Watts v Pascoe

[2011] FCA 868

FEDERAL COURT OF AUSTRALIA

Watts v Pascoe;  In the matter of Watts
[2011] FCA 868

Citation:		Watts v Pascoe;  In the matter of Watts [2011] FCA 868
Parties:		GAMBHIR WATTS and BHOJI WATTS v SCOTT DARREN PASCOE AS TRUSTEE OF THE BANKRUPT ESTATES OF GAMBHIR WATTS AND BHOJI WATTS;  IN THE MATTER OF WATTS
File number:		NSD 960 of 2011
Judge:		RARES J
Date of judgment:		22 July 2011
Legislation:		Bankruptcy Act 1966 (Cth) s 60(2) and (3) Federal Court of Australia Act 1976 (Cth) s 31A
Date of hearing:	22 July 2011
Place:	Sydney
Division:	GENERAL DIVISION
Category:	No catchwords
Number of paragraphs:	10
Counsel for the Applicants:	Mr G Watts appeared in person
Counsel for the Respondent:	Mr D Farrar

IN THE FEDERAL COURT OF AUSTRALIA
NEW SOUTH WALES DISTRICT REGISTRY
GENERAL DIVISION	NSD 960 of 2011

IN THE MATTER OF GAMBHIR WATTS AND BHOJI WATTS

BETWEEN:

GAMBHIR WATTS
First Applicant

BHOJI WATTS
Second Applicant

AND:

SCOTT DARREN PASCOE AS TRUSTEE OF THE BANKRUPT ESTATES OF GAMBHIR WATTS AND BHOJI WATTS
Respondent

JUDGE:	RARES J
DATE OF ORDER:	22 JULY 2011
WHERE MADE:	SYDNEY

THE COURT ORDERS THAT:

1.The proceedings be dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth).

2.The applicants 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 960 of 2011

IN THE MATTER OF GAMBHIR WATTS AND BHOJI WATTS

BETWEEN:

GAMBHIR WATTS
First Applicant

BHOJI WATTS
Second Applicant

AND:

SCOTT DARREN PASCOE AS TRUSTEE OF THE BANKRUPT ESTATES OF GAMBHIR WATTS AND BHOJI WATTS
Respondent

JUDGE:	RARES J
DATE:	22 JULY 2011
PLACE:	SYDNEY

REASONS FOR JUDGMENT
(REVISED FROM THE TRANSCRIPT)

1. This is an application by the bankrupts that seeks the removal of their trustee in bankruptcy, Scott Pascoe.

   THE BANKRUPTCIES

2. Mr Pascoe was appointed as trustee of the bankrupts’ estates by an order of the Federal Magistrates Court made on 11 August 2010.  However, that Court stayed the operation of the sequestration order initially for 21 days.  The stay was extended later until 31 March 2011.

3. After the expiry of the stay the trustee began investigations.  He prepared a report to creditors dated 25 May 2011 in which he noted that the bankrupts appeared to be insolvent and that the net deficiencies in their estates were in the order of about $215,000, in Mr Watt’s case, and $125,000, in his wife’s case, some of those debts being jointly owed.  As is apparent, the bankrupts’ estates are not large.

   THE BANKRUPTS’ COMPLAINTS

4. Soon after his appointment, in about March 2011, the trustee appears to have used his authority to withdraw $2,000 from a bank account operated, apparently, by Mrs Watts into which her salary was deposited.  Mr and Mrs Watts complained to the trustee and the Inspector-General in Bankruptcy about that withdrawal on the basis that the salary payment was after acquired property of one of the bankrupts and was therefore not able to be taken by the trustee in this way.  By 7 June 2011, the trustee had been advised by the Inspector-General that the $2000 ought not to have been withdrawn.  In the meantime, on 9 May 2011, the trustee made an income contribution assessment against Mrs Watts for the period of 11 August 2010 to 10 August 2011 in the sum of $9,153.15.  He required her to make weekly contributions of $704.09 commencing on 18 May 2011 for the balance of the contribution period.

5. After the Inspector-General’s letter of 7 June 2011, the trustee wrote to Mrs Watts informing her that although he was unable to apply that amount against the $3,600 that she owed her estate, he intended to apply the $2,000 against the compulsory contributions that she had been assessed as liable to pay.  The trustee said that he would credit the $2,000 against the total amount assessed, leaving a balance outstanding of $7,153.15.

6. While the trustee appears to have accepted that an error of judgment was made in withdrawing the $2,000 initially, there does not appear to have been any dispute that the money has now been applied for a proper purpose.  The matter may well have been better handled on the part of the trustee than in the manner that has occurred.  I would expect that, in the future, the trustee will be attentive to the possibility of further error without any need for the Court now to take action about this instance.

7. The second of the bankrupts’ complaints is that they were engaged in litigation with the Bendigo and Adelaide Bank in the Equity Division of the Supreme Court of New South Wales, together with a company that they previously controlled or were interested in, BMG Poseidon Corporation Pty Limited.    In his letter dated 13 April 2011, Mr Pascoe informed Mr and Mrs Watts that he required documentation from them about that litigation so as  to enable him to make a written election pursuant to s 60(2) of the Bankruptcy Act 1966 (Cth) to prosecute or discontinue the Supreme Court action.  Mr Watts appears to have had the view that it was not necessary for the bankrupts to provide the trustee with that information.  The trustee recorded, in a letter of 4 May 2011, that pursuant to s 60(3) of the Act, he had not made an election within 28 days and accordingly the action was deemed abandoned.  The trustee also denied that if, as Mr Watts was claiming, the effect of the abandonment was to permanently stay the action brought by him and his wife, they could revive it after the termination of their bankruptcies.  Clearly, the trustee and Mr Watts are at issue as to whether that is so.

8. As I explained to Mr Watts in the course of the hearing today, it would not be proper for the Court to intervene in relation to the present difference of views, since no issue will arise during the course of the bankruptcies about it.  It will only be at the conclusion of bankruptcies, if Mr Watts or the trustee claims some right to deal with the interests asserted by Mr and Mrs Watts in that litigation, that a question will arise as to what rights, if any, one or the other has.  The fact that Mr Watts and the trustee do not agree with each other about that issue at the moment is not a ground on which the Court would interfere with the conduct of the trustee's administrations or contemplate removing him from office.

9. The third basis on which the bankrupts complain that the trustee acted inappropriately is that on 17 June 2011 Mr Watts received from the trustee a bundle of documents proposing a composition for another debtor that had no apparent relationship to their bankruptcies.  Whether that was some postage mistake or otherwise is not, in my opinion, a foundation for any complaint of which the Court should take notice against the trustee.

   CONCLUSION

10. In these circumstances, having reviewed the evidence on which Mr and Mr Watts rely for seeking removal of the trustee, and having considered Mr Watts’ submissions today, it is abundantly clear that the bankrupts have no reasonable prospect of successfully prosecuting these proceedings by obtaining any order from the Court on the material about which they complain that would result in the removal of the trustee or in the Court making any order against him. For these reasons, I will give judgment in favour of the trustee and order that the proceedings be dismissed pursuant to s 31A of the Federal Court of Australia Act 1976 (Cth).

I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Rares.

Associate:

Dated:       3 August 2011