Malanos v Trovas
[2012] FMCA 897
•24 September 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MALANOS v TROVAS | [2012] FMCA 897 |
| BANKRUPTCY – Application to court to accept resignation of trustee in bankruptcy where possible perception of conflict of interest. |
| Bankruptcy Act 1966 (Cth), ss.160, 180, 181A |
| Applicant: | NICHOLAS CRAIG MALANOS |
| Respondent: | ANDREW TROVAS |
| File Number: | SYG 1990 of 2012 |
| Judgment of: | Barnes FM |
| Hearing date: | 24 September 2012 |
| Delivered at: | Sydney |
| Delivered on: | 24 September 2012 |
REPRESENTATION
| Solicitors for the Applicant: | Sullivan Fernan Lawyers |
| Respondent: | No appearance |
UPON THE APPLICANT UNDERTAKING TO THE COURT:
To make available by Wednesday 3 October 2013 for collection by the Official Trustee all files and funds in respect of the administration and otherwise cooperate with and assist the Official Trustee as reasonably required in assuming the conduct of the administration.
THE COURT ORDERS THAT:
Pursuant to s.180 of the Bankruptcy Act 1966 (Cth) the Court accepts the resignation of the applicant from the office of trustee of the bankrupt estate of Andrew Trovas.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1990 of 2012
| NICHOLAS CRAIG MALANOS |
Applicant
And
| ANDREW TROVAS |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
This is an application filed on 14 September 2012 seeking that pursuant to s.180 of the Bankruptcy Act 1966 (Cth) the court accept the resignation of the applicant, Mr Malanos, as trustee of the bankrupt estate of Andrew Trovas.
The applicant relies on an affidavit sworn by Mr Malanos on 13 September 2012 and an affidavit of service of the application on the bankrupt, Mr Trovas. There was no appearance by or on behalf of Mr Trovas today. If the court accepts the resignation of the existing trustee, s.160 of the Bankruptcy Act would come into effect. It provides that if at any time there is no registered trustee who is a trustee of the estate of the bankrupt the Official Trustee becomes the trustee of the estate. I am told from the bar table by the solicitor for the applicant that the Official Trustee was served with a copy of the application.
The application is brought in circumstances where the bankruptcy of Mr Trovas commenced in 2009. At that time a partner in the firm of Worrells Solvency and Forensic Accountants (Worrells) (other than Mr Malanos) was appointed trustee of Mr Trovas’ bankrupt estate. Mr Malanos, who is in the Sydney office of Worrells, became a registered trustee in bankruptcy in October 2009. In December 2009 he became the trustee in bankruptcy for Mr Trovas and other bankrupts pursuant to s.181A of the Bankruptcy Act. The evidence before the court is that the Trovas file was reviewed in early September 2012 because Mr Trovas was due to be discharged from his bankruptcy on 8 September 2012. As a result of the review, Mr Malanos lodged with the Insolvency and Trustee Service Australia (ITSA) a notice of objection to discharge (a copy of which is in evidence before the court), as a result of which the bankruptcy of Mr Trovas was extended for a further five years.
Relevantly, these proceedings have come about because on 6 September 2012 Mr Malanos received a letter by way of an attachment to email from a Mr Totten, a copy of which is annexed to Mr Malanos’ affidavit. Mr Totten suggested that there had been a prior and ongoing business relationship between Mr Trovas, the bankrupt and Worrells for several years and that Mr Trovas had a personal relationship with another partner in Worrells. Mr Totten raised various other matters about Mr Trovas’ financial position. Mr Totten’s precise role in this matter is not clear. It is not apparent that he is a creditor or otherwise involved in the bankrupt estate
Mr Malanos takes issue with the extent and nature of the prior relationship of Mr Trovas with Worrells and one of the partners and submits that there is not in fact an ongoing business relationship or a friendship as Mr Totten alleged. Nonetheless. Mr Trovas, an accountant, had referred clients to Worrells for advice in circumstances where a partner of Worrells subsequently became the liquidator or trustee in bankruptcy. Concerns were raised about the possibility of a conflict of interest and Mr Totten notified Mr Trovas’ creditors. These circumstances gave rise to the possibility that there may, particularly on the part of a creditor, be a perceived conflict between Mr Malanos’ interests as trustee and the interests of creditors of Mr Trovas and third parties.
Notwithstanding that Mr Malanos disputes whether there was in fact such a conflict of interest, he took steps as a result of this correspondence to investigate this issue, report to creditors and respond to Mr Totten’s concerns. He notified Mr Trovas of the concerns and asked the Official Receiver whether he would appoint a trustee in bankruptcy in his place. Section 160 of the Bankruptcy Act was brought to his attention. In these circumstances Mr Malanos seeks an order under s.180 of the Bankruptcy Act.
Mr Malanos is not seeking the costs of his resignation and nor is he seeking costs with respect to the transfer of the administration.
I raised with the solicitor for Mr Malanos whether this was a case in which some consequential or other orders ought to be made. It was acknowledged that it may be appropriate to make an order facilitating, as it were, transfer of files and any funds, if there are any funds, in respect of the administration of the bankrupt estate to the Official Trustee. There was no appearance by the Official Trustee to suggest any urgency. I am told that the estate is not, as it were, particularly active at the moment. I am told from the bar table that Mr Malanos, who is present in court, is prepared to undertake to make available by 3 October 2012 for collection by the Official Trustee all files and funds in respect of the administration and to otherwise cooperate with and assist the Official Trustee as reasonably required. It is appropriate to proceed on this basis.
I consider that it is appropriate in the particular and unusual circumstances of this case to accept the resignation of the applicant from the office of trustee of the bankrupt estate of Mr Trovas on the basis of the evidence before the court in relation to the possible perception of a conflict of interest.
I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Barnes FM
Date: 2 October 2012
0
0
1