JUDGMENT flo, 20S got IN_THE FEDERAL COURT OF AUSTRALIA ) SOUTH AUSTRALIAN DISTRICT REGISTRY ) No SG 34 of 1995 GENERAL DIVISION ) ON APPEAL FROM THE ORDERS AND JUDGMENT OF THE HONOURABLE MR JUSTICE JENKINSON MADE AND DELIVERED ON THE 5TH DAY OF MAY RE: MICHAEL JOHN FULLER, A_ BANKRUPT BETWEEN: MICHAEL JOHN FULLER Appellant AND: HUGH JENNER WILY Respondent CORAM : RYAN J PLACE: MELBOURNE DATE: 02 NOVEMBER 1995 MINUTE OF ORDERS 1. That the motion on notice dated 8 August 1995 be dismissed. 2. That there be no order as to costs. NOTE: Settlement and entry of orders is dealt with in O 36 of the Rules of the Federal Court of Australia. IN THE FEDRRAL COURT OF AUSTRALIA ) SOUTH AUSTRALIAN DISTRICT REGISTRY ) No SG 34 of 1995 GENERAL DIVISION ) ON APPEAL FROM THE ORDERS AND JUDGMENT OF THE HONOURABLE MR JUSTICE JENKINSON MADE AND DELIVERED ON THE 5TH DAY OF MAY i995 : RE: MICHAEL JOHN FULLER, A_BANKRUPT BETWEEN: MICHAEL JOHN FULLER Appellant AND: HUGH JENNER WILY Respondent CORAM: RYAN J PLACE: MELBOURNE DATE: 02 NOVEMBER 1995 REASONS FOR JUDGMENT RYAN J: A sequestration order against the estate of the above-named bankrupt, Mr Fuller, was made on 20 May 1993 on the petition of Claremont Petroleum NL ("Claremont") . The solicitors for the petitioning creditor were Piper Alderman who had also been the solicitors for Claremont and Beach Petroleum NL ("Beach") in the proceedings numbered G 53 of 1991 in this court in which the applicants recovered judgment on 16 June 1993 in the sum of $44.45m against, amongst others, the bankrupt. The respondent, Mr Wily, ("the Trustee") was appointed trustee of the bankrupt estate. Subsequently, Messrs Piper Alderman instructed Counsel who appeared for the Trustee on the examination of the bankrupt under s 81 of the Bankruptcy Act. -2- An application for removal of Mr Wily as Trustee was made by the bankrupt and based on the Trustee's refusal to prosecute an appeal against the judgment which had been entered on 16 June 1993. It was submitted, in effect, that in taking the Gecision not to prosecute the appeal, the Trustee had been influenced by the interest of Piper Alderman as a creditor of Beach in having the appeal not proceed. In December 1993, Piper Alderman, because of a perceived conflict of interest, ceased to act as the solicitors for the Trustee in connection with the administration of the bankrupt's estate. Although he found that it was regrettable that the Trustee had not taken independent legal advice about the prospects of the appeal, Jenkinson J declined on 8 May 1995 to remove Mr Wily as trustee. Mr Fuller has appealed against that judgment. By motion on notice dated 8 August 1995, the Trustee seeks the provision by the appellant of security for the Trustee's costs of the appeal against the order of Jenkinson J. It is clear that a single Judge of the Court can entertain an application for security for the costs of an appeal; Beard v Prestige Baking Industries Pty Ltd (1980) 51 FLR 454. Counsel for the Trustee, in support of the application for security, has pointed to evidence furnished by various notes and memoranda tending to suggest that the bankrupt had some ability, falling short of a power of appointment, to influence the administration of a discretionary trust ("the Vilnius Trust") established on 15 October 1986 with an initial capital -~-3- investment of approximately $Al1.3m, and administered from the Island of Jersey. Mr Fuller's capacity to influence the administration of the Vilnius Trust was reflected, for example, in a letter dated 10 November 1986 in which he set out his. "wishes" as to the future administration of the trust. That letter included this passage: "I would hope that you will deal with the Trust Fund (as defined in the Trust) and will exercise. your powers and discretions in accordance with such wishes, although I realise that you are not legally bound to do so." On 12 July 1989 it was noted in the course of administering the Vilnius Trust that a loan from that trust to "Mutley" had been repaid in Australia. However, in the course of his examination under s 81 of the Bankruptcy Act, the bankrupt who said that he "had a role as an investment adviser" to the Vilnius Trust, claimed that it was incorrect to say that the "Mutley" loan had ever been repaid. As already noted, I accept that there is jurisdiction in the Court as presently constituted, to make an order for security for costs in the present circumstances. However, that is conditional upon the Court, pursuant to s 30 of the Bankruptcy Act, considering the order "necessary for the purposes of carrying out or giving effect to" the Act; see Re Hodby; ex parte Kenny (1987) 77 ALR 118 at 122 which was applied by Burchett J in Re Taylor; ex parte Century 21 Real Estate Corporation (1994) 49 FCR 324. . 4 - There may be cases where it is necessary for the purpose of carrying out or giving effect to the Act to require the provision of security for the costs of an appeal by a bankrupt. However, I do not consider this to be one of those cases. I have not disregarded the fact that the appeal is against a discretionary judgment and, in my view, does not enjoy strong prospects of success. I have also been mindful that the bankrupt has had a full hearing on the merits at first instance and should not be allowed the "luxury" of an unsuccessful appeal at the expense of the general body of his creditors. (See Lall v 53-55 Hall Street Pty Ltd [1978] 1 NSWLR 310 at 314). However, on balance, I have decided that I should exercise my comparatively constrained discretion, limited as it is by s 30 of the Bankruptcy Act, by refusing the motion. The considerations which have led me to this conclusion include the fact that the grounds of appeal do not seek to overturn the findings of fact made by Jenkinson J, almost ail of which were favourable to the Trustee. It would therefore be open to the Trustee, without any dereliction of duty or prejudice to the general body of creditors, to enter a submitting appearance without being represented on the hearing of the appeal. In this context I should note my understanding that there are very few, if any, assets in the bankrupt estate so the interests of the general body of creditors are unlikely - - 5 - to be affected if the Trustee cannot recover the costs of successfully resisting the appeal. I further understand that the Trustee's conduct of the administration, including the s 81 examination and his resistance at first instance to the application for his removal, has been funded by two only of the bankrupt 's creditors, Claremont and Beach. No application was made for security of the costs of the proceeding before Jenkinson J although the bankrupt was as impecunious then as he is now. Since the bankrupt has the carriage of the appeal and will incur the costs of preparing the appeal books, the Trustee's costs, if he chooses to appear and be represented by Counsel, are not likely to be high. If the creditors which have been funding the Trustee to date wish him to be represented by Counsel they should be prepared to bear the relatively small additional financial burden of his doing so. I have not been persuaded that the bankrupt has access to undisclosed assets through the medium of the Vilnius Trust or otherwise from which he could satisfy an order for security. If the trustees of the Vilnius Trust could be persuaded to exercise some discretion to release part of its funds to the bankrupt, those moneys would, ipso facto, vest in the Trustee pursuant to s 58 of the Bankruptcy Act. Nor does it appear that there is any other person with the requisite funds and an interest in the success of his appeal who might be expected to provide security. -~6- For these reasons the motion for security is refused. In the circumstances, there will be no order as to costs. The bankrupt in person Counsel for the Trustee Solicitors for the Trustee Hearing date: I certify that this and the preceding four (4) pages are a true copy of the reasons for judgment of his Honour Justice Ryan! J 445. Associate: Date: iA Mr R Whitington Thomsons 25 September 1995