FEDERAL COURT OF AUSTRALIA

Bonberra Pty Ltd v Hawksford (Administrator), in the matter of the Estate of Hawksford [2013] FCA 838

THE COURT ORDERS THAT:

1.    The estate of the late Brett Paul Hawksford (the deceased) be administered under Part XI of the Bankruptcy Act 1966 (Cth).

2.    The applicant creditor’s costs be taxed and paid from the estate of the deceased in accordance with the Bankruptcy Act 1966 (Cth).

3.    Geoffrey Reidy of Rodgers Reidy, Chartered Accountants, of Level 8, 333 George Street, Sydney NSW 2000 be appointed as trustee of the estate of the deceased.

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

REASONS FOR JUDGMENT

1    This is a petition for the administration of a deceased estate under Part XI of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act).

2    The applicant is a creditor of the estate of the late Brett Paul Hawksford (the deceased). At the time of his death on 6 July 2009, the deceased was indebted to the applicant for the sum of $90,508 plus interest accrued and accruing in respect of a series of loans made in the period 15 March 2005 to 10 November 2008. As at 26 October 2012, the interest accrued on the loans was $97,935.86.

3    The respondents are children of the deceased. They were appointed administrators of the deceased’s estate on 13 September 2012 pursuant to an order of the Supreme Court of New South Wales (the Supreme Court) made on 31 May 2012 under the provisions of the Probate and Administration Act 1898 (NSW) (the Probate and Administration Act). The respondents oppose the petition.

background

The Hawksford family

4    The second respondent (born 19 July 1981) and his brother, Andrew Hawksford-Miller (born 21 January 1996), are the children of the deceased and Rita Miller. The first respondent (born 3 October 1990) is the child of the deceased and Judith Meers. Ms Meers resided with the deceased in a de facto relationship between 1981 and April 2002, when she moved to Queensland with the first respondent. The deceased followed shortly thereafter (in August 2002). He lived in a house not far from Ms Meers and the first respondent.

5    Following their separation, Ms Meers made a claim against the deceased under the Property (Relationships) Act 1984 (NSW) for the adjustment of property interests. Under the terms of consent orders made by the Supreme Court in 2006, the deceased was to pay Ms Meers a sum of money. That sum, together with interest, is currently claimed to be an amount in excess of $680,000.

The claims of family members

6    The deceased made a will in 1982 (the 1982 will) which provided a legacy to be given to Ms Meers ($200,000) and for the residue of his estate to be divided equally between Ms Miller and the second respondent. In April 2009, he prepared an informal document in which he sought to revoke the 1982 will and to leave the whole of his estate to Ms Meers and the first respondent. The deceased made no provision for his youngest son, Andrew.

7    In about June 2010, each of the children, Ms Miller, and Ms Meers commenced separate proceedings in the Supreme Court seeking orders under the Succession Act 2006 (NSW). Each proceeding remains on foot and is yet to be heard and determined.

8    In May 2011, the first respondent commenced a proceeding in the Supreme Court seeking her appointment as administrator of the deceased’s estate. Thereafter, the executor appointed under the 1982 will – Stuart John McDonald, the solicitor in this proceeding for the respondents – commenced a proceeding in the Supreme Court for an order that probate of the 1982 will be granted. The two proceedings were subsequently settled on the basis that administration of the deceased’s estate would be granted to the first respondent with leave granted to the second respondent to come in and apply for administration within 28 days thereafter. The second respondent duly made his application. As I have noted, letters of administration were issued on 18 September 2012 appointing the first and second respondents as joint administrators of the deceased’s estate.

9    Ms Miller has made a claim against the deceased’s estate as a creditor in the sum of $250,000. Ms Meers has made a claim against the estate as a creditor for the sum due to her as ordered in the earlier Supreme Court proceeding to which I have referred in [5] above.

Shares in Bremick

10    The parties accept that, leaving aside certain causes of action to which I will refer, the major, if not sole, asset of the deceased’s estate is represented by approximately half of the shares in Bremick Pty Limited (Bremick). It is not necessary for me to set out the complex structure of the shareholding in Bremick for the purpose of these reasons. It is sufficient for me to note that, at the time of his death, the relevant shares were either owned by the deceased or controlled by him through certain corporate vehicles and a trust. The remaining half of the shares are owned by the deceased’s brother, Michael Jeffrey Hawksford (Mr Hawksford), or controlled by him through certain corporate vehicles and a trust.

11    Bremick was incorporated in 1965. It carries on business as a manufacturer of fasteners used in the construction, manufacturing, mining and petro-chemical industries. Bremick’s business was originally conducted under the control of the deceased’s father. Subsequently, Mr Hawksford and the deceased took control of and developed the business. They worked together for 30 years until disagreements between them led to court proceedings.

12    The deceased commenced proceedings against Mr Hawksford and others in the Supreme Court in 2003, 2004, and 2008. Mr Hawksford commenced a proceeding in the Supreme Court against the deceased and others in 2005 (collectively, the Supreme Court proceedings and, respectively, the 2003 proceeding, the 2004 proceeding, the 2005 proceeding, and the 2008 proceeding).

The Supreme Court proceedings

13    The Supreme Court proceedings can be summarised as follows:

•    The 2003 proceeding was commenced by the deceased against Timothy Daley. The deceased sought orders invalidating a declaration of trust made in July 2001 and setting aside a transfer of shares in Bremick by him to Mr Daley pursuant to that trust.

•    The 2004 proceeding was commenced by the deceased and Brett Hawksford Management Pty Limited (BHM) against Mr Hawksford, Bremick, BMB Investments Pty Ltd (BMB), and Mr Daley. The deceased sought orders for specific performance of certain obligations under a shareholders’ agreement, for the retransfer of shares in Bremick by Mr Daley to the deceased (apparently duplicating relief sought in the 2003 proceeding), damages, and equitable compensation. An amended statement of claim was filed in that proceeding in 2008. The defendants filed defences and a cross-claim.

•    The 2005 proceeding was commenced by Mr Hawksford, Calm Family Investments Pty Ltd, and Heads & Threads Pty Ltd (both companies being under the control of Mr Hawksford and his immediate family) against the deceased, BHM (named as BMB Management Pty Limited), Bremick, and BMB. Mr Hawksford sought orders to call annual general meetings of Bremick and BMB or, alternatively, to authorise him to defend the 2004 proceeding and to pursue cross-claims in them on behalf of Bremick and BMB.

•    The 2008 proceeding was commenced by the deceased and BHM against Mr Hawksford, Bremick, and BMB. The deceased sought declarations that the shareholders’ agreement had been frustrated, notwithstanding that the deceased had sought to enforce that agreement in the 2005 proceeding. The plaintiffs also sought damages and orders for the determination of the value of the shares in Bremick and BMB and that the parties each have the right to bid for the other’s shares.

14    Exhibit A in this proceeding is a summary of the conduct of the Supreme Court proceedings. It is fair to say that, despite the length of time that has passed, and despite numerous interlocutory applications, the proceedings have achieved little progress in resolving the disputes between the parties.

15    It seems that, over an extended period, the Supreme Court has expressed concern about this lack of progress. The last occasion was on 4 February 2013 when Black J, sitting in the Equity Division, dismissed applications by the applicant to be joined as a party in the various proceedings. On that occasion, his Honour remarked that the applications for joinder had been brought in circumstances where, because of the lack of progress, there was a prospect that the proceedings would be dismissed for want of prosecution.

16    His Honour summarised the present applicant’s position as follows:

In this application, Bonberra relies on two affidavits of its solicitor, Mr Peter Condon, sworn 26 October and 9 November 2012. In summary, Bonberra contends that:

(a)    It is a creditor of the Estate of the late Brett Hawksford (“Estate”), in the amount of the approximately $187,000, arising from loans of approximately $90,500 made between 2005 and 2008 and interest on them.

(b)    The Estate creditors are in the order of $5-6 million and its only asset is its interest in Bremick and its choses in action in these proceedings and the continuation of the proceedings is essential to realise a reasonable market value for its interest in Bremick. I interpolate that this submission, and Bonberra’s approach to the application generally, assumed that the proceedings were likely to succeed so as to deliver a favourable result, but there was no evidence before me to support that assumption, for example, but way of current counsel’s opinion as to the prospects of the proceedings. There may be an open question whether that assumption is correct, particularly where no evidence is available from Brett Hawksford to support the claims. The proposition advanced by Bonberra that the continuation of the proceedings is essential to realise a reasonable market value for its interest in Bremick may be correct if the proceedings are likely to be successful; however it is unlikely that it would be correct if the proceedings are likely to fail. Whether the proceedings are likely to be successful or to fail, is not, as I have noted, a matter that was addressed in this evidence.

(c)    Bonberra has filed a creditors petition in the Federal Court of Australia seeking to appoint a trustee in bankruptcy to the Estate under s 244 of the Bankruptcy Act 1996 (Cth) and has obtained the consent of a number of the Estate’s creditors to that petition. Bonberra initially expected that application would be heard and a trustee in bankruptcy appointed by late February 2013; it appears there have been delays and that application is opposed by the Administrators. Bonberra advances various criticisms of the Administrators’ position in the Federal Court application, which are contested by the Administrators. I need not address those criticisms in order to determine this application.

(d)    Bonberra seeks these orders to preserve the Estate’s assets in the choses in action and its interests in Bremick which are the subject of the proceedings.

17    His Honour also observed:

As I noted above, it may be that Bonberra’s application for these orders has been prompted, in large part, by the Court’s indication of concern as to the lack of progress in the proceedings and the risk of their dismissal for want of prosecution. On the evidence now before me, it seems to me there is a strong case that, notwithstanding the lengthy period for which these proceedings have been on foot and the apparent lack of progress in them for a long period, they should not be dismissed before Bonberra has had a reasonable opportunity to have its application for an order for an administrator to be appointed to the Estate under s 244 of the Bankruptcy Act determined and, if a trustee or administrator were appointed, he or she has had an opportunity to determine to continue the proceedings or to abandon them. In that way, an objective assessment of the merits of the proceedings and whether they should be pursued is likely to be made and, if a trustee or administrator is appointed and determines to pursue them, they should then be pursued with an appropriate degree of expedition and diligence. I therefore propose to adjourn the proceedings for further directions before me, allowing sufficient time for the Federal Court to determine the application for appointment of a trustee or administrator under s 244 of the Bankruptcy Act.

18    There are some matters that should be noted in relation to the Supreme Court proceedings and the manner in which they have been conducted, as disclosed in the evidence before me.

19    First, Evangelos Patakas, from the firm Evangelos Patakas & Associates, acted for the deceased in respect of the Supreme Court proceedings. Following the deceased’s death, Mr Patakas continued to appear in the Supreme Court proceedings to seek adjournments pending the appointment of a legal representative to the deceased’s estate. His authority to do so is unclear to me. Mr Patakas has made a claim against the respondents in their capacity as administrators of the deceased’s estate, for $2 million in respect of unpaid fees and disbursements relating, essentially, to his conduct of the Supreme Court proceedings. By reference to correspondence annexed to Mr McDonald’s affidavit, it appears that no supporting fee notes, invoices for disbursements, statements of account or other supporting financial documents in respect of this claim have been provided.

20    Mr Patakas has an association with the applicant in this proceeding. The sole director of the applicant is Anastasia Patakas. Mr Patakas and Ms Patakas are brother and sister. Ms Patakas is the office manager of Evangelos Patakas & Associates and a general assistant to the professional staff in that law firm. Ms Patakas made a number of affidavits which were read in the present proceeding. However, significantly, no affidavit was made, or evidence otherwise given, by Mr Patakas in this proceeding.

21    In seeking that the deceased’s estate be administered in bankruptcy, the applicant made a number of criticisms of the respondents’ conduct in relation to the Supreme Court proceedings. Those criticisms carried, at least, the suggestion that the respondents had been dilatory. In my view, any such criticism would not be warranted on the evidence before me. The respondents’ appointment as joint administrators only took effect on 13 September 2012. The applicant’s applications for joinder as a party to the Supreme Court proceedings were filed on 26 October 2012, around six weeks after the respondents’ appointment. The respondents could hardly be criticised for dilatoriness in relation to the conduct of the Supreme Court proceedings by reason of a delay of six weeks, viewed against the very lengthy time that the various proceedings had been on foot. This is particularly so in the absence of any evidence from Mr Patakas, who had the conduct of those proceedings on behalf of the deceased and interests associated with him since at least the commencement of the 2003 proceeding.

22    In the reasons for dismissing the joinder applications to which I have referred, Black J made specific reference to the fact that no substantive affidavits by the deceased had been filed in the proceedings in the five years between commencement of the 2003 proceeding and the deceased’s death. The absence of any explanation in the evidence touching that matter in the present proceeding, when some explanation could readily have been given, is a matter of disquiet. Be that as it may, no complaint of dilatoriness, as such, can be laid at the feet of the respondents. Had delay in the conduct of the Supreme Court proceedings been a matter of significant concern for the applicant, it was open to it to present its petition for the appointment of a trustee in bankruptcy in relation to the deceased’s estate much earlier than it did. As I have noted, the deceased died on 6 July 2009. There was no evidence from the applicant as to why it only sought to commence the present proceeding on 29 October 2012, just three days after it filed its joinder applications in the Supreme Court proceedings.

23    Secondly, there is no evidence before me as to the prospects of success of the 2003 proceeding, the 2004 proceeding or the 2008 proceeding, beyond that touched on by Mr McDonald, or the value of those proceedings to the deceased’s estate, assuming success. A similar observation was made by Black J in his Honour’s disposition of the joinder applications in the Supreme Court proceedings: see the quotation in [16] above.

24    In his affidavit, Mr McDonald, as solicitor for the respondents, gave evidence concerning his appraisal of the Supreme Court proceedings. His view is captured in the following paragraph of his affidavit, which was admitted as submission only:

Those Supreme Court proceedings have remained on foot for almost 10 years without resolution. They were brought by the deceased against his brother, Michael, Tim Daley and related companies in 2003 and 2004 essentially concerning control of Bremick and management issues and a claim of entitlement reliant upon the terms of the Shareholders Agreement of 1991 to a declaration of a dividends as opposed to Michael’s assertion that circumstances at those times made it appropriate for Bremick to retain its profit having regard to adverse conditions to which he alludes. Brett’s death and consequent control to Michael by virtue of survivorship via 27 jointly held shares in BMB appears to answer the control and management issue under consideration. The 2008 proceedings have not advanced beyond issue of the proceedings.

25    Mr McDonald said that Mr Patakas provided him with an 89-page draft affidavit, which was apparently prepared in June 2008 for the deceased. Mr McDonald said that the draft was incomplete and alluded to events in the 1990s. It contained notations addressed to “EP” – which Mr McDonald assumed had been made by counsel – requesting additional material. Mr McDonald said that Mr Patakas gave him a folder of material relating to the Supreme Court proceedings. He said that Mr Patakas also gave him two additional folders, which Mr Patakas described as being “the essential case”. The documentary material comprises approximately 1,600 pages. Mr McDonald was cross-examined on his understanding of this material. It is a fair summary to say that he was unimpressed by it. The following exchange occurred:

Is it correct from what I understand from your earlier evidence - and correct me if I'm wrong - that you don't have a full understanding of all the available evidence, and the past history of the matter, in respect of those Supreme Court proceedings to make a fully informed view about me?---I'm not sure. For - Mr Patakas indicated to me there was a folder of documents I needed to see, which he provided later in 2012. He also indicated there were - other two folders which I was provided with in January 2013. He put those to me as being the essential case and the vital information to be seen to determine the merit. I had on no less than four or five occasions requested that he provide me with a statement as to his opinion of the merit, and he has provided me with mixed statements, but he did provide those folders, and I looked at them and I found nothing bearing on - on the - the pleadings of interest related to matters in the 1990s. Nothing - I think there was only one - one or two pages, or three pages, relating to an event of 2003. And so when you ask me that question I can only say that I did rely on Mr Patakas to provide what he considered to be the vital evidence that would sway one to come to his conclusion, and I found absolutely nothing there that would come to that. So there was an 89 page draft affidavit that essentially related things of the 1990s and early 2000-odd. It was only a draft affidavit and there has - there has been no - it's not just the merit. It was also the total absence of any affidavit material filed for the deceased, or by the deceased, in those proceedings in relation to the substantive matters. So there was nothing shown to me by Mr Patakas that in any way demonstrated any support for the claims. There were interlocutory applications, and there was evidence in relation to those, but that's a different matter of course to the primary proceedings, and in the absence of any evidence at all provided by the person who was conducting it for all those years provided - and providing to me what he determined to be the vital and important evidence, I didn't take long to come to that conclusion. He has also indicated to me that he has got I think it's 12 boxes of files, but that hasn't been put forward as a - well, I - I haven't gone to those for the reason that I haven't had guidance, and clearly he would - one would think with his - his claim for costs he would find it in his own interest to give further guidance, but he has - he has provided me with those three folders and when I looked at those I thought, well, if they're the best the others can't be much.

26     Thirdly, since about 9 October 2012, shortly after their appointment as joint administrators, the respondents and Mr Hawksford have been engaged in discussions with a view to resolving the Supreme Court proceedings. Mr McDonald gave this evidence in his affidavit:

The Administrators wish to settle the Supreme Court proceedings, have the assurance the Estate will not be exposed to an adverse cost order should the proceedings be dismissed for want of prosecution, preserve their position in terms of shareholder rights of sale in Bremick, proceed to consider Creditor claims and, with the removal of the Supreme Court proceedings proceed to take steps to realise the sale of shares in a company that does not carry the burden of litigation.

27    Mr McDonald has stated that an agreement in principle has been reached between the respondents and Mr Hawksford for the resolution of the Supreme Court proceedings. There is no admissible evidence as to the terms of that agreement.

28    Fourthly, the respondents have not sought to be joined as parties to the Supreme Court proceedings. When the joinder applications in the Supreme Court were heard, they were granted leave to appear on that occasion. Mr McDonald accepted in cross-examination in this proceeding that one reason why the respondents had not sought to be joined as parties to the Supreme Court proceedings is that they do not wish to be exposed to an adverse costs order.

Major creditors

29    In addition to the applicant’s, Mr Patakas’, Ms Miller’s, and Ms Meers’ respective claims to which I have already referred, Fabtek Finance Pty Ltd (Fabtek) claims about $750,000 against the deceased’s estate in respect of loans made to the deceased. Eclipse Engineering Sales Pty Ltd (Eclipse) claims an amount of approximately $606,000, also in respect of loans made to the deceased. There is a question as to whether all these monies are owed to Eclipse and whether some part is owed to Charles Pearce, one of the two directors of the company. It is not necessary to resolve that question in the present proceeding. There is evidence that Eclipse and another creditor, Bradfield & Scott (a firm of solicitors claiming $7,000) support the applicant’s petition. There is no evidence concerning Fabtek’s attitude to the present proceeding. There is evidence that Ms Meers initially supported the applicant’s petition, although I was informed by counsel for the respondents that that support no longer exists.

legal requirements

30    Section 244 of the Bankruptcy Act relevantly provides:

(1)    Subject to this section, where:

(a)    a debt of not less than $5,000 was owing by a deceased person at the time of his or her death to a creditor, or debts amounting in the aggregate to not less than that amount were so owing to any 2 or more creditors;

(b)    …

(c)    …

the creditor or creditors to whom the debt or debts is or are owing may present a petition to the Court for an order for the administration of the estate of the deceased person (in this section referred to as the deceased debtor) under this Part.

(2)    Subject to subsection (3), a secured creditor shall, for the purposes of subsection (1), be deemed to be a creditor only to the extent, if any, by which the amount of the debt owing to him or her exceeds the value of his or her security.

(3)    …

(4)    …

(5)    A petition under this section shall be verified by the affidavit of a person who has knowledge of the facts.

(6)    A petition under this section shall not be presented unless:

    (a)    the debt, or each of the debts, in respect of which it is presented:

(i)    is a liquidated sum due at law or in equity or partly at law and partly in equity; and

        (ii)    is payable immediately or at a certain future time; and

    (b)    at the time of his or her death, the deceased debtor:

        (i)    was personally present or ordinarily resident in Australia;

        (ii)    had a dwelling house or place of business in Australia;

(iii)    was carrying on business in Australia, either personally or by means of an agent or manager; or

(iv)    was a member of a firm or partnership carrying on business in Australia by means of a partner or partners, or of an agent or manager.

(7)    ...

(8)    ...

(9)    Subject to subsection (10), a sealed copy of the petition shall be served upon the legal personal representative of the deceased debtor or, if there is no legal personal representative, upon such person as the Court directs.

(10)    …

(11)    At the hearing of the petition, the Court shall require proof of:

(a)    the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);

(b)    service of the petition, unless service of the petition has been dispensed with; and

(c)    the fact that the debt or debts to which the petition relates is or are still owing;

and if it is satisfied with the proof of those matters, may make an order that the estate be administered under this Part.

(12)    If the Court is not satisfied with the proof of any of those matters or is of the opinion that for other sufficient cause the order sought ought not be made, it may dismiss the petition.

(13)    Where proceedings have been commenced in a court for the administration of a deceased person’s estate under a law of a State or Territory, a petition for an order under this section in relation to the estate shall not be presented by a creditor except by leave of the Court and on such terms and conditions (if any) as the Court thinks fit.

(14)    ...

(15)    ...

31    The respondents initially sought to oppose the making of an order under s 244 on three bases, which it particularised as “insolvency” (sic, solvency), “abuse of process”, and “other sufficient reasons”. Prior to the hearing of the petition, the respondents abandoned “abuse of process” as a ground of opposition.

32    There is no dispute that the formal requirements for making an order under s 244 have been met. The applicant is a creditor to whom a debt of not less than $5,000 was owing by the deceased at the time of his death, who is entitled to present a petition to the Court for the administration of the deceased’s estate under Part XI of the Bankruptcy Act: s 244(1)(a). The petition has been verified: s 244(5). The preconditions of s 244(6) have been satisfied. Service of the petition has been effected as required by s 244(9). The requirements of proof specified in s 244(11) have been satisfied. The only issue is whether, as a matter of discretion, an order under s 244 should or should not be made: s 244(11) and (12).

33    The relevant discretion has been described as broad: Estate of Hancock (Deceased) v Bennett (Executor) [1999] FCA 295 at [59]. The language of s 244(11) makes clear that satisfaction of the requirements of that provision is sufficient to enable an order to be made although, plainly, the Court retains a discretion as to whether such an order should be made. Section 244(12) provides that, if the Court is not satisfied with the proof of any matter identified in s 244(11) or is of the opinion that “for other sufficient cause” an order ought not to be made, it may dismiss the petition. Considered alone, s 244(12) could be taken as suggesting some predisposition to the making of an order in the event that other sufficient cause is not shown.

34    Subsections 244(11) and 244(12) must, however, be read together in order to appreciate the true scope of the discretion to make an order or to dismiss the petition. In Meinhardt (Hong Kong) Ltd v William Lindsay Meinhardt (Deceased) & Ors (No 2) [2006] FCA 1323, Jessup J at [51] preferred the view that the discretion was an open one that should not be guided by a predisposition to make an order unless sufficient cause to the contrary is demonstrated. I respectfully agree with that view. However, an acceptance of that view does not gainsay the different proposition that it is for the party seeking the dismissal of a petition on the basis of “other sufficient cause” to establish the existence of that cause and its sufficiency.

35    Although not a precondition to the making of an order under s 244, it is nevertheless recognised that insolvency, if established, may be a most important matter to take into account in an appropriate case in exercising the discretion: Hancock at [59]. Although alleging solvency, the respondents have not established that the deceased’s estate is solvent, whether that question is considered from the perspective of s 46C(3) of the Probate and Administration Act or s 5(2) and (3) of the Bankruptcy Act. There is no evidence of the value of the deceased’s shareholding or economic interest in Bremick and there is no evidence of the value to the estate of the Supreme Court proceedings if pursued to a successful completion. The available evidence suggests that it is likely that the deceased’s estate is insolvent. There is no evidence of the deceased’s estate having any income or readily available assets to pay debts as and when they become due and payable.

consideration

The parties’ submissions

36    The respondents’ case in opposition to the petition can be distilled to the central proposition that, whether the deceased’s estate is solvent or insolvent, it can be appropriately and more cheaply administered by the respondents under s 46C of the Probate and Administration Act than by a trustee through administration in bankruptcy under Part XI of the Bankruptcy Act.

37    Plainly, the respondents have no desire to continue the Supreme Court proceedings. It is tolerably clear that they have formed the view that those proceedings are of no material value to the deceased’s estate. With this in mind, they do not wish to take any step that would expose them or the deceased’s estate to adverse costs orders. They wish to compromise those proceedings on terms that have not been fully articulated to the Court. Only then, and for that purpose, does it seem that they would seek to be joined as parties to those proceedings.

38    The respondents acknowledge that the suite of powers and established procedures available to a trustee in an administration under Part XI of the Bankruptcy Act are more extensive than those currently available to them. They question, however, the need for and utility of those powers in the present case. For example, they point to an absence of suggestion that there are transfers of property that would be recoverable under the anti-avoidance provisions of s 120 to s 122 of the Bankruptcy Act. They query the extent to which the powers of examination under s 81 of the Bankruptcy Act can now be properly deployed to investigate the merits of continuing with the Supreme Court proceedings: Karounos and Others v Official Trustee (1988) 19 FCR 330 at 335-336.

39    The respondents also submit that there is no real suggestion of impropriety or inappropriate behaviour on their part. They submit that the imposition of a trustee in bankruptcy over their present administration of the deceased’s estate will substantially increase the costs of the general administration of the estate.

40    The applicant accepts that the appointment of a trustee in bankruptcy will increase the costs of administering the deceased’s estate. Nevertheless, the thrust of its submissions is that this cost is justified in order that a potentially valuable asset of the estate – represented by at least some of the causes of action in the Supreme Court proceedings as commenced by the deceased – is not effectively abandoned or, alternatively, lost through want of prosecution. It submits that, by making an order under s 244, an independent person will be entrusted to review the Supreme Court proceedings and to make a determination as to their true merits, so that they can be prosecuted or resolved in a way that will be in the interests of all unsecured creditors and claimants on the estate.

41    In this connection, evidence has been given by Geoffrey Reidy, a chartered accountant and registered trustee in bankruptcy, who has consented to be appointed as trustee if an order under s 244 is made. Mr Reidy has given an overview of the steps he would carry out to investigate the viability of the Supreme Court proceedings. He has provided an estimate of costs involved. He has said that Mr Patakas has offered to provide his and counsel’s advice in relation to the Supreme Court proceedings as part of the realisation of the estate’s assets on the basis that his and counsel’s fees (estimated at $15,000 to $20,000 plus GST) will be paid out of the estate’s assets on realisation. He has also said that he will consult another solicitor, who he uses in other bankruptcy matters, to provide a general overview, as opposed to a detailed opinion, in respect of the opinions given by Mr Patakas and counsel, and to consider other courses available for the realisation of the estate’s assets. He has estimated those costs to be approximately $10,000. The applicant has agreed to fund those costs on the basis that the funds provided are treated as a cost of the administration of the estate and will be repaid to it in priority to the claims of other creditors and beneficiaries. Mr Reidy has estimated that his fees for the general administration of the deceased’s estate (not including fees and costs in relation to any aspect of the Supreme Court proceedings for the realisation of the estate’s assets or investigation into creditors’ claims) to be approximately $20,000. The applicant has agreed to fund those costs, on the same basis. Mr Patakas has also agreed to contribute, pro rata to the debt he claims, to Mr Reidy’s fees, if appointed.

42    Mr Reidy said:

As a general observation it appears to me (without knowing any of the underlying reasons) that the Supreme Court proceedings have gone on for a considerable period of time without final resolution because of the number of claims and counter claims made by the parties. I understand that there is potentially a resolution available. If appointed as trustee, I would want to consider, investigate, obtain legal advice on, and understand the potential benefit, if any, of any proposed settlement for unsecured creditors and beneficiaries of the Estate. I would seek further information regarding the affairs and value of Bremick, which may include an independent opinion as to value.

43    A notable omission from the applicant’s evidence in support of the petition is any evidence from Mr Patakas who could have given evidence, at least in general terms, not only about the other matters to which I have referred (see [19]-[22] above) but also about the merits and prospects of success of the Supreme Court proceedings. As the respondents put it in their written submissions, Mr Patakas is clearly in the applicant’s “camp”. On the other hand, I do have the benefit of Mr McDonald’s general appraisal. His evidence suggests that the continuation of the Supreme Court proceedings might not be of any material value to the deceased’s estate.

Conclusion

44    In all the circumstances, I am persuaded that an order should be made and that Mr Reidy should be appointed as trustee.

45    First, an independent appraisal should be undertaken of the Supreme Court proceedings to see whether they are meritorious and can, and should, be pursued with the reasonable expectation that they will result in a material contribution to the available assets of the deceased’s estate. There is no evidence to suggest that Mr Reidy would not provide, or would be unable to provide, that independent appraisal. No doubt he will be mindful of the very little progress that has been achieved in those proceedings to date and would be astute to understand why that is so – in particular, whether the lack of progress reflects a lack of merit.

46    In coming to this conclusion, I do not wish to be taken as impugning, in any way, the integrity of the respondents or the competence of their own legal representation. It is clear, however, that a full appraisal of the merits and prospects of the Supreme Court proceedings has not been undertaken. That has not been possible, despite the steps taken by the respondents to date to reach a more informed view on those matters.

47    Secondly, I note that there are existing orders in the Supreme Court proceedings to the effect that any application filed by any party regarding the discontinuance or dismissal of the proceedings be served on the applicant’s solicitors not later than seven days before the return date of the application, so that the applicant will have an opportunity to seek to be heard on that application. Given the disagreement in the present proceeding between the applicant and the respondents as to how the Supreme Court proceedings should be managed as part of the deceased’s estate, there is a significant potential for that dispute to remain and lead to further litigation – particularly should the respondents proceed to settle the Supreme Court proceedings on a basis that reflects their own appraisal of them. This can be avoided by the appointment of an independent party as trustee who can take such action as is considered necessary in the interests of all unsecured creditors and claimants on the estate to bring the proceedings to an end or, if warranted in all the circumstances, to prosecute them with diligence.

48    Thirdly, absent such an appointment, and given the respondents’ reluctance to be joined as parties, I am satisfied that there is a real risk that the Supreme Court proceedings would remain vulnerable to dismissal for want of prosecution, putting at risk what might be shown on independent investigation to be a valuable asset of the deceased’s estate.

49    Fourthly, I am mindful that the interests of claimants on the deceased’s estate, including the interests of the respondents themselves, may not necessarily coincide with the interests of the estate’s creditors. At least on one basis, there is a real likelihood that the estate is insolvent. There is evidence that some substantial creditors support the making of an order. There is no evidence of any specific opposition by any particular creditor to the making of an order. The Court must be confident that the interests of creditors of the estate will be adequately protected.

Disposition

50    Orders as sought by the applicant should be made.

Associate:

Dated:    20 August 2013