Johnson (Trustee) v Snellgrove
[2019] FCCA 3521
•5 December 2019
FEDERAL CIRCUIT COURT OF AUSTRALIA
| JOHNSON (TRUSTEE) v SNELLGROVE | [2019] FCCA 3521 |
| Catchwords: BANKRUPTCY – Application by trustee for order to finalise bankrupt estate – where respondent has made threats to sue trustee in bankruptcy – costs. |
| Legislation: Bankruptcy Act 1966 (Cth), ss.90-15 and 90-20. |
| Cases cited: Pattison v Cook [2006] FMCA 1713 Bellin v Pattison (Trustee) [1999] FCA 51 |
| Applicant: | GREGG ROBERTSON JOHNSON AS TRUSTEE OF THE BANKRUPT ESTATE OF SHANE SNELLGROVE |
| Respondent: | SHANE SNELLGROVE |
| File Number: | ADG 150 of 2019 |
| Judgment of: | Judge Heffernan |
| Hearing date: | 15 November 2019 |
| Date of Last Submission: | 15 November 2019 |
| Delivered at: | Adelaide |
| Delivered on: | 5 December 2019 |
REPRESENTATION
| Counsel for the Applicant: | Mr Gretsas |
| Solicitors for the Applicant: | Gretsas & Associates Lawyers |
| The Respondent: | In person |
ORDERS
Pursuant to s.90 – 15 and s.90 – 20 of the Schedule to the Bankruptcy Act 1966 (Cth) (the Act’), that in the absence of the respondent filing and serving any form of proceedings in any court of competent jurisdiction in any State of Australia or in the Commonwealth of Australia and/or complaints against the applicant, his servants or agents in either his or their personal capacity or in his capacity as trustee of the bankrupt estate of the respondent (‘the proceedings’) within 45 days of today, the applicant is directed by this Honourable Court to finalise the bankrupt estate of the respondent including but not limited to paying all fees, disbursements, any remaining applicable realisation charge pursuant to the Bankruptcy (Estate Charges) Act 1997 (Cth) and any dividends to creditors who have lodged proofs of debt in the bankrupt estate pursuant to the provisions of the Act and the Bankruptcy Regulations 1996 (Cth).
In the event that the respondent fails to commence the proceedings pursuant to paragraph 1 of these orders, the respondent be and is hereby restrained from issuing the proceedings without further leave of this Court.
The respondent pay the costs of the applicant on a party basis.
Liberty to the applicant to apply for any ancillary orders.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT ADELAIDE |
ADG 150 of 2019
| GREGG ROBERTSON JOHNSON AS TRUSTEE OF THE BANKRUPT ESTATE OF SHANE SNELLGROVE |
Applicant
And
| SHANE SNELLGROVE |
Respondent
REASONS FOR JUDGMENT
This is an application by the trustee in bankruptcy against the respondent, a discharged bankrupt.
The applicant seeks orders as follows:
“1.Pursuant to s.90 – 15 and s.90 – 20 of the Schedule to the Bankruptcy Act 1966 (Cth) (the Act’), that in the absence of the respondent filing and serving any form of proceedings in any court of competent jurisdiction in any State of Australia or in the Commonwealth of Australia and/or complaints against the applicant, his servants or agents in either his or their personal capacity or in his capacity as trustee of the bankrupt estate of the respondent (‘the proceedings’) within 45 days of today, that the applicant be directed by this Honourable Court to finalise the bankrupt estate of the respondent including but not limited to paying all fees, disbursements, any remaining applicable realisation charge pursuant to the Bankruptcy (Estate Charges) Act 1997 (Cth) and any dividends to creditors who have lodged proofs of debt in the bankrupt estate pursuant to the provisions of the Act and the Bankruptcy Regulations 1996 (Cth).
2.In the event that the respondent fails to commence the proceedings pursuant to paragraph 1 of these orders, the respondent be and is hereby restrained from issuing the proceedings without further leave of this Court.
3.The respondent pay the costs of the applicant on a party basis.
4.Liberty to apply on short notice.”
The applicant relies on his affidavit sworn on 15 April 2019. The respondent has not filed a response or any affidavit material but did file and serve a written submission to which I will refer later in these reasons. The respondent does not oppose an order that the applicant proceed to finalise administration of the bankrupt estate but does oppose any order for an amount of costs that might exceed the balance of funds remaining in the estate.
The respondent became bankrupt when a sequestration order was made on 12 May 2014. The applicant was made his trustee in bankruptcy on that day. It is not a matter of dispute between the parties that the relationship between the trustee and the respondent has been fractious since that time.
A very brief summary of the applicant’s administration of the respondent’s estate is set out in the trustee’s affidavit.[1]
[1] Affidavit Gregg Robertson Johnson sworn 15 April 2019 at paras [4]-[9].
The total receipts in the bankrupt estate were $435,742.83. The applicant paid a dividend to the unsecured creditors of the estate on 11 August 2015 totalling an amount of $222,729.64. That represented a return of 46 cents in the dollar based on the proofs of debt totalling $488,394.87.
The administration of the estate was somewhat complicated by proceedings under the Family Law Act 1975 (Cth) which were running simultaneously to the administration. The applicant claimed approximately $54,000 in fees and disbursements. The respondent applied to review that remuneration through the Office of the Inspector-General in Bankruptcy on 20 October 2014. A decision was made on 13 October 2017 by a delegate of the Inspector-General disallowing the application for the review of remuneration.
As things presently stand, the applicant holds the amount of $8,234.91 in the estate. That amount is earmarked for the applicant’s remaining fees and disbursements and a further potential dividend to the creditors.
The applicant trustee states that he was the subject of numerous complaints by the respondent during the course of his administration of the estate. A number of accusations were made by the respondent against the trustee to the Australian Financial Security Authority (“AFSA”). During the course of the administration, the respondent sent over 200 emails and letters to AFSA with respect to the applicant’s administration of the estate.
The applicant deposes, and it is not suggested otherwise by the respondent, that he was not the subject of any disciplinary action or other adverse consequences as a result of any decisions or actions he took in relation to the administration of the respondent’s estate.
In December 2014, the respondent put the applicant on notice of a potential claim against him and warned him that he should contact his professional indemnity insurer. That occurred during a series of emails that passed between the applicant and the respondent over the course of two days.[2]
[2] Ibid, Annexure GRJ-3.
As can be seen from the email sent by the respondent, his tone was openly hostile and accusatory.
After the decision made by the delegate of the Inspector-General in Bankruptcy disallowing the respondent’s application for a review of the applicant’s remuneration, the respondent sent a series of further emails requesting full disclosure of; “Any fees, income, commissions, kickbacks, gifts, bonuses that you may have received or entitled to (sic) now or in the future”.[3]
[3] Ibid, p 33.
It should be noted that the bankruptcy was discharged by this stage. During the course of the correspondence the applicant pointed out that much of the information requested by the respondent had already been provided to him.
On 15 November 2017, the respondent sent an email to the applicant with respect to what he believed to be the failure of the applicant to respond to his requests for information. During the course of that email the respondent wrote:
“By all means, hide behind whatever legislation and Acts you wish to. However, I am unrelenting and will pursue all necessary avenues to obtain ALL information that I have requested.”[4]
[4] Ibid, p 28.
The applicant became aware of an email sent by the respondent to an employee of AFSA on 16 March 2018. In that email the respondent threatened to seek the intervention of the Federal Attorney-General and to hold all parties accountable, including for punitive damages. In a further email to AFSA, dated 26 March 2018, the respondent complained that he was experiencing anxiety, depression and suicidal ideation as a result of the failure of the applicant to finalise the administration of his estate. He indicated that he intended to pursue the applicant for damages, financial losses, emotional turmoil and grief, unprofessional conduct and punitive damages.
In response to the threats of litigation by the respondent, the applicant proposed, in consultation with his solicitor, to seek a written undertaking from the respondent that he would not institute legal proceedings against him. He did so as a prudent final step before finalising the estate. That course of conduct, in effect, received the imprimatur of AFSA.
As a result, Mr Gretsas, the solicitor for the applicant wrote to the respondent on 14 May 2018 advising of the amount of funds remaining in the estate and seeking particulars of any proposed litigation. The respondent was also requested to provide an undertaking that he would not pursue any litigation or complaints against the applicant. Significantly, the letter from Mr Gretsas put the respondent on notice that if he did not provide the undertaking sought, if he expressly or impliedly reserved his right to commence proceedings against the applicant, and if he failed to institute such proceedings within 90 days, that an application of the type presently before me would be instituted.[5]
[5] Ibid, Annexure GRJ-7.
The respondent replied to the above correspondence on 14 May 2018 stating, “Not interested whatsoever”. Mr Gretsas sought clarification of this response.[6]
[6] Ibid, Annexure GRJ-8.
Mr Gretsas’ letter had been sent by both email and in hard copy through the post. The hard copy was returned with the respondent’s name and address crossed out and the letters “RTS” presumably signifying the words, ‘return to sender’ and beneath that the words, “Not interested”.
Mr Gretsas made a further unsuccessful attempt to communicate with the respondent by email on 24 May 2018. A further and final attempt was made by Mr Gretsas to correspond with the applicant by email sent on 3 August 2018. That email unambiguously requested a response to the correspondence of 14 May 2018 and warned that if no response was received the respondent would be at risk of incurring costs of the kind that would be incurred by filing the within application. The email made clear that this was a final notice and that a response was required by 12 August 2018.
The applicant instructed Mr Gretsas to write yet again to the respondent on 11 February 2019 seeking a response to previous correspondence. No response was received, and these proceedings were instituted.
The applicant deposes that the respondent’s attitude throughout the administration of his estate has been “somewhat aggressive”. Mr Johnson does not believe that he can safely finalise the administration of the estate for as long as Mr Snellgrove has unclarified and outstanding threats of litigation and complaints against him. He points to the fact that he has a right of indemnity against the assets of the administration, and that he is entitled to hold onto those funds in the event that the respondent makes good on his threats to issue proceedings against him.
He makes the pertinent observation that given he has no idea of the nature of the litigation foreshadowed by the respondent, he is not able to determine whether his professional indemnity insurer would provide him with coverage in the event that any proceedings were instituted by the respondent. As he cannot hold onto the remaining funds in the estate indefinitely, he seeks an order in the terms set out above to enable him to bring the administration to a conclusion.
The applicant submits that his conduct in bringing this application is inherently reasonable in light of the fact that the accusations and veiled threats of the respondent can be traced back to as early as December 2014. Further, the nature of the allegation at that stage clearly carries the express imputation that Mr Johnson was corrupt and/or dishonest in his professional dealings with the respondent’s estate.
Further, the applicant submits that it is a matter of some significance that the penultimate threat made by the respondent on 16 March 2018 occurred in an email to AFSA and evinced an intention to seek the intervention of the Federal Attorney-General. In the submission of Mr Gretsas, the applicant clearly and unambiguously put the respondent on notice by virtue of the letter of 14 May 2018 that in the absence of an undertaking from him, or a failure to commence proceedings against the applicant, that Mr Johnson would have no alternative but to commence proceedings of this kind.
I am satisfied that the respondent received that letter as demonstrated by his email response on the day it was sent to him. I note that the hard copy of the letter was returned apparently unopened. However the respondent felt about the length of the time the administration of his estate had taken, or about the applicant’s professional attributes or capabilities, having made such serious allegations against the applicant, it was incumbent on him to either take action, withdraw his allegations and complaints, and/or at the very least, to respond to correspondence from the applicant’s solicitor.
There is nothing inherently unorthodox about the nature of the application made by the trustee in these proceedings.[7] There is an appropriately cautious approach taken by the applicant in terms of the proposed orders, allowing as they do, for a period of 45 days grace to the respondent to file proceedings should he choose to do so.
[7] Pattison v Cook [2006] FMCA 1713; Bellin v Pattison (Trustee) [1999] FCA 51.
Further, the potential risk of further litigation alleging, in essence, a breach of his duties as trustee identified by the applicant could not be said to be fanciful.[8]
[8] Watson v Healey [1996] 64 FCR 301.
Finally, the applicant submits that the conduct of the respondent since these proceedings were instituted could hardly be said to have been conciliatory. On the first return date he made an oral application for an order restraining the applicant from disbursing any further moneys from the estate. The submission of the applicant is, in effect, that the respondent’s claim at this point that he has no intention of issuing proceedings rings hollow given his repeated failure to respond to requests for clarification prior to these proceedings being issued.
For his part, the respondent made very clear in both his written and oral submission that the process of having been made bankrupt and the administration of his estate by the applicant has been something which has affected him very deeply. He did not dispute that he has made threats as alleged from time to time or that he has been aggressive during the course of the administration.
He asserted from the bar table that he has no intention of issuing proceedings against the applicant. He points to the fact that he did not do so in the two years prior to these proceedings being instituted as suggesting that this application itself is unnecessary, unwarranted and unreasonable.
The respondent’s submission was that every aspect of his life including his marriage and relationship with his children has fallen apart because of the bankruptcy process.
He believes that the entire process of bankruptcy is dehumanising and utterly lacking in compassion. Much of his outline of submissions took the form of unsworn evidence and was objected to by counsel for the applicant. That objection is appropriate particularly given the failure of the respondent to file a response or any affidavit. I have ignored the outline of submissions for testamentary purposes.
Nonetheless, the overall thrust of the respondent’s submissions was clear. He has been dealt with unreasonably, he has been put through a terrible ordeal, and he should not be held responsible for any costs implications that arise by virtue of this application. Much of what was set out in the respondent’s written submissions and covered by him in his oral submissions relates to complaints about matters that he says occurred during the course of the applicant’s administration of his estate.
I have no doubt that the respondent would like to be rid of the applicant, as he asserts. I note that he asserted that he has had a relatively recent flare-up of mental health issues.
The intersection between the operation of the Bankruptcy Act 1966 (Cth) (‘the Act’) and the personal circumstances of a bankrupt can understandably be unpleasant and distressing for the person who is the subject of a sequestration order. Nonetheless, I am satisfied that in the uncontradicted circumstances set out in the affidavit of the applicant, it was prudent, reasonable, and appropriate for him to bring an application in this form.
Further, the respondent was given repeated opportunities prior to these proceedings being filed by the applicant to either withdraw his allegations, institute proceedings himself, or sign an undertaking that he would not institute such proceedings, and he simply failed to engage with the applicant. The potential consequences of his failure to do so must have been clear to him.
Further, the fact that the respondent had expressed suicidal ideation in the past and appeared at times to be erratic and overtly aggressive in his correspondence was not a matter that could reasonably have assuaged the concerns of the applicant or given him any confidence that the respondent’s silence, when clarification was sought from him of his intention, meant that he would not make good on his threats to institute proceedings.
The applicant can hardly be said to have behaved imprudently or to have abused the process of the Court in bringing this application. I am satisfied that I have power pursuant to s.90 - 15 and s.90 - 20 of the Schedule to the Act to make the orders sought, and that it is appropriate that I do so.
Accordingly, I make the orders to be found at the beginning of these reasons.
I certify that the preceding forty-one (41) paragraphs are a true copy of the reasons for judgment of Judge Heffernan
Associate:
Date: 5 December 2019
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