Leroy as Trustee of the Bankrupt Estate of Mogilevsky v Mogilevsky

Leroy, as Trustee of the Bankrupt Estate of Mogilevsky, applied to the Federal Court of Australia seeking to restrain the trustee in bankruptcy from retaining a particular solicitor. The dispute arose because the solicitor in question was also the largest creditor of the bankrupt estate, raising concerns about the appearance of impartiality in the trustee's conduct.

The court was required to determine whether the retention of the solicitor, who was the largest creditor, compromised the appearance of the trustee's impartiality and, if so, what orders should be made. Specifically, the court considered whether to restrain the trustee from retaining the solicitor and whether to remove the trustee from their position.

Justice Jarrett found that the retention of the solicitor, given their status as the largest creditor, did indeed compromise the appearance of the trustee's impartiality. However, the court distinguished between restraining the trustee from retaining the solicitor and removing the trustee. While the former was deemed necessary to uphold the integrity of the bankruptcy process, the court refused to remove the trustee, concluding that the trustee's actions, while creating an appearance of impropriety, did not demonstrate a fundamental unsuitability for the role.

Consequently, the court ordered that the trustee be restrained from retaining the solicitor in the proceedings. The application for the removal of the trustee was dismissed.