Armstrong v WORRELLS Solvency and Forensic Accountants

[2013] FCCA 1359

FEDERAL CIRCUIT COURT OF AUSTRALIA

ARMSTRONG & ANOR v WORRELLS SOLVENCY AND FORENSIC ACCOUNTANTS [2013] FCCA 1359

Catchwords:
BANKRUPTCY – Application for removal of trustee – whether there was maladministration by the trustee – whether the costs to the estate incurred by the trustee were reasonable – whether the trustee failed to properly communicate with the debtors – no maladministration substantiated – costs incurred were reasonable – application dismissed.

Legislation:

Bankruptcy Act 1966 (Cth), s.73

Applicants: GARY AND VICKI ARMSTRONG

Respondent: WORRELLS SOLVENCY AND FORENSIC ACCOUNTANTS

File Number: BRG 203 of 2013

Judgment of: Judge Burnett

Hearing date: 3 June 2013

Date of Last Submission: 3 June 2013

Delivered at: Brisbane

Delivered on: 3 June 2013

REPRESENTATION

The Applicants appeared on their own behalf

Solicitors for the Respondent: Ferguson Cannon Lawyers

ORDERS

1. That the application filed on 4 March 2013 is dismissed.

FEDERAL CIRCUIT COURT OF AUSTRALIA

AT BRISBANE

BRG 203 of 2013

GARY AND VICKI ARMSTRONG

Applicants

And

WORRELLS SOLVENCY AND FORENSIC ACCOUNTANTS

Respondent

REASONS FOR JUDGMENT

(Ex Tempore)

1. The application today is an application by the bankrupts for the removal of the trustee, John William Cunningham. Mr Cunningham was appointed trustee of the respective estates of the applicants by an order of this Court on 17 February 2011. The principal ground advanced by the bankrupts for the removal is that they would like the trustee to engage in some negotiation with their main creditor, which is a school, in order to forward a composition proposal under s.73 of the Bankruptcy Act 1966 (Cth) (the Act).

2. However, the trustee has indicated that it requires a sum of $4000.00 to be paid in advance by the bankrupts in order to call the meeting of creditors to consider that proposal. The applicants do not have this sum. They have received advice from ITSA, the default trustee, that it would be prepared to undertake the same activity for a sum of about $1000.00. In the course of submissions today, the bankrupts have contended some maladministration on the part of the trustee, principally complaining of the trustee’s failure to fully communicate with them about matters relevant to the administration of their affairs.

3. However, none of those matters have been substantiated in the material which is filed in this proceeding and, accordingly, they cannot be afforded any real weight, there having been no opportunity for the trustee to respond to any allegations of misfeasance. In any event, there is no real basis for the granting of the relief sought in the absence of any evidence of misfeasance on the part of the trustee. The only evidence before me indicates that the fees that are sought to be charged are reasonable, and that the trustee’s approach to seeking the recovery of these prior to undertaking any of the professional duties involved is also reasonable under the circumstances.

4. There is no basis in my view to exercise the discretion. It is a very serious thing to remove a trustee from his or her administration of the estate of the bankrupt, particularly given that the trustee is in first instance appointed by the Court and acts, to a large extent, with the authority of the Court in the administration of a bankrupt. The trustee is also subject to strict regulation under the Act. None of the serious matters that need to be demonstrated to warrant the exercise of the discretion have been demonstrated in this case, and accordingly the application must fail.

5. The application is dismissed.

I certify that the preceding five (5) paragraphs are a true copy of the reasons for judgment of Judge Burnett

Date:  16 September 2013