; Mv. Howact, Roy Fed. Court. \\ " , 7 7 BANKRUPTCY ACT 1966-1975 IN THE FEDERAL COURT OF BANKRUPTCY ) ) BANKRUPTCY DISTRICT OF THE STATE OF) No. 74 of 1975x _NEW SOUTH WALES AND THE AUSTRALIAN ) CAPITAL TERRITORY RE: 1. MAX RICHARD LAIDLEY DOWLING 2. NORMAN ROY COURSE 3. JOHN ALBERT KEIR 4. TIMOTHY RICHARD WIGRAM ALLE 5. RUPERT WEBB BURGE 6. JOHN STEWART CORNER 7. WILLIAM JAMES WILBRAHAM EDWARI 8. ALEXANDER BURT 9. PETER DAVIE 10. LIONEL JAMES MILLIGAN 11. DAVID IRESON THORPE Debtors James Hardie Jamison Applicant Registrar-in-Bankruptcy Respondent ORDER JUDGE MAKING ORDER: Mr. Justice Riley _DATE OF ORDER: ' 29 December 1977 WHERE MADE: Sydney THE COURT ORDERS: A. that the questions asked be answered as follows: 1. (i) The applicant, as the controlling trustee of each of the eleven partners and as the attorney of Mr. Baume, was empowered to control jointly the joint property and joint affairs of the twelve debtors and to deal jointly and in accordance with the Act with their joint properi (ii) Does not arise. 2. (i) Yes. (ii) Yes. (iii) Does not arise. (iv) Does not arise. (ii) (iii) (iv) (v) (ii) 5. (i) Not necessary to answer. The question being amended by deleting the words "If the answer to question 3(i) is Yes", answer the question as so amended: Yes. The question being amended by deleting the words "If the answer to question 3(ii) is Yes", answer the question as so amended: Yes. Does not arise. Does not arise. Yes. Does not arise. The applicant, as trustee of each of the eleven deeds of arrangement and as the attorney of Mr. Baume, was empowered to deal jointly and in accordance with the Act and the deeds with the joint property of the twelve debtors. Does not arise. He has sufficiently so complied. Does not arise. 7. Not answered. B. that the costs of the applicant be paid out of the joint estate as defined by the deeds of arrangement of 19 March 1976 and that there be no order as to the Registrar's costs. Cc. that this was a proper case for the employment of senior counsel by the applicant. Date Entered: DISTRICT REGISTRAR Bankruptcy - Arrangements with creditors without sequestration - Partners - Separate authorities under Bankruptcy Act 1966 s. 188 - Same controlling trustee - Separate identical deeds of arrangement executed by partners - Controlling trustee appointed trustee of each deed - Trustee. also attorney of debtor being former partner - Whether joint property and joint affairs of all debtors may be dealt with jointly - Whether creditors may determine remuneration of controlling trustee by resolutions passed after control ceases - Whether controlling trustee entitled to obtain legal advice - Accounts filed in respect of debtors jointly - Whether accounts adequate - Bankruptcy Act 1966. REASONS FOR JUDGMENT @ This is an application for directions made under 'gs. 134(4) of the Bankruptcy Act 1966 as applied in relation to deeds of arrangement by s. 237(2). The applicant is Mr. J.H.Jami: who is the trustee of each of eleven deeds of arrangement. Each deed was executed under Part X of the Act by a single debtor on 19 March 1976. On 27 July 1975 each debtor had signed. a separate authority under Part X and Mr. Jamison, a registered trustee, had signed on each authority his consent to exercise the powers conferred on him by it. Each of the debtors was a partner in a firm which up to 27 July 1975 had been carrying on business as stock and share brokers under the name of Patrick Partners. Mr. M. E. Baume was a partner in the firm up to 24 February 1975, and there is a dispute between him and the eleven debtors as to whether he was. a partner on 27 July 1975. On that date Mr. Baume authorised Mr. Jamison to act as his attorney to deal with such interest as he misht have or might have had in the assets of Patrick Partners, and on 18 August 1975 he formally and in writing appointed Mr. Jamison to be his attorney with power "1. To deal in any way I may be entitled with any assets of whatever nature of the partnership Patrick Partners in which I may have an interest by virtue of my having been a staff partner in that partnership. 2. To exercise in my name and on my behalf all the powers if any in respect of the assets of the partnership Patrick Partners that would be conferred on my attorney by Section 190 of the Bankruptcy Act 1966 if I had executed an authority; under Section 188 of that Act. 3. To do all other acts matters or things necessary or incidental to the exercise of any of the foregoing powers." That appointment has not been revoked. -2- The facts which led up to the execution on 19 March were 1976 of the eleven deeds of arrangement, set forth in evidence before me on this application, and were recounted in more detail in a former judgment of mine which is reported under the name of Re Patrick Partners; Ex parte Commercial Banking Company of Sydney Limited (1976), 10 A.L.R. 71. The provisions of all the deeds were identical. Each deed contained the following provisions relevant to this application: | 1. Definitions In this Deed unless the context otherwise requires the following expressions shall have the meaning set opposite the same respectively:- "The Act" Means the Bankruptcy Act 1966 as amended. "The Commencement Date" means the date on which this Deed is executed. "Currency of the Deed" means the duration of the Deed as provided by Clause 14 hereof. "Joint Creditor" means a Creditor of the. Debtor arising in the Debtors capacity as a member of the Firm and shall include any creditor who claims to be a creditor of 'both the Joint Estate and the Individual Estate of the Debtor in respect of the same debt. "Joint Estate" : means the property of the Debtor owned jointly with the other members of the Firm being the whole of the assets of the Firm as detailed in the records of the Firm. "Participating Creditor" means a Creditor whose debt or claim has been admitted by the Trustee under this Deed in accordance with the provisions of the Act and this Deed. 3. "Property Subject of this Deed . (a) The Debtor conveys and assigns to the Trustee. the whole of the Debtor's interest in the Joint Estate upon trust to deal with the same in accordance' with the provisions of this Deed ; . (b) The Debtor shall make payments (hereinafter -3- referred to as "the Debtor's Contributions") to the Trustee of a lump sum and/or out of future income > throughout the Currency of the Deed ... All such payments made to the Trustee pursuant to this sub-clause shall be held by the Trustee upon trust to deal with the same in accordance with the provisions of this Deed. 5. Distribution of Joint Estate (a) The Trustee shall hold any moneys received by him from the realisation of the Joint Estate and otherwise received by him pursuant to this Deed upon trust and shall apply such moneys in making payments in the order prescribed by Section 109 of the Act and thereafter shall apply the balance to making payments to those Participating Creditors who are Unsecured Creditors of the Joint Estate and have not received payments in priority in pursuance of Section 109 of the Act pro rata to - such Participating Creditors indebtedness from time to time during the Currency of the Deed. 10. Moratorium Subject to Clause 11 hereof there shall be a moratorium from the Commencement Date until the expiration of the Currency of the Deed and during the moratorium no Individual Creditor shall institute prosecute or maintain against the Debtor or his Individual Estate any claim action proceeding arbitration or execution or present any Petition seeking the sequestration of the estate of the Debtor. 14. Currency of the Deed This Deed shall operate for a period of five (5) years from the Commencement Date. Mr. Jamison was controlling trustee in relation to each debtor from 27 July 1975 to 19 March 1976: ss. 187(1), 189 (1) (b); and has since 19 March 1976 been and still is trustee of each of the eleven deeds. He has made the present application because on 30 March 1977 the Registrar in Bankruptcy wrote to him raising certain matters relating to his administration of the estates of the eleven debtors which seemed to the Registrar to require attention, and since then correspondence between the Registrar and Mr. Jamison and his solicitors, and discussions that Mr. Jamison "and members of his staff have had with the Registrar, have failed to satisfy the Registrar. -4- On the hearing of the application Mr. Lockhart Q.C. and Mr. James of counsel appeared. for Mr. Jamison, Mr. Urquhart — of counsel appeared for the Registrar, and specifically described his task as being not to advocate any particular views but to assist me to arrive at a decision. I turn now to the Questions raised in the application for directions. Question 1 is as follows: "1. (i) Was the Applicant as Controlling Trustee appointed by each of the debtors by separate authorities under S.188 of the Bankruptcy Act, 1966 (hereinafter referred to as "the Act") and as the attorney appointed by Michael Ehrenfried Baume at liberty to control and deal with the joint property and joint affairs of the debtors jointly? . (ii) If the answer to question 1(i) is "No", what steps should the Applicant now take in relation to the joint property and joint affairs of the debtors?" When Mr. Jamison became controlling trustee in relation to each of the eleven debtors he became empowered by force of s. 190(2) (a), (d) to take immediate control of each debtor's "property and affairs" and to deal with each debtor's "property" in any way that would in his opinion be in the interests of that debtor's creditors. The meaning of "property" in that context has to be ascertained by reference to ss. 190(5) and 116 and the definition of property in s. 5(1l). In each case the "property" of the debtor included his interest in the partnership assets. In Livingston v. Commissioner of Stamp Duties (Q.) (1960), 107 C.L.R. 411, 453, Kitto J. said that it was clearly established that a partner has a beneficial interest, which the law will recognize and enforce, in every piece of préperty which belongs to the partnership; and none the less so because the nature of the interest is peculiar in that his share in the partnership, by virtue of which the interest in -5- a given asset exists while the asset belongs to 'the partnership, consists not of a title to specific property but of a right to a proportion of the surplus after the realisation of the assets and payment of the debts and liabilities of the partnership. As Luxmore J. put it in In re Fuller's Contract, (1933) Ch. 652, 656, "Of course, as between the partners, the partnership property must be dealt with in a particular way, but so far as all the rest of the world is concerned, there is no limitation on the interests of the partners; the partners have the beneficial interest in the partnership assets, which are held together as an undivided whole, but they respectively have undivided interests in them". In my opinion the combined effect of the eleven authorities given pursuant to s. 188 and the power givén to Mr. Jamison by Mr. Baume prima facie was that Mr. Jamison as controlling trustee was empowered to take control of all the beneficial interests in all the property of the partnership - that is, to take control of all the partnership property; and to deal with it in any way that would in his opinion be in the interests of the creditors. At this stage, it is convenient to turn to the fifth question asked by the applicant, because considerations applicable to it are also applicable to this first question. Question 5 is: "5. (i) Was the Applicant as Trustee under the Deeds of arrangement and as the attorney appointed by Michael Ehrenfried Baume at liberty to deal with the joint property and joint affairs of the debtors jointly? (ii) If the answer to question 5(i) is "No", (a) What steps should the Applicant now take in relation to the joint property and joint affairs of the _, debtors? (b) What further or other steps should the Applicant take as Trustee under the Deeds of Arrangement?" The source of Mr. Jamison's power as trustee of the deeds ~6- to deal with the joint property of the debtors is to be found not in any specific provision of the Act but in the deeds; and the result of clause 3(a), read with the definition in Clause 1 of "joint estate", is that each debtor assigned to the trustee the whole of his interest in the whole of the assets of the partnership. Taking into account also the power conferred by Mr. Baume, the result prima facie is, in my opinion, similar to that already described in the case of Mr. Jamison as controlling trustee: he was empowered to deal with all the partnership property in accordance with the trusts of the deeds. The Registrar, however, raised in correspondence the suggestion that Part X of the Act was not intended to apply to a partnership, and therefore did not empower Mr. Jamison, eithe2 as controlling trustee or as trustee of the deeds, to deal with the partnership property as a whole. It was submitted that s. 45 expressly provides for the presentation of a petition againsi a partnership by a creditor of the partnership, and s. 56 for the presentation of a debtor's petition against a partnership by © partners, but that nothing in Part X indicates that two or more partners may together give a single authority under s. 188 or execute a single deed of arrangement. Probably they may not: see Re Pepper (1969), 14 F.L.R. 282; Irlicht, Assignments, Arrangements and Compositions by Debtors, 7 - 8. On the other hand, there was nothing in Part X to prevent the eleven debtors from giving the eleven authorities which they gave or executing the eleven deeds which they executed, or to deny that, taking into account also the execution by Mr. Baume of his power of attorney, the result was that the whole of the assets of the partnership came under the administration of Mr. Jamison first as controlling trustee and then as trustee of the deeds, in each case to be dealt with in accordance with the provisions of the.Act. Nor is -7- there anything in Part X to require him to follow the inconvenient, expensive and almost impossible procedure of carrying out his administration by reference only to the individual interests of each of the debtors instead of dealing with them, as the Questions suggest, "jointly" - or in combination. Furthermore, s. 237(2) provides that s. 110 applies to and in relation to a deed of arrangement, and s. 110 prescribes how "in the case of joint debtors, whether partners or not" the joint estate and the separate estate of each joint debtor shall be applied. The Act therefore contemplates that the joint estates of partners and other joint debtors may be administered by trustees under Part X. Such an administration is distinct from a winding up of a partnership, and in my opinion no difficulty is caused by the possibility that there was an outstanding right in Mr. Baume, as a partner not shown to be insolvent, to wind up the partnership (see Re Parker (1950), 15 A.B.C. 177). Largely adopting suggestions made by counsel for the Registrar and I think concurred in by counsel for the applicant, I propose to answer Questions 1(i) and 5(i) as follows: "1(i) The applicant, as controlling trustee appointed by each of the eleven partners and' as the attorney of Mr. Baume, was empowered to control jointly the joint property and joint affairs of the twelve debtors and to deal jointly and in accordance with the Act with their joint property. 5(i) The applicant, as trustee of each of the eleven deeds of arrangement and as the attorney of Mr. Baume, was empowered to deal jointly and in accordance with the Actix he deeds with the joint property of the twelve debtors." I now turn to Question 2, which is as follows: "2 (i) Was the remuneration to be paid to the Applicant : in respect of his services as Controlling Trustee validly determined at the sum of $155,237 by the resolutions of the creditors of each of the debtors -8- passed at the concurrent meetings of creditors of the debtors held on 22 April 1976? (ii) If the answer to question 2(i) is "Yes", was the Applicant as Trustee under the Deeds of Arrangement empowered to pay the sum of $155,237.00 to himself in respect of his services as Controlling Trustee out of the joint estate of the 'debtors as defined in the Deeds of Arrangement? (iii) If the answer to question 2(ii) is "No", by whom or in what manner should the said sum of $155,237.00 be paid? (iv) If the answer to question 2(i) is "No", (a) How should the remuneration to be paid to the Applicant in respect of his services as Controlling Trustee be determined; and (b) By whom or in what manner should the remuneration to: determined be paid?" The eleven deeds were executed on 19 March 1976. The property of each debtor then ceased to be subject to control under Division 2 of Part X: s. 189(1)(b). On 22 April 1976 "concurrent meetings" of the creditors of each debtor were held. Though the Registrar expressed some doubts about the matter, I am satisfied on the evidence that though the meetings might be- described as having been held "concurrently" (see Re Forbes (1974), 4 A,L.R. 536, 537) nevertheless in fact eleven separate meetings were duly held, each in respect of a different one of the eleven debtors, at each of which the creditors of the debtor concerned duly passed an ordinary resolution and a special resolution. - The latter is relevant only to Question 3. The ordinary resolution, which was in the following terms, is the one relevant here: "That the Creditors authorise payment to J. H. Jamison of such part of the sum of $155,237.00 as relates to the services of J. H. Jamison as Controlling Trustee appointed under Part X of the Bankruptcy Act 1966-1975 by the Debtor rendered during the period from the date of his appointment 27 July, 1975 to 19th March, 1976 ("the period") as his remuneration in respect of the said services; such sum of $155,237.00 being the total of the bill of charges rendered by J. H. Jamison as controlling Trustee of each of the Debtors during the period; and such remuneration shall be paid to -9- J. H. Jamison out of the joint estate as defined in the Deeds of Arrangement executed by the Debtor and the Trustee on the 19th March, 1976." Section 193: provides that "The remuneration to be paid to the controlling trustee in respect of his services as such shall be such as is determined by resolution of the creditors". The Registrar expressed the view that the remuneration of a controlling trustee must be determined by a resolution passed while he is a controlling trustee and must be paid out of the property under his control; and apparently was of opinion that therefore, as Mr. Jamison ceased to be controlling trustee on 19 March 1976, the resolution of 22 April 1°76 quoted above was of no effect. He suggested that otherwise a controlling trustee might have difficulty in obtaining his remuneration if the creditors resolved under s. 204(1) (a) that the debtors! property be no longer subject to control without first having determined the controlling trustee's remuneration under s. 193. Equally however, if the Registrar is correct, the controlling trustee would be in difficulty if the debtor died just before the creditors were due to meet for the first time: see s. 189(1)(£). Whatever difficulties may arise in such cases, it is clear from s. 109(1)(c), as applied by s. 237(2), that the trustee of a deed of arrangement may apply the property of a debtor, which has then by force of s. 189(1)(b) ceased to be subject to control,.in payment of remuneration due to the controlling trustee; and there is nothing in the perfectly general wording of s. 193 to require the restrictive interpretatio that the Registrar seeks to put upon that section. In my opinion the point taken by the Registrar is not a good one. . Two criticisms were directed, however, to the form of the ordinary resolution which was passed at each of the eleven meetings. The first was that it did not by name identify "the -1o- Debtor" to whom it referred. But the circumstances in which it was passed at each meeting could not have left any creditor in doubt about his identity. The second was that it did not specify the amount of remuneration payable in respect of Mr. Jamison's services as that debtor's controlling trustee. In my opinion this is immaterial. I have already stated my view that Mr. Jamison could deal jointly with the joint property of the individual debtors, and I see no objection to his submitting one bill of charges to cover remuneration for the whole of his administration of all that property. Nor do I see any objection to the creditors of each debtor determining the amount of the remuneration at a total of $155,237 by separate resolutions each referring to an unquantified proportion of that total. I am of. the opinion that question 2(i) should be answered: Yes. I think that question 2(ii) should also be answered: Yes. That answer accords with the concluding words of the relevant resolutions. It was the joint estate as defined in the deeds that was being administered under the deeds, which by clause 5(a) provided that it should be applied first in making payments in the order prescribed by s. 109 of the Act, sub-sec.1(c) of which requires payment of the controlling trustee's remuneration Question 3 concerns the special resolutions, to which I have already referred, passed at the meetings of creditors held on 22 April 1976. It is as follows: "3. (i) Was the Applicant as Controlling Trustee justified in employing solicitors to perform legal services for him as Controlling Trustee? . (ii) If the answer to question 3(i) is "Yes", was the amount of the costs and disbursements properly payable to Messrs. Sly & Russell for acting for the Applicant as Controlling Trustee validly determined as being $105,902.00 by the Special Resolutions passed in respect of each of the debtors at the concurrent meetings of creditors of the debtors held on 22nd April, 1976? -11- (iii) If the answer to question 3(ii) is "Yes", was the Applicant as Trustee under the Deeds of Arrangement authorised by the said Special Resolutions to pay to Messrs Sly & Russell tHe said sum of $105,902.00 out of the joint estate of the debtors as defined in the Deeds of Arrangement? : (iv) If the answer to question 3(iii) is "No", by whom or in what manner should the said sum of $105,902.00 be paid? '(v) If the answer to question 3(ii) is "No", (a) How should the amount of the costs and disbursements properly payable to Messrs Sly & Russell be determined; and (b) By whom or in what manner should the amount so determined be paid? : Each special resolution was in the following terms: "That the Creditors authorise payment to Messrs. Sly & Russell of such part of the sum of $105,902.00 as relates to the services of Messrs. Sly & Russell as the solicitors retained by J. H. Jamison as the Controlling Trustee appointed under Part X of the Bankruptcy Act by. the Debtors rendered during the period from the 27th July, 1975 to 19th March, 1976 ("the period") the said sum of $105,902.00 being the total of the bill of costs rendered by Messrs. Sly & Russell in respect of the estates of each of the Debtors during the period; and such payment shall be made out of the joint estate as defined in the Deeds of Arrangement executed by the Debtor and the Trustee on the 19th March, 1976." There is no doubt that during his period as controlling trustee, which lasted for eight months, Mr. Jamison was faced with complicated problems, and with a series of events including litigation, with which he would have been foolish to attempt to deal without employing a solicitor. There can be no doubt that it was in the interests of the creditors that he should seek skilled legal advice. If that were all that question 3(i) were concerned with, I would have no hesitation in answering it: Yes. But the Registrar referred in correspondence to Re Adler (1969), 13 F.L.R. 381, in which Gibbs J. (at 385) came to the conclusion that: "Whatever the reason, ... on its proper constryction the Bankruptcy Act 1966-1968 does not empower a -12- controlling trustee to obtain legal advice or assistance and does not authorise the payment out of the estate of legal costs incurred by a controlling trustee". Counsel. for the trustee, however, supplied me with the full text of the judgment of Crawford J. in Re Walden, a brief note of which appears in (1970) Tas. S. R. 288. Crawford J. did not follow Re Adler. His Honour distinguished it on the narrow ground that he was dealing with a question arising out of the employment by a controlling trustee not of a solicitor (as in Re Adler) but of an accountant; but he was also critical of the reasoning of Gibbs J., and inclined to the view that s. 190(2) (b), which empowers a controlling trustee "to make such inquiries and investigations in connection with the debtor's property and affairs as the trustee considers necessary", also inpliedly empowers him to employ professional help. In my opinion, I am fortunately able to distinguish both of those cases, because of the passing in the present case of the special resolution set out above. No such resolution had been passed in either of those cases, so that in neither could s. 109(1) (k) (ii) apply. As applied by s. 237(2) to and in relation to a deed of arrangement, s. 109(1) (k) (ii) provides that the trustee of the deed shall, before applying the proceeds of the debtor's property in making any other payments, apply them "eleventh, in payment of such costs, charges and expenses incurred in the interests of creditors before the date of" the deed of arrangement "as a general meeting of creditors, by special resolution, resolves". That provision clearly regards the creditors in general meeting as having a discretion, exercisable by special resolution, to decide whether solicitors' costs, incurred in-the interests of creditors by the controlling trustee as controlling trustee, shall be paid out of the funds in the hands of the trustee of the deed, and prescribes the priority in -13- which any consequent payment shall be made. Thus it obviates the need imposed by.ss. 109(1)(c) and 209 to inquire, as the court had to inquire in Re Adler and Re Walden,whether the costs were incurred by the controlling trustee in the exercise of the powers given him by Part X of the Act. Accordingly, I do not say anything about the question as to which those two decisions differ. I propose to answer Question 3 as follows: "3 (i) Not necessary to answer. (ii) The question being amended by deleting the words "If the answer to question 3(i) is Yes", answer the question as so amended: Yes. (iii) The question being amended by deleting the words "If the answer to question 3(ii) is Yes", answer the question as so amended: Yes.. (iv) Does not arise. (v) Does not arise. Question 4 is as follows: "4, (i) Has the Applicant as Controlling Trustee sufficiently complied with S.211 of the Act? (ii) If the answer to question 4(i) is "No", what should be done by the Applicant in order that he should comply with S.211 of the Act?" The relevant provision of s. 211 is sub-section (1), which provides: "A registered trustee shall, at such time or times as is or are prescribed, in relation to each debtor in respect of whom he is or has been the controlling trustee, furnish to the Registrar an account in accordance with the prescribed form, signed by the trustee, of his receipts and payments as controlling trustee in relation to that debtor". 'It is Rule 80(1) that prescribes the time or times referred to.in s. 211(1). The controlling trustee must file an account within one month after the control ceases: Rule 80(1) (a). -14- Rule 80(1) (b), which deals with the case of control lasting for more than six months, makes sense only if read as requiring that an account covering each period of six months must be filed at or reasonably soon after the expiration of that period. Mr. Jamison filed accounts on 27 May 1976 for the period from 27 July 1975 to 27 January 1976; and on 16th June 1976, for the period from 28 January 1976 to 19 March 1976. On 1 December 1976 he filed amended accounts in respect of those periods. Bearing in mind the complexity of the matters with which Mr. Jamison had to deal, I am of the opinion that the relevar accounts were filed within reasonable times and that to that extent s. 211 was sufficiently complied with. On.7 July 1977 he filed further amended accounts in respect of the same periods. Before answering Question 4, I shall turn: to the similar Question 6 which relates to s. 175, because similar matters arise for consideration in relation to both Questions. Question 6 is as follows: "6. (i) Has the Applicant as Trustee under the Deeds of Arrangement complied with S. 175 of the Act, with respect to the period from 19th March, 1976 to 6th. October, 1977? (ii) If the answer to question 6(i) is "No", what should be done by the Applicant in order that he should comply with S. 175 of the Act, with respect to the period. from 19th March, 1976 to 6th October, 1977?" So far as it is relevant s. 175, as applied by s. 237(4), provides that the trustee of a deed of arrangement "shall furnish to the Registrar, at the prescribed times ... (a) an account in accordance with the prescribed form ... of his receipts and payments in respect of the estate ... ". The effect of Rule 73 is that Mr. Jamison had to furnish accounts at the expiration of six months commencing on and including 1 April 1976 and at the expiration of each successive period of twelve months. On -15- 16 December 1976 he filed an account for the period 20 March 1976 to 30 September 1976, thereby in my opinion sufficiently complying, so far as time was concerned, with s. 175. On 7 July 1977 he filed an amended account for that period. The problem common to both Question 4 and Question 6 arises from the following evidence of Mr. Jamison, which was contained in-paragraph 27 of his affidavit of 18 August 1977: "27. All of the Statements of Receipts and Payments which I have filed in respect of the Debtors, both for the period during which I was Controlling Trustee and for the period during which I have been trustee under the Deeds of Arrangement refer to receipts and payments which I made in respect of the Debtors jointly and no attempt has been made to apportion an, -* the receipts or payments to each of the Debtors ind:.:.dually; save that in the Amended Statements of Recw.ipts and Payments filed on the 7th day of July, 1977 certain receipts and payments which were made during the period for which I was Controlling Trustee have been ascribed to particular Debtors when those receipts or payments related to the separate estate of such Debtor. All other receipts and payments which I have made since my appointment as Controlling Trustee and since my appointment as Trustee under the Deeds of Arrangement have been in relation to the joint estate of the Debtors which consisted of their respective interests in the business known as Patrick Partners.. Because of the varying rights, inter se, of the Debtors relating to the business of Patrick Partners arising out of the differences between Equity partners and Staff partners and the rights of indemnity which Staff partners claim against Equity partners, I consider that it was impracticable to determine the individual interest of each of the Debtors in the various receipts and payments. Such a determination would have involved the dissection of each item of receipt and each item of expenditure, totalling over $8m and involving many thousands of entries. In determining such a dissection the proportion of the amount of each : transaction to be allocated to each equity partner and each staff partner could not be determined." The form prescribed for the purposes of both s. 211(1) and s. 175(1) is Form 33: see Rules 80(2), 73(2). That form is clearly intended to show receipts and payments in respect of one debtor only. But Rule 6(1) provides that strict compliance with the forms is not necessary and that substantial compliance, or such compliance as the special circumstances of a particular case allow, is sufficient. -16- As controlling trustee Mr. Jamison controlled the joint estate and the separate estate of each debtor, but it was not until 7 July 1977 that he filed accounts which ascribed to the individual debtors concerned receipts and payments relating to separate estates while he was controlling trustee. As trustee of the deeds, he has been concerned only with the debtors! joint estates; but, for the reasons he has given in his paragraph 27 set out above, he has not filed in relation to any debtor an account showing the interest of that debtor in the joint estate. In the special circumstances of this particular case, I propose to answer: Question 4(i) Yes (ii) Does not arise Question 6 (i) He has sufficiently so complied. (ii) Does not arise. ' Question 7 is as follows: "7. Is the Applicant at liberty to make a distribution by way of dividend to the joint creditors of the Debtors out of the moneys held by the Applicant as Trustee under the Deeds of Arrangement representing the proceeds of realisation of assets by the Applicant as such Trustee?" Counsel for the trustee frankly admitted, in effect, that the evidence before me would justify no more than such an answer as, "Yes, if all else is in order so far as administration is concerned and as to the other questions that have been asked". I do not think such an indecisive answer should be given, and I therefore decline to answer Question 7. I shall hear counsel, either now or at some convenient time to be fixed, on the precise terms of the answers I should give and on the question of costs, which I was asked to reserve. I indicate now that I propose to answer the questions as follows: 1. (i) The applicant, as the controlling trustee of each of the eleven partners and as the attorney (ii) (ii) (iii) (iv) 3. (i) (ii) (iii) (iv) (v) (ii) (44) (ii) 7. Not -17- of Mr. Baume, was empowered to, control jointly the joint property and joint affairs of the twelve debtors and to deal jointly and in accordance with the Act with their joint property. Does not arise. Yes. Yes. Does not arise Does not arise Not necessary to answer. The question being amended by deleting the 'words "If the answer to question 3(i) is Yes", answer the question as so amended: Yes. The question being amended by deleting the words "If the answer to question 3(ii) is Yes", answer the question as so amended: Yes. Does not arise. Does not arise. Yes. Does not arise. The applicant, as trustee of each of the eleven deeds of arrangement and as the attorney of Mr. Baume, was empowered to deal jointly and in accordance with the Act and the deeds with the joint property of the twelve debtors. Does not arise. He has sufficiently so complied. Does not arise. . answered. Sentence nial Ci anh Mee iA Neen ites tenn esteem ane . ° ~e. * . Copyright in the Commonwealth Government IN THE FEDERAL COURT OF BANKRUPLCY Bankruotcy District of the State of New South Wales and the Australian Capital Territory No. NSW 74 of 1975/X In. the matter of ~- BANKRUPTCY ACT 1966 AN APPLICATION FOR VARIATIONS RE - MAX RICHARD LATDLEY DOWLING 'James Hardie Jamison, Applicant Registrar-in-Bankruptcy, Respondent TRANSCRIPT OF PROCEEDINGS BEFORE THs HONCURARLE MR. JUSTICE RILSY ' AT SYDNEY Ol THURSDAY, 29 DECEMBER 1977, AT 10,00 A.M. (Continued from 23/12/77) —— CHL/DM/La 116° 29/12/77 Dowling ERS SSSR rr a NR ae DO EI HN OO REE TCS ENT RNAI 8 CPE ART THRE RL settee ia meee sewamaas onan gage nee ot ~e., " HIS HONOUR: Have you some shurt minutes, Mr. Janes? MR. JAMES: Yes,. your Honour - I -hand them up to your Honour, We have had the opportunity of studying your Honour's reasons for judgment and the applicant is quite satisfie with the answers proposed by your Honour on pagesl6 and of the reasons for jucgment, HIS HONOUR: Yes, I see. Ten these short minutes are really exactly in the terms of my proposals, are they? MR. JAMES: They are, HIS HONOUR: Are you happy about that, Mr. Urquhart? Have you a copy ¢ these? : MR. URQUHART: Yes, I have, It is my view that the short minutes ought tc be in the terms of the answers which your Honov indicated in your reasons would be the answers, and it i for that reason I am agreeable to the short minutes whic you 'have., There is one matter to which I should like to draw your. Honour's attention and I do so without intendi to canvass anything your Honour has seid in your reasons HIS HONOUR: Yes, quite. MR. URQUHART: There appears a passage on page 7 of your Honour!s 2 Pp. = a * * : -reasons, in the third paragraph on that page, which reac "Largely adopting suggestions made by counsel for the Registrar and, I think, concurred in by counsel for the applicant, I propose to answer questions 1(1) and 5(1) as follows oy, " It had teen my recollection that I had not suggested any answer which your Honour ought to give. I think my suggestion was the manner in which the question be asked rather than the way in which the question ought to be answered, HIS HONOUR: Well, for instance, I think it was your suggestion that I should use the word "empowered' instead of ° "entitled", MR. URQUHART: The only point I am making is that it does appear when one reads that, that it was my suggestion your Honour ought to answer the questions in that form. I suggested no answer to your Honour but rather, if the question was going to be asked it ought to be asked wns using certain terminology. CWL/DM/2a 117. -—s MR. -~-ORQUHART 29/12/77 Dowling . HIS HONOUR: That is perfectly Coest ana tT wag obliged to you for your suggestions. I have exprevcca ene position rather elliptically there, I think. - Really what happened was that you suggested the proper form of the question would be so-and-so and I have tried to frame answers in the form in which I would have answered the question had it been asked in the manner in which you Suggested, I think that is the position really, Noy I was not intending to attribute to you any suggestion you had not made. MR. URQUHART: That is the only aspect of your Honour®s reasons on which I wish to comment. HIS HONOUR: That leaves costs, I think, does it not? MR, URQUHART: Yes, your Honour, HIS HONOUR: What do you suggest about costs, Mr. James? MR, JiMES: On the question of costs, your Honour would be concerne¢ with two sets of costs, that is the costs of the applicar and tne costs of the respondent, . With regard to the applicant's costs we would seek an order that the respondent pay the applicant's costs of the application, Alternatively, if your Honour were not minded to make such an order we would seek an order that the applicant's costs be paid out of the join: estates of the debtors, as defined in the deeds of alranguent,. With regard to the respondent's costs, we would oppose any application by my friend that the applicant pay the respcndent?s costs or that the costs of the respondent be paid directly out of the estate of the debtors. HIS HONOUR: Yes. MR. JAMES: Without canvassing all the evidence (and it was voluminous) the grounds on which I rely for support of those submissions as to eosts are firstly that these proceedings were brought as a result of certain position adopted by the Registrar in correspondence, both with the applicant and his solicitors, Your Honour recognise that the proceedings arose in that way at page 3 of your Honour!s reasons for judgment. If I may refer to those briefly, you said towards the bottom of page 3: "He has made the present application because on 30 March 1977 the Registrar in Bankruptcy wrote to him raising certain watters", So that is the genesis of these proceedings, CWL/DM/ 3a 118 MR. JAMES 29/12/77 Dowling reno itn Speer niga Fag nat * The second matter ups. witch I rely is that, in my submission, the applicant has been sucocessful-on all issues, . . The third matter upon which I would rely is that the arguments relied on both by the applicant and by the Registrar were very fully canvassed in correspon- dence before these proceedings were brought. That appears from the annexures to Mr. Jamison 's affidavit. I would 'subuit to your Honour that the arguments put 'before you on behalf of the applicant had already been adduced ia writing and put to the respondent before these proceedings were brought, and that your Honour ascepted _ those arguments; conversely, that the arguments relied on by the Registrar had been put in correspondence by the Registrar before the proceedings were brought. So in summary we submit that not only was the applicant successful but the applicant was successful in nis reliance on the grounds which he had put to the Registrar before the proceedings were brought. The matters I principally rely on, therefore, are that the proceedings were nececsery because of the views adopted 'by the Registrar, that the applicant has been succ?2ssful and that the applicant has been successful on groui's which he put to the Registrar in writing before the proceedings were broughti, ' A further matter is that the Registrar does occupy an official capacity. In my submission trat snould be taken into account, certainly in respect to any application * for costs by the Registrar aimseif, HIS HONOUR: Well, in what way should it be taken into account in MR. J/MES: CWL/DM/ 4a Dowling that respect? YT would put that if an avplication is made by the Registrar that the Registrar's costs should be paid either by the applicant or directly out of the estates that it would be proper for your Honour to reject such an application and that the costs of the Registrar in discharging his function should be absorbed by the administration of the bardcruptey. (Continued on page 120) 19 eR, JAMES ' 29/12/77 . - Ma. Silos Of corse. s2 ony order is mots chat the registrar's costs bo pesi ny ree pylicant or out of the estetes3; or if the ar to bear his own costs with on indownity out of the EIS HONO cliennt is left having estates, the effect would te So reduce the funds available for crs"itors. Those are my submissions. UR: Thank you, Mr. Janes: Mr. Urquhart? MR. URQUIART : My first submission is that the respondent ss §s # KS/TH/1L Dowling is Registrar-in-Bankruptey. There was no need in this application for there to have been any respondent,.: The applicant trustee seeling directions could have A done so without a respondent, but the registrar was naned as respondent and being named as respondent and being served, he could have done two things: first, appoared before your Eonour vo subnit to whatever _ terms your Honour gave and seek your Honour's Leave to withdraw from further involvement; or second, the other course, and the course which was adopted, to appear and through counsel endeavovr to asSist the court in arriving at a Geterminetion. On that basis, without regard to other subuissions I make, 1% is not on that basis alone a matter in which the annlicaxt ought to have an order for costs against e responéent, Notwith- | standing the reasons for the anplication having been prought, so far as the application. is concerned the yespondent registrar's part has been to assist the court, In so far as the annlication is concerned, notwithstan@ing your Tonour'!s answers to certain of the auestions confirmed thet the vi ! Lew wiich tne anplicant and his solicitors tcok in the correspondence stag, there were other questions asked in the aprlica~ tion and which were raised in correspondence which, aLsheugh answered favourably so far as the apnlicant ves concerned, were so answered in the special circum stances of the case. Your Honour might recell eertain a and the linited time for doing that, It would be ny' submission that so fer as that aspect is concerned, Ss a position which the registrar took quite . Cx i) n cucstions relstihg to the filing of accounts mac it wa properly and covrectly and it was not until it was before your Honour that the special circumstauces of this caso dictated the cutcone by way of the answers your Honour gave. On that hasis the registrar ought not be the subject of my costs creer, My third submissions your Honour appreciates the position of a controlling trustee in relation to his owm renmuneraticn, the manner in which he carries out thet trusteeship ané in relation to the incurring' of expenses; for exemple, adaountants and solicitors, a 420 - MR. URQuil"nt ) 29/12/77 oo - have been Fre Sligo, = -# ae aamnenst ely small nunber of Cecisions. Your SOhUe::n cedLsion in this matter enlarzes the available Law waieh 'will guide trustces prolly and te penalise one or other ang rogistrars genore ¢ n case sich as this in of the sices {involved in 2 osts woulda be uefair to the particular relation to ¢ sidc or party in my surd HIS HONOUR: Mre Uravhars, if 2 could interrupt you, I do. not feel jnelined to make tho registrar pay sho costs of the explicant. The only thing I wonter about a Little is whether the registrar's costs should cone out of the estate or whetner he should be Left to bear then from public funds. ssiors ' MR. UNQUILIT: Thank you, your Honour: if I could turn now to the registrar's own costs. - The registrar's position has pboen to assist the court and I suomit the assistance given to your Tonour falls on two pases: first, his cavacity eas yegistrar and not solely eoncerned with this case, ecncerns the administration of that part of the act with which this case was eonecrned: that is, so that he could_ give advice to trustees trom time to time having : regard to your Honourts judg snt if your Honour cones to the conclusion thet tant really was the besis upon which tho registrar appeared in this matter. . ¥ concede that the eseditors of these at be penalised, put if your eleven estates should nov rtow that the basis upon which Honour cones to the vic the rogistrer appeared in this nabtor wes more narrow 3 that is, thet although it nay have ndventage te other trustees socking his adviec, it was nevertheless 'confined to this perticular case, then, I submit the costs of this application should be paid out of the astetee L do not propose to say anything nore on that aspect of the matture eply, Mre Janes? TMS: Ho, except to say t your Honour thot the besis ich the registrar . was proceeding was tho first, very fairly put by my friend; that it +5 a i } at least, toa ecnsia wes concerned with ouc it would be fair tc sa concerned about the courl ; mn of Gibbs, J. am the Tasmanian between the decisio he ease, at lcast to the extert that the registrar was concerned with the question of general intorest and was geoking guidance for himself and the controlling trustec gonoraliy and tno areditors of these particular ce stors should not have to suffer. = e) yr ae) KS/PH/2a . " Dowling 421 . — 29/42/77 HIS HCNOURs The only matter tuay tenures too Title as to costs is what provision should be made for the Registrar's costs. -t is tevue that the Registrar need not have best a'party as the trustee was seeking directions frem the court, but I would undoubtedly have ordered that the Hegistrar be joined and, in any event, the Registre: apnezzed by counsel wnose express purpose was to assist the court. Counsel succeeded admirably in fulfilling that purpose. Pne court venefitted greatly from the submissions that -he made. 'I did feel though that in raising questions that he did raise in correspondence with the trustee extending over quite e iong time, the Registrar was concerned to investigate matters of general interest in the administration of estates uncer deeds of arrangements. fhe Registrar in his varicus points in correspondente dealt very fully, very fairly with these matters and with reference to all the available authorities on any such point. 'the matters with which I have dealt, I have dezlt with partly on the basis that there are svecial 'eircumstaves in this case. Other matters, however, MR, JAMES: DT/SC/1a Dowling T have dealt with in such a way that I think certein points which were act altogether clear in the administration, whilst they still may not be altogether elesr, at least have the benefit, if you could call it that, of a judicial decision. On the whole I think that public funds oughu te bear the Registrar's costs. It is fortat reason only that I think I should make no order as to the Registrar's costse J do not think it would be altogether fair that the creditors of this estate should bear the costs cf the Registrar's intervention in the administration cf this estate. I would emshasize, however, that the attitude that the Registrar has taken throughout has been perfectly proper anc so fer as his representation in court by counsel wes concerned, it was not only perfectly proper but very helpful to the court. . Now I propose to give directions in accordance with the short minutes of order which I have now dated 29 December and signed and put in the file. I order that the costs of the applicant be paid out of the joint estate as defined by the deeds of arrangement of 19 March 1975. I make no order as to the Registrar! costs. Your Honour would recall that the applicant was represented by senior counsel. 422 a 29/12/77 HIS HONOUR: GQovbtiry fox seitor cutest fan onnig cee? ; . MR. JAMES: If your Honour pleases. HIS HONOUR: I certify that this was a proper case for the employment of senior counsel by the applicante T shall now adjourn. AT 10.25 A.M. VHE COURT ADJCURNED UNTIL 10.30 A.M. THE SAME DAY TO PROCEED WITH ANOTHER MATTER. DI/SC/2a 123 29/12/77 Dowlirg :