Allen, in the matter of Allen [2020] FCA 376

MURPHY J: 1 The applicants, Mr Paul Anthony Allen, Ms Joanne Emily Dunn and Ms Kelly-Anne Lavina Trenfield, seek orders under ss 180 and 183 of the Bankruptcy Act 1966 (Cth) (the Bankruptcy Act) and section 90-15 of Schedule 2 to the Bankruptcy Act for their removal as trustees appointed to certain bankrupt estates, and in one case, their replacement by another of the applicants. 2 Together the applicants were appointed as trustees of 25 bankrupt estates. They seek the orders because Mr Allen is resigning from his position as a Managing Director in the employ of FTI Consulting (Australia) Pty Ltd (FTI), to take up a new position as a partner of PKF Melbourne (PKF). By agreement with FTI, his employment with FTI will cease upon the Court making the orders sought in the application. 3 In the bankrupt estates from which Mr Allen proposes to resign as trustee, he will either be replaced by Ms Trenfield in joint trusteeship with Ms Dunn, or Ms Trenfield will remain as sole trustee, with the file staying at FTI. In the other bankrupt estates, one of Ms Dunn or Ms Trenfield proposes to resign as trustee and Mr Allen is proposed to remain as sole trustee, and conduct that file from his new position at PKF. 4 I heard the application on 5 March 2020 and required the applicants to notify the petitioning creditor in each of the relevant bankrupt estates and to put on evidence as to any objection. The applicants notified the petitioning creditors by correspondence of 5 March 2020 and I made orders on 13 March 2020 to allow the various resignations and appointments set out in a schedule to the order. I now provide my reasons for doing so.

Relevant principles 5 Sections 180 and 183 of the Bankruptcy Act provide as follows: s 180 Resignation of trustee The Court may, subject to such terms and conditions as it thinks just, accept the resignation of a registered trustee from the office of trustee of an estate. s 183 Release of registered trustee by the Court (1) A trustee may apply to the Court for an order of release from the trusteeship of an estate. (2) Where the Court is satisfied that the trustee: ... (c) has resigned or has been removed from office; the Court may make the order sought. (3) In hearing the application, the Court must also consider any objection to the order sought that is made by the Inspector‑General, the Official Receiver, a creditor or any other interested person. (4) An order of release under this section: (a) discharges the trustee from all liability in respect of any act done or default made by him or her in the administration of the estate of the bankrupt; and (b) if the trustee has not already resigned or been removed from office, operates to remove him or her from office. (5) An order of release under this section may be revoked by the Court on proof that it was obtained by fraud or by suppression or concealment of a material fact. ... 6 Rule 8.02 of the Federal Court (Bankruptcy) Rules 2016 (Cth) (the Bankruptcy Rules) requires an application under ss 180 or 183 of the Bankruptcy Act to be accompanied by an affidavit stating the grounds in support of the application. Subrule 8.02(4) requires that the application and the affidavit be served on: (a) the Official Receiver; (b) the bankrupt; and (c) anyone else (including a creditor) as ordered by the Court. 7 Section 90-15 of Schedule 2 to the Bankruptcy Act empowers the Court to make such orders as it thinks fit in relation to the administration of a regulated debtor's estate.

Resignations and appointments 8 Each of the applicants depose that the common practice of FTI was for two trustees to be appointed to bankrupt estates, where possible, so that when one of the trustees was absent from the office for any reason, the other trustee could conduct the business of the estate in their absence. Following Mr Allen's resignation from FTI, there were discussions between him and the other Managing Directors as to the estates to which he had been appointed. It was decided that: (a) Mr Allen would resign as trustee of the bankrupt estates set out in Schedule 1 of Annexure A to the orders, and: (i) in the estate of Paul Fridman be replaced by Ms Trenfield who is appointed jointly and severally with the remaining trustee, Ms Dunn; and (ii) in the estate of Angela and Harmut Frigger Ms Trenfield would remain the sole trustee; (b) Ms Dunn would resign as one of the two trustees of the bankrupt estates set out in Schedule 2 of Annexure A to the orders, and Mr Allen would remain the sole trustee; (c) Ms Dunn would resign as one of the two trustees in the bankrupt estates set out in Schedule 3 of Annexure A to the orders, and Mr Allen will remain the sole trustee. 9 As a result, Mr Allen would no longer share joint trusteeship with Ms Dunn or Ms Trenfield of the bankrupt estates listed in the schedules in Annexure A. To facilitate the changeover in trusteeship, the applicants also agreed a plan for the steps for the transfer of files and documents and for notification to the bankrupts and creditors of the change in appointees.

Dispensation with notice requirement 10 As noted above, r 8.02 of the Bankruptcy Rules requires that the application and the affidavit must be served on the Official Receiver, the bankrupt, and anyone else ordered by the Court. 11 The Australian Financial Security Authority (ASFA) is the Official Receiver and the applicants served the application and affidavits in support on ASFA by correspondence dated 18 February 2020. AFSA acknowledged receipt and took no other step. It did not raise any objection to the proposed resignation and replacement of trustees. 12 The applicants deposed that the 25 bankrupt estates have a combined total of at least 206 creditors, and the process of serving the application and affidavits on all bankrupts and creditors would be an unnecessary, costly and timely endeavour. I was satisfied that it was appropriate to dispense with the requirements of r 8.02, pursuant to r 1.34 of the Federal Court Rules 2011. But I considered it appropriate that the petitioning creditors be notified of the application so that they could be heard if the wished. Accordingly I adjourned the application to 13 March 2020 so notification could occur. I note that in Nixon, in the matter of Nixon [2015] FCA 976 at [19]-[25] and Nixon, in the matter of Nixon (No 2) [2015] FCA 1047 (together, Nixon), coincidentally a case which involved the applicants in the present case, Edelman J took the same view. 13 Further, while the applicants proposed to pay the costs of the application, I consider it appropriate to also order that the costs associated with the new appointee familiarising themselves with the estate, the costs of providing any applicant with information regarding this proceeding or the resignation or appointment of a trustee, and the costs of notifying the petitioning creditor and any incidental costs, be met by the applicants, rather than paid from the bankrupt estate. The applicants did not resist that order. 14 On 5 and 6 March 2020, Mr Adam Ayliffe of Lewis Holdway Lawyers, the solicitors for the applicants, sent a letter by email to the petitioning creditors of each of the relevant bankrupt estates, notifying them of this proceeding and that the application was returnable on 13 March 2020. Mr Ayliffe received notification from three legal firms that the correspondence had not been delivered or would not be read by the intended recipient for various reasons, and he resent the emails to addresses published on the firms' website or to the address notified in the notification email. None of the petitioning creditors raised any objection to the proposed resignation and replacement of trustees.

Conclusion 15 In the circumstances I was satisfied that it was appropriate to make the orders sought, as amended. I certify that the preceding fifteen (15) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Murphy.