Cheesman v Waters
[1997] FCA 752
•8 AUGUST 1997
FEDERAL COURT OF AUSTRALIA
CONSTITUTIONAL LAW -whether making of sequestration order exercise of judicial power such that to confer the power upon a Registrar of the Court would infringe Ch III of the Constitution -
BANKRUPTCY - application for declaration that sequestration order invalid - question whether appropriate for declaration to be made but not to proceed to annul bankruptcy considered -
BANKRUPTCY - trustee - failure of trustee to prosecute claim for alleged breach of mortgagee’s fiduciary duty - whether breach of duty established - whether failure to make available transcript of public examination breach of trustee’s duties - no obligation on trustee to make transcript available even if, as denied, copy in possession of trustee.
Bankruptcy Act 1966 (Cth), ss 31A(1)(n), 31A(8), 69(20), 154(1)(a)
Constitution, Ch III
Judiciary Act 1903 (Cth), s 78A
Harris v Caladine (1991) 172 CLR 84, considered and applied
Adsett v Berlouis (1992) 37 FCR 201, applied
Grollo v Palmer (1995) 184 CLR 348, considered and distinguished
Wilson v Minister for Aboriginal and Torres Strait Islanders (1996) 138 ALR 220, distinguished
Kable v Director of Public Prosecutions (1996) 138 ALR 557, distinguished
Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245, applied
Attorney-General (Cth) v The Queen (1957) 95 CLR 529, applied
Cameron v Cole (1943-4) 68 CLR 571, distinguished
Re Deriu (1970) 16 FLR 420, distinguished
BARRY JOHN CHEESMAN, ALICE MAY CHEESMAN, ROSS CHEESMAN, BRONWYN JOY CHEESMAN, GRAEME WALTER CHEESMAN, JEANETTE LOIS CHEESMAN v ROBERT ARTHUR WATERS and THE ATTORNEY-GENERAL OF THE COMMONWEALTH OF AUSTRALIA
VG 105 of 1997
HILL, HEEREY & SUNDBERG JJ
MELBOURNE
8 AUGUST 1997
IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG 105 of 1997 ) GENERAL DIVISION )
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: BARRY JOHN CHEESMAN
ALICE MAY CHEESMAN
ROSS CHEESMAN
BRONWYN JOY CHEESMAN
GRAEME WALTER CHEESMAN
JEANETTE LOIS CHEESMAN
BankruptsBARRY JOHN CHEESMAN
ALICE MAY CHEESMAN
GRAEME WALTER CHEESMAN
JEANETTE LOIS CHEESMAN
AppellantsAND: ROBERT ARTHUR WATERS
First RespondentTHE ATTORNEY-GENERAL OF THE
COMMONWEALTH OF AUSTRALIA
Second Respondent
JUDGES: HILL, HEEREY & SUNDBERG JJ PLACE: MELBOURNE DATED: 8 AUGUST 1997
MINUTES OF ORDER
THE COURT ORDERS THAT:
The appeal be dismissed.
The appellants pay the respondents’ costs of the appeal.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA ) ) VICTORIA DISTRICT REGISTRY ) VG 105 of 1997 ) GENERAL DIVISION )
ON APPEAL FROM A SINGLE JUDGE
OF THE FEDERAL COURT OF AUSTRALIA
BETWEEN: BARRY JOHN CHEESMAN
ALICE MAY CHEESMAN
ROSS CHEESMAN
BRONWYN JOY CHEESMAN
GRAEME WALTER CHEESMAN
JEANETTE LOIS CHEESMAN
BankruptsBARRY JOHN CHEESMAN
ALICE MAY CHEESMAN
GRAEME WALTER CHEESMAN
JEANETTE LOIS CHEESMAN
AppellantsAND: ROBERT ARTHUR WATERS
First RespondentTHE ATTORNEY-GENERAL OF THE
COMMONWEALTH OF AUSTRALIA
Second Respondent
JUDGES: HILL, HEEREY & SUNDBERG JJ PLACE: MELBOURNE DATED: 8 AUGUST 1997
REASONS FOR JUDGMENT
THE COURT:
Each of Barry John Cheesman, Alice May Cheesman, Ross Cheesman, Bronwyn Joy Cheesman, Graeme Walter Cheesman and Jeanette Lois Cheesman (“the Cheesmans”) is a bankrupt, although now discharged from bankruptcy. Sequestration orders against them were made on 4 June 1987 by Registrar Murray on the application of Elders Rural Finance Limited (“Elders”) on 4 June 1987. The petition pursuant to which the sequestration orders were made was issued by Jackson Commodities Pty Ltd, but that company sought to withdraw and Elders was substituted in its place. In the result Robert Arthur Waters became the trustee of the joint and several estates of the appellants.
The present proceedings were commenced by the appellants against Mr Waters claiming declarations that Mr Waters was in breach of his duties as trustee and damages in consequence. An amendment was permitted to the application to raise the question whether s 31A(1)(n) of the Bankruptcy Act1966 (Cth) ("the Act") as in force at the time the sequestration order was made was beyond the legislative powers of the Commonwealth by reason that it conferred judicial power of the Commonwealth on a Registrar of the Federal Court contrary to Ch III of the Constitution. Consequentially, an order was sought by way of declaratory relief that the sequestration order was null, void and of no effect.
Only indirectly did the application as filed and subsequently amended, raise other matters which if proved would have led to the conclusion that the sequestration order should have been set aside. For example, it was alleged that the petition was heard as being unopposed, notwithstanding that a notice of intention to oppose it had been filed on 5 December 1986 and earlier proceedings had been heard before a judge of the Court. It was also alleged that the Cheesmans had had no notice of the hearing and for that reason a sequestration order ought not to have been made. Another matter raised in argument, although not in the application to the Court, was whether there had been a delegation in writing to the Registrar permitting the Registrar to hear petitions in bankruptcy.
These matters were raised, as has been suggested, tangentially in the context of a pleading which alleged that Mr Waters had failed in his duty as trustee to question the process pursuant to which the sequestration orders had been made or to question the validity of the orders in fact made. They were not made in the context of an application to annul the bankruptcy. Indeed, Mr Barry Cheesman, who appeared as spokesman for the appellants, specifically eschewed seeking an order for annulment because such an order would operate to validate the acts of the trustee before the annulment: s 154(1)(a) of the Act.
If it be correct, and certainly the learned primary judge found it likely, that notice of the hearing on the sequestration was not given to the appellants, it is clear that the sequestration order would be set aside but giving the creditor, on whose application the sequestration order was made, the opportunity to proceed with the hearing of the petition, but this time with notice to the debtors. Unfortunately, the appellants for whatever reason did not, on learning of the sequestration order, seek to have it set aside. Had they done so they may have prevented the consequences to them of a forced sale of assets. But that was not to be.
The hearing at first instance occupied some five days and roamed over events that had taken place between the date the sequestration orders were made and the date the proceedings commenced in 1994. The Cheesmans were not legally represented at the hearing, although they had apparently received some legal assistance in framing submissions.
As the learned primary judge notes in the judgment appealed from, five broad categories of claim were made, being:
“· claims relating to the failure of Waters to challenge the bankruptcy orders made against the applicants;
·claims relating to the failure of Waters to prosecute various alleged breaches of duty by Elders Rural Finance Pty. Ltd. (‘Elders’) as a secured creditor of the applicants;
·claims arising out of an alleged failure by Elders to properly account for its realisation, as a secured creditor, of the property of the applicants;
·claims relating to the failure of Waters to comply with his statutory obligations to unsecured creditors;
·alleged mismanagement of the bankrupt estates of the applicants.”
Ultimately, three sets of issues emerged. Only two were the subject of submissions before us, these were first, the challenge to the constitutional validity of the power conferred on a registrar in bankruptcy to make a sequestration order, and second, the question whether the Cheesmans had established that Mr Waters acted in breach of his duties as a trustee occasioning loss to them, their bankrupt estates or others.
THE JUDGMENT APPEALED FROM
In a careful judgment from which appeal is now brought to the Full Court, Merkel J dismissed the Cheesmans’ application. He found the provisions of s 31A(1)(n) of the Act valid and in so doing relied upon the decision of the High Court in Harris v Caladine (1991) 172 CLR 84 which his Honour found not to be relevantly distinguishable. In so doing his Honour found each of the matters suggested to be relevant in Harris v Caladine to be satisfied, namely:
“· the Registrars in Bankruptcy were officers of the Court and within its organisational structure;
·judges of the Court continued to bear the major responsibility for the exercise of judicial power including the making of sequestration orders under the Act;
·the exercise of power by the Registrars was consistent with the requirements of judicial process under Ch. III and;
·the powers of the Court delegated to the Registrars were subject to a review de novo by a judge or judges of the Court.”
Turning to the question whether Mr Waters had acted in breach of his duties as trustee, his Honour stated the test of the trustee’s duty to be that set out in Adsett v Berlouis (1992) 37 FCR 201 at 208-9 in the joint judgment of Northrop, Wilcox and Cooper JJ. It is not suggested that in so doing his Honour applied the wrong test.
His Honour dealt with various factual matters in each of the five areas of complaint, to which reference has earlier been made, and reached the conclusion that the appellants had not made out a case for relief under ss 178 or 179 of the Act. Particularly, his Honour found that Mr Waters had acted reasonably, having regard to the lack of financial resources available to him as trustee. He had acted in accordance with legal advice which he had sought and taken as to the merits of taking action, for example against Elders. The learned primary judge took into account also the fact that proceedings had been taken in the Supreme Court of Victoria to challenge the validity of the appointment by Elders of a receiver and to prevent that receiver from taking possession of the property mortgaged to Elders, which proceedings had ultimately been continued by the parents of Mr Barry Cheesman and which concluded with a finding that there was no basis for interlocutory relief. His Honour also took into account that, while Mr Cheesman made continuous allegations against Elders, there was no evidence made available to Mr Waters supporting the allegations. In short, his Honour found that Mr Waters, in taking no action, acted reasonably because there was no evidence to warrant action being taken, no real prospect of success in any proceedings and no money to finance the proceedings.
It might be noted that evidence was given during the course of the proceedings before his Honour as to advice which Mr Waters took from time to time and legal professional privilege was waived in respect of that advice. There was no challenge or cross-examination by the applicants in relation to the advice given. In the result his Honour found neither breach of duty nor loss. From this decision the appellants appealed.
THE GROUNDS OF APPEAL
An amended notice of appeal disclosed essentially four grounds of appeal. The first was the constitutional challenge to the power of the Registrar to make the sequestration order. The second set of grounds, which were not the subject of written submissions, were relevantly as follows:
“...
(c)His Honour erred in not finding that Section 31A(8) was and still is applicable law for a Sequestration Order made on 04 June 1987, requiring the Registrar to refer the Substituted Petitioning Creditors petition to a Judge of the Federal Court, as a defence opposing the original petition was on file, and the original petition had previously been heard by a Judge of the Federal Court.
(d)His Honour ought to have found that Deputy Registrar Murray acted on 04 June, 1987 without the express written authority from a Judge of the Federal Court of Australia as required by Law.
...
(h)His Honour found that the substituted creditor’s petition was not duly served upon the debtor, and failed to grant an annulment of Bankruptcy as entitled by Law.”
The remaining grounds argued raised the question whether the trustee had been in breach of his duty as trustee by failing to take proceedings against Elders, and the question whether the learned primary judge had failed to give sufficient weight to the appellants’ legal rights under s 69(20) of the Act to have access to the exhibits and transcripts of a hearing under s 69 held between 5 and 8 September 1980 to which Mr Barry Cheesman was examinee.
We shall deal with the four sets of grounds of objection in the order raised in the grounds of appeal.
THE ATTORNEY-GENERAL’S MOTION
In its original form the appellant’s notice of appeal sought:
“a declaration that damages be awarded to the appellants to compensate total loss of assets, income, livelihood and self-employment from the former estates, from the Attorney-General of Australia as the primary cause of loss”.
At the hearing of the appeal, leave was granted to amend the notice of appeal in a number of respects, including the deletion of the claim for damages against the Attorney. Thereupon the Attorney applied to be removed as a party on the ground that, since damages were no longer sought against him, there was no basis for him to remain on the record as a respondent. It was submitted that he was not a “party” who was “affected by the relief sought” by the notice of appeal for the purposes of O 52 r 14 of the Federal Court Rules. Nor was he “interested in maintaining the judgment under appeal” within the meaning of that rule. His interest extended only to putting submissions to the Court on the validity of s 31A(1(n) of the Act, and this was not a direct “interest” in the outcome of the appeal. It was submitted that the appropriate role of the Attorney in the appeal was as an intervener under s 78A of the Judiciary Act 1903 (“the Judiciary Act”).
Order 52 r 14 of the Federal Court Rules provides:
“(1)Each party to the proceeding in the court appealed from who is affected by the relief sought by a notice of appeal or is interested in maintaining the judgment under appeal shall be joined as a party appellant or respondent to the appeal.
(2)The Court or a Judge may order the addition or removal of any person as a party appellant or respondent to an appeal.
(3) A person shall not be made an appellant without his consent.”
While the Attorney-General intervened under s 78A of the Judiciary Act, he is nonetheless in our opinion a "party" to the proceeding within the meaning of this rule. Also, he is "interested" in maintaining the judgment of the trial judge upholding the validity of s 31A(1)(n) of the Act. This is an interest of a public nature. The Attorney-General represents the government of the Commonwealth which has, in the most direct way, an "interest" in upholding the validity of Commonwealth legislation.
We do not accept the submission made for the Attorney that his intervention under s 78A did not have the consequence that he became a respondent to the appeal. Reference was made to subss 78A(3) and (4) which provide as follows:
“(3)When the Attorney-General of the Commonwealth or of a State intervenes in proceedings in a court under this section, then, for the purposes of the institution and prosecution of an appeal from a judgment given in the proceedings, the Attorney-General of the Commonwealth or the State, as the case may be, shall be taken to be a party to the proceedings.
(4)When the Attorney-General of the Commonwealth or of a State institutes an appeal from a judgment given in proceedings in which the Attorney-General of the Commonwealth or the State, as the case may be, has intervened under this section, a court hearing the appeal may make such order as to costs against the Commonwealth or the State, as the case may be, as the court thinks fit.”
The Attorney submitted that subs (3) did not have the effect of making an Attorney who had intervened at first instance a respondent to an appeal. It was said that subs (4) showed that subs (3) was concerned only with appeals by the Attorney. Reliance was placed on the following extract from the Explanatory Memorandum on the Bill which became the Statute Law (Miscellaneous Provisions) Act 1988, by which s 78A was inserted in the Judiciary Act:
“There is doubt whether an Attorney-General would be able to appeal from a decision of a court where the Attorney-General had intervened in proceedings before the court under s 78A(1). This can lead to an Attorney-General, who wishes to ensure access to the High Court on the Constitutional point, seeking to remove the matter into the High Court under s 40(1) of the Judiciary Act.
The proposed addition of s 78A(3) and (4) will confer on an Attorney-General, when intervening, the same rights of appeal as have the other parties to the proceedings.”
Although the language of s 78A(3) is not entirely clear, we think the better view is that the words “for the purposes of the institution and prosecution of an appeal ... the Attorney ... shall be taken to be a party” are directed to an appeal by the Attorney. That construction is supported by the words of subs (4) and by the passage from the Explanatory Memorandum. However, the Memorandum also makes clear that the subsections were directed to removing a doubt as to the standing of an intervening Attorney to appeal. While there may have been doubt at the time the Memorandum was issued, it has since been made quite clear, as indeed it was tolerably clear before, that an intervener becomes a party to the proceedings and has all the benefits and burdens of a party, including the right to appeal. In United States Tobacco Co v Minister for Consumer Affairs (1988) 20 FCR 520 at 534, Davies, Wilcox and Gummow JJ said that:
“an intervener, whether pursuant to s 12 of the ADJR Act, O 6, r 8(1) of the Federal Court Rules, s 78A of the Judiciary Act 1903 (Cth) or otherwise, becomes a party to the proceedings with the benefits and burdens of that status.”
Their Honours then quoted with approval the following passage from the judgment of Hutley JA in Corporate Affairs Commission v Bradley [1974] 1 NSWLR 391 at 396:
“A person accepted as an intervener becomes a party to the proceedings with all the privileges of a party. Thus he can appeal, tender evidence and participate fully in all aspects of the argument. ... Thus the Attorney-General of the Commonwealth appealed to the Privy Council in Attorney-General (Cth) v The Queen (the Boilermakers’ case) (1957) 95 CLR 529 ..., though he was only an intervener in R v Kirby; Ex parte Boilermakers’ Society of Australia (1956 94 CLR 254 in the High Court.”
See also O’Keefe Nominees Pty Ltd v BP Australia Ltd (1995) 128 ALR 718 at 722-723.
Given that s 78A(3) was inserted to remove a doubt as to an intervening Attorney’s right to appeal, and not to confer a right of appeal which did not otherwise exist, the fact that the subsection requires the Attorney to be treated as a party for the purposes of an appeal by him, and is silent as to his status when someone else appeals, is not a reason for treating the subsection as providing by implication that when another party appeals, an Attorney who participates in the appeal does so otherwise than as a party.
The motion of the Attorney-General for removal will be dismissed.
THE CONSTITUTIONAL ARGUMENT
Turning to the substantive argument on this issue, the judgment below recognised that Harris v Caladine authoritatively determines the extent to which the judicial power of the Commonwealth can be exercised by officers of a federal court who are not judges appointed under Ch III. In that case the delegation by judges of the Family Court to Registrars of powers to make consent orders for the settlement of property under the Family Law Act 1975 (Cth) was upheld. Relevantly for present purposes, Harris v Caladine is authority that:
A delegation must not be, either practically or theoretically, an abdication by the court of its jurisdiction, powers or functions so that the judges can no longer be said to constitute the court: Mason CJ and Deane J at 95, Dawson J at 122, Gaudron J at 149, McHugh J at 164.
A delegation must not be inconsistent with the obligation of a court to act judicially and the decisions of the officers of the court in the exercise of the delegated jurisdiction, powers and functions must be subject to review by a judge or judges of the court: Mason CJ and Deane J at 95, Dawson J at 122, Gaudron J at 151 and McHugh J at 164.
Counsel for the appellants (who appeared only on the constitutional aspect of the case) argued that the delegation under s 31A(1)(n) infringed these principles in two respects.
First, he said that the delegation did not "ensure that a person having a non-judicial interest in the matter or otherwise exercising extraneous administrative powers in relation to the matter was precluded from exercising delegated judicial powers".
In developing this argument, counsel said that a Registrar of the Federal Court may hold simultaneously an office as a Registrar in Bankruptcy as well as the delegated judicial powers under s 31A(1)(n). Both in theory and as a matter of practice, the same Registrar could exercise the powers and functions conferred on a Registrar in Bankruptcy by s 41(1)(b) to issue a bankruptcy notice and a creditor's petition under s 47 and, subsequently and in the same matter, the jurisdiction, powers and functions of the Court to order sequestration under s 43. This was said to be contrary to the doctrine of separation of powers, independence and impartiality, and the general notion of natural justice.
The argument was said to arise from the principle of incompatibility developed in Grollo v Palmer (1995) 184 CLR 348, Wilson v Minister for Aboriginal and Torres Strait Islander Affairs (1996) 138 ALR 220 and Kable v Director of Public Prosecutions (1996) 138 ALR 577. In Grollo the concept was expounded in the joint judgment of Brennan CJ, Deane, Dawson and Toohey JJ as follows (at 365):
“The incompatibility condition may arise in a number of different ways. Incompatibility might consist in so permanent and complete a commitment to the performance of non-judicial functions by a judge that the further performance of substantial judicial functions by that judge is not practicable. It might consist in the performance of non-judicial functions of such a nature that the capacity of the judge to perform his or her judicial functions with integrity is compromised or impaired. Or it might consist in the performance of non-judicial functions of such a nature that public confidence in the integrity of the judiciary as an institution or in the capacity of the individual judge to perform his or her judicial functions with integrity is diminished.”
But Grollo, Wilson and Kable were all instances of non-judicial functions conferred on a Ch III judge. The present case, like the Attorney-General (Cth) v The Queen (the “Boilermakers Case”) (1957) 95 CLR 529 and Brandy v Human Rights and Equal Opportunity Commission (1995) 183 CLR 245, is the converse: judicial functions are conferred on a non-judicial person or body. There could be no relevant apprehension of compromising or impairing capacity to perform non-judicial functions, or damaging public confidence in the integrity of administrators. Asymmetrical as it may seem, the general inhibition (subject to exceptions such as the principle in Harris v Caladine) against the conferring of judicial power on non-judicial persons or bodies, is not based on any concern for damage to public confidence in the latter.
In any case, the non-judicial functions of a Registrar of the Federal Court, in his or her capacity as a Registrar in Bankruptcy in issuing a bankruptcy notice or creditor's petition, are essentially clerical, involving the ascertainment that a proffered document complies with statutory requirements. On the hearing of an application for a sequestration order, if it were argued, for example, that the debtor ought to be able to go behind the judgment in accordance with the principle in cases such as Wren v Mahoney (1972) 126 CLR 212 (in the unlikely event that the Registrar did not refer the matter to a judge), the determination of that issue would be in no way inconsistent with an earlier decision by the same Registrar that the bankruptcy notice and petition were in proper form.
The second argument was that the only matters which the Court could delegate, consistently with the limitations of Ch III, were functions which were "subsidiary in importance to matters which are heard and determined by judges" or merely "associated or ancillary" to the jurisdiction of the Court. In advancing this proposition, counsel referred to a passage in the joint judgment of Mason CJ and Deane J in Harris v Caladine (at 94-95) as follows:
“We must emphasise that the role of the officers of the Court such as Judicial Registrars and Registrars is secondary to that of the judges. The role of the officers is to assist the judges in the exercise of the jurisdiction, powers and functions of the Court. Although it is a commonplace characteristic of modern courts that officers such as masters and registrars exercise jurisdiction, powers and functions in a wide variety of matters, those matters are, generally speaking, subsidiary in importance to matters which are heard and determined by judges.”
As we read that passage, their Honours are not there formulating a condition on the valid delegation of judicial power, but, rather, speaking descriptively of the way in which modern courts, including Australian federal courts, function. While it is true, as counsel for the appellants put, that the essential features of a bankruptcy system are sequestration and distribution, it does not follow that the making of a sequestration order is a judicial function of a kind that is inherently incapable of valid delegation to a non-judicial officer. In a setting where there is a complete right of rehearing de novo before a judge (see s 31A(6) and (7), Re Kwiatek; Ex parte Big J Ltd v Pattison (1989) 21 FCR 374 at 380-381), the making of a sequestration order is very often a routine and simple function. The act of bankruptcy relied on in the great bulk of cases is non-compliance with a bankruptcy notice. The function of the Registrar is to be satisfied as to issue and service of the notice and petition and that the other requirements of the Act and Rules have been complied with. The appellants’ argument sought to draw a distinction between "important" judicial functions and "unimportant" ones. It was said that only the latter could be validly conferred on a non-judicial person, even a person who was within the organisational structure of a Ch III court. It may be at once accepted that the power to make a sequestration order, affecting as it does the status of the bankrupt and the rights of creditors, is important. It does not follow, in our view, that this characterisation has the consequence for which the appellants contend. Practically speaking, other claims under the Act such as the setting aside of fraudulent dispositions (s 121) or the avoidance of preferences (s 122) are much more likely to give rise to difficult and complex factual and legal issues calling for resolution by a Ch III judge (see, for example, Official Trustee v Alvaro (1996) 66 FCR 372).
In our opinion, the learned primary judge was correct in holding that the present case is indistinguishable from Harris v Caladine.
THE SECOND GROUP OF APPEAL GROUNDS
The question of the proper construction of s 31A(8) and its application to the facts of the present case was not a matter raised in the application to the Court, except peripherally in the context of the obligation of the trustee to inquire into the procedure adopted. It is not surprising, therefore, that the question is not dealt with at all in the judgment.
It is not in doubt that s 31A(8) was in force as at 4 June 1987 and there is nothing in the judgment suggesting to the contrary. The sub-section has since been repealed. As originally framed, the sub-section was in the following terms:
“Where at a hearing of a proceeding that involves the exercise of a power referred to in paragraph (1)(n) in relation to a sequestration order ... a person opposes the making of that order, the Registrar shall not hear, or continue to hear, the proceeding and shall make appropriate arrangements for the proceeding to be heard by the Court.”
If, as a matter of fact, a notice of opposition was filed and a hearing had already taken place before a judge, it would seem that s 31A(8) would not have authorised the Registrar to hear the application for a sequestration order. This would be a ground for concluding that the sequestration order ought never to have been made. But as the present proceedings did not seek relief by way of annulment, and indeed as the appellants specifically disavowed a claim for such relief, the matter did not arise before his Honour and should, accordingly, not be considered further.
No evidence appears to have been adduced one way or the other before his Honour as to whether there was an express written authority from a judge of the Court to the Registrar to hear a defended petition in bankruptcy. It suffices to say that this was not a matter raised in the application to the Court and, in the circumstances, should not now be permitted to be raised at the appeal.
THE FAILURE TO TAKE PROCEEDINGS AGAINST ELDERS - THE THIRD SET OF GROUNDS
The first point sought to be made is not easy to grasp. It is expressed in the notice of appeal as follows (ground 2(i)):
“His Honour ought to have found that as Elders Rural Finance Limited were the substituted petitioning creditors and therefore Plaintiff in relation to NB 770/87 ... they were available via their Plaintiff status and filed affidavit material to be joined as a Third Party to the action by the Respondent if he chose to transfer any responsibility for his actions and inactions while acting as sole Trustee responsible for the protection of the Trust estate assets and income, but that the Respondent failed to do so.”
Matter NB 770 of 1987 is the proceeding in which the appellants were made bankrupt on the application of Elders as substituted creditor. The appellants' written submissions throw some light on the complaint. There it is said that the respondent "gradually assumed responsibility for the actions of" Elders, Elders Pastoral, Mr James and others by his continued refusal to carry out his duties and functions as required by the Act. It is also contended that the respondent "chose to accept responsibility for the actions of" Elders, James and Madgwicks by not calling on them to testify. It is said that "by this acceptance" the respondent assumed full responsibility in relation to the damage caused by Elders, Elders Pastoral, James and others.
In his reasons for judgment the primary judge makes no reference to any claim that the respondent is liable for loss caused by Elders because he had assumed responsibility for its actions as a result of his failure to carry out his duties as trustee. That is not surprising, because the further amended application does not make such a claim. In any event, his Honour would have rejected it for the same reason that he rejected the contention that the respondent was in breach of his duty in not pursuing claims against Elders. Having pointed out that the appellants were not entitled to seek relief against Elders in its absence, his Honour said that even if he had found the respondent in breach of duty in failing to sue Elders, he was not satisfied that the breach resulted in loss to the appellants. Nor was he satisfied that the respondent had funds or access to funds to enable a reasonably arguable claim to be pursued. And finally, he was not satisfied that if the claims had been pursued they would have resulted in any benefit to the appellants.
His Honour was entitled on the material before him to make those findings, and the appellants made no attempt to persuade us that they were not open to him. Accordingly, had the ground, understood in the way it was presented in the written submissions, been before his Honour, he would necessarily have rejected it for the reasons he gave for rejecting other contentions put by the appellants.
The final matter sought to be argued (ground 2(j) in the notice of appeal) is that:
“His Honour erred by failing to give sufficient weight to the Appellants’ legal rights under section 69(20) of the Act (as applicable in 1989) to access the exhibits and transcripts of the Section 69 hearing held 05-08 September, 1989, to apply as evidence during the 1996 hearing.”
Section 69 dealt with the examination of a bankrupt about his conduct and examinable affairs. Sub-section (20) provided that the transcript of the evidence given by the examinee shall be open to inspection by the examinee and the trustee.
In the course of dealing with the appellants' claim for relief under ss 178 and 179, his Honour expressed the view that it was not "just and equitable" (s 178) or "proper" (s 179) to make the orders sought against the respondent, and listed seven considerations leading him to this conclusion. Two only are presently material. The first is that the appellants had been guilty of "a general, inexcusable and inordinate delay" in bringing the claims before him. The second is that this delay, which related to events occurring primarily in 1986-1988, was inherently likely to prejudice the fair conduct of the matter. The appellants contend that this would not have been so if the transcripts and exhibits taken during their examination had been available for use before the trial judge. They claim that the respondent denied them access to the documents "in direct contravention" of s 69(20).
The trial judge made no findings with regard to the transcript or exhibits. It appears, however, that on 20 October 1995 the appellants gave the respondent notice to produce them. By letter of 30 October the respondent's solicitor informed them that he did not have, and had never had, any of the documents in his possession, custody or control. The appellants replied that the respondent must have had the documents, because the court file contained statements that the transcript was to be prepared at his request. The respondent's solicitors again stated that the respondent did not have, and had never had, the documents in his possession, custody or control, and suggested that as the documents were a matter of public record, the appellants should make inquiries of the Federal Court Registry and of the court recording service.
Many difficulties face the appellants in relation to this ground of appeal. As we have said, there are no findings in relation to the documents. All we need add is that even if the appellants were able to establish that the respondent did have the documents, he had no obligation under s 69(20) to make them available to the appellants. The transcript is filed in the Court, and the sub-section confers on the examinee and the trustee the right to inspect it free of charge. Any obligation imposed by the section is imposed on the Court's Registry, not on the trustee. Indeed, the trustee is himself a beneficiary of that obligation.
CONCLUSION
The appeal should thus be dismissed with costs.
It is unnecessary for us to decide whether, if the appellants had been successful in the appeal, it would have been appropriate for the Court to make declarations that the sequestration order was invalid without annulling the bankruptcy: cf Cameron v Cole (1943-4) 68 CLR 571 and Re Deriu (1970) 16 FLR 420. However, as presently advised, we would be of the view that the appropriate course would not be to grant declaratory relief but rather to order that the bankruptcy be annulled.
I certify that this and the preceding eighteen (18) pages are a true copy of the Reasons for Judgment herein of the Honourable Justices Hill, Heerey and Sundberg
Associate:
Dated: 8 August 1997
Counsel for the Appellants: B Lacy and B J Cheesman appearing for himself Solicitor for the Appellants: R Kennedy Counsel for the First Respondent: P Fary Solicitor for the First Respondent: J M Smith & Emmerton Counsel for the Second Respondent H C Burmester and G R Kennett Solicitor for the Second Respondent: Australian Government Solicitor Date of Hearing: 5 June 1997
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