Re Hall, N.C

[1995] FCA 349

CATCHWORDS

BANKRUPTCY - annulment application - whether trustee should be restrained pending determination of application.

Bankruptcy Act 1966 s178

Re Stelnicki (1982) 62 FLR 430
Re Tyndall (1977) 30 FLR 6

NANCY CLOONAN HALL; EX PARTE JOSEPHINE MARY ANDERSON ANDERSON
NO WB 244 OF 1995

R D NICHOLSON J
PERTH
22 MAY 1995

IN THE FEDERAL COURT OF AUSTRALIA   )   LIMITED DISTRIBUTION

GENERAL DIVISION                   )

BANKRUPTCY DISTRICT OF THE STATE OF )

WESTERN AUSTRALIA                  )     NO WB 244 OF 1995

RENANCY CLOONAN HALL

Judgment Debtor

EX PARTE              JOSEPHINE MARY ANDERSON ANDERSON

Petitioning Creditor

MINUTE OF ORDER

JUDGE MAKING ORDER:     R D NICHOLSON J

DATE OF ORDER:         22 MAY 1995

WHERE MADE:            PERTH

THE COURT ORDERS THAT:

1. The debtor's application for an interlocutory injunction against the Trustee in Bankruptcy be dismissed.

1. The debtor's application to have the bankruptcy annulled be set down for hearing on Monday 19 June at 10.15 am

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA   )   LIMITED DISTRIBUTION

GENERAL DIVISION                   )

BANKRUPTCY DISTRICT OF THE STATE    )

OF WESTERN AUSTRALIA               )     NO WB 244 OF 1995

RENANCY CLOONAN HALL

Judgment Debtor

EX PARTE JOSEPHINE MARY ANDERSON ANDERSON

Petitioning Creditor

CORAM:R D NICHOLSON J

DATE:22 MAY 1995

PLACE:PERTH

REASONS FOR DECISION

The debtor has applied, by an application dated 1 March 1995, for an order for the annulment of her bankruptcy in accordance with s153B of the Bankruptcy Act 1966. In the same application she seeks a restraint on the trustee from implementing decisions the trustee has made to realise, deal with or distribute the assets in the applicant's bankruptcy until the resolution of the application for the annulment. It is the hearing of the application for restraint which is sought by way of injunction which falls for determination now.

In presenting her case today, the debtor - who has appeared in person - has called evidence from a financial adviser engaged by her who has testified that there is a strong likelihood that a sum of money - namely $1.6 million - will be loaned by a private lender to a Mr and Mrs D. Sharp in Kalgoorlie who will on-lend it, in effect, to the debtor.  Mr and Mrs Sharp, it is testified, have adequate security to offer for the debt. It is proposed the debt would be used by the debtor to discharge both her secured and unsecured creditors.

It appears that if those arrangements are put in place there is a likelihood that the present value of the unsecured creditors would be paid in full; that is, that of an amount of $400,000 is estimated in the evidence to be likely to remain after the payment of secured debts of which $382,000 or thereabouts would discharge the present value of the unsecured creditors.  In addition there would be required to be payments made in respect of charges and interest in relation to those debts.  Nevertheless, there is a probability raised by the evidence before me that if those arrangements are put into place, the debts of the unsecured creditors may be able to be paid.

The present application is stated in the application form to be based upon s30(1)(b) but I am satisfied that is not the relevant section. The appropriate authority is s178. That section provides:

"[i]f the bankrupt, a creditor or any other person is affected by any act, omission or decision of the trustee, he may apply to the court and the court may make such order in the matter as it thinks just and equitable."

It will be observed the sub-section refers to an "act, omission or decision" of the trustee.  The applicant has not identified any particular act omission or decision beyond the range of decisions the trustee has taken or will take to realize, deal with and distribute the property.  No objection is made to the application being dealt with under this section, nor is it disputed that the trustee has made and will make decisions for the implementation of those objectives.

In Re Stelnicki (1982) 62 FLR 430 consideration was given to the manner in which a court should apply that section. It was there held by Cox J in the Supreme Court of Tasmania that the power given in the section could be exercised in the circumstances to restrain a trustee from conducting a second auction to meet a shortfall of $1000 remaining unsatisfied and to give the bankrupt the opportunity of raising the outstanding balance. At 435 Cox J said that he respectfully adopted what had been said by Deane J in Re Tyndall (1977) 30 FLR 6 at 9-10 concerning s178; 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"

whilst acknowledging, as he did, 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.  In that case Cox J said that although it was not there a case in which any error had been demonstrated in the commercial judgment of the trustee, it was - in the circumstances to which I previously referred - nonetheless just and equitable that the bankrupt should have the opportunity of discharging the relatively small deficiency.
The applicant sought to distinguish this case because it is one where the sequestration order had been made against the estate of a person who was at the time of appointment a patient held pursuant to the Mental Health Act 1963 (Tas).  In contrast, the present applicant is a person who, by her own affidavit, asserts she has wide commercial experience and in relation to whom there is no status under mental health or any other legislation of such type.  I accept that the applicant is not to be compared with the person whose estate was at issue in Re Stelnicki (supra).  However, the law as annunciated by Cox J in relation to the section to be applied to all estates where applications are made pursuant to the section nevertheless has application to the section which I am bound to apply. 

The matters raised on behalf of the applicant and said to be relevant to the exercise of the discretion which I have described are wide-ranging.  It is apparent that her family have an interest in a range of properties over which there are secured debts.  These are located in Kalgoorlie.  She wishes to see them restored to an income-earning position.  She asserts that her family is entitled to the court's leniency because of generosity which, from their assets in the past, has been displayed in terms of establishing community facilities.  While those matters are not strictly before me in evidence, I do not regard them as put into contention by the case for the creditor before me.

The applicant also nurtures a strong sense of grievance in relation to a firm of solicitors because of her understanding of their past involvement in the matter.  She combines that with the fact that the trustee is acting, in her view, in conjunction with that firm of solicitors so that the trustee is in a position of conflict where the trustee should be restrained.  None of those matters are sought to be resolved before me.  There is a question whether or not they are admissible and relevant to the issue of annulment and they await resolution on another occasion. 

The remaining point which is made for the applicant is that for the trustee to continue to deal with the properties with a view to their realisation would be, as she expressed it, "commercial insanity", at a time when a potential lender was dealing with the properties with a view to the making of a loan which would meet the needs of secured and unsecured creditors. I have no doubt that if the trustee is entitled to continue to exercise his powers such exercise has the potential to cut across any steps being taken to put into place a lending regime.

However, the facts are that the application which I have referred to, and an aspect of which is now before me, was made on 1 March 1995.  It follows a long history of the matter in the course of which the applicant has not been able to pay out her secured or unsecured creditors.  Whatever the reason, the present application has taken from the date of its lodgement to today to come before the court in respect of this aspect.  The fact is that in the time which has elapsed further time has been allowed to the debtor to put into place any arrangements that would enable her to meet the debt of the creditor from which has flowed the appointment of the trustee. 
In an affidavit before this hearing the applicant stated that arrangements were in place to pay the genuine creditors and, as has appeared before me, those arrangements are the ones to which the evidence of her financial adviser has related.  Although that evidence was to the effect that those arrangements would be put in place within 14 days, the applicant herself submits that in view of the complexity of the various properties and securities over them, it will be necessary for further time to elapse before the loan can be properly secured and the creditors paid out. 

In my view that is a realistic submission and I must take it into account. To me it is supported by the nature of the properties and the securities upon them. In all of those circumstances, it seems to me that the position which arises today pursuant to s178 of the Act is very different to that which arose before Cox J in Re Stelnicki (supra).  This is not a case where there is a relatively small deficiency which requires time for payment.  The fact is, that in the long history of this matter the secured and unsecured creditors remain unpaid. 

It is a case where the trustee ought to be able to continue with the exercise of his powers.  If the Court were to restrain him at this stage in the face of the quantum of debt which exists, it would in my view, be interfering with the commercial judgment of the trustee.  Accordingly, I am of the opinion that the evidence does not disclose that it would be "just and equitable" for an order to be made in terms of par1 of the application and I therefore refuse the application for restraint in terms of an injunction as sought in that paragraph.

It is apparent, however, that the substantive issue of annulment would best be dealt with as soon as consistent with proper preparation of the case so that both the applicant and the trustee know where they stand.  I have in mind that the applicant is unrepresented and that the merits of the matter, particularly issues which she claims to be relevant and which give rise to a sense of grievance on her part, would benefit from resolution.  Either they provide a justifiable basis for annulment or they do not. 

Accordingly, I am prepared if it is consistent with the proper preparation of the case, to have the matter set down for hearing in relation to the annulment aspect on Monday 19 June at 10.15 am, subject to confirmation with the registry that that time remains available.  That is a period of 28 days from now.  On the face of it, it would seem to me to allow time for proper preparation, notice of objection to any of the evidence which is to be taken and other matters which might arise.  In particular, it remains open during that time for arrangements to be put into place in accordance with the evidence of the applicant's financial adviser. 

It goes without saying that if those arrangements are put into place, or if there is evidence of a substantial nature that they are about to be put into place, that would be evidence on which the Court would be required to act and to hear further from the other side.   Therefore, for the reasons previously given, I refuse the application for the injunction but direct that the matter be set down on the date I have mentioned with a liberty to either party to apply in the event of there being further evidence concerning the re-financing of the applicant's affairs. 

I certify that this and the preceding 5 pages are a true copy of the Reasons for Judgment of his Honour Justice R D Nicholson.

Associate:

Date:

APPEARANCES

Miss N Hall appeared in person

Counsel for the Respondent:      Mr D Martino

Solicitors for the Respondent:    Mallesons Stephen Jacques

Date of Hearing:   22 MAY 1995

Date of Judgment:  22 MAY 1995