FEDERAL COURT OF AUSTRALIA

Southern Hotels Pty Ltd in the matter of Temple [2000] FCA 1406

BANKRUPTCY – form of proceedings – identification of party against whom relief is sought.

Bankruptcy Act 1996 (Cth) s 81, s 178

Federal Court of Australia Act 1976 (Cth)

Federal Court Rules O 1 rr 7(2), (8), O 77, O 77 rr 4(1), 4(2), 5, 6

Re Lamb; Ex parte Registrar in Bankruptcy (1984) 1 FCR 391

Re Partridge (Federal Court of Australia, Lockhart J, 22 September 1982, unreported)

Re Hetherington (Sweeney J, 14 December 1982, unreported)

Re Pruzanski; Ex parte Horne [2000] FCA 151

Farrington v Rowe, McBride & Partners [1985] 1 NZLR 83

Fullwood v Hurley [1928] 1 KB 498

Re Coles & Ravenshear [1907] 1 KB 1

Morres v Papuan Rubber and Trading Co Ltd (1914) 14 SR (NSW) 141

Jess v Scott (1986) 12 FCR 187

IN THE MATTER OF THE BANKRUPT ESTATE OF RUSSELL JAMES TEMPLE

SOUTHERN HOTELS PTY LTD (APPLICANT)

NO S 7048 OF 2000

O’LOUGHLIN J

ADELAIDE

6 OCTOBER 2000

IN THE MATTER OF THE BANKRUPT ESTATE OF RUSSELL JAMES TEMPLE

THE COURT ORDERS THAT:

1.         The application of Southern Hotels Pty Ltd as contained in a document entitled “Notice of Motion” be dismissed.

2.         There be no order as to costs.

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

IN THE MATTER OF THE BANKRUPT ESTATE OF RUSSELL JAMES TEMPLE

REASONS FOR JUDGMENT

1                     Mr Richard George Freer (“the trustee” or “Mr Freer”) is presently the trustee of the bankrupt estate of Russell James Temple (“the bankrupt” or “Mr Temple”).  Prior to his bankruptcy, Mr Temple and his parents were involved in bitter and protracted litigation in the Supreme Court of South Australia.  The antagonism that arose as a result of that litigation has flowed over into the bankruptcy proceedings and it has lead to a usual application coming before the Court.

2                     The prelude to the application was an earlier application in the same action, dated 23 March 2000, which was filed in the South Australian District Registry of the Court by Hynd and Co Pty Ltd, the solicitor for the trustee.  It sought an order that the Registrar issue a summons under s 81 of the Bankruptcy Act 1996 (Cth) (“the Act”) for the public examination of the bankrupt.  The heading that appeared on that application was:

“In the Matter of:

Richard George Freer Trustee of the Property of Russell James Temple (a Bankrupt.”

3                     The summons duly issued and an affidavit of service was placed on the Court file deposing to service on the bankrupt on 29 March 2000.  The time and date for the examination was fixed for 10:00 am on Thursday 27 April 2000.  On 20 April 2000, on the application of the bankrupt, the date for the proposed examination was vacated so that the bankrupt could complete some work in Darwin that he had undertaken; a fresh date was fixed for Monday 29 May 2000 at 9:30 am.

4                     On 26 May 2000, the Friday preceding the Monday on which the examination was due to commence, Messrs Kelly and Co, the solicitors for Southern Hotels Pty Ltd, (“Southern Hotels”) a substantial creditor in the bankrupt’s estate and one of the protagonists in the Supreme Court proceedings, filed a document styled “Notice of Motion”.  Southern Hotels can be loosely referred to as Mr Temple’s parents’ company, although the bankrupt, through a trust, was said to have a 20 per cent interest in the company.  On the next line of the documents, immediately below those words “Notice of Motion” was the endorsement “(Order 19 rule 2)” which was an obvious reference to Order 19 of the Rules of Court that have been made under the Federal Court of Australia Act 1976 (Cth).  The title of the document and reference to O 19 were incorrect in the circumstances of this case.  Order 77 of the Federal Court Rules is the Order that applies to a proceeding in the Court to which the Bankruptcy Act applies:  see O 77 r 4(1).  That Order does provide, in subr 4(2), that the other Orders of the Rules will apply but only “so far as they are relevant and not inconsistent with this Order …”.  Thus it may be appropriate in a case where substantive proceedings are on foot to use a notice of motion even though the substantive proceedings relate in some way to a bankruptcy matter.  Order 77 r 6 however states that:

“6(1)   Unless otherwise provided in this Order, a proceeding to which this Order applies must be commenced by filing an application in accordance with Form 5.

6(2)   The application must state each section of the Bankruptcy Act under which the proceeding is brought.”

Form 5 is entitled “Application”, the traditional title for the commencement of any interlocutory proceeding in a bankruptcy matter.  The mistake that was made by Messrs Kelly and Co, in inappropriately describing their client’s application as a “Notice of Motion”, may have been occasioned as a result of them following the contents of the document that had earlier been filed on behalf of the bankrupt when he sought an order delaying the commencement of his public examination; it was also styled “Notice of Motion”.  What is more, neither “Notice of Motion” complied with the provisions of O 77 r 5 which provides:

“A document in a proceeding under this Order must be headed in accordance with Form 148.”

Form 148 requires the heading of the document to be in the following terms:

                                                                            (if applicable) Respondent”

The most significant aspect of this heading is that it requires the name of the debtor or the bankrupt estate to be identified and it requires the applicant to be identified.  Depending upon the nature of the relief that is sought, it may also be necessary to identify as the respondent, a party whose interests may be affected by the orders that are sought.  That was the second mistake that was made because the “Notice of Motion” that was lodged by Messrs Kelly and Co purported to claim that the action was “In the matter of Freer”.  The correct title of the document that should have been filed by Messrs Kelly and Co was “Application”; it should have been styled “In the matter of the bankrupt estate of Russell James Temple”, it should have named Southern Hotels as the applicant and, for reasons that will be set out shortly, it should have named the trustee, Richard George Freer as the respondent.  The next incongruity was that the bankrupt was named in the heading of the “Notice of Motion” as the supposed respondent even though no orders were sought against him or against his estate.

5                     The “Notice of Motion” that was filed by Kelly and Co asked for a further deferment of the examination of the bankrupt.  It then attacked the role of Hynd and Co Pty Ltd, seeking orders that the solicitor be restrained from continuing to act as solicitor for Mr Freer in his administration of Mr Temple’s bankrupt estate.  That attack was mounted, albeit belatedly, because Hynd and Co Pty Ltd had acted in the Supreme Court proceedings for the other protagonist who, for simplicity, may be described as “the Weeks’ interests”. In fact Mr Myszka, a legal practitioner and a director of Hynd and Co Pty Ltd, later deposed in his affidavit dated 8 June 2000 that his company acted for Mr David Weeks “who is currently funding the examinations being conducted upon Mr Freer’s instructions”.  One would have thought that it might have therefore been appropriate to name Hynd and Co Pty Ltd, rather than the bankrupt, as the appropriate respondent.  Another, and in my opinion the correct, course of action would have had Southern Hotels named as the applicant and the trustee named as the respondent with the applicant seeking injunctive orders restraining the trustee from retaining the services of Hynd and Co Pty Ltd as his solicitor.  Bearing in mind the nature of the attack, it was puzzling, to say the least, that Messrs Kelly and Co would have named in the heading of the proceedings the trustee (for whom they did not act) as the applicant in the proceedings when it was apparent, from a reading of the body of the document, that the applicant was Southern Hotels.

6                     I come now to the last of the procedural errors.  Bearing in mind that the document in question incorrectly named the trustee as applicant and the bankrupt as the respondent and that it sought injunctive relief against the solicitor (who was not a party to the proceedings), it was purportedly directed to Hynd and Co Pty Ltd (as if it were a respondent) and to the trustee, as if he, also, were a respondent.

7                     Before I leave these matters of form and turn to the matter of substance, there is a further element in these misguided proceedings that needs to be addressed.  When the application (which I will henceforth refer to as the application on behalf of Southern Hotels) was called on for hearing, Mr M L Abbott QC announced his appearance with Mr H Myszka as counsel for the trustee.  Although no notice of appearance had been filed, it was apparent that the solicitor for the trustee continued to be Hynd and Co Pty Ltd.  I drew attention to the fact that the “Notice of Motion” was directed to Hynd and Co (sic) and asked whether Mr Abbott was also appearing for that party; he said that he was not.  It appeared therefore that orders in the nature of injunctive relief were being sought ex parte against Hynd and Co Pty Ltd.  Although the trustee had apparently been served, Hynd and Co Pty Ltd had not been served with a copy of the “Notice of Motion” and the supporting affidavit  even though it had become aware of the proceedings in its capacity as solicitor for the trustee.

8                     I turn now to the substance of the matter.  Two supporting affidavits were filed by Mark Gray, a director of Southern Hotels.  In those affidavits Mr Gray claimed that:

·                 Southern Hotels is a creditor of the bankrupt for an amount of approximately $1,800,000.00.

·                 The Weeks’ interests are also substantial creditors of the estate of the bankrupt.

·                 The amount for which Southern Hotels will be admitted as a creditor of the estate of the bankruptcy will directly impact on any dividend that may be paid to the Weeks interests.

·                 Hynd and Co Pty Ltd is the solicitor acting for both the trustee and the Weeks’ interests.

9                     The authorities emphasise that a trustee in bankruptcy must take the greatest care to avoid the potential for conflict.  In my opinion what has been written about a trustee’s responsibilities applies with equal force to a solicitor who acts for a trustee.  Counsel for Southern Hotels submitted that Hynd and Co Pty Ltd was in “a hopeless position of conflict”.  It was submitted that it could not advise the trustee impartially about the admissibility of a large claim by its client (i.e. the Weeks’ interests) nor could it advise the trustee impartially about the admissibility of another large claim (that of Southern Hotels) when its client and Southern Hotels were inimical to the interests of each other.

10                  Southern Hotels submitted that there exists an actual or potential conflict of such a dimension that Hynd and Co Pty Ltd cannot be permitted to continue to act for the trustee.  There has been an acknowledgment from the trustee of the potential for conflict; in a letter dated 9 March 2000 from the trustee to Messrs Purcell Lancione the former solicitors for Southern Hotel, Mr Freer wrote:

“We accept that there is a potential for conflict and if an actual conflict arises we will act accordingly….However it is our opinion that this matter is to be resolved between the trustee, the creditors represented by Messrs Hynd & Co and the solicitors themselves and should not be the concern of third parties.”

11                  The application had been brought on as a matter of urgency late on the Friday afternoon but it became necessary to adjourn the application over to the Monday morning as there was insufficient time available to investigate the competing factual issues.  However, late in the afternoon, Mr Abbott rose to offer what he advanced as a practical solution.  He said that he had instructions to inform the Court that the trustee would not instruct Hynd and Co Pty Ltd on the issues of who should be admitted as creditors in the bankrupt estate and he added that he had an assurance from Hynd and Co Pty Ltd that it would not accept any such instructions.  Mr Abbott undertook to convert those statements into written undertakings over the weekend.

12                  When the hearing resumed on the following Monday, 29 May 2000, Mr Ross‑Smith, counsel for Southern Hotels informed the Court that an undertaking in the limited terms suggested by Mr Abbott was not acceptable to his client.  Nothing short of a total removal of Hynd and Co Pty Ltd would satisfy Southern Hotels.  Mr Ross-Smith referred to and relied heavily upon the remarks of Sweeney J in Re Lamb; Ex parte Registrar in Bankruptcy (1984) 1 FCR 391.  That was a case in which his Honour concluded that the status of an employee was fatal to his continued registration as a trustee.  However, in the course of coming to his conclusion, his Honour addressed generally the role of a trustee in bankruptcy and the importance of the trustee’s independence and impartiality.  For example at 396, Sweeney J said:

“Suffice it to say that a trustee plays a central role in the administration of estates under the Act and is under a general duty to exercise the powers committed to him in such a fashion that the objects of the Act, including those of equality between creditors and fairness to bankrupts and debtors, are served.  The objects of the Act are of public importance and it is of great importance to the community that the role given by the legislature to a trustee, is fulfilled only by persons who are, and who are seen to be, completely independent.”

I respectfully agree.  In the application of those remarks, Sweeney J could not see how an employee, who is answerable to his or her employer and is under the general control of the employer, could have “either the reality or the appearance of independence which is enjoyed by a trustee who is not an employee” (at 397).  Although his remarks were directed to the facts of the case that was before him, I am of the opinion that his further comment – “that a trustee be independent and be seen to be independent” – is a statement of general application in all aspects of the bankruptcy jurisdiction.

13                  In Re Partridge, (Federal Court of Australia, Lockhart J, 22 September 1982, unreported), his Honour said of a trustee at p 3:

“He must be scrupulously careful to ensure that he never allows himself to be placed in a position of conflict between various duties or between duty and interest; nor must he ever allow the situation to arise where he may be seen to be in that position of conflict or potential conflict.  A registered trustee must not only be impartial; he must be seen to be impartial.”

After quoting the remarks of Lockhart J and referring to certain provisions in the United Kingdom legislation, Sweeney J added at 398:

“These provisions emphasise the requirement that a trustee not be placed in a position where it is difficult for him to act with impartiality, regardless of whether he would in fact act with impartiality.  The provisions illustrate a concern for a trustee to be seen to be independent and not in a position of potential conflict.”

14                  In Re Hetherington, (Sweeney J, 14 December 1982, unreported), said of a trustee that:

“A controlling trustee should not be in a position where it may reasonably appear to those who are entitled to the benefit of his impartial discharge of the duties of his office that such a conflict exists. As the office is a statutory one, there is also a public interest that the holder of it should not be, or reasonably appear to be subject to a conflict.”

This emphasis on independence and impartiality shows that it is necessary, at all times, for the trustee to proceed with care.  The test is not whether there is a situation of conflict:  the test is whether there might be, in the eyes of a reasonable person, a perception of conflict.  Such a perception might arise, for example if the solicitor who is advising the trustee is also acting for a creditor who has made a contentious claim against the estate.  It would not be wise to make a global statement that a trustee could never use the service of a solicitor who also acts for a large creditor; indeed there might be occasions when the services of such a solicitor might be beneficial to the estate.  However, at any reasonable suggestion of conflict, it would be wise for the trustee to emphasis that mantle of independence and impartiality by ensuring that his legal adviser has had no prior or current relevant contact with any of the disputants:  c.f. Re Pruzanski; Ex parte Horne [2000] FCA 151.

15                  Re Pruzanski; Ex parte Horne (2000) FCA 151, is authority for the proposition that a solicitor for a trustee in bankruptcy should not have the dual role of also being a solicitor for a major creditor in the bankruptcy if there is appropriate and reasonable opposition to that duality from another major creditor.  In that case the applicant sought the removal of the trustee in bankruptcy and sought the orders restraining a particular firm of solicitors from further acting on behalf of the trustee due to a conflict of interest.  The firm of solicitors also acted for a bank, an alleged creditor of the Pruzanski family. The trustee of the bankrupt estate, Mr Horne, sought to be indemnified by persons or entities claiming to be creditors of the Pruzanski family in respect of legal costs for the conduct of public examinations.  The bank was the only creditor who agreed to indemnify the trustee unconditionally. When other creditors realised that the bank was to fund the legal costs of the trustee, representatives of two creditors raised the issue of a possible conflict of interest.  The alleged conflict arose because the solicitors, who were acting for the bank in relation to the bank’s claims against the Pruzanskis, were also acting for the trustee.  Marshall J held that there was a clear conflict of interest existing between the solicitor’s duty to assist the bank to defeat the claims of the other creditors and the solicitor’s duty to assist the trustee to determine impartially the validity of the claims of all creditors.

16                  His Honour ordered that the solicitors be restrained from further acting on behalf of any trustee who may be appointed by the court to administer the bankruptcies of the four Pruzanski family members.  The appropriateness of the Court making orders against the solicitors – and not against the trustee – was not apparently raised for his Honour’s consideration.

17                  An acceptance by a solicitor of plural or multiple instructions is not necessarily wrong or impracticable.  However, the loyalty that must be given to a client is unqualified and undivided.  Hence a solicitor cannot properly discharge his duties to one whose interests are, or have the potential to be, in conflict with those of another client unless the fullest disclosure has been made.  Even then, there will be circumstances in which it would be impossible, notwithstanding such disclosure, “for any solicitor to act fairly and adequately for both”: Farrington v Rowe, McBride & Partners [1985] 1 NZLR 83 at 90 per Richardson J; see also Fullwood v Hurley [1928] 1 KB 498 at 502 per Scrutton LJ.

18                  Because of the exigencies of time, counsel were unable to complete their submissions within the available time on the Monday morning.  The bankrupt’s public examination was due to resume at 9:30 am that morning; Mr Abbott and Mr Fuller, his instructing solicitor (from Hynd and Co Pty Ltd) were ready to proceed as was the bankrupt and the Registrar.  In view of the delay in the institution of these proceedings I deemed it appropriate for the public examination to continue and adjourned the application that was then before me until Friday 9 June 2000 for further consideration.  I did, however, express to Mr Abbott my tentative view in these terms:

“I must say that my first views are that this is a case for the Court to interfere if the solicitors don’t voluntarily change their position …”

19                  On the resumed hearing on Friday 9 June, Mr Abbott QC appeared on behalf of the trustee, explaining, in response to my inquiry that he was not representing Hynd and Co Pty Ltd.  The following exchange then took place:

“HIS HONOUR:        Well, who is going to represent them when Mr Ross‑Smith asks me to injunct them from acting as solicitors for the trustee?

MR ABBOTT:           Your Honour, that is a matter to which I have given consideration, and I can assure your Honour that they will be represented, unless your Honour was minded to injunct them today.  But today there’s an application that I seek to make on behalf of the trustee for an adjournment to enable him to canvass the views of the other creditors.

HIS HONOUR:         I will hear you on your application for an adjournment, but my concern is primarily to know whether or not I can address you and receive submissions from you in the name of Hynd and Co.

MR ABBOTT:           No, your Honour, I am not retained to act for them today.

HIS HONOUR:         Then I think I have to turn to Mr Ross-Smith and ask him for proof of service of these proceedings on Hynd and Co if he wishes to proceed.

MR ABBOTT:           Your Honour, a partner of Messrs Hynd and Co is here in person, and that is Mr Myszka.  He is authorised to speak on behalf of Hynd and Co and I am sure, your Honour, that he will be able to inform the court that service has been made.  There will be no need for us to undergo that sort of thing, if your Honour will allow Mr Myszka to speak?

HIS HONOUR:         Of course.  Mr Myszka, you are a partner in the firm of Hynd and Co?

MR MYSZKA:           Yes, your Honour.  It is an incorporated practice, and I am one of the directors of it.  I can assure your Honour that service has been effected on Hynd and Co.

HIS HONOUR:         All right.  I repeat to you what I have said to Mr Abbott:  my concern is that Mr Ross-Smith is seeking an injunction which affects you and your – I’ll keep on saying “partners” for simplicity – and whilst I can hear Mr Abbott speaking on behalf of the trustee, there has to be an invitation to you, if you wish to avail yourself of it, to speak on behalf of yourself and your partners.

MR MYSZKA:           I understand, your Honour.

HIS HONOUR:         All right, well, as long as that is clear, I can hear Mr Abbott now on your application for an adjournment.  Mr Abbott.”

20                  Mr Abbott’s application for an adjournment, so that the trustee could consult with the creditors, was opposed and I declined to grant it.  It seemed to me that the question of a conflict of interest having the potential to arise as a result of Hynd and Co Pty Ltd continuing to act for the trustee and for the Weeks’ interests was a matter for the decision of the Court.  I could see no benefit in referring that question to the creditors for their consideration.

21                  At that stage Mr Myszka, who had been present in court throughout most, if not all of the proceedings, applied for an adjournment so that his company might obtain legal representation.  He gave no satisfactory explanation for not having sought independent legal advice on an earlier occasion.  The question of his company’s legal representation was then being raised for the first time.  It had been addressed by the Court when the matter was first called on and it had been addressed in correspondence from Messrs Kelly and Co in their letter of 30 May 2000 to Hynd and Co Pty Ltd.  I felt, nevertheless, compelled to grant the adjournment but I refused the period of fourteen days that Mr Myszka sought.  Mr Temple’s public examination was due to resume on 28 June; a further delay of fourteen days would have meant adjourning the matter to Friday 23 June.  If, on that date, Southern Hotels were successful in obtaining injunctive relief, it would leave the trustee insufficient time within which to retain a new solicitor.  Mr Abbott attempted to argue that such a predicament would not arise.  He said that if Hynd and Co Pty Ltd were prevented from acting for the trustee, the Weeks’ interests, who were presently funding the trustee, would withdraw their funding and the public examination would not, in that event, continue.  I regarded the attitude of the creditor as something akin to an in terrorem proposition and stated that I would not have regard to it in my deliberations:  if I concluded that it was appropriate to restrain the solicitor from acting for the trustee, I was duty bound to so hold despite the fact that the Weeks’ interests would or might withdraw their funding for the public examination.  Having regard to these various factors, I listed Southern Hotels’ application for argument on the following Thursday, 15 June 2000.

22                  When the matter was next called on for hearing, Mr Clayton QC announced his appearance for Hynd and Co Pty Ltd.  He informed the Court that his client was prepared, voluntarily, to cease acting for the trustee.  I think it appropriate to quote the advice that Mr Clayton tendered to the Court:

“MR CLAYTON:        Your Honour, at the outset could I just mention one matter.  Two days ago Hynd and Co advised Kelly and Co, the solicitors acting for Southern Hotels, that they were prepared to cease acting and they will cease acting.  They will do that without acknowledging that there was any conflict of interest.  In a letter of 14 June it was made clear that Hynd and Co would cease acting not because they accept that there is any conflict but because they recognise that the continuation of this peripheral dispute inures neither to the benefit of Mr Freer nor in fact Mr Weeks.”

Mr Ross-Smith, counsel for Southern Hotels, submitted that this advice from Mr Clayton was not acceptable.  It was, so he claimed “only an advice that Hynd & Co are no longer acting …”.  Mr Abbott then intervened with a statement “that my instructions are that Mr Freer no longer had Hynd and Co acting for him”.  This assurance did not allay Mr Ross-Smith’s fears.  In addition to asking for costs, he said:

“No, your Honour is not understanding my point.  I can see why your Honour might prickle at the suggestion that we don’t receive that advice on its face.  We do.  What we say, your Honour, is that it doesn’t provide for what will happen in the future.  We would contend, your Honour, that the conflict endures and what follows is that there has to be an advice, I think, that Messrs Hynd and Co are not acting and will not act for the trustee.  That’s our first point.

Our second point, your Honour, is that the proposal does not provide for the costs of the application.”

Mr Ross-Smith said that his instructions were to seek orders in the terms set out in a letter that his instructors, Messrs Kelly & Co had written to Hynd and Co Pty Ltd on 14 June 2000.  Those proposed orders were that Hynd and Co Pty Ltd would:

“1.      cease to act for any trustee appointed to administer the bankrupt estate of Russell James Temple and will refrain from acting for any such trustee at any time in the future;

2.       within 7 days, return and deliver up to Mr Freer all documents relating to the bankrupt estate of Russell James Temple obtained by Hynd & Co from any person, or created by Hynd & co, in connection with or relating to the bankrupt estate, including, without limitation, all file notes, correspondence, computer diskettes, transcript of any examinations or interviews with any person.”

23                  Putting to one side the question of costs I regarded the attitude of Southern Hotel as unrealistic and obstructionist; it had sought to prevent Hynd and Co Pty Ltd from acting for the trustee; Hynd and Co Pty Ltd by its counsel had informed the Court that it was no longer acting for the trustee and counsel for the trustee had confirmed this information.  I stated my views in these terms during the course of counsel’s submissions and Mr Ross-Smith advised the Court, after taking instructions, that he would not proceed further on the “Notice of Motion” save only for the question of costs.  As that stage, as no orders were sought against the trustee, Mr Abbott sought and obtained leave to withdraw and it was left for counsel for Southern Hotels and counsel for Hynd and Co Pty Ltd to argue whether any, and if so what, order for costs should be made in favour of Southern Hotels.

24                  Mr Clayton submitted that, in assessing the issue of costs, regard should be had to the fact that Southern Hotels had only been partially successful in obtaining the relief that it sought.  It had, for example, failed in its attempt to stay the public examination of Mr Temple and it had not pursued its application for an order that Hynd and Co Pty Ltd deliver up to the trustee all documents that it had in its possession that related to the bankrupt and to the bankrupt estate.  On the other hand, and despite Mr Clayton’s submission to the contrary, I was satisfied that the undertakings that had been given to the Court in the name of Hynd and Co Pty Ltd had the same practical effect as the injunctive relief that had been sought by Southern Hotels.

25                  Next Mr Clayton argued that the orders sought by Southern Hotels in its “Notice of Motion” were misconceived and doomed to failure because, first, Southern Hotels had no standing to bring the matter before the Court and secondly, because no cause of action had been pleaded by Southern Hotels against the solicitors.

26                  In my opinion there is substance in that submission; it is correct to state that Southern Hotels had no cause of action against Hynd and Co Pty Ltd.  The substantive answer to this particular submission is, however, to be found in s 178 of the Bankruptcy Act.

“178   If the bankrupt, a creditor or any other person is affected by any act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.”

That is the provision in the Act under which Southern Hotels, as a creditor, could have and should have brought its application to restrain the trustee (not Hynd and Co Pty Ltd) from continuing to use the services of the solicitor.

27                  Finally, Mr Clayton submitted that Southern Hotels, as a creditor, had not made out a case that warranted the Court’s interference.  In one sense that is correct because the matter did not proceed to trial and no findings of fact have been made.  But lest it be misunderstood, I should make it clear that the history of the antagonism between the Temple family and the Weeks’ interest has been so intense and of such duration that it beggars belief that the solicitor acting for the Weeks’ interest could possibly consider acting for the trustee when the respective claims of the two factions to be admitted as creditors in the estate would, in all probability, necessitate the trustee taking legal advice – the more so when it is disclosed that Mr Weeks is funding some part, or all, of the costs of the administration of the estate.

28                  I find that, in substance, Southern Hotels was justified in approaching the Court and seeking its intervention.  However, its approach was misconceived in both form and substance.  Their attack should have been on the trustee.  The Rules of Court are not intended to be restrictive and litigants are not expected to adhere slavishly to procedures that may not be appropriate in the particular circumstances of a case.  The liberality that is available to litigants is quickly found in O 1.  Subrule 7(2) states that “it shall be a sufficient compliance with these Rules as to the form of any document if the document is substantially in accordance with the requirement or has only such variations as the nature of the case requires”.  Order 1 r 8 gives to the Court a general power to dispense with compliance with any requirements of the Rules.  But no such application for an exemption was made.  As was said by the Master of the Rolls in Re Coles & Ravenshear [1907] 1 KB 1 at 4:

“Although I agree that a Court cannot conduct its business without a code of procedure, I think that the relation of rules of practice to the work of justice is intended to be that of handmaid rather than mistress and the Court ought not to be so far bound and tied by rules, which are after all only intended as general rules of procedure, as to be compelled to do what will cause injustice in the particular case.”

29                  Whilst it might now be necessary to search for a fresh analogy, the sentiments in that passage remain true to this day: Morres v Papuan Rubber and Trading Co Ltd (1914) 14 SR (NSW) 141 at 142 per Cullen CJ; Jess v Scott (1986) 12 FCR 187 at 189.  However, the errors and inadequacies in this particular case have indicated a failure that is more than a minor matter of form.  There has been no attempt to have any regard to the relevant Rules of Court whatsoever; the nomenclature of the parties is totally wrong and there was a failure to address the question of the correct form of relief.  Arguably the proceedings were therefore a nullity because of the failures that I have identified; should that be the case it would mean that Southern Hotels would not be entitled to its costs.

30                  If the proceedings are not a nullity, the question of costs remains a matter of discretion.  There being no application for an order for costs against a non-party (i.e. Hynd and Co Pty Ltd) and, even though, as a matter of practicality, Southern Hotels has achieved its objective, the order of the court should reflect its expectation that legal practitioners will have regard to the procedural requirements of the Rules of Court.  For these reasons, I decline to award costs in the matter to Southern Hotels.  As there are no other outstanding issues, Southern Hotels’ “Notice of Motion” is struck out.

Associate:

Dated:              6 October 2000