Joseph Stelnicki (Oral Judgment)
[1982] FCA 225
•7 Sep 1982
t
m. JOSEF STELNICKI
REASONS FOR JUDCMENT COX J. (Delivered Orally) 7th September 1982 ,-#C
This is an application under s . s of 'the BanlcruDtcy
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Act 1966 that the sale by auction of certain chattels of the estate of the bankrupt proposed to be conducted by the trustee
on Thursday the 9th September 1982 be postponed.
A sequestration order was made on the loth May 1982,
and Mr. Andrew Richard Crawford was appointed trustee. Some
difficulty was encountered by the trustee in obtaining information about the bankrupt's affairs as the latter had been imprisoned some time prior to the date of the sequestration order for failure
to pay income tax and was said not to have co-operated with the trustee on being interviewed at I-1.14. Prison. He refused t o sign
the statement of affairs which the trustee had prepared from information supplied by (inter alios) members of the bankrupt's
, family and his solicitors. Subsequently to that interview, the
bankrupt's imprisonment was terminated but he was made subject
to a treatment order, pursuant to the Mental Health Act 1963 and
he is presently held at Milbrook Rise near New Norfolk. No. ??/l 9:32
According to the unsigned statement of affairs, which
I take as the trustee's best estimate of he bankrupt's affairs at the time it was compiled in May 1982, his assets consisted of the following:-
-Stock in trade $10,000.00 Machinery 2,900.00
Household furniture and effects 2,000.00
1.883 hectares Arthur and
Cardigan Streets, Somerset 6,000.00
29.88 hectares Haywoods Lane
Somerset (including house) 25,000.00 Land, 23 View Street, Burnie 1,000.00 :646,900.00
His liabilities were as follows:- 1. Municipality of Burnie $6341.46 Rates
2. Commissioner of Taxes 15.00 Land tax 3. Commonwealth Industrial Gases 145.36 Purchases 4. Deputy Commissioner of Taxation 5,459.53 Income tax 5. Examiner Newspaper 16.64 Advertising 6. Ian Joyce and Brim Adams 229.90 Glasses 7. Wynyard Municipslity 3,292.25 Rates and road construction
:.bg,530.14
An affidavit by Sir Reginald Wright indicated that the government
capital valuation, as recorded at the Wynyard municipal of€ices, attributed values of $20,000 and $40,000 respectively to the two
pieces of realty at Somerset, a combined figure of $29,000
greater than that shown in the statement of affairs.
In July 1982 the trustee conducted a sale by auction
of part of what was described as the bankrupt's stock in trade. No. 77/1932
This consisted of old car bodies and parts of groat variety.
This auction realised a gross figure of $19,675 from which was deducted a sum of .$4,628.OR which was paid to the auctioneers to cover:-
- Commission $1,311.62
Hire of crane 1,427.50
Two casual abourers l ~132.x l
Advertising 756.96
(It seems to be common ground that the crane and labourers were
necessary to retrieve the various lots and to lay them out in a
suitable formation for inspection and sale). After deducting the trustee's proper costs to the end
os' Juiy 1982 amounzing to $6,455.31, a small payment to the bankrupt's wife of "$85 and bank charges of R3.75, there remained
$8,502.36 to discharge the bankrupt's liabilities. There was accordingly a shortfall of approximately $1,000. The trustee has done further work on the estate for
which he claims an entitlement to payment and has decided to
conduct an auction of a further portion of the bankrupt's stock of motor cars on the 9th Zepternber. Already, he deposes, substantial expenditure has been incurred in relation to that
sale. He estimates that the costs incurred to date and the hire
of a crane and labour to retrieve the items to be s ld exceeds $2,000. Application is now made on behalf of the bankrupt for
a postponement of this auction so as to enable him to raise the balance required to discharge the debts to his creditors and to meet any proper fees and expenses associated with the administra-
. tion of his estate. Counsel argues on his behalf that a sale of No. 77/1982
his stock in trade will in all probability result in a a e at
| i | considerable under value | and that having regard to the excess |
of his assets over his liabilities and the nature of those
assets (in the main unencumbered realty) , it is unnecessary to conduct the auction. It would constitute an unnecessary
hazsrding of the bankrupt's equity in his stock and of his means of livelihood. Learned counsel expresses confidence that, given a delay of up to a few weeks, arrangements could be made to borrow the amount required to discharge the bankrupt's
liabilities.
Counsel for the trustee argues that the court should
not exercise its supervisory powers to make a commercial decision in the day to day administration of the estate in substitution for such a decision of the trustee, unless the latter can be demonstrated to be clearly wrong. He points to the bankrupt's disability (E bankrupt) in securing such anticipated loans, zhe difficulty or' ascertaining with any precision the figure required to discharge all liabilities and the cost thrown away
by the postponement of the auction. He claims there is inadequate material to support the making of the orders sought.
The most recent consideration of the principles to
be applied by the court on an apulication under s.178, so far
as I am aware, was that of Deane J. in he Tyndall (1977) 30
F.L.R. p.8 . In that case his Honour noted the difference between s.176 of the 1966 Act (which provides "If the bankrupt,
a creditor or any other person is affected by an act, omission or decision by the trustee, he may apply to the Court and the
Court may make such order in the matter as it thinks just and
equitable") and s.148 of the Bankruptcy Act 1924 (which provided "If the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply
,
to the Court, and the Court may confirm, reverse or modify the act or decision complained of, and make such order in the matter
as it thinks justt1). His Honour observed at p.9 hat:- No. 77/1982
"The provisions of the old s.148 corresponded closely with comparable provisions f
English bankruptcy legislation. It was
established that, under these Eaglishprovisions, the Courts would only interfere
with the decision of a trustee if it
- appeared that the trustee was acting unreasonably or in bad faith." and continued:-
"The critical differences in wording between
9.148 of the 1924 Act and s.173 of the present Act are that the present Act does
not require that the applicant be a person 'aggrieved' as did the previous Act in the English bankruptcy legislation and that the present Act does not make the focal point of the jurisdiction the confirming, reversing
or modifying of 'the act or decision complained of'. Under s.170 the bankrupt,
a creditor or any other person affected by
an act, omission r decision of the trustee
is empowered to apply to the court. The
express requirement that the aplJlicant bea person 'aggrieved' no longer exists. Nor
is the court, in emress terms, required to approach the matter on the basis that the
appropriate question is whether 'the act or decision complained of' should be confirmed, reversed or modified. Once the natter is
properly before the court, the courk is
the matter 'as It thinks just and equitable'." empowered - and obliged - 'CO make such order in
&S Honour at p.10, in a ?assage to which Mr. Leeman
for the trustee referred, continued:-
"This is not, of course, to say that the court should either disregard the relevant
decision of the trustee or ignore the well established policy under bankruptcy legislation that the court should not unduly interfere with the day to day administration
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No. 77/19::2
variety of decisions aimed at enabling the
administration to be carried out with promptness and efficiency. Some o f these decisions will be business or commercial decisions in which the business or comperclal experience of the trustee would itself provide a basis for arguin& that, unless it
was shown'that the trustee's decision was
perverse or clearly wrong, it would be
inappropriate and unjust for the court tointerfere.
Mr. Zeeman also referred to the case of R Mineral
Securities Australia Ltd. (In Liquidation) (1973) 2 N.S.V.L.R. 207 where Street C.J. in Ecuity likened the court's supervisory
control over liquidators to its control over trustees in
bankruptcy, citing the approach of Plowman J. in Leon v.
York-0-Matic Ltd. (1966) 1 ':.L.&. 1450, Jessell M.R. in Ex Parte
Lloyd: Re Peters (1882) 47 L.T. 64 and Gowans J. in Re Teller
Home F'urnishln,qs B y . Ltd. (In Liquidation) (1967) V.R. 313.
Street C.J . in Equity there observed of The supervisory control
of liquidators that heavy burden is placed upon the shoulders of an applicant under the provisions of the Companies Act he
was there considering, namely:-
"S.236(3) The exercise by the liquidator of the powers conferred by this section"
(which contains a general power of sale) "shall be subject to the control of the
court, and any creditor or contributory
may apply to the court wlth respect to any exerclse or ;~ro;~osed exercise of any of those powers.
"5.279. Any person aggrieved by any act or decision of the liauidator may apllly to the
court which may confim, reverse or modify the act or decision com?lained of and make such order as it thinks Just."
His Honour said at p.231:-
IIIt is, of course, clear enough that the
court does not simply sit on appeal from
No. 77/1962
decisions of a liquidator. .'! party challenging
a decision may well bear an onus varying in inverse proportion ' i o the importance of the decision to be called in question. But whether the decision be important, or trifling, the course of the winding up machiner? imposes upon the liquidator the resJonsibility for
making it, and he is recognised as having both the qualifications and the access of the multiplicity of information which may be necessary in order to make the commercial
decisions in the windin3 U?."
And further:-
Wltimately every challenge must probably
come back to some more broadly stated
question, such as whether the liquidator's
action has such importance, and can be seen to have such defects, as to justify the court
exercising its supervisory power."
With respect I do not see those observations as havlng
much bearing on the present case. Street C.J. in Equity was
dealing with a section virtually identical to s.148 of the
Bankruptcy Act 1924 which Deane J. in Re Tvndall (suura) distin-
guished from the ?resent s.178. Furthermore, he was dealing with
the claim of a creditor of a large public company in liquidation seeking (inter alia) an order reversing the decision of the
liquidator to enter Into an exlsting agreement for sale of a
large parcel of shares and convertible loans in Robe River Limited, another public company. The application in this case is merely
to postpone a proposed sale.
I respectfully adopt what Deme J. said in Tvndall's
case about the wordlng of s.178, namely that it "is such as to confer upon the court the widest possible discretion as to the
appropriate order which should be made in the particular Case"
, (at p.lO), whilst acknowledging as he dld the well established policy under bankruptcy legislaTion that the court should not
unduly interfere with the day to day administration of a bankrupt's estate by a trustee. - a -
In the present case the evidence indicates a significant
excess of assets over liabilities after realisation of part of
A'
the assets of the estate. The presently ascertainable deficiencv
is approximately $1,000, while trustee's remuneration and expenses appear to be of the order of $3,000. On the other hand the
unencumbered real estate of the bankrupt was last valued by the
government valuer at over :i6O0,0OC). It is feared by the bankrupt that a forced sale of his stock in trade may result in a voidable
loss by depriving him of his means of livelihood on his release from the institution where he is Fresently receiving treatment.
In the normal run of cases I would be loathe to substitute my judgment on an essentially commercial matter for that of he trustee in bankruptcy. Sut the bankrupt seeks the opportunity
of discharging his debts at an early time without recourse to the sale of his stock by auction and, if he is unable to achieve
this object, then in the circumstances of this case I think it
can fairly be said that only he will be the loser. For the margin is such that the trustee representing the creditors is
not really at risk through a s ort delay of failing to obtainpayment in full, while the delzy sought is not such as to
seriously suggest any hardship to the creditors.
Although this is not a case in which any error has been
demonstrated in the commercial judgment of the trustee, it is nonetheless in my view just and equitable that the bankrupt have the opportunity to discharge the relatlvely small deficlency without further of his stock in trade being exposed for sale by auction. I accordingly order that the trustee refrain from
disposing of any of the bankrupt's stock in trade until the
expiration of 28 days, or until this c o u r t further shall order, whichever event shall occur first.
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