Borg v de Vries (Trustee), in the matter of the Bankrupt Estate of David Morton Bertram
[2018] FCA 2116
•21 December 2018
FEDERAL COURT OF AUSTRALIA
Borg v de Vries (Trustee), in the matter of the Bankrupt Estate of David Morton Bertram [2018] FCA 2116
File number: SAD 241 of 2018 Judge: WHITE J Date of judgment: 21 December 2018 Date of publication of reasons: 31 January 2019 Catchwords: BANKRUPTCY AND INSOLVENCY – application pursuant to s 90‑15 of the Insolvency Practice Schedule (Bankruptcy), Schedule 2 to the Bankruptcy Act 1966 (Cth) for the replacement of the trustees of a bankrupt estate – consideration of the matters that may tend to indicate that replacement of the trustee would advance the purposes of the Bankruptcy Act 1966 (Cth) in the administration of the estate – replacement of the trustees ordered. Legislation: Bankruptcy Act 1966 (Cth) ss 4A, 181A(3), 179(1); Sch 2 ss 1‑1(2)(b), 90‑15, 90‑20, 90‑35
Corporations Act 2001 (Cth) ss 502‑505, 600A
Insolvency Law Reform Act 2016 (Cth) Sch 2 s 165
Federal Court Rules 2011 (Cth) r 9.12
Cases cited: Australian Securities and Investments Commission v Franklin [2014] FCAFC 85; (2014) 223 FCR 204
Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) [2003] NSWSC 496; (2003) 21 ACLC 1330
DSG Holdings Australia Pty Ltd v Helenic Pty Ltd [2014] NSWCA 96; (2014) 86 NSWLR 293
Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619
Lis v Bertram [2018] SADC 34
Macchia v Nilant [2001] FCA 7; (2001) 110 FCR 101
Moore v Macks [2007] FCA 10; (2007) 4 ABC 639
Re Adam Eyton Ltd; ex parte Charlesworth (1887) 36 Ch D 299
Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262
Re Gault; Gault v Law (1981) 57 FLR 165
Re Tyndall; ex parte Official Receiver (1977) 17 ALR 182
Date of hearing: 12 December 2018 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 56 Counsel for the Applicants: Mr B Roberts SC Solicitor for the Applicants: Charlton Rowley Legal Counsel for the Respondent: The Respondent did not appear Counsel for the Intervener: Mr J Cudmore Solicitor for the Intervener: CCK Lawyers ORDERS
SAD 241 of 2018 IN THE MATTER OF THE BANKRUPT ESTATE OF DAVID MORTON BERTRAM
BETWEEN: FRANK BORG
First Applicant
ATHENA LIS
Second Applicant
PETER D’ALFONSO (and others named in the Schedule)
Third Applicant
AND: ANTONY DE VRIES AND DAVID SOLOMONS AS TRUSTEES OF THE BANKRUPT ESTATE OF DAVID MORTON BERTRAM
Respondent
DARISHA HOLDINGS PTY LIMITED
Intervener
JUDGE:
WHITE J
DATE OF ORDER:
21 DECEMBER 2018
THE COURT ORDERS THAT:
1.Pursuant to s 90-15 of the Insolvency Practice Schedule (Bankruptcy) to the Bankruptcy Act 1966 (Cth):
(a)the Respondent cease to be the trustee of bankrupt estate of David Morton Bertram; and
(b)Robert William Naudi be appointed trustee of bankrupt estate of David Morton Bertram.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
WHITE J:
On 21 December 2018, I made orders that the respondents cease to be the trustees of the bankrupt estate of David Morton Bertram and that Robert William Naudi be appointed in their place. I said that I would provide reasons for these orders later. The following are my reasons.
On 16 December 2017, David Morton Bertram was made bankrupt. The two respondents, Mr de Vries and Mr Solomons, were appointed as the joint and several trustees of his bankrupt estate.
The applicants are each creditors of Mr Bertram and have filed proofs of debt in the bankruptcy totalling $2,764,994.
By an application filed on 5 October 2018, the applicants seek orders that Mr de Vries and Mr Solomons be removed as trustees and that Robert William Naudi, a registered trustee in bankruptcy, be appointed in their place.
Mr Solomons, who has the day-to-day conduct of the trusteeship, has filed an affidavit in which he said that he would be filing a submitting appearance on the application, save as to costs. No such submitting appearance has been filed and Mr Solomons did not attend the hearing. Nevertheless, I considered it appropriate to proceed on the basis that the respondents’ attitude to the application is that they will abide by the event, save as to costs.
Mr Solomons’ affidavit is substantial and he deposed to having made it in order “to assist the Court in its deliberation”.
The Interlocutory Application indicated that the applicants also sought review of the respondents’ decision to admit the proof of debt of Darisha Holdings Pty Limited in the sum of $9,260,249.96 for the purpose of voting at the meeting of creditors held on 26 July 2018, and an extension of time in which to make that application. On 31 October 2018, the Court granted leave, pursuant to r 9.12 of the Federal Court Rules 2011 (Cth) (the FCR), to Darisha Holdings to intervene in the proceeding for the purpose only of assisting in the Court’s determination of the application concerning the admission of its debt.
However, on 12 December 2018, the applicants informed Darisha Holdings and the Court that they did not press that part of their application concerning the admission of the proof of debt of Darisha Holdings. The Court then made orders dismissing paras [3] and [4] of the Interlocutory Application (which contained the application for the review and the extension of time) and reserved the question of costs with respect to that application.
Accordingly, this judgment concerns only the application for the replacement of the trustees.
Background to the application
On 30 May 2018, the present applicants requested the respondents to transfer the administration of the bankrupt estate to Mr Naudi. At the same time, the applicants provided the respondents with a “Trustee Consent to Act Declaration” form signed by Mr Naudi indicating his willingness to administer the estate together with a Declaration of Independence, Relevant Relationships and Indemnities completed by Mr Naudi.
Following that request, in their second report to creditors of 21 June 2018, the respondents proposed that Mr Naudi become the trustee of the bankrupt estate on 5 July 2018. The report indicated that the respondents made the proposal pursuant to s 181A(3) of the Bankruptcy Act 1966 (Cth). At the same time, the respondents indicated that, if any creditor indicated objection to the appointment of Mr Naudi, a meeting of creditors would be held to consider his nomination as trustee.
In the balance of the report, Mr Solomons reported on the administration of the bankrupt estate, noting in some instances that no further investigations would be taken and, in other instances identifying matters which could be the subject of further consideration by Mr Naudi, should he be appointed as trustee.
Darisha Holdings objected to Mr Naudi replacing the respondents as trustees.
At the subsequent meeting of creditors on 26 July 2018, a representative of the applicants put forward a motion that, pursuant to s 90‑35(1)(a) of the Insolvency Practice Schedule (Bankruptcy) (the Bankruptcy Schedule) “[the respondents] be removed as the trustees for the bankrupt estate of [Mr Bertram]”. The motion was defeated by the votes cast in opposition by Darisha Holdings and other creditors related to the bankrupt. The affidavit of the applicants’ solicitors indicates that Mr Solomons had said, at the conclusion of the voting, that all of those who voted in opposition to the motion were related to the bankrupt.
Following that lack of success, the applicants brought the present application.
The Court’s powers
The power of the Court to remove and replace a trustee in bankruptcy is contained in s 90‑15(1) and (3) of the Bankruptcy Schedule which is Sch 2 to the Bankruptcy Act. That Schedule is given effect by s 4A of the Bankruptcy Act.
Section 90‑15(1) provides:
Court may make orders
(1)The Court may make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate.
Section 90‑15(3) provides (relevantly):
Examples of orders that may be made
(3)Without limiting subsection (1), those orders may include any one or more of the following:
…
(b) an order that a person cease to be the trustee of the estate;
(c) an order that another person be appointed as the trustee of the estate;
…
The applicants have standing to make the application (s 90‑20(1)).
Section 90‑15(4) identifies, in a non‑exhaustive way, matters which the Court may take into account when considering an application for removal of a trustee.
(4)Without limiting the matters which the Court may take into account when making orders, the Court may take into account:
(a)whether the trustee has faithfully performed, or is faithfully performing, the trustee’s duties; and
(b)whether an action or failure to act by the trustee is in compliance with this Act and the Insolvency Practice Rules; and
(c)whether an action or failure to act by the trustee is in compliance with an order of the Court; and
(d)whether the regulated debtor’s estate or any person has suffered, or is likely to suffer, loss or damage because of an action or failure to act by the trustee; and
(e)the seriousness of the consequences of any action or failure to act by the trustee, including the effect of that action or failure to act on public confidence in registered trustees as a group.
The powers of the Court under s 90‑15 with respect to the removal and replacement of a trustee are different in significant ways from those in its predecessor. Section 179(1) of Bankruptcy Act, which was in force until 28 February 2017, provided:
The Court may, on the application of the Inspector‑General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:
(a) remove the trustee from office; and
(b) make such order as it thinks proper.
As noted by French J in Macchia v Nilant [2001] FCA 7; (2001) 110 FCR 101 at [49]‑[50], s 179(1) required a two stage consideration: first, whether the Court should inquire into the conduct of the trustee and, secondly, if an inquiry is undertaken, whether the trustee should be removed from office and/or any other order made. In the first stage, the Court was required to consider whether, on the grounds and facts before it, a case had been made out for an inquiry: Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 at 268. Generally speaking, the Court did not order an inquiry under s 179(1) unless it considered on the evidence that there were substantial grounds for believing that the trustee had erred in his or her administration: Re Gault; Gault v Law (1981) 57 FLR 165 at 173. The Court took the view that it should not order an inquiry and put the trustee, and possibly the creditors, to the expense and trouble involved unless it thought it likely that the inquiry would reveal misconduct: Ibid.
The Court also generally took the view that it should not interfere unduly with the day‑to‑day administration of a bankrupt’s estate by a trustee. Deane J stated the position in this respect in Re Tyndall; ex parte Official Receiver (1977) 17 ALR 182 at 186:
The trustee is made responsible for the administration of the bankrupt estate under the general provisions of the Act. He must, in the course of that administration, make a variety of decisions aimed at enabling the administration to be carried out with promptness and efficiency. Some of these decisions will be business or commercial decisions in which the business or commercial experience of the trustee would itself provide a basis for arguing that, unless it was shown that the trustee’s decision was perverse or clearly wrong, it will be inappropriate and unjust for the court to interfere.
See also Ferella v Official Trustee in Bankruptcy (No 2) [2011] FCA 619 at [11]‑[20]; Moore v Macks [2007] FCA 10, (2007) 4 ABC 639 at [30].
In contrast with the former s 179(1), s 90‑15 does not require a two stage consideration. An applicant seeking the removal of a trustee does not have to establish proper grounds for an inquiry. The power to remove and replace is not made subject to conditions such as proof of error, misfeasance, negligence or other poor conduct by a trustee.
Section 90‑15 was introduced into the Bankruptcy Act by the Insolvency Law Reform Act 2016 (Cth) (the Law Reform Act). The effect of the Law Reform Act was, amongst other things, to create common rules applicable to personal and corporate insolvencies. It did so by inserting into the Corporations Act 2001 (Cth) and the Bankruptcy Act schedules with substantially common provisions. In the Bankruptcy Act, it is the Bankruptcy Schedule and in the Corporations Act, it is the Insolvency Practice Schedule (Corporations) (the Corporations Schedule). Section 90‑15 in the Corporations Schedule is in common form with s 90‑15 of the Bankruptcy Schedule.
One effect of the change is to align the provisions for the removal of a trustee in bankruptcy more closely with those for the removal of a liquidator. This is evident from the legislative history.
By s 165 of Sch 2 to the Law Reform Act, ss 502‑505 of the Corporations Act were repealed. Section 503, which concerned the removal of liquidators, had provided:
The Court may, on cause shown, remove a liquidator and appoint another liquidator.
Section 90‑15 in the respective Insolvency Practice Schedules does not replicate exactly the former s 503 but it does, in substance, contemplate a liquidator or trustee, as the case may be, being removed “on cause shown”. That being so, some assistance as to the application of the powers of removal and replacement of a trustee in bankruptcy may be derived from the authorities concerning s 503 and its predecessors. Those authorities indicated that the power to remove and replace a liquidator was not confined to circumstances of demonstrated error or shortcomings by a liquidator. Instead the power was exercised by reference to the interests of the liquidation.
In Re Adam Eyton Ltd; ex parte Charlesworth (1887) 36 Ch D 299, Cotton LJ said, at 303‑4:
[I]t is not necessary, in order to justify the Court under this section in removing the liquidator, that there should be anything against the individual. In my opinion, although of course unfitness discovered in a particular person would be a ground for removing him, yet the power of removal is not confined to that, … [I]f the Court is satisfied on the evidence before them that it is against the interest of the liquidation, by which I mean all those who are interested in the company being liquidated, that a particular person should be made liquidator, then the Court has power to remove the present liquidator, and of course then to appoint some other person in his place.
To like effect, Bowen LJ said at 306:
In many cases … unfitness of the liquidator will be the general form which the cause will take upon which the Court in this class of case acts, but that is not the definition of due cause shewn. In order to define “due cause shewn” you must look wider afield, and see what is the purpose for which the liquidator is appointed. To my mind the Lord Justice has correctly intimated that the due cause is to be measured by reference to the real, substantial, honest interests of the liquidation, and to the purpose for which the liquidator is appointed. Of course, fair play to the liquidator himself is not to be left out of sight, but the measure of due cause is the substantial and real interest of the liquidation.
Austin J applied the approach of Bowen LJ in Re Adam Eyton in Domino Hire Pty Ltd v Pioneer Park Pty Ltd (in liq) [2003] NSWSC 496; (2003) 21 ACLC 1330:
[58]The words "cause shown" indicate that a liquidator is not to be removed unless there is some ground for removal, and the ground must be established by evidence. However, "cause shown" is not a narrow concept. It is open to the applicant for removal to point to any conduct or inactivity on the liquidator's part that provides a basis for the conclusion that he or she should be removed, ranging from moral turpitude, to bias or partiality, lack of independence, incompetence or other unfitness for office. But the concept of "cause shown" is not limited to matters relating to the unfitness of the liquidator to hold office. In Re Adam Eyton Ltd; ex parte Charlesworth (1887) 36 Ch D 299, speaking of a statutory formulation where the words used were "due cause shown" rather than "cause shown", Bowen LJ said (at 306) … [see the passage just quoted]:
[59]In Network Exchange Pty Ltd v MIG Communications Pty Ltd (1994) 13 ACSR 544, Hayne J applied this test to an application for removal of an administrator, even though the statutory provision authorising the Court to remove an administrator (s 449B) does not contain the words "on cause shown". His Honour concluded that the absence of those words did not produce any marked difference, and he described the position as follows (at 550):
“In my view, however, it must be accepted that an order for removal should be made only if it is demonstrated that such an order would be for the better conduct of the administration. It is not to be contemplated that the power under s 449B is to be exercised save in circumstances that justify or require its exercise and those, speaking generally, would appear to be circumstances in which the order would conduce to the better conduct of the administration concerned.”
[60]In cases where the applicant relies on misconduct by the liquidator, the words "cause shown" do not require the Court to work through each of the particulars of misconduct relied upon, and determine one by one whether they are made out. Young J (as the Chief Judge in Equity then was) rejected such an approach in Re Biposo Pty Ltd (1995) 17 ACSR 730. His Honour said (at 734):
“The question is not whether in adversarial litigation there has been proof of a case according to the heads particularised, … but rather whether in the interests of the public the removal of the liquidator would be for the general advantage of persons interested in the winding up”.
In Australian Securities and Investments Commission v Franklin [2014] FCAFC 85; (2014) 223 FCR 204 at [55], this Court applied the approach of Austin J in Domino Hire.
I conclude that the approach in the corporations cases to s 503 and its predecessors is apposite in relation to the removal and replacement of the trustee in bankruptcy under ss 90‑15 and 90‑20 of the Bankruptcy Schedule. The Court should exercise the power to remove and replace a trustee in bankruptcy in a manner which best advances the interests of the bankruptcy, having regard to the objects of the Bankruptcy Act. Having regard to s 1‑1(2)(b) of the Bankruptcy Schedule, the proper interests of the creditors of the bankrupt will be an important consideration.
The matters relied on
In the present case, it was not part of the applicants’ primary case that there had been any error, neglect or wrongdoing by the trustees. The submission was that their removal and replacement is warranted for other reasons. In summary these were:
(a)Mr Solomons’ affidavit indicated that the respondents regarded their investigations into the affairs of the bankruptcy as being at an end;
(b)there is a basis on which to consider reasonably that further investigations of the bankrupt’s affairs are appropriate for the proper discharge of the objects of the Bankruptcy Act;
(c)Mr Naudi is willing to undertake the investigations;
(d)some of the creditors are willing to fund Mr Naudi’s investigations; and
(e)the respondents do not oppose the making of the orders for their replacement, and no one else has appeared before the Court to voice opposition.
No further investigations by the respondents
In relation to the first of these matters, Mr Solomons has deposed to a lack of funds in the bankrupt estate with which to conduct further investigations. He has also deposed that he considers that any application with respect to the matrimonial settlement between the bankrupt and his former wife (to which I will refer shortly) “would have no chance of succeeding”; and that he had received advice as to a potential challenge to the bankrupt’s exclusion as a beneficiary from his late father’s will (which was in the negative).
The respondents’ intention to take no further action in relation to the affairs of the bankrupt is confirmed by their second report to creditors dated 21 June 2018. As already noted, in the same report the respondents had referred to the request by the present applicants for them to be replaced by Mr Naudi and, had in fact proposed to the creditors that Mr Naudi become trustee of the bankrupt estate on 5 July 2018. The respondents also referred in the report to possible steps which could be taken by Mr Naudi should he become trustee. It is possible that their attitude to the taking of further steps was tempered by their anticipation that Mr Naudi would replace them as trustees.
Again as already noted, the trustees were not replaced at the meeting of creditors on 26 July 2018 because Darisha Holdings, whose proof of debt had been admitted, voted against the replacement. By reason of the size of its claimed debt relative to the claim by the present creditors, the resolution for the replacement of the trustees was thereby defeated.
Matters for further investigation
In support of the submission that there were matters requiring further investigation, counsel for the applicants referred to evidence which indicated that the bankruptcy of the bankrupt had been contemplated for at least several months before it occurred, that action may have been taken in anticipation of the sequestration order being made, the prospect of challenges to the efficacy of some of these actions, and the prospect of recoveries by the bankrupt estate.
The bankrupt’s exclusion from his father’s will
Counsel referred first to the fact that the bankrupt’s father (William Bertram) had altered his will during 2016 in a way which had the effect (apparently) of excluding the bankrupt from receiving an amount as a beneficiary during the currency of any bankruptcy. I have used the word “apparently” because the will of the bankrupt’s father was not in evidence and the applicants relied on secondary evidence. Some documents referred to the bankrupt’s father as “William Bertram” and some as “Michal Bertram”. It was not suggested that anything turned (for present purposes) on this discrepancy.
It appears that the will established a discretionary Testamentary Trust, one of the terms of which identified an “excluded person” as person “who is not entitled to any distribution from the Testamentary Trust”. Such a person is defined to be “any person who commits an act of bankruptcy and who as a consequence of that act has been made bankrupt and remains undischarged from being a bankrupt in accordance with the Bankruptcy Act” (emphasised added). The bankrupt is within this definition.
In relation to this term, the respondents had reported in the first report to creditors that “William Bertram (and/or his legal advisers) was aware of his son’s failed property development in Adelaide and consequently included the specific provision in his will in June 2016”.
The applicants also relied on a paragraph in a letter signed by the bankrupt on 26 July 2017 apparently addressed to Darisha Holdings containing an acknowledgement of the indebtedness on which Darisha Holdings relied:
I acknowledge, all previous loan agreements between me and Darisha Holdings, as well as all the amounts above. I agree to repay all loans no later than June 30th, 2017. Should I fail to pay these loans back I, as one of the trustees of the David Bertram Testamentary Trust, established by my late Father Michal Bertram, agree and give full permission that funds from the David Bertram Testamentary Trust will be used to pay back all the loans listed above or any other sources of assets or income I have.
Counsel submitted that, considered neutrally, this paragraph gave rise to a line of inquiry concerning access to the assets of the David Bertram Testamentary Trust, and the bankrupt’s control of those assets, and that that line of inquiry had not yet been pursued.
The matrimonial settlement
Counsel referred to some features of the matrimonial settlement between the bankrupt and his former wife which, he submitted, warranted further investigation.
In the first report to creditors, the respondents referred to the property settlement between the bankrupt and his former wife recorded by way of consent orders in the Family Court of Australia on 23 May 2016. They summarised the effect of the consent orders as follows:
(i)the bankrupt retain all his personal possessions, including his furniture, his Alfa car and his shares in various companies;
(ii)the wife pay the bankrupt $225,000 forthwith;
(iii)the wife pay the outstanding schools fees in respect of their child;
(iv)the wife retain four properties in East Perth, Surry Hills (2) and Malvern;
(v)the wife retain her Lexus motor vehicle; and
(vi)the wife retain her interest in her company, Dr Joni Feldman Pty Ltd, NJ Family Trust, her personal savings, her personal possessions and her superannuation fund.
Counsel for the applicants noted that, on the basis of valuations provided by the bankrupt to the first applicant at the time of entering into a loan agreement in April 2016, the value of the assets received and/or retained by the bankrupt’s former wife by virtue of the matrimonial settlement was of the order of $5.647 million whereas the value of the assets received by the bankrupt was of the order of $250,000. He submitted that this discrepancy and the timing of the matrimonial settlement in relation to the bankruptcy were a cause for suspicion. Although the respondents had concluded that any application to set aside the matrimonial settlement “would have no chance of succeeding”, counsel noted that this opinion had been formed without the obtaining of any legal advice or any further investigation.
The currency of the District Court proceedings
The third matter to which counsel pointed as suggesting the contemplation of bankruptcy (and the potential for steps to have been taken in anticipation of that occurring) were the proceedings in the District Court of South Australia in which the bankrupt had been the first defendant and a number of the present applicants the plaintiffs. Those proceedings culminated in a judgment on 4 April 2018: Lis v Bertram [2018] SADC 34.
By those proceedings, the plaintiffs sought to recover the amount of unrepaid loans from the bankrupt and companies with which he is associated. By reason of the sequestration order concerning Mr Bertram made on 16 December 2017, judgment was not entered against him. Counsel submitted that it was significant nevertheless that the proceedings had been pending against the bankrupt at the time of his bankruptcy, and that this was another matter heightening suspicion that action had been taken before the bankruptcy to diminish the amount of the bankrupt estate.
The company “receivables”
Next, counsel referred to evidence indicating that there may be some “receivables” by the companies in which the bankrupt is a shareholder and, in some instances, a director. Counsel noted that the potential for recovery of these receivables, with the potential for benefit to the bankrupt estate, had not been the subject of detailed investigation. It is not necessary to refer to the evidence in detail. I accept that there is evidence indicating a reasonable basis for the proposed line of enquiry.
The role of the bankrupt’s brother
Counsel noted that the opinion from counsel which the trustees had obtained with respect to a possible challenge to the exclusion of the bankrupt from receiving a benefit under his father’s will while a bankrupt had been funded by the bankrupt’s brother, Richard Bertram, who had provided $2,700 for this purpose. In addition, Richard Bertram had paid the trustees the sum of $25,000 on account of the trustees’ remuneration and disbursements. Counsel noted that Richard Bertram controls Darisha Holdings and that the casting of votes by Darisha Holdings had been the only reason why the resolution for the replacement of the trustees had failed. Counsel submitted that, in various ways, the provision of this funding by Richard Bertram gave rise to concern and, coupled with the opposition of Darisha Holdings to the replacement of the trustees, suggested a concern by Richard Bertram that the affairs of the bankrupt should not be further investigated.
Counsel submitted that Mr Richard Bertram’s involvement in the bankrupt estate may, despite his being a director of Darisha Holdings, be driven by his familial relationship with the bankrupt, rather than the relationship of debtor and creditor.
General considerations
Counsel acknowledged that the Court is asked to make the order for the removal and replacement of the trustees in circumstances in which a motion to the same effect had been defeated on the vote of the creditors. He submitted, however, that the Court should attach less weight to that consideration given the familial relationship between Mr Richard Bertram, who controls Darisha Holdings, and the bankrupt. Counsel invoked, by analogy, the principle underpinning the former s 600A of the Corporations Act which permitted a Court to order that the votes of related entities on motions concerning the administration, a deed of company arrangement or a winding up should be disregarded: see DSG Holdings Australia Pty Ltd v Helenic Pty Ltd [2014] NSWCA 96; (2014) 86 NSWLR 293 at [81] in which Leeming JA said of s 600A that it “reflects a legislative recognition that the reasons for the voting of related entities may diverge from those of other creditors, in a way that should be subjected to curial oversight”.
I accept that submission.
Conclusion
The circumstances described above, taken in combination, satisfy me that an order for the removal and replacement of the trustees is appropriate. That is not because I am satisfied of any misfeasance, neglect or other error in the conduct of the administration of the estate by the respondents. It is instead because I am satisfied that it appears that the respondents consider that no further investigations are warranted or practical; that despite that, there do appear to be some matters which may warrant further investigations; that the first applicant is prepared to fund Mr Naudi to undertake those investigations, but not the respondents; because the respondents do not themselves oppose the order; and because no other party opposes the order. In short, I am satisfied that the replacement of the trustees by Mr Naudi would advance the purposes of the Bankruptcy Act in the administration of the estate.
As indicated at the commencement of these reasons, the Court made orders on 21 December 2018 pursuant to s 90‑15 in the Bankruptcy Schedule giving effect to these conclusions. Those orders were:
(a)the respondents cease to be the trustees of the bankrupt estate of David Morton Bertram;
(b)Robert William Naudi be appointed as trustee of the bankrupt estate of David Morton Bertram.
The above are my reasons for those orders. I will hear from the parties with respect to any consequential orders.
I certify that the preceding fifty-six (56) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice White. Associate:
Dated: 31 January 2019
SCHEDULE OF PARTIES
SAD 241 of 2018 Applicants
Fourth Applicant:
SURRINDER KUMAR
Fifth Applicant:
MURALI KUMARAN
Sixth Applicant:
ROCKY MOLLUSO
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