FEDERAL COURT OF AUSTRALIA

Weeden v Rambaldi [2012] FCA 552

THE COURT ORDERS THAT:

1.    The applicant’s application be dismissed.

2.    In the event that the question of costs is disputed, each of the parties file and serve its submission as to costs within 14 days of the making of this order.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

THE COURT DECLARES THAT:

1.    On 19 March 2007, Andrew Reginald Yeo was appointed as the sole trustee of the property of the first respondent pursuant to a resolution passed at a meeting of creditors of the first respondent.

2.    Each of the notices of objection to discharge dated 30 June 2008 and 24 March 2010 signed by Andrew Reginald Yeo, and made in respect of the first respondent under s 149B of the Bankruptcy Act 1966 (“the Act”), was not invalid by reason that Andrew Reginald Yeo was not validly appointed as the sole trustee of the property of the first respondent.

3.    Each of the following income contribution assessments and revised income contribution assessments, made in respect of the first respondent under s 139W of the Act, was not invalid by reason that Andrew Reginald Yeo was not validly appointed as the sole trustee of the property of the first respondent:

    (a)    the notice of assessment dated 11 December 2007;

    (b)    the revised notice of assessment dated 26 May 2011;

    (c)    the notice of assessment dated 14 October 2008;

    (d)    the notice of assessment dated 8 July 2009;

    (e)    the revised notice of assessment dated 26 May 2011;

    (f)    the notice of assessment dated 29 April 2010;

    (g)    the revised notice of assessment dated 26 May 2011;

    (h)    the notice of assessment dated 2 May 2011; and

    (i)    the revised notice of assessment dated 26 May 2011.

AND THE COURT ORDERS THAT:

1.    The second and third respondents amend the National Personal Insolvency Index to show that Andrew Reginald Yeo was appointed as the sole trustee of the property of the first respondent on 19 March 2007.

2.    In the event that the question of costs is disputed, each of the parties file and serve its submission as to costs within 14 days of the making of this order.

Note:    Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

REASONS FOR JUDGMENT

1    There are two proceedings before the Court.

2    In the first proceeding, Philip Charles Weeden (“Weeden”) is the applicant. On 7 February 2007, Weeden became a bankrupt on filing a debtor’s petition and statement of affairs. On that date, Dennis Anthony Turner (“Turner”), a registered trustee in bankruptcy was appointed as the trustee of Weeden’s bankrupt estate.

3    At the instance of two creditors of Weeden, Playcorp Pty Ltd and Playgro Pty Ltd (“the Playcorp entities”), Turner called a meeting of Weeden’s creditors to consider, amongst other matters, his removal and replacement. On 19 March 2007, the meeting of creditors was held (“the creditors’ meeting”). The creditors’ meeting was attended by three people – Turner; Ms Margaret Lester (“Lester”) (who worked for Turner and was there to assist Turner including by preparing the minutes of the meeting); and Sam Bond (“Bond”), a solicitor for and the proxy of the Playcorp entities.

4    In the second proceeding, Andrew Reginald Yeo (“Yeo”) and Gess Michele Rambaldi (“Rambaldi”) are the applicants. Each of Yeo and Rambaldi is a registered trustee in bankruptcy and a partner of a firm of accountants called Pitcher Partners.

5     The primary issue, determinative of both proceedings before me, is whether at the creditors’ meeting, Yeo and Rambaldi were jointly appointed as trustees to replace Turner (as Weeden contends) or Yeo was appointed as the sole trustee (as Yeo and Rambaldi contend).

6    Relevantly to the issues raised, Weeden contends that, as joint trustees, any power conferred upon Yeo and Rambaldi by the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) in relation to Weeden’s bankruptcy, had to be exercised by both of them. It is not in issue that in relation to Weeden’s bankruptcy, Yeo lodged:

    a Notice of Objection to Discharge dated 30 June 2008 in which he described himself as the “Trustee”; and

    a Notice of Objection to Discharge dated 24 March 2010 in which he described himself as a “Joint and Several Trustee”.

7    Weeden contends that, as these acts were not acts of Yeo and Rambaldi acting jointly, neither act had any legal effect. As a consequence, and pursuant to s 149 of the Bankruptcy Act, Weeden argues that he was automatically discharged from bankruptcy on 7 February 2010, being three years from the date upon which he filed his statement of affairs. Weeden seeks declarations that the Notices of Objection to Discharge are each invalid and of no effect, and that he was discharged from bankruptcy on 7 February 2010. He also seeks a direction that the Inspector-General in Bankruptcy and Official Receiver in Bankruptcy correct the National Personal Insolvency Index (“the NPII”) to record the discharge.

8    In purported reliance upon s 139W of the Bankruptcy Act, between 11 December 2007 and 27 May 2011, initial and revised Notices of Contribution Assessment (“the Notices of Contribution Assessment”) were issued to Weeden by Yeo as “Joint and Several Trustee”. Weeden contends that as the issue of these Notices were not acts of Yeo and Rambaldi acting jointly, none had any legal effect. He asks the Court to make a declaration declaring that to be the case.

9     By their application, Yeo and Rambaldi seek a declaration that Yeo was validly appointed as the sole trustee of Weeden’s bankrupt estate, and an order that the NPII be amended accordingly. The NPII currently shows both Yeo and Rambaldi as trustees. An alternative finding that Yeo and Rambaldi were appointed jointly and severally as trustees of Weeden’s bankrupt estate, was raised but not pressed at trial.

10    Yeo and Rambaldi seek declarations that the Notices of Objection to Discharge were each valid and effective, and a consequential declaration that Weeden has not been discharged from bankruptcy. They also seek declarations that each of the income contribution assessments and revised income contribution assessments contained in the Notices of Contribution Assessment were validly made under s 139W of the Bankruptcy Act. Further, in relation to both the Notices of Objection to Discharge and the Notices of Contribution Assessment (“the Notices”) and relying upon s 306 of the Bankruptcy Act, Yeo and Rambaldi seek declarations that any formal defects or irregularities did not invalidate the Notices.

joint trustees

11    Pursuant to s 181 of the Bankruptcy Act, the trustee of a bankrupt may be replaced and substituted by resolution of the bankrupt’s creditors, at a meeting of creditors for which not less than seven days notice has been given. Section 158 of the Bankruptcy Act empowers the creditors to appoint one or more trustees, and if two or more are appointed, they may be appointed jointly or jointly and severally. If trustees are appointed jointly and severally “any or all of them may act”: Re Gudgeon and Another; Ex parte Pegler and Another (1969) 13 FLR 350 at 352 (Gibbs J). However, if appointed jointly, trustees are obliged to act jointly in the performance of their duty. They hold “a single, joint, inseparable office” and the act of one trustee alone is not binding in the absence of the “unanimous concurrence” of each joint trustee: Beath v Kousal [2010] VSC 24 at [18]-[19] where Kaye J cited and relied upon Street J in Sky v Body (1970) 92 WN (NSW) 934, 935 and Jacobs J in In the Estate of William Just, deceased (No.1) (1973) 7 SASR 508, 573. Although Kaye J was considering the position under a private trust, the position of joint trustees under the Bankruptcy Act appears to me to be the same. Absent any statutory provision to the contrary, the exercise of any power under the Bankruptcy Act by joint trustees, will only be validly exercised with the unanimous concurrence of each joint trustee. That proposition was not relevantly in contest.

12     The success of Weeden’s application depends upon two matters. Firstly, that at the creditors’ meeting, Yeo and Rambaldi were appointed as joint trustees. Secondly, that the impugned acts of Yeo constituted by the making and filing of the Notices, were not done with the concurrence of Rambaldi.

who was appointed to replace turner?

13     The first issue requires me to determine whether, by their resolution at the creditors’ meeting, the creditors appointed Yeo alone as the trustee, or instead, Yeo and Rambaldi as joint trustees. That involves the Court making a finding of fact based upon the evidence and evaluated by reference to the balance of probabilities.

14     Part of the evidence before me are the minutes of the creditors’ meeting (“the minutes”) duly signed by Turner who presided over the meeting. Weeden relies on the minutes and further relies on s 257 of the Bankruptcy Act which, I accept, has the effect of designating the minutes as prima facie evidence of the proceedings at the creditors’ meeting.

15    Under the heading “Resolution for Removal of Dennis Turner & Appointment of Gess Rambaldi and Andrew Yeo”, the minutes state:

The President advised the meeting that creditors had requested the Trustee convene a meeting to consider a resolution that Dennis Turner be removed as Trustee and Messrs Gess Rambaldi and Andrew Yeo be appointed Trustees.

Creditors were invited to propose the following motion;

“Dennis Turner be removed as Trustee of the bankrupt Estate of Philip Charles Weeden and Messrs Gess Rambaldi and Andrew Yeo be appointed as joint Trustees of the bankrupt Estate of Philip Charles Weeden”

Proposed by Mr Sam Bond as proxy for PlayCorp Pty Ltd

Seconded by Mr Sam Bond as proxy for Playgro Pty Ltd

The motion was passed

The only other section of the minutes of relevance is the section headed “Any Other Business” which states:

The President asked if there was any other business to be considered by the meeting.

Mr Sam Bond as proxy for PlayCorp Pty Ltd asked if Messrs Rambaldi and Yeo would notify ITSA of the change in Trustee, or would Mr Turner.

Mr Turner stated that both will advise ITSA of the change in Trustee.

Mr Sam Bond as proxy for PlayCorp Pty Ltd asked if there will be a surplus of funds to be passed to the subsequent Trustees. Mr Turner advised that there will be a shortfall of funds to meet his remuneration in full, after payment of costs incurred in his administration and the Realisations Charges applicable.

Mr Turner noted that he would forward to Messrs Rambaldi and Yeo sufficient funds to meet the Realisations Charges payable from the proceeds from the sale of the motor vehicle, to be accounted to ITSA in due course.

16    Given the prima facie nature of the evidence contained in the minutes, I consider that, if I am to depart from a finding consistent with the contents of the minutes, I should be satisfied that other evidence rebuts the presumption provided by s 257 of the Bankruptcy Act, that the minutes should, on a prima facie basis, be regarded as a reliable and accurate record of the proceedings at the meeting, including the resolutions there made.

17    I have come to a clear view that the minutes are not a reliable and accurate record of the resolution which appointed a trustee in substitution of Turner (“the resolution”). For the reasons I will now explain, I find that the resolution passed by the creditors at the creditors’ meeting was to the effect that Turner be removed as the trustee of the bankrupt estate of Weeden and that Yeo be appointed as the trustee of that estate.

18     Each of the three persons who attended the creditors’ meeting – Turner, Bond and Lester – gave evidence that, unassisted by documents relating to the creditors’ meeting, they had not retained any recollection of the resolution passed by the meeting replacing Turner as the trustee. Each has little or no recollection of the creditors’ meeting at all. It is completely unsurprising that should be the case. The meeting occurred a long time ago. Turner is a registered trustee. Lester is his assistant. Bond is an experienced insolvency solicitor. Each will have attended numerous meetings of creditors. There is no suggestion in the evidence that this particular creditors’ meeting was other than a routine meeting of no particular significance to any of its attendees. I have no reason to think that each of these witnesses did not do the best that each could to fairly and properly enlighten the Court as to what occurred at the creditors’ meeting and as to relevant events surrounding that meeting.

19     There are a range of documents in evidence which have assisted me in arriving at my finding about the content of the resolution. There is no suggestion that the contents of those documents have been manipulated or otherwise fashioned for a particular result. Some of the documents are more helpful than others. I have approached my task on the basis that those documents which were prepared either contemporaneously with or shortly after the creditors’ meeting, are more likely to provide a reliable and accurate record of the resolution and what otherwise occurred at the creditors’ meeting.

20    Evidence has been given by each of Turner, Lester and Bond as to their standard practices in relation to a meeting of creditors, including its conduct and the manner in which the meeting is ordinarily recorded. I have had regard to the standard practice of each of Turner, Lester and Bond as, in the absence of any indication to the contrary, the standard practice is likely to be a good guide as to the actual practice in which the witness engaged on the occasion in question.

21    There are two documents in evidence which are contemporaneous records of the creditors’ meeting. The first contemporaneous record is a set of handwritten notes made by Lester during the creditors’ meeting (“Lester’s notes”). Lester’s notes are not comprehensive. They list about ten items each described in point form. None of the items included in the notes refer to any resolutions. Lester’s evidence was that as Turner ordinarily proposes motions from his running sheet (a document I will shortly describe) or from documents notifying creditors of proposed motions for the meeting, she does not routinely copy down resolutions word for word. It seems on this occasion she did not do so at all. Lester’s notes refer to Andrew Yeo on four occasions. The first is to the effect that Turner is to make documents available to and to cooperate with Yeo. The second says “6% to Andrew Yeo”. Later, there is a note “Andrew to write to creditors” and the last entry begins “Write to Yeo”. Just above the third reference to Yeo, there is a note that “Both parties will advise ITSA”. I would infer that the note is dealing with the intent to advise ITSA of a change in trustees. There is no reference whatsoever in Lester’s notes to Rambaldi.

22    The second set of contemporaneous notes are those made by Bond on a copy of the agenda page distributed at the creditors’ meeting (“Bond’s notes”). There are seven handwritten notations which appear at the foot of the page, under the typed list of the items on the agenda. The contents of that typed list reflect precisely the contents of the agenda notified by Turner to creditors in a letter of 7 March 2007 to which I will shortly return.

23    Paragraph (l) of the list is in the following terms:

(l)    Resolution removing Mr Dennis Turner as the Trustee of the Bankrupt Estate of Philip Charles Weeden and appointment of Mr Andrew Yeo as Trustee of the Bankrupt Estate of Philip Charles Weeden.

24    One of Bond’s handwritten notations says “Voted in favour of removal and replaced”.

25    Bond held a proxy for both of the Playcorp entities. No other creditors or their proxies attended the meeting. He was the only person to vote.

26     A further note immediately below that which I have just referred to says “both to advise ITSA”. I would infer that this note is dealing with advice to be given to ITSA of the change in trustees. There is an earlier note – “copies of all to AY. – Co – Operate”. I accept Bond’s evidence that “AY” is a reference to Andrew Yeo and that his recollection, having regard to that note, is that Turner agreed to provide copies of all relevant documents to Yeo and to cooperate with Yeo in connection with the bankruptcy. There is no other reference to Yeo and there is no reference whatsoever to Rambaldi in Bond’s notes.

27    There is a third document which I regard to be of significance and which I will call “the running sheet”. The document has a handwritten title - “Running Sheet”. Immediately underneath that is a typed heading describing the document as “Minutes of the Meeting of Creditors of Philip Charles Weeden…”. A description of the time and place of the creditors’ meeting is included in that heading. It was the evidence of both Turner and Lester that in relation to a meeting such as the creditors’ meeting, Lester prepared what Turner called his running sheet for the meeting. Turner identified the running sheet as his running sheet for the creditors’ meeting. Lester described the document as the “draft minutes”. It was Lester that usually prepared such a document prior to a meeting.

28    The running sheet contains a number of bolded headings listing the expected subject matters to be dealt with at the meeting. Most of the subjects dealt with may be described as routine. The running sheet is written in the form of a script for Turner and on the expectation that he will chair the meeting. It includes the resolutions which it was expected creditors would propose. It ends with Turner calling for “any other business”.

29    In relation to the resolution dealing with the change of trustee and under a heading “Resolution for Removal of Dennis Turner and Appointment of Andrew Yeo”, the running sheet contains the following typed terms:

As you are aware, Creditors have requested I convene a meeting to consider a resolution that I be removed and Mr Andrew Yeo be appointed Trustee.

Accordingly creditors are invited to propose the following motion;

“Dennis Turner be removed as Trustee of the bankrupt Estate of Philip Charles Weeden”

Passed/not passed

“Andrew Yeo be appointed as Trustee of the bankrupt Estate of Philip Charles Weeden’

Passed/not passed

30    The typed resolutions set out above are annotated in handwritten script. The second resolution is crossed out and after the first resolution the following has been added “& replaced by ANDREW YEO”, so that a single proposed resolution read:

“Dennis Turner be removed as Trustee of the bankrupt Estate of Philip Charles Weeden & replaced by ANDREW YEO”.

31    Turner’s practice is to read his running sheet just prior to a meeting. It is probable that he made the annotations, to which I have just referred, in preparation for and just prior to the creditors’ meeting. Both Lester and Turner’s evidence was that Turner uses a running sheet to conduct the meetings which he chairs. Turner’s practice is not to take notes at meetings. It is probable that those practices were followed at the creditors’ meeting.

32    The running sheet (in its annotated form) makes two references to Yeo. Both references are in the extract (as annotated) which I have set out above. There is no reference in the running sheet to Rambaldi.

33    Turner’s evidence was that his running sheet was a document which he would ordinarily use to aide his recollection of what had happened at a meeting. Lester’s evidence was to the same effect. Whilst the running sheet is not a contemporaneous record of the creditors’ meeting, in the sense that it was not made contemporaneously with the communications at the meeting, its use as a script by Turner imbues the document with significance. In the absence of evidence to the contrary, I would regard the contents of the running sheet as a reliable guide to what Turner said at the creditors’ meeting prior to Turner calling for “any other business”.

34    The references in the agenda and the running sheet, to the substitution of Yeo for Turner, is consistent with all of the relevant events leading up to the creditors’ meeting other than one. The exception relates to a document (“the Consent to Act”) provided by Yeo and Rambaldi to Bond on or about 22 February 2007. I will return to consider that document later.

35     As to the relevant events leading up to the creditors’ meeting, on 9 February 2007, Bond wrote to Turner advising of the debts owed by Weeden to the Playcorp entities and seeking Turner’s report to creditors. In around the middle of February 2007, Bond telephoned Yeo, who he knew to be a registered trustee in bankruptcy, to enquire as to whether Yeo would be willing to replace Turner as trustee of Weeden’s bankrupt estate. Yeo confirmed that he would be so willing. On 1 March 2007, Bond wrote to the Playcorp entities regarding Weeden’s bankruptcy and advised as to the procedure for removing and replacing a trustee. He advised that the Playcorp entities had the capacity to request a meeting of creditors and have a resolution passed to appoint a preferred trustee “such as Mr Andrew Yeo of Pitcher Partners”. He stated that in anticipation of his clients’ instructions he had requested Yeo to provide his consent to act as trustee.

36     On 2 March 2012, Bond wrote to Turner referring to Weeden’s Statement of Affairs, noting that Weeden had four creditors, two of whom were the Playcorp entities, and that those entities constituted the majority in value of Weeden’s creditors. Bond advised of his clients’ intent to vote in favour of a resolution at a meeting of creditors to remove Turner and appoint Yeo to be trustee in his place. Turner was invited to resign or, alternatively, should he not resign he was requested to convene a meeting of creditors. The letter referred to the requirement for notice of the meeting to be given to all creditors including the proposed agenda. For that purpose, Bond requested that the following two items be included on the agenda:

1.    that Mr. Dennis Turner be removed as Trustee in Bankruptcy;

2.    that Mr. Andrew Yeo be appointed as Trustee in Bankruptcy.

37    The letter stated that it enclosed “a copy of Mr. Yeo’s consent to act as the trustee in Bankruptcy to be circulated to creditors and tabled at the meeting”. The Consent to Act which had earlier been provided to Bond by Yeo and Rambaldi was enclosed with that letter. Bond’s evidence was that he had not noticed that the document contained the consent of both Rambaldi and Yeo.

38     By letter dated 7 March 2007, Turner wrote to Weeden’s creditors giving notice of the creditors’ meeting. He advised creditors that he had received notice from two of Weeden’s creditors that they wished to remove him as trustee and replace him with Yeo. The letter went on to state that at the forthcoming meeting, creditors would be asked to vote on a resolution removing him and a separate resolution appointing Yeo to take his place. The agenda for the meeting was attached. A Statement of Claim and Proxy Form was also attached. The Proxy Form included a section headed “Voting Directions” which provided for a general proxy or in the alternative, the capacity to indicate voting intentions in relation to proposed motions. Two of those motions were motions in the terms notified by Bond to Turner and set out at [36] above.

39    The creditors’ meeting commenced at 3 pm on 19 March 2007 and lasted for about half an hour. There are two documents in evidence which were prepared within two hours of the meeting. Both were prepared by Bond. The first is a facsimile from Bond to Yeo. The second is a letter from Bond to the Playcorp entities. Each correspondence reports that resolutions were passed removing Turner and appointing Yeo. The correspondence contains no reference to Rambaldi. Given the temporal proximity of the preparation of the correspondence with the creditor’s meeting, I would regard Bond’s recollection at the time the correspondence was prepared, as a reliable recollection of his understanding of what transpired at the creditors’ meeting.

40     Although the minutes purport to have been made on the same day as the creditors’ meeting, the minutes were not finalised until at least three days later. Lester worked on the preparation of the minutes on 19, 20 and 22 March 2007. Despite what the minutes say, the minutes must have been signed off by Turner on or after 22 March 2007.

41    It is likely, as Lester acknowledged, that the minutes were prepared by her by reference to her recollection, Lester’s notes and some or all of the documents which were on the Weeden file including, the agenda, the running sheet, the Consent to Act and a letter from Turner to Yeo and Rambaldi dated 19 March 2007 (‘the letter to Yeo and Rambaldi”) which Lester drafted on 19 March 2007. I would infer that in large part, the minutes were prepared by reference to the running sheet. A comparison of the two documents shows that other than in relation to “Any Other Business” (for which the running sheet was unscripted), the minutes are largely an adaptation of the running sheet which puts into past tense the speaking notes in the running sheet and fills the blanks in the running sheet by inserting the names of those who proposed and seconded the resolutions recorded as carried. That conclusion is fortified by Lester’s description of the running sheet as the “draft minutes”.

42     However, it is evident from a comparison between the minutes and the running sheet, that in relation to the subject matter of Turner’s removal and replacement, on each of the three occasions when Yeo is mentioned in the running sheet, an additional reference to Rambaldi appears in the minutes.

43     The addition of Rambaldi, at least in one respect, was clearly incorrect. The minutes say that Turner advised that the creditors’ meeting had been convened to consider a resolution that “Dennis Turner be removed as Trustee and Messrs Gess Rambaldi and Andrew Yeo be appointed trustees”. Whatever happened at the meeting, that description is wrong in describing the terms of the resolution notified to creditors prior to the meeting. The error suggests the mechanical inclusion in the minutes of Rambaldi’s name wherever Yeo’s name appeared in the running sheet.

44    There are some other difficulties with the minutes when compared to Lester’s notes. There are at least three entries in Lester’s notes that do not appear in the minutes. They are that Turner will make documentation available and co-operated with Yeo, that Turner will write to Yeo and that Yeo will write to creditors. Further, contrary to the requirements of s 64Z of the Bankruptcy Act, the minutes are not signed by Lester, nor was a certificate recording the precise words of the resolutions passed, made by Lester.

45    The minutes also use the word “both” in recording who will advise ITSA of the change in trustee. The use of the word “both” in the context set out in the second extract at [15] above, is curious. Its use would be appropriate in the context of one trustee replacing another but unusual if the context was that one trustee was replaced by two trustees.

46     Turner gave evidence that he was aware of the requirements of s 64Z(4) of the Bankruptcy Act. His normal practice is to follow the statutory requirements. In particular, if a proposed resolution which had been notified to creditors prior to a meeting was the subject of an amendment during a meeting, Turner’s practice was to have recorded in the minutes the proposal for the original motion to be amended. Despite that practice, there is no suggestion to be found in the minutes, of any amendment proposed to the original motion relating to Turner’s replacement notified to creditors. Further, given that of all Weeden’s creditors only the Playcorp entities were represented at the creditors’ meeting, if any such proposal for amendment was put, it had to be put by Bond. There is nothing in the evidence which would suggest any reason why Bond would have proposed an amendment to the motion his clients gave notice that they would propose. In particular, no evidence suggests any incentive on the part of the Playcorp entities to appoint replacement trustees as joint trustees. Given the additional administrative burden involved in trustees acting jointly rather than jointly and severally, it would be surprising for a creditor, assisted by an experienced insolvency solicitor like Bond, to propose such an arrangement without some good reason. No such reason is suggested by the evidence.

47    I am fortified in my conclusion that it is not probable that any amendment was moved to the original motion, by the absence of any reference or hint of an amendment in either Lester’s notes, Bond’s notes or any other document. Given Lester’s usual recording practice, it is more probable than not, that she would have noted any deviation from the running sheet in relation to a proposed resolution. Further, it is also likely that Bond would have made a note of any proposed amendment, at the very least by annotating the original motion on the agenda sheet upon which he was recording his notes of the meeting.

48    That conclusion does, however, call into question how it is that Rambaldi’s name found its way into the minutes. Yeo and Rambaldi suggest, by reference to evidence which Lester gave, that it is the Consent to Act provided by them which is the genesis of the wording of the minutes. I will now better explain the contents of that document.

49    As earlier indicated, by his letter of 9 February 2007 to Turner, Bond enclosed a copy of what was said to be Yeo’s consent to act as the trustee. What was in fact enclosed was a pro-forma document headed “Consent to Act and Trustee Declaration” signed by both Rambaldi and Yeo in which, in relation to Weeden’s bankrupt estate, each consented to act as trustee of “the bankrupt’s estate/s of the person/s named in this instrument pursuant to resolution by creditors as joint or successive trustees. s158(1) or (2)”. The words just quoted appear as one of six options on the form. The box adjacent to that option was crossed to indicate the nature of the consent. Other available options dealt with other provisions of the Bankruptcy Act. None of the options on the pro-forma document dealt with the situation of a trustee being replaced, as in this case, pursuant to s 181 of the Bankruptcy Act.

50     The evidence given by Lester is that at the time of drawing up the minutes, she had a copy of the Consent to Act in her possession. The Consent to Act was one of a number of documents she had in her possession and she may have had resort to some or all of those documents. Further, Lester was involved in the preparation on 19 March 2007 of the letter to Yeo and Rambaldi. That letter advised that at the creditors’ meeting, a resolution was passed removing Turner as trustee, and appointing Rambaldi and Yeo to replace him. Lester accepted that it was possible, although she could not really say, that she looked at the Consent to Act rather than the running sheet to prepare the letter. It is in that context that Rambaldi and Yeo contend, that the genesis for Rambaldi’s inclusion in the minutes, is that Lester had regard to the Consent to Act and mistakenly assumed that as both Yeo and Rambaldi had consented to be Weeden’s trustees, the resolution passed at the creditors’ meeting had resolved to appoint both.

51     Whilst there was evidence of the administrative arrangements within Pitcher Partners which led to the terms in which the Consent to Act was provided and also evidence of the likely intent of Rambaldi and Yeo in providing the Consent to Act in the form that they did, evidence of their intention is not relevant to the question of what resolution was passed at the meeting. The Consent to Act does, however, provide a possible explanation as to how Rambaldi’s name found its way into the minutes.

52    It must also be acknowledged that, it is possible that the Consent to Act was the genesis of the resolution itself, and not just the genesis of the wording of the minutes later prepared. I accept that it is likely that the Consent to Act was on Turner’s file and likely to have been in his possession when preparing for the meeting and during the meeting. I also accept it as possible that Turner did, either just prior to the meeting, or during the meeting, read the document and as a result thought that he was to be replaced by both Yeo and Rambaldi. In that context, it is possible that in putting the form of the motion to the meeting, Turner departed from the words of the running sheet and included Rambaldi in the proposed resolution. Whilst I accept that as a possibility, I do not think it probable. Given Turner’s practice of relying on his running sheet and also the likelihood that shortly before the creditors’ meeting Turner made the handwritten annotation to the proposed resolution on the running sheet, I consider it improbable that Turner departed from the running sheet when putting the proposed resolution to the meeting. It is also improbable, for the reasons that I have already explained, that any departure by Turner from the running sheet and from Bond’s expectation of the resolution to be put, would not have been noted by either Lester or Bond.

53    Given the absence of any reference to Rambaldi in the contemporaneous records of the creditors’ meeting and in the running sheet and given the terms of the correspondence sent by Bond shortly after the meeting, the genesis for Rambaldi’s inclusion in the minutes is more likely to be the result of a mistake by Lester, made after the meeting, than anything said or resolved during the meeting. The lateness in the preparation of the minutes, the scant notes taken by Lester and the other difficulties with the minutes (to which I have earlier referred), all support that conclusion.

54    Weeden relied upon various occasions on or after November 2007 in which Yeo and Rambaldi described themselves as joint trustees of Weeden’s estate. The first such occasion was the commencement of proceedings in November of 2007 against Weeden’s mother alleging the transfer by Weeden of property for undervalue. Bond acted for Yeo and Rambaldi in that proceeding. However, by November 2007, Turner had written to Yeo and Rambaldi by letter dated 19 March 2007, stating that it had been resolved that Yeo and Rambaldi would replace him and on 2 April 2007 ITSA had issued a Certificate of Appointment listing Rambaldi and Yeo as Weeden’s trustees. It is not surprising that in that context and in the context of conflicting advice provided in the earlier correspondence from Bond to Yeo on 19 March 2007, that Yeo’s descriptions of his appointment have been inconsistent. Nor is it surprising that on many occasions on and after November 2007 Yeo and/or Yeo and Rambaldi described themselves in a manner inconsistent with what they now contend to be the true position. Whilst the confusion is regrettable, it is explained by reference to the provision to Yeo, Rambaldi (and Bond) of conflicting information to which insufficient attention was paid. The fact of that confusion is not instructive as to who was appointed as Weeden’s trustee.

was there concurrence from rambaldi?

55    It is not necessary that I determine the first alternative contention of Yeo and Rambaldi, that if they were joint trustees, the Notices were validly given by Yeo because they were given with the knowledge and acquiescence of Rambaldi. If it had been necessary, I would have determined that the evidence fell well short of establishing that the impugned acts of Yeo were done with the concurrence of Rambaldi.

section 306 of the bankruptcy act

56    There was no issue between the parties that if Yeo was appointed the sole trustee, the operation of s 306 of the Bankruptcy Act was not required to cure any formal defect or irregularity. The s 306(1) case mounted by Yeo and Rambaldi only arose if the Court found that Yeo and Rambaldi were jointly appointed. That having not occurred, I need not determine the competing contentions on the operation of s 306(1).

57    If it had been necessary, I would have rejected the contention because I would have determined that Yeo and Rambaldi had failed to establish a “formal defect or irregularity” within the meaning of s 306(1). In each case, the asserted formal defect or irregularity was the subsequent or late consent by Rambaldi to the impugned earlier act effectuated by Yeo alone. Yeo and Rambaldi asserted that s 306(1) cures the act of a joint trustee acting alone where there was no concurrence with other joint trustees at the time the act was effectuated, so long as a state of concurrence, in relation to that act, was subsequently arrived at. In my view, the absence of concurrence by all joint trustees at the time at which their concurrence is required for the act to be valid, is not a “formal defect or irregularity” within the meaning of s 306(1).

58    Section 306(1) of the Bankruptcy Act is in the following terms:

(1)     Proceedings under this Act are not invalidated by a formal defect or an irregularity, unless the court before which the objection on that ground is made is of opinion that substantial injustice has been caused by the defect or irregularity and that the injustice cannot be remedied by an order of that court.

59    As Marshall and Mansfield JJ held at [48] in O’Brien v Sheahan [2005] FCAFC 59, by reference to observations made by Hill, Carr and Weinberg JJ in Nilant v Macchia (2000) 104 FCR 238:

…the words ‘proceedings under this Act’ in s 306(1) are to be given an operation extending beyond curial proceedings, and extend to steps taken pursuant to, and in accordance with, the requirements of the Act…

60    I accept that, as steps taken pursuant to the Bankruptcy Act, an objection to discharge made under s 149B and the making and notification of a contribution assessment under s 139W are “proceedings” under the Bankruptcy Act within the meaning of s 306(1). However, those provisions require that the steps be taken by “the trustee”. In my view, the fact that an act required to be done by the trustee under s 149B or 139W was not done by the trustee, is not a “formal defect or an irregularity” within the meaning of s 306(1).

61    The meaning of “a formal defect or irregularity” was considered by Gleeson CJ, Gummow, Kirby, Hayne, Callinan, Heydon and Crennan JJ in Adams v Lambert (2006) 228 CLR 409. At [24] to [26], the Court said:

…What is excluded from the section is a defect or irregularity of such a nature that, reading s 306 in the context of the whole Act, it is not "a formal defect or an irregularity". What kind, or degree, of defect is to be regarded as having such a nature?

In some cases the answer to that question may be easy. In others, a difficult question of judgment may be involved. The matter for judgment was identified by this Court in Kleinwort Benson Australia Ltd v Crowl. In that case, the majority contrasted the concept of a formal defect or irregularity with a defect or irregularity that renders a bankruptcy notice a nullity that cannot be saved by s 306. To describe a defect as merely formal, or to describe a notice as a nullity, is, of course, to state a conclusion, rather than the reason for reaching that conclusion. Even so, it is necessary to identify the question that arises for judgment. The majority, referring to James v Federal Commissioner of Taxation, and Pillai v Comptroller of Income Tax, summarised the exclusionary aspect of the meaning of "a formal defect or an irregularity" by saying:

    "The authorities show that a bankruptcy notice is a nullity if it fails to meet a requirement made essential by the Act, or if it could reasonably mislead a debtor as to what is necessary to comply with the notice."

The question of construction raised by the words "a formal defect or an irregularity" is one to be decided by reading s 306 in the context of the whole Act, informed by the general purpose of the legislation, and the particular purpose of the provisions relating to bankruptcy notices. It is similar to the question that, in former times, would be explained by asking whether a statutory requirement was mandatory or directory. In Project Blue Sky Inc v Australian Broadcasting Authority it was said: "A better test ... is to ask whether it was a purpose of the legislation that an act done in breach of [a] provision should be invalid ... In determining the question of purpose, regard must be had to 'the language of the relevant provision and the scope and object of the whole statute'". [Footnotes omitted]

62     Further, at [28] the Court stated:

The other exclusionary aspect of the expression "a formal defect or an irregularity" in s 306 was said to consist in a failure to meet a requirement made essential by the Act. Here again, the word "essential", in its application in a particular case, involves a conclusion. If a requirement is made essential by the Act, then a failure to meet that requirement is not a formal defect or an irregularity within the meaning of s 306. Whether a requirement is made essential is to be decided by a process of statutory construction undertaken in the manner described above. The majority in Lewis regarded the error in that case as involving a failure to meet a requirement made essential by the Act.

63    A consideration of the language and scope of the provisions in question and the object of the Bankruptcy Act, does not suggest validation was intended. Under the Bankruptcy Act, trustees are given important responsibilities involving wide powers and considerable discretions including in relation to the functions conferred by s 149B and s 139W. When such powers and discretions have been conferred on joint trustees by conduct taken pursuant to the Bankruptcy Act, it is unlikely that the Bankruptcy Act intends that such powers could be validly exercised other than by the joint trustees appointed to exercise those powers. I consider that the validity of an act effectuated by a trustee or trustees at the time the act was effectuated, to be an “essential” requirement, the absence of which is not capable of validation by s.306(1).

disposition

64    I will make declarations that Yeo was validly appointed as the sole trustee of Weeden’s bankrupt estate at the creditor’s meeting and that the Notices were not invalid by reason that Yeo had not been validly appointed. The declarations sought by Yeo and Rambaldi are in wider terms than those I am prepared to make. I consider that the terms of the declarations made should not travel beyond the basis for the asserted invalidities which were the subject of the findings which I have made.

65    I will also order that the NPII be amended to show that Yeo was appointed as the trustee with effect from 19 March 2007. Such an order was not resisted by the Official Receiver and is consistent with the objective of Reg 13.03(6) of the Bankruptcy Regulations 1996 that any error in the NPII be corrected.

66    I have not heard submissions from the parties on the question of costs. If the parties are able to agree on costs, proposed consent orders should be provided within seven days. In the event that costs are disputed the orders I will make will require the exchange of short submissions on the question of costs.

Associate:

Dated:    29 May 2012