Buggy, M.F. v Morton, R.W

No judgment structure available for this case.

IN THE FEDERAL COURT OF AUSTRALIA )
j
GENERAL DIVISION 1
i NO. AB 67/90

BANKRUPTCY DISTRICT OF THE

1 1
AUSTRALIAN CAPITAL TERRITORY 1

Re : MICHAEL FRANCIS BUGGY

A Bankrupt

EX parte: ROBERT WILLIAM MORTON

Trustee

IN THE FEDERAL COURT OF AUSTRALIA )
j
GENERAL DIVISION 1
i NO. AB 68/90

BANKRUPTCY DISTRICT OF THE

) 1
AUSTRALIAN CAPITAL TERRITORY 1

Re : LEONIE FRANCES BUGGY
A Bankrupt

EX parte: ROBERT WILLIAM MORTON

Trustee

of creditors as requested by Hongkong Bank of Frances Buggy, is justified in not calling a meeting
MINUTE OF ORDER

JUDGE MAKING ORDER : Neaves J.

DATE OF ORDER . 31 July 1990 .

WHERE MADE Canberra
THE COURT DIRECTS:
1. That Robert William Morton, the trustee of the bankrupt estates of Michael Francis Buggy and Leonie
Australia Limited and Bank of Singapore (Australia) Limited to consider and if thought fit to pass the resolutions set out in sub-pars (a) and (b) of par.1 of the application herein dated 3 July 1990.
2. That Robert William Morton as such trustee as aforesaid is justified in calling a meeting of creditors to consider a proposal that the creditors provide indemnities or other funding for the administration of the affairs of the bankrupts, Michael Francis Buggy and Leonie Frances Buggy.

AND THE COURT ORDERS THAT the costs of the application dated 3 July 1990 be an expense in the administration of the bankrupt estates.
Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.

IN THE FEDERAL COURT OF AUSTRALIA )
1

GENERAL DIVISION 1
1 No. AB 67/90
BANKRUPTCY DISTRICT OF THE 1
i
AUSTRALIAN CAPITAL TERRITORY 1

Re : MICHAEL FRANCIS BUGGY

A Bankrupt

EX parte: ROBERT WILLIAM MORTON

Trustee

IN THE FEDERAL COURT OF AUSTRALIA ) 1
GENERAL DIVISION ;
1 No. AB 68/90
BANKRUPTCY DISTRICT OF THE )
j
AUSTRALIAN CAPITm TERRITORY 1

Re : LEONIE FRANCES BUGGY

A Bankrupt

Ex parte: ROBERT WILLIAM MORTON
Trustee

I

CORAM: Neaves J.

DATE: 31 July 1990

REASONS FOR JUDGMENT

Robert William Morton ("the trustee") is the trustee
of the bankrupt estates of Michael Francis Buggy and Leonie
Frances Buggy; his wife. The trustee has applied to the

I

Court, by application dated 3 July 1990, for the following directions and orders:

I

"1. That in the events that have happened he is

justified in not calling a meeting of creditors to
consider and if thought fit to pass the following
resolutions:

a. At the meeting of creditors of Leonie Frances Buggy:
i. That Robert William Morton be removed as Trustee of the Estate of Leonie Frances Buggy.
ii. That David William Sistrom be appointed Trustee of the Estate of Leonie Prances Buggy
iii. In the alternative to (ii) that Michael Gregory Jones be appointed Trustee of the Estate of Leonie Frances Buggy.
iv. In the alternative to (ii) and (iii) that David William Sistrom and Michael Gregory Jones be appointed jointly and severally as Trustees of the Estate of Leonie Frances Buggy.

b. At the meeting of creditors of Michael Francis Buggy:
i. That Robert William Morton be removed as Trustee of the Estate of Michael Francis Buggy.
ii. That David William Sistrom be appointed Trustee of the Estate of Michael Francis BugW.

iii. In the alternative to (ii) that Michael

Gregory Jones be appointed Trustee of the Estate of Michael Francis Buggy.
iv. In the alternative to (ii) and (iii) that David William Sistrom and Michael Gregory Jones be appointed jointly and severally as Trustees of the Estate of Michael Francis Buggy.
2. That he is justified in calling a meeting of creditors to consider a proposal that the creditors provide indemnities or other funding for the administration of the affairs of both bankrupts.
3. That the cost of this application be an expense in the administration."

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Michael Francis Buggy became a bankrupt on 29 May 1990 upon the endorsement by the Deputy Registrar in Bankruptcy for the Bankruptcy District of the Australian Capital Territory of the acceptance of a debtor's petition presented on his behalf (Bankru~tcv Act 1966 (Cth), sub- s.55(4A)). Leonie Frances Buggy became a bankrupt on the following day by virtue of the presentation by her of a petition against herself. The petitions were presented following the passing, at meetings of creditors held on 25 May 1990, of resolutions requiring the presentation by the debtors of debtor's petitions within 7 days of the passing of the resolutions. The creditors also resolved that Mr Morton be the trustee of the estate of each of the debtors. It appears from the minutes of the meetings of creditors that the representatives of Hongkong Bank of Australia Limited and Bank of Singapore (Australia) Limited voted at such meetings in favour of Mr Morton's appointment as such trustee.

By letter dated 8 June 1990 addressed to the Singapore (Australia) Limited, claiming to be creditors of

trustee, Hongkong Bank of Australia Limited and Bank of

each of the bankrupts in an amount totalling in excess of $10,000,000, requested the trustee "to convene meetings of the creditors of Leonie Frances Buggy and Michael Francis Buggy at the Law Society of New South Wales on 25 June 1990 at 10.30 a.m. for the purpose of considering and voting upon" the resolutions set out in the letter. Those resolutions were in
similar terms to those set out in the application and which
are reproduced above. The letter concluded:
"Your attention is drawn to section 181 of the Bankruptcy Act which requires 7 days notice of a meeting to pass a special resolution removing the Trustee. Notice of this meeting should therefore be sent to creditors on or before 14 June 1990."

The trustee replied to each of the companies concerned by letters dated 12 June 1990. Those letters, which were in similar terms, read:
"I have your facsimile of the 8th of June 1990
concerning the abovementioned bankrupts.
In view of the fact that at the meeting of creditors of the two bankrupts which was held on the 25th of May 1990 your representatives voted in favour of a resolution that both debtors execute their own petition and that I be Trustee of their bankrupt estates I am surprised at the request contained in your facsimile.
That meeting (the meeting of the 25th of May 1990) was a meeting purporting to be held under Part X of the Bankruptcy Act and was certainly not a meeting of the bankrupt estates.

could have made an application under Section 156A(4) If you were dissatisfied with my appointment you
of the Act but I note that you have made no such
application.

I am not satisfied that you fall within the requirements of Section 64 ( 1) of the Bankruptcy Act and I therefore decline to call a meeting of creditors at this time for the purpose which you have outlined.
I would have thought with respect that in any event

your proposed nominee or nominees as Trustees however constituted (and I note that Mr Jones is the Partner of Mr Sistrom) have a conflict of interest in that Mr Sistrom is the Provisional Liquidator of a company in which one or the other or both of the bankrupts has an interest and in which it is alleged at least that the male bankrupt is a debtor.

I have already made tentative arrangements with the Inspector General to provide me with funding to investigate the affairs of the bankrupts and in due course I shall be convening a meeting to consider the Inspector General's requirements and to seek to obtain indemnities which he has suggested.

I have been properly appointed and unless restrained I propose to continue the administration of these

estates. "

By letter dated 12 June 1990, the solicitors for Bank of Singapore (Australia) Limited informed the trustee that, in their view, the request contained in the letter dated
8 June 1990 was a valid request pursuant to s.64 of the
Bankruptcy Act, that the trustee's letter dated 12 June 1990 provided no grounds for declining to call the meetings and that the trustee's "failure to call a meeting will result in our client making an application pursuant to Section 181 of the Bankruptcy Act to have the court call a meeting of the creditors". No such application has, in fact, been made.

By letter dated 14 June 1990, the solicitors for Hongkong Bank of Australia Limited asserted that the trustee was bound to call the meetings under s.64(l)(b) of the Bankruptcy Act as their client and Bank of Singapore (Australia) Limited satisfied the requirements of that provision. It was said that at the meetings of creditors of the debtors held on 25 May 1990 Hongkong Bank of Australia Limited and Bank of Singapore (Australia) Limited were admitted to vote in respect of debts of $6,855,822.90 and

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$3,185,465.32, making a total debt in excess of $10,000,000 while the total debts of those claiming to be creditors of the debtors at those meetings amounted to less than $30,000,000. The letter concluded:
"We therefore insist that you comply with your obligations as Trustee of the estates of the above bankrupts and call a Meeting of Creditors for the purpose of considering the resolutions set out in the request from our client and the Bank of Singapore (Australia) Limited, ensuring that at least 7 days notice of the meeting is properly given to all creditors."

The solicitor for the trustee subsequently sought from the solicitors for Hongkong Bank of Australia Limited and Bank of Singapore (Australia) Limited the reasons why those companies considered that the trustee should be replaced. The solicitors responded that their respective clients were not prepared to inform the trustee of any reasons for their request that the meetings of creditors be called. Further attempts by the trustee to ascertain the reasons why it is asserted that he should be removed as trustee of the bankrupt

estates have elicited no response.
By letter dated 12 July 1990, the solicitors for Hongkong Bank of Australia Limited informed the trustee that if the trustee failed "to give notice of the meeting requested by our client before close of business on Wednesday, 18 July 1990, our client may seek orders from the Court direcding the holding of a meeting". No application to the Court has, in fact, been made.
On 17 July 1990 the trustee addressed a letter to the solicitors for Hongkong Bank of Australia Limited. Despite its length, the letter should I think be set out in full. It reads:
"I am in receipt of your correspondence dated 12th July 1990 addressed to Higgins Solicitors concerning the calling of meetings of creditors for the sole purpose of considering and voting upon resolutions that I be removed as Trustee of the estates of the bankrupts.
As you are aware, the request by you in your letter of 8th June 1990 was overtaken by events in that the bankrupts made applications for my removal as Trustee on Friday 15th June 1990. I have already informed you that these applications were dismissed.
As you know, it is the duty of a Trustee to determine the assets and the liabilities of a bankrupt estate. You will be aware that the bankruptsr claim that they are indebted to Associated Holdings Limited in the sum of approximately S13M.
It seems to me that whether I call a meeting or not as Trustee I still have to deal with the proof in relation to this apparent debt and no doubt the Chairman of the meeting would have to properly deal with any proxy with which he is presented.
In addition, in view of the fact that the bankrupts have been involved in over forty (40) companies and

certain that I cannot at this early stage of these possibly one hundred (100) litigation cases I am administrations determine with any degree of
accuracy the true liabilities of the bankrupts.

Furthermore, it seems to me that in view of the work that I have undertaken in respect of these bankrupt estates the replacement of myself as trustee would involve fruitless expenditure.

Now as you are aware I myself and through my solicitors have sought in vain reasons as to why I should be removed. Despite repeated requests I have to date received no written indication of any perceived dissatisfaction with my administration in these estates. Mr John Robertson of the Hong Kong Bank did indicate to me that I may not be impartial. I would have thought the fact that the bankrupts

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have sought to have me removed would of itself indicate my impartiality. MS Sutherland of Heidtman and CO indicated to Mr Coombes of Higgins Solicitors that I may not be progressing with the administration of these estates. I have frozen bank accounts, conducted searches, held conferences, obtained records, sought funding, accepted countless telephone calls and dealt where necessary by correspondence as well as arranged summonses under Section 69 and 81 of the Bankruptcy Act in respect of the bankrupts and their company accountant. Since it is just over one month since the commencement of these bankruptcies I can hardly see that such a statement is justified.
As far as I know there are five (5) registered trustees in the ACT. These are:
1.    David Sistrom
2.    Barry Taylor
3.    Robert Yeomans
4.    Ian Morrison
5.    Robert Morton

As you know David Sistrom is the liquidator of Tekin Australia Limited. He is pursuing the male bankrupt in respect of property which apparently belonged to the company. He therefore, it seems to me may have a claim at least against the estate of the male bankrupt.

Barry Taylor is the liquidator of Tymplum Pty Limited and I believe that he likewise may have a claim against the bankrupts estate's [sic] and most likely in respect of rent due to that company which has been misappropriated or rent due by the bankrupts in respect of an area of the 5th Floor of Morrissett House.

Robert Yeomans was for many years the accountant for

the bankrupts and prepared their personal income tax
returns.

Ian Morrison is semi-retired and a consultant to Ernst and Young. His partner or associate is Ray Dawson who is currently the Receiver of Leprechaun Hotels Pty Limited (the ACT company).

I have had no connection previously with the bankrupts. It seems to me that the replacement of myself with any of the other Trustees in the ACT could well lead to a conflict of interest. In view of the litigious nature of the bankrupts I am certain that such a proposition would put them to advantage and would not be in the best interest of creditors generally. In fact such a situation would lead in my opinion to an injustice.

In view of the fact that you have failed to provide me with any reasons for holding such meetings as you request I sought the directions of the Federal Court on Friday last in this matter. I have asked the Judge to restrain a resolution concerning my removal at these meetings. I believe I have given him all the facts including the problem of the Associated Holdings debt. His Honour, Neaves J., before whom I sought direction indicated that he wished to consider the matter further.

I have been informed yesterday by the Deputy Registrar that the Judge may not be free to deal with this matter until Friday 20th July 1990. I am awaiting confirmation of a date from the Registry and will advise you accordingly in order to give you the opportunity to take instructions from your client.

Now let me make this very clear to you M r Robertson. If you wish me to be removed, please ensure that you put your reasons in writing and fax the correspondence to me at the earliest possible date.
I will put your correspondence on affidavit to
ensure that the Judge gives it consideration before
providing me with directions."

The solicitors for Hongkong Bank of Australia
Limited replied by letter dated 18 July 1990 reiterating that
the company had no obligation to give reasons for seeking the

trustee's removal and that the company did not intend to be represented on the hearing of the trustee's application for

directions. The solicitors requested that the trustee place certain correspondence before the Court. This the trustee has done.
Apart from the material to which I have already
referred, I have, in considering the trustee's application for
directions, taken into account the minutes of the meetings of

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creditors held on 25 May 1990, the statement of affairs of each of the bankrupts and the contents of the trustee's two reports made pursuant to s.19AA of the Bankruptcy Act.

Sub-section 64(l)(b) of the Bankruptcy Act provides that the trustee shall convene a meeting of the creditors of a bankrupt whenever so requested in writing by at least one- fourth in value of the creditors. Sub-section 19(l)(b)
provides that, where a person becomes a bankrupt, it is the
duty of the trustee to convene a meeting of the bankrupt's
creditors whenever required by sub-s.64(1). It is, however,
well established that, notwithstanding the terms in which
those provisions are expressed, the Court may, in an
appropriate case, in the exercise of the very wide powers
vested in it by s.30 of the Bankruptcy Act intervene, to
declare that the request for the calling of a meeting of
creditors need not be acted upon by the trustee (In re J.
Burn: Ex parte E.N. de V. Dawson. H.T. McClellan and the
Trustee [l9321 1 Ch. 247 at pp.256-8, 260-1; Re Crawford
jdeceased!: Ex parte the Trustee. the Official Receiver and
Autoterms Ltd (1943) 13 A.B.C. 201) or to restrain the holding

of such a meeting (Ex parte Saver: In re Manse1 (1887) 19
Q.B.D. 679).
A consideration of the material before the Court leaves no room for doubt that the task of properly administering the estates of the bankrupts will be a complex, time consuming and difficult one. I accept that the

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information which the trustee has been able to discover so far in the administration of the estates has not been sufficient to enable him to prepare what might reasonably be thought to be an accurate and complete list of the creditors of each bankrupt estate and the amount of each creditor's debt. Even that task is presenting the trustee with considerable problems. With this in mind, the assertion by Hongkong Bank of Australia Limited and Bank of Singapore (Australia) Limited that, in terms of sub-s.64(1)(b) of the Bankruptcy Act, the debts due to them together constitute at least one-fourth in value of the creditors cannot be accepted with complete confidence.
It may strictly be correct, as a matter of law, that Hongkong Bank of Australia Limited and Bank of Singapore (Australia) Limited are under no obligation to inform the trustee of the reasons why they assert that he should be removed as trustee of the two estates in question. Nevertheless, being well aware of the trustee's application to

the Court and being advised, as they are, by experienced firms of solicitors, they might well have been expected to have
assisted the Court by providing to it whatever material they
may have relevant to the question whether the trustee's
removal should be considered by a meeting of creditors
convened so recently after his acceptance by those creditors
as a suitable person to administer the bankrupt estates.
Neither company has, however, seen fit to do so.

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As appears from the trustee's reports under s.19AA of the Bankruptcy Act, he has carried out extensive enquiries and incurred substantial costs in the administration of the estates. There is nothing in the material before the Court to suggest that the trustee has been dilatory in the administration of the estates or has otherwise failed to carry out his responsibilities as trustee. In the absence of any reasons being advanced for dissatisfaction with the trustee's administration, it is clearly in the interests of creditors

generally that the trustee continue with the enquiries which he is in the course of undertaking. To do otherwise would involve duplication of effort by a new trustee with consequent increase in the costs of administration and unnecessary delay without any apparent compensating benefit.
I am not satisfied on the material before me that any useful purpose would be 'served by requiring the trustee to accede to the request that he call meetings of creditors to consider his removal as trustee. If any creditor has material

which would justify that course, the creditor is, of course,
free to make an appropriate application to the Court. I, therefore, consider it a proper case in which to give directions to the trustee in terms of pars 1 and 2 of the

application dated 3 July 1990. It is also, in my opinion,

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appropriate to order that the costs of the application be an
expense in the administration of the bankrupt estates.
I certify that this and the
preceding 12 pages are a true copy of the Reasons for Judgment herein of the

Honourable Mr Justice
Neaves .
Dated: 31 July 1990

The trustee appeared in person.
Michael Francis Buggy attended on his own behalf and on behalf of Leonie Frances Buggy.

Date of hearing . 13 July 1990

Date of judgment 31 July 1990

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Citations

Buggy, M.F. v Morton, R.W [1990] FCA 391

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IN THE FEDERAL COURT OF AUSTRALIA	)
j
GENERAL DIVISION	1
i NO. AB 67/90
BANKRUPTCY DISTRICT OF THE	1 1
AUSTRALIAN CAPITAL TERRITORY	1

IN THE FEDERAL COURT OF AUSTRALIA	)
j
GENERAL DIVISION	1
i NO. AB 68/90
BANKRUPTCY DISTRICT OF THE	) 1
AUSTRALIAN CAPITAL TERRITORY	1

GENERAL DIVISION	1
1 No. AB 67/90
BANKRUPTCY DISTRICT OF THE	1
i
AUSTRALIAN CAPITAL TERRITORY	1

IN THE FEDERAL COURT OF AUSTRALIA )	1
GENERAL DIVISION	;
1 No. AB 68/90
BANKRUPTCY DISTRICT OF THE	)
j
AUSTRALIAN CAPITm TERRITORY	1

By letter dated 8 June 1990 addressed to the Singapore (Australia) Limited, claiming to be creditors of	trustee, Hongkong Bank of Australia Limited and Bank of
each of the bankrupts in an amount totalling in excess of $10,000,000, requested the trustee "to convene meetings of the creditors of Leonie Frances Buggy and Michael Francis Buggy at the Law Society of New South Wales on 25 June 1990 at 10.30 a.m. for the purpose of considering and voting upon" the resolutions set out in the letter. Those resolutions were in
similar terms to those set out in the application and which are reproduced above. The letter concluded:

certain that I cannot at this early stage of these	possibly one hundred (100) litigation cases I am	administrations determine with any degree of accuracy the true liabilities of the bankrupts.
Furthermore, it seems to me that in view of the work that I have undertaken in respect of these bankrupt estates the replacement of myself as trustee would involve fruitless expenditure.
Now as you are aware I myself and through my solicitors have sought in vain reasons as to why I should be removed. Despite repeated requests I have to date received no written indication of any perceived dissatisfaction with my administration in these estates. Mr John Robertson of the Hong Kong Bank did indicate to me that I may not be impartial. I would have thought the fact that the bankrupts

Barry Taylor is the liquidator of Tymplum Pty Limited and I believe that he likewise may have a claim against the bankrupts estate's [sic] and most likely in respect of rent due to that company which has been misappropriated or rent due by the bankrupts in respect of an area of the 5th Floor of Morrissett House.	Robert Yeomans was for many years the accountant for	the bankrupts and prepared their personal income tax
returns.
Ian Morrison is semi-retired and a consultant to Ernst and Young. His partner or associate is Ray Dawson who is currently the Receiver of Leprechaun Hotels Pty Limited (the ACT company).
I have had no connection previously with the bankrupts. It seems to me that the replacement of myself with any of the other Trustees in the ACT could well lead to a conflict of interest. In view of the litigious nature of the bankrupts I am certain that such a proposition would put them to advantage and would not be in the best interest of creditors generally. In fact such a situation would lead in my opinion to an injustice.
In view of the fact that you have failed to provide me with any reasons for holding such meetings as you request I sought the directions of the Federal Court on Friday last in this matter. I have asked the Judge to restrain a resolution concerning my removal at these meetings. I believe I have given him all the facts including the problem of the Associated Holdings debt. His Honour, Neaves J., before whom I sought direction indicated that he wished to consider the matter further.
I have been informed yesterday by the Deputy Registrar that the Judge may not be free to deal with this matter until Friday 20th July 1990. I am awaiting confirmation of a date from the Registry and will advise you accordingly in order to give you the opportunity to take instructions from your client.
Now let me make this very clear to you M r Robertson. If you wish me to be removed, please ensure that you put your reasons in writing and fax the correspondence to me at the earliest possible date.
I will put your correspondence on affidavit to
ensure that the Judge gives it consideration before providing me with directions."

trustee's removal and that the company did not intend to be	represented on the hearing of the trustee's application for
directions. The solicitors requested that the trustee place certain correspondence before the Court. This the trustee has done.
Apart from the material to which I have already referred, I have, in considering the trustee's application for directions, taken into account the minutes of the meetings of

of such a meeting	(Ex parte Saver: In re Manse1 (1887) 19
Q.B.D. 679).

the Court and being advised, as they are, by experienced firms	of solicitors, they might well have been expected to have
assisted the Court by providing to it whatever material they may have relevant to the question whether the trustee's removal should be considered by a meeting of creditors convened so recently after his acceptance by those creditors as a suitable person to administer the bankrupt estates. Neither company has, however, seen fit to do so.

Date of hearing	. 13 July 1990
Date of judgment	31 July 1990

[1990] FCA 391

31 Jul 1990