Horwath Corporate Pty Ltd v Huie

[1999] FCA 583

FEDERAL COURT OF AUSTRALIA

Solicitors’ Trust v Hurburgh [1999] FCA 583

THE SOLICITORS’ TRUST v ANDREW DAVID HURBURGH

NO. TG 7026 OF 1998

HEEREY J
20 APRIL 1999
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY	TG 7026 OF 1998

EX PARTE THE MATTER OF:	THE SOLICITORS' TRUST Applicant
AND:	ANDREW DAVID HURBURGH Respondent

JUDGE:	HEEREY J
DATE:	20 APRIL 1999
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. I am satisfied that the respondent, Andrew David Hurburgh, has committed an act of bankruptcy in that he failed to comply on or before 18 August 1998 with the requirements of the bankruptcy notice which was served on him on 28 July 1998 or to satisfy the Court that he had a counter-claim, set-off, or cross demand equal to or exceeding the sum specified in the schedule of the bankruptcy notice, being a counter-claim, set-off, or cross demand that he could not have set up in the action in which the judgment referred to in the bankruptcy notice was obtained.

2. The issue before the Court is whether the Court should nevertheless decline to make a sequestration order because there is “other sufficient cause” within the meaning of s 52(2)(b) of the Bankruptcy Act 1966 (Cth). Yesterday I refused Mr Hurburgh's application for an adjournment of the hearing of the petition; I shall not repeat everything I said in making that ruling. Some of those matters are relevant to the claim to the exercise of the s 52(2)(b) discretion and I incorporate by reference in these reasons what I said yesterday.

3. In opposing the making of the order Mr Hurburgh said that he had a moral obligation to repay his creditors, and particularly former clients who had trusted him, that he wanted to repay but would not be able to if he became bankrupt.  He said that he was “now basically destitute”.  He suggested the only way he would achieve his object of repaying his creditors would be by bringing the various legal proceedings to which he referred yesterday.

4. He said that because he had no assets there was no point in making him bankrupt.  He said that there was “quite a long list of cases” supporting the proposition that persons with no assets should not be made bankrupt.  However no such authorities were cited to me, and I do not accept that there is any such proposition. 

5. This is very much a case where there should be a sequestration order.  Mr Hurburgh claimed yesterday that at one stage he had assets worth some $2 million;  he has since been struck off the Roll of Legal Practitioners of the Supreme Court of Tasmania.  After the administration in that Court of the Court fund under the Legal Profession Act 1993 (Tas) and also the administration of the Guarantee Fund conducted by the applicant, the Solicitors’ Trust, there is a net deficiency to the Solicitors’ Trust of some $1.9 million.  So the debt on which the bankruptcy notice was founded, some $65,000 being the expenses of Mr Cameron Leslie, the manager appointed to conduct his practice, is relatively small compared with the total amounts involved in the collapse of Mr Hurburgh's practice. 

6. As counsel for the applicant said, it is important that the machinery of the Bankruptcy Act be available to examine thoroughly what has happened to Mr Hurburgh's alleged assets and whether there is any possibility of recovery from some other person.

7. As to Mr Hurburgh's prospects of bringing legal proceedings against various potential defendants including Mr Leslie, the Law Society and the Disciplinary Tribunal, there would be no inhibition on him commencing such proceedings if he were able to obtain an assignment from the Trustee in Bankruptcy.  So his position is essentially no different to that which would apply if he were not made bankrupt.

8. I should say, however, that having heard Mr Leslie cross‑examined I am quite satisfied that there is no substance in the sweeping, extravagant and offensive allegations Mr Hurburgh has made against Mr Leslie, a practitioner of some 30 years standing. 

9. Mr Hurburgh alleged that Mr Leslie fraudulently and unconscionably colluded with his client Perpetual Trustees Ltd to take advantage of Mr Hurburgh's medical condition and to convert Mr Hurburgh's former mortgage fund to themselves.  This was said to be pursuant to a scheme to favour Perpetual Trustees in preference to Tasmanian Trustees who had, it was said, offered a higher price for Mr Hurburgh's mortgage fund.  However the evidence showed that while initially Tasmanian Trustees did make a higher offer, it was soon recognised that this was based on a misunderstanding of the Legal Profession Act, and in particular the effect of s 111(3) which provides that after a legal practitioner is in default a right to claim against a practitioner is converted into a right to claim against the Court fund established under s 111(2).

10. Tasmanian Trustees’ initial offer had wrongly assumed that the clients and investors in Mr Hurburgh's mortgage practice could be dealt with regardless of the change in status effected by s 111.  When subsequent offers were made by Tasmanian Trustees and Perpetual Trustees they were essentially in the same form;  they both offered to acquire from Mr Hurburgh mortgages which conformed with their own lending criteria as to the proportion of the value of the property secured.  Tasmanian Trustees offered 1 per cent of the capital and Perpetual Trustees offered 1.5 per cent, so it is hardly surprising that the manager accepted the latter offer. 

11. In any event, it is difficult to see how the applicant the Solicitors’ Trust, which is a statutory corporation vested under s 97 of the Legal Profession Act with the function of administering and managing the Guarantee Fund, would be liable for the conduct of Mr Leslie appointed as manager of Mr Hurburgh’s practice.  But much the more important finding is that there is no substance, in my opinion, in any allegation of misconduct against Mr Leslie.

12. There was other reference in the course of Mr Hurburgh's adjournment application to the possibility of somehow setting aside his striking off order and alleging lack of jurisdiction by the Disciplinary Tribunal, but that course of action seems to be completely forestalled in the light of the various Supreme Court orders to which I referred yesterday.  So, there will be a sequestration order against the estate of the respondent.

13. I will appoint the Official Trustee trustee of the estate.  The costs will be in accordance with the statute.

I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey.

Associate:

Dated:            20 April 1999  

Counsel for the Applicant:	Mr Williams
Solicitor for the Applicant:	Gunson, Pickard & Hann
Counsel for the Respondent:	Mr Hurburgh appeared in person
Date of Hearing:	19-20 April 1999
Date of Judgment:	20 April 1999