Rondo Building Services Pty Ltd v Starkey
[2005] FMCA 275
•10 March 2005
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RONDO BUILDING SERVICES PTD LTD v STARKEY | [2005] FMCA 275 |
| BANKRUPTCY – Removal of a trustee – conduct of meeting of creditors under Part IV. |
| Federal Magistrates Act 1999, s.64(4) Bankruptcy Act 1966, ss.30, 64ZA, 153A(3), 156A(4)(b), 178, Part IV |
| Re Dingle; Westpac Banking Corporation v Worrell and Anor (1993) 47 FLR 478 Pascoe v Prentice [2003] FMCA 198 Re Ly; Ex parte Dixon v Ly (1995) 62 FLR 432 Re Wong; Ex parte Wong v Donnelly (1995) 63 FLC 426 Re Lamb; Ex parte Reg in Bankruptcy (1984) 1 FLR 391 Re Challen (a bankrupt); Ex parte Brown v Bendeich (unreported, FCA, Beaumont J, 23 April 1996) Re Partridge (unreported, FCA, Lockhart J, 22 September 1982) Re Hetherington (unreported, FCA, Sweeney J, 14 December 1982) Deputy Commissioner of Taxation v Niemann (1982) 69 FLR 79 Commonwealth of Australia v Irving (1996) 65 FCR 291 Re Chevron Furnishers Pty Ltd (in liq); Amalgamated Industries Pty Ltd v Harris (1993) 12 ACSR 565 Re Dawes (1934) 7 ABC 190 Spiteri v Lindholm [2003] VSC 42 Ogilvie v Adams [1981] VR 1041 |
| Applicant: | RONDO BUILDING SERVICES PTY LTD (ACN 000 289 207) |
| Respondent: | GRAHAM LINDSAY STARKEY AS TRUSTEE OF THE ESTATE OF JOHN DANCE |
| File Number: | BRG 10 of 2004 |
| Judgment of: | Rimmer FM |
| Hearing date: | 11 May 2004 |
| Delivered at: | Brisbane |
| Delivered on: | 10 March 2005 |
REPRESENTATION
| Counsel for the Applicant: | Mr McQuade |
| Solicitors for the Applicant: | James Conomos Lawyers |
| Counsel for the Respondent: | Mr McSweeney |
| Solicitors for the Respondent: | MacGilverays |
ORDERS
That the respondent be removed as the trustee of the estate of Peter John Dance and that Mr Nick Combis be appointed as trustee in his place.
That there be no order as to costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 10 of 2004
| RONDO BUILDING SERVICES PTY LTD (ACN 000 289 207) |
Applicant
And
| GRAHAM LINDSAY STARKEY AS TRUSTEE OF THE ESTATE OF JOHN DANCE |
Respondent
REASONS FOR JUDGMENT
Application
This is an application by a creditor of the bankrupt estate of Peter John Dance, Rondo Building Services Pty Ltd (ACN000 289 207) seeking a number of declarations against the trustee of the bankrupt estate, Graham Lindsay Starkey, as follows:
·That the trustee wrongly admitted a number of proofs of debt as outlined in the application;
·Further on in the alternative, a declaration that the meeting of creditors held on 20 November 2003 was not conducted in accordance with Division 5 of Part IV of the Act;
·A declaration that the resolution that the trustee be removed as the trustee of the estate of Peter John Dance and that Nick Combis be appointed to be the trustee in his place;
·Further on in the alternative, an order that the respondent be removed as the trustee of the estate of Peter John Dance and that Nick Combis be appointed as trustee in his place;
·An order that the respondent pay the costs of the applicant of this application to be taxed on an indemnity basis, if not agreed, and that the respondent not be indemnified from the estate of Peter John Dance.
This application is supported by one other major creditor of the bankrupt estate, CSR Ltd.
The trustee sets out in his submissions to the Court that he does not wish to be seen to take an active part in the application, that no reliance will be placed upon any affidavit filed by the trustee on any issue and that he wishes to make it clear that he resists the application only for the following reasons:
·Two creditors out of fourteen creditors in the estate challenge his ability to act impartially;
·Fifty-eight percent of value of creditors voted against a change in trustee, knowing of the two creditors complaints;
·He is not biased in favour of the bankrupt or unwilling to investigate his affairs;
·He believes the applicant’s claim to a perception of bias is unreasonable. If a trustee thinks that the creditor’s applications have no merit, he is justified in his initial decision to resist it, until it can be seen that the creditors have voted decisively in favour of the trustee’s removal from office.
The trustee has therefore placed no properly sworn evidence before the Court that can be relied upon in this decision.
The trustee has made it clear to the Court in his submissions that he does not seek to rely on any affidavits he filed and therefore will not be cross-examined, as pursuant to section 64(4) of the Federal Magistrates Act 1999 cross-examination is limited to deponents who adduce evidence.
Issues to be determined
The following issues arise for consideration in this application:
·Whether the Court should order the removal of Mr Starkey as trustee of the bankrupt estate of Peter John Dance and appoint another trustee. This application is brought under sections 30, 156A(4)(b) and 178 of the Bankruptcy Act 1966 (“the Act”);
·The conduct of the meeting of creditors under Part IV of the Act held on 20 November 2003, and in particular the entitlements to vote of various creditors at that meeting;
·The effect of the position taken by Mr Starkey who has not stated that he opposed his removal as trustee of the estate and has not stated in the notice of opposition the basis upon which he opposes such relief and has not adduced any evidence which he relies upon at the hearing of this application.
Background
The applicant is a creditor of the bankrupt, Peter John Dance, in the sum of $201,993.79. The creditor CSR Ltd, who supports the application, is a creditor in the sum of $265,997.95.
The bankrupt became bankrupt on 3 September 2003 upon the presentation of a debtor’s petition and Mr Starkey became the trustee of the estate by operation of section 153A(3) having lodged with ITSA a consent to act as trustee.
The bankrupt was the sole director and secretary of the company, Casaron Pty Ltd (“Casaron”).
On 23 October 2001, the applicant obtained judgment against Casaron in the District Court of Queensland in the sum of $168,889.19 (excluding costs to be assessed). The debtor/creditor relationship between the applicant and the bankrupt and CSR Ltd and the bankrupt arises from guarantees given by the bankrupt in respect of the obligations of Casaron.
The only shareholder of Casaron was the company Spuncod Pty Ltd (“Spuncod”). In respect to Spuncod:
a)The bankrupt was a director and the sole secretary of the company for the period 5 January 1983 to 15 April 2003;
b)The shareholders of the company are recorded in the ASIC search as the bankrupt and Elizabeth Anne Dance, the bankrupt’s wife;
c)It is the trustee of the Dance Family Trust No 2, of which the bankrupt is a beneficiary;
d)At the date of bankruptcy Spuncod was indebted to the bankrupt;
e)It is the holding company of Casaron;
f)On 11 March 1997 Casaron provided in favour of Spuncod a fixed and floating charge over its assets and undertaking (which was registered on 11 April 1997). The charge remains unsatisfied.
On 18 February 2002, while the bankrupt was a director of Spuncod, he did on behalf of that company appoint Mr Starkey receiver and manager to the assets and undertakings of Casaron. Mr Starkey ceased to be the receiver and manager on 27 February 2004, subsequent to the filing of this application on 13 January 2004 and the delivery of the entry of appearance and notice of opposition filed on 28 January 2004.
The bankrupt’s son, Timothy Arthur Bruce Dance, is the current director and secretary of Spuncod.
By order of the Supreme Court of Queensland made on 18 February 2001, Casaron was wound up in insolvency pursuant to the provisions of the Corporations Act. A number of the bankrupt’s creditors arise from guarantees provided in respect of obligations incurred by Casaron in the course of its trading.
The applicant requested that Mr Starkey call a meeting of creditors for the purpose of a resolution removing Mr Starkey as trustee.
The law
Removal of the trustee
The applicant applies under sections 30, 156A(4)(b) and 178 of the Act for an order that the respondent be removed as the trustee of the estate of Peter John Dance. Consideration must be had to each of those provisions in the Act.
Section 30 of the Act provides that the Court has power to make the orders sought and relevantly states that:
(1) The Court:
a)Has full power to decide all question, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
b)May make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
I accept that the Court has jurisdiction to review the decision of a trustee under section 178 of the Act. In my view it is clear from section 30 of the Act that this section alone is sufficient to enliven the jurisdiction of the Court to grant the relief sought by the applicant and it is not necessary for any application to be made under section 178 or 179: Re Dingle; Westpac Banking Corporation v Worrelll and Anor (1993) 47 FLR 478 at pp. 484-486; Pascoe v Prentice [2003] FMCA 198 at paragraph 15.
The application to remove a trustee for reason of a conflict or perceived conflict does not solely depend upon an application being made under section 179 of the Act as this section relates to an enquiry into the conduct of the trustee and can be an entirely different issue.
The conduct of a trustee is subject to the general supervision of the Court as a trustee is treated as an officer of the Court. A trustee is an officer of the Court with a duty to act impartially: Re Ly; Ex parte Dixon v Ly (1995) 62 FLR 432 at 437.
Section 178 is applicable to be considered in this matter as the trustee has made a decision that he will continue as trustee of the bankrupt’s estate and in that case the jurisdiction of the Court under this section has been enlivened: Re Wong; Ex parte Wong v Donnelly (1995) 63 FLR 426. In these circumstances the Court must make as it thinks just and equitable as the Court has a wide discretion.
Section 156A(4) is also applicable in this decision. Where a trustee is appointed pursuant to section 156A the Court may, on an application of a creditor, remove a trustee on the ground that:
“The connection of a trustee with, or the relation of a trustee to, the bankrupt is likely to make it difficult for him or her to act with impartiality in the interests of the creditor generally.”
There are accepted general principles to be applied by the Court when considering an application for removal of a trustee.
A trustee in bankruptcy plays an important role in the administration of bankruptcy and has a duty to exercise the statutory powers under the Act. It is of importance to the community that the role of trustee is fulfilled only by persons who are, and who are seen to be, completely independent, both of the bankrupt and any creditor: see Re Lamb; Ex parte Reg in Bankruptcy (1984) 1 FLR 391 at 396.
The general principles for removal have been expressed in the following ways:
a)The Court will not countenance a situation where there are reasonable grounds for a reasonable apprehension on the part of a creditor that a trustee might be impeded or inhibited from acting impartially in the interests of all creditors. If the relationship between the trustee and the bankrupt is shown to be such that a fair minded person informed of the facts could reasonably entertain a doubt as to the trustee’s capacity to be independent in the circumstances in which the trustee was required to investigate the bankrupt’s past conduct, it is not appropriate for the trustee to continue to act: Re Challen (a bankrupt); Ex parte Brown v Bendeich (unreported, FCA, Beaumont J, 23 April 1996).
b)A trustee must be scrupulously careful to ensure that he never allows himself or herself to be placed in a position of conflict between duties or between duty and interest. Likewise the trustee should not allow the situation to arise where the trustee may be seen to be in a position of conflict or potential conflict. The trustee must not only be impartial but be seen to be impartial: Re Partridge (unreported, FCA, Lockhart J, 22 September 1982) at 3.2; Re Hetherington (unreported, FCA Sweeney J, 14 December 1982); Deputy Commissioner of Taxation v Niemann (1982) 69 FLR 79 at 97.3-98.3; Re Challen (a bankrupt); Ex parte Brown v Bendeich (unreported, FCA, Beaumont J, 23 April 1996) at 2.2. The appointee must be independent and be seen to be independent: Commonwealth of Australia v Irving (1996) 65 FCR 291 at 294G-295, 297A;
c)As was said of a liquidator, a liquidator must have no prior or other involvement either with the company in liquidation, its directors and major shareholders, or one of its creditors so that he or she could not fairly and impartially carry out the duties as liquidator: Re Chevron Furnishers Pty Ltd (in liq); Amalgamated Industries Pty Ltd v Harris (1993) 12 ACSR 565 at 570;
d)It should not be left to the trustee to determine upon what he or she conceives to be his own ability to reconcile conflict or impartiality, but should ensure that the conflict or impartiality does not exist: Re Hetherington; Ex parte Deputy Commissioner of Taxation (unreported, FCA, Sweeney J, 14 December 1982) at 38.1.
Section 156A(4), like other provisions in the Act, emphasises the requirement that a trustee not be placed in a position where it is difficult for him to act within impartiality, regardless of whether he would in fact act with impartiality. The provision illustrates a concern for a trustee to be seen to be independent and not be in a position of potential conflict: Re Lamb; Ex parte Reg in Bankruptcy (1984) 1 FCR 391 at 398.6. This provision indicates a legislative intention as to the necessity for a trustee to be free from any influence that may make it difficult for the trustee to act impartially in the interest of the creditors generally: Re Dawes (1934) 7 ABC 190 re section 153(2) of the 1924 Act.
There needs to be a connection with, or a relation of the trustee, to the bankrupt. Otherwise, as referred to the decision of Sweeney J in ReLamb; Ex parte Reg in Bankruptcy, the test is no different to the principles referred to above.
An important factor to take into account is whether subconsciously the trustee is not likely to act impartially. The trustee’s unconscious loyalty is a factor to be taken into account.
Proofs of Debt
The central issue arising from the conduct of the meeting is the admission by Mr Starkey of a number of proofs of debt (or section 64D statement) in respect of the person’s entitlement to vote at the meeting: section 64ZA. The Court has power to review that decision under section 30 or 178. When a Court reviews an entitlement to vote at a meeting the Court must decide the question of the creditor’s entitlement to vote and on the material before it: Re Dingle; Ex parte Westpac Banking Corporation v Worrell (1993) 47 FCR 478 at 484-485, 488.9.
A number of the determinations of the trustee related to cash loans from one claimant to the bankrupt. The applicant claims that there was insufficient information to support the claims. The claimant should at least provide details cheque butts, deposit slip in relation to the amounts, or any other evidence establishing the amount: Spiteri v Lindholm [2003] VSC 42 at [44]-[47].
Submissions of the applicant
As to removal of the trustee
The applicant submits that the respondent, Mr Starkey, has had a significant prior relationship with and connection with the bankrupt and with Casaron as its receiver and manager and with Spuncod, as its appointee.
The applicant submits he is a person who is not independent and plainly is not a person who can be seen to be independent. Further, he is a person who cannot be regarded as being seen to be impartial or is likely to be impartial.
The applicant submits a fair-minded person informed of the facts referred to below would reasonably entertain a doubt as to the trustee’s capacity to be independent, particularly in the context that a trustee will be required to investigate the bankrupt’s past conduct, his association with Casaron and Spuncod.
The applicant submits it is plain that the respondent, Mr Starkey, would have at least an unconscious loyalty to the bankrupt and Spuncod and it is clear that subconsciously the respondent is not likely to act with impartiality. The respondent has had a significant association or connection with the bankrupt, Casaron and Spuncod for a number of years. The applicant relies on the fact that the respondent did not resign as the receiver and manager of Spuncod until the application was filed to support the conclusion that the respondent does not comprehend the obligations he has as to independence, impartiality and conflicts of duty. He could not subconsciously act with impartiality and independence.
The bankrupt was the sole director and secretary of Casaron. The sole shareholder was its secured creditor Spuncod. The applicant’s debt (together with the debt of CSR Ltd) arose from obligations given by the bankrupt in respect of the trading of Casaron.
The shareholders of the secured creditor Spuncod are the bankrupt and his wife. Spuncod is also trustee of the Dance Family Trust No 2. The bankrupt is a beneficiary of that trust. Further, it appears from the statement of affairs that Spuncod was indebted to the bankrupt.
Spuncod by its director, the bankrupt, appointed the respondent as receiver and manager of the assets and undertakings of Casaron pursuant to the fixed and floating charge granted by Casaron to Spuncod. As the receiver and manager he owed duties to the appointor.
The applicant submits that, despite the bankruptcy occurring on
3 September 2003, the respondent remained receiver manager of Casaron and the trustee of the estate. It was not until this application was filed that he resigned as receiver and manager of Casaron on
27 February 2004. He had been appointed receiver and manager for a period of two years. The bankrupt had been in control of the secured creditor for the majority of that time. The bankrupt’s son is now the director of Spuncod. The bankrupt remained a shareholder of the company during that period.
It is further contended that it is quite likely that, under section 19AA, the trustee will need to consider involving the power to investigate the bankrupt’s examinable affairs which will include Casaron, Spuncod and the Dance Family Trust No 2:
a)In particular, as to Spuncod:
i)He will need to examine the bankrupt’s dealings with the company generally, the income he was earning, if any, the amounts he was owed by way of loans as recorded in the statement of affairs and the proof of debt of Davtrion Pty Ltd as referred to below;
ii)In respect of potential recoveries against that company he may need to examine the assets and liabilities of the company to determine the prospects of satisfying any judgment obtained against the company;
iii)He will need to examine the terms of the trust deed and any distributions of either capital or income paid to beneficiaries including the bankrupt;
iv)He will for the purposes of determining any income contributions of the bankrupt need to examine generally the income (both past and present) of the bankrupt, including the benefits that may be provided to bankrupt which would be caught by section 139L or alternatively services or benefits being provided for which the bankrupt receives no or inadequate remuneration, including benefits to Spuncod;
b)He will need to examine the affairs of the bankrupt, which are complex (as referred to below).
If a public examination is conducted, then sensitive decisions need to be made as to who should be publicly examined, how the creditors should be advised and what action should be taken, including possible action against Spuncod.
That applicant states that there is a real concern of two major creditors that by reasons of the prior relationship or connection or dealings of the trustee to bankrupt, Spuncod and Casaron that the trustee may not be pursuing the investigation with the vigour they think appropriate.
By letter on 29 October 2003 from the applicant’s solicitors, the issues arising about potential conflict and impartiality of the respondent, Mr Starkey, were raised. An opportunity was given to Mr Starkey to resign. No response was received to that letter. Mr Starkey expressed the view that his appointment of receiver and manager of Casaron would in no way impact upon his appointment as trustee of the debtor’s estate.
It is submitted that as the affairs of the bankrupt are complex and there is a need for a proper investigation into the affairs of the bankrupt by a person who is not only independent, impartial and without conflict but also by a person who is seen to be independent and impartial. In this case:
a)The bankrupt was the sole director and secretary of Casaron which was placed into liquidation;
b)A number of his largest creditors are also creditors of Casaron (the applicant and CSR Ltd);
c)As is evident from the accounts of Messrs Hawthorn Cuppaidge & Badgery upon which that firm’s proof of debt is founded, the affairs of the bankrupt and entities with which the bankrupt was associated are complex;
d)One of the creditors, Davtrion Pty Ltd (in its proof of debt) records the bankrupt’s form of business as Spuncod claiming an amount owing as $38,007.00. The declaration attached to the letter records a personal loan to Peter Dance being made payable to his company, Spuncod. Therefore, there is an amount owing by Spuncod to the bankrupt to the sum of $25,000.00 (according to the statutory declaration) upon which Mr Starkey is alleged to collect. In other words, Mr Starkey is required to adjudicate on that debt and is to recover the obligation from Spuncod, a company that appointed him receiver manager;
e)
The account of Messrs Hawthorn Cuppaidge & Badgery of
19 November 2003 in the sum of $103,047.79 was addressed to the bankrupt, other entitles and Spuncod. The trustee therefore must adjudicate on a proof of debt for an amount which was addressed to not only the bankrupt but also a company for which he was previously acting in a professional capacity;
f)The alleged amount claimed as owing by Hawthorn Cuppaidge & Badgery in respect of the party project Handicoate Pty Ltd – ATO Debt, which forms part of the proof of debt of Hawthorn Cuppaidge & Badgery records that the solicitors had telephone discussions with the respondent regarding the matter. The respondent is therefore required to adjudicate on a proof of debt for amounts of which involve discussions with him in respect to those matters;
g)Hawthorn Cuppaidge & Badgery claims an amount owing by the bankrupt in respect of the litigation between the applicant and Casaron. Some of those costs relate to the period in respect of which the respondent was the receiver and manager of Casaron;
h)The statement of affairs of the bankrupt discloses:
i)The bankrupt’s occupation was a construction manager;
ii)His unsecured creditors total some $961,000.00;
iii)The bankrupt was associated with the following entities or trusts:
·Fords Paint and Plastering Pty Ltd of which he was a director and secretary;
·Lancianant Pty Ltd of which he was a director and secretary. That entity acted as trustee and he had owned shares in the company;
·Global Limited Australia Pty Ltd of which he was the company’s secretary;
·Lakeside Entrance Pty Ltd of which he was a director and secretary;
·Lake Menton Pty Ltd of which he was a director and secretary;
·Global Limited Australia Ptd Ltd of which he was a director and secretary;
·Cableborough Ptd Ltd of which he was a secretary. That was a trustee entitle. The bankrupt held shares in that entity;
·Project Handicoate Pty Ltd, to which the respondent was appointed liquidator of on 11 May 2002;
·Metroland Pty Ltd of which he was a director, secretary and shareholder;
·Glolim Pty Ltd of which he was a director and secretary;
·Somerbeach Pty Ltd of which he was a director, secretary and shareholder. That is referred to as a trustee entity for a super fund;
·A. Altos Appliances Pty Ltd in which he has been involved. It is described as a white goods rental business and acts as trustee;
·Casaron;
·Dignitas Pty Ltd of which he was a director and shareholder, which is described as a trustee entity;
·Brighton and Redfurn Plaster Pty Ltd of which he was a director and the respondent was appointed liquidator on 6 June 2001;
·Dance Family Trust No 1 which is a discretionary trust, the trustee being Cabborough Pty Ltd;
·Dance Family Trust No 2, the trustee of which is Spuncod. The bankrupt is a shareholder and has outstanding loans with that entity. The statement of affairs does not disclose what type of trust it is. That trust has assets. The bankrupt records that he has received an income or capital distribution from the trust in the last two years;
·Dance Family Trust No 3, the trustee is recorded as Lancient Pty Ltd. It is a discretionary trust which owns a quarter share in property;
·Dance Family Trust No 4, the trustee of which is Lancient Pty Ltd which is a discretionary trust;
·Dance Family Trust No 5, a discretionary trustee and the trustee is Global Lim Australian Pty Ltd;
·AAALTOS Unit Trust, the trustee of which is A.Altos Appliances Pty Ltd. It is a unit trust in which the bankrupt is a beneficiary.
iv)The only asset disclosed in the statement of affairs was a camera with an estimated value of $50.80.
The applicant submits that it is a significant factor that two of the largest creditors, who are not associated with the bankrupt, have formed the view that they consider the respondent is not and does not appear to be independent or impartial and that he is not likely to be impartial. The perception that Mr Starkey may not be impartial or act with complete independence has to be recognised.
It is the applicant’s submission that the views expressed by the creditors related or associated with the bankrupt should be given little weight, such as the mother and the son.
The applicant raised the issue about the position of the respondent at an early stage. The administration is at an early stage. The respondent does not suggest that he has carried out substantial work with respect to the affairs of the bankrupt or that a change of the trustee would materially delay the due administration of the estate or cause inconvenience which is substantial.
Proofs of debt and voting rights at the creditors meeting
As to the proofs of debt, it is submitted by the applicant that:
a)Gill McKerrow & Associates in the sum of $9,641.94. The services were provided to “Dance Family Trust No 2”. The trustee is Spuncod and not the bankrupt. There is simply no debtor/creditor relationship with the bankrupt. The claim should have been rejected;
b)Peter Challen trading as Hawthorn Cuppaidage & Badgery $103,047.79:
i)The account attached to the proof is address to “Mr Peter Dance, Global Andoora Australia Pty Ltd, Spuncod & PPP (Qld) Pty Ltd. In the proof it purports to claim that the bankrupt is indebted to the firm for the full amount even though the work was undertaken for other entities;
ii)There was no solicitor client agreement produced which supports the contention that the bankrupt was obliged to pay for work done for other entities;
iii)Work was charged after the date of bankruptcy, which was admitted, to proof;
c)Isabel Marion Olsen (mother) claims the sum of $362,917:
i)The proof states that information has been provided by the bankrupt;
ii)There is simply no evidence whatsoever to support the loan. The terms of the loan are not referred to. Certainly there is no evidence to support the provision for interest. There is no cheque butt, bank statement, deposit slip to evidence that the payments have in fact been made by the bankrupt’s mother to the bankrupt and that they were intended to be a loan;
iii)The proof does not set out the terms of a loan, if any. As the terms of the loan are not specified they must be repayable on demand. The alleged loans were made in April 1995, August 1996 and November 1996: Ogilvie v Adams [1981] VR 1041. The loans are statute barred and are not provable;
d)Elizabeth Anne Dance (wife) claims the sum of $9,500. There is no evidence that the payments were used to pay amounts owing by Peter Dance on his credit cards. The credit card statement for the bankrupt has not been produced;
e)Coorparoo Constructions Pty Ltd claims $68,581.11. The loan agreement has not been stamped. The terms of the loan were that it was repayable on demand. The loan was made in 1990. The loan is statute barred and is not provable.
The vote at the meeting was for the resolution removing Mr Starkey $512,246.36 and against the resolution $711,698.84. An ordinary resolution requires a majority in value of creditors voting on the resolution: section 5(1).
For the outcome of the meeting to be affected by the determination of the entitlement to vote the value of the persons voting against the resolution must be below $512,246.36, a reduction of $199,452.48. For example, if Elizabeth Anne Dance is ruled not to be entitled to vote then the resolution would have succeeded.
The trustees position
Removal of the trustee
The trustee as I have said has made his position in this matter very clear. He relies only on the evidence of the applicant and seeks only to put matters of legal principle together with those facts to the Court. The trustee says that he does this as in his view the majority of creditors at a properly constituted meeting have rejected the resolution that he be removed as the Trustee of Peter John Dance and that another trustee be appointed in his place.
The trustee states that the facts in this matter are that all of the creditors who voted at the relevant meeting had lodged proof’s of debt and has sufficient proof of those debts to enable him as the trustee to accept the debts for the purpose of establishing the right to vote of each of the creditors and the value of each of their votes for the purpose of voting at the meeting.
The trustee outlines that the value of the creditors as admitted by him was $1,223,943.87 and of those $711,697.92 or 58% voted against the motion and $512,245.95 voted for the motion. The trustee contends therefore that unless the applicant can show that $199,452 worth of creditors ought not to have voted, then the motion was validly defeated.
The trustee also says that simply because he was the appointee of Spuncod and has previously been requested by Peter John Dance to take on the role as the receiver and manager of Casaron (both clearly integrally linked with Peter John Dance), which he has done, that this does not give rise to a relationship between the trustee and the bankrupt nor give rise to any perception of bias in a fair-minded independent person. The trustee says that he has resigned as the receiver and manager of Casaron and even if he has remained as the company’s receiver, this does not disentitle him to continuing to act in the bankruptcy of it’s former director and shareholder, as Mr Dance clearly is.
Proof of debts and voting rights at creditors meeting
The trustee states that all of the section 64D notices provided by each of the creditors who had proof’s of debt accepted by him and voted at the meeting were adequate and provided sufficient information for him to make his decision on the proof’s of debt and that the applicant’s solicitor Mr Yam was given an opportunity to attend the creditors meeting and to review all of the material upon which the trustee had made his decision for each proof of debt.
The trustee states that he had arranged for a representative of ITSA to attend the meeting and that representative did not have any concern as to the conduct of the creditors meeting.
In those circumstances the trustee says that all his actions were proper and in accordance with his obligations and duties under the Act and there is no basis to find that the meeting was conducted otherwise than properly in accordance with Division 5 of Part IV of the Act.
The trustee says that even if there were irregularities in relation to the meeting that they are not such as to convince the Court that it should exercise it’s discretion to grant the relief sought by the applicant. The trustee is entitled to make his or her own ruling on matters arising relating to the operation of the meeting under section 64ZB(3) and this includes deciding the question about an entitlement to vote. This must be made in a summary way and on the best information available at the time.
Consideration and findings
I accept that if Mr Starkey remains as trustee of this bankrupt estate he would in fact be likely to be quite impartial as he is a professional in his field. That is not what has led me to the conclusion that in this matter there is a sufficient prior connection between the trustee Mr Starkey and the bankrupt Peter John Dance. This has occurred through the entities Casaron and Spuncod. I am satisfied that an impartial fair-minded person would harbour doubt as to impartibility in the exercise of the trustee’s very important duties, obligations and functions as the Trustee of the bankrupt estate. I accept that Mr Starkey himself has a strong belief that he would act with impartiality as he is a person who is highly professional in undertaking his role as trustee.
In so finding, I make it clear that I do not for a moment suggest that there has in fact been any wrong doing on the part of the trustee Mr Starkey. However, the fact remains that two very large and truly at arms length creditors have significant concerns as to this issue.
I have had regard to the fact that the question as to whether in settling of the administration of this bankrupt estate, very significant proofs of debt are accepted (not just as they have been for the purposes of voting at a particular meeting as has occurred this far) from very close family members of the bankrupt, will need to be determined by the trustee.
I have also considered the fact that the affairs of the bankrupt are extremely complex and this, in my view, adds to the need for the trustee to be seen by all concerned as completely independent and impartial.
Upon determining that, the Court should exercise the powers in sections 30 and 178 of the Act and make an order for removal of the trustee on these grounds. I find that it is not necessary for the Court to then step into the role of determining whether there was any difficulties with the decision of the trustee to accept all of the identified proof’s of debt and then whether a declaration be made as to the resolution which arose from that meeting.
After reviewing the evidence of the minutes of that meeting and the evidence in the statement of affairs of the bankrupt and other supporting documents, as far as is possible for the Court to do so, I can see no reason to find that the trustee acted improperly in any way in accepting the proofs of debt as he did for the purpose of the voting rights being established at the meeting. Thereafter the trustee was governed by the outcome of the votes obtained at the meeting.
Accordingly I make the orders as set out at the commencement of these reasons. As neither the applicant nor the trustee have been entirely successful in obtaining all relief sought from the Court I am not satisfied that the Court should exercise it’s discretion to make any order for costs to be paid by the applicant or by the trustee. Therefore I propose to make no order as to costs.
I certify that the preceding sixty-three (63) paragraphs are a true copy of the reasons for judgment of Rimmer FM
Deputy Associate: T.Thomson
Date: 10 March 2005
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