Re The Official Trustee in Bankruptcy v Warshall, M

[1987] FCA 151

CATCHWORDS

Bankruptcy - Discharge - Trustee's application for extension of

time at which objection to dlscharge will lapse dismissed -

Bankrupt's costs - Whether to order payment

by trustee.

__

Bankruptcy Act, 1966 - s.149f8)

No. 1176 of 1981

Jenkinson J.

Melbourne

6 April, 1987

..

IN THE FEDERAL COURT OF AUSTRALIA	)
GENERAL DIVISION	) No. 1176 of 1981

BANKRUPTCY DISTRICT OF	THE STATE	1
OF VICTORIA	)

E: MICHAEL WARSHALL, a

bankrupt

EX PARTE: THE OFFICIAL TRUSTEE IN

BANKRUPTCY (as trustee of

the property of Michael

Warshall, a bankrupt)

Applicant

W: Jenkinson J.

PLACE	:	Melbourne
DATE:	6 April, 1987

On 26 November 1986 I dismissed an application, by the

trustee of the bankrupt, for an order pursuant to s.149(8) of the

Bankruptcy Act 1966 that the period, at the expiration of which an

objection which the trustee had entered under s.l49(3)(c) of that

Act will lapse, be extended. Mr. Davles of counsel for the

bankrupt, by whom the application had been successfully resisted,

sought an order that the bankrupt's costs of the application be paid by the trustee. The ground of the appllcation had been that time was required for further investigation of the bankrupt's

conduct, both to determine whether that conduct had been seriously

blameworthy in certain respects and to discover any further assets

by the recovery of which the bankrupt's estate might be augmented.

The submissions in support of the bankrupt's clalm for

costs against the trustee were slmilar to those advanced in

support of such a claim In Re N.R. Campbell; Ex parte Officlal

Trustee in Bankruptcv (No. 234 of 1977). In the latter case I

have today refused to make any order for costs and have published

my reasons for that refusal. That case concerned an application

by a trustee under s.149(12) whlch was dismlssed, but in my

oplnion the reasons stated are applicable, mutatis mutandis, to an

application under s.143(8). For the reasons stated m Re N.R.

Campbell, a copy of whlch is annexed to these reasons, I consider

that no order for costs should be made against a trustee whose

appllcation for an order under s.143(8) is dismlssed, unless the

making or the prosecutlon of the application has been	in some way
unreasonable.

It was pointed out that in this case of Mr. Warshall

there had been very great delay in administration of the

bankrupt's estate, for which delay the evidence provided no

explanation. That clrcumstance should in my opinion be considered

as tending to attract an order that the trustee pay the bankrupt's

costs of an unsuccessful application under s.149(8). As in the

course of time the Court's attitude to circumstances of that kind,

in relatlon to applications under sub-sections ( 8 ) and (12) of

s.149, is disclosed by reasons given for the decisions of such

applications, the likelihood will increase that the bringlng of an

appllcation in the face of circumstances previously held by the

Court to preclude the making of the order sought will be

considered to be unreasonable, and will attract an order that the

applicant pay the bankrupt's costs. But I do not think that in

I certify that this and the t w o preceding pages are a true copy of

the Reasons for Judgment herein of the Honourable Mr. Justlce

Jenk lnson .

Dated: 6 April, 1487

Counsel for the Applicant;	Mr. G.T. Bigmore,	Sallcitor
Counsel for the Debtor	Mr. G. Davles

Solicltor f o r the Applicant : Mr. G.T. Bigmore

Solicitor f o r the Debtor Madywicks

Dates of Hearmg 25 and 26 November, 1986

Bankruptcy - Discharge - Trustee’s application for deferment

dismissed - Bankrupt’s	costs	-	Whether	to	order	payment	by
trustee.

Bankruptc-r Act, 1966 - s.143(12)

Hunter - J . Official Trustee (1980) 33 B.L.R. 457

Scott Fell v . Llovd (1911) 13 C.L.R. 230

Re Arthur Williams; Ex Parte Official Receiver C19133 2 K.B.	88
In re John Tweddle & Co. C19103 2 K.B. 697

Bottomlev v. Brouuham C13083 1 K.B. 584 at 587-588

RE: NOEL RODNEP CAMPBELL EX PARTE: THE OFFICIAL TRUSTEE

No. 234 of 1377

Jenkinson J.

Melbourne

6 April, 1987

IN THE FEDERAL COURT OF AUSTRALIA )

GENEXAL DI'JISION No. 234 of 1377

BANKRUPTCY DISTRICT	OF THE STATE	)
OF VICTORIA	)

E: NOEL RODNE't CAMPBELL

4 Bankrupt

M PARTE: THE OFFICIAL TRUSTEE

Applicant

CORAM: Jenkinson J.

PLACE	:	Melbourne
m:	6 April, 1987

REASONS FOR JUDGMENT

On 30 May 1986 I dismlssed an applicatlon, by the trustee of the bankrupt estate of Noel Rodney Campbell, for an order that the bankrupt should not be discharged from bankruptcy by virtue of s.143 of the Bankruptc7 Act 1366. Mr. Campbell, who

had appeared by counsel to resist the application, sought an order

that his taxed costs of the application be paid by the applicant

trustee. It was submitted by Mr. McLsan of counsel for Mr.

Campbell that the Official Trustee, like any trustee of the estate

,

of a bankrupt, was liable to be ordered to pay the bankrupt's costs of an unsuccessful application under s.149(12) of the

Bankruptcy Act 1966, bjr exercise of the discretionary power with

respect to costs in accordance with the same general principles'as

guide the exercise of the discretlon in civil litigatlon between

parties who are acting in furtherance of their own interests. The

applicability of those principles to a proceedlng lnstltuted by

the trustee of a bankrupt under that sub-section was established, according to the submission, by Hunter - J . Official Receiver (1980)

33 A.L.R. 457; Scott Fell v. Llovd (1511) 13 C.L.R. 230; and

Arthur Williams & Co.; Ex parte Official Recelver C19131 2 K.B.

5 8 .

The first two of those cases were concerned xlth the

costs of appeals in which the bankrupt was appellant and the

trustee respondent. The third case xas concerned with the costs

of an applicatlon to which the parties were the trustee and a

person found in the decidlng of the application to be	a stranger
to the bankruptcy.

The Full Court of this Court stated in Hunter v.

Official Receiver 33 A.L.R. at 463 the principle by which the

decision of the High Court in Scott Fell v. Llovd, supra bound

this Court in the words of Griffith C.J. in the latter case (13

C.L.R. at 2441 : 'I ...... when an official assignee becomes an

active litigant he is exposed to the same risks as any other

litigant." It may be thought that the principle was glven by the

Full Court a further exposition, and was shown to be not limited

in its applicatlon to the litigious activitles of a trustee in

bankruptcy in appellate proceedings; by the reference made by th2

Full Court, with apparent approval, to the distinction dra-xn in &

Arthur Willlams & Co., supra "between cases where the Official

Recelver is performing a quasi-judlcial function under a statutory

obligation and cases where he engages In litigation in exercise of

a discretion to do so" (33 A.L.R. at 4 6 2 1 . In the forner case the

3 .

Official Recelver ought not to be ordered to pay costs, it =as held, but in the latter caae costs mlght be awarded against hlm.

Re Arthur Willlams E; Co. =a5 not a case of appeal and the

principle upon shich the Full Court 6 declsion of the questlon of costs in Hunter v. Official Receiver was based 1s not expressed to

be confined - although it was propounded in relation - to a

trustee in bankruptcy's partlcipation in an appeal. I think I

should regard the principle as applicable to an application by

which the trustee has invoked	the	xercise	of	original
jurisdiction.

This case is not one in xhich the Official Trustee lay under an express statutory obligation to bring the application.

Section 14Y(12) of the Bankruatcv Act 1966 co2fers a power on each

of "the Registrar, the Inspector-General, the trustee or a

creditor" to apply for an order airscting that the bankrupt shall

not be dlscharged from bankruptcy by virtue of that section, but

on none of chem does the Act expressly impose an obligation to

make such an application. It was In exercise of a discretion that

the Official Trustee brought the application. But I think that a

consideration of the judgments in Re Arthur Williams & Co., supra

and in In re John T-deddle & Co. C13103 2 K.B. 637 shows that the

statutory obligation which the members of the Court of Appeal had

iricontemplatlon included that which was implied as well as that

wh3ch was express. The provisions of the Bankruptcy Act 1366 with

respect to the powers and functions of the Registrar and the

Inspector-General give no ground for doubting'the sufficiency of

those powers to enable them effectively to exerclse, if the need

arose, the functlon conferred on them by s.149(12) : see s s .

4 .

lZ(l)(b)(i), 12(l)(ba)(i), 12(1B), 12(2), 14 and 19B. Eut in my

opinion a consideration of the scheme of the Act and of the

practical operatlon of its admlnistratlon suggests that in the

ordinary course of that administratian It is upon the trustee of

the bankrupt that the responalbility should fall of deciding

whether an application should be made to the Court under

s.143(12). And the prescription made by Rule 518 of the BankruntcJ Rules of the matters to be taken into account by the

Court, pursuant to s.149(13), in deciding xhether to accede to

such an application strongly indicates the trustee of the bankrupt

as the person who would usually be the most suitable applicant, and the best placed to decide whether application should be made,

in my opinion. Read as a whole, the Act is in my opinion to be

taken to impose an obligation on the trustee of a bankrupt to

- ( . I

consider whether such an application ought to be made and, if the

trustee considers that it ought, to make it. Each of the other

persons named in s.149(12) who are ngaged In bankruptcy

administration - the Registrar and the Inspector-General - may in

certain circumstances have occasion to consider whether he ought

to bring such an application, but In most cases each of them would

expect that the trustee would undertake the responsibility of

determlning whether an application should be brought. It is

difficult to suppose that the legislative intentlon disclosed by

Part VI1 of the Bankruptcy Act 1966 - and in particular that which

is disclosed by s.149 - could be carried into effect unless

trustees did undertake that responsibility. The resources

available to the Registrar and the Inspector-General could hardly

support adequate consideration by either of them of all the

matters relevant to the discharge of that responsibility in

relation to all, or to any very substantial proportion of,

bankrupts, much less support the burden of institutmg and

conducting those applications under s.143(12) which either of them

should think himself under a duty to brmg if he were to consldsr

the case of every bankrupt.

-3

My conclusion is that the trustee of the bankrupt lies

under an obligation, the existence of which is to be inferred from

the terms of the Bankruptcv Act, to decide whether an applicatlon

under s.149(12) of that Act ought to be made and, if he decides

that it ought, to bring the application unless it appears that one

of the other persons qualified to apply intsnds to do so. I turn

to consider the references In Hunter v. Official Receiver, supra,

and in the two English cases cited, to the "judicial" or

"quasi-judicial" or "seml-judlcial" character of those litigious

activities of the Official Receiver wnich, it is said, do not

expose him to the risk of an order agalnst him for costs. What is

indicated by those references is, not the exerclse by the Official Receiver of a decision-making function (although that may precede

and determine what he is to do), but his participation in a

judicial proceeding under statutory obligation, as by making a

report upon the making of which, or upon the inclusion of

specified matter in which, the institution of a curial proceeding

is. conditioned. (See, for example, the report requlred by s.8(2)

of-the English Companies (Windino-up) Act 1830 : C19103 2 K.Z. at

6 3 s . The introduction of the adjective "judicial", and the

slgnificance accorded the wo'rd by Cozens-Hardy M.R. In the two

Engllsh cases, may be traced in the judgment of Farwell L . J . In

re John Tweedle Companv Ltd. C13101 2 K.B. at 706 to the judgment

6.

of Channel1 J. in Bottomlev v. Brousham C19083 1 K.B. 534 at

587-588. Consldering whether absolute privilege, under the law of

defamation, attached to the contents of a report of an Officlal

Receiver made in pursuance of s . 5 \ 2 ) of the English Companies

(Windinq-up) act la90, LCnannell J. sbserved:

"The real doctrine of what is called 'absolute

privilege' is that in the public interest it

is not desirable to inquire whether the words

or acts of certain persons are malicious or

not ...... it is desirable that persons who

occupy certain positions a5 judges, as

advocates, or as litigants should be perfectly

free and independent, and, to secure their

independence, that their acts and words should

not be brought before tribunals for inquiry

into them merely on the allegation that they

are malicious ......

Starting with that as being the doctrine, does not the case of the official receiver come

clearly within it? In my opinion it comes

within it on two grounds.

I think, In the first place, that the official receiver has a statutory duty to inquire in a judicial way into certain matters by the Act of 1890, and that In performing that duty he is acting in a judicial capacity. It is quite true that the report is made ex parte, but

that makes no difference. A judge In hearing

an ex parte application ia still acting as a

judge, and the absolute privilege applies

quite as much as when he is hearing a case in

which both parties appear. The fact that this

was a preliminary inquiry equally does not

prevent it being a judicial inquiry. An

inquiry before a magistrate on a charge of

murder, for instance, which he has certainly

no power to deal with, and as to which he is

only inquiring in a preliminary way whether

there is a case for committing the accused

person for trial, is clearly a judicial

proceeding although it is preliminary to the

trial. ......

But, even if that is not sound, there is the

further ground that the report	of the official
receiver may be treated, not	so much as the

judgment in a judicial proceeding, but as the

initial stage of proceedlngs in the winding-up

Court, whlch clearly is a Court. It is the

7 .

information upon which the proceedings take

place, and it is made by the official recelver

under a statutory duty."

In my opinion the reasoning of the members of the Court

of Appeal in In re Arthur Williams & Co.. supra and In re John

Tweddle & Comuanv Ltd. intends no more by reference to the

"judicial" character of the functions under discussion than that

each function forms part of an administratlve process of which the

final Etages are committed to a Court and in which the function so

characterised is exercised under a statutory obligation to

discharge what Cozens-Hardy M.R.	descrlbed as "public duties for
the public welfare". If that be	so, the obligatlon under whzch,

as I have held, the trustee of a bankrupt lies of considering

whether he should make an application under s.143(12), and of

making the application if he considers that the decision of the

Court should be sought under that sub-section, is an obligation of

a quasi-judicial kind, in the sense in which in those cases and in

Hunter v. Official Receiver that description is applied. In such

a case the trustee does not in my opinion engage in litigation in

exercise of a discretion to do so, in the sense intended by the

reasoning of those cases. The trustee discharges an obligation to

make the application under s.143(12) when he makes it in the

conviction that it ought to be made, and made by him. And the

discharge of the obligation 1s In my opinion correctly conceived

as the performances of a publlc duty for the publlc welfare. If

the trustee's declsion to make an application under s.143(12) were

consldered by the Court to have been unreasonable, or if the

conduct of the application by the trustee were considered to have

been unreasonable in some respect, that would be a consideration

in favour of an exercise of the discretionary power to order the trustee to pay the bankrupt's costs of the appllsation. But I do not consider that in this case there was anything unreasonable in

the lnstitution or the prosecutlon of the application. In those

circumstances I do not consider that any order for payment of the

bankrupt's costs by the applicant trustee ought to be made.

Both Hunter v. Official Receiver, supra and Scott Fell v. Lloyd, supra were cases in which the Official Receiver in the

one case and the Official Assignee in the other had in compliance

with his statutory duty made a report to the Court to which the

bankrupt applied in the first instance for discharge. In each case it was only the costs of proceedings by way of appeal from the original order for discharge that were in question. In each

case the appellate Court characterised the position of the

Official Receiver or Assignee as Indistinguishable, in respect of

costs, from that ofher unsuccessful litlgants. The

characterisatlon thus adopted accords with the dominant principle

to be discerned in the rules a to costs formulated in respect of

proceedings, both at first instance and on appeal, to which

bankruptcy trustees and liquidators are parties. (See McDonald

Henrv and Meek : Australian Bankruptcv Law and Practice (5th ed.)

paras. 100, 101, 796; Williams and Muir Hunter on Bankruutcv (19th

.

ed.) 423-424; Re Wilson Lovatt & Sons Ltd. C19771 1 All E.R. 274.)

Underlying the adoption of the principle that trustees in

bankruptcy and liquidators should suffer the same consequences, in

cos'ts, of failure m litigatlon as other litigants seems to have

been a concern to ensure fairness to the adverse parties. That

concern, and the reasoning whlch proceeded from it, did not

l

3.

comprehend, as it seems to me, the bankrupt himself as a party to litlgatlon against his trustee, except in appellate procredlngs.

Eut I do nut ground my conclusion that in this case there should

be nu order a5 to c0sts on that opinion.

I certify that this and the eight preceding pages are a true copy

of the Reasons for Judgment herein	of the Honourable Mr.	Justice
Jenkinson.
Dated: 6 April, 1387