Ross, Re F. & Anor Jolliffe, Ex Parte J.

[1986] FCA 623

IN THE FEDERAL COURT OF AUSTRAGIA )

BANKRUPTCY DISTRICT OF "HE STATE ) No. W95 of 1985X

OF NEW SOUTH WALES AND THF,	)
AUSTRALIAN CAPITAL TERRITORY	)

FREDEXICK ROSS AND	HELEN
ANNE SHERRIFF

Ex PARTE: JAMES J O H N JOLLIFFE

Deputy Registrar in

Bankruptcy

Applicant

BRYAN RICHARD HARPER

First Respondent

:	THE OFFICIAL TRUSTEE IN
BANKRUPTCY

Second Respondent

m: Evatt J

: 23 December 1986

PLACE: Sydney

MINUTES OF ORDER

THE COURT ORDERS THAT:

1. The applicant's application for the costs of the application

I

dated 21 April 1986 and the application for the examination

0 of Mr Sherriff and Mr Thompson dated 30 May 1986 is refused.

Note: Settlement and entry of orders is dealt with in.,O% er 36

of the Federal Court Rules. I , ' '?.

IN THE FEDERAL COURT OF AUSTRALIA )

BANKRUPTCY DISTRICT OF THE STATE ) No. W95 of 1985X

OF NEW SOUTH MLES AND THE	)
AUSTRALIAN CAPITAL TERRITORY	)

FREDERICK ROSS	AND HELEN
ANNE SHERRIFF

EX PARTE:

JAMES JOHN JOLLIFFE

Deputy Registrar ln

Bankruptcy

Applicant

AND : BRYAN RICHARD HARPER

First Respondent

THE OFFICIAL TRUSTEE	IN
BANKRUPTCY

Second Respondent

CORAM: Evatt J

DATE : 23 December 1986

PLACE: Sydney

REASONS FOR JUDGMENT

Before the Court is an application by James John Jc llli ffe, a

Deputy Registrar in Bankruptcy, that the costs of an application

filed by him on 21 April 1986 in respect of examinations sought

-%yXhe Registrar inBankruptcy pursuant to ss.179(3) and 212B(3)

of the Bankruptcy Act 1966 (the Act) be paid by Frederick Ross

Sherriff and Helen Anne Sherrlff (the debtors).

2 .

The history of the substantive application I s briefly set out.

On 9 April 1985 following a meetlng of creditors called pursuant

to 5.194 of the Act, a composition under Part X of the Act was

entered into by Mr and Mrs Sherriff. Mr Lindsay Robert Aitken,

who was then a registered trustee within the meaning of the Act,

was appointed the trustee of that composition. "he said meeting

whlch had been called following the signing by the debtors of an

authority in accordance with 5.188 of the Act, was chaired by one

Bryan Rxhard Harper. m e composition provided for the creditors

acceptmg from the debtors the sum of $10,000, payable, as to

$5000, forthwith and as to the balance of $5000, within one year.

Shortly after the sald meeting the flrst amount	of $5000 was paid
by the debtors to Mr Altken as trustee.

Prior to October 1985 Mr Aitken had become trustee of several

other compositions under Part X of the Act, in many cases as a

result of approaches to debtors by the said Mr Harper or other

representatives of a company with which Mr Harper had apparently some connection. Mr Aitken had been made bankrupt following the

filing by him of his own debtor's petition some little tine

before October 1985.

On 8 October 1985, by order of the Court (Neaves J), the

registration of Mr Aitken as a trustee under the Act was

cancelled and the Officlal Recelver was appointed trustee of the

var1ous compositions in whlch	Mr	Altken had been involved,
including that of the debtors.

On 3 April 1986 the second $5000, due under the composition

entered Into by the debtors on 9 April 1985, was pald by the

debtors to the Official Receiver as trustee of the composition.

Thereafter on 21 April 1986 James John Jolliffe, a Deputy

Registrar in Bankruptcy, brought an application in W95 of 1985X.

being the matter of the composition filed on behalf of the

debtors, under s.179(3) and s.212B(3) of the Act seeking the

Court's leave that an examination be conducted pursuant to the

sald sections of the Act of the sald Mr Harper. That appllcation

came on before Neaves J on 8 May 1986 and was dealt wlth ex

parte. The Court granted leave for Mr Harper to be examined in

respect of eight items set out in the said application.

The said examination of Mr Harper came on for hearing before the

Court as presently constltuted on 29 and 30 May 1986. On that

occasion Mr Skinner of Counsel appeared for the Registrar in

Bankruptcy. On the second day when the examination of Mr Harper

concluded, Mr Skinner sought leave of the Court that Mr Sherriff,

the male debtor, and Mr Robert Clive Thompson, the debtors'

solicitor of Grafton, be also examined under ss. 179(3) and

- -2323 i3 ) in --respect nf certain items set out in short minutes of

order then handed to the Court. This ex parte applration was

granted by the Court.

4 .

Thereafter, examinations of Mr Sherriff and Mr Thompson were

conducted on 12 June 1986 and 13 June 1986 respectlvely after

which all examinations were stood over generally.

At the conclusion of Mr Thompson's examination Mr Skinner

informed the Court that he had been instructed to seek an order

pursuant to 5 . 2 2 2 of the Act declaring that the composition in

respect of the debtors was void. At that time Mr Allatt of the

Australian Government Solicitor's Office indicated to the Court

that he appeared on behalf of the Official Trustee in Bankruptcy,

the trustee of the composition. It was pointed out to the Court

that it was only the Official Receiver (a5 trustee) who could

apply under s.222(7) of the Act for a sequestration order against

the estate of the debtors even though the application under

s.222(1) for orders declaring the composition void could be made

(Inter alia) by the Registrar in Bankruptcy. Accordingly, Mr

Allatt sought an adjournment of the application made by Mr

Skinner in order that he could consider the matter and receive

instructions from the trustee. Accordingly the matter was stood

over generally.

On 7 July 1986 the Official Receiver, a5 trustee, filed an

, _ - . -application seeking '(inter alia] an order declaring that the

composition in respect of the debtors void under s.222 or an

order terminating the composition pursuant to s.242(1) and for a

further order that the debtors' estate be sequestrated pursuant

to either s.222(7) or s . 2 4 2 ( 3 ) . That application also asked that

costs of that appllcation be provided for.

e

3 .

Thereafter on 1 October 1986 that application was listed before

the Court. Mr MacReady appeared for the debtors and Mr Skinner,

instructed by the Australian Government Solicitor's Office,

appeared for the Official Trustee. After discussions between the

parties and the Court, the Court, by consent, declared that the

composition entered into by the debtors on 9 April 1985 was void

and ordered that each party pay their own costs of that

application. It then being noted that the debtors undertook that

they would slgn an authority under s.188 of the Act authorising

the calling of a meeting of their creditors and that such meeting

be held within 28 days of the signing of that authority. It was

also noted that the trustee would make available, for the

purposes of any composition entered into at such meeting, the sum of $5000 received by the trustee In April 1986 from the debtors.

The application otherwise was stood over until 19 November 1986.

Thereafter on 19 November 1986 both the application of Mr

Jolliffe of 21 April 1986 and the application	of the trustee of	7
July 1986 were listed before the Court.

The Court was then informed of the meeting of creditors of 29

October a986 and of -the second composition entered into	in
respect of the debtors' estate whereby the creditors agreed to

accept the said sum of $5000 held by the Official Trustee as the

total amount of a fresh composition under Fart X of the Act.

6.

This then effectively disposed of the	trustee’s application	of 7
July 1986.

Mr Skinner then sought an order that the costs of the application

dated 21 April 1986 for the examination of Mr Harper and of the

examinations of	Mr Sherriff and Mr Thompson be paid by the
debtors.

The Court‘s power to order costs	is provided for by 5 . 3 2 of the
Act which reads:

The Court may in any proceeding before it, including a

proceeding dismissed for want of jurisdiction, make such

orders as to costs as it thinks fit.

Mr MacReady, for the debtors, opposed Mr Skinner’s application

submitting that the Court, in its discretion, would not make any

order as to costs against his clients. He submitted that it was

clear that the orlginal application of 21 April 1986 came about

following the sequestration of the estate of Mr Aitken when the

Registrar in Bankruptcy apparently decided that enquiries should

be made as to the numerous Part X compositions that had been

entered into by debtors wherein Mr Aitken had become the trustee

and the circumstances under which it came about that Mr Aitken

was so appointed by creditors at the respective meetings held

under 5.194 of the Act. That is, it was clear that the primary

purpose of the application was directed to that end and not to

the conduct of Mr or Mrs Sherriff prlor to the calling of the

first credltors meeting in respect of those debtors. He

I .

submitted that it was clear that the debtors in the present

matter took both the advice of Mr Harper Initially, and that of

Mr Thompson, their solicitor, and that there was no evidence to

suggest that they were doing anything other than that which they

believed they were entitled to do under the Act. He further

submitted that if the Registrar in Bankruptcy was entitled to an

order of costs against anyone, then it should be against either

Mr Aitken or Mr Harper, or both.

I am of the view that the submissions of Mr MacReady should

generally be accepted. It is clear, in my view, that the debtors have been merely a pawn in the game played by Mr Harper and Mr Aitken and that it would be unjust in the circumstances that any

order for costs be made against the debtors.

In all the circumstances, in the exercise of the Court's

discretion, the application for costs made by the Registrar in Bankruptcy in his application filed on 21 April 1986 and in his

application for the examination of Mr Sherriff and Mr Thompson

made on 30 May 1986 should be refused.

I certify that this and the ~ J ' W

precedlng pages are a true copy of the Reasons for Judgment hereln of his Honour Mr Justice Evatt

Associate

8 .

Counsel for Mr & . Mrs Sherriff : Mr MacReady

Solicitors for Mr & Mrs Sherriff: Pollack, Greening and

Hampshire, Grafton

Counsel for The Official Trustee

in Bankruptcy	: Mr Skinner
Solicitors for The Official
Trustee in Bankruptcy	: Australian Government Solicitor