Australian Litigation Fund Pty Ltd v Burton, in the matter of Burton

[2002] FCA 567

FEDERAL COURT OF AUSTRALIA

Australian Litigation Fund Pty Ltd v Burton, in the matter of Burton
[2002] FCA 567  

AUSTRALIAN LITIGATION FUND v LESLIE ROSS BURTON, IN THE MATTER OF LESLIE ROSS BURTON
N 7494 OF 2001

HILL J
23 APRIL 2002
SYDNEY

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7494 OF 2001

IN THE MATTER OF LESLIE ROSS BURTON

BETWEEN:

AUSTRALIAN LITIGATION FUND PTY LTD
APPLICANT

AND:

LESLIE ROSS BURTON
FIRST RESPONDENT

HUGH WILY
SECOND RESPONDENT

JUDGE:

HILL J

DATE OF ORDER:

23 APRIL 2002

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.        the application be dismissed with costs.

2.        the cross-claim be dismissed.

3.the trustee cross-claimant pay the applicant cross-respondent’s costs of the cross-claim on an indemnity basis.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY	N 7494 OF 2001

IN THE MATTER OF LESLIE ROSS BURTON

BETWEEN:

AUSTRALIAN LITIGATION FUND PTY LTD
APPLICANT

AND:

LESLIE ROSS BURTON
FIRST RESPONDENT

HUGH WILY
SECOND RESPONDENT

JUDGE:	HILL J
DATE:	23 APRIL 2002
PLACE:	SYDNEY

REASONS FOR JUDGMENT

1. Before the court is an application by the applicant, Australia Litigation Fund Pty Limited, for costs on an indemnity basis against Mr Hugh Wily, the trustee of the bankrupt estate of Leslie Ross Burton who became a bankrupt as a result of a sequestration made on 8 July 1993.

2. Also before the court is a cross-claim on the part of the trustee, also claiming indemnity costs against the applicant and claiming, as I understand it, that the applicant pay to the trustee the costs of convening a meeting of creditors of the bankrupt. 

3. It is obvious that there has been a degree of bad blood between the parties in the present proceedings and in particular between the trustee and Belgravia Investments Pty Limited (“Belgravia”), a creditor of the bankrupt which company assigned its debt of $1,105,495.40 to the applicant by deed and for the nominal consideration of $1.

4. The evidence discloses that there have been other proceedings in this court between the trustee and Belgravia.  Disputes arose between those parties concerning the administration of the estate.  Belgravia sought information about that administration which the trustee requested.  It also sought the removal of the trustee.  These disputes provide some background for the ultimate assignment of Belgravia’s debt to the present applicant.  Otherwise these matters to a great extent are irrelevant to the present proceedings.

5. It seems that after the assignment of the Belgravia debt to the applicant the applicant sought information concerning the administration of the bankrupt's estate.  It did not receive the information and indeed was effectively met with a response from the trustee refusing to give information, although permitting inspection as the trustee was required by the Bankruptcy Act 1966  (Cth) (“the Act”) to permit.  The matters progressed until 24 November 2000 when Independent Cement & Lime Pty Limited, another creditor in the bankruptcy, sought the convening of a meeting of creditors to pass motions removing Mr Wily and for the appointment of a Mr Palmer in his place.  Subsequent requests for meetings dated 12 December 2000, and a subsequent request from E.E. Emmett & Sons Pty Limited, another creditor, was also delivered to Mr Wily. 

6. On 18 December Mr Wily, who apparently had objected to the bankrupt's discharge, withdrew that objection and in consequence the bankrupt was discharged from the bankruptcy.  On 22 February 2001 the applicant requested the convening of a meeting.  It is common ground that the applicant together with Independent Cement & Lime Pty Limited and E.E. Emmett & Sons Pty Limited were creditors with at least one fourth in value of the face value of debts lodged for proof in the estate.

7. The trustee by letter dated 14 March 2001 refused to call a meeting. He alleged that the administration came to an end once there had been a withdrawal by him of his objection to the bankrupt's discharge. The applicant took a contrary view relying, correctly, upon s 184 of the Act which makes it clear that a trustee continues in office for a period of 7 years after the administration of the estate is finalised.

8. Notwithstanding further correspondence the trustee continued to refuse to call a meeting and the present proceedings commenced on 21 November 2001 for an order that the trustee convene a meeting of creditors.  Ultimately, without the necessity of a court order, Mr Wily in fact did call a meeting of creditors on 11 February 2002.  That meeting was held on 25 February 2002.  At the meeting the resolution seeking Mr Wily's removal failed.

9. The only issues now left between the parties are therefore the costs of the application brought by the applicant and the cross-claim to which reference has been made.  The words of s 64 are mandatory. There is no other way in which they can be construed.  If, as was the case here, one fourth in value of creditors request in writing the trustee to convene a meeting, the trustee had no discretion.  He is required to convene the meeting notwithstanding that on the face of it there may be inadequate funds to recompense the trustee for the expenses of calling the meeting.

10. If any authority for the mandatory meaning of s 64 be needed it can be found in the decision of Dunwoody v Jefferson [2000] FCA 456 at [16]. Counsel for the trustee submitted, however, that he was not obliged to call a meeting. In support of the submission, which I reject, counsel argued:

    (1) that the assignment in question was relatively recent; 

    (2) that there was no consideration for the assignment. Reference was made to the provisions of s 64D(aa) of the Act which requires notice to be given by a creditor (after the notice of meeting had been issued by a trustee) advising if there had been an assignment and the quantum of consideration for it;

    (3) that the bankrupt had long since been discharged and there was no purpose to convening a meeting; 

    (4) that the estate of the bankrupt had long since been administered, and again that calling of the meeting was futile; 

    (5) that there was some doubt as to the liabilities of the estate and who the creditors were.  Although this submission was put it is difficult on the evidence to see that this was a truly made case.

11. As I have already indicated the trustee has no discretion in the matter and although a number of the matters, particularly the futility of calling a meeting, may explain the trustee's reasons for refusing, they do not provide a defence to the present proceedings.  Unfortunately it was necessary for the applicant to commence the proceedings to obtain the convening of the meeting which the trustee refused and in the circumstances it seems to me that the trustee must pay the applicant's costs of the application.  However, having regard to the fact that the trustee was obliged to pay the costs of the meeting out of his own pocket and the fact that there seems little point in the meeting being called I would have great difficulty in ordering the trustee to pay costs on an indemnity basis and I do not do that.

12. I am concerned about the cross-claim brought by the trustee alleging that there was an abuse of process on the part of the applicant in commencing the present proceedings.  It was said that Belgravia had in the past sought the convening of meetings which had been in fact held and that in the circumstances it was an abuse of process on the part of the applicant as successor to Belgravia, to call a meeting.  With respect that does not seem to me to be the case.  Whatever actions may have been taken by Belgravia in the past the present applicant was entitled to have a meeting convened in accordance with s 64 and there is nothing in the evidence before me that would provide grounds for an allegation that in commencing the present proceedings it had in any way abused the court's process.  Indeed such an allegation, in circumstances where no evidence is adduced in support, calls for some criticism from the court.

13. Abuse of the court's process is a serious allegation and not one that should lightly be made when the facts do not disclose it.  I would dismiss the cross-claim including the claim of the trustee to indemnify the calling of the costs of the meeting and, so far as the cross-claim is concerned, order the trustee cross-claimant to pay the applicant cross-respondent's costs of the cross-claim but in the circumstances on an indemnity basis.

14. I otherwise dismiss both the application and cross-claim.

I certify that the preceding fourteen (14) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Hill.

Associate:

Dated:             13 May 2002

Counsel for the Applicant:	D Pritched
Solicitor for the Applicant:	J Chippendell
Counsel for the Respondent:	Corrs Chambers Westgarth
Solicitor for the Respondent:	MD Nikolaidis & Co
Date of Hearing:	23 April 2002
Date of Judgment:	23 April 2002