Coyne v Douglas-Brown

The Nature of the Proceeding 6 The application, although it does not so state, is brought under s 179 of the Bankruptcy Act which appears in Div 4 of Pt VII of the Act relating to control over trustees. Section 179 provides: "179(1) The Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following: (a) remove the trustee from office; and (b) make such order as it thinks proper. (2) The Inspector-General or a creditor may at any time require a trustee to answer an inquiry in relation to the bankrupt's estate or affairs." 7 In this case the bankrupt has been discharged by effluxion of time since 14 July 2002. Nevertheless, the supervisory jurisdiction of the Court extends to the conduct of the trustee after discharge - Official Receiver v Todd (1986) 14 FCR 177 at 178-180 (Fisher J) and 183 (Lockhart J); Re Cheesman; Cheesman v Waters (1997) 143 ALR 78 (Merkel J); Macchia v Nilant (2001) 110 FCR 101 at 116-117 (French J); cf Watson v Healey (1996) 64 FCR 301 at 304 (Lee J) and Bellin v Pattison (Trustee) [1999] FCA 51 at [20] (Kenny J). 8 The nature of the process undertaken in an application under s 179 was set out in Macchia v Nilant and it is convenient to repeat here what I said there at 120: "As appears from the language of s 179 it invites first a consideration, albeit upon application by a person with standing, of whether the Court should inquire into the conduct of the trustee. If inquiry is undertaken, the next question is whether the trustee should be removed from office and/or any other order made. The first question requires the Court to consider whether on the grounds and facts before it, a case has been made for an inquiry: Re Alafaci [(1976) 9 ALR 262 at 268 (Riley J)] The application of s 179 to that first step involves a broad discretion as to whether or not there are sufficient grounds to make an inquiry appropriate: Turner v Official Trustee in Bankruptcy [(unrep, Fed Ct Full Court, No 8 of 1998, 27/11/98)]." The threshold for entering into an inquiry was stated by Ellicott J in Re Gault; Gault v Law (1981) 57 FLR 165 at 173: "… the court should be loath to order an inquiry unless it considers that on the evidence before it there are substantial grounds for believing that the trustee erred in his administration. If the court considers that an inquiry is unlikely to reveal misconduct it should not make an order and put the respondent and possibly the creditors to the expense and trouble involved." That passage was quoted with approval by the Full Court in Turner v Official Trustee in Bankruptcy. 9 As I observed in Macchia v Nilant at 120: "Section 179 operates in aid of the Court's supervision of trustees who are its officers. That operation, however, is subject to restraint against undue interference and to discretionary considerations including the practical benefit likely to be derived from the conduct of any inquiry. Like s 178, it may be invoked by a bankrupt after discharge and in part for the same reason, namely that the trustee's powers continue in the various ways referred to by Merkel J at first instance in Cheesman. It may also be the case that the trustee should be held to account for conduct in the administration of the estate which has affected the bankrupt in some way. As is the case with s 178, it is not a vehicle for pressing claims for common law damages under the general law. That is a matter for a court of appropriate jurisdiction. In addition the court will also have in such cases the discretion to determine the utility of an inquiry and its likely outcomes. For 'although the court is given a broad discretion under s 179 of the Act, that discretion must be exercised in the interests of the orderly administration of the bankrupt's estate': Re Challen (a Bankrupt); Ex parte Brown v Bendeich (unrep Fed Ct, Beaumont J, No QB1548 of 1993, 23/4/96) cited with approval by Merkel J in Cheesman at first instance, at 114." 10 In light of the above, the first task of the Court on the present application is to determine whether it should inquire into the conduct of the trustee with a view to possible removal.

Factual History - Introduction 11 The history of the bankruptcy is convoluted. What appears from the material placed before the Court in support of the application is incomplete and chronologically confused on both sides. It is necessary however for a proper appreciation of the grounds to construct, so far as appears from the papers, at least an overview of relevant events relating to them. There was no cross-examination upon the affidavits but much of the history is based upon documentary material. The major areas of dispute between the bankrupt and the trustee lie in the characterisation of their conduct and the inferences to be drawn from the evidence. At this stage the Court is concerned with the limited question whether there should be an inquiry into the conduct of the trustee. If it finds that there should be, it may be necessary that there be some cross-examination and possibly some supplementary evidence. 12 Prior to his bankruptcy, Coyne was engaged in litigation on a number of fronts in the Supreme Court of Western Australia. As appears from the reasons for the decision, which I gave on 10 November 1992, for adjourning the creditor's petition against him to 2 February 1993, he had at that time a judgment against Citizen Finance Limited for defamation which, inclusive of the costs of appeals up to and including the High Court, amounted to some $300,000. Judgment however had not been realised. He had also, it appears, settled an action for defamation against Commercial Equity Corporation Ltd ("Commercial Equity") for which, he now says, he received a payment of $50,000 by way of damages with an apology to be read in Court and a costs order in his favour. He did not recover the costs. He asserts that the right to tax and collect the costs vested in the trustee. At the time the sequestration order was made he had three other actions in train in the Supreme Court of Western Australia against Commercial Equity for defamation. He had also commenced proceedings in the Supreme Court against a legal practitioner, Martin Bennett, for alleged breach of fiduciary duty. He says that the three actions against Commercial Equity were settled on confidential terms in his favour on the third day of a trial of those actions in 1994 which sum he received in that year. 13 The costs order which ultimately grounded the creditor's petition was incurred in the course of proceedings brought by Binningup (South) to remove a caveat which Coyne had lodged on land known as Peppermint Lakes Estate at Binningup and which was said to be supported by an equitable lien based upon work he had done. On 16 August 1990, Commissioner O'Connor QC, sitting in the Supreme Court of Western Australia, made an order directing the Registrar of Titles to remove the caveat from the Register and ordered that Coyne pay the costs of Binningup (South). The costs of the action were taxed on 5 December 1990 and allowed at $2,853.60. A writ of fi fa issued out of the Supreme Court on 14 December 1990 was returned unsatisfied. In opposition to the creditor's petition, which was based upon the act of bankruptcy flowing from non-satisfaction of the writ of fi fa, Coyne said that the costs judgment in the Supreme Court had been obtained by fraud. In that respect he referred to submissions made in the course of the hearing in the Supreme Court by counsel for Binningup (South) in answer to an objection taken by Coyne that counsel and his instructing solicitors had a conflict of interest and were in breach of fiduciary duty to him by reason of having acted previously for Coyne against persons connected with those behind Binningup (South). These submissions were rejected but the petition was adjourned in part on the basis that Coyne's refusal to pay the costs order did not arise from his inability to do so but from his belief that it would be acceding to an injustice if he made that payment. At the time of the hearing of the creditor's petition he had made an offer to pay the amount of the costs order. That offer was not accepted as the petitioning creditor was concerned about the possibility of a preference, there being evidently another petition pending. 14 The practitioner concerned was Martin Bennett who, according to Coyne's affidavit in these proceedings, had provided advice to him to register the caveat over the land at Binningup and who had acted for him in proceedings against Commercial Equity. Nevertheless, Bennett's firm acted for the petitioning creditor at the hearing in October 1992 which led to the first judgment in November 1992. However at the time of the resumed hearing which took place on 2, 11 and 12 February 1993, the petitioning creditor was represented by another firm, Dwyer Durack. 15 According to Coyne's evidence in these proceedings, following the making of the sequestration order, he notified the trustee of his action in the Supreme Court against Bennett for breach of fiduciary duty. He says that he recently attended the Supreme Court Registry and confirmed that no action had been taken in respect of that matter since 1993. That fact is not relied upon as a ground for removal. Nor could it be. The fact that a trustee decides not to adopt and continue proceedings initiated by an applicant does not, of itself, indicate any misconduct by the trustee or failure in the exercise of the trustee's duty.

The Conflict of Interest 16 At the time of the sequestration order and his appointment as trustee, Douglas-Brown was a partner at Horwarth & Horwarth. Coyne says that Horwarth & Horwarth were auditors to Citizen Finance before and at that time. He states his belief that Douglas-Brown remained a partner at Horwarth & Horwarth until at least January 1995. Another partner at Horwarth & Horwarth had prepared an investigating accountant's report for Commercial Equity in 1998 whereby, through its subsidiary, Binningup (South), it acquired land at Binningup in the set of transactions from which all of Coyne's litigation arose. Because of their involvement in the transactions Coyne says he subpoenaed Horwarth & Horwarth in September 1993 to provide records in the three defamation actions which he had commenced in the Supreme Court. Horwarth & Horwarth, he said, were also appointed auditors of Commercial Equity in July 1994. His action against Commercial Equity for breach of contract (No 2046/1983) was still on foot while Douglas-Brown was a partner at Horwarth & Horwarth and while that firm was still auditor to Commercial Equity and until February 1997. 17 Coyne says he refused to provide a statement of affairs to Douglas-Brown immediately after the sequestration order was made because of his concern that information in the statement would find its way back to either Bennett, Citizen Finance or Commercial Equity and might compromise his claim against them. He met Douglas-Brown at the offices of Horwarth & Horwarth within a week of the sequestration order being made. He told him he wanted to annul the bankruptcy as soon as possible. He raised the conflict problems of Horwarth & Horwarth and his intention to subpoena their records. A few days later he offered to pay the petitioning creditor's debt and Douglas-Brown's costs. He also offered to pay the legal costs claim relating to Bennett's fees into court pending resolution of his action against Bennett. 18 Douglas-Brown rejected Coyne's offer. He asked Coyne to "write out the conflict issues and to provide them to him". Coyne wrote to Douglas-Brown about the alleged conflict and said he was reluctant to provide a statement of affairs for that reason. The exchange of correspondence between Coyne and Douglas-Brown on this issue is reflected in his letter of 29 April 1993, Douglas-Brown's reply of 4 May 1993 and Coyne's further letter of 19 May 1993. In the last letter Coyne said, in effect, that unless Douglas-Brown ceased to act as trustee he would apply to the Federal Court to have him removed. 19 In the event, that is what Coyne sought to do. He made an application to the Court, filed on 24 September 1993, seeking the removal of Douglas-Brown as trustee in bankruptcy "on the grounds of conflict". He exhibited to his affidavit in support of that application correspondence including the letters referred to above. As Douglas-Brown says in his affidavit, Coyne raised in those proceedings the same kinds of allegations of conflict which he raises in this application. The application for removal came on before Carr J on 18 March 1994. Coyne did not attend the hearing. He informed this Court, from the bar table, that he was "trapped in Bruce Rock" at the time and could not get out of the town. He rang the Court in Perth to tell them of his predicament and also arranged for somebody to attend on his behalf. That person, a Mr Avon Lovell, who is not a legal practitioner, attended. He asked for an adjournment of the hearing. This was refused. Carr J then dismissed the application with costs. 20 Douglas-Brown says in his affidavit that the auditors of Commercial Equity were Horwarth & Horwarth, Melbourne during the relevant period from 13 March 1993 to 31 March 1995. He was at all times a member of Horwarth & Horwarth, Perth. They are, he said, separate partnerships. The alleged conflict is, in the context of this bankruptcy, a piece of ancient history. It was the subject of proceedings which were dismissed by Carr J in 1994, albeit evidently not on the merits. It forms no basis for an inquiry into the conduct of the trustee at this late stage and no useful outcome would emerge from such an inquiry.

Delay in Administering Estate and Finalising Creditors 21 Douglas-Brown wrote to Coyne on 12 March 1993 informing him of his obligation to submit a statement of affairs. A copy of the letter is exhibited to his affidavit. He met with Coyne on 16 March 1993 and requested details of the creditors. He used the information then provided and other information he had to prepare a creditors schedule. He sent a copy of the schedule by fax to Coyne then followed it up with a letter dated 23 February 1994. The reason for the delay in communication between March 1993 and February 1994 does not appear clearly from the materials although it is notable that no statement of affairs was provided until 14 July 1994. Douglas-Brown referred to Coyne's proposal to pay out his creditors and to attend to debts incurred after the commencement of the bankruptcy. He asked Coyne, by 1 March 1994, to finalise his statement of affairs and his proposal to pay out the creditors and to deal with post-bankruptcy debts. He spoke to Coyne by telephone on 28 March 1994. Coyne claimed not to have received the letter of 23 February 1994 so Douglas-Brown re-sent it on the same day. Exhibited to Douglas-Brown's affidavit is a copy of the document entitled: "Peter Anthony Coyne Summary of Liabilities @ 28 March 1994 (as per Bankrupt's Estimate)" 22 Coyne responded on 29 March 1994. His handwritten letter included` the following: "Following from our discussions in February and again last night I confirm my intention to discharge my liabilities under the schedule and have my bankruptcy annulled. I will over the course of the next seven days have discussions with Kelvin Lord, Claudio Shaw, and Esanda in relation to their disputed accounts. Separately I will discharge my liabilities to Carmel Coyne, CJ Green, Atrack Machinery. However I do require written confirmation of Brian Coyne's undertaking to waive his right of claim in favour of Carmel." He said he would also provide a written undertaking on behalf of family and friends not to prove debts in the estate. The remaining debts, he said, related to unpaid taxed costs, one of which had been claimed twice. The other was claimed despite having been refused at a taxation of costs hearing. He wrote that the trustee had indicated that he would attend to these queries and advise Coyne in due course. Coyne continued: "Subject to the above occurring, it is my intention to have the Estate completely settled and the bankruptcy annulled within 30 days." 23 Coyne's account of the early stages of his discussions with Douglas-Brown post-sequestration has already been mentioned. 24 As appears from Douglas-Brown's affidavit, Coyne did not provide him with a statement of affairs until 14 July 1994. The statement of affairs disclosed the existence of a company called Doveton Holdings Ltd of which Coyne said he was managing director. The principal activity of the company was described as "Agriculture and Mining Service". Coyne claimed to be owed in excess of $100,000 by the company. In his list of assets his principal asset was shown to be a residential dwelling at 2 Riviera Place, Binningup which he valued at $140,000. This was said to be jointly owned. He also claimed to be owed sums of $32,000 and $1,500,000 by Commercial Equity and others, $8,000 by solicitors, Corser & Corser and $14,000 by Brian Coyne. His secured creditors were said to be the National Australia Bank, owed $95,000 secured by a mortgage over the residential property, and Esanda. The security for the latter debt, which was not quantified, was described as his Ford Sedan. Presumably there was a leasing or hire purchase arrangement of some kind in place with Esanda. His statement of affairs disclosed no unsecured creditors. 25 A continuing issue in determining creditors' claims involved ascertaining whether Coyne had any taxation debts due and owing. Taxation returns were significant to Douglas-Brown in investigating whether Coyne had derived sufficient income to enable an income contribution assessment to be issued. In Coyne's statement of affairs he said that he last lodged a taxation return in 1986. Douglas-Brown requested subsequent income tax returns both from Coyne and from the Australian Taxation Office. He was not provided with any from Coyne. On 30 March 1998, he received a letter from the Australian Taxation Office advising that Coyne had neglected to lodge his tax returns for many years. He was prosecuted for non-lodgement of returns for the years 1983 to 1989. At the time the letter was sent he still had returns outstanding for the years 1994 to 1997. These had also been demanded. Douglas-Brown had other concerns as to whether Coyne had disclosed all of his debts in the estate. In his investigations after the bankruptcy he discovered that the Water Corporation had lodged a memorial against Coyne's Binningup property. He wrote to the Corporation on 17 April 1996. On 16 May 1996, the Water Corporation responded stating that as at 1 July 1993 Coyne owed it $8,540.55. The statement of affairs had not disclosed any debt to the Water Corporation. 26 Douglas-Brown said that in his meeting with Coyne on 16 March 1993 and subsequently, Coyne had disclosed a number of claimants none of whom were mentioned in his subsequent statement of affairs. Douglas-Brown acknowledged that a number of these claimants had not later lodged proofs of debt. Coyne had informed him that there were a number of these claims that he disputed or, alternatively, being family or associates he would seek to have not proved in the estate. 27 In referring to Coyne's attempts to finalise his bankruptcy, Douglas-Brown referred to damages awards of at least $325,000 as a result of defamation proceedings. These were described in the statement of affairs of 14 July 1994 as "income". According to Douglas-Brown, Coyne has confirmed on a number of occasions that he received the amount during his bankruptcy. He does not know when Coyne received it. There is no doubt that Coyne's total income disclosed in his statement of affairs showed a sum of $325,000. This included an amount of $225,000 said to be derived from Commercial Equity and from Kay & Lafferty, Solicitors. In addition there were sums of $25,000 said to be income derived from each of CJ Green, LE Holmes, WR Munro and KJ Smith. Each of these sums was said to derive from a personal injury claim. This seems to be by way of assertion that the amounts of "income" recovered or recoverable were not part of the divisible property for the purposes of the bankruptcy. 28 Douglas-Brown says he asked Coyne for details of the amounts received. For although the awards would not be divisible property, interest earned on them would not be so protected. Coyne, he said, failed to provide the information to him. Douglas-Brown said that as he knew Coyne had access to substantial resources and his creditors' claims were modest, he believed Coyne should consider a composition proposal to bring about an end to the bankruptcy. He suggested to Coyne on a number of occasions between 1994 and 1996 that he make a composition proposal. His letter of 23 February 1994 raised the possibility. It was raised again in a letter of 4 October 1996. 29 In his letter to Coyne of 4 October 1996, Douglas-Brown referred to pending action he had taken for vacant possession of the residential property in Binningup and Coyne's opposition to it. He noted that Coyne had indicated to the Court that he would be seeking orders at that time that he be removed as trustee and orders for the annulment of his bankruptcy. He referred to Coyne's stated reservation to paying certain creditors. He confirmed his advice to Coyne that if he were desirous of dealing with the creditors then a mechanism existed within the Bankruptcy Act for him to put forward a composition proposal. He referred to the terms of s 73 of the Act in that respect. He said: "I emphasise that if you are putting forward a proposal, an amount of money needs to be put aside and held by me or your solicitors separately for this specific purpose. There is no point contemplating a composition proposal in the current circumstances, based on time payment, due to the length of time of the estate and the limited assets available if payment is contemplated over a period of time." He told Coyne that he was advised by his solicitors that if his application for vacant possession was to be adjourned they would each need to sign a minute and lodge it in Court the following Monday. He asked Coyne to confirm to him that he wished to put forward a composition proposal and to pay out his creditors either in whole or in part and that he would have a proposal within a twenty one day period. In the event that a firm proposal were put to him, Douglas-Brown said the application for vacant possession could be further adjourned after the twenty one days. In the event that no realistic proposal was put forward, he would continue with the vacant possession application. 30 Coyne responded in writing on 2 December 1996 referring to "various recent telephone conversations" and the letter of 4 October 1996. In his letter he made a composition proposal involving payment of the sum of $40,000 in full and final settlement of all claims against the estate up to and including 10 March 1993. Separate arrangements had been concluded with creditors Kelvin Lord and Cedric Green and no provision should be made for them in the composition. The other two creditors that ought not to be considered in the arrangement, according to Coyne, were Claudio Shaw who did not have a legitimate claim and the Commonwealth Bank whose small potential claim was a post-bankruptcy debt which would be dealt with by him early in the new year. On the basis of this advice he suggested to Douglas-Brown that he prepare and send him a copy of the list of creditors and their claims prior to notifying them of the composition so they could collectively agree the claimants. He referred to earlier advice he had given to Douglas-Brown that the source of funds for the composition might be by borrowings but contemplated that in fact they might be earnings. 31 In the event the composition proposal did not proceed at that time. Douglas-Brown says that Coyne's letter of 2 December 1996 had required that he obtain a "pre-commitment" from a creditor. This is a reference to a Mr Waller, who was associated with AM Securities Pty Ltd. Douglas-Brown says he was unable to give such assurance as this was a matter for the creditor concerned, rather than for him. 32 The proceedings in the Federal Court to obtain vacant possession of the Binningup property continued. Douglas-Brown says that he commenced proceedings to obtain vacant possession because: 1. Coyne was the registered proprietor of the property which vested in him as trustee of his estate under s 58 of the Bankruptcy Act. 2. Despite Coyne having suggested that he would take steps to pay out his creditors and obtain an annulment this had not occurred notwithstanding the passage of some three years and despite Coyne having funds from his successful defamation litigation with which to do so. 3. On Douglas-Brown's calculations there was an equity in the property. 4. In accordance with his duties as trustee of Coyne's estate, that equity being an asset which he considered to be readily realisable, ought to be realised for the benefit of the creditors. He says that at all times he considered, and still considers, the proceedings to obtain vacant possession and thereafter a sale of the Binningup property were in accordance with the law and his duties as trustee and in the interests of the creditors. It was on that basis that he commenced and prosecuted them. He did not prosecute them to a final conclusion because of the claim by the secured creditor, the National Australia Bank Limited, for vacant possession of Binningup. Subsequently Coyne did make a composition proposal. A meeting of his creditors was convened to consider that proposal on 5 March 1998. The only persons present at the meeting were Douglas-Brown who acted as President, Coyne, Mr B Waller, representing AM Securities, Binningup (South) and B & C Waller, Mr Brian Coyne representing himself, Mr WP Coyne who was an observer and Mr M de Kerloy, a solicitor representing Coyne. In addition there was a minutes secretary. 33 The composition proposal was that Coyne would procure a payment of $45,910 or such other amount as might be agreed with him and his creditors to be paid to his trustee. The payment was to be distributed as follows: (i) $3,664 for statutory government charges - although the President stated at the meeting that this amount might end up being nil.

(ii) $15,000 for trustee's fees. (iii) The balance of $27,086 or any additional amount raised to pay his creditors who proved and were admitted in the estate an amount of 100 cents in the dollar. (iv) Bank charges of approximately $160. It appeared that AM Securities at this stage had made a claim for $15,000 of which Douglas-Brown said he was previously unaware, although he had been told orally a few days before that there might be a further claim in the estate. He had been provided with no details of it. He asked Coyne whether in the light of the additional claim he wished the proposal to stand or wished to withdraw the composition. He also asked Coyne whether, if the $15,000 claim by AM Securities was proved and admitted, he would be able to raise that money. Coyne, according to the minutes, said he would be able to. Douglas-Brown said he would allow AM Securities to vote in the matter for an amount of $1. After some debate, Waller said he would vote against the proposal on behalf of AM Securities, Binningup (South) and himself. In the event the motion was lost as two creditors totalling approximately $14,604 voted for the motion and three creditors totalling $11,135 voted against it. 34 Subsequently in a letter dated 5 June 1998, Douglas-Brown wrote to Coyne in response to a facsimile from him regarding a further composition meeting. He confirmed in that letter that he had oral advice that if he were to reject the AM Securities' claim for $15,000 this would not be disputed. He had oral confirmation from the Waller interests that they would vote in favour of the new proposal. He said, however, that he was unable to give a guarantee of how creditors would vote on the day. He confirmed that for a meeting to be called, the necessary funds, namely $47,100, would need to be secured prior to such a proposal being sent out by him. This would involve the moneys being available in a cash form. He said to Coyne there had been no delays on his part and in fact he had been telephoning Coyne's solicitor to ask when he would be proceeding with a new composition. He told Coyne the documentation for the proposal was with him and only needed to be amended to incorporate Coyne's proposal. He attached a suggested draft form of proposal which he understood was in a form acceptable to the Waller interests. He asked Coyne to advise when he would be in a position to provide the necessary funds so a meeting could be called. 35 In a further letter dated 15 June 1998, Douglas-Brown responded to a letter from Coyne about the AM Securities' debt. He said he did not have the power to reject the debt at that time as he was not formally dealing with debts in accordance with the Act. He had advertised for claims and advised Coyne's solicitor on 28 April. He asserted that any delay was on Coyne's part in providing documents relating to the AM Securities' debt which Coyne had only done in mid May. Douglas-Brown and Coyne had had a meeting about this and he had then approached AM Securities. It was then they advised him they would not challenge any rejection of their $15,000 claim. He said to Coyne that if he wished to have the matter proceed he should forward composition moneys to him or to his solicitor together with the signed proposal. Douglas-Brown would then call a meeting. He also asked Coyne to confirm that he had dealt or would deal with the Claudio Shaw and Kelvin Lord claims. Despite this and other correspondence which is referred to in Douglas-Brown's affidavit of 2 October 2002, Coyne did not contact him regarding a further composition proposal. He said that correspondence has never received a response. Douglas-Brown also made the point that in the course of his activities as Coyne's trustee in bankruptcy, he had sometimes received information from those dealing with Coyne. This included an undated letter from Coyne to a John Berger. The authenticity of this letter was not disputed by Coyne although he said he would have wanted to cross-examine Douglas-Brown on the fact that he had received it anonymously. In the letter, which was under the letterhead of Agri-Tech, and which was dealing with a proposal for a corporate structure apparently related to the development of soil conservation ploughs, Coyne wrote that it suited his purpose to remain a bankrupt while other litigation against other parties continued. It is to be noted that the letterhead "Agri-Tech" appears above the words "Doveton Holdings Ltd" among others which are struck through. 36 According to Douglas-Brown, his usual practice in a bankruptcy is not to call for proofs of debt and finally adjudicate upon creditors' claims until proceeding to declare a dividend. Often there is nothing to distribute. Formally calling for proofs of debt involves additional expense both to the estate and creditors without any benefit. It is sufficient, in Douglas-Brown's experience, to prepare a list of known creditors from information supplied by the bankrupt and other parties. Disputed amounts are noted. Once it is evident that there is to be a distribution he formally calls for proofs of debt and finally adjudicates on them. This, he says, is the manner in which he approached the issue of ascertaining creditors in relation to Coyne's estate. From the outset he took steps to identify the creditors. As a result of orders made by Lee J in 1997 he departed from his normal practice in order to facilitate a composition proposal. Following the failure of the proposal on 5 March 1998, he placed an advertisement in the West Australian calling for proofs of debt and proceeded to adjudicate on claims received. There was an exchange of letters between himself and Coyne's solicitor about that process which are annexed to his affidavit. In his letter of 28 April 1998 to Coyne's solicitor he enclosed a copy of a schedule of claims received and dealt with to that date. He referred in his letter to the claim by AM Securities advising that neither Coyne nor his solicitors had responded with information about that claim. He also complained in the letter that Coyne had not advised if money had been paid to the National Australia Bank in respect of interest on a mortgage loan which was a critical undertaking to be complied with by Coyne. He also raised the problem of the taxation debt. Again complaining that apart from "platitudes" by Coyne that he had no debt, no documentation had been provided. He requested copies of assessment notices in the event that returns had been lodged. He said: "Your client has had 5 years to put forward a composition proposal and has chosen not to. He has also failed to explain to both myself and ITSA his income details and trade dealings, thus, despite Mr Justice Lee's orders, I am unable to comply with orders where the Bankrupt is not providing any assistance with respect to documentation regarding the disputed debt." 37 Douglas-Brown said that neither Coyne's solicitor nor Coyne responded to his letter of 28 April 1998. Following orders made by this Court on 14 August 2002, he provided Coyne, by his solicitor, with a list of accepted proofs of debt. He has not received any correspondence by or on behalf of Coyne disputing any of those accepted proofs of debt. 38 A further issue arose late in 2001 in relation to the inheritance by Coyne from the deceased estate of his father. This is referred to later in these reasons. After having acquired from the executors moneys out of Coyne's inheritance, Douglas-Brown says he began preparation for finalisation of the estate. Although he had previously advertised and made determinations as to creditors' claims, he decided that as he was proceeding to declare a first and final dividend, it was necessary to make a fresh notification to creditors and potential claimants calling for proofs of debt. He thought there was a possibility that further creditors' claims might be received, in particular creditors who had stood aside for the purposes of the composition might wish to participate in a distribution from the bankrupt estate. There was also the question of interest. He is now concerned that the amount he allowed for his potential remuneration and costs as trustee of Coyne's estate may be insufficient. Considerable fees and costs have been incurred as a result of the present proceedings. He appreciates that whether he is ultimately entitled to draw those fees and costs from the bankrupt estate will depend in part on the outcome of the proceedings. There will also be a need for a creditors' resolution to fix his entitlement to remuneration. However, the additional work and costs involved in defending the proceedings means that the amount he originally estimated would be required from the deceased estate to satisfy the claims, remuneration and charges, may be insufficient. To that end on 16 September 2002, he obtained from the Supreme Court of Western Australia orders adjourning Coyne's application for payment out of the remainder of his entitlement from the deceased estate of his father. 39 Douglas-Brown says he is now virtually in a position to finalise Coyne's estate. There has been notification in accordance with the Act of an intention to make a first and final dividend, proofs of debt have been received and considered and subject to the determination of remuneration and costs and the possible necessity of a further application to the Supreme Court of Western Australia in relation to the deceased estate of Coyne's father, there are available assets to pay creditors' claims in full. 40 Douglas-Brown considers that all that is required for finalisation of Coyne's estate is the following: 1. Determination of the present proceedings and formal orders disposing of Federal Court action WAG7068 of 1997. 2. Determination of any of the costs issues consequent upon these proceedings. 3. Fixing by taxation legal costs payable by him. 4. A meeting of Coyne's creditors to fix his remuneration. 5. Declaration of a first and final dividend and consequential payment out of remuneration and costs and creditors' claims. 6. Payment of the surplus, if any, to Coyne. 41 The preceding history as may be seen is incomplete. It is apparent from some of the documentary material referred to in the affidavits that there have been many communications and dealings between trustee and bankrupt that are not set out. The proceedings have undoubtedly been protracted. It is not necessary for present purposes that I make specific findings relating to the role of the bankrupt in engendering those delays. It may be that there have been from time to time delays which are attributable to and are the responsibility of the trustee. However, the evidence does not disclose, in my opinion, sufficient grounds for instituting an inquiry for the removal of the trustee. In any event, as a matter of discretion to institute such an inquiry in respect of essentially historical matters at such a late stage in the administration of the estate would simply incur additional costs and be of no benefit to creditors.

Objection to Discharge 42 On 7 March 1996, Douglas-Brown lodged an objection to Coyne's discharge pursuant to s 149B of the Bankruptcy Act. This was because of Coyne's conduct in his bankruptcy. The stated grounds in the notice of objection were as follows: "1. The Bankrupt appears to have engaged in misleading conduct in relation to a person in respect of an amount that exceeds $3,000. The Bankrupt purchased tyres from GE Fennell Tyre Dealer in May 1994. I have a letter from the Credit Manager of GE Fennell Tyre Dealer stating that the account ($3,280) has not been paid and my discussions with them indicate that the Bankrupt did not disclose his bankrupt status when engaging in the transaction. The Bankrupt appears to have mislead (sic) certain members of the public by obtaining credit under a business name without disclosing his bankrupt status as required by law. This is one instance of this occurring and it is possible that further credit has been obtained without disclosure of the bankrupt status. 2. The Bankrupt has failed to comply with written requests from me to provide information about property, income or expected income. A letter was sent to the Bankrupt on or around 28 April 1995 requesting further details regarding property, his activities and his income. Also included in this request was a Certificate of Assessment of Bankruptcy Income and Contribution. To date I have not received any reply to my queries. Due to the bankrupt's reluctance to provide me with information regarding his affairs it has been difficult to establish whether there are any assets available for creditors and what business, if any, the bankrupt is currently conducting. This has hampered the administration of the estate. 3. The Bankrupt has failed to pay to the trustee income contributions due of $8,029.00 (as detailed in point 2 above). Although an assessment has been issued, the Bankrupt has not paid the contributions to me and I have in fact never received an indication whether the Bankrupt objects to the assessment or will pay the contributions. 4. The Bankrupt failed to disclose in his statement of Affairs a liability which would have existed at the date of bankruptcy. It was brought to my attention that the Bankrupt had a debt of approximately $8,000 to the Water Authority of Western Australia. This debt is also secured over property owned by the Bankrupt. The debt was not listed in the Statement of Affairs prepared and lodged by the debtor. I am not able to state whether the above was intentional or not, however, it does indicate that the extent of the Bankrupt's liabilities may be greater than disclosed in the Bankrupt's Statement of Affairs. 5. The Bankrupt has failed to sign a document after being requested by me to do so. On 8 March 1995, in reply to the Bankrupt's Income Questionnaire, I requested the Bankrupt to execute an affidavit swearing that the information provided to me was correct and that all information had been provided to me. This affidavit has never been returned to me. This document was requested to satisfy myself that the Bankrupt has complied with his duties under the Act. The failure to execute the document may indicate that the Bankrupt has not been disclosing all materials facts to me as his trustee." 43 In the notice advising Coyne of the objection the trustee stated: "If you dispute the grounds upon which the objection was lodged you may apply to the Inspector-General for a review of the decision to lodge an objection and/or apply to the Administrative Appeals Tribunal for a review of the decision. For further details, please refer to the attached annexure." The attached annexure was by way of information about the effect of the notice of objection and the avenues for administrative review of it. 44 Coyne complains that Douglas-Brown had extended his bankruptcy on the grounds that he had incurred credit beyond that allowed by the Bankruptcy Act and that Douglas-Brown had not sought any information from him about the purported transaction before extending his bankruptcy. 45 The letter argued that there had been no credit incurred. The relevant liability involved the replacement of a punctured tyre on a plough. The tyre was of substantial size - two metres in diameter. The tyre supplier at Bruce Rock agreed to lend Coyne a second hand tyre while the original was being repaired in Perth. He was subsequently told that his tyre was unrepairable. He was offered the second hand tyre at about $3,000. He rejected that offer on the basis that the new price was only $5,000. It was going to take about twelve weeks to obtain a new tyre replacement from Japan. He subsequently received invoices requiring payment of $3,000 for the second hand tyre which he had not purchased. When the new tyre eventually arrived they agreed that as the plough would be returning to Perth they would wait until that time to fit the tyre and thus save $500 in time and travel to Bruce Rock. He paid for the fitting of the tyre on 28 April 1995, a total of $5,415, which he says he paid by cheque. 46 He took issue with other matters mentioned in the notice. It is notable however, that he did not make any attempt to seek review by the Inspector-General or the Administrative Appeals Tribunal. There is nothing to suggest that the trustee did not have grounds for filing an objection when he did. There is no basis here for an inquiry into the trustee's conduct.

Entry onto Binningup Property 47 Coyne complains that in 1996, Douglas-Brown made a demand by letter for vacant possession of his house at 2 Riviera Place, Binningup. Coyne challenged the entitlement to possession on the grounds that he shouldn't have been declared bankrupt, was in the process of getting the bankruptcy annulled and was in funds, as a result of settling his Supreme Court claims, and that the mortgagee would be paid in full. Douglas-Brown then brought proceedings for possession which, for reasons already outlined, were not prosecuted to a conclusion. 48 Coyne says that in March 1997, Binningup (South), through its lawyers, notified Douglas-Brown that it claimed some of the land registered in title to him at 2 Riviera Place. Douglas-Brown wrote to or telephoned him and Coyne informed him that what he called "the boundary dispute" was a dead issue as Binningup (South) had no claim. He said he confirmed this in writing. The matter came before Lee J on 12 November 1997 on Coyne's application for vacant possession. However the Court allowed time to resolve the boundary dispute. 49 On or about 16 December 1997 when Coyne was not in Bunbury, an employee of Binningup (South) and another man entered the property, removed and realigned the rear fence, broke the reticulation system and removed the clothes line. His son came home from school and the man told his son they would be back on the following day to remove the pergola and barbeque and to bulldoze the back corner of the house. Coyne immediately applied to the Federal Court for an injunction to prevent this happening. As a result of the injunction proceedings, the parties got together and a deed of settlement was executed whereby his wife and he paid $1,500 to Binningup (South). On that basis it was agreed that the land belonged to Coyne. He exhibited to his affidavit a deed of settlement between himself and his wife on the one hand and Binningup (South) on the other. Under this settlement, Binningup (South) agreed to sell the disputed land to the Coynes for the sum of $1,500. There seems to have been no consideration of the possibility that this might have involved an unlawful subdivision. As will be seen, the transaction was later reversed by agreement involving Douglas-Brown, the National Australia Bank and Binningup (South). So far as it goes however the complaint indicates no misconduct on the part of Douglas-Brown. Dealing with AM Securities Pty Ltd's Claim 50 Coyne's complaint in relation to Douglas-Brown's handling of the last minute claim by AM Securities is set out in his affidavit of 2 August 2002. He said that Waller, who was a director of Binningup (South), the petitioning creditor, claimed at the last minute that a company related to him, namely AM Securities was owed $15,000. This claim had never previously been made and was in his view, an attempt by Waller to derail his composition proposal. The claim he asserts was false and specious, it has never been pursued and was withdrawn after the meeting. 51 Coyne says that much to his frustration and disappointment, Douglas-Brown allowed Waller to vote for $1 in respect of that claim. Waller voted against the proposal and voted against companies which he represented receiving 100 cents in the dollar in respect of their claims. He also asserted that Waller, on behalf of Binningup (South) had, during the bankruptcy hearing in 1993, twice rejected full tender of the judgment debt. He refers in his affidavit to the defeat of the composition proposal in March 1998. He says it came as no surprise when Douglas-Brown informed him that if he were to reject the claim by AM Securities, Waller would not dispute that rejection. He said that when the AM Securities' claim was raised on the eve of the composition meeting, he had disclosed to Douglas-Brown all relevant facts relating to it. These were: (i) A writ had been issued against him in 1989 by both AM Securities and United Development Corp Pty Ltd (both Waller companies) for the same amount of $15,000. (ii) An application for summary judgment was dismissed with costs. (iii) Both actions were discontinued. (iv) Since 1989 there had been no action or claim of any sought from AM Securities. (v) Such documents as he had, he gave to Douglas-Brown. He says all of this was entirely ignored and Waller's claim given credence. 52 Douglas-Brown says that he did not recollect receiving any documents from Coyne prior to the meeting of 5 March 1998 and believes that he did not. The ground for this belief was that he had an exchange of correspondence after 5 March 1998 in which he sought documentation in relation to the AM Securities' claim. That correspondence is exhibited to his affidavit. 53 In my opinion, it is difficult to see any basis upon which the trustee's dealing with the AM Securities' claim, raised as it was at the last moment, even if it can be criticised, provides a foundation for an inquiry into his removal at this stage.

Sale of Binningup Property at Undervalue 54 Following his purported resolution of the boundary dispute in relation to the Binningup property by payment of $1,500 to Binningup (South), the National Australia Bank as mortgagee obtained vacant possession and sold the property by private treaty. Coyne asserts his belief, based on his experience with land in the area and his knowledge of the property, that it was worth, at the time, at least $175,000. He considered that Douglas-Brown should have negotiated with or demanded of, the Bank that it auction the property to ensure that any surplus might be obtained for the benefit of the creditors or his bankrupt. 55 Since then he notes that Binningup (South) and the National Australia Bank, with the support of Douglas-Brown, purported to reverse the transaction and agreement recorded in his deed. One of the reasons for the purported reversal is that the transferee was Binningup (South) and it should have been Lakewood Shores Pty Ltd. His concern is that Douglas-Brown knew of all the circumstances leading up to the deed and knew the representatives of Binningup (South) well. He meekly accepted the purported reversal of the transaction. 56 In my opinion there is again nothing in this material to indicate a basis for an inquiry for removal of the trustee.

Estate of PJ Coyne (deceased) 57 The late Peter Joseph Coyne was the father of the bankrupt. Douglas-Brown had met him as he wanted to discuss a loan of approximately $70,000 he had made to Coyne after his bankruptcy. In late 2001, Douglas-Brown became aware that Mr Coyne senior had died. He evidently died in November that year. Douglas-Brown made inquiries and became aware that the deceased had made a will under which he left his estate to be divided equally among four children, including Coyne. Douglas-Brown formed the view that Coyne's interest in the deceased estate passed to him as trustee in bankruptcy as after acquired property. Coyne had not told him that his father had died. Nor did he tell him of his entitlement under the will. 58 Douglas-Brown contacted the executors of the deceased estate, who were Coyne's sisters, and informed them that as trustee he was entitled to Coyne's share under the will. He did not require the trustees to pay to him the whole of Coyne's entitlement. Instead, he says, he calculated the amount he considered would be sufficient to satisfy the claims in the estate, his remuneration and costs as trustee and the levy payable to the government by way of a realisation charge. In determining a figure for his remuneration and costs he estimated a figure based on his then time costs. There had not then been a meeting of creditors to consider any resolution to fix his entitlement. At the time his estimate of claims, remuneration and charges was $129,217. He also considered it necessary to claim from the trustees of the deceased estate an amount sufficient to meet the potential interest claim by the creditors, Esanda and Binningup (South). He notes that following the issue of these proceedings, Coyne has procured and provided to him a letter from Esanda waiving any interest claim. 59 Douglas-Brown said he asked the executors of the deceased estate to pay to him the sum of $129,217. He did this by a notice of demand dated 18 March 2002. Pursuant to that demand the sum requested was paid. This was done by two cheques on or about 7 June 2002. Following its receipt he began preparations for the finalisation of Coyne's bankrupt estate which have already been referred to. It appears that a remaining balance of $40,415.55 has been paid into the Supreme Court by the executors. Coyne instructed his solicitors to make an application to the Court to have the money paid out. According to Coyne, this application was opposed by the legal firm of McKinlays who had previously acted for Douglas-Brown and against him in the course of the bankruptcy. They were acting for a creditor, Margaret Jill Manning, who had issued a writ against him on 31 May 2002. At the hearing of the application before Wallwork J on 16 July 2002, a letter from Douglas-Brown to McKinlays and to Coyne's solicitors was produced. In that letter Douglas-Brown advised that he had made an estimate of the money required to finalise the estate and had had further time to examine a list of possible claimants. He indicated the possibility that persons who had said they would not claim against the estate for the purposes of the composition might now wish to claim for a normal dividend. Accordingly, he needed to write to every known creditor to ask if they would be proving and to submit a proof of debt. Although he was not represented at the proceedings before Wallwork J he believed that the matter should be adjourned for a period of at least forty five days to allow for creditors to be written to and responses received. In the event, Wallwork J made an order that the hearing of the summons be adjourned for forty five days until 16 September 2002. 60 In Coyne's affidavit of 7 October 2002, he said that his father died in November 2001. Following his death he had a conversation with his sister, Patricia, one of the executors, who said that the estate comprised approximately $1 million to be divided evenly between the four children. She expected the process to take a couple of months. Later attempts by Coyne to communicate with his sister were unsuccessful. He then phoned his brother, Roger, who was another of the beneficiaries, who told him that he had received his distribution. Coyne complains that he had no correspondence or communication from Douglas-Brown on this matter. Douglas-Brown did not notify either him or his solicitors that he had claimed on his late father's estate. Coyne also complains orally in his submissions that the trustee has failed adequately to investigate his entitlement to the estate. 61 Although obviously the question of the level of fees claimed by the trustee is a matter of concern, there is nothing in my opinion to indicate that his conduct in relation to the deceased estate warrants an inquiry. Mere assertion of necessarily hypothetical omissions is not evidence for that purpose.

Level of Trustee's Claimed Remuneration 62 Douglas-Brown points out that he is yet to draw any remuneration for his services as Coyne's trustee in bankruptcy, although a $750 recovery has been applied towards disbursements incurred. The costs for his services have been exacerbated, he says, to Coyne's conduct in relation to the administration of the estate. He has had to take additional time over and above what he would consider to be normal in:

1. Seeking to identify assets.
2. Seeking to identify income derived by Coyne.
3. Realisation of assets (due to Coyne's failure to deliver up).
4. Determining creditors and the amounts of creditors' claims.
5. Litigation.
6. Failed compositions (including negotiations as to proposals).
7. Investigation of post-bankruptcy conduct of Coyne.
8. Section 77C examinations of Coyne.
9. The objection to discharge of Coyne from bankruptcy. 10. Creditor inquiries (both pre and post-bankruptcy creditors) including dealing with post-bankruptcy claims for debts incurred and remaining unpaid for the period subsequent to the bankruptcy. He asserts that had Coyne cooperated with him and provided proper assistance in the conduct of his administration of the estate, the costs of his services as trustee would have been greatly reduced. 63 Before the present proceedings were commenced the costs for his services as trustee of the estate, calculated on a time basis, were $66,374.62. That amount covers the period from 10 March 1993 to 15 July 2002. It is based upon charging at a rate of 85% of the Insolvency Practitioners Association of Australia Guide to Hourly Rates in accordance with s 162(4) of the Bankruptcy Act and reg 8.08 of the Bankruptcy Regulations. 64 Although, in order to facilitate Coyne making a composition he was prepared to compromise his entitlement to remuneration in 1998, any compromise was conditional upon a composition being approved and proceeding. In his report to creditors of 25 February 1998, he stated that as at the date of that report costs incurred in respect of the bankrupt's estate were in excess of $34,600 but, in an effort to resolve the matter, he had agreed to fix fees at $15,000 in the event that the composition was approved. This did not involve any concession that his fees were not properly incurred. He said he has never intended to draw remuneration from Coyne's estate based solely on a time basis. His usual preference is for creditors to assess and fix a remuneration resolution. Accordingly, he convened a meeting of creditors for 8 August 2002. As his report to that meeting indicates, the amount he sought by way of remuneration for services was not the $66,374.62 calculated on a time basis but a reduced sum of $55,000 plus any applicable GST, plus the additional costs of finalising the estate. Because the meeting has been adjourned by orders of the Court made on 7 August 2002, his creditors have not considered by resolution fixing his remuneration. No creditor has sought that his remuneration be taxed. Nor has Coyne sought that his remuneration be taxed. He says that he instructed his solicitors to write to Coyne's solicitors on 4 September 2002 allowing him a further seven days in which to seek taxation of his claimed remuneration. This letter was exhibited. No request has been forthcoming for taxation. 65 In accordance with orders made in this Court on 14 August 2002, he provided a breakdown of the remuneration he claims for the administration of the estate. This breakdown is by way of a schedule of time costs set out in exhibit "PAC1" to Coyne's affidavit sworn on 7 October 2002. It shows dates and hours worked for Douglas-Brown and various members of his staff since March 1993. He also provided a schedule of disbursements and a summary of time costs by year and by level of staff member. In addition Douglas-Brown has incurred legal fees in respect of his administration of Coyne's estate under three heads:
   1. Payment to Sly & Weigall in relation to Coyne's first application for his removal as trustee.
   2. MacKinlay & Co in relation to the application for possession of the Binningup property.
10. Gadens and Deacons in relation to these proceedings. The costs payable to Sly & Weigall were the subject of an order made against Coyne as it was his application that was dismissed. They were ultimately taxed and were paid direct to Sly & Weigall. Douglas-Brown intends to have Gadens' and Deacons' costs of these proceedings taxed. MacKinlay & Co have not been paid in full for their costs. Their total costs are $15,816.12. Of that $8,694.65 has been paid. These were made partly from his former firm's personal funds and partly by an indemnifying creditor. They have not been paid from the property of Coyne's estate. Douglas-Brown intends to seek reimbursement in due course. 66 In my opinion, the estate is plainly one which has been extremely difficult from the point of view of the trustee. The costs seem substantial. However an opportunity has been offered to have them taxed. I am not prepared to institute an inquiry as to the conduct of the trustee based upon those costs. The evidence does not warrant it.

Conclusion 67 For the preceding reasons, I am not satisfied that this matter should proceed any further to an inquiry into the conduct of the trustee with a view to his removal. While the administration of the estate has taken an unconscionably long time, I am not prepared to say that this is generally attributable to failings on the part of the trustee. Coyne has been a particularly difficult bankrupt to deal with. And even if there are criticisms of the administration of the estate by the trustee, I do not consider that an inquiry at this stage would be of any use to anybody. The application will be dismissed with costs to be paid out of the bankrupt estate.

Post Script 68 The orders which I have indicated above were made on 24 October 2002. Parties were advised that the reasons would be available on 25 October and they are published as indicated. At the time of making the orders I indicated that I would be prepared to entertain an application to extend the time for taxing the trustee's claimed remuneration. Counsel for the trustee indicated, however, that this would be academic as the trustee would submit to the creditors' meeting, to take place on 25 October, a revised updated claim so that the time for seeking a taxation would run from 25 October. On the basis of that indication, it is unnecessary to make any order extending the time for taxation of costs. Coyne can proceed to seek taxation of the trustee's costs if he desires within the time limited by the Regulations. I certify that the preceding sixty eight (68) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French: Acting Associate: Dated: Mr PA Coyne appeared on his own behalf. Counsel for the Respondent: Mr PB O'Neal and Mr J Vaughan Solicitor for the Respondent: Deacons Date of Hearing: 10 October 2002 Date of Judgment: 24 October 2002