Condon v Watson

(Revised from transcript) 1 These proceedings concern an application by Mr Scott and Mr Pascoe in respect of six bankrupt estates of which they are joint and several trustees. The relevant bankrupt estates are those of: (a) Jamie Bruce Roberston; (b) Barry William Thompson; (c) Gerard McGowan; (d) Luisa Maria & Raymond John Snelling; (e) Chris Phylactou; and (f) Athanasia Phylactou (collectively, the Bankrupt Estates). 2 The application before the Court is brought on an urgent basis due to the imminent resignation of Mr Pascoe. Mr Pascoe resigned from his position as senior adviser within PriceWaterhouseCooper (PWC) and his employment will cease from Friday, 11 June 2021. From that date, Mr Pascoe will no longer have access to the resources of PWC including staff, computer and file management systems. 3 By originating process filed on 2 June 2021, Messrs Scott and Pascoe seek orders under section 180 of the Bankruptcy Act 1966 (Cth) (Bankruptcy Act) accepting the resignation of Mr Pascoe and accepting the appointment of Mr Scott as the sole trustee of the Bankrupt Estates. In addition, the Applicants seek leave to dispense with the requirement to serve the application on the bankrupts and the creditors of each of the Bankrupt Estates in accordance with rule 8.02 (4)(b) and (c) of the Federal Court (Bankruptcy) Rules 2016 (Cth) (Bankruptcy Rules). Such leave is sought under rule 1.34 of the Federal Court Rules 2011 (Cth) (Rules) and rule 1.04(1) of the Bankruptcy Rules.

Legal principles 4 The Court possesses a discretion to accept the resignation of a registered trustee if it is just to do so: Bankruptcy Act, s 180. This Court also has the power to make orders as it thinks fit in relation to the administration of a regulated debtor's estate including an order that a person cease to be a trustee of an estate: Bankruptcy Act, Sch 2 ss 90-15(1). 5 In circumstances where there are multiple trustees, section 180 permits the Court to accept the resignation of one of them: Condon v Watson [2009] FCA 11; (2009) 174 FCR 314 (Condon) at [33] (Lindgren J). Further, it is open to the Court to subject the resignation of a trustee in those circumstances to the condition that the other trustee consent to continue as the sole trustee of the estate: Condon at [36] (Lindgren J). Such an approach is uncontroversial and has been endorsed by this Court: see e.g. Nixon, in the matter of Nixon [2015] FCA 976 (Nixon) at [22] (Edelman J (as his Honour then was)); Nixon (Trustee) [2018] FCA 720 at [8] (Collier J). 6 Where there has been an application for the resignation or release of a trustee from an estate under section 180 of the Bankruptcy Act, notice of that application is required to be given to the Official Receiver, the bankrupt and anyone else (including a creditor) as ordered by the Court: Bankrutpcy Rules, r 8.02(4). 7 In de Vries, in the matter of the bankrupt Estate of Cunningham [2021] FCA 188, Nicholas J considered the Court's ability to dispense with compliance with the notice requirements under rule 8.02(4)(b) of the Bankruptcy Rules and, having regard to the approaches taken by Edelman J in Nixon at [9] - [10] and Murphy J in Allen, in the matter of Allen [2020] FCA 376 at [12], held that such dispensation is permissible under rule 1.34 of the Rules (at [17]). 8 When determining whether to exercise the discretion to dispense with the requirement for service of an application for the acceptance of the resignation or release of a trustee under section 180 of the Bankruptcy Act, the "inconvenience and expense to the estates" is a relevant consideration, as is the likely prejudice to the creditors and bankrupts: Shanahan, in the matter of Shanahan [2014] FCA 1080 (Shanahan) at [7] - [8] (Rangiah J); See also Condon at [15] (Lindgren J).

Consideration 9 Having regard to the material before the Court and for the reasons which follow, I make orders substantially in accordance with the Applicants' proposed short minutes of order. 10 The application is supported by an affidavit of Mr Scott of 1 June 2021. Mr Scott's evidence demonstrates that he has had the day to day carriage of each of the Bankrupt Estates and has consulted Mr Pascoe from time to time in respect of their administration. It is proposed that Mr Scott act as the sole trustee of each of the Bankrupt Estates upon Mr Pascoe's resignation. As such, the administration of the Bankrupt Estates will continue as it has, with no interruption. Such an arrangement is efficient and cost-effective as there will also be no costs incurred by a new trustee familiarising him or herself with the conduct of the estates. The Applicants also seek an order that they pay their own costs of this proceeding. 11 Mr Scott also deposes to the historical fact that no express request was made by any of the outgoing trustees, by the American trustees, or the Court (in the case of the estate of Mr McGowan) at the time that Mr Scott and Mr Pascoe were appointed that their appointment be as joint trustees. Rather, Mr Scott and Mr Pascoe were jointly appointed consistent with Mr Scott's usual business practice so that as co-trustees each could cover the position of the other in the event that either was absent from office on leave or for some other reason. 12 The Applicants also rely on the affidavits of Ms Reynolds of 2 June 2021 and 3 June 2021 which indicate that the Official Receiver of the Australian Financial Security Authority (AFSA) has been notified of the application in accordance with orders for short service made on 2 June 2021. The Official Trustee has informed the Applicants' solicitor in correspondence dated 2 June 2021 that it does not object to the orders sought in the application. 13 During the hearing of the application before me, Ms Reynolds tendered email correspondence that demonstrated that the present application has been notified to the solicitor for the American trustee in relation to the McGowan estate. Further, that in a conversation earlier today, the solicitor for the American trustee communicated that her client does not oppose the application. 14 Accordingly, I am satisfied that it is appropriate to accept the resignation of Mr Pascoe on condition that Mr Scott act as sole trustee of the Bankrupt Estates unless and until any other trustee is appointed. I note for completeness, that another trustee may be appointed in a joint capacity or to replace Mr Scott should that prove necessary or desirable. 15 With respect to provision of notice to the bankrupts and creditors of the present application in accordance with rule 8.02(4)(b) and (c) of the Bankruptcy Rules, I am also satisfied that compliance with those requirements can be dispensed with for the following reasons: (a) This Court has expressed a degree of reluctance to dispense with the requirement to notify petitioning creditors of an application in certain circumstances, namely where the petitioning creditors have insisted on only the retiring trustee being appointed or where a new trustee (unfamiliar with the estates) was intended to replace the retiring trustee: Nixon at [14] and [17]; Allen at [12] and [13]. However, those are not the circumstances of the present application. As stated above, it is not intended that Mr Pascoe be replaced by a new trustee and neither the bankrupts nor the creditors expressed any position on Mr Scott and Mr Pascoe being appointed as joint trustees. (b) Mr Pascoe's imminent resignation and the urgency with which this application has been brought means that notification of the bankrupts and creditors may cause "inconvenience and expense to the estates": Shanahan at [7] (Rangiah J). This is particularly so in the case of the estate of Mr McGowan where the bankrupt and his creditors are located in the United States of America and in circumstances where the solicitor for the American trustee has indicated to Ms Reynolds that the present application is not opposed. 16 The Applicants are to serve a copy of the orders made today on each of the bankrupts and creditors within 7 days. I grant the Applicants leave to apply should that timeframe prove problematic. 17 As I have noted, the Applicants' proposed orders were that the Applicants pay their own costs of the proceedings. That is an appropriate course and I make orders accordingly. I certify that the preceding seventeen (17) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Cheeseman.