Birdseye v Sheahan [2004] FCA 609

FEDERAL COURT OF AUSTRALIA

Birdseye v Sheahan [2004] FCA 609

BANKRUPTCY – trustee – validity of appointment of registered trustee – consent to act – registered trustee filed Notice of Objection to discharge – whether at time of objection, registered trustee was in law trustee of bankrupt estate – certificate of appointment issued – registered trustee not notified in writing of appointment – whether registered trustee informed Official Receiver within 10 days of appointment of acceptance to act – whether formal defect invalidated appointment.

Bankruptcy Act 1966 (Cth) NICHOLAS GUY BIRDSEYE v JOHN SHEAHAN and THE OFFICIAL RECEIVER S 7005 of 2003 LANDER J ADELAIDE 14 MAY 2004

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY S7005 OF 2003

BETWEEN: NICHOLAS GUY BIRDSEYE

APPLICANT

AND: JOHN SHEAHAN

FIRST RESPONDENT

THE OFFICIAL RECEIVER

SECOND RESPONDENT

JUDGE: LANDER J

DATE OF ORDER: 14 MAY 2004

WHERE MADE: ADELAIDE

THE COURT ORDERS THAT: 1. The application is dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA

SOUTH AUSTRALIA DISTRICT REGISTRY S7005 OF 2003

BETWEEN: NICHOLAS GUY BIRDSEYE

APPLICANT

AND: JOHN SHEAHAN

FIRST RESPONDENT

THE OFFICIAL RECEIVER

SECOND RESPONDENT

JUDGE: LANDER J

DATE: 14 MAY 2004

PLACE: ADELAIDE

REASONS FOR JUDGMENT 1 This matter was heard at the same time as a similar application in action number S7006 of 2003, O'Brien v Sheahan [2004] FCA 608. 2 After stating the facts in this matter, I shall refer to the reasons in that matter. 3 The applicant seeks: '1. A declaration that Mr John Sheahan is deemed to have declined the appointment as the Trustee in Bankruptcy of the Applicant's bankrupt estate on or about 23 June 2000. 2. A declaration that the Certificate of Appointment in favour of Mr John Sheahan dated 7 July 2000 is void and/or of no effect. 3. A permanent injunction restraining Mr John Sheahan from further acting or purporting to act as the Trustee in Bankruptcy of the Applicant's bankrupt estate. 4. That Mr John Sheahan pay the Applicant's costs of and incidental to this application. 5. Such further or other orders as the Court deems fit.' 4 On the petition of the Deputy Commissioner of Taxation, a sequestration order was made and the applicant became bankrupt on 9 November 1998. At the time of his bankruptcy, no registered trustee had agreed to act as trustee of his estate and the Official Trustee, by operation of the Bankruptcy Act 1966 (Cth) (the Act), became the applicant's trustee in bankruptcy: s 58. 5 On 14 January 1999 the applicant filed his Statement of Affairs. 6 The respondent is a registered trustee. On 26 April 2000 the respondent signed a Consent to Act as trustee pursuant to s 156A of the Act. 7 A meeting of the applicant's creditors was convened on 16 May 2000 for the purpose of resolving to appoint the respondent as trustee of the applicant's estate in place of the Official Trustee. A quorum did not assemble. 8 On 13 June 2000 a second meeting of the applicant's creditors was held at the respondent's office. In attendance were the trustee's representative, Mr Anthony Lehmann, and the respondent's partner, Mr Ian Lock. 9 The minutes of that meeting disclose that Mr Lehmann advised that he had been appointed by a written authority signed by the Official Trustee pursuant to s 63B of the Act to represent the Official Trustee at the meeting. The written authority was signed on 9 June 2000. Present at the meeting were persons representing the applicant's creditors, one of whom was in attendance by telephone. 10 A number of resolutions were passed, the only relevant one being that 'John Sheahan be appointed as trustee of the bankrupt estate of Nicholas Birdseye in place of the Official Trustee'. 11 On 7 July 2000 a Certificate of Appointment, pursuant to s 157(4) of the Act issued, which showed the date of Mr Sheahan's appointment as 13 June 2000. An extract from the National Personal Insolvency Index (NPII), as at 7 July 2000, showed Mr Sheahan to be the trustee of the applicant's estate. 12 No notification in writing ever passed from the Official Trustee to Mr Sheahan, as registered trustee, advising him of his appointment as trustee of the applicant's estate following the meeting of creditors of 13 June 2000. 13 There is no communication in writing from Mr Sheahan accepting appointment as the trustee of the applicant's estate following upon the resolution of the meeting of creditors of 13 June 2000. 14 The failure by the Official Receiver to advise Mr Sheahan in writing and the issue of the Certificate of Appointment without first obtaining Mr Sheahan's consent after the meeting of creditors was not an oversight. On 5 June 2003 the Official Receiver wrote to the applicant's solicitors and said, inter alia: '4. The practice of this office in notifying a trustee of their appointment as trustee under the provisions of the Bankruptcy Act, 1966 is through a "Certificate of Appointment". In this instance, that certificate was dated 7 July 2000. This document is on the public register and can be obtained for the requisite fee. 5. The practice of this office in having an administration transferred to another trustee is to obtain the consent of registered trustee who is willing to become the trustee and then engage them to act as the Official Trustee's agent in the calling of a meeting of creditors for this purpose. In this instance the "Consent to Act as Trustee" was dated 26 April 2000. 6. Upon being formally advised that the meeting has been held and resolution passed, a "Certificate of Appointment" is then issued.' 15 It was contended that, because of a failure by Mr Sheahan to inform the Official Trustee in writing pursuant to s 157(3) within 10 days after the meeting of creditors resolved to appoint him, he is deemed to have declined the appointment. 16 The respondent contended that he was appointed trustee of the applicant's estate on 7 July as evidenced by the Certificate of Appointment. 17 In these proceedings, the sole question was whether, in those circumstances, s 157(5) of the Act means that Mr Sheahan is taken to have declined appointment as trustee on or about 23 June 2000, being 10 days after Mr Sheahan failed to inform the Official Trustee in writing that he accepted the office. 18 The applicant was discharged from bankruptcy on 14 January 2002: s 149(4). He contends that Mr Sheahan was not the trustee of his estate at any time and, in particular, was not trustee of his estate between 13 June 2000 and the date of his discharge on 14 January 2002. 19 Between 7 July 2000 and the applicant's discharge on 14 January 2002, Mr Sheahan caused the applicant to be examined under s 81 of the Act on three occasions, and the applicant's wife on one occasion. Mr Sheahan brought proceedings in the Federal Magistrates Court against the applicant, in the applicant's capacity as trustee of the Nicholas Birsdeye Family Trust. He also brought proceedings against the applicant's wife in the District Court of South Australia claiming $340,697.12. Proceedings were brought in this Court by the respondent seeking to appoint a Receiver to the assets of the Nicholas Birdseye Family Trust. 20 On 7 November 2000, Mr Sheahan lodged an objection to the applicant's discharge from bankruptcy. 21 The applicant complained to the Inspector General of Insolvency about the respondent's conduct. On 28 May 2001, the Insolvency and Trustee Service Australia advised the applicant: 'From the material you have provided, I am satisfied that the trustee is administering your estate in accordance with the Act.' 22 The objection was withdrawn on 17 July 2001. 23 On 19 July 2001, the respondent lodged a second Notice of Objection. The second objection was not received by the Official Receiver and, therefore, not entered on the National Personal Insolvency Index (NPII). 24 A further objection was made by Mr Sheahan on 18 February 2002. However, because pursuant to s 149G of the Act an objection only takes effect from the date of entry on the NPII, the Official Receiver took the view that the applicant had been discharged by operation of s 149 of the Act on 14 January 2002. 25 Notwithstanding the applicant's discharge, the respondent sought to make contribution assessments against the applicant pursuant to Part VI Division 4B of the Act. 26 The applicant protested to the Director of Bankruptcy Regulation, Mr Barr, the delegate of the Inspector General. Mr Barr reviewed these assessments. The applicant complained of the review, but the review stood. Eventually, and with some difficulty, the applicant obtained leave to seek a review of the assessments in the Administrative Appeals Tribunal. 27 The applicant made a number of offers to the respondent to secure his release from bankruptcy. The offers were refused. 28 On 3 May 2001 the applicant's auditor's licence was cancelled by the Companies Auditing and Liquidators Disciplinary Board. 29 The applicant complains in a second affidavit, sworn on 22 September 2003 and read in these proceedings: '13. If it is found that the non-compliances with s157 of the Bankruptcy Act of which I complain were formal defects or irregularities, I say that, by reason of the matters set out in this affidavit, I have suffered substantial injustice by virtue of those defects or irregularities which injustice cannot be remedied by an order of this Court. In particular, I say that the course of my bankruptcy was prolonged and the costs of defending my and my family's interests increased as a direct result of the actions of Mr Sheahan. Some of the costs incurred as a result of the actions of Mr Sheahan are set out in exhibit "NGB13". In addition to these direct costs - the cost of my time in providing instructions to my legal advisers, as well as dealing with Mr Sheahan, Mr Coope, Mr Lock, Mr Bradshaw, Mr Barr and Ms Tregauer cannot now be properly calculated, however, since Mr Sheahan's purported appointment as my trustee I would estimate that issues concerning Mr Sheahan have occupied a significant proportion of my time; - the actions of Mr Sheahan (in particular the matters set out in paragraphs 12.1.1, 12.2.1 and 12.2.8 as well as the proceedings against me) have caused me and my family (in particular my wife) great emotional stress over an extended period; and - I fear that the actions of Mr Sheahan (in particular the proceedings taken against me and my wife by Mr Sheahan) have caused damage to my professional reputation. 14. Further, in my view, the actions of Mr Sheahan in taking what I consider to be a non-commercial approach to the various offers I made during the time he was acting as my trustee in bankruptcy has caused substantial injustice. Also, I consider that the attitude taken by Mr Sheahan and representatives as to my discharge and the constant threats made that I would be kept in bankruptcy for 8 years was not reflective of commercially sound approach to my bankruptcy but was an attempt to unfairly put pressure on me and my family.' 30 For the reasons given in O'Brien v Sheahan, the complaint of substantial injustice could not, even accepting the matters contained in [29], be made out. 31 In my opinion, the respondent was appointed trustee of the applicant's estate on 7 July 2000. For the reasons in O'Brien v Sheahan, this application must be dismissed.