IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION NEW SOUTH WALES AND THE ) ) ) ) BANKRUPTCY DISTRICT OF THE STATE OF ) ) ) ) ) AUSTRALIAN CAPITAL TERRITORY No. T886 BETWEEN: BRIAN MUIR, REGISTRAR IN BANKRUPTCY Applicant AND: DAVID GEOFFREY BRADLEY Respondent CORRIGENDA Amendment to the judgment of his Honour Mr. Justice Beaumont dated 27 April 1984. p.l of The Schedule 3. "Estate R.W. Dale" should read "Estate R.W. Dole" ht ee Associate to Mr. Justice Beaumont 4 July, 1984. CATCHWORDS Bankruptcy - Trustees - Application for cancellation of registration under s.155(5) of the Bankruptcy Act, 1966 - Principles applicable. Re Alafaci (1976) 9 A.L.R. 262 - con. Re Hodgekiss (1962) S.R.(N.S.W.) 340 - con. Bankruptcy Act, 1966 s.155(5) BRIAN MUIR, REGISTRAR IN BANKRUPTCY v. No. T886 Beaumont, 6 July 1984. Sydney. DAVID GEOFFREY BRADLEY IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF TEE STATE No. T&eé OF NEW SCUTH WALES AND TEE ee ee eee ee AUSTRALIAN CAPITAL TERRITORY EEDWEEN: BRIAN MUIR, KEGISTRAR IN BANKRUPICY Applicant AND DAVID GEOFFREY ERADLEY Responient CRDER Jiige making order: Beaumont, J. Tate order made: 6 July 1984 Where made: Sy iney THE COURT ORDERS EAT: 1. That the registration of the responient as trustee be cancelled pursuant to s.155(5) cf the Eankrupicy Act, 1966. 2. 2. That liberty be reserved to the applicant to eprly on three jays' notice for further relief, if necessery. z. That the applicant pay the costs of tke responient of the preliminary point decidei on 16 November 1983; ani that, save as aforesé1i, the responient pay the costs of the applicant of the epplication, including reservei costs. ss ny wh IN TEE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE ho. T8&86 OF NEW SOUTH WALES AND TEE ee Ne ee ee AUSTRALIAN CAPISAL TERRITORY BETWEEN: BRIAN MUIR, REGISTRAR IN BANKRUPTCY Applicant NL LTAVID GECFFREY BRADLEY Respondent CCRAM: Beaumont, J. DATED: 6 July 1984. REASONS FCR JUDGMENT (NC. 3) The backgrouni to this application, seeking tne cancellation of the registration of the responient's registration as a person qualified to act as trustee, 15s described un the Reasons for Jnigment (No. 2) herein dated 27 April 1¢64 which should be treatei eas part of these reasons. 'The matter has now proceeied to a final hearing. The applicant callei no further evidence. The responient 2. adduced certain further evidence including an affidavit sworn by himself, upon which he was cross-examined. In his affidavit evidence, the respondent endeavoured to explain his default in the administration of the estates concernel by referring to a number cf matters which had distracted him from professional juties. One such matter was that in 1978-79, he was engagei in i1sputes with his partner in their accountancy practice. This lei to the dissolution of the partnership which he described as "acrimenious". Che litzrgetion which ensued is still not resolvei. In 1979, the respondent commenced practice on his own account at North Parramatta, seeking to specialise in insolvency work. However, because of the lack of qualified and experienced professional staff, the respondent was compellei to employ the services of junior staff and sub-contracted staff to a large legree. 'The applicant then tegan to experience raetrimonial difficulties whicn led to litigation in the Family Court between May 1980 and Cctober 1981 with respect to questions of maintenance and the custody of and access to, the children of the merriage. The applicant said, eni this was net challenged, that juring the proceedings in the Family Court, he was subjected to severe and distressing emotional strain. The difficulties encountered by the respondent in the period from the end of 1981 until tke middle of 1983 were described in his affidavit sworn herein on 14 June 1984: "33. After the settlement of my divorce proceedings in 1981, I realised that I hed neglected my practice to a substan- tial degree. I was aware that I was substantially behind with the filing of returns in various matters in which I had been appointed Trustee and that this had been caused substantially by the emotional pressure which I hai been under due to my iaivorce and other Problems. 34. My financial position was such, at the time, that I could not effori to employ expensive qualified experienced staff ani I was dependant (sic) upon the assistance of a Public Accountant who worked for me on a contract basis wnen he was not working in his own practice, and upon a University graduate who was completing his professional year through the Institute of Charterei Accountants. 55. I had borrowei substantial sums of money from my bankers, to complete the terms of my Family Law settlement with my wife, in April 1962. I was very distressed by the fact that I had lost contact with my children. 36. During July, 1982, I met Miss Lesley Ajams, who is a Chartered Accountant, and discussed with her, at length, what I shouli do to endeavour to restructure my practice. Miss Aijems suggestei to me that I should lease a computer and employ more qualified staff and seek to move to larger premises at Parramatta. 37. At this time I was the only registered Trustee 1n Bankruptcy in the Western Snburbs and Parramatta district and was consulted extensively by many local solicitors and Chartered ani Public accountants who had clients with insolvency problems. On hinisight, I believe that I accepted mcre work than I could handle andi I accepted appointments un estates in which there was little prospect of substantial return. I wes working seven days a week to fulfil my obligations ani I was working long hours each day. 36. uring this period I continueli to be under severe financial strain and was assisted ty a personal loan of $32,000, from Miss Adams. 39. I began to notice thet I was very tired ani when I went to sleep, I would sleep for long hours. 4C. I have been informel by many of ny friends that when I went to sleep I appeared to be in a comatose condition. 41. In hovember, 1962, after a weekeni in which I remained asleep for sometning in excess of thirty hours, I sougkt medical advice. 42. I was advisei by ry jloctor that 1 was exheusted and that = sheuld act return to work for two weeks. 4%. It was during this perioi that I had planned to move my office across the street to new premises at Parramatte. 44. Gn Eth December, 19&2, I collapsed and I was taken to hospital. Iwas advised by the medical practitione there that I was suffering from overwork ani was severely stressel. i was further edvisei to take a long holiday over the Christmes period, which I 111. 45. In January end February, 1983, I employel two experienced Chartered Accountants who were experienced in the field of bankruptcy end liquidation, respectively. I paid these men substan- tial selaries to assist me in bringing the arrears of work up to date. 46. At this time I was most concerned that many of my returns in many of the estates of which I was Trustee were not being filed and thet I was aware that I was under constant pressure. 47. I hai received a number of reauisitions from the Fegistrar 1n Bankruptcy eni I was concerned that these requisitions be enswered as soon as possible. 48. My accounts had been inspected by « Deputy Official Keceiver of the New South Wales Official Receiver's Office in April 1982 andi he kad found no irregularities in the accounts whatsoever. 49. Whilst in my employ, tke tro Chartered Accountants I emrloyed dij reduce tne arrears of work to some degree. Eowever, they i114 not achieve the results that I nad expected. 50. Eoth left my employ on extremely shert netice in may andi dune 19835 without completing a number of jobs delegatei to them. 51. I have since been info~mei that tne ~eason for their abrupt ieeving was that they hai heard that these rroceelings were to be instituted against me. They did not tell me this reason when they left. 52. In July, 19&3 I, once egain, felt severe signs of stress ani = consultei a medical practitioner in Farremetta. I was iunfcrmed by him that I was saffering from severe hypertension and tnet 1n kis view this hypertension wes caused by the emctional and professional stress which I had suffered. It was apparent that I hai sufferel from hypertension for some time, without knowing it. 55. He further informel me taat in his opinion it was necessary that I enjoy a holiday for at leest two months. He further iunformei me that 1f I 414 not obtain some relief from the workload that I kad, I might well suffer a 6. collapse. He further informed me that the tiredness from which I suffered was symptomatic of the hypertension and prescribed a drug called Senormin in a quantity of 50 milligrams per jay to contain my blood pressure. Ee told me that if I felt stressei or weary, I should go walking or, alternatively, go home for a sleep." However, the respondent's position, both in terms of his professional ectivities ani of his health, scems to have improved considerably from the middle of 1983 elthoveh he 18 still receiving medical treatment. With assistance from Miss Ajams, steps were taken to improve the level of professional efficiency of the practice, especiaily by computerisation. Further, in the miilijle of 1983, Mr. Thomas wes employed. His significant role in the practice has alreaeiy been jiescribed in the reasons for juigment herein dated 27 +pril 19&4. In about Cetober 1963, the respondent commenced negotiations with a large firm of accountants fcr the sale of his practice. In the negotiations, the vresponient disclosed the pendency of these preceeiings, which were commenced on 22 September 1983. The negotiations were broken off in February 1984. The respondent said that he believed that the negotiations, which had reached én advanced stage, were broken off by the other party because of the disclosure of this application. In his oral eviience in this application, the respondent disclosed to the Court some other matters. In March 1983, the respondent pleaded guilty to twenty seven charges of failing to hold general meetings of companies of which he was liquidator in contravention of s.271 of the Companies Act, 1961 (N.S.W.). Mr. Simpson, S.M. was of the view that, in the circumstances, considerable leniency was justified and fined the respondent $20.00 on twenty six of the charges and $5.00 on the remaining charge. In dune or duly 198%, the respondent was charged with professional misconiuct by the Institute of Chartered Accountants in respect of his convictions for contraventions of the Companies Act. Although the position 111 not clearly emerge, it would appear that the institute convictei the respondent of this charge, reprimanded him ani ordered him to pay costs in an amonnt of approximately $1,000.CC. Farther, the cancellation of the registration of the respondent as a liquidator unier Division 2 of Part II of the Companies (N.S.m#.) Code 1s presently under constjeration by the National Companies ani Securities Commission. In the Feesons for Judgment dated 27 April 1964, I concluded (at p.5) that Mr. Thomas' evidence established, prime facie at least, that the responient lecks the capacity to discharge with professional competence the obligations inherent in the assumption of the office of trustee under the Act. 'The failure by the respondent to administer with any reasonable degree of diligence the estates catalogued in the schedule to those Reasons only confirms that view. And nothing which has since emerged in this proceeding displaces the provisional view which I had earlier formed. It is significant 1n this regari, that the respondent failed to respond to the many requests made by the Registrar for an explanation of the delays which had occurred in "the administration of the estates in question. In the period 1980 - 1983, in most of the subject estates, requisitions weve sent by the Registrar to the respondent seeking information and requesting action to be taken. In the great majority of cases, the requisitions faileil to achieve any response in the short or even medium term. In a haniful of cases, a reply was given but even then delays of rany months were not uncommon: in this regari, the schedule annexed to the earlier Reasons speaks for itself. An important feature of the case 1s the failure of the respondent to make any attempt to explain to the Registrar the difficulties he was experiencing in the period 1979 ~ 1983. For example, on 7 October 1981, the Registrar wrote to the respondent as follows: "ROBERT WILLIAM DOLE - N.&.W. 21 of TRUSTEES ' ACCCUNTS SECTIONS 175 and 211 (RULES 73 & &C) OF SHE BANKRUPTCY ACT 1966 The abovenamed debtor executed a Deed of Assignment to you as Trustee on 15 Fetruary 1976. Your Controlling @rustees Account for the period 31 dJenuary 1978 to 15 February 1978 was receivei on 8 March 197&. No further Trustees Accounts have been received to date. Your first Trustees' Account of Receipts and Payments wes iue on 1 September 1978, the second Trustees! Account on 1 September 1975, third Account on 1 September 19&C end fourth Account on 1 September 1951. These Accounts are all overdue. Please attend to the matter forthwith ani I expect these Accounts to be filei witnin 7 days of receipt of this letter. Failure to do so will leai to the matter being referred to the Court." The respondent did not answer tne letter. ho accounts were filei until 15 April 1962 (see tne schedule to the earlier Reasons). The filing of these accounts (and cthers) can be explained by reference to the letter written ty the Registrar to the respondent on 29 Januery 1982 as follows: "PRUSTEES ACCOUNTS 10. fECfIONS 175 and 211 (RULE 73, 80) OF BANKRUPTCY ACT 1966 Examination of my records discloses that accounts in mentioned below are overdue: ESTATE E.M. DCUGLAS I.A. DCUGLAS R.W. DCLE Rew. HETEERINGTON Pd. HETEERINGTON M. FULLER P.M. DALEY C. DALEY A.B. AMOS R.B. BOWMAN No. 7/78/X 8/76/% 21/76/X 26/75/X 25/78 /X 50/78/X 183 /78/X 184/78/% 62/79/X 69/79/X respect of the PERICD 27.1.78 Composition 27.1.78 Composition 15.2.7& Assignment 10.3. 7€ Ccmpositicn 10.3.78 Compositicn 12.4.78 Composition 16.11.76, s.186 Authority 16.11.76, s.16& Authority 20.4.79, Deed of Assignment 26/4/79 Deed of Assignment estate/s ACCOUNTS FILED Controlling Trustees a/c filei. No other a/c's have been filei. u ' '" it ho A/c.s filed Contrcllin Trustees arc filei, 16.¢.61. A/e for 20.10.&0 filed. ho other a/e.s filed. no a/c.s filed. ESTATE C.R. JONES V.A. CLEAPY B.E. CLEARY B.A. KEARNS R.A. KEARNS F.w. VINCENT DLL. WEATHFRBURN R.L. WEATHERBURN L.K. GEORGE -M. GECRGE so] -M. BOME qy yw . ECNE G.T. BRISTOW S. BRISTOW W.M. COVERDALE A.?. COVERDALE J.P. TENNANT J.A. SCOLES M.D. SCOLES L.d. JENKINS B.L. JENKINS No. 95/79/X 179/79/X 180/79/X 205/79/X 206/79/X 207/79/X 206 /79/X 209/79/X 13 /8C /X 14/80/X 15 /80/X 16 /80/X 27 /80/X 28 /80/X 29 /60/X 50 /80/X 49 /60/% 67/80/X 68/80 /X 76 /80/X 77/80/X 11. PERICD 10.5.79 Composition 25.10.79 Assignment 25.10.79 Assignment 29.11.79 Assignment 29.11.79 Assignment 30.10.79 Composition 13.10.€0, s.166 18.1.80, s.18€ 18.1.60, s.186 1.2.6C, s.1€8 1.2.60, s.16& 1.2.80, 5.166 1.2.66, 5.166 1.2.€0, s.18& 31.35.86, s.166& 31. 3.80, s.188 16.4.80, s.1&8 16.4.80, s.1&8 ACCCUNTS FILED no a/e.s filed t Ll Kot all a/e.s filed No a/c.s filed Ll " tt " Wt W " u " w " " Ll ci ESTATE L.A. RIGGS T.J. FCRBES J.R. WALKER G.C. GENNAOUI B.J. NELSON L.M. MAKIN E.d. MAKIN Pod. & JW. O'ROURKE P.E. COLLINS R.W. SWITZER J.D. SEARP D.X. SEARP J. McQUADE N.G. HATTCN M.L.F. BODENDORF B.d. DEAN H. DEAN D.E. GILL XO. 120/80/X 122 /80/Xx 121/80/X 244 /80/X 245 /80/% 246 /80/X 247 /80/X W 1159/80 3/81/% 40/81/X 41/81/X 42/81/X 43 /81/X 44 /81/% &&/81/X 106 /&1/X 107/81/X 140/81/X 12. PERIOD 12.6.80, s.1&5 12.6.80, s.185 12.6.80, 5.188 19.1.81 Composition 18.12.80, 5.188 18.12.80, s.188 18.12.80, s.185 (Date of Bankruptcy) &.12.80 19.2.61, Composition 5.3.81, s.1€€ Assignment Assignment 6.3.1, s.1&& Deed of Assignment 3.4.81 Composition 2¢.1.81 Composition 6.8.81 Composition 5.8.81 Composition 3.9.81 tt n No e/es W Ww t " tt tt You will notice from the above list that the accounts in the majority of estates are seriously in arrears. I hereby require you to file the accounts due in each of the above estates on or before 5 ACCOUNTS FILED tt " Ly tt " t " filed Ww W March 1962. Fa1rlure to do so will result in my applying to the Court to examine you under section 179(3) of the Bankruptcy Act 1966 and to remove you from the office of trustee under section 179 of the Bankruptcy Act 1966. I also intend to request the Auiitor-General to audit the accounts 1n the above estates. This notice is e final notice." It 18 surprising, to say the least of it, that the respondent made no attempt to reply te this letter. It 1s true that, by April 1982, the respondent had made arrange- ments for the preparation of many of the accounts the subject of complaint althougk well beyond the time prescribed pursuant to s.175(1) of the Act. Nonetheless, no attempt was maie ty the responient to explain to the Registrar the virtually insurmountable personal and other difficulties he had experienced and was continuing to experience. Indeei, until these proceedings were lastituted, no attempt was made ty the respondent to communicate the nature of his many problems to the Registrar or to the Court. This must reflect poorly upon the capacity of the respondent to continue to act as a trustee. In my opinion, default in the form of failure by the respondent to take any step towards the filing of proper accounts 1n a significant proportion of the estates of which he was trustee extending, as 1t 414, over a period of some three years in many cases, thus constituting a serious preach of Division 3 of Part VIII of the Act, ani, in 14. particular, s.175(1), coupled with the failure by the respondent to ensure that the Registrar or the Court was informed of his incapacity to accept fresh appointments as a trustee, constitutes misconduct sufficiently serious to warrant the cancellation of the registration of the respondent es a trustee pursuant to s.155(5) of the Act on the grouni that the respondent is not "a fit and proper person to be entrusted with the important juties and grave responsibility which belong to a trustee" (cf. Re Humphreys and Walter (1931) 3 A.B.C. 254 at p.256). The respondent confesses his default but seeks to attritute it to his partnership dispute, his matrimonial troubles and ill-health, none of which, the respondent submits, any longer apply. With regeri to his health, the respondent points, for example, to the unchallenged evidence of Miss Adams to the effect that, in recent times, his health has to a lerge degree, apparently improved. However, the respondent is still receiving medical treatment and, made no attempt to call any expert medical evidence on this score; inieed, he successfully objected to the tender by the applicent of a report by the respondent's medical adviser. In these circumstances, I must assume that such adviser if called would not assist the respondent's case ani ar therefore uneble to make a finding in favour of the respondent that he has fully recovered from his illness. In any event, the recency of the respondent's failures leaves 15. open, as a real possibility, the unacceptable prospect of a relapse in performance on the part of the respondent. Moreover, the extent of the failure of the respondent to perform adequately or, 1n some cases, at all, his professional iuties in the estates mentioned in the period from 1979 to early 1963 together with the feilnre of the respondent to inform the Court of his inability to act uron any fresh appointments in that pericd, cannot be entirely explicable as resulting from his partnership dispute, matrimonial troubles and 11l-healtn. The resftonient further submits that the Court should take into account as favouratle to his case the circumstance that no ljebtors end no creiitors have sought to appear 1n and to support this application. Eowever, a number of letters were written at the time to the Cfficial Receiver or the Registrar on behalr of creditors corpleining of the inaction of the responient in some at least or the estates 1n question. In eny event, 1t would be unrealistic to expect that creditors, either uniividually or collectively, would te sufficiently enthusiastic as to wish to appear in this epplication, since in the main, their only interest was a relatively small Jiviieni. It follows, in my view, that the absence of debtors ani creditors from these proceedings 1s no answer to the Registrar's clair. 16. Then the respondent submits that the Court should take into account in this application consiierations of the kind which the Courts have taken into account 1n cases involving striking off for professional misconduct. Reliance was placei upon the decision of the New South Wales Supreme Court in Re Hodgekiss (1962) S.R. (N.S.W.) 346. It was urged on behalf of the respondent that the reasoning 1n Hodgekiss, to the effect that "mere" negligence, even if of a serious character, 1s not misconiuct sufficient to warrant striking off tne practitioner (see at pp.>50-2 per Hardie, d.). It may be accepted that tne striking off ceses jo provide a useful guide in an application ander s.155(5) of the Act, especially insofar es those authorities emphasise the prcetective, .rather_than the punitive, aspect of the whe proved matter. Eut, although the ultimete question 1s the fitness of the frerson in question to holi the particular office, it 1s trite law that each case must jlereni upon its own facts. Hodgekiss, although ruch relied on by the responient, is far removed from the present case: the charge there levellei egeainst the solicitor was basei upon an alleged merely technical breach of the regulations governing the manner in which solicitors! trust accounts were to be kept. it was not eae case of failure to file accounts at all or at least for lengthy periods and thus can provide no useful analogy to the facts of this case. Certainly, the decision of 17. Riley, J. 1n Re Alafaci (1976) 9 A.I-.R. 262, whilst turning on its own facts, provides 2 closer analogy for present purposes (see especially at pp.2&3-4). Finally, the respondent contenis that the present application 1s satisfactorily dealt with by the Court's merely eccepting the undertakings he now proffers as follows: "1. That the respondent will use his best enleavours to comply promptly and efficiently with all oktligations and matters required of him by the Act. 2. That the respondent will notify the Registrar of any event which may impede hin in the performance of his trusteeshirs." In my view, such undertakings, which are merely declaretcry of the respondent's statutory obligations 1n any event, provilje no answer to the strong case made by the Registrar against the respondent. More importently, suck undertakings provide no protection in any practical sense to those who, as debtors, creditors or otherwise, would dereni upon tke diligent discharge by the respondent of his functions ses their trustee. Nor, in my view, is it reasonable to expect the Court or the Registrar to police the performance of such undertakings (see Re Fahey (1935) & 4A.B.C. 171 at p.173). 18. In the circumstances, I] am of the opinion that the registration of the respondent as trustee should be cancelled pursuant to s.155(5). In the event that consequential relief in the form of delivery up of documents and the like is necessary, further application may be made pursuant to the liberty to apply which I propose to reserve. The respondent must pay the applicant's costs except that the applicant must pay the costs of the respondent of the preliminary point decided on 16 November 1983. The Court orders: l. That the registration of the respondent as trustee be cancellei pursuant to s.155(5) of the Bankruptcy Act, 1966. 2. That liberty be reserved to the applicant to apply on three days' notice for further relief, 1f necessary. 3. That the applicant pay the costs of the respondent of the preliminary point decided on 16 November 1983; and that, save as aforesaid, the respondent pay the costs of the applicant of the aplication, including reserved costs. ceruly. 2! Yo lkegoc the IZ srcce_ing 2eas fro te, Ae ARI pen "Q@S frog ilar. y of it reasons fer i? - ( xf fa)pea oO , a? Cries. cube toe Beauraics | ; » Justice Reauiac |. Sumary Gregory Associate S.