CATCHAORDS 345 oa Bankruptcy - appeal - application for inquiry into conduct of appellant as Trustee of cectain estates and for cancellation of appellant's reqistration as a person qualified to be a Trustee in bankruptcy - default by Trustee in preparation and filing of documents - whether undue weight qiven to past dereicction - whether insufficient weiaht given to subsequent improvements - the Court's expectations of a Trustee in bankruptcy. Bankruptcy Act 1966, s. 156(5), 160, 179, 215B, 215 DAVID GEOFFREY BRADLEY v. BRIAN MUIR, REGISTPAR IN BAaNKPurrTtCcy No. 238 of 1984 ST. JORN, LOCKHART & MORLING JJ. 22 OCTOEFER 1984 SYDNEY frets tates vray es alias ad aay 8 abe Re eR? DE omy Ala Pa) IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION No. T8856 GF NEW SOUTH WALES AND THE No. G238 of 1984 ) ) BANKRUPTCY DISTRICT OF THE STATE ) ) ) AUSTRALIAN CAPITAL TERRITORY JUDGES MAKING DATE OF ORDER: WHERE MADE: THE COURT ORDERS THAT: l. The appeal be 2. The appellant OM_APPEAL FROM A SINGLE JUDGE OF THE FUDERAL COURT OF AUSTRALIA BETWEEN: DAVID CEOFFREY BPADLEY Appellant AND; BRIAN MUIR, —- PEG TS TRAR IN BANKRUPTCY Respondent ORDER ORDER: ST. JOHN, LOCKHART & MOFLING JJ. 22 OCTOBER 1984 SYDNEY dismissed. pay the respondent's costs of the appeal. oma testa: ue "nt ibe a si) tn a ee oe ol aha ce fF 2 Tene ed eres PSAs? IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY No. Tas No. G238 of 1984 —we ew we ON APPEAL FROM A SINGLE JUDCE OF THE FEDERAL COURT OF AUSTRALIA BETWEEN : DAVID GroOFFREY BRADLEY Appellant AND; BRIAN MUIR, REGISTRAR IN BANKRUPTCY Respondent CORAM; 5t. John, Lockhart & Morling JJ. DATE: 22 Octoser 1984 REASONS FOR JUDGMENT THE COURT This is an appeal from the judament of a single Judae of this court (Beaumont J.) whereby his Honour ordered that the reqistration of the appellant as a trustee in bankruptcy be cancelled pursuant to sub-section 155(5) of the Bankruptcy Act 1966 ("the Act"), The appellant is 49 vears of ade. He qualified as a chartered accountant in 1976. Previously he had been emvloyed bv various firms of chartered accountants in Svydnev, and specialised in insolvency work and the liquidation of companies. After qualifving as a chartered accountant, he entered into partnership with another chartered accountant and purchased a practice at Lidcombe. Host o£ the work done by the appellant was in the field of liquidatisn and to insolvency with which he wis familiar. Problems arose between the partners, and in March 1979 the partnership was dissolved, The appellant then commenced practic® on hi own account at North Farramatta. The work of the practice was demanding, and the appellant employed jtmior staff and subcontracted work to a larae degree. For various reasons. the appellant's financial position wag not particularly healthy, and it appears to have progressively worsened for some vears after 1978. In February 1980 marital problems arose between the annellant and his wife. The dispute between the two was acrimontous and involved proceedings in the Family Court which resulted in their being divorced in May 1981, and in the approval by that Court to a property settlement in October 1981 which required paymant of money by the appellant to his former wife. These, and other matters. contributed to the appellant s failure to fille documents required by the Act and the Bankruptcv Rules, especially accounts, in some 42 of the 76 estates of which he had been appointed trustee. Most of the administrations were under Part X of the Act. Various letters were written to the Official Receiver and to the Registrar in Bankruptcy on hehalf of creditors complaining of the inactivity of the appellant in relation to some of the estates in question. ON eee Seem 3. The respondent applied to this Court on 22 Setember 1983 for, first. an order pursuant to s. 179 and s. 2128 of the Act that the Court inquire into the conduct of the appellant as truste* of certain estates: and, second, an orter pursuanr to cubes, LOS¢t) for cancellation of the appellant's reaisclreation as a person qualified to be a trustee in bankruptcv. There is no dispute that in manv cases the appellant was auiltyv of default in the preparation and filing of document; required by the Act and Rules notwithstanding that since the commencement of these proceedings steps have been taken bv him to rectify the position. Details of the appellant's default are cnntained in a schedule annexed to the learned trial Judge's reasons for judgment which we need not pause to specifv. His Honour found that the problems which bes=t the appellant were essentially over the period 1979 to 1983 and that the apnellanc's "position, both in terms of his professional activities and of his health. seems to have improved considerably from the middle of 1983 although he is still recelvina medical treatment. Wath assistance from Miss Adams. steps wera taken to improve the level of professional effictency of the practice, esvecially bv compuberiziticn. Further, in the middle of 1983, Mr. Thomas wis employed." Miss Adams is a charkered accountant who asstsred the appellant with some of his problems and, indeed, lent bim $32,000. Me. Thomas is a chartered accountant emploved by the appellant in 19483 CC le ro wow : Swat aXe 77 De Oe age ce tS hoe als he ae Be ora + moss PARTON oF 20 a engl Aiea SF ag Pens to rectify some of the serious problems shich had arisen in the course of the administration of his office. His Honour found: "In about October 1983. the appellant commenced neqotiations with a large firm of accountants for the sale of his practice. In the negotiations, the appellant disclosed the pendency of these proceedings, wonich were commenced on 2? September 1983. The negotiations were broken off in Februarv 1984. The appellant said that he believed that the negotiations, which had reached an advanced staqae,. were broken off by the other party because of the disclosure of this application. In his oral evidence in this application. the appellant disclosed to che Court some other matters - In March 1983, the appellant pleaded quiltvy to twenty seven charaqes of failina to hold general meetings of companies of wnich he was liquidator ain contravention of 5s. 271 of the Companies Act, 1961 (N.S.W.). Mr. Simpson, 8.4. was of the view that, in the circumstances, considerable leniency was iustified and fined the appellant $20.00 on twenty six of the charges and $5.00 on the remaining charade. In June or July 1983, the appellant war charaqed with professional misconduct by the Institute of Chartered Accountants in respect of his convictions for contraventions of the Companies Act. Although the position did not clearlv emerge, it would appear that the Institute convicted the appellant of this charade, reprimanded him and ordered him to pay costs in an amount of approximately $1,000.00, Furth=r, the cancellation of the tearstration of the appellant as a liquidator under Division 2 of Part IT of the Companies_(N.S.W.) Crde is presently under consideration bv the Nationyl Companies and Securities Commission." ed ow Fi wee shoes aw AA ree at Ae oe ar Pets WT o WAS" wt hh er ao Es Mo MR Oe, Wade ~ e In fact the triai Judge referred to the appellant throughout his reasons for iudament as "the respondent" hecause he was the respondent to the application before the Court: but, for reason; of convenience, we have substituted in our ecrtations from hire Honcur's reasons the word "appellant" for the word "respondent". His Honour aave two reasons for yudament: one on 27 April 1984 when he determined that this was an appropriate case in which to hold an inquiry under sections 179 and 212B; and the second on 6 July 1984 when his Honour made the orders under challenge in this appeal. In his April reasons for jtudament his Honour said: "In the Reasons for Judament dated 27 Avril 19824, T concluded (at p.5) that Mr. Thomas' evidence established. prima facie at least, that the appellant lacks the capacity ta discharaqe with professional compatence the obliaations inherent in the assumption of the office of trustee under the Act. The failure bv the anpellant to administer with any reasonable dearee of diligence the estares 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. Tt 1s significant in this regard, that the appellant failed to respond to the manv requests made hv the Registrar for an explanation of the delavs which had occurred in the administration of the estates in question. In the pertod 1980-1983, in most of the subiect estates, reauisitions were sent bv the Registrar to the appellant seeking information and requesting action to be taken. In the great majority of cases, the requisitions failed ta achieve anv response on the short or even wedium term. In a handful of cases, a reply was a1ven but even then delavs of manv months were nok uncommon: in this regard, the schedule annexed to the earlier Reasons speaks for itself. eam fg TR yar al re Oe Se rr oe ee pS M4 Are ag 13 Seat ete & yay eed STRAT weed OP ade sieeal An important feature of the case is the failure of the appellant to nake any attempt to explain to the Registrar the difficulties he was experiencing in the period 1979-1983." His Honour, tin his July reasons for dudament, referred to a letter of 29 January 1982 from the respondent to Fhe appellant which stated that examination of his records disclosed that accounts in respect of a large nmuaber of estates, mostly under Part X, were overdue. and the estates were particularized. The respondent required the appellant to file the accounts ber 5 March 1982 and said in his letter that failure to do so would result in the respondent applying to the Court to examine him under sub-s. 179(3) of the Act and for an order that he be removed from the office of trustee under s. 179. The respondent also said in the letter that he intended to request the Auditor-General to audit the accounts in the r2levant estates. His Honour found: "Tt is surprising, to sav the least of it, that the appellant made no attempt to reply to this letter. It is true that, bv April 1982. the appellant had made arrangements for the preparation of manv of the accounts the subject of complaint although well beyond the time prescribed pursuant to s. 175(/1) of the Act. Nonetheless, no attempt was made bv the appellant to explain to the Reqistrar the virtually insurmountable personal and other difficulties he had experienced and was continuing to experrence. Indeed, until these proceedings were instituted. no attempt was made by the appellant to communicate the nature of his many problems to the Peqistrar oar to the Court. This must reflect poorlv upon the capacity of the appellant to continue to act as a trustee. In my opinion, default in the form of failure bv the appellant to take anv step towards the filing of proper accounts in a sianificart proportion of Ehe estates of which he was trustee extending. as at did. over a period of some three vears in manv ewe a astra tt ear em "FERN AL ut veers at [7 ae a at yf oe oe Seer Soa i | 2 se ot ee ve ' 7. cases, thus conztituting a serious breach of Division 3 of Part VIII of the Act, ant. in particular. s. 1175/1). coupled with the failure by the appellant to ensure that the Reqistrar or the Court was informed of his incapacity to accepr fresh appointments ac a frustee, constitutes misconduct sufficiently serious to warrant the cancellation of the registration of the appellant as a trustee pursuant to 5s. 155(5) of the Act on the qround that the appellant is not "a fit and proper person to be entrusted with Ehe important duties and arave responsibility which belong to a trustee" (cf, Re Humphreys. and Walter (1931) 3 A.B.C. 254 at p. 258)." His Honour went on to deal with the appellant's case that his faults were attributable to his partnership dispute, his matrimonial troubles, and his ill health, none of which, accordina to the appellant, applied any longer. His Honour examined each of these matters in same detail and concludad that the failure of the appellant to perform adequately or, in some cases, at all, his professional duties in the estates mentioned in the period from 1979 to early 1983, together with the failure of the appellant to inform th eCourt of his inabilitv to act upon any fresh appointments in that period, could not be entirely explained on the basis of his partnership disprte, matrimonial troubles and 111 health. Beaumont J.''s findings were challended befare us on Fehalf or the appellant on various qdrounds. . Clad ae weer @ Ne CRO OARTINE wo oh ret ¥ ~U?! > nah eee Toke) oT Ba, fala BR ake eek Caytert eee ed ei dl re oe ter yy pine wi " nee brett aed Shaws = eT Ee Sp Reet rs First. it was submitted by counsel for the appellant that his Honsur found a prima facie case that the appellant was in ill health over the period 1979 to 1983. but based that finding essentially on the evidence of Mr. Thomas, wha was not ao aualified medicai practitioner. Tt was said fhat his Honour treated the appellant 13 having an onus to displace that primi facie presumption. This wa3 said to constitute an error by the trial Judae. This is not in our view an accurate description of his Honour's reasoning process. His Honour found. primarily from Mr. Thomas' evidence. in his April judament that: ",.. the evidence given by Mr. Thomas of the respondent's behaviour patterns is admissible. in my view, as primary evidence of a non-expert nature of the respondent's capacity to perform the professional work involved in the trusteeships in question." The appellant himself gave evidence after the April judament where he asserted in substance the same matters mentioned by Nr. Thomas im his earlier evidence. If there was an error by his Honour in relvingq on Mr. Thomas' evidence, and we do not think that there was, it was subsumed in the appellant's own later adoption of tha substance of that evidence. The appellant accepted that his health during the period 1979 to 1983 was poor. Indeed. he based much of his case upon that assertion, and he gave evidence that his health had improved considerably from mid 1983, althouqh it seems he ais still receiving some medical treatment. a rr 1 eat Sette " atte shad eh es 9. His Honour specifically referred to the unchallenged evidence of Miss Adams to the effect that the appellant's health has improved substantiallv since 1983. His Honour said: "However, the respondent 1s still receivina medical treatment and, made no attempt to call anv expert medical evidence on this score; injieed. he successfully objected to the tender by the applicant of a report bv the respondent's medical adviser. In these circumstances, I must assume that such adviser if called would not assist the respondent's case and am therefore unable to make a finding in favour of the respondent that he has fully recovered from his illness. In anv event, the recency of the respondent's failures leaves 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, in some cases, at all, his professional duties in the estates mentioned in the period from 1979 to early 1983 together with the failure of the respondent to inform the Court of bis inability to act upon anv fresh appointments in that period, eannot be entirely explicable as resulhing from hic partnership dispute, matrimonial troubles and ill-health." We are not satisfied. having heard all the submissions advanced on behalf of the appellant, that his Honour erred in making anv of those findings. Counsel for the appellant then submitted that his Honour placed undue weight on the past dereliction of dutv by the appellant over the period 1979 to 1983; that he gave insufficiant weiaht to the reasons for it. to the subsequent improvement in the manadement of estates by the appellant, to his installation of a computerised office svstem, to the fact that the documents which should have been filed have now been filed, to the improvement in the health of the appellant ee a ee a oye gene! araeny Rt Raw, "FRESH AD Re onl 4 ite he ADR oat 179 SS a ' aat e aetah wR PT mon Pee val a "Ws Qe 10. andi to the absence of any element of dishonesty by the appellant. It is common qround that there is no suggestion in this case of anv dishonesty by the appellant. We feel some svmpathv for the appellant in the predicament in which he found himself throuqdhout the vears 1979 to 1983. H= has, rightly we think taken steps to make amends for his former misconduct. But a trustee in bankruptcy 1s a person who must command and retain the confidence of the Court, of the creditors and debtors in bankruptcy proceedings and of the qeneral communitv. His competence must be, and remain, of a high order. The events of the vears 1979 to 1983 would plainlv be sufficient of themselves to support the making of the order for disqualification notwithstanding the subsequent attempts bv the applicant to regain the confidence of the Court in himself as a trustee. His Honour took into account. hewever, the matters advanced bv the appellant to establish his present fitness to 27] remain a trustee. In our opinion it has not been established that. in taking those matters inco account, his Honour fell into any error. Finally, it was assumed bv both parties throughout these proceedings that the effect of an order under sub-s. 155(5) cancelling the registration of the avpellant as trustee would extend to disqualify him from continuing to act as trustee of bankrust estates or Part X administrations to which he has already been appointed. Huis Honour appears to have acted on that basis when he stated: eT ue sew nna PUA oe ™ eat Tere as, PDR fae ye RS ta 4 areyy ll. "In the event that consequential relief in the form of delivery up of documents and the like is necessary, further application mav be made pursuant to the liberty to apply which I propose to reserve." That assumption is probably correct (see ss. 160 and 215 of the Act); but the point is not entirely free from doubt and we do not find it necessary to decide it. As the application before his Honour was not onlv for cancellation of the appellant's reqistration asa trustee pursuant to sub-s. 1555) but also for an inquiry pursuant to ss. 179 and 212B, those sections confer ample power upon the Court to make orders removing the appellant from his office as trustee ot thre estates concerncd. His Honour's order reserving liberty to the respondent to applv for further relief is an adequate vehicle for that purpose. The appeal should be dismissed with costs. sh I certify tit this and the Tex (10) 1 precedi.- 7 ares are a true copy of the Reasons "-. Sadgment herein of hgwHcrours Mr, Justices ST Jews, Loccunaer motuns 4A85901aAbG —— capes peg nem at anaemia NRrETT A" N - 7 ot ~~ "* a OR eae et " sneer,