Re Haskins, David & Anor Haskins, David & Anor The Official Trustee in Bankruptcy [1996] FCA 242

CATCHWORDS

BANKRUPTCY - Trustee's refusal to continue with litigation instituted by bankrupt - Review by Court - Trustee to furnish bankrupt with information reasonably required concerning bankrupt's property or affairs - Whether entitles bankrupt to require production of trustee's complete file.

ARBITRATION (VICT.) - Award - Appeal to Supreme Court on question of law - Leave required - Principles applicable - Refusal of leave - Leave of judge required to appeal from refusal - Principles applicable.

Bankruptcy Act 1966, ss.170(2), 178

Commercial Arbitration Act 1984 (Vict), s.38

Re Tyndall (1977) 30 FLR 6

Re Stelnicki (1982) 62 FLR 430

Re Wheeler (1994) 54 FCR 166

Gray v. Clout (1990) 27 FCR 141

The Antaios [1985] AC 191

The Nema [1982] AC 724

DAVID HASKINS and CONNIE CASSAR v THE OFFICIAL TRUSTEE IN BANKRUPTCY (As Trustee of the Bankrupt estate of David Haskins and Connie Cassar) VB 35 of 1996

COURT: Sundberg J

PLACE: Melbourne

DATE: 10 April 1996

IN THE FEDERAL COURT )

OF AUSTRALIA )

GENERAL DIVISION ) No. VB 35 of 1996

BANKRUPTCY DISTRICT )

OF THE STATE OF VICTORIA )

RE: DAVID HASKINS and

CONNIE CASSAR

The Bankrupts

DAVID HASKINS and

CONNIE CASSAR

Applicants

AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY (As Trustee of the Bankrupt estate of David Haskins and Connie Cassar)

Respondent

COURT: Sundberg J

DATE: 10 April 1996

PLACE: Melbourne

MINUTES OF ORDER

The Court orders that the application be dismissed with costs.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT )

OF AUSTRALIA )

GENERAL DIVISION ) No. VB 35 of 1996

BANKRUPTCY DISTRICT )

OF THE STATE OF VICTORIA )

RE: DAVID HASKINS and

CONNIE CASSAR

The Bankrupts

DAVID HASKINS and

CONNIE CASSAR

Applicants

AND: THE OFFICIAL TRUSTEE IN BANKRUPTCY (As Trustee of the Bankrupt estate of David Haskins and Connie Cassar)

Respondent

COURT: Sundberg J

DATE: 10 April 1996

PLACE: Melbourne

REASONS FOR JUDGMENT

SUNDBERG J:

Background

The applicants became bankrupt on 8 January 1996 upon the presentation of their own joint petition. The respondent is the trustee of each of their estates. Rodney John Willoughby is the person in the respondent's office who is responsible for the administration of the estates.

On 15 January 1996 the applicants attended upon Mr. Willoughby for an initial interview, and told him they were parties to a number of proceedings involving Brae Villa Homes Pty Ltd. Mr. Willoughby informed them that the right to continue with the litigation vested in the Official Trustee. The applicants asked that the litigation be pursued, and were told that the Official Trustee would have to examine the documents relating to the proceedings before making a decision.

The applicants subsequently provided relevant documents to Mr. Willoughby. He then instructed the Australian Government Solicitor ("AGS") to advise the Trustee on the merits of the various proceedings. After receiving AGS's advice, on 14 February Mr. Willoughby wrote to the applicants advising them that, on the basis of the advice, the Trustee would not be continuing with the litigation.

The proceeding

The applicants applied to this Court under s.178 of the Bankruptcy Act 1966 to review the Trustee's decision. In their affidavit in support they contend that they were denied natural justice by Byrne J. in proceeding No. 6942 of 1994 in the Supreme Court of Victoria. In that matter the applicants sought leave to appeal to the Supreme Court against an interim award handed down by an arbitrator in favour of Brae Villa. Byrne J. dismissed the application. In the present proceeding the applicants claim that, having heard their submissions, his Honour did not call upon counsel for Brae Villa because he was going to decide the case against the applicants. They also complain that they do not have a copy of his Honour's reasons for decision. They do not actually assert that his Honour did not give reasons. Rather they say that "even upon searching the file in the Supreme Court of Victoria. His Honour Justice Byrne gave no reasons for his decision". They say they have a right to reasons so they can read and understand the decision. They claim that the absence of reasons denies them "reasons for Appeal".

Mr. Willoughby filed an affidavit in which he gave the Trustee's reasons for deciding not to continue with the proceedings. AGS's advice that the proceedings should not be continued was a "strong factor". AGS's letter described seven Supreme Court proceedings in which the applicants were involved, and examined three in particular. In the first, No. 8203 of 1995, the applicants sued Brae Villa in relation to a fire on their property which seriously damaged the house thereon. They claim that Brae Villa failed to maintain insurance on the property, and was liable to them in damages. AGS advised that the Trustee should neither adopt nor assign this proceeding. AGS noted that the first applicant had signed a letter stating that he had set the property alight, presumably in order to spite Brae Villa. AGS concluded that the merits of the proceeding were "highly dubious".

I have already described proceeding No. 6942 of 1994. Byrne J.'s reasons for dismissing the application for leave to appeal are not available. The applicants want the Trustee to appeal to the Court of Appeal from his Honour's refusal of leave. To do this the Trustee will need leave to appeal. AGS's advice included this passage:

As the bankrupts were represented by counsel at the hearing one must assume that they received adequate legal advice and that their case was put competently. Accordingly, I have assessed the prospects of leave to appeal being granted on the basis of the merits of the claim against the arbitrator.

His Honour Justice Nathan gives a fairly comprehensive analysis of the merits, or lack thereof, of the claims against the arbitrator in proceeding number 7031 of 1995. After reading Nathan J's decision one cannot but form the view that the bankrupts will not accept that they are on the losing side of the dispute with Brae Villa. ... In the writer's view it is unlikely that leave to appeal would be granted by the Court on the basis that no sufficient ground of appeal has been established. More importantly, even if the Court indulged the bankrupts (or at least the Trustee as trustee of their estate) with leave to appeal one would still be faced with an appeal which appears
to be based, at the end of the day, on unmeritorious claims previously dismissed by [Mr. Justice] Nathan. The Trustee is advised not to pursue this application on behalf of the bankrupts ....

In the third action, No. 7031 of 1995, the applicants sought to remove the arbitrator for misconduct. After a five day hearing, the application was dismissed. Nathan J.'s reasons for judgment were before me.

In addition to AGS's advice that the Trustee should not continue with the proceedings, the Trustee, in coming to his decision, took into account that there is no money in the estate to fund any legal action.

Section 178

Section 178 enables a bankrupt who is affected by any act, omission or decision of the trustee to apply to the Court, which may make such order as it thinks just and equitable. The section confers the widest possible discretion, and the jurisdiction is not limited to cases where the trustee has acted absurdly, unreasonably or in bad faith: Re Tyndall (1977) 30 FLR 6; Re Stelnicki (1982) 62 FLR 430; Re Wheeler (1994) 54 FCR 166. The Court can interfere even though the trustee's decision was correct on the material before him, if the material before the Court shows some ground for review: Gray v. Clout (1990) 27 FCR 141, at p.144.

Leave to appeal from Byrne J.

Section 38(2) of the Commercial Arbitration Act 1984 (Vict.) provides that subject to sub-s.(4) an appeal lies to the Supreme Court on any question of law arising out of an award. Sub-section (4) provides that an appeal under sub-s.(2) may be brought with the consent of all other parties to the arbitration agreement, or with the leave of the Supreme Court. Sub-section (5)(a) provides that the Court shall not grant leave under sub-s.(4) unless it considers that, having regard to all the circumstances, the determination of the question of law concerned could substantially affect the rights of one or more of the parties to the arbitration agreement. Unless the Supreme Court gives leave, an appeal does not lie to the Full Court from the grant or refusal of leave: sub-s.(6).

A draft Notice of Appeal was part of the material before Byrne J. It identifies the questions of law said to arise out of the Award. So far as material to this Application they are:

1. Whether the Arbitrator erred in law in:

(a) stating that the works were deemed practically completed on the 1st day of April, 1993;

(b) refusing the Applicants permission to lead evidence at the Arbitration that was relevant to the issues raised in the Notice of Dispute.

So far as presently material, the grounds of appeal are that the arbitrator erred in law:

1. In making an Interim Award in favour of the Respondent in the circumstances that the Arbitrator found the contract to have been practically completed.

2. In making an Interim Award in favour of the Respondent in the circumstances where the Arbitrator found that the Respondent had not given a Certificate of Practical Completion.

An appeal from Byrne J.'s refusal of leave to appeal will only lie if his Honour or another judge grants the Trustee leave to appeal. In The Antaios [1985] AC 191, at p.205 Lord Diplock, speaking of the English equivalent of s.38(6), said:

when should a judge give leave to appeal to the Court of Appeal from his own grant or refusal of leave to appeal to the High Court from an arbitration award?

... leave to appeal to the Court of Appeal should be granted by the judge ... only in cases where a decision whether to grant or refuse leave to appeal to the High Court ... in the particular case in
his view called for some amplification, elucidation or adaptation to changing practices of existing guidelines laid down by appellate courts; and that leave to appeal ... should not be granted in any other type of case.

Judges should have the courage of their own convictions and decide for themselves whether, applying the existing guidelines, leave to appeal ... ought to be granted or not.

The "guidelines" referred to are those laid down in The Nema [1982] AC 724, at pp.742-743 and The Antaios [1985] AC, at p.600. See also the propositions formulated in Sharkey and Dorter, Commercial Arbitration (1986), pp.271-274. Their proposition 4 is as follows:

Where there arises out of an award a question of the construction of a contract in a standard form leave to appeal should only be granted where:

(a) the events are of a kind that it is not unlikely that they will be reproduced in similar transactions between other parties engaged in the same trade;

(b) the decision on the question of construction in the circumstances of the particular case will add significantly to the clarity and certainty of commercial law; and

(c) the court considers that a strong prima facie case has been made out that the arbitrator had been wrong in his construction.

After I had reserved my decision, it became apparent that I could not decide the issue raised by the application without having a copy of the building contract. I therefore caused my Associate to communicate with the parties to ascertain whether they agreed that I should treat the contract as part of the evidence before me. They did so agree, and I have been provided with a copy of the contract. It is MBAV form UHC.1, and is a standard form contract. Clause 23(a) entitles the builder to be paid the unpaid balance of the contract price when the works are "Practically Completed". Under clause 22(a) Practical Completion is "that stage when the Works are completed except for minor omissions and/or defects which do not prevent the Works from being reasonably fit for occupation and/or use by the Proprietor ...". "Practically Completed" has a corresponding meaning. Sub-clause (b)
provides that when, in the opinion of the builder, the works are "Practically Completed", the builder shall give the proprietor notice thereof in writing. Sub-clause (e) provides that if the proprietor takes possession of the works without the written agreement of the builder, "the date of Practical Completion shall be the date possession is taken ...". The facts were not in dispute. On 1 April 1993 the applicants re-keyed the locks and entered. They did not obtain Brae Villa's written agreement before doing so. Accordingly, under clause 22(e) the contract was deemed to be "Practically Completed", and thus clause 23(a) entitled Brae Villa to be paid. The arbitrator said:

I reject the Proprietors' repeated submission that Practical Completion can only occur if the Builder gives a notice under clause 22(b). In my view, deemed Practical Completion can and did occur under clause 22(e) when the Proprietors took possession, regardless of whether or not a notice is given under clause 22(b).

That view is clearly correct. It was shared by Nathan J. See pages 1 and 19 of his reasons for judgment. There was no dispute as to quantum, and the applicants abandoned their counterclaim relating to quality, defects and incomplete works. There is therefore no merit in grounds 1 and 2 in the applicants' draft Notice of Appeal. An application for leave to appeal would, in my view, have no prospect of success. Although Byrne J.'s reasons are not available, it is obvious that his Honour agreed with the arbitrator's view of the effect of clauses 22(e) and 23(a) on the undisputed facts. Further, there is nothing to suggest that the case calls for any amplification, elucidation or adaptation to changing practices of the guideline summarized in the Sharkey and Dorter proposition 4. In those circumstances, if an application for leave to appeal were made to Byrne J., he would doubtless have the courage of his own convictions, and would apply proposition 4 and refuse leave to appeal. The Trustee could not make out a prima facie case that the arbitrator was wrong in his construction of the contract, let alone a strong prima facie case.

Denial of natural justice

The applicants' complaint that they were denied natural justice in that Byrne J. did not call on counsel for Brae Villa has no substance, and would not lead to the grant of leave to appeal. Byrne J. was obliged to hear the applicants, and there is no complaint that he did not do so. Having decided that the applicants' case was without substance, his Honour was not obliged to hear counsel for Brae Villa. There is no denial of natural justice to one litigant who has been heard in a judge saying that he does not need to hear the other side. What a judge cannot do is decide a case against a party without giving that party the opportunity to put his case. It is not an admissible ground of complaint that the other party has not been heard.

The complaint that Byrne J. did not give written reasons, or that no transcript was made of his oral reasons, would not lead to the grant of leave to appeal. As I have said, it is obvious that his Honour agreed with the arbitrator's view of the effect of clauses 22(e) and 23(a).

Although it is not one of their grounds of appeal, the applicants' draft Notice of Appeal identifies, as a question of law arising out of the Award, the arbitrator's refusal to permit them to lead evidence that was relevant to the issues raised in the Notice of Dispute. This was explained in the second applicant's affidavit in support of the application before Byrne J. She said the arbitrator prevented the applicants from leading evidence as to the works that had not been completed by Brae Villa. This complaint was dealt with by Nathan J. as follows:

I come to the next point raised by the owners. It is that the arbitrator refused to properly hear their evidence and that he stopped them from adducing evidence in relation to the incomplete works.

...

The plaintiffs did not choose to run this issue during the arbitration itself. The timetable to which I have already referred and settled upon at the preliminary conference, allowed them full access to delivering submissions. They themselves raised the matter that they would not be issuing a counterclaim and there was no dispute as to the debt for the $30,000.

In the points of defence and in their request they were asked about what works were allegedly incomplete. They never supplied them. In the letter of 28 July 1993 from the solicitors then acting for the owners, they again stated they were not counterclaiming in respect of incomplete works but would seek access to the Guarantee Fund.

The correspondence is redolent of assertions by the owners that they would not be seeking to pursue any claim for incomplete works. This is a latter day revival of a complaint in respect of an issue which they had specifically removed from the Arbitrator's purview. They cannot be heard now to complain.

There is no substance in the applicants' claim that the arbitrator erred in law in refusing to allow evidence to be called about the alleged incomplete works. And there is no prospect of leave to appeal being granted on this ground.

Leave to appeal - conclusion

In coming to his decision the Trustee, in addition to AGS's advice, took into account: that there are no funds in the estates with which to pay for an application for leave to appeal; that the applicants have no assets with which to finance further proceedings; that other creditors are most unlikely to provide the Trustee with an indemnity in relation to the costs of further proceedings which the Trustee has been advised not to pursue, and the risk that the court might order the Trustee personally to pay the costs of an unsuccessful application. All these matters amply justified the Trustee's decision not to seek leave to appeal.

The 28 February letter

In their Application to this Court the applicants also seek an order "As per attached Letter dated 28th February, 1996". This is a letter the applicants wrote to the Trustee. Apart
from enquiring about the future of the legal proceedings, the letter requested copies of various documents. In their affidavit in support, the applicants ask for an order that the Trustee provide them with the "full and complete file with no exceptions". They rely on s.170(2) of the Bankruptcy Act which requires the trustee to furnish to a bankrupt "information reasonably required by the bankrupt concerning his property or affairs". I doubt that the sub-section requires a trustee to comply with a demand that he turn over the whole of his file. But I need not decide the point, because Mr. Willoughby has deposed that on or about 14 March he provided the applicants with copies of all but three documents in his file. Those three documents are his instructions to AGS, a facsimile of AGS's advice and the original of that advice. A copy of the advice is of course an exhibit to Mr. Willoughby's affidavit. The only document the applicants do not have is the Trustee's letter of instructions to AGS. Assuming in favour of the applicants that the letter is "information" within s.170(2), it is not, in my view, information reasonably required by them concerning their property or affairs. Although in their letter of 28 February they asked for a copy of the advice, they did not ask for the Trustee's letter of instructions. And, despite the fact that Mr. Willoughby deposed that that letter was the only document in his file a copy of which the applicants did not have, they did not mention it before me.

The Application is dismissed with costs.

I certify that this and the preceding 9 pages are a true copy of the reasons for judgment of the Honourable Justice Sundberg

.................................................

Associate

10 April 1996

The applicants appeared in person.

Counsel for the Respondent: Mr G Carroll

Solicitor for the Respondent: Australian Government Solicitor

Date of Hearing: 27 March 1996

Place of Hearing: Melbourne

Date of Judgment: 10 April 1996

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