Re Simersall

[1996] FCA 674

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA  )
GENERAL DIVISION, BANKRUPTCY DISTRICT  )
OF THE STATE OF NEW SOUTH WALES  )       No. NB 859 of 1989

RE:RAYMOND GERALD SIMERSALL

CORAM:Lehane J

PLACE:Sydney

DATE:25 June 1996

MINUTE OF ORDERS

THE COURT ORDERS:

1. THAT pursuant to the provisions of subsection 109(10) of the Bankruptcy Act 1966 Woodbury Pty Limited shall receive the whole of the verdict and costs recovered by the Trustee of the bankrupt estate of the said Raymond Gerald Simersall in the proceedings in this Honourable Court entitled David Ernest Willis Blackwell (Applicant) v Barroile Pty Ltd (First Respondent) and Peter Connell Baines Larcombe & Ors carrying on practise as solicitors under the firm name or style of Westgarth Middletons (Second Respondents) after payment of any sums properly payable under paragraph (a) of subsection 109(1) of the said Act.

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

LIMITED DISTRIBUTION

IN THE FEDERAL COURT OF AUSTRALIA  )
GENERAL DIVISION, BANKRUPTCY DISTRICT                )
OF THE STATE OF NEW SOUTH WALES  )           No. NB 859 of 1989

RE:RAYMOND GERALD SIMERSALL

CORAM:Lehane J

PLACE:Sydney

DATE:25 June 1996

EXTEMPORE REASONS FOR JUDGMENT

LEHANE J: This is an application by a creditor, Woodbury Pty Limited (Woodbury), pursuant to subsection 109(10) of the Bankruptcy Act 1966. The application is that Woodbury should receive the whole of the verdict and costs recovered by the Trustee in certain proceedings.

The facts can be very shortly summarised.  The proceedings were against a firm of solicitors.  They were based upon alleged professional negligence and alleged breach of duty under section 52 of the Trade Practices Act. The Trustee sought indemnity from creditors in respect of the costs of the proceedings; the only creditor which was prepared to indemnify the Trustee, and did so, was Woodbury.  The case was evidently by no
means free of complications; at first instance it failed.  There was a successful appeal; but before the appeal was instituted the Trustee had been advised, and so had Woodbury, that though there were prospects of success, success could by no means be guaranteed.  There were other circumstances to which I was referred which indicate that the risk taken by Woodbury in granting the indemnity was by no means an insubstantial one.

I think, however, that there is no need for me to examine those circumstances now in any detail.  Woodbury paid, as costs and disbursements relating to the proceedings, approximately $297,000.  If the proceedings had failed it may conservatively be assumed that Woodbury would have been responsible for about twice that sum.  The amount recovered in the proceedings ultimately was about $570,000, including costs.

Quite plainly the recovery would not have been made but for Woodbury's indemnity;  quite plainly Woodbury took a very considerable risk in granting the indemnity.  Other creditors, given the opportunity to provide an indemnity, not surprisingly declined to do so.  I say not surprisingly having regard particularly to two matters: one, the apparently doubtful prospects of success as the matter was viewed at the outset; the other, the relatively small amount of the debts owing to the other proved creditors.

Mr Aldridge has referred me to a number of authorities dealing with the exercise by the Court of its discretion under subs 109(10) and the corresponding provisions of the Corporations Law and its predecessors.  The most recent authority to which I have been referred was the judgment of Sackville J in Re Jane Vida Cork; Ex Parte The Official Trustee in Bankruptcy, 15 March 1996 unreported.

I do not think it is necessary for me to discuss at length the principles for which the authorities stand: they appear to be very well established. Applying those principles it seems to me that having regard to the degree of risk taken by Woodbury in this case, the fact that the sum recovered would not have been recovered at all but for Woodbury taking that risk and the general desirability (as at least some authorities appear to see it) of recovering claims available to a bankrupt estate, it seems to me clear that this is a case in which I ought make the orders sought.

I note that one reasonably substantial creditor has consented to the making of the order.  I note also that other creditors have had the opportunity to object and have not done so.  Accordingly, I make order 1 as sought in the application dated 17 May 1996.

I certify that this and the preceding 2 pages are a true copy of the Reasons for Judgment of the Honourable Justice Lehane.

Associate:

Dated: 29 July 1996

Heard:  25 June 1996

Place:  Sydney

Decision:  25 June 1996

Appearances:  Mr M R Aldridge of counsel instructed by Cutler Hughes & Harris appeared for the applicant.

Mr D E W Blackwell, the Trustee of the Bankrupt Estate, appeared in person.