CATCHWORDS

BANKRUPTCY - application by bankrupt to remove his trustee - detailed examination of evidence and of primary judge's conclusions - applicable principles.

Bankruptcy Act 1966, ss. 134(4), 178, 179.

MICHAEL JOHN FULLER v HUGH JENNER WILY

No. SG 34 of 1995

CORAM:    SHEPPARD, SPENDER AND HILL JJ

PLACE:    ADELAIDE

DATE:     28 JUNE 1996

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

SOUTH AUSTRALIAN DISTRICT REGISTRY    )    No. SG 34 of 1995

                                  )

GENERAL DIVISION                  )

        On appeal from the judgment of a judge of the

                 Federal Court of Australia

                        RE:       MICHAEL JOHN FULLER,

                                  A BANKRUPT

                        BETWEEN:  MICHAEL JOHN FULLER

                                      Appellant

                        AND:      HUGH JENNER WILY

                                      Respondent

                      MINUTES OF ORDER

CORAM:    SHEPPARD, SPENDER AND HILL JJ

PLACE:    ADELAIDE

DATE:     28 JUNE 1996

THE COURT ORDERS THAT:

1.   The appeal be dismissed.

2.   The appellant pay the respondent's costs of the appeal.

NOTE:     Settlement and entry of orders is dealt with in

          Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA)

                                  )

SOUTH AUSTRALIAN DISTRICT REGISTRY    )    No. SG 34 of 1995

                                  )

GENERAL DIVISION                  )

        On appeal from the judgment of a judge of the

                 Federal Court of Australia

                        RE:       MICHAEL JOHN FULLER,

                                  A BANKRUPT

                        BETWEEN:  MICHAEL JOHN FULLER

                                      Appellant

                        AND:      HUGH JENNER WILY

                                      Respondent

CORAM:    SHEPPARD, SPENDER AND HILL JJ

PLACE:    ADELAIDE

DATE:     28 JUNE 1996

                    REASONS FOR JUDGMENT

THE COURT:  This is an appeal from a judgment of a judge of this Court (Jenkinson J) delivered on 6 May 1995.  The effect of the judgment was to dismiss an application brought by the appellant as applicant in which the appellant sought an order pursuant to s.179 of Bankruptcy Act 1966 ("the Act") that his trustee in bankruptcy, the respondent to the appeal, be removed as such trustee.  The sequestration order made against the appellant was made on 20 May 1993.  The act of bankruptcy was failure to comply with a bankruptcy notice based on a
final judgment dated 11 September 1992 in which a company, Claremont Petroleum NL ("Claremont"), recovered from two respondents, one of whom was the appellant, judgment in the sum of $493,750.

     The respondent had agreed to consent to act as trustee of the estate of the appellant and, by the operation of subsec. 156A(2) of the Act, became trustee on the making of the sequestration order.  At the time that the judgment was entered, there was pending in this Court another proceeding in which Claremont was an applicant.  Together with another company, Beach Petroleum NL ("Beach"), it had sued a number of respondents one of whom was the appellant.  The applicants in the proceedings succeeded on a number of causes of action against numbers of the respondents including the appellant based upon a finding of conspiracy, "gross breaches" of the duties of some of the respondents as directors of Beach and causing that company to enter into certain transactions without, inter alia, undertaking any proper due diligence.  The proceedings in which those claims succeeded were heard over a period extending from early in July 1992 until early in April 1993.  Judgment was delivered on 10 June 1993.  Orders were made on that day for the entry of judgments against the respondents, including the appellant, in the sum of $44,450,000.  Reference may be made to Beach Petroleum NL v Johnson (1993) 43 FCR 1.  It is to be observed that the estate of the appellant had been sequestrated some three weeks prior to the entry of the judgment against him.

     After the entry of the judgment, both the appellant and the respondent gave consideration to an appeal.  The respondent decided not to appeal.  The circumstances under which he reached that decision are the principal matter of contention in this appeal.  We shall refer to the detail of them a little later.

     The solicitors for the applicant in the Beach Petroleum case were an Adelaide firm, Piper Alderman.  As the length of the case would indicate, it involved a great many witnesses and a great many exhibits.  There were over 10,000 pages of transcript and many hundreds of documents.  Obviously the litigation was extremely complex and involved.

     The application for the respondent's removal as trustee indicates that the grounds to be relied upon are to be found in the appellant's affidavit of 23 September 1993.  The respondent filed an affidavit sworn on 1 October 1993 in opposition to the application.  Points of claim and points of defence were filed by the parties.  The points of claim pleaded that the solicitors for the petitioning creditor upon the bankruptcy petition which led to the appellant's bankruptcy and the solicitors for the trustee were Piper Alderman.  They also pleaded that prior to 20 May 1993, the date of the sequestration order, both Claremont and Beach were clients of the respondent in his practice as a chartered accountant.  Paragraph 4 of the points of claim pleaded that the respondent on at least one occasion had, at the request of Piper Alderman, given professional advice and assistance to Claremont and/or Beach in their respective businesses and in relation to the legal proceedings in which they were involved.  Paragraph 5 of the points of claim alleged that the respondent, Claremont, Beach and Piper Alderman had entered into agreements or understandings whereby the respondent was to use Piper Alderman as his solicitors in connection with any matter relating to the appellant's estate, the costs of Piper Alderman would be borne by Claremont or Beach and the respondent would act in relation to the administration of the estate of the appellant "as he may be directed, counselled or advised by either or all of Claremont, Beach or Piper Alderman."  Paragraph 6 alleged that, as a consequence of such agreement or understanding, the respondent declined, neglected and refused to institute an appeal or to assist or facilitate the appellant appealing against the judgment in the Beach Petroleum matter.  It was further alleged that the respondent determined not to institute an appeal or to facilitate or assist the appellant to appeal at the time and in circumstances in which the respondent had no opportunity to make any proper and objective assessment of the prospects of any such appeal, the costs of such an appeal, the person by whom such costs might be payable, and the interest of any creditor of the estate in the support of any such appeal.

     Eventually it was alleged that the respondent determined not to institute an appeal or assist or facilitate the prosecution of an appeal by the appellant by reason of the agreements and understandings earlier referred to and by reason of his perception of the interests of Claremont, Beach and Piper Alderman as not being served by any such appeal.  It was also alleged that the respondent did not consult with any person prior to his determination not to institute or assist in the prosecution of an appeal.  It was pleaded that, in these circumstances, it was incumbent upon the respondent at the very least to maintain the rights of appeal either vested in him or the debtor pending consultation with creditors of the estate and the respondent, the obtaining of advice in connection with the prospects of any such appeal, the benefits to the estate of a successful appeal, the amount of the costs that might be incurred in connection with the institution and of prosecution of such an appeal and whether any creditor was interested in supporting the maintenance of such rights pending legal advice being obtained.

     The points of claim then referred to the lodgement of a notice of appeal by the appellant on 1 July 1993.  It is to be observed that that was the last day upon which such a notice could be lodged as of right.  It was pleaded that the respondent did not seek advice from any person other than Piper Alderman until after 12 July 1993.  The advice which was received was not in writing and was directed only to the question of in whom any right of appeal vested by reason of the operation of the sequestration order.  Finally, it was alleged that the "abandonment" by the respondent of the appeal instituted by the appellant was, in the particular circumstances, "gross misconduct" in the respondent's capacity as trustee.  A number of particulars were given which included the respondent's having permitted the interests of Claremont and Beach and also of Piper Alderman unduly to influence him in failing to ascertain the wishes of other creditors or creditors generally in the estate.  It was also alleged that the respondent's actions advantaged Claremont and Beach and also Piper Alderman in foreclosing the prosecution of any appeal and the appeal instituted by the appellant himself.

     In his points of defence the respondent said that, during the conduct of the administration of the estate, he had instructed Piper Alderman and also had instructed another firm, M.D. Nikolaidis & Co. who were solicitors in Sydney, in relation to the matter.  The points of defence otherwise denied most of the allegations in the points of claim.  Additionally, the respondent said that his decision to use Piper Alderman was based upon the extensive knowledge and information which that firm held with regard to the history and business activities of the appellant and "associated entities, and also the cost efficiency and benefit to the estate and its creditors in the utilisation of Piper Alderman with that knowledge and information."  The respondent also said that Claremont and Beach were by far the major creditors of the appellant and had funded the respondent's legal costs in and about undertaking enquiries and investigations into the affairs of the appellant.   Paragraph 6 of the points of defence said that the respondent had instructed Nikolaidis & Co. to advise in relation to "the obligation of the Trustee to deal with the Debtor's appeal."  The effect of the advice was that the respondent had no obligation to pursue any appeal.  It was then said that the advice from Nikolaidis & Co. was received prior to the respondent's making a determination not to institute or prosecute an appeal.  In this respect it may be noted that the advice, if given, was not given until 28 July 1993 some four weeks after the time for appeal had expired.  There were then some matters of detail referred to.  A principal matter relied upon by the respondent was that he had no funds to prosecute any appeal.

     It was the tenor of the respondent's evidence that he had not received or sought any legal advice in relation to whether or not he as trustee should lodge an appeal.  The advice he sought was in relation to an appeal brought by the appellant himself and the question whether the respondent should consent to or join in that appeal.  In the course of his Honour's judgment he said that he was not persuaded that "a man of the trustee's experience was imprudent in forming his own judgment in abstaining from taking advice."  Implicit in this finding by his Honour is a finding that that is what the respondent in fact did.  One of the grounds of appeal is based on a submission that the respondent did not in fact form his own judgment in the matter.  His Honour continued by saying that, if what he had said was too absolute a statement, it was to be borne in mind that it was obvious, both to the appellant and to the respondent, that the appellant's creditors other than Beach and Claremont, would be fully aware of the fact that the Beach Petroleum case had been proceeding and fully aware that it had concluded with a judgment against the appellant for many millions of dollars.  His Honour also referred to the fact that the appellant, to the respondent's knowledge, was a qualified lawyer and a man of experience in commercial life so that if there were a reasonable view of the prospects of appeal more sanguine than the respondent's own view, he could confidently expect that that would be drawn to his attention by the appellant and by those creditors, other than Beach and Claremont, who shared that view.  His Honour added that, once 1 July had passed, the respondent had the further comfort of knowing that an appeal was, "in the technical sense, on foot", and that there was still further time in which to wait and see whether a more sanguine view of the prospects of success would emerge and, if it did emerge, whether those who were putting it forward were prepared to support their opinions "with some money".

     The appeal which was brought was brought by the appellant in his own name.  It was not an appeal brought by the respondent as trustee of the appellant's estate.  There may therefore have been a question whether the appeal brought by the appellant in his own name could provide the comfort to which his Honour referred.  We do not express a view on this matter.  In any event, that appeal being on foot, the Court, if the respondent had decided to appeal, might have been sympathetic to an application for leave to appeal out of time.

     His Honour next dealt with a submission that it was incumbent on the respondent as promptly as possible to communicate with the creditors, particularly the creditors other than Claremont and Beach, to let them know what his state of mind was and enable them to communicate with him.  His Honour concluded that certain of the provisions of the Act and the Rules for the notification of creditors were not "exactly complied with" in this case.  But he did not accept the submission that the circumstances of the case imposed any further, more pressing obligation on the respondent.  He referred again to the fact that the respondent was entitled to anticipate that the creditors other than Beach and Claremont would be aware of what had occurred and interested in what had happened so that they were quite capable of making any views they had formed known to the respondent.

     His Honour then said that he found no basis in the evidence that the respondent had acted or would act pursuant to an understanding with Piper Alderman and perhaps Claremont and Beach in relation to the administration of the estate of the appellant "as they might direct or counsel him."  His Honour said there was nothing to suggest that the respondent in any way failed to make the decisions that he did make independently and without influence by Claremont, Beach or Piper Alderman.  His Honour continued:

     "He [the respondent] did, of course, as has been shown in evidence, on a number of occasions take legal advice from Piper Alderman and take that advice into consideration, but there is nothing to suggest that he was overborne, or even influenced further than a lay trustee ought to be influenced, by the advice of his legal advisers.  There is no basis for the allegation in point 6 that the refusal to institute an appeal or facilitate Mr. Fuller's appealing was in consequence of any improper influence on him."

His Honour also said:

     "The advice which the trustee received when he first consulted Piper Alderman in respect of the question of an appeal against the judgment was good advice:  that is that there was a conflict of interest, or at least the prospect of a conflict of interest, and that he should take independent legal advice on those questions.  It would appear that that advice was not altogether followed between the time it was given and December 1993 when Piper Alderman withdrew as solicitors for the trustee in this proceeding by way of application to remove the trustee.  It is regrettable, but it comes nowhere near the kind of failure in duty by a trustee that might attract even consideration of removing him.  It was understandable that the trustee should want to learn as much as he could about the prospects of the attack upon Mr. Fuller's appeal as incompetent, and it is perhaps understandable that he was also inclined, when he wanted advice about the responses that he should make to the bankrupt, who kept approaching him in writing, that he should ask the solicitors who were the general solicitors in relation to the administration of the estate rather than go to the trouble of asking other solicitors who would, no doubt, need rather more instruction by the trustee or his officers in order to be able to give the advice.  At all events, it was clearly the right course to take that Piper Alderman eventually withdrew as solicitors in this proceeding and what happened does not come anywhere near justifying thought of removing the trustee, in my opinion."

The emphasis is added.

     His Honour then dealt with a submission by the appellant which he said was made late in the proceedings.  It raised the question whether the respondent might have assigned to the appellant the right which, on the hypothesis stated in the passage from the judgment just quoted, was vested in the respondent, to appeal against the judgment.  His Honour referred to the fact that in July and August of 1993, the appellant was asking for consent to the institution and maintenance of the appeal which he had instituted and also asking the respondent to facilitate it.  But his Honour pointed out that there was no statement as to the means by which that could occur.  He thought that the respondent's failure, if it were a failure, to advert to the possibility of an assignment for value could not be characterised as any failure to exercise reasonable care and skill in the performance of his duties.  He added that, even if it appeared that such a course could be taken and had legal effect and also did not involve the risk of expense or costs, that would be the position.

     His Honour rejected a submission based upon the respondent's failure or refusal to answer letters written to him by the appellant.  In the course of what he said, his Honour referred to the fact that the respondent had communicated his decision to the appellant who, if dissatisfied with it, had a number of courses open.  These included the course actually taken of applying for the respondent's removal.  But there is a less draconian course provided for in s.178 of the Act which provides that if, inter alios, the bankrupt, is affected by an act, omission or decision of the trustee, he may apply to the Court and the Court may make such order in the matter as it thinks just and equitable.  No application has been made by the appellant under s.178.

     Subject to some consequential matters, the concluding paragraph of his Honour's judgment was as follows:

     "I do not find anything in the evidence to suggest conduct on the part of the trustee that would warrant consideration of removing him.  It is not uncommon for a trustee to have some association with a major creditor in a bankruptcy.  It is not unusual for a trustee to have funds provided by one of the creditors in bankruptcy.  It does not seem to me that on this evidence any perception could reasonably have arisen that there was anything improper in the relationship between this trustee and Piper Alderman or with the creditors who, the evidence shows, have been providing funds.  The application must be dismissed."

     We next refer to the evidence of the appellant and the respondent.  Both gave the substantial part of their evidence in chief by affidavit.  Both were cross-examined.  In his affidavit, the appellant, after referring to a number of documents, dealt with his examination pursuant to s.81 of the Act.  He said that he appeared before the Registrar in Bankruptcy on 15, 16 and 17 September 1993.  He said that he was examined by counsel appearing for the respondent "on instructions from Piper Alderman in relation to my affairs", and that the examination was continuing.  He said that he applied for an adjournment on 16 September 1993 on the ground that he wished to make application to have the respondent's conduct examined and to have him removed as his trustee.  The application for adjournment was refused.  He said that on 17 September 1993 he made a formal objection to the continuation of the examination upon the grounds that both the respondent and Piper Alderman had a conflict of interest which was unresolved and that both were conducting the examination on behalf of Claremont and Beach, as well as the firm of Piper Alderman itself, for a collateral purpose "and not exclusively for the purposes of" the appellant's creditors generally or for the benefit of his estate.  The adjournment was again refused.  It should be mentioned here that counsel for the respondent pointed out to us in the course of his submissions that no objection had been taken to the examination at its commencement and that objection had only been taken when counsel began to explore the relevance and significance of certain off-shore trusts which had been established in one or other of the Channel Islands.

     Reference was then made by the appellant to a statement of receipts which he had received from the trustee.  He had also asked the respondent for a statement of payments.  Receipts only were shown.  He said that he had a conversation with the respondent in which the respondent said that there had been no expenditure incurred up to that stage.  He asked whether this included expenditure for legal costs and was told that none had been incurred which was a liability on the estate.  An inference which the Court was asked to draw was
that the costs which were being incurred were being paid by Claremont and Beach.

     It should be made clear at this point that a trustee in bankruptcy, particularly a private trustee, usually has no access to funds for the purpose of prosecuting proceedings or conducting an examination of the bankrupt except those which are brought to the credit of the estate as assets of the bankrupt or are provided by or on behalf of creditors or other persons who may consider that they have a sufficient interest in the outcome of the administration of the bankruptcy to warrant expenditure on legal proceedings.  If funding for these purposes is not available from these sources, trustees are faced with the dilemma of either having to fund the costs of the examination or other proceedings personally or not to undertake them.  And, if the only source of funds is the assets of the bankrupt, the trustee may consider it to be in the best interests of creditors not to risk the assets in litigation but to preserve what is there for the benefit of creditors.  These are common problems in the administration of bankrupt estates.  They are the matters to which his Honour was referring in the final paragraph of his judgment earlier quoted.

     It is unusual for a creditor to put a trustee in bankruptcy in funds for any purpose unless the creditor sees benefit itself in the exercise which is being undertaken.  That is so, usually, whether the creditor is a private creditor or whether it may be an instrumentality of government such as the Commissioner of Taxation.  The reason for this is that creditors, being owed money by a bankrupt, are understandably unwilling to chase a bad debt with further moneys which may or are likely to be lost.  There are some circumstances in which the Government may provide funds but this is not a course which happens with any regularity.

     In his affidavit the appellant claimed that Piper Alderman had a material interest in the institution and/or prosecution of any appeal by the appellant or on his behalf in respect of the Beach Petroleum judgment.  He also said that there was not sufficient time for the respondent to obtain advice in relation to the merits or otherwise of an appeal against the judgment on his behalf unless reliance was placed "on the counsel" of persons familiar with the proceedings.  The appellant said that the respondent had not spoken to "my Counsel" nor did he seek advice from any creditor in the estate except Claremont and Beach.  Finally he referred to the fact that the respondent had declined to provide him with a copy of any legal advice he had obtained or any particulars of the person or persons whom he consulted "with respect to his claimed business judgment decision not to prosecute an appeal".

     The affidavit annexed some letters passing between the appellant and the respondent.  On 23 June 1993 the appellant referred to a previous letter and pointed out that the time limit for any appeal expired on 1 July.  He said that in ordinary circumstances he would be lodging a notice of appeal against the decision.  He said that he needed the respondent's advice urgently as to whether he intended to prosecute an appeal "on my behalf and on behalf of my creditors" or whether the respondent was prepared to allow him to do so on his own initiative.  On 24 June 1993 the respondent replied to this letter saying that he confirmed that "in my capacity as Trustee of your estate" he did not intend to prosecute an appeal.

     In an undated reply, the appellant referred to the fact that the respondent had not consented to his proceeding on his own account.  He asked that the respondent either consent to the prosecution of the appeal in the appellant's name, or failing consent, the respondent's reason for withholding it.

     On 28 July 1993 the respondent wrote to the appellant referring to his letter.  The respondent said that he had sought legal advice in respect of the appellant's right of appeal and had been advised that in general terms the right vested in him as trustee.  The respondent also said that he had been advised that a right of appeal might vest in the appellant personally in respect of certain findings against him such as those relating "to matters of a criminal nature."  The respondent said that, in those circumstances, his consent to an appeal would not be required.  He continued that, on the basis of the distinction which he had mentioned, he advised that he was not prepared to consent to the prosecution of an appeal by the appellant to the "extent that the right of appeal vests in your Estate."  He added that he was not satisfied that there was a benefit to the estate in pursuing the appeal and that the appellant should obtain his own legal advice as to which matters he was entitled to appeal in his own right.

     In evidence is a draft of the respondent's letter of 28 July.  The draft had been prepared by the respondent.  On 28 July he sent it by facsimile to Piper Alderman with a note which said, "Draft letter to Mr Fuller follows for your comment."  He had previously sent to Piper Aldermen various letters which he had received from the appellant.  One page of these letters had been omitted.  This page was forwarded along with the draft.  The draft was in the same terms as the letter which was sent except that there had been added a sentence which said, "I am not satisfied that there is a benefit to the estate in pursuing the appeal."  The relevance of this to the appellant's case is that, in his submission, it tends to suggest that, notwithstanding what the respondent said about making the decision not to appeal himself, he was in fact receiving advice about the matter from Piper Alderman.  This was not a matter dealt with specifically by his Honour in his judgment although it appears that it was raised in the appellant's submissions at the primary hearing.

     After the appellant received the respondent's letter of 28 July, he wrote further letters to the respondent.  We do not find it necessary to refer to the detail of these.  Eventually on 3 August 1993 the respondent wrote to the appellant reiterating much of what he had said in the letter of 28 July.  The respondent also said that he had considered "the relative assets to liabilities of the Estate and the potential cost to the Estate if any appeal was lost and on this basis I am not prepared to consent to the prosecution of an appeal."  He added:

     "As far as legal advice is concerned you should not confuse advice in respect of the right of appeal (which I have obtained) and advice regarding the chances of an appeal succeeding.  As indicated previously, I have made my own judgment in respect of the latter."

     It should be mentioned at this point that Beach and Claremont applied to strike out the appeal lodged by the appellant as incompetent.  The basis of the application was that the right of appeal vested only in the respondent as trustee of the estate of the appellant and not in the appellant personally.  The objection to competency was dealt with by a Full Court of this Court on 14 September 1993; see Fuller v Beach Petroleum NL (1993) 43 FCR 60.  By majority the Court upheld the objection.  The High Court granted special leave to appeal against this judgment.  On 20 June 1996, the appeal was dismissed; see Fuller v Claremont Petroleum NL, High Court of Australia, 20 June 1996 (as yet unreported).

     In his affidavit, the respondent said that the public examination referred to in the appellant's affidavit was conducted at his request and upon his instructions.  He instructed Piper Alderman to act on his behalf "having made a decision that Piper Alderman was the best firm to retain given its involvement" in the Beach litigation.  He said that that litigation had involved the investigation of a "massive" amount of material regarding the affairs of the appellant and the affairs of entities and persons associated with him.  The trial occupied ten months and involved the numbers of exhibits and documents and the transcripts to which we have earlier referred.  The respondent said:

     "Given Piper Alderman's intimate knowledge of those documents and that information I determined that it would be more efficient if Piper Alderman were retained by me in relation to the public examination of Fuller."

     The respondent said that he was present at the examination on 15 September 1993 and had perused the transcript of the proceedings on 16 and 17 September 1993.  He described the topics dealt with in the examination and referred to the appellant's affidavit where it was alleged that he had a conflict of interest.  The respondent denied this.  He said that he had taken the view that Piper Alderman did not have a conflict of interest in acting for him in respect of the public examinations and that it was in fact prudent for them to act.  He denied that the examinations were being conducted for a collateral purpose.  He said that the examination was conducted on his instructions for the purpose of identifying assets able to be recovered by the estate which would be available for distribution to creditors.  The respondent said no costs had been incurred by the estate because Claremont had agreed to fund "my administration" in respect of the public examination.

     The respondent then dealt with the consideration given to the question of an appeal.  He said that, in his assessment that it was correct not to institute an appeal, he considered the reasons for judgment of the primary judge "which to me indicated that Fuller was patently liable on the grounds found by his Honour and that further, the Estate did not, to my knowledge have sufficient funds to prosecute an appeal.  In addition, in the event of losing the appeal an order would have been sought against me personally without any indemnity payable from the Estate."

     Paragraph 10.5 of the respondent's affidavit was as follows:

     "On a date which I cannot now specify, but after the issue of the notice of appeal by Fuller on the 1st July, 1993, I had a telephone conversation with Mr. Davis of Piper Alderman.  I asked Mr. Davis if he would advise me as to what course of action I should take as Trustee in relation to the notice of appeal filed by Fuller.  Mr. Davis said words to the effect to me that given that he acted for Claremont and Beach in respect of the judgment from which Fuller sought to appeal he was in a position of conflict and was unable to advise me as Trustee of Fuller's estate.  Mr. Davis said words to the effect to me that advice had been given by him to Claremont and Beach that in his opinion the right of appeal of Fuller vested in me as Trustee and that on the basis of that advice Claremont and Beach had instructed him to make application to the Full Federal Court of Australia to have the Notice of Appeal dismissed for a lack of standing.  Mr. Davis said to me that he would confirm to me in writing the course of action Claremont and Beach intended to take in relation to the notice of appeal filed by Fuller and the reasons therefor."

     Annexed to the respondent's affidavit was a letter written by Mr Davis of Piper Alderman on 12 July 1993.  The letter referred to discussions concerning the appellant's appeal and also an appeal of one of the other respondents to the application in the Beach Petroleum case, Mr Cummings, and confirmed that both "bankrupts" had filed notices of appeal.  Copies of these were enclosed.  Mr Davis said that "our client" (a reference to Claremont) had instructed him to apply to the Federal Court to have the notices of appeal dismissed.  Mr Davis said that, in his opinion, the right of appeal had vested in the respondent so that there was no "locus standi" in either of the respondents to appeal.  The letter continued, "We note your comments that as Trustee it is not your intention to appeal the judgment."  Mr Davis then set out his reasons for his conclusion that the only appeal was an appeal available to the respondent.  The letter concluded with the following paragraph, "We have been instructed to inform you, as trustee, of our client's intention to apply to dismiss the Notices of Appeal and the reasons therefor in the foregoing terms.  We would be interested to learn your views on the topic and your attitude to our client's applications."

     The respondent said that subsequent to the receipt of this letter he took "separate legal advice" from Mr Nikolaidis.  He said that on a date which he could not specify, he had a telephone conversation with Mr Nikolaidis who advised him that in his opinion in general the right of appeal vested in the respondent as trustee but that a right of appeal might vest as well in the appellant personally in respect of certain of the findings made against him.  The respondent said that, on the basis of that advice and his reading of the judgment in the Beach Petroleum case and the financial position of the estate, he informed the appellant in his letter of 28 July 1993 that he was not prepared to consent to the prosecution of an appeal by the appellant to the extent that that right vested in him as trustee.  He referred also to his letter of 3 August 1993.

     The respondent emphasised that Piper Alderman had provided no advice to him in relation to the appeal by the appellant from the judgment of the primary judge.  We pause to say that we find that statement rather extraordinary.  That is because of the letter written to the respondent by Mr Davis on 12 July 1993.  It is true that the letter is open to the construction that Mr Davis was relaying to the respondent the effect of his advice to Beach and Claremont.  But the letter opened with a reference to discussions concerning the appeals brought by the appellant and Mr Cummings and then proceeded to inform the respondent in detail of the reasons why, in Mr Davis' opinion, no right of appeal vested in the appellant.

     There is a conflict between the advice given by Mr Davis and that given by Mr Nikolaidis which, although largely to the same effect as Mr Davis' advice, said, nevertheless, that a right of appeal might vest in the appellant personally in respect of certain findings, they no doubt being findings either of criminal conduct or fraud.

     Events establish, notwithstanding the dismissal of the appeal to the High Court, that Mr Nikolaidis was well justified in making the reservation he did.  As events have turned out the decision of the Full Court was not unanimous, Hill J delivering a dissenting judgment.  And the High Court apparently considered there was sufficient doubt about the matter to warrant the grant of leave to appeal.  Accordingly, the position as it was at the end of July 1993 was by no means clearcut.

     It has to be said, of course, speaking objectively, that it was in the interests of both Beach and Claremont that there should be no independent right of appeal vested in the appellant and that the right of appeal should be vested entirely in the respondent.  In the light of the respondent's decision not to appeal himself, that, if it were the position, would put an end to the litigation with the consequence that Beach and Claremont would be able to treat the judgment as finally disposing of the litigation by upholding their claims.

     The respondent concluded his affidavit by saying that the appellant's public examination was completely unrelated to any institution and/or prosecution of an appeal by the appellant from the judgment.  Somewhat curiously he also said that he knew the facts deposed to in his affidavit "of my own knowledge and partly on the basis of the knowledge supplied to me by Mr Davis of Piper Alderman which I believe to be true having no reason to doubt the veracity of the same."

     In his oral evidence, the respondent said that he ceased to retain Piper Alderman on 13 December 1993 when a firm known as Thompsons was appointed "to be my solicitors in this administration."

     The respondent was cross-examined by the appellant who, as mentioned, has legal qualifications.  The respondent agreed that he had been advised by Piper Alderman in July 1993 that there was "a potential conflict".  The cross-examination proceeded as follows:

     "Now, it was not until December of 1993 that that potential conflict was resolved?---Sure, in regard to this matter.

     Notwithstanding the fact that you were aware of this potential conflict, you sought advice on two occasions, one in July and one in September from Piper Alderman in relation to matters pertaining to my attempt to appeal the judgment in G53 of 1991?---Yes.

     That is so, is not it?---That's right.

     One of those occasions was when you sought Mr Davis' comments on a proposed letter which you intended to send to me?---Yes.

     In fact you did send me a letter dated 28 July 1993?---Quite right.

     You subsequently sought Mr Davis' advice again with respect to later correspondence received from me?---I think that's correct.  I don't recall the exact dates.

     I will put the documents to you in a minute?---Sure.  Thank you.

     You understood, did you not, from your reading of the judgment, and also from a proof of debt that had been filed, that a judgment had been entered against me for a significant sum of $44 million?---Yes.

     You knew also that there were findings of fraud made against me?---I believe so.

     They were in anybody's parlance serious findings against me?---Yes.

     You understood, did you not, from my correspondence with you following the publication of that judgment, that I was endeavouring to appeal that judgment?---Yes.

     Did you appreciate the serious consequences to me of not being able to appeal that judgment?---Yes.

     So that was a factor operating on your mind?---Yes.

     You did not see it as something that required you to try and assist me to appeal?---I wrote to you, Mr Fuller, and told you that you have the right to appeal.  You were welcome to do so.  As far as the trustee was concerned, he wasn't going to do it."

     The respondent said that "the view" (meaning advice he received) in Sydney was that, with regard to certain matters, the appellant "could well have the right to appeal."  The advice was obtained from Mr Nikolaidis in what was suggested was "a short conversation".  The respondent said that he had also spoken to a Mr Chippendall, a barrister in Sydney "with whom I deal very actively."  The respondent agreed that that view had not resulted from his retaining either Mr Nikolaidis or Mr Chippendall but was an informal advice "of general principle".  He agreed that he had sought advice on the matter from Mr Davis of Piper Alderman who told him that he had a conflict.

     Exhibit C before his Honour consisted of facsimiles written by the appellant to the respondent in handwriting.  These were dated 28 July 1993, 2 August 1993, 4 August 1993 and 11 August 1993.  On 17 September 1993 the respondent sent a facsimile to Mr Davis of Piper Alderman which consisted of copies of each of these letters from the appellant to the respondent.  Previously, on 28 July 1993, the respondent had sent to a Mr Bagot of Piper Alderman the draft letter (earlier referred to) which he proposed to write to the appellant and also a copy of the appellant's letter to the respondent.  The draft letter was sent for Mr Bagot's "comment".  The draft did not contain the paragraph which was inserted prior to the letter being sent.  The terms of the letter as sent have also been earlier set out.

     The appellant referred the respondent to these various documents in the course of his cross-examination.  The respondent agreed that the draft letter was the letter upon which he was seeking Mr Davis' comment.  The respondent agreed that he had spoken to Mr Davis after sending the facsimile of 28 July.  He was referred to his diary which disclosed that on that day he had an appointment with Mr Bagot at 11 a.m.  The respondent had no recollection of how long his meeting with Mr Bagot lasted.  He said, "One can assume that the discussion with Glen Davis plus the meeting with Bagot took no more than half an hour."  The half an hour came from a reference to "A half" in the diary.  The diary also contained a note, "Fuller letter".  That was the letter which, in draft form, had been sent to Mr Bagot on 28 July.  The diary also contained a note after the reference to that letter, "Discussion Glen Davis and D. King."  The reference to Mr King was a reference to the managing director of Claremont and Beach.

     The respondent conceded that there was no note in his diary of any telephone conversation or conference that he had with Mr Nikolaidis.  He agreed that the only communication he "personally" had with any solicitor for the purpose of advice on that day in relation to correspondence to him was with Mr Davis.  The respondent, however, emphasised in his answer that he was referring only to a "personal" communication.

     The respondent was then referred to the additional paragraph added to the draft before it was sent to the appellant.  He was asked how the additional paragraph came to be added.  He said that his understanding was that the draft letter, after he was told by Piper Alderman that they had a conflict of interest, was discussed by telephone with a member of the respondent's staff, a Mr Geason, who spoke to Mr Nikolaidis about the matter and settled the letter to be sent to the appellant.  The respondent was pressed about advice from Mr Nikolaidis and said that it was he who settled the letter to the best of the respondent's knowledge.  Later he said that there was no question that Mr Nikolaidis had settled the letter.  He said that he could not find a copy of a letter from Mr Nikolaidis containing the additional paragraph.  He said that he had spoken to Mr Nikolaidis about the matter, "but I haven't actually got a copy of the letter, I don't think.  I believe the copy has been supplied to Thompsons."  He agreed that he had no file copy of the letter.

     The cross-examination then proceeded as follows:

     "Obviously there was a draft on Mr Nikolaidis's file, but apparently not the original?---I don't know that.

     The question of whether you got advice from anybody other than Piper Alderman on 28 July is a matter of some importance.  Is it not?---Well, you say so.  It is a fact that I did.

     On that day you are firstly seeking advice from Piper Alderman in relation to an intended communication to me?---Yes.

     With respect to my correspondence with you in relation to requests that you permit me to, or facilitate me to appeal and to prosecute my appeal that I had lodged?---Yes.

     You were aware that Piper Alderman apprehended some possible conflict?---Yes.

     In those circumstances it appears that somebody from your firm approached Mr Nikolaidis, but not you?---Yes.  Quite right.

     You say quite definitely that the letter sent to me was settled by Mr Nikolaidis?---Quite right.

     In the terms that it was sent to me?---Yes.

     I am asking you now whether you have made any inquiries yourself or caused somebody on your behalf to make inquiries of Mr Nikolaidis for a copy of the letter of advice as sent to you?---My lawyers spoke to Nikolaidis and Co and asked him for a copy of advice sent to me.

     Your understanding is that there is no copy?---I don't have a copy in my possession.  I can't find it."

     The appellant called for the production of the letter of advice from Mr Nikolaidis to the respondent "said to be dated 28 July 1993."  The answer to the call was, "Not produced".

     In the course of his re-examination, the respondent said, "I have no recall of seeking advice on the merits of the appeal."  He was then referred to a file note in the handwriting of Mr Geason, who as mentioned, was one of the respondent's employees.  The file note was dated 28 July 1993.  It was tendered.  It is headed with the name "Fuller".  There follow the words "Discussion with Leon Nikolaidis."  There is then a heading, "Matter Discussed", beside which are written the words, "Right of Appeal in Beach Judgment".  The note proceeds:

     "-   right of appeal lies with estate as a general principle

     -    personal right attaches to criminal matters always

     -    re estate trustee consider

          1)   brought for estate

          2)   chance of success

          3)   risks of running it

          4)   costs

     -    Fuller can always approach the Court if aggrieved."

The file note ends with the date, 28 July 1993, a time of 3.15 p.m. and an initial which is apparently that of Mr Geason.

     The appellant's complaints about the conduct of the respondent centre upon his actions in dealing with a possible appeal from the judgment in the Beach case.  A question of any appeal in that case has, of course, been overtaken by events.  No appeal has in fact been lodged by the respondent.  If it were now sought to lodge an appeal, that appeal would be well out of time and there is a serious question whether the Court would grant leave.  The appellant lodged an appeal in his own name.  That appeal has been declared incompetent by a Full Court of this Court.  The Full Court's decision has been upheld by the High Court.  It is therefore established that the appellant had no personal right of appeal.  But, for the purposes of its case, the important matter to be emphasised is that, if contrary to the position as it has turned out to be, the appellant had been found himself to have had a right of appeal, that appeal could have been prosecuted by him without reference to the respondent.  For this purpose, he would not have required his consent or approval.

     Because of these matters, it was put to the appellant during the argument on this appeal that the application he made for the respondent's removal as his trustee no longer had any purpose.  The appellant's response to this was to say that the conduct of the respondent had been such as to lead him to conclude that the respondent was no longer deserving of his confidence or trust because he had acted in the interests of the two judgment creditors and on the advice of their solicitor in circumstances where it was plainly in their interest that there should be no appeal from the judgment in the Beach Petroleum case.  For that reason, he wished to persevere with his attempt to have the respondent removed as trustee.  It is on this basis that the appellant challenges the finding made by the primary judge that there was nothing in the evidence to suggest conduct on the part of the respondent that would warrant "consideration of removing him."

     The appellant also raised a further question.  It concerned a suggestion made by him late in the hearing of the case at first instance that the respondent's right of appeal could be assigned to the appellant.  The suggestion was not made until after the time for lodging an appeal had elapsed.  His Honour said that, even if it subsequently appeared that such a course could be taken and have legal effect, and involve no risk of expense or costs consequences to the trustee, there was no failure on the part of the respondent to exercise reasonable care and skill in the performance of his duties.  His Honour said that the legal position might be one in which a course such as was suggested by the appellant could be taken but it was not, in his opinion, a possibility which reasonable care and skill should have suggested to the trustee or, if a solicitor had been asked to advise, to a solicitor.

     His Honour did not deal with the detail of the evidence.  He reached his conclusions on a broad approach having taken into account the whole of the evidence which he had heard.  His judgment was an ex tempore one.  Thus none of the detail of the cross-examination or the exhibits to which reference has been made is dealt with in his Honour's judgment.

     The strength of the appellant's case lies, in our opinion, in the dealings concerning a possible appeal against the judgment which the respondent had until quite late in the affair with the solicitors for Claremont and Beach, and it would appear from the respondent's diary note, their managing director.  Plainly they had a conflict of interest.  It may have been understandable for the respondent to retain them in relation to the general administration of the estate.  It is unlikely that there would have been any other source of funds to enable him to carry out his investigations.  But when it came to the question of an appeal from the judgment, it should have been clear to him as an experienced trustee that he ought not to seek advice from the solicitors who had acted for the successful applicants in an action which had resulted in such a large judgment against the appellant.  There is much to be said for the view that he should, from the outset, have sought independent advice on all aspects of the question whether an appeal should be lodged, and if so, by whom.

     As Rogerson J, sitting in the Court of Insolvency of South Australia, said in Re Ladyman (1981) 38 ALR 631 (at 643), trustees in bankruptcy are governed by the rules of the general law relating to trustees in general except in so far as their position is modified by the provisions of the Act or of other statutes.  His Honour said that it could not be argued that they were governed solely by the few relevant provisions of the Act; the gaps would be "enormous".  His Honour added, "If a provision of the Act is clear, it will be interpreted according to its terms, although if its meaning is obscure or if it was clearly intended by Parliament merely to modify in some way the existing general law, it may be necessary to ascertain the provisions of the general law."  These remarks were approved by the Full Court of this Court in Adsett v Berlouis (1992) 37 FCR 201 at 209.

     The relationship of trustee and beneficiary is a fiduciary relationship; see, inter alia, Hospital Products Limited v United States Surgical Corporation (1984) 156 CLR 41.  There Mason J said (at 96-97):

     "The accepted fiduciary relationships are sometimes referred to as relationships of trust and confidence or confidential relations (cf. Phipps v Boardman [1967] 2 A.C. 46, at p. 127), viz., trustee and beneficiary, agent and principal, solicitor and client, employee and employer, director and company, and partners.  The critical feature of these relationships is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person in the exercise of a power or discretion which will affect the interests of that other person in a legal or practical sense.  The relationship between the parties is therefore one which gives the fiduciary a special opportunity to exercise the power or discretion to the detriment of that other person who is accordingly vulnerable to abuse by the fiduciary of his position.  The expressions 'for', 'on behalf of', and 'in the interests of' signify that the fiduciary acts in a 'representative' character in the exercise of his responsibility, to adopt an expression used by the Court of Appeal.

     It is partly because the fiduciary's exercise of the power or discretion can adversely affect the interests of the person to whom the duty is owed and because the latter is at the mercy of the former that the fiduciary comes under a duty to exercise his power or discretion in the interests of the person to whom it is owed:...."

     In Equity Doctrines & Remedies 3rd ed. (1992) Meagher, Gummow, Lehane, the learned authors say (at 130-131) that the critical element is that the fiduciary undertakes or agrees to act for or on behalf of or in the interests of another person.  The authors say that that identifies - or at least comes close to identifying - what is the essential element.  The distinguishing characteristic of a fiduciary relationship is that its essence or purpose is to serve exclusively the interests of a person or group of persons.  To put it negatively, it is a relationship in which the parties are not each free to pursue their separate interests.  Thus, the essence of a trust is that a trustee holds and deals with property in the interest of beneficiaries.

     Reference should also be made to Jacobs' Law of Trusts in Australia 5th ed. (1986) at 372 and following.  The current editors there say (in para. [1608] at 374-5) that the very fact that trustees are fiduciaries means that all the powers of a trustee are fiduciary.  Two consequences flow from this. The first is that, although a power is a "mere power", if it is vested in a trustee, that trustee has a duty to consider
whether it should be exercised or not and to put himself in a position where he can make a rational judgment on the matter; whereas a non-fiduciary repository of such a power is under no such duty.  The second consequence is that, unless there are clear words to the contrary, such a power cannot be exercised by the trustee in his own favour.  That is not of relevance in the present case.

     Paragraph [1609] (at 375) of Jacobs is as follows:

     "What, then, are the duties of a trustee with a discretionary power?  His first duty is to act honestly and in good faith. There is no distinction between 'honestly' and 'in good faith'.  Moreover, mere carelessness or honest blundering will not negative 'good faith'  Nor need he observe the rules of natural justice: he may exercise a power to the disadvantage of a beneficiary without seeking that beneficiary's views.  His second duty is to act 'upon genuine consideration', that is to take an informed view of whether or not to exercise his discretion, and not to act irresponsibly capriciously or wantonly.  His third duty is to exercise his power with due consideration for the purpose for which it was conferred, and not for some ulterior purpose.  While it is irrelevant whether or not his decision proves beneficial or prudent, and equally irrelevant whether the court would exercise the power in the same way, a grotesquely unreasonable result may be evidence of a miscarriage of duty."

We have omitted the footnotes.

     A trustee in bankruptcy such as the respondent here is a trustee in the conventional sense and owes fiduciary duties to the creditors of the bankrupt, to the bankrupt himself and, depending on the circumstances, perhaps to others.  Not infrequently the trustee will find himself or herself in a difficult position because of conflicts of interest which will emerge during the course of the administration either between creditors, as where the trustee seeks to set aside a transaction of which a creditor has had a benefit such as a preference, or as between the creditors and the bankrupt.  Sometimes the public interest will require the trustee to act contrary to the interests of the bankrupt.  That will usually be in cases which are specifically provided for by the Act itself.  The trustee will need to be astute to detect situations in which conflicts or potential conflicts may arise.  Usually the trustee will be wise to seek appropriate advice about aspects of the administration particularly where there are conflicts.  In some circumstances a trustee is empowered to approach the Court for directions; see subsec. 134(4) of the Act which enables the trustee at any time to apply to the Court for directions in respect of a matter arising in connection with the administration of the estate.  The right of a trustee in bankruptcy to make such an application is subject to certain limitations; see generally the decision of Sweeney J in Re Driller (1972) 21 FLR 159.

     The problem in the present case arose because of the conflict which necessarily existed between the two major creditors in the estate, Beach and Claremont, and the appellant.  The sequestration order was made whilst the litigation in which the very large judgment eventually entered against the appellant was unresolved.  The litigation was not completed until almost month after the sequestration order was made.  Serious findings were made against the appellant.  These included findings of fraud and fraudulent conduct of a very serious kind.  So the appellant was not affected only in financial terms; he was affected also in terms of his honesty and reputation both personally and in relation to his commercial and professional dealings.

     It was not in the interests of either Beach or Claremont that there should be any appeal.  They had been successful in the litigation.  Not only that, but an appeal would have had consequences for them in costs.  And this in a situation where there may have been little prospect of their recovering costs from the appellant in the event that any appeal brought were unsuccessful.  The respondent as trustee was well aware, or should be deemed to have been aware, of these various matters when he decided to retain the solicitors who had represented the two companies in the litigation.  His decision to retain Piper Alderman as the solicitors to represent him in relation to the general matters arising in the course of the administration of the estate is understandable.  It was plainly for the benefit of the general body of creditors for the appellant to be subjected to a wide-ranging and searching examination concerning his property dealings and affairs.  There was a public interest in this as well as the interest of creditors generally.  Realistically this task could probably not have been undertaken without funds provided by Claremont and Beach.  They themselves had a direct interest in this being done.  No doubt that is why they made funds available, but that is of no consequence because their own interest co-incided both with the interest of the creditors generally and the public interest.

     It is to be emphasised that the trustee has a problem.  As mentioned, unless he is funded for costs and expenses, he cannot incur legal costs except on the basis that he pays them personally.  He has no source of funds other than funds provided by creditors or, in some cases, as a consequence of an application to the Attorney-General.  Here the trustee incurred no costs because Claremont was prepared to fund the respondent's costs itself.  As we understand the arrangement, the costs incurred by the respondent were billed to Claremont and not to the respondent.

     Upon the face of the evidence, we do not see any problem about the respondent's conduct until the question whether or not an appeal would be lodged either by the respondent as trustee of the estate or by the appellant himself arose for consideration.  That is when the respondent needed to obtain independent advice and not advice from Piper Alderman.  Piper Alderman itself perceived that this was the case and advised the respondent accordingly.  Nevertheless, the evidence to which reference has been made establishes that some advice in relation to aspects of whether or not an appeal should be lodged was sought from Piper Alderman and may have been given.

     The respondent has asserted all along that he did not seek advice on the question whether or not the estate itself should appeal.  He made his own decision upon that matter.  In doing so, he said that he took into account the terms of the judgment itself and the fact that there was no source from which he could expect to receive moneys in order to fund the appeal.  He did not consult creditors other than Beach or Claremont because he thought that no other creditor would be willing to fund litigation in circumstances where it would be unlikely that a creditor other than Beach or Claremont would stand to gain very much by the success of an appeal and where the prospects of success might be thought to be, if not remote, then not substantial.  Thus, according to his evidence, he made a commercial business decision not to appeal.  The matter upon which he sought advice was the question whether the bankrupt had any right to appeal in his own name in relation to any aspect of the judgment and, if so, whether he was obliged or empowered to consent to it, or in some way not specified in the appellant's submissions, to support it.  He was at first advised by Piper Alderman that the appellant had no such right.  This advice was qualified either on 28 July 1993 by Mr Bagot or Mr Davis of Piper Alderman or by Mr Nikolaidis.  The advice that the appellant had no right of appeal was qualified to the extent of saying that the appellant might have a limited right personally to appeal against some of the findings made in the judgment.

     The only witnesses called in the case were the appellant and the respondent.  One might have expected that Mr Davis, Mr Bagot, Mr Geason and Mr Nikolaidis would have been called to confirm what the respondent said.  The failure of a party to call relevant evidence apparently available to him not infrequently leads a court to conclude that nothing that such witnesses would have said would have assisted that party's case.

     This is not a matter which is dealt with in his Honour's judgment.  Nor does his Honour make any express finding in relation to the credibility of either the appellant or the respondent.  But it would appear from the way his Honour approached the matter, that he proceeded on the basis that he should accept the respondent's evidence both in relation to his having made his own decision not to appeal on behalf of the estate and also in relation to his having been told by an independent solicitor, Mr Nikolaidis, that, although the appellant might have a limited right personally to appeal against the decision, there was no occasion or warrant for the respondent to approve that course or in some way lend his support to it.  If the right were available to the appellant, it was for him to exercise it without reference to the respondent.

     It is not clear on the face of the appellant's submissions that he seeks on this appeal to challenge these findings which we think we should infer were made by his Honour.  If the findings were challenged, the appellant would have been faced with the usual problem which an appellant has, of endeavouring to persuade an appellate court to intervene when the findings of a primary judge are based on the evidence of witnesses whom he has seen and observed; cf Devries v Australian National Railways Commission (1993) 177 CLR 472.  Hence a challenge to findings to the effect of those which his Honour must have made would have almost certainly failed.  In any event, the critical factor in the equation was money.  We have referred to the complexity of the proceedings brought by Claremont and Beach.  The judgment delivered in the case is itself a reflection of that complexity.  If the respondent had sought independent advice from counsel or solicitor (perhaps both) about the prospect of success of an appeal, that advice could not have been obtained without there being incurred a comparatively large sum of money.  Understandably, neither Beach nor Claremont would have funded the obtaining of such advice; the appellant could not and it was unlikely that other creditors would have done so.

     We think, however, that the respondent is open to three criticisms.  Firstly, he should not have allowed a situation to develop in which it could reasonably have been thought that Piper Alderman were in fact advising him about an appeal.  That is how matters appeared to the appellant and one can understand that this view of things was reasonably open to him.  The vice of the situation was that the respondent was apparently obtaining advice from the solicitors for Beach and Claremont which would have been concerned to discourage or prevent any appeal.  The respondent should have made it clear at all times that, so far as an appeal was concerned, he was distancing himself from Piper Alderman.  As his Honour remarked, the respondent is a trustee of long experience.  He should not have acted in the way he did.  He should not have needed to be told by Piper Alderman on 28 July 1993 that there was a conflict.  He should have known this himself.

     Then the respondent should have given consideration to whether he ought approach the Court under subsec. 134(4) of the Act for a direction that he would, in all the circumstances, be justified in acting as he proposed to do.  Notice of such an application could have been given the appellant who could have been heard by the Court if he had wanted to be.

     Finally, notwithstanding the respondent's view that he was unlikely to obtain financial assistance from other creditors, he ought to have notified them of his intention to give them an opportunity of stating their attitude.  Probably none would have been prepared to contribute money even for the purpose of obtaining advice but the creditors should have been given the opportunity.

     It is to be remembered that the critical period was between 10 June 1993, the date of the judgment, and 1 July 1993, the last day for the lodgement of an appeal.  That is when the respondent must have made his decision.  At that time he was in close association with Piper Alderman and indeed, probably with executives of Beach and Claremont.  He did not obtain independent advice, he did not approach the Court and he did not consult other creditors.  When one adds to these considerations the fact that, at least until the end of July 1993, he was consulting, or attempting to consult, Piper Alderman about an aspect of an appeal from the judgment, that is whether the appellant had a personal right to appeal, one can well understand the basis of the central allegations in the appellant's points of claim.  We do not go back to the whole of them, but the critical allegation was that the respondent did not appeal because of his perception that the interests of Claremont, Beach and Piper Alderman were not served by such a course.  These, and the allegations made leading up to them, are at the heart of the appellant's case that either the respondent's actual conduct or the conduct in which he appeared to have engaged warranted his removal.  That is the case which was made to his Honour and it is essentially the case which the appellant has made on this appeal.  His Honour rejected it.  The question for us is whether he was in error in doing so.

     The answer to this question lies in an evaluation of the respondent's conduct in the light of the findings made expressly or by implication by his Honour and also in the significance to be attached to what the respondent may have done or failed to do in relation to the overall task he had in administering the appellant's estate.  At the outset it has to be said there is no finding by his Honour, and no material upon which such a finding could have been justified, of dishonesty or absence of good faith on the part of the respondent.  To the extent that the respondent's handling of the matter of the appeal leaves room for criticism, it is because of a failure by the respondent to bring to bear on the problem a sufficiently objective and detached approach.  That that was the case was due to the fact that he allowed himself to be perceived to be acting in concert with, and in accordance with, advice given by the solicitors for Beach and Claremont which were paying the costs incurred by the trustee in retaining the solicitors.

     But, although that is so, the matter must be approached practically and realistically.  His Honour accepted, if inferentially, the respondent's evidence that he made his own decision not to appeal.  He made the decision not on legal advice but on the grounds that there was no likely source of money to fund an appeal coupled with his view that the reasons for the judgment pronounced against the appellant and others were, if not compelling, then very persuasive.  If the respondent had sought a direction from the Court as to whether he would have been justified in taking the course he did, there seems little doubt that the Court would have answered the question in the affirmative.  What it comes down to is that practical considerations establish that there really was no course reasonably open to the respondent other than the one which was taken.  The matter may not have been handled as well as it might have been, but that is the reality.

     Then, so far as any personal right of appeal which the appellant might have had was concerned, the appellant's position was protected by the notice of appeal which was lodged in time.  That appeal is now finally judged incompetent.  But, as earlier mentioned, if that had not been found to be the case, the appellant would have been able to prosecute the appeal himself.  He would not have needed the respondent's assistance for this purpose.

     There is another matter, raised late in the piece before his Honour, of a suggested assignment of the respondent's right of appeal.  This suggestion was not made until any such right of appeal would have been well out of time.  The appellant criticised the respondent for not advising him of this as a possibility.  We reject this criticism for the reasons given by his Honour, namely, that the respondent's failure, if there were a failure, to advert to the possibility of an assignment for value could not be characterised as any failure to exercise reasonable care and skill in the performance of his duties.

     In support of his submission, the respondent relied upon the decision of Bainton J sitting in the Commercial Division of the Supreme Court of New South Wales in Cotterill v Bank of Singapore (Australia) Limited (7 July 1995).  A question was raised during the argument concerning the correctness of this decision.  We do not regard it as necessary to reach a conclusion on this question.  That is because the suggested course cannot overcome a fundamental problem.  The respondent could not be satisfied that the assignment of the right of appeal would remove the risk to him of personal liability for the costs of the appeal if it failed and the appellant were ordered to pay the costs of it.  The appellant could offer no satisfactory solution to this problem.  Accordingly, we are satisfied that the failure of the respondent to embrace this proposal could not constitute any basis for a finding of breach of the fiduciary duty owed by him to the appellant.

     The appellant contended that he had lost all confidence in the respondent as his trustee because of the various matters which have been referred to.  We do not think that that conclusion is reasonably justified.  It needs to be emphasised that the appellant is not the only person to whom the respondent owes duties.  He owes them as well to the creditors and he has a duty also to act in the public interest.  These duties, owed as they are by all trustees in bankruptcy, will often put trustees in positions of conflict, or seeming conflict, with bankrupts or with creditors.  The relationship is more complex than the usual one where a trustee owes duties to one or more beneficiaries in a conventional trustee and beneficiary relationship.  Even then, as Jacobs has pointed out in the passage earlier quoted (para. [1609]), the trustee may exercise a power to the disadvantage of a beneficiary without seeking that beneficiary's views.  The important matter is that the trustee must exercise his power with due consideration for the purpose for which it was conferred.

     In the result we have reached the conclusion that this is not a case where an order for the removal of the respondent as trustee of the appellant's bankrupt estate was warranted.  We dismiss the appeal with costs.

     I certify that this and the forty-six (46) preceding pages are a true copy of the reasons for judgment herein of the Court.

     Associate

     Dated:  28 June 1996

                         APPEARANCES

Appellant:                        M.J. Fuller (in person)

Counsel for the Respondent:       R.J. Whitington

Solicitors for the Respondent:    Thomsons

Date of Hearing:                  16 and 17 November 1996

Place of Hearing:                 Adelaide

Date of Judgment:                 28 June 1996