Re Turner, James George; The Bankrupt v The Official Trustee in Bankruptcy
[1998] FCA 456
•23 APRIL 1998
FEDERAL COURT OF AUSTRALIA
BANKRUPTCY - application for inquiry into conduct of Official Trustee - alleged lodgement of proof of debt untrue in a particular - alleged false or misleading proof of debt
Bankruptcy Act 1966 (Cth) ss 86(1), 134(1)(f), 179, 263(1)(d)(i), 263B, 267C
Cheesman v Waters (1997) 143 ALR 78 applied
RE: JAMES GEORGE TURNER EX PARTE: THE BANKRUPT
JUDGE: HEEREY J
DATE: 23 APRIL 1998
PLACE: HOBART
IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TG 7009 of 1997
RE:
JAMES GEORGE TURNER A BANKRUPT
EX PARTE:
THE BANKRUPT APPLICANT
THE OFFICIAL TRUSTEE IN BANKRUPTCY RESPONDENT
JUDGE:
HEEREY J
DATE:
23 APRIL 1998
PLACE:
HOBART
THE COURT ORDERS THAT:
The application be dismissed.
The applicant pay the respondent’s costs of the application, including reserved costs.
Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
IN THE FEDERAL COURT OF AUSTRALIA
TASMANIA DISTRICT REGISTRY
TG 7009 of 1997
RE:
JAMES GEORGE TURNER A BANKRUPT
EX PARTE:
THE BANKRUPT APPLICANT
THE OFFICIAL TRUSTEE IN BANKRUPTCY RESPONDENT
JUDGE:
HEEREY J
DATE:
23 APRIL 1998
PLACE:
HOBART
REASONS FOR JUDGMENT
A sequestration order was made against the estate of the applicant on 29 August 1994. The applicant has previously been bankrupt. That earlier bankruptcy was annulled on 19 May 1992. By the present application the applicant seeks an inquiry into certain aspects of the administration of his present bankruptcy pursuant to s 179(1) of the Bankruptcy Act 1966 (Cth) (the Act). The application, as amended, is in the following terms:
“1. That pursuant to Section 179 the Court enquire into the conduct of the Official Trustee in Bankruptcy in respect of his decisions:
(i)Not to apply Section 86(1) in relation to the proof of debt of Mr C J and Mrs J E Whitford;
(ii)To reject in its entirety the proof of debt of Mr C J and Mrs J E Whitford.
2. That pursuant to Section 179 the Court enquire into the conduct of the Official Trustee in Bankruptcy concerning his failure to consider the exercise of his discretion pursuant to Section 134(1)(f) to prosecute Mr C J and Mrs J E Whitford for their breach of Section 263(1)(d)(i) and Section 267C in lodging a proof of debt that was untrue in a material particular.”
Section 179(1) provides:
“179. (1) The Court may, on the application of the Registrar, the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee 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.”
It is accepted that there is a two stage process in relation to the application of s 179(1). I first have to be satisfied that it is appropriate to order an inquiry. If I reach that conclusion, the inquiry will then take place: Cheesman v Waters (1997) 143 ALR 78.
The matters with which this application are concerned arise out of a property of some 197 acres at Middleton in Tasmania (“the property”), formerly owned by Colin John Whitford and Joyce Evelyn Whitford (“the Whitfords”).
On 1 January 1987 the Whitfords leased the property to the applicant for a term of three years at a rental of $5,000 per year. On 17 August 1989 the Whitfords issued a writ, no 117 of 1989, out of the Supreme Court of Tasmania against the applicant alleging that the applicant’s tenancy had been terminated pursuant to a notice served on him. The Whitfords claimed possession of the property, mesne profits at a rate of $5,000 per year and rates, taxes and assessments including land tax payable in respect of the property until the applicant gave them vacant possession.
By a defence filed on 30 August 1989 the applicant pleaded certain defences which are not relevant for present purposes. However paras 16 to 19 of the defence raise a counter-claim against the Whitfords. By those paragraphs the applicant alleges that on 9 January 1989 the Whitfords, in concert with other persons, attempted to forcibly eject him from the property and distrained upon his stock for unpaid rent.
In par 18 of his defence the applicant claims that as a result of his attempted ejection he suffered injuries. He claims that he was “distressed and injured”, “incurred legal and other expenses” and “was charged with assault and resisting arrest and escaping from custody”. By par 19 the applicant sets up a claim for “general, special and exemplary damages”. Particulars of those damages are as follows:
“PARTICULARS
Special Damage
(a) Double damages pursuant to Section 45 of the
Landlord and Tenant Act $340.00
(b) Labour to unpen and repaddock stock one
Labourer and the Defendant for one day each $128.00
(c) autopsy on dead sheep veterinary fees $ 30.00
(d) Loss of sub tenants rental S Quarrell $1500.00General Damage
(a) Loss of reputation;
(b) Possible imprisonment for breach of bond;
(c) Distress.”
By par 19 the applicant seeks to set-off against the Whitfords’ claim any damages found to be owing by them to him.
The Supreme Court proceeding was cross-vested to the Federal Court on 23 August 1991. On 5 September 1991 the applicant, the Whitfords and the Official Trustee in Bankruptcy executed terms of settlement which provided that the parties agreed that “compensation” was owing to the Whitfords for the occupation of the property from the period 1 January 1990 to 31 July 1991 in the amount of $7,916.66 “together with a rate of $416.66 per month until possession” and rates for the period 1 January 1990 to 30 June 1991 “plus rates at $50.61 per month until possession”. The total then agreed to be due was $8,736. It was agreed that there be a consent order for the Official Trustee to pay the Whitfords $8,736 and that vacant possession be given to the Whitfords on 16 September 1991.
On the next day Sweeney J made by consent an order in the terms agreed upon.
The counter-claim was, I am told, cross-vested back to the Supreme Court. No further steps have been taken in relation to the prosecution of it. Order 79 r 11 of the Tasmanian Supreme Court Rules requires leave from the Court to proceed where no steps have been taken in a proceeding for more than six years.
As already noted, a sequestration order was made against the applicant on 29 August 1994. On 28 February 1995 the Whitfords lodged a proof of debt against the estate of the applicant in the amount of $17,950.75. The basis of this claim was for possession of the property from 17 September 1991 to 29 August 1994 at a rental of $416.66 per month, as well as rates at $50.61 per month totalling $1,786.53 and land tax for the period totalling $1,456.12. On 9 May 1995 the applicant lodged his statement of affairs. In relation to the property he stated:
“I vacated Whitfords’ property in accordance with the Federal Court order. Two horses we could not catch and 10-20 sheep we also couldn’t round up (they used to hide in the bush when you went to look for them) remained. We eventually got the horses and the sheep were attacked by dogs who killed some and we then got the rest ...”
In an affidavit sworn in this proceeding, the Official Trustee in Bankruptcy, Mr Brett Harrison, said that subsequent to receiving the statement of affairs Mr Whitford advised him that on or about 28 October 1991 a local livestock carrier moved most of the applicant’s livestock from the property, although two horses and some “rogue” sheep remained on the property.
In September 1995 Mr Harrison sought legal advice as to whether the applicant had given vacant possession of the property to the Whitfords, and if so, on what date. Mr Harrison was advised that “vacant possession” meant “a right to actual unimpeded physical enjoyment of the premises”. Accordingly on 3 October 1995 Mr Harrison wrote to the Whitfords in relation to the proof of debt and said that he would be willing to admit a proof in the sum of $676, being compensation based on the order of the Federal Court dated 6 September 1991. The Whitfords subsequently agreed to reduce their claim to that amount and the proof was admitted in that sum on 24 October 1995.
In consequence of the present application, which was commenced on 25 July 1997, Mr Harrison had cause to re-examine the order of the Federal Court. He noted that the order as to payment of compensation to the Whitfords was made against the Official Trustee in Bankruptcy, rather than the applicant. Mr Harrison advised the Whitfords accordingly and on 31 October 1997 he rejected their proof of debt in its entirety. In rejecting the proof, Mr Harrison advised the Whitfords that on its withdrawal he would pay them the amount of $676 less amounts already paid to them in dividends. The Whitfords have not applied under s 104 of the Act for a review of the rejection of their proof of debt and the time for making such an application has expired.
It was said in argument by counsel for the applicant that the ultimate aim of an inquiry was removal of the trustee.
As to the first ground on which an inquiry is sought, I am not satisfied that any useful purpose would be served by an inquiry. The practical outcome is the same whether the Whitfords’ reduced claim of $676 is treated as a debt of the estate or a liability of the Official Trustee. Bearing in mind that the applicant has taken no steps to prosecute his counter-claim since, on the best view available to him, 1991 when the matter was cross-vested back to the Supreme Court, I see very little practical value in an inquiry into the Official Trustee taking the decision not to prosecute the counter-claim on behalf of the estate.
I was told that the estate has been “three-quarters administrated”, that the assets have been sold and that dividends totalling about thirty-one cents in the dollar have been paid. Further, the Official Trustee has offered to assign the counter-claim to the applicant for him to pursue if he wishes. In any event, much of it would seem to amount to a claim which did not become divisible property by virtue of s 116 of the Act.
As to the second limb of the application, I note that the only express power conferred on a trustee in bankruptcy in relation to the investigation of possible criminal offences, relates to offences possibly committed by the bankrupt: see s 19(1)(h)(i). The offences that were alleged here would be contraventions of s 263(1)(d)(i) and s 263B. Section 263(1)(d)(i) reads:
“263(1) A person shall not:
...(d) with intent to defraud:
(i) in any proceedings in bankruptcy;
...make a false claim or a declaration or statement of account that is untrue in any particular or lodge a proof of debt that is untrue in any particular.
Penalty: imprisonment for 3 years.”
Section 263B provides:
“263B. A person shall not:
(a)make a false or misleading statement in a proof of debt lodged with a trustee under this Act; or
(b)lodge with a trustee under this Act a proof of debt which is false or misleading in any material particular.
Penalty:$1,000 or imprisonment for 6 months, or both.”
In the case of the latter, s 15B(1)(b) of the Crimes Act 1914 (Cth) provides a limitation period of twelve months.
On the material shown to me there is no reasonable ground for investigating, still less prosecuting, any criminal claim against the Whitfords. The Whitfords’ claim no doubt arose from the fact that after the applicant had left the property he went back into possession of it. Mr Harrison formed a view that any claim that arose out of that would only be a right to damages for the Whitfords and not continued possession by the applicant within the meaning of the terms of settlement and the order of the Federal Court of 6 September 1991.
The material shows no more than the fact that the Whitfords lodged a proof of debt setting out a claim which, in the ordinary course, the Official Trustee might well investigate. There was no suggestion of concealment. There was, as far as I can see, legitimate room for argument on fact and law as to what possession of this rural property involved. The Official Trustee investigated the claim, took legal advice and took a different view of the applicant’s conduct. He advised the Whitfords that the claim would be reduced to $676, with which the Whitfords concurred. I think that any prosecution of the Whitfords would be a waste of the creditors’ money and of no value to the estate. Accordingly, I dismiss the application.
I order that the applicant pay the costs of the application, including reserved costs.
I certify that this and the preceding six (6) pages are a true copy of the Reasons for Judgment herein of the Honourable Justice Heerey
Associate:
Dated: 1 May 1998
Counsel for the Applicant: Ken Read Solicitor for the Applicant: Jennings Elliott Counsel for the Respondent: Peter Wood Solicitor for the Respondent: Piggott, Wood & Baker Date of Hearing: 23 April 1998 Date of Judgment: 23 April 1998
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