Maxwell-Smith v Donnelly

In Maxwell-Smith v Donnelly, the appellants sought to have their bankruptcies annulled on the basis that they were unaware there would be no mediation and that the Registrar had made sequestration orders without procedural fairness. The applicants also sought compensation for the trustee's actions and an inquiry into the trustee's conduct. The court was required to determine whether the appellants' procedural fairness had been breached, whether an inquiry into the trustee's conduct was warranted, and whether compensation should be awarded.

The court examined the threshold for ordering an inquiry into a trustee's conduct under s 179 of the Bankruptcy Act 1966 (Cth). It noted that the court has a broad discretion and should not order an inquiry unless sufficient grounds have been demonstrated. The court considered the appellants' claims and determined that while there were issues regarding the trustee's conduct, they did not warrant an inquiry into the entire administration. However, the court found that an inquiry was necessary into the trustee's refusal to grant permission for Mrs Maxwell-Smith to travel outside Australia.

The court allowed the appeal in part, setting aside the primary judge's orders and ordering an inquiry into the trustee's refusal to grant travel permission. The court dismissed the application for compensation and the remainder of the appeal, with no order as to costs.