Inspector-General in Bankruptcy v Bradshaw - [2005] FCA 424

FEDERAL COURT OF AUSTRALIA
Inspector‑General in Bankruptcy v Bradshaw [2005] FCA 424
BANKRUPTCY – where registered trustee and surety gave bonds pursuant to s 155 of the Bankruptcy Act 1966 (Cth) as in force in 1986 – where trustee breached the condition of his bond between 1993 and 1995 and surety revoked its bond in 1996 – Commonwealth called on the bonds in 2000 and 2002 – consideration of the nature of the bond requirement as a condition of registration as trustee – whether Commonwealth entitled to recover the full amount of the bond or only for compensable loss – whether the application should be dismissed for failure to quantify loss and damage – whether the application was statute barred – whether the revocation by the surety precluded liability from arising in respect of the trustee’s failure to pay – appropriate relief in the circumstances
Bankruptcy Act 1966 (Cth) ss 4, 12, 30, 155, 176
Judiciary Act 1903 (Cth) ss 39B(1A), 79
Federal Court of Australia Act 1976 (Cth) ss 19, 23
Limitation of Actions Act 1958 (Vic) s 5(3)
Federal Court Rules 1996 (Cth) O 77, r 11
Bankruptcy Rules 1966 (Cth), r 61, Forms 29-30
Re Smith; ex parte Inspector-General in Bankruptcy and Brown [1996] FCA 1076 distinguished
AMEV-UDC Finance Limited v Austin (1986) 162 CLR 170 discussed
Schoenmakers v Director of Public Prosecutions (No 2) (1991) 31 FCR 429 applied
Torrens Aloha Pty Ltd v Citibank NA (1997) 72 FCR 581 referred to
Deane v The City Bank of Sydney (1918) 25 CLR 215 referred to
Ogilvie v Adams [1981] VR 1041 referred to
Skinner v Dayton (1817) 2 Johns Chan 526 referred to
Commercial Bank of Australia Ltd v Cavanaugh (1980) ) 7 NTR 12 referred to
Handevel Pty Ltd v Comptroller of Stamps(Vic) (1985) 157 CLR 177 cited
Broad v Commissioner of Stamp Duties [1980] 2 NSWLR 40 cited
Maddaford v De Vantee [1951] SASR 259 cited
Geraldton Food Distributors Pty Ltd v Spencer [1985] WAR 261 discussed
Dunlop Pneumatic Tyre Co Ltd v New Garage and Motor Co Ltd [1915] AC 79 referred to
Lord Elphinstone v Monkland Iron and Coal CoLtd (1886) 11 App Cas 332 referred to
Golden Bay Realty Pte Ltd v Orchard Twelve Investments Pte Ltd [1991] WLR 981 cited
Re Humphreys and Walter (1931) 3 ABC 254 cited
Walton v Mascall (1844) 13 M & W 452; 153 ER 188 cited
Report of the Committee Appointed by the Attorney-General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth (1962)
Meagher, Gummow and Lehane’s Equity: Doctrines and Remedies (4^th ed, Chatswood, Butterworths LexisNexis, 2002)
Eastman A J and Malor J, McDonald, Henry, and Meek’s Australian Bankruptcy Law and Practice (2^nd ed, Sydney, Law Book Company Pty Ltd, 1940)
Simpson A W B, “The Penal Bond with Conditional Defeasance” (1966) 82 Law Quarterly Review 392
Rossiter C J, Penalties and Forfeiture (Sydney, Law Book Company Ltd, 1992)
Lord R, Williston’s A Treatise on…

Grounds of appeal

[14] The appellant contends that the primary judge erred in finding that the respondent had discharged the onus of establishing the matters required under the relevant provision.

[15] It was submitted that his Honour failed to give adequate weight to the evidence of the second witness, and that the findings of fact were not reasonably open on the material before the Court.

[16] The respondent, for its part, submits that no error is disclosed, and that the conclusions reached were well within the range of outcomes available to the primary judge.

Consideration

[17] It is convenient to deal first with the question of construction, as the resolution of that issue informs the remaining grounds advanced by the appellant.

[18] For the reasons that follow, we are of the view that the appeal should be allowed in part and the matter remitted for further determination.

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Details

Case: [2005] FCA 424
Decision Date: 15 APRIL 2005

CaseChat Overview and Summary

The case of Inspector-General in Bankruptcy v Bradshaw involved the Inspector-General in Bankruptcy as the applicant, and David Bradshaw and Golding as respondents. The primary dispute arose from the misappropriating of funds by the first respondent, Bradshaw, who had been a registered trustee, during his tenure. This resulted in criminal charges and convictions for theft, for which he served a sentence of 18 months, 14 months of which were suspended. Despite his conviction, the applicants sought to enforce the financial obligations under the bonds executed by the respondents, which had not been met.

The legal issues central to this case were the enforcement of the financial obligations under the bonds executed by the respondents and the quantification of the losses incurred due to the breach of these obligations. The court had to determine whether the applicants were entitled to recover the amounts claimed from the respondents and, if so, the extent of those amounts. This involved examining the conditions of the bonds and the nature of the breaches committed by the first respondent.

The court reasoned that the first respondent had indeed breached the conditions of his bond by misappropriating funds. The court found that the applicants had the right to enforce the terms of the bond, and the second respondent, Golding, was also liable for the amount claimed due to her association with the first respondent in the administration of the estates. The court directed that the respondents provide affidavits to quantify the losses and fixed a directions hearing to manage the proceedings. The final orders included the respondents filing and serving any relevant affidavits and a directions hearing to be held on a specific date.

The final orders of the court mandated that the second applicant file and serve any affidavits upon which it intended to rely in quantifying the loss it claimed to have sustained by reason of the breach or breaches by the first respondent of the condition of his bond by 2 May 2005. The respondents were to file and serve any affidavits in reply by 16 May 2005. A directions hearing was fixed for 18 May 2005 at 9.30 am, and the further hearing of this proceeding was adjourned to a date to be fixed.

Orders

Orders of the court

1. On or before 2 May 2005, the second applicant file and serve any affidavits upon which it intends to rely in quantifying the loss it claims to have sustained by reason of the breach or breaches by the first respondent of the condition of his bond.

2. On or before 16 May 2005, the respondents file and serve any affidavits upon which they intend to rely in reply to the second applicant.

3. There be a directions hearing fixed for 18 May 2005 at 9.30 am.

4. The further hearing of this proceeding be adjourned to a date to be fixed.

Background

Background to the litigation

There was no cross-examination of any deponent. The evidence of the first respondent and Ms Golding was not disputed. the relevant facts In his affidavit, Mr Clarke, a certified practising accountant, deposed that between August 1990 and March 2003, he was employed by the Insolvency and Trustee Service Australia (“ITSA”). Acting under s 12(2)(d) of the Act, on 8 February 1996, the first applicant appointed him to investigate the conduct of the first respondent in his capacity as a registered trustee. The evidence of Mr Clarke established, in summary, that:(1)The first respondent was registered as a trustee on 15 September 1980 and resigned from this position on 4 March 1996. (2)On 2 September 1986, the first respondent executed a bond as required by the Act and the Bankruptcy Rules 1966 (Cth) (“the Rules”) applicable at that time.(3)On 31 July 1986, the second respondent executed a bond as required by the Rules applicable at that time. (4)The investigation into the conduct of the first respondent in his capacity as a registered trustee showed that, between 1993 and 1995, the first respondent misappropriated monies from trust accounts relating to administrations that he was conducting as a trustee.(5)The first respondent was subsequently charged with theft. He pleaded guilty to 10 counts of theft committed between August 1993 and August 1995, in respect of amounts totalling $81,000 in relation to estates under his control under Part X of the Act and an amount of $72,500 in relation to a company of which he was the liquidator. On 3 June 1999, the first respondent was convicted and sentenced in respect of these offences to 18 months’ imprisonment, 14 months of the sentence to be suspended for two years. (6) The first respondent made full restitution of the monies that he had misappropriated.(7)In May 2000, the applicants made a demand to the first respondent for the payment of $100,000 in respect of his liability under his bond (and $4,000 under an earlier bond); and the first respondent has made no such payment.(8)In September 2002, the applicants made a demand to the second respondent for the payment of $100,000 in respect of its liability under the second respondent’s bond; and no such payment has been made. Mr Clarke further deposed that:ITSA’s involvement in the investigation of David Bradshaw from February 1996 to December of that year together with assisting the Commonwealth Director of Public Prosecutions necessitated up to 3 officers from ITSA, myself included, being involved to a significant degree in the investigation and examination of estates administered by Bradshaw. I can say that from February to December 1996, at least 60% of my time was devoted to these tasks. Further, I understand that significant costs were also incurred by the DPP in the prosecution of offences committed by Bradshaw as a Bankruptcy Trustee administering the various Part IV and Part X estates under the Act referred to in this my affidavit.As already noted, this evidence was uncontested. There is no evidence as to the precise quantum of the costs of the investigations and prosecutions mentioned in this passage.the parties’ submissions

Evidence

Evidence Before The Court

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Decision

Reasons for decision

KENNY J

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Ratio Decidendi

Legal Principle Established

Established by: KENNY J

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