Application By William James Hamilton

[2009] FMCA 1040

FEDERAL MAGISTRATES COURT OF AUSTRALIA

APPLICATION BY WILLIAM JAMES HAMILTON [2009] FMCA 1040

BANKRUPTCY – Whether the court should give directions that a Trustee may accept an offer of settlement on behalf of bankrupt’s estate.

Bankruptcy Act 1966, ss.19, 120, 121, 134(4)

Re Driller (1972) 21 FLR 159
Willoughby v Official Trustee in Bankruptcy (2001) FCA 1345
Donnelly v Porteous (2002) FCA 607
Re Pilling; Ex Parte Sullivan (1906) 2KB 644

Applicant: APPLICATION BY WILLIAM JAMES HAMILTON
IN THE MATTER OF TREVOR WILLIAM MORGAN

File Number: SYG 2235 of 2009

Judgment of: Raphael FM

Hearing date: 14 October 2009

Date of Last Submission: 14 October 2009

Delivered at: Sydney

Delivered on: 14 October 2009

REPRESENTATION

Solicitors for the Applicant: Sally Nash & Co

THE COURT DIRECTS THAT pursuant to s.134(4) Bankruptcy Act 1966

1. William James Hamilton as Trustee of Bankrupt Estate of Trevor William Morgan may accept the compromise proposal of settlement made on behalf of Dianne Burcham in a letter from Sally Nash to Mr Hamilton dated 1 September 2009.

2. No order as to costs.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG 2235 of 2009

APPLICATION BY WILLIAM JAMES HAMILTON
IN THE MATTER OF TREVOR WILLIAM MORGAN

Applicant

REASONS FOR JUDGMENT

1. In this matter the Trustee makes an application pursuant to s.134(4) of the Bankruptcy Act 1966 (the “Act”) for directions. He specifically asks that the court directs that he may accept a compromise proposal put forward by the wife of the bankrupt in respect of a claim by the Trustee which, had it proceeded, would have done so under ss.120 and 121 of the Act.

2. When the matter first came before me there was provided an affidavit of Mr Hamilton, the Trustee, which spoke of the dispute between himself and the debtor’s wife and the steps which he had taken to seek reimbursement of certain sums representing the value of property received by her.  I was told by the lawyer for the Trustee that it was believed that certain of the bankrupt’s creditors were not in favour of the settlement proposal and so I ordered that details of the proposal be sent to each of the creditors and that they be advised of the date of the adjourned hearing of the matter.  This was done, but when Ms Nash appeared today and the matter was called outside the court, there was no appearance for any creditor and no notice of appearance has been filed nor has any document suggesting any opposition to the proposal.

3. The Trustee caused examinations to be held of the bankrupt’s wife in order to elucidate the circumstances surrounding the transfer of property and, based upon the results of those examinations, he negotiated with the wife and secured the offer which he seeks the court’s directions for him to accept.

4. The details of the offer contained in a letter from the wife’s then solicitor, found as Exhibit E to Mr Hamilton’s affidavit of 10 September 2009, provides the repayment of $30,000.00 in full satisfaction of any claim by the Trustee against Ms Dianne Burcham and for the parties to enter into a deed of release.  I have considered the affidavit of Mr Hamilton and a later affidavit, which he swore 16 September 2009 and filed on 21 September 2009, deposing to the amount of costs which would be involved in any claim being litigated.

5. Whilst I have some critical views about the manner in which the transfer of the property took place, it does seem to me, from the evidence that I have considered, that there is now a little equity in the property, so that even if the trustee brought a successful claim against Ms Burcham the end result might be payment of less than the amount currently offered. To my mind, the compromise proposed represents a reasonable offer which I would have expected a Trustee to have accepted pursuant to his powers to compromise proceedings, s.19 of the Act.

6. I do understand the Trustee’s concern which led him to make this application.  I have looked at the details of the bankrupt’s other creditors, found as an annexure to the affidavit of Louise Harper filed 22 September 2009, and note that there are some people in that list whom one might have expected to have been concerned about the acceptance of an offer without full consultation.  Ms Nash tells me that the principal objector was the creditor known as Veranda Café Northbridge Pty Ltd, which had financed the costs of the examination of Ms Burcham.  But neither that creditor nor any of the others have seen fit to attend here and I can only assume that they have taken the view that the matter is not worth pursuing much further and that their interests would be best served by receiving some money rather than the possibility of none at all, or any money they do receive being absorbed in the Trustee’s costs.

7. The power of the court to make directions of this nature is not denied.  Ms Nash, in her usual exemplary manner, has provided me with some helpful written submissions referring to seminal cases such as Re Driller (1972) 21 FLR 159, Willoughby v Official Trustee in Bankruptcy (2001) FCA 1345 and Donnelly v Porteous (2002) FCA 607. The power is, however, seldom exercised in cases such as this although the major case on the matter, Re Pilling; Ex Parte Sullivan (1906) 2KB 644 makes it clear that a Trustee in bankruptcy can apply for leave to accept a compromise and in today’s more litigious times it is perhaps surprising that it is not done more often.

8. So, whilst there is no general rule that a court is obliged to give directions when a Trustee seeks them in respect of a bankrupt estate I think that in this particular case it is appropriate for the court to do so and thus protect Mr Hamilton from the in terrorem indications that his advocate advises have been made.  In those circumstances, and having read the affidavits of Mr Hamilton filed on 14 and 21 September 2009, the affidavits of Christine Boyd and Louise Harper filed in court on 14 October 2009, and upon being satisfied that the creditors of the bankrupt have had sufficient notice of the application but have not attended or filed appearances, the court directs that William James Hamilton as trustee of the bankrupt estate of Trevor William Morgan may accept the compromise proposal made on behalf of Dianne Burcham in the letter from Sally Nash & Co dated 1 September 2009 to Mr Hamilton.  I understand that as part of the settlement the costs of this application have been paid by Ms Burcham and no further order for costs will be made. 

I certify that the preceding eight (8) paragraphs are a true copy of the reasons for judgment of Raphael FM

Associate: 

Date: