Re LA

[1993] FCA 62

JUDGMENT NO. ... ...... ........ . .. llW3 1. aaa41.

IN THE BANKRUPTCY DISTRICT OF THE STATE OF QUEENSLAND

Part X No. 122 of 1991

ROBERT EUGENE MURPHY

Applicant

PHILIP ARTHUR HENNESSY

Respondent

MINUTES OF ORDER

JUDGE MAKING ORDER:	Cooper J.
WHERE MAJJE:	Brisbane
DATE OF ORDER:	3 February, 1993
THE COURT ORDERS:

That the sum of $1,250.00 being the costs of and incidental to the respondent Phillip Arthur Hennessy's appearance on the proceedings brought by Robert Eugene Murphy by application filed on the 3rd day of April, 1992 be paid out of the debtor's estate and be afforded the priority in the debtor's estate provided for under section 109(l)(b)(i) of the Bankruutcv Act.

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Note:	Settlement and entry of orders is dealt with in Rule
124 of the Bankruptcy,Rules.  1

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IN THE BANKRUPTCY DISTRICT OF THE STATE OF OUEENSLAND

Part X No. 122 of 1991

ROBERT EUGENE MURPHY

Applicant

PHILIP ARTHUR HENNESSY

Respondent

CORAM :	Cooper J.
PLACE :	Brisbane
m:	3 February, 1993

EXTEMPORE REASONS FOR JUDGMENT

On 3 April, 1992 Robert Eugene Murphy filed an application for an order that his property be released from the control of his trustee, Philip Arthur Hennessy, and filed an affidavit in support of that application.

Mr. Murphy had signed on 12 September, 1991 an authority under Section 188 of the Bankru~tcv Act appointing Mr. Hennessy as his controlling trustee. Mr. Hennessy, as controlling trustee, received a statement of affairs and a meeting of creditors was held on 17 October, 1991.

A proposal put by the debtor to his creditors was not accepted on that occasion and the meeting adjourned to 15 November, 19 9 1 . On that occasion a proposal put to his creditors that they agree to a deed of assignment under Part X of the Bankru~tcv Act failed to obtain the requisite majority. Thereafter Mr. Murphy sought of the trustee that meetings be called to consider proposals which the debtor wished to put to his creditors, and during this period advised Mr. Hennessy that there had come into existence a creditor with a debt of some $12,000,000.00 which debtor would effectively provide Mr. Murphy with the necessary majority to have his proposal accepted.

For reasons set out by Mr. IIennessy i n the af f idav i t material read before me, Mr. Hennessy did not call any further meetings. It was the refusal to call meetings which initiated the application on the part of Mr. Murphy to have his property released.

That matter was heard before me on 24 April, 1992. On that day Mr. Hennessy appeared by his solicitor before me and placed before the court substantial material relevant to the circumstances surrounding the refusal to call further meetings. There was also evidence that a judgment in favour of the National Australia Bank in the sum of approximately 3.5 million dollars, which debt had been accepted at the creditors

meetings and voted against the interests of Mr. Murphy had	been set aside in the Supreme Court of Queensland, and that
there was presently litigation in relation to whether or not the bank was entitled to recover such amount from Mr Murphy.
Upon Mr. Murphy undertaking to immediately execute an authority under Section 188 of the Bankruptcy Act in favour of Mr. Ivor Worrell, I ordered that the property of Mr. Murphy be released from the control of Mr. Hennessy as his trustee. There was no application for costs made on that occasion by either party. Subsequently, Mr. Hennessy lodged with Mr. Worrell, the new controlling trustee, a proof of debt in the sum of $1,250.00, being the legal fees incurred by Mr. Hennessy in taking advice and preparing materials to place before the court on the return of the application for the release of the property and for representation of him by legal representatives on that occasion.
Mr. Worrell has rejected the proof of debt claiming that Mr. Hennessy while trustee did not obtain the consent in writing of the debtor to the obtaining of legal advice or assistance within the terms of Section 190(3A) of the Bankruptcv Act.
Section 190(3A) provides :-

"For the purpose of exercising the powers conferred by subsection (2) a trustee may, with the consent in writing of the debtor obtain such advice or assistance as the trustee considers desirable."

The powers set out in subsection (2) of section 190 are :-

"(a) to take immediate control of the

debtors property and affairs.

(b)	to make such inquiries and investigations in connection with the debtor's property and examinable affairs as the trustee considers necessary.
(c)	to carry on a business of the debtor

if, in the opinion of the trustee, it

will be in the interests of the creditors to do so;
(d)	to deal with the debtor's property in

any way that will, in the opinion of

the trustee, be in the interests of

the creditors. "

As is made clear by Gibbs J., as he then was, in & Adler (1969) 13 FLR 381, there is a difference between the obtaining of advice for the purpose of exercising the powers contained in section 190(2) and the incurring of costs in proceedings under the Bankruptcv Act or other proceedings which fall within the operation of section 32 of the Bankruptcv Act. Section 32 relevantly provides :-

"The court may in any proceedings before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit."

In the instant case, Mr. Hennessy was a respondent to proceedings brought by Mr. Murphy against him seeking orders for release of the property which was properly then in the control of Mr. Hennessy as trustee. The material relied upon by Mr. Murphy raised questions as to the appropriateness of the refusal of Mr. Hennessy to call the relevant meetings in order to have a further proposal put before the creditors

of Mr. Murphy.

In my view, Mr. Hennessy was entitled and as trustee and officer of the court obliged to place before the court relevant information going to the exercise of a discretion as to whether or not in all the circumstances the property ought to have been released.

In my view, the costs incurred by Mr. Hennessy were

not costs incurred in order to receive legal advice or assistance for the purpose of exercising any of the powers conferred by section 190(2) of the Bankru~tcv Act. The costs were incurred as a direct consequence of Mr. Hennessy being made party to a proceeding instituted in this court in its bankruptcy jurisdiction by Mr. Murphy.

In the circumstances, I am satisfied that I have a discretion under section 32 of the Bankru~tcv Act to make an order for costs on those proceedings.

The material indicates that the trustee, Mr. Worrell, is aware that the application was to be brought before the court seeking a review of the rejection of the proof of debt, and also seeking an order in relation to the costs occasioned by the appearance before me on the last occasion. He has by his solicitors indicated that he neither consents nor opposes the making of such an order and will abide the order of the court. No ground has been taken that I

been made at the time I determined the application for release	am functus officio having regard to the application not having
of the property. I propose to exercise my discretion in favour of the applicant.
If I am wrong in the view that section 32 does not give to the court a jurisdiction and a power to make an award of costs in favour of Mr. Hennessy, then I am nevertheless satisfied that the costs were properly incurred by Mr.
Hennessy in the discharge of his duties and functions as controlling trustee and are costs in respect of which he is entitled as trustee to be indemnified out of the estate of Mr. Murphy, and that indemnity is, in the circumstances of this case not subject to the operation of section 190(3A) of the
Bankru~tcv Act.
THE COURT ORDERS:

That the sum of $1,250.00 being the costs of and incidental to the respondent Phillip Arthur Hennessy's appearance on the proceedings brought by Robert Eugene Murphy by application filed on the 3rd day of April, 1992 be paid out of the debtor's estate and be afforded the priority in the debtor's estate provided for under section 109(l)(b)(i) of

the Bankru~tcv Act.

I certify that this and the five ( 5 )

preceding pages are a true copy of the reasons for judgment herein of the Honourable Mr. Justice Cooper.

Date: 22 February, 1993 ] l t l L l (. ;li ( (< ! , I :

Associate

Solicitors for the Applicant:	Mr. A. Hewlett of Cleary & Hoare
Hearing Date:	3 February, 1993