wn IS! CATCHWORDS Bankruptcy - Discharge - Trustee's application for extension of time at which objection to discharge will lapse dismissed - Bankrupt's costs - Whether to order payment by trustee. Bankruptcy Act, 1966 - s.149(8) RE: MICHAEL WARSHALL, a bankrupt EX PARTE: THE OFFICIAL TRUSTEE IN BANKRUPTCY (as trustee of the property of Michael Warshall, a bankrupt ) No. 1176 of 1981 Jenkinson J. Melbourne 6 April, 1987 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA No. 1176 of 1981 —~ ewe RE: MICHAER WARSHALL, a bankrupt EX PARTE: THE OFFICIAL TRUSTEE IN BANKRUPTCY (as trustee of the property of Michael Warshall, a bankrupt) Applicant CORAM: Jenkinson J. PLACE: Melbourne DATE: 6 April, 1987 REASONS FOR JUDGMENT On 26 November 1986 I dismissed an application, by the trustee of the bankrupt, for an order pursuant to s.149(8) of the Bankruptcy Act 1966 that the period, at the expiration of which an objection which the trustee had entered under s.149(3)(c) of that Act will lapse, be extended. Mr. Davies of counsel for the bankrupt, by whom the application had been successfully resisted, sought an order that the bankrupt's costs of the application he paid by the trustee. The ground of the application had been that time was required for further investigation of the bankrupt's conduct, both to determine whether that conduct had been seriously blameworthy in certain respects and to discover any further assets by the recovery of which the bankrupt's estate might be augmented. The submissions in support of the bankrupt's claim for costs against the trustee were similar to those advanced in support of such a claim in Re N.R. Campbell; Ex parte Official Trustee in Bankruptcy (No. 234 of 1977). In the latter case I have today refused to make any order for costs and have published my reasons for that refusal. That case concerned an application by a trustee under s5.149(12) which was dismissed, but in my Opinion the reasons stated are applicable, mutatis mutandis, to an application under s5.149(8). For the reasons stated in Re N.R. Campbell, a copy of which is annexed to these reasons, I consider that no order for costs should be made against a trustee whose application for an order under s.149(8) is dismissed, unless' the making or the prosecution of the application has been in some way unreasonable. It was pointed out that in this case of Mr. Warshall there had been very great delay in administration of the bankrupt''s estate, for which delay the evidence provided no explanation. That circumstance should in my opinion be considered as tending to attract an order that the trustee pay the bankrupt's costs of an unsuccessful application under s.149(8). As in the course of time the Court's attitude to circumstances of that kind, in relation to applications under sub-sections (8) and (12) of 5.149, is disclosed by reasons given for the decisions of such applications, the likelihood will increase that the bringing of an application in the face of circumstances previously held by the Court to preclude the making of the order sought will be considered to be unreasonable, and will attract an order that the applicant pay the bankrupt's costs. But I do not think that in Li the circumstances ar this c will he no order as to cost uch an order is justified. Thera a) I certify that this and the two preceding pages are a true copy of herein of the Honourable Mr. Justice the Reasons for Judgment Jenkinson. Dated: os April, 1387 Counsel for the Applicant Counsel for the Debtor Solicitor for the Applicant Solicitor for the Debtor Dates of Hearing - Mr. G.T. Bigmore, Solicitor Mr. G. Davies Mr. G.T. Bigmore Madgwicks 25 and 26 November, 1986 CATCHWORDS Bankruptcy - Discharge - Trustee's application for deferment dismissed - Bankrupt's costs - Whether to order payment by trustee. Bankruptcy Act, 1966 - s.149(12) Hunter v. Official Trustee (1980) 33 A.L.R. 457 Scott Fell v. Lloyd (1911) 13 C.L.R. 230 Re Arthur Williams; Ex Parte Official Receiver £19133 2 K.B. 88 In re John Tweddle & Co. £1910] 2 K.B. 697 Bottomley v. Brougham £19081 1 K.B. 584 at 587-588 RE: NOEL RODNEY CAMPBELL EX PARTE: THE OFFICIAL TRUSTEE No. 234 of 1977 Jenkinson J. Melbourne 6 April, 1987 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF VICTORIA No. 234 of 1977 a) : NOEL RODNEY CAMPBELL - A Bankrupt EX PARTE: THE OFFICIAL TRUSTEE Applicant CORAM: Jenkinson Jd. PLACE: Melbourne DATE: 6 April, 1987 REASONS FOR JUDGMENT: On 30 May 1986 I dismissed an application, by the trustee of the bankrupt estate of Noel Rodney Campbell, for an order that the bankrupt should not be discharged from bankruptcy by virtue of s.149 of the Bankruptcy Act 1966. Mr. Campbell, who had appeared by counsel to resist the application, sought an order that his taxed costs of the application he paid by the applicant trustee. It was submitted by Mr. McLean of counsel for Mr. Campbell that the Official Trustee, like any trustee of the estate of a bankrupt, was liable to be ordered to pay the bankrupt's costs of an unsuccessful application under 5.149(12) of the Bankruptcy Act 1966, by exercise of the discretionary power with respect to costs in accordance with the same general principles 'as guide the exercise of the discretion in civil litigation between parties who are acting in furtherance of their own interests. The applicability of those principles to a proceeding instituted by the trustee of a bankrupt under that sub-section was established, according to the submission, by Hunter v. Official Receiver (1980) 33 A.L.R. 457; Scott Felli v. Lloyd (1911) 13 C.L.R. 230; and Re Arthur Williams & Co.; Ex parte Official Receiver [£19131 2 K.B. 88. The first two of those cases were concerned with the costs of appeals in which the bankrupt was appellant and the trustee respondent. The third case was concerned with the costs of an application to which the parties were the trustee and a person found in the deciding of the application to be a stranger to the bankruptcy. The Full Court of this Court stated in Hunter v. Official Receiver 33 A.L.R. at 463 the principle by which the decision of the High Court in Scott Fell v. Lloyd, supra bound this Court in the words of Griffith C.J. in the latter case (13 C.L.R. at 244) : "...... when an official assignee becomes an active litigant he is exposed to the same risks as any other litigant." It may be thought that the principle was given by the Full Court a further exposition, and was shown to be not limitad in its application to the litigious activities of a trustee in bankruptcy in appellate proceedings, by the reference made by the Full Court, with apparent approval, to the distinction drawn in Re Arthur Williams & Co., supra "between cases where the Official Receiver is performing a quasi-judicial function under a statutory obligation and cases where he engages in litigation in exercise of a discretion to do so" (33 A.L.R. at 462). In the former case the Official Receiver ought not to be ordered to pay costs, it was held, but in the latter case costs might be awarded against him. _ Re Arthur Williams & Co. was mot a case of appeal and the principle upon which the Full Court s decision of the question of costs in Hunter v. Official Recsiver was based 15 not expressed to be confined - although it was propounded in relation - to a trustee in bankruptcy's participation in an appeal. I think I should regard the principle as applicable to an application by which the trustee has invoked the exercise of original jurisdiction. This case is not one in which the Official Trustee lay under an express statutory obligation to bring the application. Section 149(12) of the Bankruptcy Act 15966 confers a power on each of "the Registrar, the Inspector-General, the trustee or a creditor" to apply for an order diracting that the bankrupt shail not be discharged from bankruptcy by virtue of that section, but on none of them does the Act expressly impose an obligation to make such an application. It was in exercise of a discretion that the Official Trustee brought the application. But I think that a consideration of the judgments in Re Arthur Williams & Co., supra and in In re John Tweddle & Co. £19103 2 K.B. 697 shows that the statutory obligation which the members of the Court of Appeal had ir- contemplation included that which was implied as well as that which was express. The provisions of the Bankruptcy Act 1966 with respect to the powers and functions of the Registrar and the Inspector-General give no ground for doubting the sufficiency of those powers to enable them effectively to exercise, if the need arose, the function conferred on them by 5.149(12) : see 55. 4. 12(1)(b) (i), 12(1) (ba) (i), 12(1B), 12(2), 14 and 19B. But in my opinion a consideration of the scheme of the Act and of the practical operation of its administration suggests that in the ordinary course of that administration 1t is upon the trustee of the bankrupt that the responsibility should fall of deciding whether an application should be made to the Court under s.149(12). And the prescription made by Rule SIlA of the Bankruptcy Rules of the matters to be taken into account by the Court, pursuant to 5.149(13), in deciding whether to accede to such an application strongly indicates the trustee of the bankrupt as the person who would usually be the most suitable applicant, and the best placed to decide whether application should be made, in my opinion. Read as a whole, the Act is in my opinion to be taken to impose an obligation on the trustee of a bankrupt to consider whether such an application ought to be made and, if the trustee considers that it ought, to make it. Each of the other persons named in s.149(12) who are engaged in bankruptcy administration - the Registrar and the Inspector-General - may in certain circumstances have occasion to consider whether he ought to bring such an application, but in most cases each of them would expect that the trustee would undertake the responsibility of determining whether an application should be brought. It is difficult to suppose that the legislative intention disclosed by Part VII of the Bankruptcy Act 1966 - and in particular that which is disclosed by 5.149 - could be carried into effect unless trustees did undertake that responsibility. The resources available to the Registrar and the Inspector-General could hardly support adequate consideration by either of them of all the matters relevant to the discharge of that responsibility in relation to all, or to any very substantial proportion of, bankrupts, much less support the burden of instituting and conducting those applications under s.149(12) which either of them should think himself under a duty to bring if he were to consider the case of every bankrupt. My conclusion is that the trustee of the bankrupt lies under an obligation, the existence of which is to be inferred from the terms of the Bankruptcy Act, to decide whether an application under 5.149(12) of that Act ought to be made and, if he decides that it ought, to bring the application unless it appears that one of the other persons qualified to apply intands to do so. I turn to consider the references in Hunter v. Official Receiver, supra, and in the two English cases cited, to the "judicial" or "quasi-judicial" or "semi-judicial" character of those litigious activities of the Official Receiver which, it is said, do not expose him to the risk of an order against him for costs. What is indicated by those references is, not the exercise by the Official Receiver of a decision-making function (although that may precede and determine what he is to do), but his participation in a judicial proceeding under statutory obligation, as by making a report upon the making of which, or upon the inclusion of specified matter in which, the institution of a curial proceeding is. conditioned. (See, for example, the report required by 5.8(2) of- the English Companies (Winding-up) Act 1890 : £19103 2 K.B. at 698.) The introduction of the adjective "judicial", and the significance accorded the word by Cozens-Hardy M.R. in the two English cases, may be traced in the judgment of Farwell L.J. in In ye John Tweedle Company Ltd. £19101 2 K.B. at 706 to the judgment of Channell J. in Bottomley v. Brougham (£19083 1 K.B. 584 at 587-588. Considering whether absolute privilege, under the law of defamation, attached to the contents of a report of an Official Receiver made in pursuance of 5.912) of the English Companies (Winding-up) Act 1390, Channell J. observed: "The real doctrine of what is called 'absolute privilege' is that in the public interest it is not desirable to inquire whether the words or acts of certain persons are malicious or mot ...... it is desirable that persons who eccupy certain positions as judges, as advocates, or as litigants should be perfectly free and independent, and, to secure their independence, that their acts and words should not be brought before tribunals for inquiry into them merely on the allegation that they are malicious ...... Starting with that as being the doctrine, does not the case of the official receiver come clearly within it? In my opinion it comes within it on two grounds. I think, in the first place, that the official receiver has a statutory duty to inquire in a judicial way into certain matters by the Act of 1890, and that ain performing that duty he is acting in a judicial capacity. It is quite true that the report is made ex parte, but that makes no difference. A judge in hearing an ex parte application is still acting as a judge, and the absolute privilege applies quite as much as when he is hearing a case in which both parties appear. The fact that this was a preliminary inquiry equally does not prevent it being a judicial inquiry. An inquiry before a magistrate ona charge of murder, for instance, which he has certainly no power to deal with, and as to which he is only inquiring ina preliminary way whether there is a case for committing the accused person for trial, is clearly a judicial proceeding although it is preliminary to the trial. ...... But, even if that is not sound, there is the further ground that the report of the official receiver may be treated, not so much as' the judgment in a judicial proceeding, but as the initial stage of proceedings in the winding-up Court, which clearly is a Court. It is the information upon which the proceedings take Place, and it is made by the official receiver under a statutory duty." In my opinion the reasoning of the members of the Court of Appeal in In re Arthur Williams & Co.. supra and In re John Tweddle & Company Ltd. intends no more by reference to the "judicial" character of the functions under discussion than that each function forms part of an administrative process of which the final stages are committed to a Court and in which the function so characterised is exercised under a statutory obligation to discharge what Cozens-Hardy M.R. described as "public duties for the public welfare". If that be so, the obligation under which, as I have held, the trustee of a bankrupt lies of considering whether he should make an application under s.149(12), and of making the application if he considers that the decision of the Court should be sought under that sub-section, is an obligation of a quasi-judicial kind, in the sense in which in those cases and in Hunter v. Official Receiver that description is applied. In such a case the trustee does not in my opinion engage in litigation in exercise of a discretion to do so, in the sense intended by the reasoning of those cases. The trustee discharges an obligation to make the application under 5s.1493(12) when he makes it in the conviction that it ought to be made, and made by him. And the discharge of the obligation 15 1n my opinion correctly conceived as the performances of a public duty for the public welfare. If the trustee's decision to make an application under s.149(12) were considered by the Court to have been unreasonable, or if the conduct of the application by the trustee were considered to have been unreasonable in some respect, that would be a consideration 8. in favour of an exercise of the discretionary power to order the trustee to pay the bankrupt's costs of the application. But I do not consider that in this case there was anything unreasonable in the institution or the prosecution of the application. In those circumstances I do not consider that any order for payment of the bankrupt's costs by the applicant trustee ought to be made. Both Hunter v. Official Receiver, supra and Scott Fell v. Lloyd, supra were cases in which the Official Receiver in the one case and the Official Assignee in the other had in compliance with his statutory duty made a report to the Court to which the bankrupt applied in the first instance for discharge. In each case it was only the costs of proceedings by way of appeal from the original order for discharge that were in question. In each case the appellate Court characterised the position of the Official Receiver or Assignee as indistinguishable, in respect of costs, from that of other unsuccessful litigants. The characterisation thus adopted accords with the dominant principle to be discerned in the rules as to costs formulated in respect of proceedings, both at first instance and on appeal, to which bankruptcy trustees and liquidators are parties. (See McDonald Henry and Meek : Australian Bankruptcy Law and Practice (5th ed.) paras. 100, 101, 796; Williams and Muir Hunter on Bankruptcy (19th ed.) 423-424; Re Wilson Lovatt & Sons Ltd. £19771 1 All E.R. 274.) Underlying the adoption of the principle that trustees in bankruptcy and liquidators should suffer the same consequences, in costs, of failure in litigation as other litigants seems to have been a concern to ensure fairness to the adverse parties. That concern, and the reasoning which proceeded from it, did not 3. comprehend, as it seems to me, the bankrupt himself as a party ta litigation against his trustee, except in appellate proceedings. But I do not ground my conclusion that in this case there should be no order as to costs on that opinion. I certify that this and the eight preceding pages are a true copy of the Reasons for Judgment herein of the Honourable Mr. Justice Jenkinson. Associate Dated: 6 April, 1987