Clout (Trustee), in the matter of Warren (Bankrupt) v Warren

LOGAN J: 1 Ms Alexia Margaret Warren (Ms Warren) was once a solicitor. She is presently a bankrupt. 2 There are two applications before the Court. One is an application under s 146 of the Bankruptcy Act 1966 (Cth) by the trustee of Ms Warren's bankrupt estate, Mr D.L. Clout, for orders which would permit the declaration of dividends in respect to creditors in respect of the administration of the bankrupt estate, notwithstanding a failure on the part of Ms Warren to file a statement of affairs. That application is made in QUD 274 of 2022 (QUD 274). It was filed on 5 August 2022. 3 The other application before the court, also filed in QUD 274, is an application by Ms Warren for the following orders on what is said to be an interim basis: 1. Pursuant to Rule 41.03 of the Federal Court Rules, or otherwise in accordance with the governing Act and Rules, this Honourable Court stay the Order of His Honour Judge Vasta made in the Federal Circuit Court in BRG 1033/2015 on 5 February 2016, and dated Orders of His Honour Justice Rangiah in the Appeal therefrom to the Federal Court in QUD 165/2016, or be stayed pending determination of the applications herein. 2. Pursuant to Rule 39.05 Federal Court Rules, or otherwise in accordance with the governing Acts and Rules, the Court set aside the Order of His Honour Judge Vasta dated 5 February 2016 in BRO 1033/2015 and Orders dated 22 September 2015 and 22 October 2015 in BRG 632/2015, and Order of His Honour Justice Rangiah dated 12 July 2018, or otherwise allow the appeal to set aside the Bankruptcy Order against Applicant Respondent, or otherwise annul the Order dated 6 February 2016, as obtained in the absence of the Applicant Respondent or by fraud, or collusion, or not fairly obtained, or to otherwise to mislead the Court; and the judgment debt on which Orders referred to were obtained was not owing by the Applicant Respondent. 3. The law firm, Messrs Cowen Schwarz Marschke, Lawyers cease to act or otherwise be removed as Solicitors for the Applicant due to being in a position of conflict of interest. 4. The Application of David Lewis Clout, filed by Messrs Cowen Schwarz Marschke on 5 August 2022 be stayed pending determination of the applications herein. 5. Directions for the further conduct of the proceedings. 6. Such further and other Orders as this Honourable Court deems fit. [sic] 4 The two applications were, by an order which I made on 1 February 2023, ordered to be heard together. 5 Each proceeding has its origins in the cancellation in June 2011 by the Queensland Law Society (the Society) of Ms Warren's practising certificate. As it emerges from reasons delivered by Alan Wilson J in the Queensland Civil and Administrative Tribunal (QCAT) in Warren v Queensland Law Society Incorporated [2013] QCAT 115, the background to that cancellation in June 2011 was this. 6 Ms Warren's practising certificate was cancelled by a decision made on 22 June 2011 because of her failure, since about mid-August 2009, to pay $22,500 owed to her professional indemnity insurer. That debt was a sequel to a claim against her by a former client whose action for damages for personal injury had been struck out and, in turn, a particular premium amount being payable to the professional indemnity insurer. After she received notice of the cancellation, Ms Warren promptly paid that sum. She was then granted a practising certificate for the 2011/2012 year, as from 1 July 2011. 7 There was a period of some few days when she was without a certificate. Before QCAT, Ms Warren had sought an order that the Society's decision to cancel be declared invalid and set aside. As Alan Wilson J's reasons reveal, his Honour was satisfied that her failure to pay the deductible and the penalty levy, which I have termed the premium, demonstrated qualities of a kind that called for a conclusion that: While she was in default, she was not a fit and proper person to hold a practising certificate and thus, that the application to review the Society's decision should be dismissed. 8 Those reasons also reveal that his Honour made provision for submissions in respect of costs. It further emerges from bankruptcy proceedings in the then Federal Circuit Court of Australia (Federal Circuit Court), Warren v Queensland Law Society Incorporated [2015] FCCA 2572, before Judge Vasta that, on 23 May 2013, Alan Wilson J determined a costs application which had been made by the Society and made an order directing that costs be paid by Ms Warren, as assessed by reference to the Supreme Court of Queensland scale under the Uniform Civil Procedure Rules 1999 (Qld) by Mr Paul Garrett of Hickey and Garrett, legal cost consultants. 9 On 19 December 2014, Thomas J, in his then capacity as President of QCAT, in succession to Alan Wilson J, ordered that the costs of the proceedings before QCAT be fixed in the amount of $59,025.34, payable by Ms Warren to the Society. It is convenient to term that order, 'the QCAT judgment': see Warren v Queensland Law Society Inc [2016] QCAT 310; Warren v Queensland Law Society Incorporated [2015] FCCA 2572, at [5]. On 12 May 2015, as is permitted by the legislation governing QCAT, the Society registered the QCAT judgment with the Magistrates Court of Queensland. 10 Thereafter, the Society obtained a bankruptcy notice based on the QCAT judgment as registered and served the same on Ms Warren. That bankruptcy notice was obtained and served in June 2015. Ms Warren applied to the Federal Circuit Court on 9 July 2015 in what became proceeding BRG 632 of 2015 to set aside that bankruptcy notice. On 22 September 2015, that application by Ms Warren was dismissed by the Federal Circuit Court (Judge Vasta). The following month, on 22 October 2015, in that same proceeding, BRG 632 of 2015, his Honour made an order that Ms Warren pay the Society's costs in the sum of $41,571.75. 11 On 5 November 2015, in Queensland Law Society v Warren, BRG 1033 of 2015, the Society presented a creditor's petition in the Federal Circuit Court seeking the making of a sequestration order against the estate of Ms Warren. The petition was grounded on a failure by her to comply with the bankruptcy notice to which I have earlier made reference or otherwise to satisfy a court having jurisdiction in bankruptcy that she had a settled or cross-claim or demand. That petition was adjourned but came on for final hearing before Judge Vasta on 5 February 2016. On that date, his Honour made a sequestration order against the estate of Ms Warren: see Queensland Law Society Incorporated v Warren [2015] FCCA 3563. 12 It will be obvious from the orders that Ms Warren seeks in the so-called interim application that the Society, as petitioning creditor, was always a required respondent to her application. As filed by Ms Warren, that application named only her trustee, Mr Clout, and a firm of solicitors which acted for the trustee, Messrs Cowen Schwarz Marschke. On 1 February 2023, I directed that the interim application and supporting material be served on the Society. In the result, the Society has appeared by counsel on the hearing of Ms Warren's application. 13 Although it had lodged a proof of debt with the trustee and was aware of the application made by the trustee, the Society did not choose to become a respondent in the trustee's s 146 application. I should however note that the Society did state in court that it did not oppose the application made by the trustee. Ms Warren, on the other hand, most emphatically did oppose that application. The foundation for her opposition was set out in her so-called interim application to which I have already made reference. Given that particular application by her is aptly characterised as reactive to the trustee's s 146 application, in the circumstances, it seemed to me in the interests of justice, to hear the two together. On 1 February 2023, I made orders adapted to that end. 14 Ms Warren's material in support of her application and in answer to the trustee's application consists of two affidavits: one filed by her on 1 March 2023 in QUD 165 of 2016 (QUD 165); the other filed on 28 October 2022 in QUD 274. The parties were agreed that evidence relied upon in QUD 165 should be treated as also relied upon in QUD 274 and vice-versa, to the end that the evidence would be considered both with respect to the trustee's application and the respondent's opposition thereto, as well as in respect of Ms Warren's so-called application for interim orders. 15 In addition, and apart from affidavits filed in QUD 165, the Society relied upon affidavits filed in the Federal Circuit Court in the application to set aside the bankruptcy notice, as well as on the hearing of the creditor's petition. Ms Warren also made reference to these. They particularly included an affidavit made by Mr Richard Handcock, filed on 22 September 2015 in BRG 632 of 2015, the affidavits read in support of the creditor's petition, of which Mr Handcock's affidavit filed on 4 February 2016 and, even more so, the affidavit of Bronwyn Jane Neroni filed on 4 February 2016, each in BRG 1033 of 2015, featured prominently in submissions. 16 Before proceeding further, it is necessary to supplement the chronology already offered. As noted, the sequestration order was made on 5 February 2016. On 26 February 2016, Ms Warren filed, in this court, a notice of appeal against that order. That became QUD 165. On 5 April 2016, in QUD 165, Rangiah J made interlocutory case management orders in respect of the appeal to the end of the listing of the appeal on a date to be fixed during the court's Full Court and appellant sitting period of 1 to 23 August 2016. 17 On 4 May 2016, his Honour made orders which extended to dates for compliance, as fixed by the earlier order. Materially, for present purposes, his Honour also awarded: In the event that [Ms Warren] fails to comply with any of the orders on 5 April 2016, as amended by these orders, then: (a) the appeal will stand dismissed without further order; and (b) the appellant pay the costs of the appeal without further order. 18 The evidence before me is that there was no compliance by Ms Warren with the orders of 5 April 2016, as varied on 4 May 2016. On 9 May 2016, Ms Warren filed an interlocutory application in QUD 165. That sought a stay of the execution of the sequestration order. In the result, apparently because the appeal was treated as dismissed per force of the guillotine order made on 4 May 2015, that application was not heard and determined. 19 On 15 June 2018, Ms Warren filed a further interlocutory application in QUD 165. She sought, by that application, the following orders: 1. Pursuant to Rule 41.03 Federal Court Rules, the Court stay the Order of Federal Court dated 23 May 2016 and Rule 41.11, the enforcement thereof, 2. Further, or in the alternative, pursuant to Rule 41.66 Federal Court Rules or otherwise in accordance with the Rules, the Court set aside or stay the enforcement of the judgment of Federal Court of Australia at Brisbane dated 23 May 2016 and the Appeal filed 26 February 2016 be reinstated. 3. Pursuant to Rule 41.03 Federal Court Rules or otherwise in accordance with the Rules, the Court stay all proceedings and Orders made under the Sequestration Order dated 5 February 2016 pending determination of this application or further order; 4. Pursuant to section 153B(1) Bankruptcy Act 1966 Cth, the Sequestration Order dated 5 February 2016 be annulled as ought not to have been made; 5. Such further and other Orders as this Honourable Court considers appropriate. 20 On 12 July 2018, Rangiah J ordered that that application be dismissed. The interlocutory application which Ms Warren had filed on 15 June 2018 was, on its face, returnable on 12 July 2018. Ms Warren admitted in the present proceedings that she had failed to appear on 12 July 2018. Inferentially, the basis for dismissal was a failure to appear. There, matters rested for over four years until, as I have mentioned, Ms Warren filed what I regard as a re-active application to the trustee's section 146 application. 21 Ms Warren sought the adjournment of the hearing when the proceeding was called-on yesterday. I decided to refuse that adjournment application. Ms Warren sought time to complete the gathering of evidence from the QCAT file. She also made reference to a medical certificate annexed to her more recent affidavit. That medical certificate was furnished by Dr J. Ryan of Wishart Family Medical Practice and is dated 22 February 2023. In that certificate, Dr Ryan opines that Ms Warren: ... will be unfit for her normal work from 22 February 2023 to 24 February 2023, inclusive. There was no more recent medical evidence as to Ms Warren's condition; only assertions from the bar table. Indeed, assertions from the bar table featured prominently in what I heard from Ms Warren. That apart, the two affidavits upon which she relied might, in my respectful view, be described as a farrago of fantasies; fantasies in the sense that there are statements in those affidavits which lack evidentiary foundation or give secondary evidence as to contents of documents which are apparently still in existence and in turn are coupled with argumentative rhetoric. 22 In my view, there was yesterday and remains nothing which might give rise to any reasonable expectation that any adjournment would result in the gathering of any evidence of any materiality. There was no explanation offered by Ms Warren, by evidence, for over four years of inaction following the dismissal on 12 July 2018 of her application in QUD 165. Nor for that matter was there any evidence of action between 2016 when her appeal was dismissed per force of the guillotine order and when she filed, in June 2018, her application in QUD 165. It seemed to me, and still does, that insofar as documentary evidence is relevant, it had been placed before the Court at the times when the application to set aside the bankruptcy notice was heard and determined and, later, at the time when the creditor's petition came on finally for hearing. 23 I note that there never was an application by Ms Warren to appeal against the order refusing to set aside the bankruptcy notice. 24 Also of relevance, in my view, in relation to the refusal of the adjournment was the prejudice that would be occasioned by the adjournment, both to the Queensland Law Society, a creditor in the bankruptcy, and to other creditors. Necessarily, an adjournment would see particular costs of appearance in respect of the dates fixed for hearing thrown away. Ms Warren did not offer to pay those costs; much less did she offer any evidence of any ability whatsoever to pay such costs. 25 It is evident from the application made by the trustee under s 146 that the dividend which might otherwise have flowed to creditors is, in all likelihood, a dividend much diminished by costs necessarily incurred by the trustee in reacting to Ms Warren's conduct. Those costs would only have further been increased by an adjournment. Also taken into account by me was that there was a period of some two-and-a-half months between when interlocutory case management directions were made and the dates fixed for hearing. That seemed to me to have been ample time for Ms Warren to have made or at least improved, at an evidentiary level, such case as she could, either in support of her application or in opposing that made by the trustee. 26 In turn, it is also relevant to take into account that the proceeding instituted by Ms Warren had been instituted in October last year. There comes a time, in my view, when enough time is enough, in terms of allowance of preparation for trial. 27 Yet further, I took into account the opportunity cost in terms of relative judicial time that would necessarily be occasioned by fixing, to occur at some indefinite time in the future, fresh hearing dates. I say indefinite time because it was not at all apparent from Ms Warren's affidavits when it might be expected that anything might come from the searches which she said she had undertaken of the QCAT file. 28 I also took into account the outcomes which had already occurred in QCAT in respect of applications by her to overturn the costs judgment. None of these have been successful. They gave no reason when read in conjunction with Ms Warren's affidavits to expect any likelihood of any different outcome in terms of forming a view as to the costs judgment in this court in the exercise of bankruptcy jurisdiction. 29 Ms Warren's allegations in her affidavits, as well as in submissions, alleged fraud or improper conduct - if that be any different - in the obtaining of the costs judgment and in the conduct of the trustee and the trustee's solicitors. These proceedings are governed as to standard of proof by s 140 of the Evidence Act 1995 (Cth). In relation to allegations of fraud and the like, that means that the considerations to which reference is made in s 140(2) are pertinent. Those in turn take up sentiments voiced notably by Sir Owen Dixon in Briginshaw v Briginshaw (1938) 60 CLR 336. In short, although Ms Warren need only establish fraud to a civil standard, it is not established by inexact proofs and indirect references. 30 Much less it is established by making assertions and then submitting that a model litigant ought to admit the same. I accept, for present purposes, that the role of the Society in relation to the regulation of the solicitors' branch of the profession under statute can be regarded as carrying with it such obligations. Indeed, there was no submission at all to the contrary in that regard on behalf of the Society. It would be surprising if there had been. 31 Allegations of fraud must be distinctly alleged and proved. There is no such proof in this case. Ms Warren placed in evidence email exchanges with QCAT and the Brisbane Magistrates Court in October 2022. These exchanges do not directly affect whether or not the sequestration order should have been made. At the time when the bankruptcy notice in this case was issued, there was no stay operative in respect of the judgment debt which followed from the registration in the Magistrates Court of the QCAT judgment. There was, however, a stay later granted by a magistrate, Magistrate Hay, the operation of which was keyed to the hearing and determination of an application by Ms Warren before QCAT to reopen proceedings which had resulted in the costs judgment. 32 The evidence before the Federal Circuit Court in February 2016 when the sequestration order was made was such that it admitted of a conclusion that the terms of a guillotine order made by QCAT's then President Thomas J on 22 January 2016 had been engaged in respect of Ms Warren's reopening application. In those circumstances it was open for the Circuit Judge to conclude that there was no operative stay resulting from the order which would have been made in the Magistrates Court. 33 Even if there had been such a stay it does not follow, as Ms Warren contended, that in terms of s 44(1)(b) that there was not then a debt which was a liquidated sum due at law or in equity or partly at law and partly in equity and which was payable immediately or at a certain future time. 34 Although Ms Warren pointed to no authority in respect of the contention which she made and on the assumption that there was a stay operative, there is authority on the point to which I was helpfully taken by Mr O'Brien of counsel for the Society. The authority is Pollack v Commissioner of Taxation (1991) 32 FCR 40 (Pollack). Regard to that Full Court case discloses that Ms Warren's submission is not without support, but that support is to be found in the dissenting judgment of Beaumont J. The majority, which comprised Pincus and Gummow JJ, who delivered separate judgments, came to a view which is contrary to the submission advanced from Ms Warren. Pincus J stated, at 1: Counsel for the Commissioner argued that the debt was payable immediately within the meaning of section 44(1)(b)(ii). He said that if there was a stay of enforcement of the judgment, the debt nevertheless remained payable. That appears to me to be correct. I have found no authority in support of the proposition that a stay of enforcement of a judgment produces the result that the debt ceases to be payable; surely the judgment creditor could, despite the stay of enforcement, plead the debt as a common law set-off. Counsel for the Commissioner aptly, in my view, contrasted the wording of section 44(1)(b)(ii) with that of section 40(1)(g) of the Act, which has the effect that an act of bankruptcy is committed by failure to comply with the requirements of a bankruptcy notice; that provision uses the expression: If a creditor who has obtained against the debtor a final judgment or final order, being a judgment or order the execution of which has not been stayed. In that same case, at 56 to 57, and having referring to Re Padagas; Ex parte Carrier Air Conditioning Pty Ltd (1977) 30 FLR 170, Gummow J, at 57, stated: In my view, in the present case the existence of a stay of enforcement pursuant to subrule 2(8) does not, of itself, and without more, deprive the judgment debt of its character an obligation that is payable immediately, as indicated in subrule 1(2). 35 In my view, I am bound in light of Pollack to hold there is no substance in Ms Warren's contention, even if I were of the view that there was evidence before me which showed that the stay granted by the Magistrates Court on terms was still operative. Further and in any event, it seems to me that the difference in wording as between section 40(1)(g) and section 44(1)(b) of the Bankruptcy Act to which reference is made by Pincus J in the passage quoted is telling. 36 Insofar as there were any suggestion that I am not bound by Pollack, I respectfully agree with the view voiced by Pincus J: 37 Ms Warren made reference to the power of the Court of Bankruptcy to go behind a judgment. I accept unreservedly that there is such a power. A succinct statement in respect of that power was offered recently by Downes J in Thompson v Lane (Trustee) [2023] FCAFC 32 (Thompson), at [145], by reference to Ramsay Health Care Australia Pty Ltd v Compton (2017) 261 CLR 132 and also Lowbeer v De Varda (2018) 264 FCR 228. Her Honour stated: 145 Where a question is raised as to whether a judgment or order establishes the amount truly owing to the petitioning creditor, there are two separate questions: first, whether there is a proper basis to exercise the discretion to go behind the judgment, and second, if there is, whether there is in truth and reality no debt. And then at [146]: The discretion may be exercised where the judgment or order which comprises the debt was reached with fraud, collusion or a miscarriage of justice: Corney v Brien (1951) 84 CLR 343; [1951] HCA 31. However, as also recognised by the primary judge at [69] J, the circumstances in which a court may go behind a judgment are not limited to fraud, collusion or miscarriage of justice. A bankruptcy court should go behind a judgment where sufficient reason is shown for questioning whether behind the judgment there is in truth and reality a debt due to the petitioning creditor. 38 Ms Warren has sought on more than one occasion to persuade QCAT to set aside the costs order. She has not been successful in any such endeavour. In dismissing the second application which she made to reopen proceedings in QCAT so as to set aside the costs order, Carmody J, then a presidential member of QCAT, stated: The obvious inference to be drawn from the structure of the President's directions is that he intended to forever foreclose the option of reopening OCR159-11 if the applicant did not make good her assertion about new material and fraud on the tribunal. See Warren v Queensland Law Society Inc. [2016] QCAT 310, at [14]. 39 A little over six years after that statement was made, Ms Warren has maintained her assertions about new material and fraud on the QCAT and, in turn, on this Court. She has not, however, notwithstanding all of that time, made good by evidence those assertions. She has failed in making submissions to set aside the bankruptcy notice and she has failed also, as is so evident from the reasons for judgment given in respect of this creditor's petition, to make good such submissions. I am not persuaded that there is any basis to exercise the discretion to which I have referred. 40 In Ahern v Deputy Commissioner of Taxation [1987] 76 ALR 137 (Ahern), at 148, the Full Court stated: It is also well established that in general a court exercising jurisdiction in bankruptcy should not proceed to sequestrate the estate of a debtor where an appeal is pending against the judgment relied on as the foundation of the bankruptcy proceeding providing that the appeal is based on genuine and arguable grounds: Re Rhodes; ex parte Heyworth [1884] 14 QBD 49, Bayne v Baillieu [1907] 5 CLR 64 and Re Verma; ex parte Deputy Commissioner of Taxation [1984] 4 FCR 181. These cases rest on the broad principle that before a person can be made bankrupt, the court must be satisfied that the debt on which the petitioning creditor relies is due by the debtor and that if any genuine dispute exists as to the liability of the debtor to the petitioning creditor it ought to be investigated before he is made bankrupt. Bankruptcy is not mere inter partes litigation. It involves change of status and has quasi-penal consequences. [sic] 41 It is evident that the learned Federal Circuit Court Judge was disposed, notwithstanding his consideration of various objections which Ms Warren had raised, nonetheless to make a sequestration order. His Honour embarked on that consideration even in then absence, as it turned out that day, of an appearance by or on behalf of Ms Warren. I am not at all persuaded that Ms Warren had no notice of the hearing date. In any event, taking into account Ahern, I have considered afresh whether it was, nonetheless, erroneous to sequestrate, even assuming, contrary to a conclusion which I have reached, that there was no stay operative and that the guillotine order made by Thomas J had come into effect. 42 The long and the short of it is that there is nothing more than shadowy assertion, and never has been, in respect of the QCAT judgment debt's foundation and whether it was truly owed. 43 Ms Warren made various assertions, as she had so evidently previously done, in the Federal Circuit Court about the authority of the Society to institute proceedings. As far back as 2013, Wilson J, in the review of the practicing certificate cancellation decision, made reference to Ms Warren's focus on the process, rather than substance. 44 It is evident from Ms Neroni's affidavit, relied upon in support of the creditor's petition, that the creditor's petition proceedings were duly authorised to have been instituted by the Society. There is no reason, assertion apart, to doubt that nor is there any reason, assertion apart, to doubt that; the entirety of the QCAT proceedings were duly prosecuted by the Society. Insofar as it could be said that there was, in some way, shape or form by virtue of an undecided reopening application, a questioning of the debt, it seems to me that the case was always one which fell within the exception noted in the passage quoted from Ahern. There were never genuine and arguable grounds present here to question the QCAT judgment debt. 45 The question of staying the operation of the sequestration order no longer arises given that the case is being heard substantively. Section 37(2) of the Bankruptcy Act provides that the Court does not have power to rescind or discharge or suspend the operation of a sequestration order. That notwithstanding, it has been held that there is power in the Court to preserve the subject matter of litigation where there is an appeal extant so as to stay the operation of the sequestration order. Ms Warren pointed to r 39 of the Federal Court Rules 2011 (Cth). Even assuming that that might provide a source of power, which I doubt in the face of s 37(2), it would nonetheless be necessary for her to persuade me that the sequestration order was obtained by fraud. As I have indicated, there is no such persuasive evidence here. 46 In any such application, as Monroe Schneider Associates (Inc) v No 1 Raberem Pty Ltd (No 2) (1992) 37 FCR 234 establishes, it would be for Ms Warren to show newly discovered evidence that could not have been found at the time when the creditors' petition was heard and evidence so material that its production at the hearing of the creditors' petition would probably have affected the outcome. Moreover, as here, where in effect she alleges false statements in affidavits, she would have to produce evidence so strong as would reasonably be expected to be decisive on the hearing of that creditors' petition and which, if unanswered, would have had that result. There is no such evidence here. 47 In any event, I doubt that whatever power there may be under r 39 is any greater to what seems to me to be the scheme of the Act, which admits of a power to annul a bankruptcy pursuant to s 153B of the Bankruptcy Act if satisfied that a sequestration order ought not to have been made. For reasons which I have already given, I am not satisfied that a sequestration order ought not to have been made. This appears to me to be a case where there was established the judgment debt, that the debt was still owing and that there had been an act of bankruptcy constituted by a failure to comply with the bankruptcy notice regularly issued in respect of a person then resident in Australia. I see no basis, therefore, which would ground the satisfaction to which s 153B(1) refers. 48 Further, Ms Warren placed before me no evidence whatsoever that she was, in fact, at the time when the creditors' petition was heard and determined in February 2016 solvent. Because of her failure to comply with the bankruptcy notice, she was prima facie not solvent. Also in evidence is that she has failed, as is required by the Bankruptcy Act, to file a statement of affairs. Indeed, that very fact is one of the grounds upon which the trustee makes application under s 146 of the Bankruptcy Act. 49 Ms Warren has also failed to demonstrate by evidence any proposal to pay any part of the costs incurred to date in the administration of her bankrupt estate or even to pay in whole or in part any of the debts proved in bankruptcy in the bankrupt estate. Quite apart from the debt grounded in the Law Society's proof, I note there is a separate debt owed to the Commonwealth of Australia in respect of taxation liabilities in excess of $100,000. 50 Were it a matter of deciding whether or not to exercise a discretion to annul the bankruptcy pursuant to s 153B, the facts to which I have made reference would persuade me that this is not a case in which to exercise a discretion to annul pursuant to s 153B. I note that in Thompson, the Full Court accepted that it was relevant in the exercise of such a similar discretion in respect of a debtor's petition occasioned bankruptcy to take into account a failure to lodge a statement of affairs. 51 I am, therefore, not satisfied that Ms Warren has established any basis for the substantive relief which she seeks, which corresponds with the basis upon which she opposes the application made by the trustee, under s 146 of the Bankruptcy Act. 52 As to that application, in McLean (Trustee), in the matter of Erbas (Bankrupt) v Erbas [2019] FCA 1763, Anderson J helpfully collected pertinent authority in the following passage: 7 In circumstances where a bankrupt has not provided a statement of affairs, a trustee of bankrupt estate may be uncertain as to the identity of the creditors in the estate and therefore unable to meet the statutory requirements for distributing a dividend to creditors. To this end, s 146 of the Act provides the following: Distribution of dividends where bankrupt fails to file statement of affairs Where a bankrupt has failed to file a statement of his or her affairs as required by this Act, the Court may, on the application of the trustee, upon such terms as it thinks fit, order that distribution of dividends amongst the creditors who have proved their debts shall proceed in accordance with this Division as if the bankrupt had filed a statement of his or her affairs and those creditors had been stated to be creditors in it. 8 In Barnet (Trustee), in the matter of Zhang (Bankrupt) v Zhang [2017] FCA 924, Lee J stated the following at [22] and [23]: Section 146 of the Act is "intended to facilitate the distribution of dividends among the creditors of the bankrupt in circumstances where the trustee has not had the benefit of a statement of affairs prepared by the bankrupt": Re Sturt; Ex parte Official Trustee in Bankruptcy [2001] FCA 1649; (2001) 117 FCR 1 at 4 [14] per Sackville J. Its purpose is "to give the Court the means of ensuring that the absence of a statement of affairs does not prejudice those with an interest in the bankrupt's affairs": Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968 at [4] per Gyles J. In Sturt, Sackville J said (at 5 [19]): ... [o]n any application under s 146 of the Bankruptcy Act the Court must be satisfied that it is appropriate to make an order. The Court may need to be satisfied, for example, that creditors have been notified of the application and have had an opportunity to be heard (although ordinarily the application would be made in the interests of creditors). As in this case, the Court might require evidence that the trustee has taken appropriate steps to ascertain whether there are creditors, other than those who have come to its attention by filing a proof of debt or otherwise. 9 There is no requirement under the Act that the Bankrupt be named as a respondent to the Trustee's application under s 146: Rahman v Lombe [2018] FCA 457 at [12] per Gleeson J. 10 Also relevant to the Trustee's application is s 32 of the Act, which provides that "[t]he Court may, in any proceeding before it, including a proceeding dismissed for want of jurisdiction, make such orders as to costs as it thinks fit". In addition, the Court has the power under s 90-15(1) of the Insolvency Practice Schedule (Bankruptcy), being sch 2 to the Act, to "make such orders as it thinks fit in relation to the administration of a regulated debtor's estate". This includes "an order in relation to the costs of an action (including court action) taken by the trustee of the estate … in relation to the administration of the estate": s 90-15(3)(d). 53 In this particular case, the trustees' evidence discloses that the trustee has already placed appropriate advertisements soliciting proofs of debt in the bankrupt estate. I am not, therefore, persuaded that there would be any advantage to creditors or potential creditors by conditioning a s 146 order, by requiring further advertisement. I note, as I have already mentioned, that there have been proofs of debt lodged by the Society and, on behalf of the Commonwealth, the Commissioner of Taxation. 54 Also in evidence is correspondence which the trustee has, in the course of the administration of the estate, directed to other apparent creditors; the Commonwealth Bank and Westpac Bank. Notwithstanding endeavours to follow up with each of those banks, the trustee has not had the benefit of a reply from either bank. To describe that as disappointing would be to adopt a euphemism. Trustees in bankruptcy, are not mere busybodies. They are officers of the Court appointed to discharge an important role in insolvency administration, under the Bankruptcy Act. As noted in Ahern by the Full Court, bankruptcy proceedings are not inter partes proceedings. They do involve a change of status and have a quasi-penal quality. They are proceedings with a public interest element in relation to a person found unable to pay their debts and be insolvent and entail an administration of a bankrupt estate for the benefit of creditors. In these circumstances, one might hope and expect that well-resourced banks would at least afford the trustee the cooperation with the administration according to law of a bankrupt estate of a considered reply, if only that the bank has made a value judgment in the circumstances not to prove in the administration of the estate. 55 In light of the endeavours, as evidenced by the trustee, to obtain such a reply from each of these banks, I see no reason whatsoever to condition a s 146 order with requirement that further correspondence will be directed to either bank. 56 I should also mention that, in the course of her submissions, Ms Warren made reference to alleged misconduct on the part of the trustee in relation to the realisation of a unit at Albion held before bankruptcy in joint tenancy. It is trite that bankruptcy severed the joint tenancy. Thereafter, the evidence before me discloses nothing more than a realisation of the unit by the trustee who had succeeded to Ms Warren's interest in the property in cooperation with the other co-owners. It would be a disservice to Mr Clout to do other than record that the allegation made against him by Ms Warren is not grounded in any evidence. Again, allegations of fraud must be distinctly alleged and proved. 57 I have considered the subject of the realisation only in terms of whether or not, having regard to the trustee's conduct, there was some reason that might intrude, either in relation to the distribution or separately in relation to allowance of costs to the trustee. 58 Ms Warren's application also sought an order that Messrs Cowen, Schwarz, Marschke cease to act as solicitors for the trustee and that the trustee's application be stayed pending the determination of her application. The consequence of dismissing her application is that there is no occasion to stay the s 146 application. For reasons which are evident, but which bear repeating, in terms of absence of evidence, there is no occasion whatsoever for and order which would require Messrs Cowen, Schwarz, Marschke to cease to act as solicitors for the trustee. 59 For the foregoing reasons, then, Ms Warren's application must be dismissed. 60 There will be an order under s 146 in terms of the draft promoted by the trustee by his solicitor. I shall now hear the parties as to costs. 61 In relation to costs, some truly difficult issues arise. In part, those issues arise as a result of the evidence before me from the trustee as to what remains in the bankrupt estate and the costs and apprehended costs of administration, albeit, as yet, not formally approved. The trustee made what, in my view, was an entirely orthodox and appropriate application under s 146 in the course of the administration of a bankrupt estate, where the bankrupt did not file, as required, a statement of affairs. 62 It is obvious enough from the evidence which I have before me that the costs of the administration of the estate must necessarily have been made higher than one might otherwise have expected by dealing with Ms Warren. Ms Warren did not, as she always should have, join the Society as a respondent to her application. The Society's appearance was not just appropriate, but also helpful in terms of the submissions made. The Society was an appropriate contradictor, both to Ms Warren's application, as well as the basis upon which she sought s 146 orders should not go. 63 The dilemma that arises is that, prima facie at least, in terms of an order of priority of payment, for which s 109 of the Bankruptcy Act provides, a costs order in favour of the Society would rank above the costs of the administration of the bankrupt estate. And all of that by virtue of an application by Ms Warren, which always was, and ought to have been appreciated by her, to have been completely unmeritorious, if not vexatious. 64 In those circumstances, it appears to me that Ms Warren would receive, potentially, a benefit if I made an order that the costs of the Society be costs in the administration. That is, she would have no separate order for costs made against her. A tempering consideration is that may just leave the Society without recovery, although I have no evidence as to Ms Warren's present income or assets. In turn, if so disposed, that may leave the Society in the position of again having to petition for Ms Warren's bankruptcy or at least to prove in another bankruptcy, if there be any other creditor disposed to move in that regard. 65 As I have already stated, the trustee made an entirely appropriate application. It seems to me that the funds available to meet the costs of administration would be diminished unacceptably if I were to make an order for costs in favour of the Society. There is an interest, also, in trustees at least receiving some incentive for acting as trustees in respect of bankrupt estates. There is a public interest in that. There is also a public interest which the Society so conspicuously observed in responding. Hence, my putting to counsel in the course of submissions that there was something of an element of Hobson's choice to make in relation to costs. 66 Ms Warren's submissions opposing the making of an order for costs, or at least only making no order as to costs, rehearsed submissions already rejected as a basis for dismissing her application. 67 Faced with what I regard as Hobson's choice, in my view, the order for costs should be this: Ms Warren pay the Society's costs of, and incidental to, her application; save, as aforesaid, the costs be as per the order promoted for the trustee. It gives me no satisfaction to make that order, but that order does seem to me, in the overall circumstances of the case, the just way to exercise a discretion for costs. In so doing, I recognise that that varies what would otherwise be the effect of the order of priority in s 109 of the Bankruptcy Act. I certify that the preceding sixty-seven (67) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan.

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Judgment (11 paragraphs)

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Cases Cited (17)