vesmuaers= IN_THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY No. W95 of 1985X weer ws RE: FREDERICK ROSS AND HELEN ANNE_SHERRIFF EX PARTE: JAMES JOHN JOLLIFFE Deputy Registrar in Bankruptcy Applicant AND: BRYAN RICHARD HARPER First Respondent AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY Second Respondent CORAM: Evatt J DATE : 23 December 1986 PLACE: Sydney MINUTES OF ORDER THE COURT ORDERS THAT: 1. The applicant's application for the costs of the application dated 21 April 1986 and the application for the examination ° of Mr Sherriff and Mr Thompson dated 30 May 1986 is refused. 4 oe eM Lae! het ese Note: Settlement and entry of orders is dealt with infer 36 of the Federal Court Rules. IN THE FEDERAL COURT OF AUSTRALIA BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY No. W95 of 1985X RE: FREDERICK ROSS AND HELEN ANNE _ SHERRIFE EX PARTE JAMES JOHN JOLLIFFE Deputy Registrar in Bankruptcy Applicant AND: BRYAN RICHARD HARPER First Respondent AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY Second Respondent CORAM: Evatt J DATE : 23 December 1986 PLACE: Sydney REASONS FOR JUDGMENT Before the Court is an application by James John Jolliffe, a Deputy Registrar in Bankruptcy, that the costs of an application filed by him on 21 April 1986 in respect of examinations sought ~by the Registrar in Bankruptcy pursuant to ss.179(3) and 212B(3) of the Bankruptcy Act 1966 (the Act) be paid by Frederick Ross Sherriff and Helen Anne Sherriff (the debtors). to The history of the substantive application is briefly set out. On 9 April 1985 following a meeting of creditors called pursuant to s.194 of the Act, a composition under Part X of the Act was entered into by Mr and Mrs Sherriff. Mr Lindsay Robert Aitken, who was then a registered trustee within the meaning of the Act, was appointed the trustee of that composition. The said meeting which had been called following the signing by the debtors of an authority in accordance with s.188 of the Act, was chaired by one Bryan Richard Harper. The composition provided for the creditors accepting from the debtors the sum of $10,000, payable, as to $5000, forthwith and as to the balance of $5000, within one year. Shortly after the said meeting the first amount of $5000 was paid by the debtors to Mr Aitken as trustee. Prior to October 1985 Mr Aitken had become trustee of several other compositions under Part X of the Act, in many cases as a result of approaches to debtors by the said Mr Harper or other representatives of a company with which Mr Harper had apparently some connection. Mr Aitken had been made bankrupt following the filing by him of his own debtor's petition some little time before October 1985. On 8 October 1985, by order of the Court (Neaves J), the registration of Mr Aitken as a trustee under the Act was cancelled and the Official Receiver was appointed trustee of the various compositions in which Mr Aitken had been involved, including that of the debtors. On 3 April 1986 the second $5000, due under the composition entered into by the debtors on 9 April 1985, was paid by the debtors to the Official Receiver as trustee of the composition. Thereafter on 21 April 1986 James John Jolliffe, a Deputy Registrar in Bankruptcy, brought an application in W95 of 1985xX, being the matter of the composition filed on behalf of the debtors, under s5.179(3) and s.212B(3) of the Act seeking the Court's leave that an examination he conducted pursuant to the said sections of the Act of the said Mr Harper. That application came on before Neaves J on 8 May 1986 and was dealt with ex parte. The Court granted leave for Mr Harper to be examined in respect of eight items set out in the said application. The said examination of Mr Harper came on for hearing before the Court as presently constituted on 29 and 30 May 1986. On that occasion Mr Skinner of Counsel appeared for the Registrar in Bankruptcy. On the second day when the examination of Mr Harper concluded, Mr Skinner sought leave of the Court that Mr Sherriff, the male debtor, and Mr Robert Clive Thompson, the debtors' solicitor of Grafton, be also examined under ss. 179(3) and -212B(3) in -respect of certain items set out in short minutes of order then handed to the Court. This ex parte appliation was granted by the Court. Thereafter, examinations of Mr Sherriff and Mr Thompson were conducted on 12 June 1986 and 13 June 1986 respectively after which all examinations were stood over generally. At the conclusion of Mr Thompson's examination Mr Skinner informed the Court that he had been instructed to seek an order pursuant to s.222 of the Act declaring that the composition in respect of the debtors was void. At that time Mr Allatt of the Australian Government Solicitor's Office indicated to the Court that he appeared on behalf of the Official Trustee in Bankruptcy, the trustee of the composition. It was pointed out to the Court that it was only the Official Receiver (as trustee) who could apply under s.222(7) of the Act for a sequestration order against the estate of the debtors even though the application under 8.222(1) for orders declaring the composition void could be made (inter alia) by the Registrar in Bankruptcy. Accordingly, Mr Allatt sought an adjournment of the application made by Mr Skinner in order that he could consider the matter and receive instructions from the trustee. Accordingly the matter was stood over generally. On 7 July 1986 the Official Receiver, as trustee, filed an -application seeking (inter alia) an order declaring that' the composition in respect of the debtors void under s.222 or an order terminating the composition pursuant to s.242(1) and fora further order that the debtors' estate be sequestrated pursuant to either s.222(7) or s.242(3). That application also asked that costs of that application be provided for. in Thereafter on 1 October 1986 that application was listed before the Court. Mr MacReady appeared for the debtors and Mr Skinner, instructed by the Australian Government Solicitor's Office, appeared for the Official Trustee. After discussions between the parties and the Court, the Court, by consent, declared that the composition entered into by the debtors on 9 April 1985 was void and ordered that each party pay their own costs of that application. It then being noted that the debtors undertook that they would sign an authority under s.188 of the Act authorising the calling of a meeting of their creditors and that such meeting be held within 28 days of the signing of that authority. It was also noted that the trustee would make available, for the purposes of any composition entered into at such meeting, the sum of $5000 received by the trustee in April 1986 from the debtors. The application otherwise was stood over until 19 November 1986. Thereafter on 19 November 1986 both the application of Mr Jolliffe of 21 April 1986 and the application of the trustee of 7 July 1986 were listed before the Court. The Court was then informed of the meeting of creditors of 29 October 1986 and of the second composition entered into in respect of the debtors' estate whereby the creditors agreed to accept the said sum of $5000 held by the Official Trustee as the total amount of a fresh composition under Part X of the Act. 6. This then effectively disposed of the trustee's application of 7 July 1986. Mr Skinner then sought an order that the costs of the application dated 21 April 1986 for the examination of Mr Harper and of the examinations of Mr Sherriff and Mr Thompson be paid by the debtors. The Court's power to order costs is provided for by s.32 of the Act which reads: The Court may in any proceeding before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit. Mr MacReady, for the debtors, opposed Mr Skinner's application submitting that the Court, in its discretion, would not make any order as to costs against his clients. He submitted that it was clear that the original application of 21 April 1986 came about following the sequestration of the estate of Mr Aitken when the Registrar in Bankruptcy apparently decided that enquiries should be made as to the numerous Part X compositions that had been entered into by debtors wherein Mr Aitken had become the trustee and the circumstances under which it came about that Mr Aitken was so appointed by creditors at the respective meetings held under s.194 of the Act. That is, it was clear that the primary Purpose of the application was directed to that end and not to the conduct of Mr or Mrs Sherriff prior to the calling of the first creditors meeting in respect of those debtors. He submitted that it was clear that the debtors in the present matter took both the advice of Mr Harper anitially, and that of Mr Thompson, their solicitor, and that there was no evidence to suggest that they were doing anything other than that which they believed they were entitled to do under the Act. He further submitted that if the Registrar in Bankruptcy was entitled to an order of costs against anyone, then it should be against either Mr Aitken or Mr Harper, or both. I amof the view that the submissions of Mr MacReady should generally be accepted. It is clear, in my view, that the debtors have been merely a pawn in the game played by Mr Harper and Mr Aitken and that it would be unjust in the circumstances that any order for costs be made against the debtors. In all the circumstances, in the exercise of the Court's discretion, the application for costs made by the Registrar in Bankruptcy in his application filed on 21 April 1986 and in his application for the examination of Mr Sherriff and Mr Thompson made on 30 May 1986 should be refused. I certify that this and the s/w preceding pages are a true copy of the Reasons for Judgment herein of his Honour Mr Justice Evatt Associate Dated: 23 12-E¢ we Counsel for Mr & Mrs Sherriff Solicitors for Mr & Mrs Sherriff Counsel for The Official Trustee in Bankruptcy Solicitors for The Official Trustee in Bankruptcy : Me MacReady : Pollack, Greening and Hampshire, Grafton : Mr Skinner : Australian Government Solicitor