FEDERAL COURT OF AUSTRALIA

Wade v Leroy [2010] FCA 178

THE COURT ORDERS THAT:

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

2.                  The application be dismissed.

3.                  The applicant pay the respondent's costs.

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

REASONS FOR JUDGMENT

Introduction

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

The changing nature of the relief sought in outline

2                     In the applicant's original application filed 20 May 2009, the applicant sought relief under s 178 of the Act.  The only parties named were the applicant and the respondent.  That remained the position in the proceedings generally (and, in particular, during the hearing when evidence was given and submissions made) and remains the position now.  Section 178 provides:-

[1] If the bankrupt, a creditor or any other person is affected by an 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.

[2] The application must be made not later than 60 days after the day on which the person became aware of the trustee's act, omission or decision.

In the original application, the applicant sought the following orders:-

[1] Order the pursuant to section 178 of the Bankruptcy Act the choses in action belonging to the applicant prior to her going into bankruptcy which thereupon vested in the respondent as the applicant's trustee in bankruptcy and any choses of action during the currency of the applicant's bankruptcy that devolved upon the applicant and which thereupon vested in the respondent as the applicant's trustee in bankruptcy be assigned retrospectively to take effect as from the 16^th January, 2006 from the respondent to the applicant by way of deed. (the deed of assignment).

[2] In the alternative order that pursuant to section 178 of the Bankruptcy Act the choses in action belonging to the applicant and prior to her going into bankruptcy which thereupon vested in the respondent as the applicant's trustee in bankruptcy and all choses of action during the currency of the applicant's bankruptcy that devolved upon the applicant and which thereupon vested in the respondent as the applicant's trustee in bankruptcy revested in the applicant on the 16^th January, 2006.

[3] Nunc pro tunc the date the 15^th March, 2006 for the making of this application pursuant to section 178 of the Bankruptcy Act.

[4] The respondent is to immediately do all things necessary to prepare, execute and deliver the deed of assignment to the applicant.

[5] The respondent is to include the following term in the deed of assignment: "the choses of action that vested in me upon my being appointed as trustee in bankruptcy of Dawn Florence Wade and the choses of action that subsequently vested in me during the currency of the bankruptcy of Dawn Florence Wade were assigned by me to Dawn Florence Wade on the 16^th January 2006".

[6] The respondent to include the further following term in the deed of assignment: "That one third of any awarded damages received by the applicant after deduction of all her expenses including legal costs in respect of her current proceedings in the New South Wales Supreme Couort respectively against Brian Muir and Donald Wakeling (case number 20026 of 2008) and against Donald Wakeling (case number 20194) vest in me as trustee for the estate of Dawn Florence Wade (formerly bankrupt) or vest in any other trustee nominated by this court for the estate of Dawn Florence Wade (formerly bankrupt)".

[7] The respondent is to pay for the costs of preparing, executing and delivering the deed of assignment and any stamp duty that may be imposed on the deed of assignment.

[8] That should the respondent fail to immediately in any way comply with orders 4, 5 and 6 the Registrar of this court is empowered in lieu of the respondent to prepare, execute and deliver the deed of assignment to the applicant.

[9] Such further or other order as this court sees fit.

[10] Costs on an indemnity basis.

3                     In an amended application and statement of claim filed 1 July 2009, the applicant sought an inquiry into the respondent's conduct under s 179 of the Act.  Section 179 provides:-

[1] The Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:

(a) remove the trustee from office; and

(b) make such order as it thinks proper.

[2] The Inspector-General or a creditor may at any time require a trustee to answer an inquiry in relation to the bankrupt's estate or affairs.

In particular, the applicant sought declarations which, in substance, called for a finding that the respondent had received correspondence from the applicant and failed to either consider or accede to the requests they contained to assign the choses in action, and orders removing the respondent as her trustee in bankruptcy and replacing him with Mr Frank Lopilato. Mr Lopilato has given his consent to act as the applicant's trustee.

4                     During the hearing, the applicant handed up a document entitled 'Amended Notice of Motion' seeking to further amend the amended application to seek two additional declarations.  The declarations sought were:-

[1] That the causes of action pleaded in the Supreme Court proceedings Wade v Wakeling, 20194/08 that is property that was acquired by the applicant after her discharge from bankruptcy on the 4^th January 2006.

[2] That the causes of action pleaded in the Supreme Court proceedings Wade v Muir and Wakeling, 20026/08 is property that the applicant at all material times has been holding on trust for the benefit of the former shareholders of GSR, Souad Clarke and Matthew Trnka.

5                     However, at the outset of the hearing (and before evidence was given and cross-examination undertaken) the applicant narrowed her case to seek only orders under s 179 that the respondent be removed as her trustee in bankruptcy and that Mr Lopilato be appointed as trustee.  At all times during the hearing the applicant was represented by counsel.

6                     After judgment had been reserved, the applicant filed a notice of motion seeking leave to reopen the matter, and in particular to pursue the application for relief under s 178 that she had abandoned (through her counsel), contending that ss 27(1) and 31(1) of the Act gave the Court exclusive jurisdiction to determine who has title to the property (choses in action) underpinning the Supreme Court proceedings.

7                     I consider this application to reopen later in this judgment.

The claim pursued at the hearing founded on s 179

8                     I first deal with the relief pursued at the hearing. Evidence was given in support of the application by the applicant, Mr Claudio Grizonic, Ms Souad Clarke, Mr Greg Jones and Mr Charles Firns.  The respondent gave evidence opposing the relief sought.  The following represents findings of fact unless I indicate, or it appears from the context, that I am simply recounting evidence of a particular witness.

9                     It is desirable to mention, at the outset, something about the Supreme Court proceedings in which the applicant is involved: Wade v Wakeling (20194/08) and Wade v Muir & Wakeling (20026/08). A defence had been raised in both matters that Ms Wade cannot maintain the proceedings.

10                  The defendants in those matters, Mr Wakeling and Mr Muir, have at times served as legal advisors to Glass Slipper Racing Pty Ltd (GSR), a company with interests in horses and property.  Mr Wakeling also served as the applicant's legal advisor until approximately 10 February 2003, and is presently an undischarged bankrupt.  Mr Wakeling succeeded Mr Muir as GSR's advisor during a real estate transaction involving the company's purchase of a property at Buckets Way in Gloucester in late 2001, settlement of which occurred on 8 February 2002. GSR sold the property in November 2002.  On 8 February 2003 GSR's two shareholders, the applicant's neighbour Ms Souad Clarke and the applicant's son Mr Matthew Trnka, purported to assign to the applicant by deed any choses in action vested in GSR. The consideration was one dollar. The applicant gave a personal guarantee for the liabilities of GSR.

11                  The purported assignment of GSR’s choses in action occurred during the applicant's bankruptcy.  Ms Clarke gave evidence that she held her shares on trust for the applicant.  It was not until 2009 that the applicant approached the respondent on the advice of Mr Jones, her counsel at the time, to ask him to assign to her the choses in action arising from the purported assignment. GSR was wound up by the Commissioner of Taxation and has since been deregistered. The Commissioner of Taxation claimed that the company had a tax liability of $22,000 together with outstanding fines.  The applicant alleged in her evidence that the company was wound up as a result of failure of Mr Wakeling to carry out certain tasks in relation to the company.  The applicant commenced proceedings in the Supreme Court against Mr Wakeling in February 2008 in which this failure is raised and against Mr Muir and Mr Wakeling in mid 2008. 

12                  It is necessary to refer to other Supreme Court proceedings which involve Mr Grizonic: Claudio Grizonic v Suzanne Ranken Suttor & Anor (6141/2003).  Mr Grizonic was the applicant’s de facto partner between approximately July 2003 and late 2006. At the time those proceedings were commenced, Mr Grizonic and a Ms Suttor were in partnership in a restaurant business.  The partnership was dissolved as a result of the commencement of those proceedings and receivers of the business were appointed. Those proceedings concerned a property at 9 Magdala Road, East Ryde. Mr Grizonic and Ms Suttor had lived on this property together at various times. Mr Grizonic and Ms Suttor were tenants in common in equal shares. During the course of the proceedings, Mr Grizonic petitioned the Court to appoint the respondent and a Mr McDonald as the statutory trustees for sale of the property under part 4 division 6 of the Conveyancing Act 1919 (NSW). The applicant referred Mr Grizonic to the respondent. On 27 February 2004 an order was made by Campbell J appointing trustees for sale: Grizonic v Suttor [2004] NSWSC 137. Mr Grizonic bought the house from the trustees on 8 November 2004. The proceeds of the sale of the house were divided according to terms of settlement lodged with the Supreme Court. Relevantly, a sum of $85,000 from the sale was paid into the Supreme Court. The respondent and the applicant both seek payment of monies from that fund.

13                  Mr Grizonic was dissatisfied with the way the respondent and Mr McDonald conducted the sale of the property. In April 2005 he commenced proceedings against them in the Supreme Court: Grizonic v McDonald and Ors (2475/05). In those proceedings, Mr Grizonic claimed that the respondent and Mr McDonald failed to exercise due diligence and care in relation to aspects of the sale of the house, and that they otherwise delayed the sale of the house. The applicant swore an affidavit in support of this claim in May 2005. The proceedings were dismissed as Mr Grizonic did not comply with an order requiring him to provide security for costs, and a costs order was made against Mr Grizonic.

14                  Shortly afterwards, in July 2005, Mr Grizonic took steps to enter into a personal insolvency agreement under Part 10 of the Act, and appointed Mr Ivor Worrell as his trustee.  At a meeting of Mr Grizonic’s creditors on 12 August 2005, the respondent and Mr McDonald submitted a ‘statement of claim and proxy form’, claiming remuneration and costs incurred in conducting their defence in the Grizonic v McDonald & Ors proceedings (2475/05). Their claim was rejected by Mr Worrell at the meeting. At a subsequent creditors’ meeting on 19 August 2005, Mr Worrell confirmed his previous decision to reject the respondent and Mr McDonald’s claim for voting purposes.  Mr Grizonic’s proposal for a personal insolvency agreement was rejected by the creditors.

15                  Probably from late 2005, Mr Grizonic took steps to enter into another personal insolvency agreement under Part 10 of the Act, appointing a Mr Chamberlain as his trustee. The applicant gave evidence that Mr Chamberlain advised her that “this will not pass… he said “You had better get some creditors to buy up the debts of the partnership [with Ms Suttor] and support [Mr Grizonic]”, and that is what I did”. This is an apparent reference to the applicant taking an assignment of Mr Grizonic’s debts.

16                  In August 2008 the respondent and Mr McDonald served Mr Grizonic with a taxed certificate of costs in the sum of $109,000 for the Grizonic v McDonald & Ors proceedings (2475/05). Mr Grizonic became bankrupt by presenting a debtor’s petition in December 2008. On 20 March 2009 Brereton J made orders in the Grizonic v Suttor proceedings (6141/03) permitting the applicant to intervene and orders that the applicant and the respondent were to file documents substantiating their claims to be paid from the fund of $85,000.  It appears the respondent's claim on the fund is to satisfy his costs, charges and expenses, and the applicant's claim on the fund is to satisfy Mr Grizonic’s creditors.

17                  I return to consider more directly the dispute between the applicant and the respondent about his conduct as the applicant’s trustee. The applicant gave evidence that on 6 June 2006 she hand-delivered a letter to the respondent requesting him to assign to her all the choses in action she believed vested in him as her trustee.  She gave evidence that she had the respondent's secretary sign a copy of the letter, which the applicant kept but which was destroyed in a house fire on about 16 July 2006.  The applicant gave evidence that the letter contained words to the effect that if she did not hear from the respondent by a certain date, she would "assume that he had abandoned or re-vested or whatever" the choses in action.  The respondent denied ever receiving the letter, and said he did not see the letter until the applicant exhibited a copy of it to one of her affidavits filed in the present proceedings.  The respondent was cross-examined at length on this issue.  Counsel for the applicant explored the respondent's office's internal procedures for mail delivery.  The respondent said that it was policy for correspondence to go either to himself or a manager.  He said that he did not think that it was possible that the applicant could have delivered a letter to his office and the office's internal procedure failed to deliver it to him.  He said that it was "unlikely" that the "letter just did actually reach the file and just fell out somewhere". For his part, counsel for the applicant accepted that the letter may have got lost in the system.

18                  The respondent appeared to me to be a witness of truth.  I accept his evidence that he never saw the 6 June 2006 letter, even if the applicant left it in his office.  Had he seen it, it is inherently likely he would have responded in some way, shape or form.

19                  The applicant has had no oral communication with the respondent since March 2004.  It is common ground that there was no further correspondence between the applicant and the respondent after the 6 June 2006 letter until April/May 2009. In the absence of a response to her letter of 6 June 2006, the applicant said that she presumed that the administration of her estate had been finalised, that the choses in action had reverted to her and that in the circumstances it was reasonable to make these assumptions.

20                  On 29 April 2009, the applicant was advised that no document declaring completion of the administration of her estate had been filed with the Official Receiver.  The following day the applicant sent an email to the respondent that said "[i]t was my understanding prior to appointing you as trustee that you would willingly release all past, present and future legal causes [sic] of action to me.  I wrote to you in January 2006 confirming this."  The email went on to request the respondent to declare in writing that he had had no interest in any past, present or future legal causes [sic] of action since 5 January 2006 (that is, the day after the applicant was discharged from bankruptcy), and offering him "an indemnity".  The email gave him until 4 May 2009 to comply, and threatened to commence an action in this Court "for an order to have all my property released back to me" in the event of default.  The applicant accepted in cross examination that she did not tell the respondent in this email what the causes [sic] of action were.  She said she "assumed that the conversations we had when I - just prior to going bankrupt and during my bankruptcy, was that he was - it was fine with him, he would assign whatever it was back to me that vested in him on my discharge.  And I didn’t realise he would not want to do that."

21                  The applicant sent another email the following day, on 1 May 2009.  In this later email she said "[i]f you fail to answer the request of yesterday by email by 4pm Monday 4 May 2009, I have instructed counsel to file an application under s 208 of the Bankruptcy Act with regards to releasing my past, present and future causes of action.  I will be seeking costs against you."

22                  The respondent replied by email later the same day.  In his reply the respondent said that he did "not recall any such undertaking being made on my part concerning 'past, present or future causes of action'.  The statement simply doesn't make sense.  If there is a specific cause of action that vests with me as Trustee then it should be disclosed in the Statement of Affairs either as an asset or contingent asset. I request you be more specific in regards to the issue you are raising.  I may then be in a better position to provide you with a more accurate response."

23                  The applicant sent a letter to the respondent on 5 May 2009.  The letter was entitled "Re: Myself v Brian Muir and Donald Wakeling Supreme Court proceedings case number 20026 of 2008". In the letter, the applicant detailed her belief that the respondent had agreed to sell to her for $1.00 the choses in action that she believed devolved to him during her bankruptcy.  The applicant "conservatively" estimated that she could be awarded as much as $1.5 million in damages when she succeeded in prosecuting her claims in the proceedings, and offered to give the respondent 30% of the damages she was seeking.  The letter concluded by advising that unless the respondent informed the applicant by writing by 4pm "the 8^th instant" that he would assign to her all choses in action that vested in him, she will "immediately without further notice make application to the Federal Court pursuant to section 178 of the Bankruptcy Act for appropriate relief and seek costs against [him]."

24                  As noted earlier, the initial application leading to this proceeding was filed on 20 May 2009.  The applicant sent another email to the respondent on 21 May 2009.  In the email the applicant confirmed that a number of documents regarding the present application were served on the respondent's assistant.

25                  The applicant sent another email to the respondent on 25 May 2009.  In the email she requested that the respondent resign as trustee on the grounds that a serious conflict of interest existed between them.  The applicant accepted in cross examination that this email was the first time she asked the respondent to resign as trustee, though she did not articulate in this email what the conflict of interest was.  During his cross-examination, the respondent said that up until the commencement of these proceedings, "as far as [he is] aware there has been nothing there that would indicate any displeasure from [the applicant's] side".

26                  The respondent replied by email on 25 May 2009.  The respondent said "[y]ou are now raising other concerns and again with no specifics.  Please provide me details of your concerns and how you can reach the conclusions you have made in your email.  Please also explain why it is only now you appear to raise these allegations”.

27                  On 27 May 2009 the applicant wrote to the respondent’s solicitors.  In the email she said she would be participating in the Court ordered mediation and “I confirm that I will not be making any applications to remove Paul Leroy as trustee prior to the mediation on 1^st of June 2009.  I will again be requesting that Paul Leroy resign as my trustee directly after my mediation and be replaced by a subsequent trustee.”

28                  A mediation was held on 1 June 2009.  The applicant accepted in cross-examination (in response to a question that was not objected to by her counsel) that at the mediation she demanded that the respondent sign a deed of assignment in her favour, a deed prepared by Mr Jones.  The June deed referred to the January 2006 letter and the request within it that there be an assignment of all of the choses in action.  

29                  It is necessary to mention one other matter which, in point of time, occurred before the events I have just been describing. The applicant contends that her son, Mr Matthew Trnka, suffered financial disadvantage in a transaction involving thoroughbred horses as a result of the respondent's conduct. She alleges that her son was unable to establish unencumbered title to certain horses as a result of the respondent failing to answer her requests that he advise the Thoroughbred Racing Board and the Australian Stud Book that he had no interest in certain horses. On 2 January 2003 the applicant sent a letter to the respondent which enclosed payment from her son in the sum of $5000 for her share of nine horses. This money was part of an arrangement the respondent had with the applicant whereby the applicant's son would buy the applicant's interest in the horses for $5000, subject to valuation of the horses. This money was paid into the respondent's account pending valuation, as it was either full or part payment of the horses.

30                  On 26 February 2003 the Registrar of Racehorses sent the respondent's firm a list of twenty-six horses in which the applicant had a current interest.  On 9 November 2003 the applicant sent the respondent a letter again requesting that he "confirm with the Thoroughbred Racing Board and the Australian Stud Book that [the respondent] has no interest in [the applicant's horses]. The urgent matter is Inexcelcis… ". In support of the applicant's claim that she had no interest in the horses, Mr Trnka swore two statutory declarations on 28 October 2003 which stated that he had purchased his mother's share of two horses, Jade Mistress and Inexcelcis, in 2001 and 2002 respectively. In explanation for his delay in acceding to the applicant's request, the respondent gave evidence, which I accept, that "literally throughout that year there were horses being uncovered, that the original list [the nine horses in the applicant's 2 January 2003 letter] doesn't match with the final list [the twenty-six horses detailed in the Registrar's 26 February 2003 correspondence] and that the problem with the Registrar was that there were horses that were registered in [the applicant's] name but she claims weren't owned in her".  The respondent replied on 17 November 2003, advising that he had no interest in either Jade Mistress or Inexcelcis, and that "[the applicant] may wish to provide a copy of this letter to the appropriate authorities".

31                  On 19 April 2004 the respondent sent a letter to the Thoroughbred Racing Board advising that he had no further interest in any of the nine horses named in the applicant's initial letter of 2 January 2003 or in Jade Mistress or Inexcelcis, but that the applicant was recorded as retaining an interest in fourteen other horses, and that he was seeking confirmation from her. On 25 May 2004 the respondent sent a letter to the applicant to this effect. The applicant replied that day, advising the respondent she "never felt" an interest in any of the remaining fourteen horses. On 20 July 2004 Ms Sandra Fung, of the respondent's office and on his behalf, sent a facsimile to the applicant advising that the respondent had disclaimed his interest in the remaining horses and had notified the Thoroughbred Racing Board and the Australian Stud Book.

Should an inquiry take place?

32                  The applicant's discharge from bankruptcy on 4 January 2006 was a consequence of the operation of s 149 of the Act, which brings about the automatic discharge of a bankrupt three years after filing a statement of affairs, subject to any objections.  A discharged bankrupt is required by s 152 to provide such assistance as the trustee reasonably requires in the realisation and distribution of the discharged bankrupt's property as vested in the trustee.  This section assumes that the trustee remains trustee even in circumstances where the bankrupt has been discharged.  When a trustee has finalised the administration of an estate, regulation 8.14 of the Bankruptcy Regulations 1996 (Cth) stipulates that the trustee must, within seven days of finalising the administration of an estate, give notice of the finalisation in writing to the Official Receiver.  That notice, on the evidence, had not been given at the time of the hearing though was likely to occur shortly after the hearing concluded. 

33                  The applicant asked the Court to exercise the power under s 179 of the Act to make an order removing the respondent as her trustee.  This section was considered by Gray J in Trkulja v Morton [2005] FCA 659. Before ultimately dismissing the application for as inquiry and removal of the trustee, his Honour identified a two-part process to be undertaken and a number of factors to consider when doing so:

[4]       In its terms, this power is plainly concerned with ‘the conduct’ of the trustee ‘in relation to a bankruptcy’.  As Macchia v Nilant [2001] FCA 7 (2001) 110 FCR 101 at [49] – [50] demonstrates, the Court must first consider whether it should inquire into the conduct of the trustee.  If an inquiry is undertaken, the next question is whether the trustee should be removed from office and/or whether any other order should be made.  The Court should be reluctant to undertake an inquiry, unless there are substantial grounds for believing that the trustee erred in the administration.  If an inquiry is unlikely to reveal misconduct, it should not be undertaken.  The Court should not unduly interfere with the day-to-day administration of a bankrupt’s estate by the trustee.  In order to remove a trustee in bankruptcy, it is necessary to find misconduct on the part of the trustee.  Removal is possible if the relationship between the trustee and the bankrupt has broken down totally:  Doolan v Dare [2004] FCA 682 at [49].  In that case, Spender J found that there was a clear conflict of interest between the trustee’s interests in having her remuneration paid and how she thought that might be achieved, and her obligations as a fiduciary to the creditors and the bankrupt.

(Emphasis added)

The trial judge's decision was subsequently upheld by the Full Court in Trkulja v Morton [2005] FCAFC 259 per Lee, Tamberlin and Dowsett JJ.

34                  In Boensch v Pascoe [2007] FCA 1977, Buchanan J dealt with an application for an inquiry into the conduct of a trustee. In that case, his Honour determined what must be established to demonstrate a basis for removal and specifically where it was alleged there had been a breakdown in the relationship between trustee and bankrupt. His Honour said:-

[92]      Obviously enough, a bankrupt should not be allowed, by an assiduous pattern of resistance to the trustee of his estate, to generate and then rely upon a suggested reason for removal thereby created.  No doubt there are many instances in which disagreement may arise about the way a trustee is administering an estate or exercising his powers.  Adequate opportunities exist for challenges to be made, if there are grounds for doing so.  None have been made in the present case, save for the matters with which I am dealing.

[93]      It is clearly an insufficient ground for removal of a trustee that a bankrupt resists the proper administration of his estate or sets out to frustrate a trustee in the proper performance of his duties.  Mr Boensch’s obligation was to co-operate fully with his trustee.  He is obliged to ‘aid to the utmost of his power in the administration of his estate’ (s 77(g)).  It is not necessary, or desirable, to make comprehensive findings about Mr Boensch’s own conduct.  It is sufficient to say generally that the apparently marked lack of trust which exists between him and Mr Pascoe does not indicate any failing by Mr Pascoe in the administration of Mr Boensch’s bankrupt estate or provide a reason for the Court to intervene in that task.

[94]      Accepting, as Spender J observed [in Doolan v Dare [2004] FCA 682 at [49]], that there will be cases where removal of a trustee is warranted due to a total breakdown in relationship, nevertheless the present is not a case, in my view, where that is called for or whether any further inquiry into the issue is necessary or desirable.

(Emphasis added)

35                  In the present case, the applicant's counsel advanced a number of propositions in support of the application for an inquiry into the conduct of the respondent and his subsequent removal.  The gravamen of the applicant's case is that the relationship between her and the respondent had irrevocably broken down.  For the following reasons, I will not undertake an inquiry into the respondent's conduct, as I am unconvinced that there exists 'substantial ground for believing that the trustee erred in the administration [of the estate]', or that there was misconduct on the behalf of the respondent.

36                  The applicant's propositions, and my conclusions on each, are as follows:-

1.                  The respondent failed to respond to the letter of 6 January 2006.  I found at [18] that there was no reason to reject the respondent's evidence that he never saw the 6 June 2006 letter.  In these circumstances the respondent's failure to respond is unexceptionable.

2.                  The respondent failed to respond, or inadequately responded, to the emails sent by the applicant in April and May 2009, and the requests contained therein.  The respondent's emails of 1 May 2009 and 25 May 2009, detailed at [22] and [26], show that he was unclear as to the particulars of the applicant's requests that he assign the choses in action.  Having regard to the communications to which he was responding his responses, were, in the circumstances, unexceptionable.  It was reasonable for the respondent to adopt this position.

3.                  The respondent remained as trustee in circumstances where the applicant had given an affidavit in support of Mr Grizonic's Supreme Court of NSW proceedings.  The respondent, of course, had to act with the utmost propriety as a trustee: Nguyen v Pattison (2005) 142 FCR 561 at [86].  However it does not appear to me that there was any necessary tension between the applicant furnishing an affidavit in proceedings against the respondent where the affidavit was supportive of the opponent's case.  In swearing an affidavit, the applicant was obliged to tell the truth.  It was not suggested, as I understood the submissions, that a point was ever reached where the respondent might have had to challenge the evidence of the applicant and, in so doing, possibly deploy facts known to the respondent through his having acted as trustee.

4.                  The respondent is party to proceedings concerning the distribution of funds paid into the Supreme Court of NSW, proceedings in which the applicant is also a party.  My conclusions on this proposition are substantially the same as those in relation to the preceding contention.  In any event, any adjudication on the competing rights in relation to the funds will occur after when, in all probability, the respondent has ceased to be a trustee.

5.                  The respondent failed to inquire in a diligent manner as to the prospects of the applicant's Supreme Court of NSW actions resulting in some financial return in the administration of the estate. The material provided by the applicant to the respondent on this question was paltry.  In the absence of any material of substance, including a legal advice, it does not appear to me that the respondent was obliged to undertake enquiries of the type advocated by the applicant in these proceedings.

6.                  The respondent failed to properly consult with the applicant concerning aspects pertaining to the prospects of success.  There was no failure to consult.  The email correspondence clearly shows that the respondent requested specific information on 1 May 2009, and the applicant did not provide it.

7.                  The respondent failed to obtain or seek to obtain legal advice in regard to the potential prospects of the applicant's Supreme Court of NSW actions, particularly from the solicitors acting for Ms Wade at that time in those matters.  Mr Jones, who at the time acted for the applicant, gave evidence that he had not given advice.  The respondent's conduct was unexceptionable having regard to the matters already discussed in relation to propositions 5 and 6 above.

8.                  The respondent failed to ascertain the proprietary status and ownership of the applicant's Supreme Court of NSW actions, including whether they appropriately vested in the trustee in his administration or not.  What I have said in relation to propositions 5, 6 and 7 apply equally to this proposition.

9.                  The continuing failure of the respondent to carry out number 8.  It follows from what I have said in relate to proposition 8, that this proposition is without substance.

10.              The respondent failed to communicate adequately with the bankrupt with regard to the registration of horses with the Thoroughbred Racing Board in view of the purchase by Mr Trnka of the applicant's interest in these horses for $5000.  I see no reason to criticise the conduct of the respondent in relation to the horses.

11.              The respondent failed to communicate with the applicant as to the administration of her affairs between March 2004 and April 2009, excepting two letters sent to an incorrect address.  Even if the respondent could have been more fulsome in his communication, I do not view the way he communicated with the applicant as warranting an inquiry into his conduct.

The application to reopen

37                  The final issue to be resolved is the applicant's notice of motion filed after judgment was reserved seeking leave to reopen the matter.  In support of her notice of motion, the applicant contended that this Court had exclusive jurisdiction under ss 27(1) and 31(1) of the Act to make declarations about her title to the choses in action underpinning the Supreme Court proceedings.  Yet the issues the applicant seeks to agitate were expressly abandoned by her through her counsel during the course of the hearing. It does not seem to me appropriate or fair to burden the respondent with additional costs (even if only non recoverable solicitor client costs) by reopening these proceedings in these circumstances. Additionally, reopening the proceedings without having joined to the proceedings (and particularly before the evidence was given and tested in cross-examination) the defendants in the Supreme Court proceedings appears to me to be problematic.  The issue sought to be agitated in this Court is an integer of those parties' defence and determining the issue in their absence (assuming, as the applicant contends, that the resolution of the issue in this Court would determine the issue for the purposes of the Supreme Court proceedings) would probably constitute a denial of procedural fairness.  Even if they were joined if the proceedings were reopened, there would be a real issue about the status of the evidence given to this point.  The proceedings should not be reopened.

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

Conclusion

39                    The application should be dismissed. The applicant should pay the respondent's costs.

Associate:

Dated:         5 March 2010