CATCHWORDS BANKRUPTCY - objection to appointment of particular trustee - allegation that administration of a deed of arrangement required investigation - prima facie no conflict of duty and interest - interests of creditors. Re Allen Phillip Elliott Ex parte: Allen Phillip Elliott Estate No. 184 of 1995 Cooper J., Brisbane, 27 March, 1995 IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND Estate No. 184 of 1995 RE: ALLEN PHILLIP ELLIOTT (Debtor) EX PARTE: THE ABOVENAMED (Applicant) JUDGE MAKING ORDER:Cooper J. WHERE MADE: Brisbane DATE OF ORDER: 27 March, 1995 MINUTES OF ORDER THE COURT ORDERS THAT: 1. The deed of arrangement dated 11 December, 1991 be terminated; 2. A sequestration order be made against the estate of Allen Phillip Elliott; 3. Jay Arscott Stevenson and Philip Gregory Jefferson be appointed trustees of the estate of the bankrupt. 4. The costs of Jay Arscott Stevenson and Philip Gregory Jefferson of and incidental to the application filed on 27 March, 1995 be the trustee's costs of and incidental to the administration of the estate in bankruptcy, and be given priority and paid in accordance with the provisions for the payment of costs in section 109 of the Bankruptcy Act 1966. THE COURT DIRECTS THAT:- 5. The Registrar not receive a debtors petition from Allen Phillip Elliott. Note: Settlement and entry of orders is dealt with in Rule 124 of the Bankruptcy Rules. IN THE FEDERAL COURT OF AUSTRALIA GENERAL DIVISION BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND Estate No. 184 of 1995 RE: ALLEN PHILLIP ELLIOTT (Debtor) EX PARTE: THE ABOVENAMED (Applicant) CORAM: Cooper J. PLACE: Brisbane DATE: 27 March, 1995 REASONS FOR JUDGMENT The court has before it two applications: one from Allen Phillip Elliott for the termination of a deed of arrangement entered into by him on 11 December, 1991 and for the appointment of Mr. Ivor Worrell as trustee of his estate in bankruptcy, it being contemplated that a debtors petition lodged with the court would be accepted immediately upon the deed being terminated. The other application is from Mr. Jefferson, the trustee under the deed of arrangement, who also seeks termination of the deed, that a sequestration order in respect of Mr. Elliott's estate be made and that he and Mr. Jay Arscott Stevenson as trustees of the bankrupt estate. I am satisfied that the deed of arrangement ought to be terminated, and I am also satisfied that the estate of Allen Phillip Elliott ought to be sequestrated. I propose to make those two orders on the application of Mr. Jefferson. The only real issue in this case is who ought, in all the circumstances, to be appointed as trustee of the bankrupt's estate. Mr. Elliott objects to the appointment of Mr. Jefferson, alleging that the administration of the deed of arrangement under Mr. Jefferson's trusteeship requires investigation. The basis upon which it is alleged that such an investigation is appropriate lies in the level of remuneration taken by the trustee from a payment of $25,000.00 into the estate made by Mr. Elliott. That remuneration was approximately $21,413.00. It is submitted on behalf of Mr. Elliott that there needs to be an independent examination as to whether or not that remuneration for the quantum of it was properly payable. It appears that one of the allegations is that the applications to the court which represent a substantial part of the costs incurred against that fund were necessary because of negligence on the part of Mr. Jefferson in the preparation of the deed of arrangement. Mr. Elliott, I note from the material, is a solicitor, and one would expect capable of construing and understanding the deed. Mr. Jefferson has filed a lengthy affidavit wherein he explains the circumstances of the applications to the court, and the need to appear to resist an attempt to set aside the deed of arrangement and also to resist allegations on the part of Mr Elliott as to his obligations under the deed. In the result, Mr. Jefferson says that the fees incurred in the administration of the estate by him and in particular in the applications to the court were necessary costs because of steps taken by Mr. Elliott to in effect challenge the operation of the deed and mr. Elliott's obligations under it. I am not satisfied on the material that there is truly a situation of conflict of duty and interest. It is clear that Mr. Elliott and Mr. Jefferson do not see eye to eye, and there may be some general dissatisfaction with the administration, but in the circumstances deposed to in Mr. Jefferson's affidavit, prima facie the steps he has taken appear to be proper. I am conscious that it is not in the interests of creditors to have a situation whereby there appears to be a conflict of duty and interest which requires to be investigated arising out of the circumstances of the former trusteeship. No creditor has appeared today and sought that Mr. Jefferson not be appointed. On the other hand, there may be a substantial saving to be had in the administration of the bankrupt's estate if it is not necessary to repeat investigations as to the existence of property or to conduct a fresh investigation into the affairs of the bankrupt. On balance I am satisfied that Mr. Jefferson and Mr. Stevenson ought to be appointed trustees. I say that in these circumstances: if it appears later that there are serious questions as to the prior administration capable of being sustained on admissible material, then it remains open for any creditor or Mr. Elliott to apply to the court for the removal of the trustees on proper grounds being shown. THE COURT ORDERS THAT: 1. The deed of arrangement dated 11 December, 1991 be terminated; 2. A sequestration order be made against the estate of Allen Phillip Elliott; 3. Jay Arscott Stevenson and Philip Gregory Jefferson be appointed trustees of the estate of the bankrupt. 4. The costs of Jay Arscott Stevenson and Philip Gregory Jefferson of and incidental to the application filed on 27 March, 1995 be the trustee's costs of and incidental to the administration of the estate in bankruptcy, and be given priority and paid in accordance with the provisions for the payment of costs in section 109 of the Bankruptcy Act 1966. THE COURT DIRECTS THAT:- 5. The Registrar not receive a debtors petition from Allen Phillip Elliott. I certify that this and the preceding three (3) pages are a true copy of the reasons for judgment herein of his Honour Justice Cooper. Date: 27 March, 1995 Associate Solicitor for the Applicant: Mr. P.F. Whitman of Whitman & Co. Solicitor for the Respondent Trustee: Mr. G. Rodgers of Bayliss Rodgers Date of Hearing: 27 March, 1995 Place of Hearing: Brisbane Date of Judgment: 27 March, 1995