Re Vaccaro, C

[1990] FCA 706

IN THE FEDERAL COURT OF AUSTRALIA )	,	S
GENERAL	DIVISION	1

BMKRUPTCY DISTRICT OF THE STATE ) No NX 468 of 1986	. ,
QF NEW SOUTH WAtES AND THE	1
AUSTRALIAN CAPITAL TERRITORY	1

Re: CONSTANCE VACCARQ

EX !CEMPORE JUL)GMENT

Einfeld ;L	Svdney	4 October 1990	i
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This is an application by John Howard Mann to dismiss	L L
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summarily an amended application filed on behalf of Constance	,:.
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Vaccaro on 10 July 1990. Mrs Vaccaro's application seeks a	r
large number of orders, the effect of all of them being that	,.
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Mr Mann should cease and be declared no longer to be the
controlling trustee of her property.	I
The circumstances under which Mr Mann became the controlling	! , .
trustee are now a matter of some history, part of which I have
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dealt with in other judgments earlier in these proceedings.	I	I.
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will, therefore, not do other than repeat them in the most	i
summary way now.	i -
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In November 1986 Mrs Vaccaro declared that her liabilities	[. +
substantially exceeded her assets and that she was unable at	I
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that time to pay her debts. The consequence was that a 8 ,

meeting of creditors constituted or purported to constitute	.-
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and appoint Mr Mann as the controlling trustee of her
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property. A deed was entered into which was subsequently declared void by consent because of formal defects, but it is agreed in these proceedings that, nonetheless, M ~ M has remained the controlling trustee of her property under the Act.

When these events took place, Mrs Vaccaro made available a statement of her affairs. In short it revealed that she had trade or other creditors to whom she owed of the order of $480,000; that she owned other property which had a negative or deficit value and therefore were liabilities rather than assets; and that the only assets which could possibly translate into any funds to be distributed amongst her creditors, was some furniture on which she put a value of $50,000 and an option to purchase for $900,000 from some people named Brown a property in Bowral known as Annersley- Westwood, of which she was at the time a tenant.

At these premises prior to the events which I have just

related, Mrs Vaccaro had been conducting a guest house and	apparently a restaurant within the framework of the guest
house. It appears that she only made one rental payment in respect of this property and that because of the non payment of rent at other times Mr and Mrs Brown became creditors of Mrs Vaccaro.
In appointing m M ~ M as the controlling trustee, the creditors appear to have decided that their best interests were served by permitting Mrs Vaccaro, at any rate for the time being, to continue to operate the guest house and restaurant. At a subsequent time they appear to have agreed that she might convert the guest house into a boarding school for the purpose of training people from Asia in particular, but perhaps other countries overseas as well, in English for 6 monthly periods at a time.
The language school has never in fact been set up and it is not entirely clear to me on the evidence when Annersley- Westwood ceased to be operated as a guest house but this is of little present moment in any event. The fact is that the task which fell to Mr Mann was to protect the interests of the creditors who had appointed him or consented to his appointment.
There is some dispute in defining what Mr Mann's duties as
perhaps goes wider than merely Mr Mann's stewardship into the controlling trustee actually were. This is a dispute which
question of the whole purpose of the controlling trustee aspects of the legislation. It does not seem necessary for me to define in general what controlling trustees ought to be doing when they are appointed because it may very well be that these tasks will vary depending upon the nature of the estate to which the controlling trustee is appointed. It is submitted on behalf of Mrs Vaccaro that there is an analogy between the task of the controlling trustee and that of the provisional liquidator of a company. As I have always understood it, provisional liquidators of companies are mostly fact-finders to enable the court to determine what ought to be the fate of the company, and to permit other interested parties to make knowledgeable submissions to the court on that subject.
If that analogy were carried through here, then Mr Mann's tasks would have been to examine the statement of affairs presented by Mrs Vaccaro and report back to the creditors and perhaps if required, to a court, about the truthfulness or otherwise of what she had declared. In other words, his task would have been to ascertain and advise creditors whether there was any real advantage in enabling somebody who was in, on the face of it, a hopeless financial position, to remain out of bankruptcy. I doubt if that was what Mr Mann was appointed to do.
Vaccaro in these proceedings, are not that he failed to report On the other hand, the assertions made against Mr Mann by Mrs
to the creditors but that he failed, in effect, to achieve the immediacy of a return of the amounts owing to them, by promptly getting in and realising the assets which she had. This assertion then is that Mr Mann failed to act promptly over the intervening four years to bring in the assets so that the creditors could be paid. There would be relatively few provisional liquidators I would suggest whose tasks would include such activities.
As I have said earlier, the deed under which Mr Mann was
appointed was declared void by consent for reasons which were explained at that time and do not need to be repeated now. The first attack now brought against him is that he failed to ensure that the deed under which he was appointed was valid. I take this to include the fact that after it was declared invalid, he failed to present another deed for Mrs Vaccaro to sign which was valid. In view of the concession made that, notwithstanding the absence of a valid deed, M11 Mann is and has at all times been the controlling trustee, I cannot see that the absence of a valid deed makes any difference to this particular case, whatever it might do in some other piece of litigation.
The second attack made on him relates to the fact that he should not have incurred legal costs and costs of his own which were said as at about two years ago to amount to approximately $65,000 in all, of which $35,000 was then the legal costs component. These figures do not seem to be
disputed, nor is it doubted that they would by now have been significantly increased.
It is also said against him that he failed to establish, in effect, the truthfulness of the statement of affairs by getting in touch with the creditors declared by Mrs Vaccaro - and that is a large number of people and firms - failed to make an assessment of the value of her assets and liabilities, and failed to make provision for payment of the creditors in due course.
As to the first of those two, that is the incurring of the legal and other professional costs, it does not seem to me that it would be possible to realise the assets without incurring some costs and I am not in a position to know whether the costs incurred are excessive because I do not know what they cover. From my knowledge of this litigation which now goes back over almost the whole of its course, and for that matter the whole of the course of my time on the bench - we are both now reaching our fourth birthday I think - I do not find it surprising that costs of the order referred to have been incurred. If there were some evidence proffered that Mr Mann had in some way incurred these legal costs for activities which were by way of personal frolics or excesses or some form of peripheral activity other than his professional work in connection with this estate, this matter might have had some substance but no such allegations have been made and no such evidence has been drawn to my attention thus far.
As far as establishing the assets and liabilities are concerned, I can see no reason at all why Mr Mann would not
have accepted Mrs Vaccaro's statement of affairs at least as a reasonable starting point in assessing what was a reasonable thing to do in expending moneys and effort and what was not. A person seeking to avoid bankruptcy would have no reason that I can think of for exaggerating her list of creditors and understating her assets. She would have every reason for giving an impression that she might be able to trade her way out of the deficiency. Hence, I can see no reason why in this estate, which really had only one major asset, a trustee would have gone off and spent time and money on matters other than trying to sell the major asset, or deal with it in a way which might produce the maximum return for the creditors. Nor has it been suggested what would have been achieved if he had done so. It seems odd to me that a submission of this kind should have been made by the debtor who maintains to this day a commitment to the truth of her statement of affairs.
That leaves what is the principal submission, viz. that Mr Mann failed to realise the assets promptly. I have said that the assets really amount to two - the furniture and the option to purchase the Brown's property. I am informed, and I accept for the purposes of this matter at the present time, that the furniture belonged to the boarding house or guest house which was then being run at Annersley-Westwood. It was not therefore presumably ordinary domestic furniture but rather the kind which would enable someone to run a guest house. I
was especially new, unique or antique furniture which would have no idea how old it was but it is not suggested that it
attract substantial interest in the market place. It might attract the interest of someone who was running a guest house or a boarding school or some other place where many people live who might have been prepared to buy the furniture in one line. Perhaps two or three such people might have bought it in sections so that each individual item did not have to be sold separately.
But in view of the deficiency in this estate, I do not think that Mr Mann can be significantly faulted for not having spent a considerable time selling second hand guest house furniture. In my experience, people's valuation of their own furniture is, to say the least, rarely accurate. If this was presented to an auction for example, which would be the normal thing that trustees do in such circumstances, the chances of realising a large sum, indeed even covering the auctioneer's commission and other necessary expenditure, might be regarded as somewhat more than doubtful. Even if a nett sum of money had been obtained, even if it was the $50,000 estimated by Mrs Vaccaro, the return to the creditors would hardly be likely to be particularly large.
In addition, M r Mann would be entitled to take into consideration that the removal of the furniture and its sale would mean firstly that the building could not be continued on as a guest house which appears to have been within the minds of the creditors as one of the ways in which Mrs Vaccaro might
trade out of her problems. Nor could it be converted easily into a boarding school for language training without having to
purchase new furniture to replace it. On the evidence I have heard in some other parts of this litigation, the boarders were to be charged something of the order of $10,000 to $12,000 for six months residence in this establishment on a full-board basis. They would have needed and been entitled to furniture. Mrs Vaccaro had no funds to purchase other furniture. I therefore reject the assertion that M r Mann's failure to sell the furniture should cause his removal.
The main attack on Mr Mann is in relation to the option to purchase the Bowral property. During the course of the litigation that has been associated with this matter, I have heard evidence on a number of occasions of efforts to sell this property. At different times quite a number of buyers or potential buyers have cropped up. Indeed there was one occasion, I recall, some years ago in which the Court was being pressed to make very urgent orders in a rather complex matter, because one of the purchasers was going to be deserted by his funder if Mr Mann was not given permission to buy the property for on-sale, or assign the option, to this purchaser within a very short time.
Other evidence has been given in other aspects of the proceedings that buyers seemed to be coming and going, some from interests associated with this litigation, some completely independent and at arm's length. It has eventuated, however, that nobody has bought the property, and
I have reserved judgment in another part of these proceedings
on whether Mr Mann has been able properly to exercise the option to buy it himself as the controlling trustee for Mrs
Vaccaro, with the intention of onselling it to yet another buyer. If that proceeding is determined in favour of the Browns and against Mr Mann, then the option no longer exists and has not been exercised by anybody, and the property is available to be sold, presumably by the Browns, to anyone at all.

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So that the question that now falls for consideration is whether there has been identified any conceivable mistake, negligence, incompetence, or other failure of obligation by Mr Mann in relation to this option.

It was here mentioned in passing that if I found in the other proceedings in which judgment has been reserved, that the option had failed to be exercised on the day in question by Mr Mann, that would be another act of negligence. But in fact that case turns on whether he successfully exercised an option by proffering a deposit of $1000 for a $900,000 property, in circumstances fully litigated there, where up to the time of the alleged exercise he had believed that a deposit of $90,000 was required. I do not understand precisely what negligence would attach to WC Mann for having taken advantage of a particular circumstance that arose, as deposed to in that litigation, of an option or a step which had not been available to him at any other time other than at the time when he actually acted.

So that I must deal with the question as to whether he has	failed in some way to sell and get in the value of this option
on some other occasions when it would have been reasonable for him to have done so.
Earlier in these proceedings I ordered, in view of the nature of the application, that Mrs Vaccaro should file an amended application which clearly set out the nature of the claims
made against Mr Mann. Subsequently she was ordered to file

points of claim and precise and detailed particulars of the	m	,
allegations made in them. That was not done. Those documents
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are all very largely a narrative of things that Mrs Vaccaro
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did and M r Mann did, or did not do, but could not be said to

constitute a set of precise allegations of negligence of the	.	L.,	I- I
kind which both Mr Mann and the Court would be entitled to have in considering a matter of this kind. It will suffice to say, for present purposes, that none of the documents filed makes out a case, by way of allegation, that Mr Mann has in some way been recreant in his duties.	L *
During the course of argument in this litigation, on the motion of Mr Mann's counsel for a summary dismissal of the amended application because it failed to make out a case either in the points of claim or in the particulars, I was favoured by counsel for Mrs Vaccaro with a more precise statement of the allegations made. As I understood his submissions, the allegations were that Mr Mann:

1. should have advertised the option on several occasions

2. should have placed the option in the hands of real estate i '

agents for sale

1. should have made inquiries in the Bowral area about the

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possibility of sale there I

1. should have taken professional advice about how best to sell or dispose of the option and get in the asset which it represented

Although, because this is a sununary application, I have not been taken to the evidence in the matter, I do know because I have read the papers, that Mr Mann says that he has advertised the option, at least in the Australian Financial Review.

No challenge is made anywhere to his claim that he did advertise on the occasions he mentioned. For that reason I think I should take this assertion as being that the advertising that he says he did does not represent an adequate advertising of the option to maximise the chances of sale. NO particulars of this alleged failure have been given and no evidence outlined which could prove that otherwise a sale would or may have been achieved or even that his duty was to advertise the option more than he did.

concerned, I am not entirely clear what steps it is alleged	So far as placing the option in the hands of agents is
that he might have taken in this regard but I do know that agents have from time to time come to the notice of the parties as either potential purchasers themselves or the introducers of potential purchasers. There are no particulars of this allegation at all.
As far as making inquiries in the Bowral area is concerned, I am not quite sure what is meant by this assertion. Obviously
M r Mann who, from the papers, appears to carry on his business
as a chartered accountant in Parramatta could not have been expected to hawk this option door to door in the Bowral area. He could, I suppose, have advertised it in the two local newspapers which circulate in the Southern Highlands district but if the advertising of such a substantial investment property in the Financial Review did not produce purchasers, it seems unlikely that the Highlands Post would have filled the gap. This is a newspaper which, from my own knowledge, generally specialises in advertising local professional services, domestic real estate, wood and second-hand motor cars together with occasional horses and dogs but I have not frequently seen in its pages advertisements for $900,000+ investment properties. In any event, no particulars of what was intended to be proved under this heading were given, including anything about the chances of a sale if this course had been taken.
particulars have been given of the professions whom he might So far as taking professional advice is concerned, no
have consulted. He is a chartered accountant himself; he is accused of having spent too much in legal expenses, all or most of which appears to have gone or been owing to Mr Mahoney who is the solicitor acting for him in these proceedings. I think I am entitled to infer that in the discussions which he has had with his own solicitor over a period of time, he would
have taken a least the type of professional advice which a city solicitor might be able to give about the selling of a property of this kind in the Southern Highlands.
I have not been told what other professions he might have consulted to get advice. By this period of time there probably is no-one who is more knowledgeable about the possibilities with regard to the selling of the property than Mr Mann himself. Because of the nature of the circumstances of this most extraordinary case and the way in which potential purchasers have suddenly cropped up from time to time and faded away equally as speedily, I think that a reasonable trustee looking at the situation would have gradually come to the conclusion, especially recently, that this property was going to be quite difficult to sell. He might certainly have concluded that a price in excess of the $900,000 that would go automatically to the Browns as the purchase price would be difficult to achieve. He would just have to wait, talk to people, promote - and hope. From Mr Mann's point of view,
unless someone was willing to offer something to him to assign the option over and above the $900,000, a sale for that price
was of no significance at all to his duties as controlling trustee of this estate because it would return not a cent to the creditors and would not even pay his own accumulated professional fees.
Thus it seems to me that overall the allegations made against him anywhere in this case could not conceivably make out a case that he had been, in a sufficiently significant way at least, recreant in his duties or obligations as controlling trustee.
I think that counsel for Mrs Vaccaro is right when he says that the intention of this part of the legislation is not to have controlling trustees for long periods of time, particularly in a relatively simple estate such as this one which is heavily in debt subject only to this option. I think that four years is certainly much longer than the 1egislatLon envisages or than the fathers of the legislation would ever have intended. But counsel suggested that Mr Mann should have resigned some time ago. That raises the concept that somehow the creditors would have been benefited by Mr Mann resigning as controlling trustee at some earlier stage. This was not a particular of negligence but it certainly is one of the things sought by the originating process of Mrs Vaccaro in these
proceedings.
It may very well be, looked at from the point of view of the intention of the legislation, that Mr Mann might have been better off from many points of view if he had cut his losses at some earlier stage and resigned but it cannot be that he could be held to be recreant to his duties for not doing so. Indeed, it might even have been said that he would have been negligent if he had done so at some stages particularly when there appeared to be at least a possibility that the option could be sold for a sum in excess of the purchase price involved.
Unaided by any submission or particulars on the matter, I am quite unable to identify a point of time with any precision at which he might have resigned with equanimity and at which his failure to do so could conceivably be identified as an act of negligence, impropriety or inappropriateness such as would enable the applicant, Mrs Vaccaro, to succeed in the application which she has brought before the Court.
In all these circumstances I can see no basis upon which the current application can succeed. The authorities are very clear that summary relief should not be granted in any form of litigation if there is any reasonable chance that a case could be presented, however weak. In the General Steel case and the various other cases that are by now well known and to many of which I have referred in other judgments in recent months,
there is a unanimity of view, albeit expressed sometimes a little differently, that a case really has to be virtually
hopeless to be struck out before it is heard. I think this is such a case.
I have read carefully the amended application, the points of claim and the so-called particulars and, although not formally read in these proceedings for summary relief, I have read the affidavit material to ensure that the wholly inadequate particulars of the claim are not merely technically deficient.
I fail to see how taking the applicant's case at its very
highest and drawing all conceivable inferences in her favour, the type of relief which is sought in the application could conceivably be granted. Perhaps the applicant has a case but she has not yet presented it. In those circumstances there
can be only one result. I dismiss the application.
[After submissions] I order that the applicant pay the respondent's costs.

I certify that th!s and the

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preceding opges are a true copy r f !h?

.Re?sons for Judgment here~n of h s rlonour

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Just~ce E~nleld

i	Pssoc~ate
Dated. 4 mbb~k	lqqo
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