Wade v Leroy

Case [2010] FCA 178

FEDERAL COURT OF AUSTRALIA

Wade v Leroy [2010] FCA 178

Citation: Wade v Leroy [2010] FCA 178
Parties: DAWN FLORENCE WADE v PAUL ANDREW LEROY
File number: NSD 449 of 2009
Judge: MOORE J
Date of judgment: 5 March 2010
Catchwords: BANKRUPTCY – discharged bankrupt – application for order to remove trustee in bankruptcy – inquiry into conduct of trustee in bankruptcy – substantial ground for believing that the trustee erred in the administration of the estate
Legislation: Bankruptcy Act 1966 (Cth) ss 149, 152, 178, 179
Bankruptcy Regulations 1996 (Cth) reg 8.14
Cases cited: Boensch v Pascoe [2007] FCA 1977 applied
Lauren Kay Cordes as Trustee for Alexander George v Dr Peter Ironside [2009] QCA 302 cited
Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380 cited
Nguyen v Pattison (2005) 142 FCR 561 applied
Scott v Bagshaw (2000) 99 FCR 573 cited
Trkulja v Morton [2005] FCA 659 applied
Trkulja v Morton [2005] FCAFC 259 cited
Date of hearing: 8, 9, 21 October 2009
Date of last submissions: 22 December 2009
Place: Sydney
Division: GENERAL DIVISION
Category: Catchwords
Number of paragraphs: 39
Counsel for the Applicant: B Antcliffe
Counsel for the Respondent: J Johnson
Solicitor for the Respondent: Yates Beaggi

IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 449 of 2009
BETWEEN:

DAWN FLORENCE WADE
Applicant
AND:

PAUL ANDREW LEROY
Respondent

JUDGE:

MOORE J

DATE OF ORDER:

5 MARCH 2010

WHERE MADE:

SYDNEY

THE COURT ORDERS THAT:

1.The applicant's notice of motion of 10 November 2009 seeking leave to reopen the matter be dismissed.

2.The application be dismissed.

3.The applicant pay the respondent's costs.

Note:Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.
The text of entered orders can be located using Federal Law Search on the Court’s website.


IN THE FEDERAL COURT OF AUSTRALIA

NEW SOUTH WALES DISTRICT REGISTRY

GENERAL DIVISION

NSD 449 of 2009
BETWEEN:

DAWN FLORENCE WADE
Applicant
AND:

PAUL ANDREW LEROY
Respondent

JUDGE:

MOORE J

DATE:

5 MARCH 2010

PLACE:

SYDNEY

REASONS FOR JUDGMENT

Introduction

  1. The applicant, Ms Dawn Wade, presented a debtor's petition in January 2003. Her estate vested in Mr Paul Leroy, the respondent, as her trustee in bankruptcy. The respondent continued, at least until the time of the hearing, to act in that capacity though the applicant was discharged from bankruptcy on 4 January 2006. She is presently engaged in other litigation in the Supreme Court of New South Wales. She wishes the respondent to assign to her certain choses in action underpinning the Supreme Court proceedings. She contends those choses in action vested in him during the administration of her estate. The applicant asks the Court to inquire into the conduct of the respondent and remove him as her trustee under s 179 of the Bankruptcy Act 1966 (Cth) (the Act) and appoint another trustee.

    The changing nature of the relief sought in outline

  2. In the applicant's original application filed 20…

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Wade v Leroy [2010] FCA 178
Case
[2010] FCA 178
Decision Date

CaseChat Overview and Summary

The case of Wade v Leroy involved the applicant seeking to have the Court exercise its power under the Bankruptcy Act to remove the respondent as her trustee. The application was dismissed by the Court, which declined to reopen the proceedings. The applicant argued that the Court was the appropriate forum to make the declarations she sought, citing several cases including Scott v Bagshaw and Lauren Kay Cordes as Trustee for Alexander George v Dr Peter Ironside.

The primary legal issue was whether the Court should inquire into the conduct of the respondent as a trustee, and if so, whether the respondent should be removed from office. The Court considered the principles established in earlier cases, such as Trkulja v Morton, which outlined a two-step process for determining whether to remove a trustee: first, whether there are substantial grounds to believe the trustee erred in the administration, and second, whether the trustee should be removed if misconduct is found. The Court emphasised the need to be reluctant to interfere with the day-to-day administration of a bankrupt’s estate unless there are clear grounds for removal.

The Court found that the applicant had not demonstrated substantial grounds for believing the respondent erred in the administration of the estate, and therefore declined to undertake an inquiry. The relationship between the applicant and the respondent, while strained, did not indicate any failing by the respondent in the administration of the estate. The Court concluded that the present case did not warrant the removal of the trustee or further inquiry into the matter. The application was dismissed, and the applicant was ordered to pay the respondent’s costs.

Orders

Orders of the court

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Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

My decision not to reopen the present proceedings is neither an acceptance nor a rejection of the applicant's contention that this Court is the appropriate forum to make the declarations she seeks. Whether that is so may well be determined by reference to the cases relied upon by the applicant in her notice of motion, namely the Full Federal Court decision Scott v Bagshaw (2000) 99 FCR 573 and the Queensland Court of Appeal decision Lauren Kay Cordes as Trustee for Alexander George v Dr Peter Ironside [2009] QCA 302, in addition to the decision of a Full Court of this Court in Meriton Apartments Pty Ltd v Industrial Court of New South Wales (2008) 171 FCR 380.Conclusion The application should be dismissed. The applicant should pay the respondent's costs.

Ratio Decidendi

Legal Principle Established

The applicant asked the Court to exercise the power under s 179 of the Act to make an order removing the respondent as her trustee. This section was considered by Gray J in Trkulja v Morton [2005] FCA 659. Before ultimately dismissing the application for as inquiry and removal of the trustee, his Honour identified a two-part process to be undertaken and a number of factors to consider when doing so: [4]In its terms, this power is plainly concerned with ‘the conduct’ of the trustee ‘in relation to a bankruptcy’. As Macchia v Nilant [2001] FCA 7 (2001) 110 FCR 101 at [49] – [50] demonstrates, the Court must first consider whether it should inquire into the conduct of the trustee. If an inquiry is undertaken, the next question is whether the trustee should be removed from office and/or whether any other order should be made. The Court should be reluctant to undertake an inquiry, unless there are substantial grounds for believing that the trustee erred in the administration. If an inquiry is unlikely to reveal misconduct, it should not be undertaken. The Court should not unduly interfere with the day-to-day administration of a bankrupt’s estate by the trustee. In order to remove a trustee in bankruptcy, it is necessary to find misconduct on the part of the trustee. Removal is possible if the relationship between the trustee and the bankrupt has broken down totally: Doolan v Dare [2004] FCA 682 at [49]. In that case, Spender J found that there was a clear conflict of interest between the trustee’s interests in having her remuneration paid and how she thought that might be achieved, and her obligations as a fiduciary to the creditors and the bankrupt. (Emphasis added)The trial judge's decision was subsequently upheld by the Full Court in Trkulja v Morton [2005] FCAFC 259 per Lee, Tamberlin and Dowsett JJ. In Boensch v Pascoe [2007] FCA 1977, Buchanan J dealt with an application for an inquiry into the conduct of a trustee. In that case, his Honour determined what must be established to demonstrate a basis for removal and specifically where it was alleged there had been a breakdown in the relationship between trustee and bankrupt. His Honour said:-[92]Obviously enough, a bankrupt should not be allowed, by an assiduous pattern of resistance to the trustee of his estate, to generate and then rely upon a suggested reason for removal thereby created. No doubt there are many instances in which disagreement may arise about the way a trustee is administering an estate or exercising his powers. Adequate opportunities exist for challenges to be made, if there are grounds for doing so. None have been made in the present case, save for the matters with which I am dealing.[93]It is clearly an insufficient ground for removal of a trustee that a bankrupt resists the proper administration of his estate or sets out to frustrate a trustee in the proper performance of his duties. Mr Boensch’s obligation was to co-operate fully with his trustee. He is obliged to ‘aid to the utmost of his power in the administration of his estate’ (s 77(g)). It is not necessary, or desirable, to make comprehensive findings about Mr Boensch’s own conduct. It is sufficient to say generally that the apparently marked lack of trust which exists between him and Mr Pascoe does not indicate any failing by Mr Pascoe in the administration of Mr Boensch’s bankrupt estate or provide a reason for the Court to intervene in that task.[94]Accepting, as Spender J observed [in Doolan v Dare [2004] FCA 682 at [49]], that there will be cases where removal of a trustee is warranted due to a total breakdown in relationship, nevertheless the present is not a case, in my view, where that is called for or whether any further inquiry into the issue is necessary or desirable.(Emphasis added)