondence; there being at this moment 13 or 14 letters lying at the Post Office for the insolvent, which the Official Assignee has commenced legal steps to obtain.

It is impossible to contemplate the dexterous scheme to which the insolvent has had recourse, without being deeply impressed with the opinion that it required prompt and energetic measures on the part of the Official Assignee to perform satisfactorily the duty cast upon him of collecting the assets of the estate. In this faithful and zealous performance of that duty every Official Assignee is entitled to the encouragement of the creditors, and the support of the Court.

The common law, when it casts a duty upon a party, sanctions all necessary means for its performance. Equity, with less strictness, sanctions the adoption not only of all necessary means, but of such as are reasonably requisite for the purpose. Exercising, then, in this jurisdiction, the powers both of a Court of Law and of a Court of Equity, this Court should sanction not only the adoption of such means as are necessary to enable the Assignee to collect the insolvent's effects,---but also all reasonably fair and legitimate means, that the peculiar difficulties and exigencies of his position may sometimes render advisable. A course of proceeding adequate to ordinary occasions, may be very inefficient and inadequate when an extraordinary emergency demands extraordinary exertions. Success is not always a test of the propriety or prudence of any measure; but, trying the exertions used for collecting the Insolvent's estate on the present occasion by its success, let us see what has been the result of these exertions.

By the steps that have been taken, by the departure of Mr. Campbell quick on the heels of the Insolvent, he succeeded in obtaining for the creditors a surrender of the bills of lading of the goods of the Insolvent, in the favourite and Velocity, leaving instructions that the goods should be landed and sold for the estate, and which have since been sold, yielding the gross amount of £2680. Mr. Campbell moreover obtained from the clerk of the Insolvent, besides a cash balance of £59 16s., the bills which had been given by the Insolvent's brother in settlement of the goods by the Dart and Christina, and which had been shipped to Port Fairy. Still further, by the power of substitution which he was provided with, he appointed attornies at Belfast and Portland ; thus securing a reasonable prospect of the Insolvent's property in those places being made available to the creditors. Moreover, as the fruits of the same activity and zeal, Mr. Roope, who had been appointed representative of the Assignee in Hobart Town , succeeded in securing to the estate the brig Lord Hobart, which was laid on with freight and passengers for California . This vessel and her cargo have been since sold for £1070. Besides these successful steps, various other arrangements likely to lead to a favourable result have been adopted; and the Official Assignee states on oath, that the whole of the insolvent's estate is likely to be realized for the creditors, as "he (the Assignee) is in treaty with an authorised agent for the surrender of the Will Watch and her cargo."

It is not to be wondered at, that with facts before them indicative of such meritorious and successful zeal, on the part of the Official Assignee and the agents he employed, the creditors should have come in a body, as they may be said to have done, testifying in strong language of commendation their approval of the measures taken for their advantage; and testifying further their conviction that had not these steps been taken "the probability is that scarcely one shilling would have been realized for division to the estate."

It is true that the pursuit of the insolvent to Jervis Bay and to Western Port was not successful; but who can doubt that it was a reasonable and judicious measure to adopt, for the purpose of collecting the large portion of the estate in the insolvent's possession? In reference to this transaction, the affidavit filed by a large body of respectable creditors, in expressing their satisfaction with much force and reason states,

"with respect to the payment of the sum of one hundred and six pounds for the use of the steamer Eagle, and two hundred and thirty-seven pounds seventeen shillings for the steamer from Melbourne to Western Port, although the main object, the capture of the Insolvent, his vessel the Will Watch, and her cargo, estimated at five thousand or six thousand pounds sterling, failed, yet these deponents are of opinion that the expenditure has not been fruitless to the creditors, as not only showing an earnest of the determination on the part of the creditors to discountenance fraud, but deponents believe has led to the voluntary surrender of goods and debts to the amount of four thousand or five thousand pounds sterling, retained by the insolvent's brother in the store at Port Fairy as his property, and subsequently sold by him to a person of the name of Josiah Harper, which goods and debts are now in the course of being realised for the creditors."

Seeing, then, that on the whole review of what has been done, the mode of collection adopted by the Official Assignee is sustained by the reasonableness of the measures he adopted to defeat the machinations of a very wily person; that it is sustained, moreover, by the success which generally attended his measures, and by the recorded approbation of a large body of those whose interests are most affected, the creditors of the estate, we see no reason to disturb to any material extent the plan of distribution that has been filed. With the single exception of the pursuit of Hovenden, the steps taken have been hitherto successful, and, with respect to that exception, we say, as the Court said in the case of Gordon's insolvency,

"the Assignee had reasonable and probable grounds for acting as he did. It would be a great discouragement to trustees so acting, if their zealous exertions to increase the assets of the estate, because unsuccessful and unfortunate, (especially under such circumstances as are here disclosed), were met with the reward proposed for the trustees, of being made to pay for their ill success out of their own pockets."

Having then taken a view, in outline, of what has been done in this estate and the result of it, we proceed to notice briefly the grounds of objection stated in the caveat of Mr. Lyons.

First---he objects to the charge of five per cent on the gross receipts; and proposes to restrict the Assignee to an allowance on the sum realized by him for the estate by the sales in Sydney ---on the ground chiefly that other and very heavy charges were incident to the amount realized at Melbourne , and transmitted thence to Sydney .

As to the amount of compensation to be allowed to an Assignee, it is a discretionary matter with the Court;---depending partly on the extent and value of the Assignee's exertions, and partly on the nature and amount of the property collected, and whether collected solely by the Assignee, or partly by the assistance of other persons. In Gordon's Insolvency the Chief Commissioner allowed a commission of 7½ per cent. on the assets; and, on a review of the circumstances by the Court, that rate of commission was not disallowed:---the Assignees there having paid an Accountant out of it. According to the rate of allowance under the English Insolvent Act, "the Court is empowered, whenever it shall think proper, to allow compensation to Assignees, not exceeding five pounds per cent upon all sums of money collected of the estates of insolvents." ( Cooke's Insolvent Debtors' Practice, p. 134. )---Considering the zeal evinced, and the trouble and responsibility incurred by the Official Assignee in the present instance, we are disposed to make him a liberal allowance. On the other hand, we are not prepared to say that a percentage is in all cases, by any means, a proper mode of remuneration. On large receipts, five per cent might be a very extravagant rate. On small collections, it might be a very inadequate one.

The actual trouble expended must be looked at; and the approval of a majority of the creditors, although affording us a useful guide, is not to be conclusive on the Court, when called upon to decide according to what may be right, by a creditor entitled to dissent. Now, the sums collected in Melbourne were collected by no personal effort of the Assignee; and a commission of five per cent there, besides heavy law expenses, and the expenses of Mr. Campbell, and a charge for remitting thence to Sydney , is already debited on them. The Official Assignee, however, must be considered as having exercised a control over these operations; and he has received the Melbourne proceeds, and has the duty cast on him of distributing them. On the whole we think, that the Official Assignee should be allowed in this case a commission of 5 per cent on the proceeds realized in Sydney , and of 2½ per cent on those remitted from Melbourne .

As to the charge for the travelling expenses of Mr. Alexander Campbell, and the payments for the hire of the vessels employed to pursue the insolvent, these expenses were incurred in prosecution of the duty of collecting the assets of the estate---and if, in Gordon's case, the Court justly considered the danger of delay from convening a meeting of the creditors to obtain their sanction, and the likelihood of such delay defeating the object of the trustees, as justifying the prompt and expensive proceedings adopted by the trustees in that estate, the narrative of the transactions in this case presents as strong a claim for immediate and active interference, and discloses as urgent a necessity as can well be imagined, for the energetic measures taken with promptitude, and crowned with signal success.

In pronouncing an opinion upon the discretion of the Official Assignee as to the course of proceeding he adopted, it cannot be lost sight of that at the very commencement, (---on the fourth October,---the day after the flight of the insolvent,) a meeting of several creditors was convened, and the advice and opinion of those present,---Mr. Lyons being the mover of the two principal resolutions,---were favourable to the most energetic measures---from which they undertook to hold the committee of creditors then appointed harmless.

With respect to the bills of costs of Messrs. Rogers and Russell, and of Messrs. Moor and Chambers, at Melbourne, charged in the plan of distribution, to which it is objected that the latter has not been taxed at all, and that the other has not been duly taxed, with a view to the question whether the charges are proper to be paid by the estate, we think it right to direct that the costs of Messrs. Rogers and Russell be now taxed by the Chief Commissioner.---And we shall be glad if the Chief Commissioner at Melbourne, (over whom, however, we have no jurisdiction in this matter,) will also in like manner tax the bills of Messrs. Moor and Chambers. If this be declined, either by that Officer, or by those gentlemen, an application should then be made to His Honor the Resident Judge, under Mr. Brewster's Act, for the usual order to tax that bill.

As to the charges of Mr. Salamon, there is sufficient evidence in the affidavit of Mr. King and Mr. Perry, to show that 2½ per cent commission is a customary rate of charge; and that when obliged to sell upon credit, and required to guarantee his sales, the auctioneer usually makes a further charge of 2½ per cent. Where, moreover, the auctioneer is requested to hand over the proceeds in cash, less the usual rate of discount, one per cent additional is charged. We should have thought that these charges, in the present case, very unreasonable; and that the duty of selling, and guaranteeing the sales, might have been discharged for a sum much more moderate. We are bound, however, by the evidence; and the Official Assignee appears to have paid the amount, in accordance with the usage, which (according to that evidence) appears to prevail in such cases. We also think that the one per cent for discount might have been saved. But we think that, as there were some reasons for incurring that charge, it would be harsh and unfair to throw it back on the Assignee---who evidently intended to act for the best.

As to the costs, we conceive that no course is open for us, consistently with the fair claims of both parties, but that of ordering them to be paid on either side out of the estate. The opposing creditor's objections, in one of which he has succeeded, were as much calculated to benefit the other creditors as himself. He has also succeeded, in respect of the taxation of the solicitors' bills. The charges of the auctioneer, we also think, were fairly questionable. The Official Assignee, on the other hand, ought clearly not to be exposed to any costs. Most of the charges made by him have been sustained; and, although a certain portion of his charge for commission has not been allowed, he had no small reason for thinking himself entitled to the higher rate---while his conduct throughout in managing the estate, his zeal, energy, and ability, have merited our entire and warm approval.

The rate of dividend to the Creditors, as proposed by the plan, will be forthwith paid to them. The difference between the commission charged, and the rate allowed, as well as any deductions from the solicitors' bills, if any, will be matter for adjustment hereafter.

Published by the Division of Law, Macquarie University