Symes v HOLBROOK (No.3) - [2004] FMCA 71

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SYMES v HOLBROOK (No.3)

[2004] FMCA 71

BANKRUPTCY – Annulment – duty of Trustee before the Court – Costs of trustee where annulment order made.

Bankruptcy Act 1966, ss.135B, 154

Applicant:

FREDERICK KEITH SYMES

Respondent:

KIM HOLBROOK

File No:

WZ 86 of 2001

Delivered on:

4 February 2004

Delivered at:

Perth

Hearing Date:

4 February 2004

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr A.O.Karstaedt

Solicitors for the Applicant:	Leask & Co
Counsel for the Respondent:	Mr A.F. Carles

Solicitors for the Respondent:

Carles Solicitors

ORDERS

The Trustee costs of the proceedings pursuant to the Federal Court Scale be an expense of the estate pursuant to s.154 of the Bankruptcy Act 1966 to be taxed in default of agreement pursuant to Order 62 of the Federal Court Rules.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

WZ 86 of 2001

FREDERICK KEITH SYMES

Applicant

and

KIM HOLBROOK

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

In this application the court had on an earlier occasion delivered a judgment on 20 February 2002 upon application for an annulment pursuant to s.135B of the Bankruptcy Act. After the delivery of that judgment, the applicant appealed to the Federal Court of Australia. The appeal from the decision of this court was an appeal against the decision that the application for annulment be dismissed and an order made that the applicant pay the respondent's costs. On 28 February 2003 his Honour Nicholson J allowed the appeal and further ordered that the orders made by this court on 20 February 2002 be set aside. The matter was remitted to this court for determination according to law.
The matter was then further heard on 2 May 2003 and a decision delivered on 8 January 2004. In the decision of the court on 8 January 2004 I made an order that the applicant's bankruptcy be annulled pursuant to section 153B of the Bankruptcy Act. The issue of costs was reserved for further submissions this day and counsel for the applicant has submitted that in the circumstances the court should make an order that the respondent pay the applicant's costs of this application.
Essentially, the applicant through counsel has submitted that, firstly, the trustee respondent should not have advised the applicant to present a debtor's petition for bankruptcy and, secondly, it has been submitted that in the circumstances rather than adopt a partisan or neutral role, the trustee has effectively opposed and continues to oppose the application for annulment. In addition, it is submitted that during the course of submissions, both at the first hearing of the application before this court and at the remitted hearing, the trustee had pursued the issue of the trustee's costs in a sense as a condition of any annulment order that may be made, and it was pointed out that the court ultimately rejected the suggestion, albeit that there is some conflict in the report, in the authorities, rejected the suggestion that the annulment should be conditional upon payment of the trustee's costs, charges and expenses of the administration of the bankruptcy.
It was submitted for and on behalf of the applicant that after a proper analysis of the material, including a detailed analysis of the respondent's outline of submissions, the court should properly form the view that the trustee, rather than adopting a neutral position and in particular having asserted the right to the costs order as a precondition of the annulment, has placed himself in a position where a costs order should be made against the trustee. In support of that submission, some reliance was placed upon the unreported decision of Einfeld J in the matter of McKay v Mobil Oil Australia Ltd [1999] FCA 1124 (4 August 1999) and in particular paragraph 10 as follows:-
“10 The trustee argued, but the actual creditor did not, that notwithstanding a finding that the documents were not served, the Court should exercise its discretion not to annul the bankruptcy on the basis that there is no genuine dispute about the debt. It is quite unusual in my experience for a trustee to take a stand in relation to the annulment at all, especially when the creditor is here to defend it. A trustee is supposed to be, as it were, an independent person who takes charge of estates when bankruptcy is pronounced. It is perfectly legitimate for a trustee to present to the Court evidence which goes to relevant questions, but it is surely unusual for the trustee to take a particular partisan line in relation to annulments. In particular, a trustee is not supposed to have a position on whether service was actually effected or not unless perhaps there is no-one else to present that argument. I find it strange that the weight in this regard has been carried more by the trustee than by the creditor.”
It is noteworthy that in that passage his Honour states significantly the fundamental principles of the role of the trustee. I accept those principles apply in the present case though extend them to the extent that his Honour had referred to a duty of the trustee to be present and present evidence to the court which goes to relevant questions.

I extend that by adding the duty to make appropriate submissions which are relevant to the issues before the court and which may include submissions in relation to matters of fact and law.
In the present case it is clear that in support of the application for costs the applicant is genuinely aggrieved by the advice which he claims to have received and which to a certain extent has been confirmed he did receive from the trustee at an early stage when his financial circumstances were under consideration. I accept that at that time there was at least a denial by the applicant that any debts claimed then to be against him were improperly incurred as a direct result of the fraud of his then late wife.
It is also clear though that when assessing the role of a trustee one should look at the role of the trustee in the circumstances at the time advice was given for the filing of a debtors petition. At that time, whilst it is clear that there was a debate or dispute over the enforceability of debts then claimed against the applicant, it is by no means certain that the applicant had the means or resources to disprove those claims, nor was it clear then that the full extent and nature of the fraud and the debts incurred was then disclosed. It would be unfair to retrospectively impose upon the trustee knowledge of the facts and circumstances now known to the court which were then only superficially known to the parties and specifically the trustee.
In my first decision I had drawn a conclusion, based on the material then before me, as to the role of the trustee and indeed had drawn conclusions as to whether or not he had acted in a manner which would be considered unprofessional or irresponsible. In that decision, at paragraph 59, I stated the following:
“I do not believe on the material presently before me that there is any basis upon which it could be said that the respondent has acted in a manner which would be considered to be unprofessional or irresponsible. I do accept however that the applicant's dealings with the respondent have caused the applicant and his family great stress though in the circumstances that would appear to be inevitable given the extraordinary financial circumstances and the tragic death of the applicant's wife.”
The comments I made in paragraph 58 of my earlier decision in my view are still appropriate, notwithstanding the additional material that has now been provided to the court. On a proper assessment of the facts which were then available to the trustee, I cannot see anything in the conduct of the trustee which would lead the court to conclude that there is some culpability or liability on the part of the trustee in terms of giving what might be described as improper advice. In my view it is clear that what has occurred in the application both at first instance and on the remitted matter, and indeed on my reading of the material and the judgment of his Honour Nicholson J before the Federal Court on the material presented to that court, that throughout the trustee had indeed not opposed the application.
I am strengthened in that conclusion when I note that before this court on remittal an application that was made by the applicant to adduce and rely upon further affidavit material, which clearly advanced the state of material significantly to the point where this court was persuaded to make an annulment order, was material which was also sought to be adduced and not opposed by the respondent before the Federal Court. The lack of opposition to that material, particularly before the Federal Court where ultimately that court refused to accept the material, demonstrates the proper role of the trustee in not opposing the application.
It is true, however, that in the present case, on a proper analysis of the respondent's outline of submissions, that submissions were made which required the court to take time to consider the issues, including the issue of solvency and further included an analysis of the material and the financial circumstances of the applicant. In addition, court time was taken in assessing the issue of whether or not it was appropriate for this court to make an annulment order conditional upon payment of the trustee's fees.
I am satisfied that on a proper analysis of the trustee’s submissions that they do no more than provide submissions on matters of relevant issues before the court and bring to the attention of the court authorities which the court needs to consider in its deliberations on the application for annulment. In my view, having heard the submissions and considered the material, I cannot see anything in the conduct of the trustee which would support the view that at the relevant time advice to present a debtor's petition should not have been given, nor can I see on the material before me anything which would lead me to conclude that the trustee in this application has not acted in a neutral or bipartisan manner.
This is not a case of a kind similar to the McKay decision of Einfeld J where specific matters were raised in that case and a position taken. In this case the position taken by the trustee in my view is no more than a position which involves making submissions on relevant facts and law which the trustee had a duty to place before the Court.
The trustee has a duty to attend this court and it is clear in the circumstances that that duty goes beyond simply a mere duty to appear but rather a duty to present to the court submissions on relevant matters of fact and law. I otherwise rely upon what was said by French J in Re Hatcher; ex parte Hatcher, an unreported decision, 6 November 1987.
Having found that the trustee, in appearing before this court, has discharged the duty to attend and make relevant submissions, has not acted in a partisan manner and has not opposed the application, it follows, in the exercise of my discretion, that on an application for an annulment, with the annulment application ultimately being successful, that I should make an order in relation to costs of the kind sought by the respondent, who has submitted that it is appropriate, if I were to draw the conclusions to which I referred, that I should make an order that the trustee's costs, pursuant to the Federal Court scale of the proceedings, be an expense of the estate pursuant to s.154 of the Bankruptcy Act, and I so order.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 4 February 2004