Official Trustee in Bankruptcy [2009] FCA 850

FEDERAL COURT OF AUSTRALIA

Official Trustee in Bankruptcy [2009] FCA 850

Bankruptcy Act 1966 (Cth) ss 30, 134, 156A, 159, 160, 181A, 183 Federal Court (Bankruptcy) Rules 1995 (Cth) r 8.02 Re Brian, Muir v Bradley (1984) 3 FCR 91; ref to Griffin v Triscott (2004) 183 FLR 1; ref to OFFICIAL TRUSTEE IN BANKRUPTCY (AS TRUSTEE FOR FIFTEEN ESTATES NAMED IN SCHEDULE A)

NSD 800 of 2009

EMMETT J

7 AUGUST 2009

SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 800 of 2009

GENERAL DIVISION

OFFICIAL TRUSTEE IN BANKRUPTCY (AS TRUSTEE FOR FIFTEEN ESTATES NAMED IN SCHEDULE A)

Applicant

JUDGE: EMMETT J

DATE OF ORDER: 7 AUGUST 2009

WHERE MADE: SYDNEY

THE COURT ORDERS THAT:

1. The proceeding be dismissed. Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules. The text of entered orders can be located using eSearch on the Court's website.

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY NSD 800 of 2009

GENERAL DIVISION

OFFICIAL TRUSTEE IN BANKRUPTCY (AS TRUSTEE FOR THE 15 ESTATES NAMED IN SCHEDULE A)

Applicant

JUDGE: EMMETT J

DATE: 7 August 2009

PLACE: SYDNEY

REASONS FOR JUDGMENT 1 This application relates to fifteen bankrupt estates in respect of which Mr David Patrick Watson, a registered trustee, who died on 18 July 2009, was the trustee in bankruptcy. Section 160 of the Bankruptcy Act 1966 (Cth) (the Act) provides that if at any time there is no registered trustee who is the trustee of the estate of a bankrupt, the Official Trustee is, by force of s 160, to be the trustee of the estate. Following the death of Mr Watson, it appears to follow that the Official Trustee became trustee of the fifteen estates. 2 By the application, the Official Trustee seeks to have Mr Michael Gregory Jones, a registered trustee, appointed as trustee of eleven of the estates and Mr Schon Gregory Condon, also a registered trustee, appointed trustee in respect of four of the estates. Messrs Jones and Condon have consented to being appointed trustee in bankruptcy for the respective estates in question. 3 Section 159 of the Act affords a procedure whereby a vacancy in the office of trustee in bankruptcy can be filled. Under s 159(1), the creditors may, at a meeting of the creditors, fill any vacancy in the office of trustee. Under s 159(2), an Official Receiver must, on the requisition of a creditor, summon a meeting of creditors for the purpose of filling such a vacancy. Relevantly for present purposes, s 159(3) provides that, for the purposes of s 159, an office of trustee is deemed to be vacant, notwithstanding that it is for the time being filled by the Official Trustee by reason of the operation of s 160. 4 A possible alternative procedure is afforded by s 181A of the Act. Under s 181A(1), the current trustee of a bankrupt's estate may, with the written consent of another trustee (either a registered trustee or the Official Trustee), nominate the other trustee as the new trustee of the estate. Thus, it would appear that the Official Trustee could nominate Mr Jones or Mr Condon, as appropriate, as the new trustee of the respective estates in question. Under the provisions of s 181A, the Official Trustee would be required to give written notice of the nomination to all creditors, specifying a date from which it is proposed that the new trustee would become the trustee of the estate. The date must be at least ten days after the notice is given. If no creditor lodges a written notice of objection at least two days before the specified date, the new trustee replaces the current trustee as trustee of the estate on the date specified in the notice and the new trustee is to be treated as having been appointed by the creditors. 5 The fifteen estates in question have little or no assets and the Official Trustee does not wish to enliven the operation of s 159 or s 181A because of the costs involved. Rather, the Official Trustee asks the Court to appoint Messrs Jones and Condon as trustee of the respective estates, pursuant to s 30(1) or s 134(4) of the Act. 6 Under s 30(1), the Court has full power to decide all questions in any case of bankruptcy coming within the cognizance of the Court and may make such orders as the Court considers necessary for the purpose of carrying out or giving effect to the Act in any such case or matter. Section 134(4) provides that a trustee in bankruptcy may apply to the Court for directions in respect of a matter arising in connection with the administration of the estate. Those provisions would empower the Court to determine any question that arises in the administration of the estates in question and to give directions to the Official Trustee as to the way in which those questions should be resolved. 7 However, I do not consider that those provisions have the effect of empowering the Court to appoint a new trustee to replace the Official Trustee who holds office by virtue of s 160. The mere fact that Messrs Jones and Condon have consented to act is, of itself, of no effect. Section 156A(1) provides that a registered trustee may consent to act as the trustee of the estate of a debtor. Under s 156A(3)(a), where, at the time when a debtor becomes a bankrupt, a registered trustee has so consented to act as the trustee of the estate of that debtor under s 156A(1), the registered trustee becomes, at that time, by force of s 156A(3), the trustee of the estate of the bankrupt. However, those provisions have no application in the present case. 8 Section 180 provides that the Court may accept the resignation of a registered trustee from the office of trustee of an estate. That provision does not, in terms, apply to the Official Trustee. Further, under s 183, a trustee may apply to the Court for an order of release from the trusteeship of an estate and, where the Court is satisfied, relevantly, that the trustee has resigned, the Court may make the order sought. Rule 8.02 of the Federal Court (Bankruptcy) Rules 1995 (Cth) deals with an application under s 180 or s 183. Under r 8.02, an application for acceptance of a trustee's resignation from the office of trustee of an estate or release of a trustee from the trusteeship of an estate must be accompanied by an affidavit stating the grounds in support of the application and, in the latter case, a statement giving details of the realisation of the bankrupt's property and distribution of the estate by the trustee. The Court, of course, can waive compliance with that rule in an appropriate case. However, neither s 180 nor s 183 has any application in the present circumstances. 9 There may be circumstances in which the Court may have resort to s 30 to appoint a trustee. For example, where there is a real potential for an appearance of conflict of interest and duty on the part of the trustee, it may be appropriate to appoint an additional trustee to ensure the proper, efficient and cost effective administration of the estate (see Griffin v Triscott (2004) 183 FLR 1). However, that is not this case. If the Act provided no mechanism for the appointment of a new trustee following the death of a registered trustee, it may be appropriate to resort to s 30. Apart from the provisions of s 30, a court of bankruptcy has broad inherent powers to deal with matters arising in its jurisdiction of an administrative kind. The administration in bankruptcy is under the control of the Court, except where it is limited by statute (see Re Brian, Muir v Bradley (1984) 3 FCR 91). 10 I am not persuaded that the Court has power to make the orders sought by the Official Trustee in the present circumstances. The Act provides a procedure whereby Mr Jones and Mr Condon can be appointed as trustee of the relevant estates. On one view, ss 159 and 160, when read together constitute a code intended to govern exhaustively the filling of the office of trustee when that office becomes vacant (see Re Brian above). Section 181A affords a more streamlined process for replacing a trustee in the manner that I have described. Neither procedure appears to me to be unduly onerous. In having regard to the availability of those procedures, I am not persuaded that it is necessary for the purpose of carrying out or giving effect to the Act to appoint replacement trustees for the Official Trustee. Nevertheless, it would be appropriate to give a direction that the Official Trustee would be justified in taking steps to have a meeting of creditors of the estate convened for the purposes of filling the vacancy occasioned by Mr Watson's death or by initiating the steps contemplated by s 181A. The proceeding should be otherwise dismissed. 11 Having regard to restrictions on the availability of funds for the Official Trustee, it may be appropriate for the Parliament to give consideration to possible amendment to the Act to deal with circumstances such as have arisen as a consequence of Mr Watson's death. The estates in respect of which the Official Trustee seeks to have Mr Jones appointed have been administered by Mr Jones' office and the estates in respect of which the Official Trustee wishes to have Mr Condon appointed have been administered by Mr Condon's office. That is to say, it is in everybody's interest for Mr Jones and Mr Condon to be appointed trustee of the respective estates in question. The Official Trustee has no connection with those estates. In circumstances where the estates have no funds, a cost effective mechanism for the appointment of a replacement trustee for the Official Trustee may be appropriate. I certify that the preceding eleven (11) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Emmett.