Street, Janice June v Official Trustee in Bankruptcy

[1996] FCA 364

IN THE FEDERAL COURT OF AUSTRALIA                 ) 
  )  
BANKRUPTCY DISTRICT OF THE STATE OF     )  No 1762 of 1995
  )  No 1763 of 1995
NEW SOUTH WALES  )  No 1764 of 1995
  )  No 1765 of 1995              GENERAL DIVISION  )     

BETWEEN:          JANICE JUNE STREET  

Applicant

AND:                   OFFICIAL TRUSTEE IN BANKRUPTCY

Respondent

Coram:        Davies J.
Date:          3 April 1996
Place:         Sydney

REASONS FOR JUDGMENT

This is an application bought by the Official Trustee in Bankruptcy ("Official Trustee"), trustee of the estates of Mr Francis Terence Halls, Mrs Colleen May Halls, Mr Stanley Street and Mrs June Sheila Street, seeking approval of a compromise of a claim made by Ms Janice June Street, daughter of Mr and Mrs Street.

The matter arose in association with a dispute between the bankrupts and the Official Trustee with respect to certain property in the nature of furniture, ornaments, electrical goods, tools and so on.  There was a dispute as to whether such items were "necessary household property" or were "ordinary tools of trade, plant and equipment"

etc., and therefore not "divisible property" under the provisions of s. 116 of the Bankruptcy Act 1966 (Cth).

Some of the property which the Official Trustee was seeking to sell as property of the bankrupts' estates was claimed by Ms Street.  The claims made by the bankrupts themselves were compromised and the Court has already approved of that.  The claim made by Ms Street was particularised and ultimately, after negotiations, it also became the subject of a compromise.  However, the compromise is opposed by Retravision Ltd (NSW) ("Retravision") which was the petitioning creditor and the major creditor in the bankrupts' estates. 

I am satisfied that the compromise that has been reached by the Official Trustee has been reached in good faith on the Official Trustee's part and arrived at with a view to the proper administration of the bankrupts' estates, taking into account questions of time and cost and efficiency and all those matters of a practical nature which trustees in bankruptcy take into account.  Indeed, when the original dispute first came to the Court, I encouraged the Official Trustee to resolve the dispute.  It seemed to me to be clear that if these matters became the subject of lengthy litigation, a long time in court would be required to resolve the matters in dispute between the parties.  The Official Trustee has, since that time, been astute in looking into the matter and has arrived at compromises, taking account of what, in his view, was the preferred action.

The Official Trustee is aware of matters which can be said against the claim
made by Ms Street and there was a lengthy affidavit of Mr Studman of 1 February 1996 which referred to many of those matters.  But, having considered those matters and having negotiated further and received additional proof from Ms Street with respect to certain of the items, the Official Trustee has come to the view that there ought to be a compromise and that it is in the interests of everyone to enter into the compromise which is now put before the Court.

Mr Robert Tregenza, counsel for Retravision, has submitted that the compromise should not be approved and has offered, on behalf of Retravision, to indemnify the bankrupts' estates and the Official Trustee against the costs of the proceedings.  The offer is that Retravision will take over the defence of Ms Street's claim.  Mr Tregenza has properly put the view that Retravision would propose doing so for reasons of integrity rather than as a matter of commercial convenience.  The affidavit relied upon, an affidavit of Ms Helen Kanios, recites quite a long history of disputes between Retravision and the parties to the bankruptcy and to the present proceeding.

Mr Tregenza submitted that an inference can be drawn that Ms Street has been taken advantage of by the bankrupts for their own gain to the disadvantage of Retravision.  He submitted that the affidavits suggest that Ms Street has been a party to a breach of a Mareva injunction and he has pointed to matters that can be put against Ms Street's claim. 

In my view, however, it is desirable, both in the interests of the bankrupts'
estates and in the public interest, that the compromise should be approved. 

The essential purpose of a bankruptcy is to bring to an end existing disputes between bankrupts and persons connected with them and creditors.  The Court often refuses applications by bankrupts which seek to force trustees in bankruptcy to continue disputes which the bankrupt previously had and which the trustee thinks it is not useful to carry on in the interests of the bankrupts' estate.  So, too, I think it would not be useful to carry on the longstanding conflict between Retravision and the Street and Halls families and to turn the conflict into an inquiry about ownership of property in the nature of furniture and the like.

Retravision has petitioned for bankruptcy, it has achieved an order that the estates be sequestrated and the estates are now in the hands of the Official Trustee.  I think that a claim such as Ms Street is making is the very type of claim that ought to be left to a trustee in bankruptcy to determine and, preferably, it ought to be determined in a practical, sensible way without involving the Court in lengthy litigation and judicial determination.  So, for that reason, the proposal put forward that Retravision should take over defence of the claim will be rejected and the compromise will be approved.

Therefore, I make the orders sought in the notice of motion. 

In the special circumstance of the Official Trustee, having regard to the position of the estates, and because costs have been incurred since the Court was
informed of the compromise, it seems to me that the Official Trustee should be indemnified by an order for costs. 

I will therefore order that Retravision pay the Official Trustee's costs of and incidental to the motion, incurred from and including 27 March 1996, such costs to be assessed or taxed on an indemnity basis.  I will order that Retravision pay the applicant's costs on and from 27 March on the ordinary party/party basis.

I certify that this and the 4 preceding pages
are a true copy of the reasons for judgment herein of
the Honourable Justice Davies.

Associate:

Date:   3 April 1996