Turner, J.G. v Ex parte Mulley, K. [1995] FCA 616

CATCHWORDS BANKRUPTCY - Application for orders in relation to conduct of trustee in administration of estate - claims by bankrupt against certain creditors and others for unascertained amounts - whether the unascertained amounts claimed should be set-off - whether causes of action should be assigned back to bankrupt by trustee Bankruptcy Act 1966 ss 86, 178 re Tyndall (1977) 30 FLR 6 Guy v McIntyre (1991) 171 CLR 609 re Capel; Ex parte Marac Finance Australia Ltd v Capel (1994) 48 FCR 195 JAMES GEORGE TURNER EX PARTE KEITH MULLEY NO TB 434 OF 1994 NORTHROP J HOBART 22 JUNE 1995

IN THE FEDERAL COURT OF AUSTRALIA EXERCISING FEDERAL JURISDICTION No TB 434 of 1994 IN BANKRUPTCY BANKRUPTCY DISTRICT OF THE STATE OF TASMANIA RE: JAMES GEORGE TURNER Applicant EX PARTE: KEITH MULLEY Respondent

COURT: NORTHROP J PLACE: HOBART DATE: 22 JUNE 1995

REASONS FOR JUDGMENT

There is an application before the Court brought by James George Turner, a bankrupt, in which Mr Turner is seeking orders under section 178 of the Bankruptcy Act 1966. That section provides as follows: "178. If the bankrupt, a creditor or any other person is affected by any act, omission or decision of a trustee, he may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable."

The nature and extent of the power conferred by that section was considered by Deane J in re Tyndall (1977) 30 FLR 6, and I refer in particular to what his Honour said at pages 9-10: "In my view, the wording of s.178 of the Act is such as to confer upon the court the widest possible discretion as to the appropriate order which should be made in the particular case and is quite inconsistent with the approach that, upon an application made pursuant to the section by a bankrupt, creditor or other person affected by an act, omission or decision of the trustee, the court is only empowered to interfere with the trustee's act, omission or decision if it is of the view that the trustee has acted absurdly or unreasonably or in bad faith. Once the matter is properly before the court, the court is, by the express words of s.178, empowered (and, as I have said, obliged) to make such order in the matter as it thinks just and equitable. This is not, of course, to say that the court should either disregard the relevant decision of the trustee or ignore the well established policy that bankruptcy legislation that the court should not unduly interfere with the day‑to‑day administration of a bankrupt's estate by a trustee. The trustee is made responsible for the administration of the bankrupt estate under the general provisions of the Act. He must, in the course of that administration, make a variety of decisions aimed at enabling the administration to be carried out with promptness and efficiency. Some of these decisions will be business or commercial decisions in which the business or commercial experience of a trustee would itself provide a basis for arguing that, unless it were shown that the trustee's decision was perverse or clearly wrong, it would be inappropriate and unjust for the court to interfere. Again, under the present legislation, the trustee will ordinarily be the official receiver and the court must be conscious of the fact that the official receiver will be made responsible for the administration of an extraordinarily large number of estates. In such circumstances, the administration of the Bankruptcy Act demands that the court take into account, in exercising its functions under the provisions of s.178 of the Act, the opinion of the official receiver, as trustee, as to what is expedient in the interests of the prompt and efficient administration of a particular bankrupt estate. That is, however, a completely different thing to saying that the court can only interfere with an act, omission or decision of the official receiver, as such trustee, when it is of the view that the official receiver has acted unreasonably, absurdly or in bad faith in so acting or failing to act or in reaching that decision."