Moore v Macks
[2006] FMCA 594
•27 April 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| MOORE v MACKS | [2006] FMCA 594 |
| BANKRUPTCY – Application for inquiry into conduct of trustee pursuant to s.179 of Bankruptcy Act – threshold determination required before inquiry embarked upon. |
| Wilson v Mannahill Mining Co Pty Ltd [2004] FCA 912 Wilson & Anor v The Commonwealth of Australia & Anor [1999] FCA 219 |
| Applicant: | DAVID GERALD MOORE |
| Respondent: | PETER IVAN MACKS |
| File Number: | ADG66 of 2005 |
| Judgment of: | Lindsay FM |
| Hearing date: | 2 December 2005 |
| Date of Last Submission: | 2 December 2005 |
| Delivered at: | Adelaide |
| Delivered on: | 27 April 2006 |
REPRESENTATION
| Applicant: | In person |
| Counsel for the Respondent: | Mr Madsen |
| Solicitors for the Respondent: | Madsen Rowley |
ORDERS
That the application filed on 16 March 2005 for orders pursuant to s.179(1)(a) of the Bankruptcy Act removing the respondent as trustee of the applicant’s bankrupt estate and for orders relating to the trustee’s conduct, other than his proposed abandonment of appeals instituted by the applicant in SAD175/04 and SAD176/04 in the Federal Court of Australia, be dismissed.
That further consideration of the application as it relates to orders sought arising out of the proposed abandonment of the said appeals be adjourned 9.30 am on Wednesday 17 May 2006.
That the interim application filed on 10 April 2006 do stand dismissed.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MOORE v MACKS |
ADG66 of 2005
| DAVID GERALD MOORE |
Applicant
And
| PETER IVAN MACKS |
Respondent
REASONS FOR JUDGMENT
Introduction
This is an application filed on 28 April 2005 in which Mr Moore seeks the removal of his trustee in bankruptcy pursuant to s.179(1)(a) of the Bankruptcy Act 1966 (Cth) (hereinafter “the Act”). The respondent has applied for a summary dismissal of the application and the following constitutes my reasons for judgment in relation to same.
The respondent is the trustee.
Mr Moore also seeks an order restraining Mr Macks from abandoning an appeal instituted by Mr Moore in matter SAD176 of 2004 filed in the Adelaide Registry of the Federal Court.
Mr Moore was made bankrupt by an order of Registrar Christie in this Court on 21 January 2005. He applied for a review of that sequestration order and the proceedings were heard by me. On 1 July 2005 I dismissed his application for a review of Registrar Christie’s sequestration order. Mr Moore appealed my decision and on 10 February 2006 Mansfield J in the Federal Court dismissed his appeal.
Mr Moore has instituted an appeal against the decision of Lander J in the Federal Court in Wilson v Manna Hill Mining Co Pty Ltd [2004] FCA 912 and in relation to a related costs order (hereinafter “the appeals”). That decision was handed down on 14 July 2004.
On 21 March 2005 solicitors representing the respondents to that appeal gave notice to Mr Macks requiring him to make an election in relation to whether to prosecute the appeal and a related costs appeal.
Mr Macks had not made his decision in relation to that appeal when I reserved my determination in this matter. I have read the transcript of proceedings before Finn J in the Federal Court dated 27 July 2005 when His Honour conducted a directions hearing in relation to the two appeals. Essentially matters relating to the s.60 Notice were deferred until the determination by Mansfield J of Mr Moore’s appeal from my decision of 1 July 2005. The respondents to the appeal have flagged an intention to argue that the trustee is unable to seek an extension of time in relation to his response to the s.60 Notice.
This application, then, for orders pursuant to s.179 is made against that background.
Section 179 of the Act provides:
(1)The Court may on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trust in relation to a bankruptcy and may do one or both of the following:
(a)remove the trustee from office; and
(b)make such order as it thinks proper.
(2)The Inspector-General or a creditor may at any time require a trustee to answer an inquiry in relation to the bankrupt’s estate or affairs.
The application to summarily dismiss the s.179 application was filed on 14 June 2005 and was argued before me on 2 December 2005.
Mr Madsen, who appeared on behalf of Mr Macks, indicated at the outset of his submissions that whilst the application was for summary dismissal pursuant to Rule 13.10 of the Rules of this Court he would also argue that there is in all applications pursuant to s.179 of the Act a threshold requirement that must be satisfied before the order for the inquiry should be made.
Rule 13.10 of the Rules of this Court provide:
The Court may order that a proceeding be stayed, or dismissed generally or in relation to any claim for relief in the proceeding, if it appears to the Court that:
(a)no reasonable cause of action is disclosed in relation to the proceeding or claim for relief; or
(b)the proceeding or claim for relief is frivolous or vexatious; or
(c)the proceeding or claim for relief is an abuse of the process of the Court.”
The threshold requirement
In Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9ALR 262 Riley J observed in relation to a request by the Registrar in Bankruptcy for an inquiry in relation to the conduct of a trustee at p.268:
“Before the application is heard, therefore, the trustee will know the grounds on which the court will be asked, inter alia, to inquire into his conduct and the facts on which the Registrar proposes to rely in supply of his application that the court do so inquire. I do not wish to be taken as presuming to lay down any rule as to the procedure to be followed in, or the approach to be made by the court to, a case of this sort; but it seems to me that in such a case there is a preliminary question to be decided by the court – namely on the grounds and facts before it, has a case been made for inquiry into the trustee’s conduct? If the answer to that question is ‘yes’, the next question is – what is to be the scope of the inquiry? It may be that the material already before the court sufficiently defines the scope of the inquiry; on the other hand, the court may find it necessary to define the subjects for inquiry – e.g. in the form: ‘Did the trustee do (or fail to do) so and so?’ – and to give directions before proceeding to inquire.”
In Re Gault; Gault v Law (1982) 57 FLR 165 the Federal Court was asked to conduct an inquiry in relation to the trustee of the bankrupt’s estate. In fact, the case involves the second such request for an inquiry made many years after the first request had been made and refused. Ellicott J referred to Re Alafachi (supra) at p.173 and said:
“It was with his Honour’s comments in mind that I required the applicant to give particulars of the misconduct he relied on to found his application. The court has a broad discretion in deciding whether to order an inquiry. In my opinion it is not required to order an inquiry unless it is satisfied that sufficient grounds had been made out.
For instance, the court should be loathe to order an inquiry unless it considers that on the evidence before it there are substantial grounds for believing that the trustee erred in his administration. If the court considers that an inquiry is unlikely to reveal misconduct it should not make an order and put the respondent and possibly the creditors to the expense and trouble involved. It should also be borne in mind that a debtor applicant may have other remedies to pursue, for example in an action for breach of trust.”
In Registrar in Bankruptcy v Bradley (1983) 72 FLR 231 Beaumont J was considering an application by the Registrar in Bankruptcy for a s.179 inquiry. His Honour referred to the passages from Re Alafachi and Gault (supra) and said at p.233:
“In my opinion, the balance of convenience in this case indicates that a preliminary inquiry of the type urged by the respondent was the appropriate course to be adopted provided that, in the event that the matter goes forward to an inquiry on a final hearing, the evidence taken and submissions made in the preliminary inquiry are to be regarded as evidence and submissions in the final inquiry: in other words, the preliminary inquiry should be treated as part of the final inquiry. It is as if the respondent were to move for the dismissal of the proceedings as an abuse of process and then to fail in that application, in which event the material before the court in the summary application is to be treated as part of the material before the court upon the final hearing of the proceeding.”
Finally, in Wilson & Anor v The Commonwealth of Australia & Anor [1999] FCA 219 Branson J discusses the nature of proceedings pursuant to s.179 of the Act in addition to proceedings under s.178 of the Act. At [44] Her Honour summarises the law in relation to s.179 as follows:
“Although it is not a rule of universal application, the court will not ordinarily initiate an inquiry under s.179 unless it is satisfied that a proper case for an inquiry has been demonstrated …… There will ordinarily be a proper case or an inquiry where there is a reasonable cause to believe that a trustee may have failed to act in relation to a bankruptcy in the manner required by the Act or the general law. However, as Ellicott J pointed out in Re Gault at 173:
‘The court has a broad discretion in deciding whether to order an inquiry. In my opinion it is not required to order an inquiry unless it is satisfied that sufficient grounds have been made out.’ ”
Section 178 of the Act provides:
(1) If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the court, and the court may make such order in the matter as it thinks just and equitable.
(2) The application must be made not later than 60 days after the date on which the person became aware of the trustee’s act, omission or decision.”
There can be no doubt then that the Court is not obliged to embark upon an inquiry pursuant to s.179 simply because it is asked to do so.
I have to be satisfied before embarking upon the inquiry that sufficient grounds have been demonstrated for the inquiry to be conducted. I will only be able to determine that if the applicant has revealed the basis claimed for the inquiry and the trustee given the opportunity to respond. I am satisfied that I am obliged to carry out this discrete preliminary step before embarking upon the inquiry and I would do so whether or not an application for summary dismissal was before me. The application for summary dismissal was based upon the same preliminary adjudication that the authorities discussed above require me to carry out. It was not pursued on any other basis. I propose to deal with the application as one made pursuant to the provisions of the Act itself rather than as one made pursuant to Rule 13.10.
Discussion
I received Mr Moore’s affidavit of 28 April 2005 and 27 June 2005 and his affidavit of 15 July 2005 in support of his application, though the July affidavit is focused almost exclusively on an application made by Mr Moore at or about that time for me to disqualify myself from the hearing of his various applications. I also received an affidavit from Mr Macks of 14 June 2005. I have read the decision of Lander J in Wilson v Manna Hilll Mining Co Pty Ltd (supra) in addition to the transcript of the hearing before Finn J. I have taken the opportunity to read the decision of Mansfield J in the appeal from my orders referred to above. I heard oral submissions from Mr Madsen and from Mr Moore. I received written submissions from Mr Madsen.
It is convenient at this point to note the role Mr Macks played previously in relation to Manna Hill Mining Co Pty Ltd (hereinafter “the company”). He was appointed administrator of the company in January 2000 and deed administrator in May 2000. At those times Mr Moore was a director and share-holder of the company. The terms of the deed of company arrangement were completed and Mr Macks resigned as deed administrator in September 2001. Mr Moore was a creditor of that company and like other creditors received partial payment of his debts during the course of the deed administration. Furthermore, Mr Macks has this to say at paragraph 11 of his affidavit:
“Further, at a proposed extraordinary general meeting of Manna Hill Mining to be held on 18 July 2003, I had intended to exercise my proxy as trustee of the estate of Anne Dubois, a bankrupt who held shares in the company, to vote in favour of a resolution removing the applicant as a director of Manna Hill Mining. The meeting was never held. I understand that a further meeting of the company may have been held in 2004 but I did not attend or submit a proxy to vote at that meeting.”
The respondents to the appeals currently before the Federal Court are represented by a solicitor by the name of Mr Iles.
Mr Moore’s first complaint about Mr Macks is that he is in a position of conflict of interest arising from his previous role as deed administrator of the company.
This allegation is the subject of considerable attention in Mr Moore’s affidavit. Unfortunately the applicant does not go beyond the making of very broad assertions as to the existence of this alleged conflict of interest and as to conduct on the part of Mr Macks said to be either illegal or deceitful. It is contended in paragraph 22 of the June affidavit that:
“I believe he deliberately kept his position as ‘trustee of Dubois’ silent from me to ‘keep’ a position in the Company and use his power and position when he needed to at I think at possibly the detriment to me. Why would he not be open and forthright to me?”
It is not clear to me why certain parts of the above passage from the affidavit are in quotation marks.
The topic of Mr Macks’ involvement as trustee of the bankrupt estate of Ms Anne Dubois is the subject of correspondence received by my Associate from the solicitors acting for Mr Macks during the period of the reservation of this judgment and dated 29 March 2006. I set that letter out in full:
“29 March 2006
Associate to Federal Magistrate Lindsay
Federal Magistrates Court
Commonwealth Law Courts Building
3 Angas Street
ADELAIDE SA 5000
Dear Madam
David Gerald Moore v Peter Ivan Macks
Federal Magistrates Court of Australia Action No. ADG66/2005
I refer to the hearing which took place on 2 December 2005 in relation to the above matter before Federal Magistrate Lindsay.
I do not have a copy of the transcript of that hearing given that there are presently no funds available in the bankrupt estate of Mr Moore to pay for disbursements. However, during the course of the hearing, the issue of Mr Macks’ involvement as the trustee of the bankrupt estate of Ms Anne Dubois was raised. In response to that issue being raised, I indicated to the Court that my instructions were that the bankruptcy of Ms Dubois was discharged on 13 December 2004. I may also have indicated to the Court that, as a consequence, Mr Macks had ceased to be the trustee of Ms Dubois. I make that comment in light of Order 2 made on 2 December 2005 to the following effect:
‘That the applicant, David Gerald Moore, be at liberty to provide my associate within 7 days documentary material said by him to contradict the assertion of the respondent that he ceased to act as the trustee of Anne Dubois on 13 December 2004.’
It has recently been brought to my attention that pursuant to section 184 of the Bankruptcy Act, a registered trustee who has not already been released under section 183 of the Act is only released at the end of seven years from the date that the trustee furnished the final account in respect of the estate. I am instructed by Mr Macks that he has not been released as trustee of the estate of Ms Dubois by an order under section 183 of the Bankruptcy Act.
In the circumstances, while it remains my instructions that the bankruptcy of Ms Dubois was discharged on 13 December 2004, Mr Macks remains the trustee of that estate by virtue of section 184.
I have taken the step of writing directly to the Court in relation to this issue in order to correct any inadvertent error made during the course of my submissions. I am available at short notice to attend at Court should any further submissions be required tin relation to this topic.
A copy of this letter will be sent to Mr Moore.
Yours faithfully,
MADSEN ROWLEY
JACK MADSEN
Partner.”
Mr Moore was given a copy of that letter and it has given rise to a interim application filed on his behalf and heard by me on 26 April 2005 which is the subject of separate determination by me herein.
The letter I take to be unexceptional in that Mr Madsen, as an officer of the Court, is taking steps to ensure that the Court has not in any sense been inadvertently misled by him as to Mr Macks’ continuing statutory obligations pursuant to s.183 of the Act.
I have paid careful attention to Mr Moore’s contentions as to the role of Mr Macks in the administration of the company in 2000 and 2001 and his role as trustee of the bankrupt estate of Ms Dubois, but am unable to find that the conduct described by Mr Moore provides any or any sufficient basis to embark upon a s.179 enquiry. It is plain that Mr Moore has a belief that Mr Macks has some deep-rooted animosity towards him and that this has evidenced itself in his involvement in matters relating to the company, but there is no conduct of Mr Macks or no communications between Mr Macks and Mr Moore which provides any basis for the Court to infer that such attitude on Mr Macks’ part exists.
The conflict of interest contention has not been particularised by Mr Moore. He is really inviting the Court to infer that Mr Macks is unable to discharge his duties according to law at the present time because of some activity approximately four or five years ago in relation to the company, but no explanation is given as to the basis on which such an inference can be drawn and I am not prepared to speculate about such matters.
Similarly with respect to Mr Macks’ role in the bankrupt estate of Ms Dubois I am not prepared to speculate as to what the motive was for what Mr Macks may have done but did not do in relation to his proxy vote in 2003. Again, I am really being invited to speculate about the existence of circumstances which would give rise to a conflict of interest and I am not prepared to do so.
The next category of matters said to provide the basis for the conduct of an inquiry relate to the conduct of the bankrupt estate of Mr Moore to date. I will deal separately with the question of the s.60 Notices in a moment. A complaint is made about certain correspondence Mr Moore received from Mr Macks at or about the time of the sequestration order and about various communications he had with Mr Macks’ office at the time. Mr Moore claims to have been suffering from ill health at the time. There is a complaint that he was not notified of the first meeting of creditors but he did attend that meeting and says in paragraph 53 of his June affidavit that he addressed the meeting of creditors for approximately 30 minutes and answered questions. The June affidavit provides further details in relation to this meeting and suggests that the Minutes of the meeting are not complete or inaccurate. Once again I have paid careful attention to the detail provided by Mr Moore of these events but am unable to identify within his account the basis for any inquiry into the trustee’s conduct. It is one thing for Mr Moore to contend that the actions of Mr Macks are “perverse, unprincipalled (sic), display bad faith, bad conduct, breaches of fiduciary duties to me and to creditors and shows conflict of interests” (see paragraph 57 of the June affidavit). It is an altogether different matter to provide the foundation for such commentary and I find such foundation is lacking in the material provided by Mr Moore in support of his application.
The June affidavit contains multiple allegations by Mr Moore that Mr Macks is being dishonest, deceptive and fraudulent.
The April affidavit goes so far as to suggest that Mr Macks takes pleasure in seeing Mr Moore harmed and hurt.
Both the April and June affidavits are replete with references to Mr Macks in effect conspiring with Mr Iles to disadvantage Mr Moore. An allegation is made that Mr Iles is responsible for a break-in to Mr Moore’s home. (See for example paragraph 25 of the June affidavit where it is baldly asserted that whilst Mr Moore was in hospital Mr Iles and certain members of the company broke into his office and stole documents. At paragraph 36 of the same affidavit a reference is made to an attempted “break-in” by Mr Iles at an earlier time). As far as I can ascertain no direct allegation is made that Mr Macks has been involved in such break-ins but Mr Moore is in effect inviting me to infer from the existence of a professional relationship between Iles and Macks that Macks is if not complicit in such criminal conduct, then he is supportive of it.
I should say at the outset in relation to this allegation that nothing has been put forward by Mr Moore to establish any impropriety in the professional relationship between Iles and Macks. The existence of a professional relationship from time to time is acknowledged by Macks in his affidavit. Furthermore, no basis has been established for the extremely serious allegation Mr Moore makes against Mr Iles in relation to his taking part in break-ins let alone that Mr Macks would be complicit in or supportive of such activity.
The allegations as they relate to alleged harassment by Macks and his being particeps with Iles in criminal conduct are made without any apparent factual foundation and I reject them unambiguously as providing any basis for the Court embarking upon a s.179 inquiry. I do not propose to deal with each and every allegation Mr Moore makes in relation to Mr Macks on account of the absence of factual material being made available in support of such allegations. I accept the submission of the respondent that it is inappropriate to order an inquiry on the strength of allegations which have no factual basis and agree that to do otherwise would encourage disaffected bankrupts to make baseless allegations which would have the effect of requiring trustees to needlessly expend time and costs in defending their position.
The judgment of Mansfield J in relation to Mr Moore’s appeal from my decision of 1 July 2005 was delivered on 10 February 2006.
I am unable to identify anything arising from Mr Macks’ decision to defer his decisions in relation to those appeals which would provide the basis for a s.178 inquiry. The reasons for the deferral of a decision in relation to the s.60 Notices were explained in some detail to Finn J on 27 July 2005 and there was nothing unreasonable in my view in Mr Macks awaiting a determination by Mansfield J of the appeal from my decision before he made his election in relation to the Notices. It was clearly vital to know whether or not Mr Moore would continue to be bankrupt. If he were not, the decisions in relation to the appeals would be for him to make.
I will deal with the issue of the appeals and the trustee’s attitude in relation to same separately hereunder.
I have considered the miscellany of other complaints raised by Mr Moore against Macks. They all fall into the same category of unsubstantiated assertion. They do not provide the basis for the Court embarking upon a s.179 inquiry. In dismissing the same, I am not specifically relying upon the provision of the Rules of this Court but have made by determination in accordance with what I understand to be the threshold requirement prescribed in the various Federal Court decisions discussed in the earlier part of these Reasons.
As indicated earlier, Mr Moore filed an interim application on 10 April 2006 which came before me on 26 April 2006. Macks was not represented at that hearing. In the interim application Mr Moore asked for the letter from Macks’ solicitors set out in paragraph 25 of these Reasons to be admitted into evidence. I so ordered. It became an exhibit in this application.
He also asked (again) for Mr Macks to be removed as trustee. He asked for an opportunity to cross-examine Macks. His application contained further assertions in relation to the conduct of Mr Macks but without seeking any other specific orders. He filed an affidavit on 10 April 2006 in support of this interim application.
I reserved my determination in relation to his interim application and indicated I would deliver a judgment in relation to same contemporaneously with the delivery of my Reasons in relation to the application pursuant to s.179 of the Act.
The affidavit filed in support of the application and the submissions made by Mr Moore in support of it on 26 April 2006 alerted me to further developments with respect to the appeals. Following the delivery of Mansfield J’s judgment on 10 February 2006 Mr Macks indicated through his solicitors that Mr Macks proposed to abandon the appeals. It was anticipated that they would be abandoned in a formal sense when the appeals were next listed for directions before Mansfield J on 22 March 2006.
In fact what happened was that Mr Moore filed an application in the High Court Registry seeking the issue of a Writ of Mandamus directed to Mansfield J requiring him not to dismiss or allow the abandonment of the appeals. I was not provided with a sealed copy of the Writ and it is unclear as to what process Mr Moore has in fact issued in the High Court Registry but he told me (and no one was present to contradict his assertion), that on 22 March 2006 Mansfield J declined to make an order dismissing or permitting the abandonment of the appeals. Whether he did so in consequence of any process or proposed process in the High Court is not clear.
The information before me, then, is that the appeals are still pending but that the trustee has evinced an intention to abandon the appeals. Mr Moore also informed me on 26 April 2006 that there has been no furtherance of the submission made on behalf of the petitioning creditors before Finn J on 27 July 2005 that the trustee was out of time in respect of any decision to elect to prosecute the appeals.
Mr Moore’s application filed on 16 March 2005, it will be recalled, sought an order by way of interlocutory relief that inter alia, “nothing be done to stop and/or intercept the appeal in Federal Court SAD176 of 2004”.
Mr Moore told me on 26 April 2006 that he had not turned his mind to the question of the seeking of any relief pursuant to s.178 of the Act.
It will be recalled that at the time I reserved my decision in relation to the s.179 application no decision had been made by the trustee in relation to the prosecution of the appeals. Now that a decision has been made it would be inappropriate for me to determine the application as it relates to that aspect of the matter before giving all parties the opportunity to make submissions in relation to same in light of the trustee’s decision. Mr Moore has only sought interlocutory relief in relation to this aspect of the matter and his application does not refer to s.178 or s.179 specifically. The claim for final orders relating to the removal of the trustee can only be a claim pursuant to s.179(1)(a) of the Act.
Out of an abundance of caution I consider the appropriate order to be an order adjourning further consideration of that aspect of his application which relates to the abandonment of the appeals to a date in the near future. The difficulty is in identifying that part of the application filed on 16 March 2005 which can be taken to relate specifically to orders relating to the abandonment of the appeals.
The balance of the application for orders pursuant to s.179 will be dismissed.
The interim application filed on 10 April 2006 should also be dismissed other than as it seeks an order that the Madsen letter be admitted into evidence. The threshold requirement not having been satisfied, no entitlement to cross-examine Madsen arises. It is appropriate to deal with the application on the basis of the evidence adduced by Mr Moore. To the extent that I have relied on Mack’s affidavit (which is in fact to a very minor degree) it has been in respect of matters which are not put in issue on Moore’s own case - for example, the events relating to the proposed proxy vote of Ms Dubois.
The affidavit filed in support of the interim application (also dated 10 April 2006) traversed the same matters which I had reserved upon in December. No formal application to make further submissions or adduce additional evidence was made. To the extent that it was implied, it is rejected. I did not consider the further affidavit material other than those parts of it which advised of developments with respect to the appeals. Those parts were properly put before me by Mr Moore so as to draw my attention to recent developments with respect to same since I reserved my decision. Those matters are referred to in paragraphs 44 to 46 herein.
I certify that the preceding fifty-three (53) paragraphs are a true copy of the reasons for judgment of Lindsay FM.
Associate: Ms K Clarke
Date: 27 April 2006.
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