Barlaw Pty Ltd v Crouch - [2011] FMCA 384

FEDERAL MAGISTRATES COURT OF AUSTRALIA

BARLAW PTY LTD v CROUCH

[2011] FMCA 384

BANKRUPTCY – Application to remove trustee for misconduct – consideration of the conduct of the trustee – acceptance of resignation of the trustee.

Bankruptcy Act 1966 (Cth), ss.30, 64D, 64Z, 64ZA, 156A, 178, 179, 180
Bankruptcy Regulations 1996 (Cth)

Moore v Macks [2006] FMCA 594
Rondo Building Services Pty Ltd v Starkey [2005] FMCA 275
Trkulja v Morton [2005] 3 ABC (NS) 231

Applicant:

BARLAW PTY LTD TRADING AS BARRAK LAWYERS

Respondent:

NICHOLAS CROUCH AS TRUSTEE OF THE ESTATE OF MARK ANTHONY BARTOLO

File Number:

SYG 79 of 2011

Judgment of:

Driver FM

Hearing dates:

25-26 May 2011

Delivered at:

Sydney

Delivered on:

29 July 2011

REPRESENTATION

Counsel for the Applicant:

Mr M K Rollinson

Solicitors for the Applicant:

Barrak Lawyers

Counsel for the Respondent:

Mr S Golledge

Solicitors for the Respondent:

Mathews Folbigg

ORDERS

Pursuant to s.180 of the Bankruptcy Act 1966 (Cth) the resignation of Nicholas Crouch as trustee of the estate of Mark Bartolo is accepted.
The application filed on 18 January 2011 is dismissed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 79 of 2011

BARLAW PTY LTD TRADING AS BARRAK LAWYERS

Applicant

And

NICHOLAS CROUCH AS TRUSTEE OF THE ESTATE OF MARK ANTHONY BARTOLO

Respondent

REASONS FOR JUDGMENT

Introduction and background

By application filed on 18 January 2011 the applicant (Barlaw) seeks relief against the respondent (Nicholas Crouch) as trustee of the estate of Mark Anthony Bartolo relating to the administration of the estate by the trustee. Importantly, Barlaw seeks an order pursuant to ss.30, 156A, 178 and 179 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) that Mr Crouch be removed as the trustee of the estate and that Mr David Solomons be appointed as trustee in his place. In the alternative, Barlaw seeks an inquiry into the conduct of Mr Crouch under s.179 of the Bankruptcy Act.
The application is opposed by Mr Crouch but he has offered to resign as trustee on the basis that it is obvious that Barlaw has no confidence in his administration of the bankrupt estate of Mr Bartolo. Mr Crouch does not concede that he has been at fault in the administration of the estate but accepts that conflict between him and Barlaw is hampering the administration of the estate.
The following statement of background facts is derived from the submissions of the parties.
Barlaw filed a creditor’s petition on 31 August 2010. This is against a background of litigation between Mr Bartolo and Barlaw.
On 18 October 2010, Mr Bartolo executed an authority pursuant to s.188 of the Bankruptcy Act authorising Mr Crouch to convene a meeting of his creditors for the purpose of considering a resolution for approval, by the creditors of a Personal Insolvency Agreement (PIA). Mr Crouch had had no relevant contact with Mr Bartolo prior to being approached for the purpose of obtaining Mr Crouch’s consent to accept appointment as controlling trustee.
Following his appointment, Mr Crouch undertook an investigation of the debtor’s affairs. In accordance with the provisions of the Bankruptcy Act, he prepared, and circulated to creditors, a detailed report concerning the debtor’s circumstances, and, in particular, concerning the proposed PIA. Mr Crouch recommended that creditors not accept the debtor’s proposal.
Mr Bartolo appointed Mr Crouch as controlling trustee on 18 October 2010. The creditor’s meeting was conducted on 19 November 2010. The PIA was not accepted.
Mr Bartolo became bankrupt on his own petition on 22 November 2010, the day before a creditor’s petition presented by Barlaw was to be heard on 23 November 2010. Mr Crouch is the trustee in bankruptcy, nominated in the debtor’s petition.

The application, evidence and submissions

In the application five separate orders are sought. Barlaw seeks the removal of Mr Crouch or an inquiry. Further, or in the alternative, Barlaw seeks that the Court overrule some decisions made by Mr Crouch. The essential ground is that Mr Crouch has shown an undue partiality to the bankrupt (Mr Bartolo) and creditors said to be closely related to him, to the disadvantage of the other creditors, of whom Barlaw is the largest unsecured creditor. At the trial of the matter it became clear that the principal relief sought by Barlaw is the removal of Mr Crouch. The alternative order for an inquiry is directed to the same end.
The application is supported by the affidavit of Benjamin Barrak, principal director of Barlaw, made on 18 January 2011 and a second affidavit by Mr Barrak made on 10 May 2011 based on documents produced under subpoena by Mr Crouch. A substantial bundle of documents were also exhibited to his affidavits. Mr Barrak was cross-examined on his affidavits.
Mr Crouch relies upon his own affidavits made on 12 April 2011 and 23 May 2011. Mr Crouch was cross-examined on his affidavits.
I also received oral evidence from Bradley O’Brien, an officer of the Insolvency and Trustee Service Australia (“ITSA”), who had attended the meeting of creditors called to deal with the then proposed PIA.
I received the following exhibits:
·R1    Letter to Barrak Lawyers from Matthews Folbigg Lawyers, 06.04.2011
·R2    Proof of Debt form
·R3    Copy of Proof of Debt Register
·A1    Bundle of Documents
·A2    Contract for the sale of land
·A3    Consent to Act as Trustee declaration

Submissions

Barlaw submits that the evidence supports an order for the removal of Mr Crouch.
Paragraphs 1 to 40 of the affidavit of Mr Barrak sworn on 18 January 2011 summarise events up to 18 October 2010. In 2008-2009, Mr Barrak incurred costs in acting as solicitor for Mr Bartolo. In January 2010 he commenced an action in the District Court to recover those costs. Mr Bartolo then applied for a solicitor-client costs assessment. The result was a costs assessment certificate for $229,108, of which $44,597 was paid pursuant to an interim costs assessment certificate and $184,511 remained due. On 6 August 2010, Mr Barrak recorded judgment for the amount remaining. The judgment debt was not paid and Barlaw served a bankruptcy notice on Mr Bartolo. The bankruptcy notice was not complied with. A creditor’s petition was then presented.
On the first return of the creditor’s petition on 6 October 2010, Mr Bartolo though his then solicitors, O’Neill Partners, announced an intention to oppose it, and it was adjourned to 19 October 2010.
An application to the District Court to stay the underlying judgment was dismissed on 15 October 2010, with indemnity costs in favour of Barlaw.
On 18 October 2010, the day before the petition was to be heard, Mr Bartolo appointed Mr Crouch as controlling trustee under Part X, thus obtaining a further adjournment to 23 November 2010 to allow a creditor’s meeting to be convened to consider a PIA.
Paragraphs 44 to 49 of Mr Barrak’s affidavit summarise the debtor’s position according to his statement of affairs and other information conveyed to Barlaw before the creditors’ meeting. His total claimed debts were $1.013 million. Of this, $250,271 (24.7 per cent) was owed either to Barlaw (18.2 per cent) or to two other firms of solicitors who had acted for Mr Bartolo. The remainder, 75.3 per cent, was claimed to be owed to persons related to the debtor – including $15,000 to solicitors who had acted for him in the litigation against Barlaw, $27,000 to his friends Mr and Mrs Attard and $710,000 (70.1 per cent) to relatives – his parents, his wife, a company controlled by her, and his brother. (Among the related party debtors is an alleged secured loan of $450,000 made by his parents to him in 1992, but still outstanding today, and protected by a caveat dated March 2009 stamped 6 April 2010 and only lodged for registration on 6 April 2010, after the District Court action was brought by Barlaw against Mr Bartolo). The total of related party debts, $762,851, or 75.3 per cent, would have been just enough to carry a resolution to approve a PIA and avoid bankruptcy.
Paragraph 50 of Mr Barrak’s affidavit summarises developments between the debtor’s petition and the creditors’ meeting, which Mr Crouch called for 19 November 2010. Mr Barrack believed Mr Bartolo was attempting to sell real estate at Schofields. Mr Barrak obtained orders to restrain the debtor from dissipating assets.
Paragraphs 51 to 68 of Mr Barrak’s affidavit summarise his version of events on the day of the creditors’ meeting, 19 November 2010, before the meeting began. According to Mr Barrak, Mr Crouch told Mr Barrak on his arrival that he was “accepting all of the proofs for the debtor”, but was querying Barlaw’s proofs, which had added interest and the amount of later District Court costs orders to the judgment amount in the petition (paragraph 60). He required Mr Barrak to obtain records of his work in progress (WIP) to justify the extra amounts. Eventually Mr Crouch accepted only 82 per cent of the Barlaw proofs for voting purposes, but some of the other proofs in the full claimed amount (paragraph 72). Mr Barrak asserts that representatives of ITSA who were present told him that if the proposed PIA was approved on the votes of the related creditors, ITSA would apply to the Court to set it aside (paragraph 62).
Paragraphs 69 to 82 of Mr Barrak’s affidavit summarise the creditors’ meeting. Mr Crouch stated that “the parents and the family trust” withdrew their proofs of debt (which totalled $675,000). Mrs Tracey Bartolo, the debtor’s wife, was proxy for all related party creditors, and she was present by telephone. Mr Crouch intervened to stop Mr Barrak from questioning Mr Bartolo on his statement of affairs. When the PIA was put to the vote, Mr Barrak for Barlaw and as proxy for Bateman Battersby (6.1 per cent) voted against, all other creditors abstained, and the PIA was defeated.
Paragraphs 82 to 85 of Mr Barrak’s affidavit deal with the fact that on Monday 22 November 2010, three days after the meeting and the day before the creditor’s petition was to come on for hearing, Mr Bartolo lodged a debtor’s petition and became bankrupt on it. He nominated Mr Crouch as trustee in bankruptcy. Mr Crouch accepted that appointment.
Paragraphs 86 to 89 of Mr Barrak’s affidavit summarise Mr Barrak’s attempts to obtain information regarding the related party proofs of debt, and his telephone discussions with Mr Crouch. The essential allegation is that Mr Crouch did not intend to call for new proofs of debt, but proposed to accept the related party debts, and a possible additional Family Law Act 1975 (Cth) property claim by Mrs Tracey Bartolo, and proceed to a “commercial solution” involving sale of a property and possible part-payment of a small amount, if anything, to non-related creditors (page 30 of Mr Barrak’s first affidavit).
Paragraphs 90 to 101 of Mr Barrak’s affidavit summarise Mr Barrak’s inspection of the proofs of debt at Mr Crouch’s office on 25 November 2010, the asserted discrepancies in the related party proofs, and his conversation with Mr Crouch about this. Mr Crouch said that all the proofs were still current and that some had been withdrawn on 19 November 2010, the day of the creditor’s meeting, “for voting purposes only”.
Paragraphs 104 to 109 of Mr Barrak’s affidavit deal with Mr Crouch’s claim that the amount of an interim certificate of assessed costs, paid by Mr Bartolo on 24 June 2010, should be refunded by Barlaw under s.122 of the Bankruptcy Act.
The affidavit of Mr Barrak sworn on 10 May 2011 deals with issues since 18 January 2011, being the date of Mr Barrak’s affidavit sworn on 18 January 2011. It particularises 17 specific complaints about the conduct of Mr Crouch by way of elaboration on his first affidavit in light of the availability of documents produced by Mr Crouch under subpoena.
Mr Crouch submits that the evidence does not support orders for his removal or for an inquiry.
Virtually from the date of the appointment, Mr Barrak, the principal of Barlaw, had grave reservations about the debtor’s conduct. He believed he had information available to him which established that, contrary to statements made in the debtor’s statement of affairs, debts allegedly owed by Mr Bartolo to related parties were not genuine. Further, he apparently believed he had information showing that the debtor had been engaged in conduct whereby assets were disposed of prior to the appointment of the controlling trustee. For reasons which are not known, Mr Barrak did not share that information with Mr Crouch. Further, and notwithstanding the request by the trustee that creditors lodge their statements of claim for the purpose of attending and voting at the creditor’s meeting not less than 24 hours before that meeting, Barlaw did not submit its claim documents until 7.09pm on the evening before the meeting was due to be held. Those documents exceeded 100 pages in length. Mr Crouch asserts that delivery of that material to the trustee’s office at that time, and in such proximity to the creditor’s meeting, caused substantial disruption in the trustee’s preparations for the meeting.
The trustee had been provided with details of the claims to be made by the various related parties. He had spent some time, before 19 November 2010, reviewing that material and, in respect of one aspect of the claims by the debtor’s parents, had sought legal advice. Prior to the meeting commencing Mr Crouch had formed the view that he would admit the related party claims in full although no occasion for formally deciding that question would arise until the meeting was underway[1].
[1] See s.64ZA(8) of the Bankruptcy Act
As it happened, the trustee was never called upon to formally rule upon the claims of the related parties or to make a decision as to whether they should or should not be admitted for the purposes of voting at the meeting. That is because the statements of claim which had been lodged pursuant to s.64D of the Bankruptcy Act were withdrawn before the question of any ruling arose. Thus, the debtor’s proposal for a PIA failed, and the only resolution, apart from a resolution as to fees, which was passed at the meeting was that the debtor’s affairs no longer be subject to control under Part X of the Bankruptcy Act.
Although there was no decision made by the trustee at the meeting, Mr Barrak formed an adverse view of Mr Crouch’s conduct and in particular of his indication that he was proposing to accept the related party claims. Mr Crouch submits that, viewed objectively, no flaw can be detected in the manner in which he dealt with the claims (both of Barlaw and of the related parties) nor in respect of his, admittedly preliminary, view about those claims. However, in Mr Crouch’s view, one thing is clear; the adverse view formed by Barlaw has infected Mr Barrak’s assessment of every other aspect both of the controlling trusteeship and the bankruptcy administration.
Mr Crouch notes that Barlaw has filed two lengthy affidavits in support of its application. The affidavits outline an array of complaints, some going to matters of substance and others which Mr Crouch suggests are insignificant. Exhibited to the affidavits are hundreds of pages of documents.
The evidence from Barlaw contains a number of serious allegations, either of misconduct or, at the very least, of dubious professional practice by Mr Crouch. A trustee, in such a case, is compelled to respond, and Mr Crouch has done so with evidence in reply. The submission at the end of the case, on behalf of Mr Crouch is that the Court should find, as Federal Magistrate Lindsay did in Moore v Macks[2], that Mr Barrak’s allegations of misconduct or error on behalf of Mr Crouch, cannot be substantiated and that no case for removal is made out.
[2] [2006] FMCA 594

Consideration

The trustee’s submissions usefully summarise the relevant legal principles. The application for removal is based upon ss.30, 156A, 178 and 179 of the Bankruptcy Act. Sections 156A and 179 contain express reference to a power to remove a trustee. There is no doubt that the width of s.178 would, in an appropriate case, also provide a basis for an order for removal. Section 30 of the Bankruptcy Act has been held to have the same effect[3], although it is hard to envisage circumstances where it would be necessary to resort to that provision.
[3] Rondo Building Services Pty Ltd v Starkey [2005] FMCA 275
In an application under s.179, a trustee should not be removed in the absence of evidence of misconduct[4]. Section 156A(4) conditions the power of removal on a finding that the trustee is not fit to act or of evidence establishing such a connection with the bankrupt as might be seen, by a reasonable observer, to impact on the trustee’s ability to remain truly independent.
[4] Trkulja v Morton [2005] 3 ABC (NS) 231
In Rondo Building Services Pty Ltd v Starkey, which was a case where the application for removal was based, principally, on an allegation of lack of independence (which appears to be at the heart of the present application), Federal Magistrate Rimmer expressed the view[5] that, at least when considering an application under s.156A(4), the following principles have been established:
a)a case for removal will be established where there are reasonable grounds for a reasonable apprehension on the part of a creditor that a trustee might be impeded or inhibited from acting impartially in the interest of all creditors;
b)a trustee must be scrupulously careful to ensure that he (or she) never allows himself or herself to be placed in a position of conflict or between duty and interest. Likewise, the trustee should not allow the situation to arise where the trustee may be seen to be in a position of conflict or potential conflict. A trustee must not only be impartial, but be seen to be impartial;
c)a trustee must have no prior or other involvement with the debtor, or one of the creditors so that he or she could not fairly or impartially carry out their duties;
d)it should not be left to the trustee to determine what he or she conceives to be his or her own ability to reconcile conflict or impartiality.
[5] Supra at [25]
However, a trustee will not be removed merely because a creditor (or the bankrupt) disagrees with a decision of the trustee in respect of a matter arising in the bankruptcy administration. Further, the mere fact that Barlaw, in this case, has gone to some considerable length in seeking to make out a case for removal does not, of itself, establish a case for removal. Mr Crouch adopts, and I acknowledge the force of, the statement in the judgment of Federal Magistrate Lindsay in Moore v Macks[6]:
It is one thing for Mr Moore to contend that the actions of Mr Macks are “perverse, unprincipalled (sic), displayed bad faith, conduct, breaches of fiduciary duties to me and to creditors and shows conflict of interest”. It is altogether a different matter to provide the foundation of such commentary …
[6] op cit, which was an application pursuant to s.179 of the Bankruptcy Act.
In light of the statutory provisions, and the cases which have considered them, I accept the submission that the application should be determined in accordance with the following general principles:
a)it is for the applicant to make out a case for removal;
b)mere dissatisfaction with a decision, or actions, of the trustee or mere assertions of partiality, no matter how stridently put, are not enough to justify removal;
c)the power to order removal should be exercised in the interests of all those directly concerned in the bankruptcy administration, namely the bankrupt and all creditors.
d)To justify removal because of bias or lack of independence, actual partiality may not be necessary but there must be reasonable grounds for an apprehension of a lack of independence .

In the present case, the main complaint of Barlaw is that Mr Crouch has shown undue partiality to the bankrupt and creditors said to be closely related to him to the disadvantage of other creditors including, in particular, Barlaw. Mr Crouch responds that he has treated all persons claiming to be creditors equally, in an obviously hostile situation. Mr Crouch recommended against the PIA and allowed Barlaw to vote as a creditor notwithstanding that he saw deficiencies in respect of its statement of claim at that time.
The meeting of creditors was stood over to allow proofs of debt to be ruled upon in circumstances where it was obvious that such rulings would determine whether the proposed PIA would be adopted. Barlaw had delivered four separate statements of claim very shortly before the meeting of creditors and the acceptance or rejection of some or all of those claims would determine whether Barlaw was able to defeat the proposed PIA. Mr Crouch held discussions with Mr Barrak and Mr Bartolo (and apparently with his wife by telephone) during these adjournments and, in my view, he did the best he could in a difficult and tense situation.
Mr Barrak is concerned that his firm was singled out for criticism by the trustee in relation to its claims of debt. However, other creditors had advised of their claims well prior to the meeting of creditors and information had also been provided by Mr Bartolo. Mr Barrak was the only creditor present in person at the meeting as others were all represented by proxy.
Mr Barrak asserts that related party debts were inflated. Mr Crouch denies that any related party claims were inflated between the time of Barlaw’s lodgement of its statement of claim and the meeting of creditors. On the other hand, it is apparent that Barlaw’s four claims were intended to maximise its asserted debt in order to seek to ensure that the PIA could be defeated.
Mr Barrak is critical of Mr Crouch for not allowing him to question Mr Bartolo at the meeting of creditors. Mr Crouch invited questions but decided that Mr Bartolo should be excused from the meeting because of his physical appearance and concern for his state of health. Mr Crouch was in the best position at the time to determine whether Mr Bartolo was in a fit state of mind and health to be subjected to questioning and I do not accept that Mr Crouch was attempting to shelter Mr Bartolo from questioning.
Mr Barrak asserts that the behaviour of Mr Crouch leading up to the meeting of creditors was questionable in that he allegedly acted in the interests of related party creditors and against the interests of non related creditors. This assertion is reflective of Mr Barrak’s view that the related party claims of debt are bogus. That view was not supported by the oral evidence of Mr O’Brien from ITSA, at least in relation to the claim by Mr Bartolo’s parents. It is fair to say that the statement of affairs lodged by Mr Bartolo was questionable and, indeed, Mr Crouch recommended against the acceptance of the PIA. Mr Crouch sought further and better particulars of a number of claims of debt to enable adjudication of them. Those included claims by the parents of Mr Bartolo and a family trust. Mr Crouch obtained legal advice on the claims of related parties for his own assistance and protection, and not for the benefit of anyone else. It is true that that advice was paid for by Mr Bartolo’s wife but that does not alter the position that the advice was obtained to assist Mr Crouch, not to assist the Bartolos.
Mr Barrak asserts that Mr Crouch engaged in the differential treatment of creditors’ claims without appropriate evidence. Mr Crouch accepted the greater part (between 82 and 95 per cent) of Barlaw’s claims and the reductions he made were based upon reductions by a costs assessor on those elements of the claims that had been dealt with by the costs assessor. It is noteworthy that some of the claims made by Barlaw were for payment of costs which had not been independently assessed and to the extent that Barlaw’s costs claims had been assessed, there had been reductions in them. I am satisfied that Mr Crouch’s approach, in the limited time available, while “broad brush”, was reasonable in assuming that unassessed costs would be marginally reduced to the same extent that the assessed costs had been.
Mr Barrak complains that Mr Crouch made handwritten notes on his firm’s claims of debt. I see nothing sinister in that.
Barlaw has not established that Mr Crouch applied a different standard of vetting creditor statements of claim as between Barlaw and other creditors. The assessment of claims by a trustee prior to a meeting of creditors under Part X of the Bankruptcy Act does not involve a final determination. Unless a claim as disclosed by a creditor is clearly frivolous or baseless or not provable, rejection of a claim on the basis only that one creditor has asserted that the claim is not valid would not, in my view, be justifiable. Mr Crouch was not satisfied that the claims by the parents and the wife of Mr Bartolo were obviously frivolous or concocted or fraudulent. In my view, Mr Barrak’s concern is based more on the fact of who claims to be a creditor of Mr Bartolo rather than the substance of their claims.
Barlaw complains about the failure by Mr Crouch to provide a copy of minutes of the meeting of creditors or different versions of those minutes. I accept that the minutes are prima facie evidence of what occurred at the meeting. I also accept that s.64Z of the Bankruptcy Act has been complied with.
Barlaw asserts that Mr Crouch failed to comply with s.101 of the Bankruptcy Act. I accept Mr Crouch’s submission that this assertion is misplaced as no “proofs of debt” had been lodged or admitted in the bankrupt estate as at 23 November 2010. Barlaw had sought and was granted access to the claims of debt. I reject the contention that there was any breach of s.101.
Barlaw asserts that Mr Crouch failed to answer or deal with reasonable inquiries of creditors. I accept that there have been numerous requests by Barlaw to the trustee for information. I also accept that not all of those requests have been dealt with by Mr Crouch. However, the Bankruptcy Act does not oblige a trustee to answer every item of correspondence or enquiry by a creditor and it needs to be borne in mind that ordinarily, there will be limited if any funds available to a trustee in the administration of a bankrupt estate. If excessive demands are made on a trustee by one creditor that is likely to disadvantage other creditors by reducing funds available for distribution from the estate.
Barlaw asserts that Mr Crouch failed to acknowledge that certain related creditors withdrew their claims of debt unconditionally such that Barlaw held more than 25 per cent of the votes at the meeting of creditors. This is denied by Mr Crouch. I accept that Mr Bartolo’s parents withdrew their claims for the purpose of voting at the creditors’ meeting but I do not accept that in consequence they were not entitled to lodge any proof of debt with the trustee in the bankrupt estate.
Barlaw complains of a failure by Mr Crouch to call a creditors’ meeting pursuant to s.64 of the Bankruptcy Act. Mr Crouch holds the view that he was entitled to take into account the claims of Mr Bartolo’s parents and the family trust for determining whether Barlaw was or was not a creditor whose claim exceeded 25 per cent of the creditors’ claims. Mr Crouch believed then, and continues to believe, that Barlaw’s debt does not constitute 25 per cent of the creditors’ claims and accordingly, he has declined to call a meeting under s.64 of the Bankruptcy Act unless security for the costs of the meeting is provided. Upon being notified of that refusal, Barlaw had several options available to it. It could have paid the amount requested by the trustee for the conduct of the meeting (a maximum of $5,000). It could have sought to review the decision pursuant to s.178 of the Bankruptcy Act or conducted further inquiries itself.
Mr Crouch concedes that a meeting of creditors would have provided a forum for resolution of critical issues which have arisen in the administration of the bankrupt estate. However, Barlaw has commenced the present proceedings which are a more general attack on the conduct of the trustee. It is now for the Court to resolve the dispute on the basis of the broad range of allegations advanced by Barlaw. It is neither necessary or appropriate, in my view, to deal with the issue of the voting power of Barlaw in isolation.
Barlaw asserts that Mr Crouch has failed to appropriately investigate or examine the bankrupt’s affairs and has failed to refer the matter to the Inspector General or other appropriate authorities. Mr Crouch responds that there is no evidence of fraud or a dissipation of assets. It is true that the debtor’s statement of affairs provided to the trustee was deficient but those deficiencies were corrected upon inquiry by the trustee. It is a matter for the administering trustee to determine what further inquiries or actions are necessary or appropriate in the administration of the bankrupt estate. I am not persuaded, on the basis of the available material, that Mr Crouch has neglected his duties in this regard.
Barlaw is critical of the appointment of Mr Bartolo’s former solicitors as solicitors for the trustee. Mr Crouch denies that there was any conflict of interest but in these proceedings agreed to withdraw instructions from the solicitors and appoint new solicitors. In my view, it was unwise for Mr Crouch to engage the former solicitors of the bankrupt and their withdrawal was appropriate.
Barlaw asserts that the trustee has been “urgently dissipating assets against a background of his appointment as trustee being challenged”. This relates to the trustee’s attempts to sell the bankrupt’s equity in real estate at Quakers Hill to Mrs Bartolo. Having heard evidence in relation to that proposed sale I am persuaded that the sale is a sale for a fair price on an arm’s length basis and the completion of the sale is in the interests of all creditors. Indeed, I made orders on 26 May 2011 to facilitate the completion of the sale for the benefit of creditors.
In summary, I am not persuaded that the assertions made by Barlaw, when considered individually or collectively, warrant the removal of Mr Crouch as trustee by the Court or for an inquiry into his conduct.
This is an estate where, absent substantial recoveries from void transaction or other litigation, the assets available to any trustee may be insufficient to meet the costs incurred already in the administration of the estate. Mr Crouch took the view that the incurring of substantial costs was not in the interests of creditors. He may have been unwise to agree to act as trustee on the debtor’s petition in the light of his experience as administering trustee of the proposed Part X composition. He has previously offered to resign pursuant to s.180 of the Bankruptcy Act. He remains willing to resign if by doing so these proceedings (and associated costs) will be brought to an end. To the extent that Barlaw asserts an interest in the level of the trustee’s fees then that would be a matter to be dealt with pursuant to the Bankruptcy Act and the Bankruptcy Regulations (“the Bankruptcy Regulations”) in the normal way. Mr Crouch would, following resignation, be compelled to seek approval for his fees by reference to regulation 8.08 of the Bankruptcy Regulations and Barlaw, as well as any other creditor, would be entitled to seek to have his remuneration claim taxed or assessed. The remuneration would then be fixed in whatever amount was determined by that process. Mr Crouch would then seek to recoup those fees, together with his costs, from the assets in the estate. It is an unfortunate fact that there may be little or nothing left in the estate once those claims have been paid but that is a direct result of the circumstances impacting on the administration of the estate.
I will order that the resignation of Mr Crouch be accepted and that the application before the Court be dismissed.
I will hear the parties as to costs.

I certify that the preceding sixty-one (61) paragraphs are a true copy of the reasons for judgment of Driver FM

Date: 29 July 2011