FEDERAL COURT OF AUSTRALIA

Coshott v Burke [2013] FCA 155

THE COURT ORDERS THAT:

1.    Upon the first respondent giving an undertaking to provide his files to the Official Trustee in Bankruptcy with respect to the estate of Robert Gilbert Coshott, a bankrupt, and otherwise cooperate with and assist the Official Trustee in Bankruptcy as reasonably required, pursuant to s 180 of the Bankruptcy Act 1966 (Cth) the Court accepts the resignation of the first respondent from the office of Trustee of the bankrupt estate of Robert Gilbert Coshott.

2.    The cost of this application be a cost of the bankruptcy administration from 27 October 2009, when the claim was commenced, to 14 December 2012, when the amended statement of claim was filed.

3.    These proceedings be otherwise dismissed.

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

REASONS FOR JUDGMENT

Procedural history

1    These proceedings were commenced by application on 27 October 2009. The application was that the first respondent be removed as trustee of the applicant’s estate under s 179 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”). A statement of claim was filed on 9 November 2009.

2    On 15 June 2010, Rares J commenced taking evidence in the application. The applicant gave evidence and was cross-examined. The first respondent gave evidence-in-chief and his cross-examination by the applicant commenced. At the end of proceedings on that day the first respondent remained under cross-examination. The proceedings were adjourned until 2 July 2010. The proceedings did not resume before Rares J. Rares J thereafter dealt with another issue concerning the applicant and then recused himself at the request of the applicant.

3    In due course the present application was transferred to my docket. On 22 November 2012, Mr Burke’s cross-examination recommenced. No amendment to the proceedings had been made. It became apparent during the course of Mr Burke’s further cross-examination that the case upon which the applicant wished to rely had become a substantially different case from that which was commenced in 2009. Eventually, after most of the day had been used in Mr Burke’s further cross-examination, the applicant applied for leave to amend his statement of claim. Leave to amend was granted and arrangements were made for further pleadings to be filed and for the hearing to resume today, 25 February 2013. An amended statement of claim was filed on 14 December 2012. The amended statement of claim sought to erect a case against the first respondent which was substantially different from that put by the earlier statement of claim.

Resignation of trustee

4    On 15 February 2013, the first respondent filed an interim application supported by affidavit seeking the leave of the court to resign as trustee. His affidavit outlined the personal reasons why the resignation was sought. The resignation of the trustee is not opposed. I accept his explanation for seeking to resign. The resignation of the first respondent renders the proceedings of no further utility and there is no opposition to the proceedings being dismissed.

5    The first respondent is engaged in litigation in proceedings NSD 1412 of 2009 in this Court, involving the applicant and members of his family. Those proceedings are listed before me later in the year. It will be necessary for those proceedings to be amended by substituting as a respondent and cross-claimant any trustee appointed to replace Mr Burke.

6    Mr Burke has obtained the consent of two trustees to act in his place in the administration of the applicant’s bankrupt estate. They are Mr Maxwell Prentice and Mr Scott Pascoe, with Mr Andrew Scott being a secondary contact for Mr Pascoe. Mr Coshott has provided a form of consent to act as trustee given by Mr Daniel Cvitanovic. In terms of the dates which those consents bear, that provided by:

    Mr Cvitanovic is dated 20 February 2013;

    Mr Pascoe is dated 22 February 2013; and

    Mr Prentice is dated 25 February 2013.

7    The Office of the Insolvency and Trustee Service Australia provided a letter dated 20 February 2013, saying that the Inspector-General in Bankruptcy did not intend to participate in the proceedings today and had no objection to Mr Burke resigning his office. Similarly, the letter also advised that the Official Trustee had no objection to Mr Burke resigning his office.

Appointment of new trustee

8    One question which arises for consideration as a result of Mr Burke’s resignation is whether I should appoint a trustee to replace him from amongst those who have consented to act. It appears that Mr Coshott wishes Mr Cvitanovic to be appointed. Mr Burke has secured the consent of the other two trustees and is confident he could act in cooperation with them if either was involved in the administration of Mr Coshott’s estate. Mr Burke does not suggest he could not act in cooperation with Mr Cvitanovic, but it has been pointed out that Mr Cvitanovic is not located as centrally as the other two trustees.

9    Under s 160 of the Bankruptcy Act, if at any time there is no registered trustee the Official Trustee shall be the trustee. Section 159 provides a facility whereby creditors may initiate the appointment of a trustee. The Official Trustee may also use s 181A to appoint a trustee. To this point in time no procedure has been invoked under s 181A of the Bankruptcy Act to replace the trustee. I do not doubt that the Court has power to appoint another trustee under s 180 of the Bankruptcy Act as a condition of Mr Burke’s resignation, and that I would not be obliged to leave the matter in the hands of the creditors. On the other hand, I see no sufficient basis for making a selection amongst the three trustees who have consented to act. In my view, that is a matter which should be left in the hands of the Official Trustee for the time being. The procedure which is used to select a new trustee will also be in the hands of the Official Trustee.

Costs

10    The other outstanding matter is the question of costs. I am satisfied that Mr Burke’s resignation from his position as trustee is bona fide. He was made a respondent to the present application and was required to incur costs in relation to it. The case which is now advanced against him is quite different from the earlier case which was commenced against him.

11    I am not satisfied that Mr Burke acted improperly in any of the senses which are alleged against him in the proceedings, either as commenced or as most recently maintained. The proceedings did not reach a point where any finding, however tentative, could be made to that effect. I am obliged, in my view, to assume that Mr Burke acted properly as trustee as no sufficient case has been erected to make any assumption or tentative finding to the contrary. As a result, I should proceed upon the basis that his costs were properly incurred as trustee, there being no respectable alternative basis upon which to proceed.

12    In those circumstances, I make the orders sought in the interim application filed on 15 February 2013.

Associate:

Dated:    1 March 2013