Gore v Prentice (Trustee), in the matter of the Personal Insolvency Agreement of Gore
[2012] FCA 104
•3 January 2012
FEDERAL COURT OF AUSTRALIA
Gore v Prentice (Trustee), in the matter of the Personal Insolvency Agreement of Gore [2012] FCA 104
Citation: Gore v Prentice (Trustee), in the matter of the Personal Insolvency Agreement of Gore [2012] FCA 104 Parties: CRAIG KIRRIN GORE v MAXWELL WILLIAM PRENTICE AS TRUSTEE OF THE PERSONAL INSOLVENCY AGREEMENT OF CRAIG KIRRIN GORE and ANTHONY JOHN WARNER File number: QUD 669 of 2011 Judge: LOGAN J Date of judgment: 3 January 2012 Catchwords: PRACTICE AND PROCEDURE – interlocutory injunctions – whether serious question to be tried – where applicant alleged second respondent was not or appeared not to be impartial – where second respondent was partner of liquidator of a company of which the applicant was a director – no serious question to be tried – where balance of convenience favoured the respondent – interlocutory application dismissed Legislation: Bankruptcy Act 1966 (Cth) ss 30, 156A, 160, 178, 179, 222A, 231
Corporations Act 2001 (Cth) ss 180, 181, 182, 183, 184
Federal Court of Australia Act 1976 (Cth) s 23
Bankruptcy Regulations 1996 (Cth) Sch 6Cases cited: Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 followed
Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 referred to
Starkey v Rondo Building Services Pty Ltd (2005) 145 FCR 423 consideredDate of hearing: 3 January 2012 Place: Brisbane Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 27 Counsel for the Applicant: Mr A Morris QC with Mr I Erskine Solicitor for the Applicant: Evans Ellis Lawyers Counsel for the First Respondent: The First Respondent did not appear Counsel for the Second Respondent: Mr NA Cotman SC Solicitor for the Second Respondent: Breene & Breene
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 669 of 2011
IN THE MATTER OF:
THE PERSONAL INSOLVENCY AGREEMENT OF CRAIG KIRRIN GOREBETWEEN: CRAIG KIRRIN GORE
ApplicantAND: MAXWELL WILLIAM PRENTICE AS TRUSTEE OF THE PERSONAL INSOLVENCY AGREEMENT OF CRAIG KIRRIN GORE
First RespondentANTHONY JOHN WARNER
Second Respondent
JUDGE:
LOGAN J
DATE OF ORDER:
3 JANUARY 2012
WHERE MADE:
BRISBANE
THE COURT ORDERS THAT:
1.The interlocutory application is dismissed.
2.The applicant is to pay the second respondent’s costs of and incidental to the interlocutory application, to be taxed if not agreed.
3.The application is adjourned for directions to a date to be fixed by the docket judge.
Note:Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011
IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY
GENERAL DIVISION
QUD 669 of 2011
IN THE MATTER OF:
THE PERSONAL INSOLVENCY AGREEMENT OF CRAIG KIRRIN GOREBETWEEN: CRAIG KIRRIN GORE
ApplicantAND: MAXWELL WILLIAM PRENTICE AS TRUSTEE OF THE PERSONAL INSOLVENCY AGREEMENT OF CRAIG KIRRIN GORE
First RespondentANTHONY JOHN WARNER
Second Respondent
JUDGE:
LOGAN J
DATE:
3 JANUARY 2012
PLACE:
BRISBANE
REASONS FOR JUDGMENT
On 18 November 2010, a meeting of creditors of Mr Craig Kirrin Gore (Mr Gore) voted on and passed a resolution for the execution by him of what is known under the Bankruptcy Act 1966 (Cth) (the Act) as a personal insolvency agreement. The trustee originally appointed in respect of that personal insolvency agreement was Mr Maxwell William Prentice (Mr Prentice).
On 23 December 2011, a meeting of Mr Gore’s creditors was held. At that meeting, a resolution was passed for the removal of Mr Prentice as the trustee, and further, for his replacement as trustee by another registered trustee, Mr Anthony John Warner (Mr Warner). Mr Gore has applied for a declaration that Mr Warner be precluded from being appointed to or acting as trustee of his personal insolvency agreement. Alternatively, he has applied for an order that Mr Warner be removed as trustee of the estate and the personal insolvency agreement. By way of interim relief, Mr Gore has sought an injunction restraining Mr Warner by himself, his servants or agents from:
(a)accepting the appointment or acting as the Trustee of Mr Gore’s estate and personal insolvency agreement;
(b)obtaining from Mr Prentice any books, records and property of Mr Gore concerning his personal insolvency agreement; and
(c)acting on any resolution to remove Mr Prentice as Trustee and appointing Mr Warner as Trustee of Mr Gore’s personal insolvency agreement.
It is that interlocutory application which is the subject of proceedings today. The application is one aptly brought in the vacation period for this reason: in the event that there is a basis for the removal of Mr Warner, it is appropriate that application to restrain his acting as trustee be made in a timely way before costs or further costs are incurred by him in the trusteeship in question.
The only respondents named in respect of both the substantive application and, for that matter, the application for interlocutory injunctive relief are Mr Prentice and Mr Warner. Mr Prentice has not appeared today; Mr Warner has. Mr Prentice’s stance, inferentially, is that of abiding the order of the court. Mr Warner took the role of contradictor in respect of the interlocutory application. That, in my opinion, was an appropriate stance for him to take, particularly given the absence of service of the application on any of the creditors.
Mr Warner’s stance, in effect, was that of defending the appointment made by the creditors at the meeting of 23 December 2011. That is not to say that a creditor would not have been entitled to be heard today. Depending on the fate of the interlocutory application, it may be necessary for notice of the application and any orders made to be given to creditors with a reservation to them of liberty to apply in respect of those orders. Mr Gore has, by his counsel, given the usual undertaking as to damages in respect of the interlocutory relief which he seeks.
In respect of this application, it is particularly helpful to remind oneself of the principles which must be applied in respect of the granting of interlocutory injunctions. They are to be found in Australian Broadcasting Corporation v O’Neill (2006) 227 CLR 57 (O’Neill) commencing at para 65. In short order, and by reference to an earlier decision of the High Court in Beecham Group Ltd v Bristol Laboratories Pty Ltd (1968) 118 CLR 618 (the Beacham Group Case), the two main inquiries are:
The first is whether the plaintiff has made out a prima facie case, in the sense that if the evidence remains as it is there is a probability that at the trial of the action the plaintiff will be held entitled to relief … The second inquiry is … whether the inconvenience or inquiry which the plaintiff would be likely to suffer if an injunction were refused outweighs or is outweighed by the injury which the defendant would suffer if an injunction were granted.
However is there a qualification made by Gummow and Hayne JJ in O’Neill at [65], that:
By using the phrase “prima facie case”, their Honours [Kitto, Taylor, Menzies, and Owen JJ in the Beacham Group Case] did not mean that the plaintiff must show that it is more probably than not that at the trial the plaintiff will succeed; it is sufficient that the plaintiff show a sufficient likelihood of success to justify in the circumstances the preservation of the status quo pending the trial.
The statutory foundation for the granting of the relief sought is said to be found in one or more or a combination of ss 30, 178 and 179 of the Act, read in the context of the more general powers conferred in respect of matters of which the Court is seized with jurisdiction as provided for by s 23 of the Federal Court of Australia Act 1976 (Cth). It is a moot point, but one ultimately not for decision today, whether each of the particular claimed jurisdictional foundations in the Act does indeed provide such a foundation.
In relation to personal insolvency agreements, the general provisions of the Act are subject to the modifications for which s 231 provides. One of those is that, by virtue of s 231(5):
Part VIII [of the Act] applies, with any modifications prescribed by the regulations, in relation to a trustee on a personal insolvency agreement as if:
(a) the debtor by whom the agreement was executed were a bankrupt; and
(b) the trustee of the agreement were the trustee in his or her bankruptcy.Part 3 in Sch 6 to the Bankruptcy Regulations 1996 (Cth) provides, as contemplated by the Act, for modifications of the Act in its application to, materially, trustees of personal insolvency agreements. One of those modifications is to substitute for s 160 a provision in respect of a vacancy in the position of trustee where the Official Trustee is to act:
160 Vacancy in position of trustee – Official Trustee to act
If at any time there is no controlling trustee in relation to a debtor, or no trustee of a personal insolvency agreement under Part X, the Official Trustee is to act as the trustee.
The regulations do not provide for any modification or omission of either s 178 or s 179. That said, in Starkey v Rondo Building Services Pty Ltd (2005) 145 FCR 423, at 437 at [56] (Starkey v Rondo Building Services), French J, as his Honour then was, expressed the opinion that the view of a federal magistrate from whom an appeal was taken to the Court, that her Honour had power under s 178 to remove a trustee who had declined when requested to resign in favour of another trustee on the basis of an asserted conflict of interest was incorrect. His Honour expressed the opinion that such a decision was not one open to review under s 178. Although he expressly stated it was not necessary finally to determine the point, French J added, at [56], that it was “highly questionable that s 30 [of the Act] confers power upon a court to remove a trustee”.
This apart, insofar as the application seeks to attack an assumption of office, it admits of the difficulty alluded to in submissions on behalf of Mr Warner that the assumption of office has already occurred, and further, occurred per force of statute upon the passage of the requisite resolutions.
Section 179 of the Act as modified provides for the conduct of an inquiry by the Court into the conduct of a trustee in relation to a personal insolvency agreement upon the application of, materially, and as modified, the debtor under that agreement. Upon such an inquiry, the Court may remove a trustee from office and, further or alternatively, make such order as it thinks proper. In form, the application does not seek an inquiry under s 179 of the Act. However, and appropriately, Mr Warner took the position that that this particular defect in form ought not prevent dealing with the application as if such an inquiry had been sought with interlocutory relief then in turn sought to support it. I am content to approach the interlocutory injunction application on that basis.
As originally formulated, there were two bases upon which interlocutory injunctive relief was propounded. The first was a conflict of interest said to arise by virtue of Mr Warner’s partner in the firm CRS Warner Kugel, Mr Kugel, having previously acted as the liquidator of a company Secured Capital and Finance Pty Ltd.
Mr Kugel had been appointed official liquidator of SCF by an order made in the Supreme Court of New South Wales on 16 June 2009. SCF has since been deregistered, following the completion of the winding up.
The other basis upon which the interlocutory injunctive relief was sought, and the basis which is pressed, is not unrelated to the administration of the winding up of SCF. In a report to the creditors of SCF dated 27 May 2010 Mr Kugel had made reference to, inter alia, Mr Gore as director having held numerous directorships in other companies that have, like SCF, been placed into external administration. Mr Kugel made reference then to potential or alleged offenses reported to the Australian Securities and Investments Commission arising from alleged or potential offenses against ss 180, 181, 182, 183, and 184 of the Corporations Act 2001 (Cth). In that report, Mr Kugel further stated that his investigations to date had led him to conclude that SCF was a vehicle through which its directors, and materially for present purposes, Mr Gore, had raised funds from members of the public. He further stated in that report that in the absence of books and records to adequately record and explain the transactions of the company:
I can only conclude that the operation of the company was somewhat akin to a Ponzi Scheme. A ponzi scheme is a fraudulent investment operation offering high returns to induce investors into the scheme.
He further expressed the view in that report that:
There may be claims against, materially, Mr Gore, for breaches of section 588G of the Corporations Act for allowing the company to continue to trade and incur debt from investors from inception of the company in 2001 to its demise.
As a sequel to that report, an article appeared in a number of newspapers entitled “Gore Jnr Denies Ponzi Scheme”. As a further sequel to that report to creditors and its consequential reporting in a number of newspapers, correspondence was directed by solicitors acting on behalf of Mr Gore to solicitors acting on behalf of Mr Kugel and his firm, of which Mr Warner was then, as he remains, a partner. The effect of that correspondence was to allege that the reports were defamatory of Mr Gore. That was denied in correspondence in response. Prior to his appointment at the meeting on 23 December 2011, Mr Warner made a disclosure of the prior involvement of Mr Kugel as liquidator of SCF. He did not in any way make reference in the disclosure statement to the allegation of defamation which had been made as a sequel to the report to creditors and the subsequent newspaper reporting.
That particular absence of disclosure and the anterior assertion of liability for defamation on the part of the firm of which Mr Warner was a member formed the alternative basis upon which interlocutory injunctive relief was sought. In the result, the association derived from Mr Kugel’s having acted as the liquidator of SCF was not in itself pressed as a basis upon which Mr Warner ought to be removed. Nonetheless, it was submitted to form part of the background against which the gravity of the nondisclosure of the alleged defamation and related non-disclosure of the controversy concerning the same should be measured. It is necessary in assessing whether or not there is, in terms of O’Neill, a prima facie case to address the bases upon which the Court may remove a trustee from office. In essence, the principles which are called in aid go to an alleged want of impartiality or a perception, more particularly, of a want of impartiality on the part of Mr Warner in his capacity as trustee in respect of Mr Gore’s personal insolvency agreement. Those principles are comprehensibly summarised by French J in Starkey v Rondo Building Services at paragraphs 56 to 71. Though his Honour’s discussion is particularly directed to the language found in s 156A of the Act, a provision which is expressly omitted from application to personal insolvency agreements, I do not doubt that those same principles would attend the an inquiry under s 179 of the Act as to whether the Court ought to remove a trustee from office. In short, a trustee should be and should appear to be independent and impartial.
The question, therefore, in relation to whether there is a prima facie case is whether, particularly having regard to the earlier controversy which attended Mr Kugel’s report to creditors in the administration of SCF, Mr Warner might be said to be or to be perceived to be unable to be independent or impartial in the administration of Mr Gore’s personal insolvency agreement? It must first be said that the report to the creditors of SCF was that of Mr Kugel, not Mr Warner. That said, Mr Warner was nonetheless at one stage at least potentially in jeopardy of being sued for defamation by Mr Gore in his capacity as a member of the same firm of which Mr Kugel was a member. Save for the bare possibility that a limitation period might be extended, there is now no prospect of any such proceeding being instituted. More than 12 months have elapsed since the publication of the newspaper reports of the report to creditors.
One is left, then, with what was aptly described in submissions made on behalf of Mr Warner as a “referred animus” only. Whether or not such an animus is sufficient to warrant the removal of Mr Warner is ultimately a matter for the trial judge. It is not for me to adjudicate upon that question, only to form a view as to whether there is, particularly having regard to the explanation as to what is meant by a prima facie case in the context of interlocutory injunction relief, such a case raised.
Mr Warner did have, apart from that particular jeopardy, albeit one never manifested in litigation, some passing involvement in the administration of SCF. When one examines the remuneration and report provided in the context of that administration, one sees that he received, in respect of work done between June 2009 and May 2010, the sum of $200 for, it seems, some advisory work in relation to a proposal at one stage under consideration in that administration.
Even when that is added to the controversy which flared following the report to creditors, and the nondisclosure of the same, my opinion is that there is not shown a prima facie case in terms of O’Neill.
Strictly, that renders it unnecessary to consider questions of where the balance of convenience lies. That question is not, of course, to be treated as wholly discrete from the question of whether there is a prima facie case. There is an interplay between the two in relation to questions of whether the interlocutory injunctive relief should be granted. As to that, there is, at the present stage of the administration, an instalment payment which is due under the personal insolvency agreement from Mr Gore on 7 January 2012. The proximity of the date for the payment of that instalment is another reason why it was apt for the application to be brought on urgently.
So far as the balance of convenience is concerned, it is put that, in the event that Mr Warner were to be enjoined, another trustee, being the Official Trustee, would be just as well equipped to receive the payment as Mr Warner. I have already made reference to the modification effected by the regulations of the Act so far as s 160 is concerned in relation to personal insolvency agreements. The granting of interlocutory injunctive relief would not remove Mr Warner from office, but rather prevent his acting in that office pending the hearing and determination of the substantive application. That said, for the purposes of the application today, and on the subject of balance of convenience, I do assume, in favour of Mr Gore, that the substituted s 160 in its reference to “if, at any time, there is no trustee of the personal insolvency agreement”, is wide enough to embrace a circumstance where there is no trustee able to act per force of an interlocutory injunction. Further and in any event, as far as there may be a gap in the substituted s 160, s 30 of the Act would, in my opinion, in its generality of bankruptcy powers, enable the Court to appoint the Official Trustee to act during a period in which Mr Warner was not, per force of an interlocutory injunction. I do not see that the interlocutory injunction, if granted, would restore Mr Prentice to office. He has been removed by a deliberate vote of creditors. Thus, there is, in terms of the balance of convenience, an ability for another trustee, namely, the Official Trustee, to act.
The difficulty about that in terms of balance of convenience is that would see a third trustee having to come to grips with the administration to date. Further, the powers which that trustee would be required to exercise would not be confined merely to the receipt of money in terms of the instalments due, or even to the adjudication of outstanding proofs. They would extend, as was put in submissions, to the making of a value judgment under s 222A(1) of the Act, as to whether, in the event of a default, a proposal ought to be put to creditors in respect of a bankruptcy. Thus it would be no idle matter for the Official Trustee to assume office. It would necessarily involve a full reading in to the administration, with all the attendant costs that entails. Were I to have a view that the strength of the applicant’s case was such that there was a prima facie case, then that is a cost which would have to be born, but the cost of a further trustee’s intervention is a factor which I take into account in deciding where the balance of convenience lies.
I also take into account, in relation to whether to grant the interlocutory injunctive relief, another consideration related to s 222A(1) of the Act, particularly in light of a history which is revealed on the material as to Mr Gore’s belatedness in making earlier instalment payments. As was put on behalf of Mr Gore, the discretion that is entailed in s 222A is one which may have serious consequences. It is certainly not the case that Mr Warner is a mere recipient and custodian of money. That is well highlighted by the discretion found in s 222A(1). Again, though, in reaching the view that the case is not one for the granting of interlocutory injunctive relief, I have taken into account the absence in my view of a prima facie case when balanced against what I accept is a serious discretion nonetheless, which may have to be exercised by Mr Warner.
Further, so far as the question of proofs of debt, which remain for adjudication, there is no suggestion made on behalf of Mr Gore that the adjudication of any of those debts will entail any embarrassment arising from, or in any way related, to Mr Kugel’s earlier administration of SCF.
For these reasons, then, the application is dismissed.
I certify that the preceding twenty-seven (27) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Logan. Associate:
Dated: 17 February 2012
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