Macchia v Nilant

Federal Court of Australia|1997-04-11|Before: Lee J, Beaumont J, French J

Introduction 1 Mario Silverio Macchia, a former bankrupt, seeks orders from the Court including orders for an inquiry into the conduct of his trustee in bankruptcy and for the payment of damages. He says, in substance, that the trustee breached his duty to him in various ways through the lodgment of objections to his automatic discharge from bankruptcy. The objections were invalid and, he says, caused him to suffer loss and damage. He invokes ss 178 and 179 of the Bankruptcy Act 1966 (Cth) under which the Court exercises supervisory powers over trustees in bankruptcy. The primary questions for decision are whether this is a case to which those sections should be applied and whether the relief sought is consistent with their purpose.

Factual Background 2 Mario Silverio Macchia became a bankrupt on 16 September 1991 under a sequestration order made pursuant to a creditors' petition. Charles Nilant was appointed and remained his trustee in bankruptcy. A statement of his affairs was filed with the Registrar in Bankruptcy on 21 January 1994. In the ordinary course, by virtue of s 149(3) of the Bankruptcy Act 1966 (Cth), Mr Macchia would have been automatically discharged on 21 January 1997, that being the end of the period of three years from the date on which the statement of affairs was filed. Automatic discharge however did not occur because on 3 July 1996 Mr Nilant lodged an objection to discharge. The ground of the objection was that: "…the bankrupt failed to pay the trustee any part of the amount that the bankrupt was liable to pay under Section 139ZG of the Act, being $10,451 or alternatively $8,985." The ground was based upon s 149D(1)(f) of the Act. In elaboration of the objection it was said in the Notice of Objection that on 15 February 1995 Mr Nilant had assessed Mr Macchia as being liable to make income contributions from his income towards his estate for the Contribution Assessment Periods of 1 July 1992 to 30 June 1993 and 1 July 1993 to 30 June 1994. Correspondence ensued between Mr Nilant and Mr Macchia's solicitors from June to November 1995. In the event, on 20 June 1996 Mr Nilant reassessed Mr Macchia for Contribution Assessment Periods 1 July 1992 to 30 June 1993 and 1 July 1993 to 30 June 1994. That reassessment had the effect of reducing the contribution required from $10,451 to $8,985. As appeared from the Notice of Objection dated 3 July 1996, Mr Macchia did not pay the contributions or any part thereof. As the Notice observed the objection had the effect of extending Mr Macchia's bankruptcy to 21 January 2002. 3 Notwithstanding the objection, Mr Macchia filed an application in this Court on 12 October 1995 seeking a declaration that he was discharged from bankruptcy on 17 September 1994. That application did not come on for hearing until 8 April 1997. In the meantime a second objection was filed on 19 March 1997. The ground of this objection, set out in the Notice was: "THAT the bankrupt failed to respond to a written request from his trustee to provide written information about the bankrupt's property, income or expected income, in particular his interest in the deceased estate of Giulia Macchia and the property at 31 Gill Street, North Perth." Reliance was placed upon s 149D(1)(d) of the Bankruptcy Act 1966. In setting out evidence establishing the grounds for the objection Mr Nilant referred to correspondence to Mr Macchia's solicitor in April and June 1995. He sought information to enable him to determine whether Mr Macchia had any entitlement to property or income from the deceased estate of his mother Giulia Macchia who had died on or about 21 March 1995. This objection was also said to have the effect of extending the bankruptcy to 21 January 2002. 4 A separate Notice of Objection, albeit arising out of the same circumstances, was lodged on the same day. The grounds of objection asserted that Mr Macchia had failed to disclose to the trustee his beneficial interest in any property and, in particular, in the deceased estate of Giulia Macchia and the property known as 31 Gill Street, North Perth. This objection was brought under s 149D(1)(n) of the Act. It was said by Mr Macchia also to have had the effect of extending the bankruptcy. 5 The hearing of Mr Macchia's application for a declaration that he had been discharged from bankruptcy on 17 September 1994, in the alternative sought an order under par 33(1)(c) of the Bankruptcy Act 1966 abridging the time limited under s 149 of the Act for his discharge from the bankruptcy. In the event, on 11 April 1997 a judge of the Court made an order in the following terms: "1. The time limited by sub-s 149(3) of the Bankruptcy Act 1966 (Cth) for the period of bankruptcy in this matter be abridged to 13 months from the date on which the bankrupt filed his statement of affairs. 2. There be no order as to costs." See Macchia v Nilant (Lee J, 11 April 1997, unreported). 6 The period of bankruptcy limited by s 149 of the Act was therefore abridged from three years to one year and one month from the date of filing of the statement of affairs. As a result, Mr Macchia was discharged from bankruptcy as at 22 February 1995, a period of three years and five months. Mr Nilant appealed against the decision and on 14 September 1997 the Full Court allowed the appeal, set aside the orders made on 11 April 1997 and remitted the matter to the primary judge for further consideration. It was also ordered that Mr Macchia pay Mr Nilant's costs of the appeal and of the proceedings at first instance - Nilant v Macchia (1997) 78 FCR 419. 7 Under the orders made by the Full Court there was a further rehearing on 12 October 1999. At that time the application was amended to seek a declaration that the Statement of Affairs be deemed to have been filed on 16 September 1991. The application was also amended to seek orders that the objections to discharge were invalid and that Mr Nilant's assessments under s 139W of the Act of income payable by Mr Macchia were invalid. At the hearing Mr Macchia's solicitors drew the primary judge's attention to the decision of the Full Court in Challen v Bendeich [1999] FCA 845, a judgment given on 25 June 1999. The effect of that decision was that an income contribution assessment could not be made retrospectively but had to be made during the contribution assessment period in question. Mr Nilant accepted that it followed from this that any objection to discharge lodged on the ground of an assessment so made would also be invalid. The hearing on 12 October 1999 was adjourned on the basis that Mr Nilant's solicitors would consider Challen v Bendeich in more detail and advise him of the effects of that decision on the Notices of Objection to discharge which he had lodged against Mr Macchia. He received legal advice subsequently that the effect of the decision in Challen v Bendeich was that the Notice of Objection to discharge against Mr Macchia dated 3 July 1996 could not stand and he should therefore withdraw that objection. The flow on effect would be that Mr Macchia would have been discharged from bankruptcy in January 1997 and that the two subsequent Notices of Objection dated 19 March 1997 would therefore also be invalid. On the basis of this legal advice, Mr Nilant said he withdrew all three objections to discharge in December 1999. 8 The hearing continued on 23 February 2000 but in view of the withdrawal of the objections was confined to the question of whether any declaration should be made. On 27 March 2000 the learned primary judge gave judgment declaring that Mr Macchia was discharged from bankruptcy in September 1994. In so doing, his Honour applied s 306(1) to overcome the difficulty caused in relation to the Statement of Affairs - Re Macchia; Ex parte Macchia v Nilant (2000) 172 ALR 158. An appeal against that decision was filed in the Full Court and was heard by the Full Court on 31 August 2000. On 27 October, the Full Court allowed the appeal on the basis that s 306 could not be applied to overcome a failure to file a Statement of Affairs under s 54 - Nilant v Macchia [2000] FCA 1528. 9 On 7 March 2000, Mr Nilant issued a bankruptcy notice against Mr Macchia making demand for payment of taxed costs of $12,600 arising out of the orders of the Full Court made in September 1997. On 31 March 2000, Mr Macchia applied to this Court to set aside the bankruptcy notice. It is that application which has led to the present proceedings.

The Amended Application 10 The application filed by Mr Macchia in these proceedings was amended on 9 May 2000 and the relief claimed thereunder was as follows: "1. Pursuant to section 41(7) of the Bankruptcy Act an order setting aside the bankruptcy notice dated 7 March 2000 by the Respondent against the Applicant on the ground that the Applicant has a counter-claim, set-off or cross demand as is referred to in section 40(1)(g) of the Bankruptcy Act. 2. Pursuant to section 179 of the Bankruptcy Act the Court inquire into the conduct of the Respondent as trustee in relation to the Applicant's bankruptcy and orders that: (a) The Respondent be removed from office. (b) The Respondent pay damages to the Applicant in such sum as the Court considers just and equitable. 3. In the alternative to paragraph 2(b), an order pursuant to section 178 of the Bankruptcy Act that the Respondent pay damages to the Applicant in such sum as the Court thinks just and equitable. 4. Costs." 11 On 27 July 2000, Mr Nilant filed a motion seeking an order that the claim under ss 178 and 179 of the Act be struck out and/or dismissed. That motion came on for hearing on 31 July 2000. By agreement the substantive application also proceeded on that day save that the question of the setting aside of the bankruptcy notice would depend upon the outcome of the other relief claimed.

The Points of Claim 12 The points of claim filed on behalf of Mr Macchia on 9 May 2000 raised the following contentions:-

Mr Nilant as trustee was under a duty to Mr Macchia: (a) to exercise reasonable diligence and prudence; (b) to exercise his powers for a proper purpose; (c) not to exercise his powers for an improper purpose. (Par 3).
Assuming no Notice of Objection, Mr Macchia would have been entitled to automatic discharge from his bankruptcy pursuant to s 149(3) of the Act on 21 January 1997. (par 5).
The Notice of Objection filed on 3 July 1996 extended the date of discharge to 21 January 2002 albeit the extension ceased upon its withdrawal on 17 December 1999. (pars 7 and 24).
The Notice of Objection of 3 July 1996 was invalid for a variety of reasons which are particularised. (par 8)
In issuing the Notice of 3 July 1996 Mr Nilant breached his duty to Mr Macchia to exercise reasonable care and diligence. This assertion is also particularised (par 9).
A further Notice of Objection of 19 March 1997 based upon Mr Macchia's alleged failure to respond to a written request to provide information also operated to extend his bankruptcy to 21 January 2002 unless earlier withdrawn which occurred on 17 December 1999. (pars 11 and 24)
The first Notice of Objection dated 19 March 1997 was invalid for reasons particularised. (par 12).
In issuing the first Notice of Objection dated 19 March 1997 Mr Nilant breached his duty to Mr Macchia to exercise reasonable diligence and prudence. He also issued the Notice for an improper purpose. (pars 13 and 14).
The second Notice of Objection also issued on 19 March 1997 was invalid for reasons particularised. (par 17).
In issuing the second Notice of Objection dated 19 March 1997 Mr Nilant breached his duty to Mr Macchia to exercise reasonable diligence and prudence and issued the Notice for an improper purpose. (pars 18 and 19).
In related proceedings in this Court between the same parties in 1997 the trial judge raised in open court doubts as to the validity of a Notice of Objection dated 3 July 1996 and expressed those doubts in his reasons for decision. In other proceedings, WG7007 of 1996, Mr Macchia by an Amended Application dated 19 April 1999 challenged the validity of the Notice of Objection of 3 July 1996. Mr Nilant was aware of these things or would have been aware of them if he had exercised reasonable diligence and prudence. Mr Nilant breached his duty to Mr Macchia to exercise reasonable diligence and prudence in failing to review properly or at all, the validity of the Notice of Objection to Discharge dated 3 July 1996 following the trial judge's comments on 8 April 1997. (pars 20, 21, 22 and 23).
The effect of the objections to discharge was that Mr Macchia, who would have been discharged from bankruptcy on 21 January 1997, remained and was treated as an undischarged bankrupt until the withdrawal of the objections on 17 December 1999. (par 25).
As a result of Mr Nilant's breach of duty it is said Mr Macchia suffered loss and damage during the period 21 January 1997 to 17 December 1997 in various respects which are particularised. (par 26).
In the premises it is said Mr Nilant is liable to Mr Macchia and it is appropriate that the Court inquire into his conduct as trustee during Mr Macchia's bankruptcy. (par 27). 13 Before considering the points of claim and Mr Nilant's challenge to their application generally, it is convenient to set out the relevant provisions of the Bankruptcy Act 1966. Statutory Framework - General Powers of Court 14 Section 30 of the Act provides, in the relevant parts: "30(1) The Court: (a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and (b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter. (2) The Court may direct such inquiries to be made and accounts to be taken for the purposes of any proceeding before the Court as the Court considers necessary and may, when directing an account to be taken, or subsequently, give special directions as to the manner in which the account is to be taken or vouched." Subsections (3) to (6) are not relevant for present purposes. Statutory Framework - Control of Trustees 15 Division 4 of Pt VII of the Bankruptcy Act 1966 relates to control over trustees. Sections 178 and 179 provide: "178 If the bankrupt, a creditor or any other person is affected by any act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable. 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." Prior to the 1996 amendments to the Act a Registrar in Bankruptcy could also make an application under s 179. 16 Reference should also be made to s 176 which appears in Division 3 of Part VII entitled "Accounts and Audits". Section 176 provides: "176(1) Where, on application by the Inspector-General or by a creditor who has or had a debt provable in the bankruptcy, the Court is satisfied that a person who is or has been a trustee of a bankrupt's estate has been guilty (whether before or after the commencement of this section) of breach of duty in relation to the bankrupt's estate or affairs, subsection (2) applies. (2) The Court may make any one or more of the following orders: (a) an order directing the person to make good any loss that the bankrupt's estate has sustained because of the person's breach of duty; (b) if the person is a registered trustee - an order directing the Inspector-General to cancel the person's registration as a trustee; (c) any other order that the Court considers just and equitable in the circumstances."

Statutory Framework - Contributions by a Bankrupt 17 Division 4B of Pt VI of the Act is concerned with contribution by the bankrupt and the recovery of property of the bankrupt. The relevant provisions are set out as they stood before the 1996 amendments to the Act. The objects of the Division are set out in s 139J thus:- "139J The objects of this Division are: (a) to require a bankrupt who derives income during the bankruptcy to pay contributions towards the bankrupt's estate; and (b) to enable the recovery of certain money and property for the benefit of the bankrupt's estate." 18 Sections creating the liability for contributions are ss 139P and 139Q which are in the following terms: "139P(1) Subject to section 139Q, if the income that a bankrupt is likely to derive during a contribution assessment period as assessed by the trustee under an original assessment exceeds the actual income threshold amount applicable in relation to the bankrupt when that assessment is made, the bankrupt is liable to pay to the trustee a contribution in respect of that period. 139P(2) Subject to section 139Q, if the income that a bankrupt is likely to derive during a contribution assessment period as assessed by the trustee under an original assessment does not exceed the actual income threshold amount applicable in relation to the bankrupt when that assessment is made, the bankrupt is not liable to, but may if he or she so wishes, pay to the trustee a contribution in respect of that period." There is provision for the Official Receiver to vary the contribution on grounds of hardship on application by the bankrupt (s 139T). 19 The liabilities created by these provisions are not affected by a subsequent discharge (s 139R). The amount of the contribution is half of the difference between the assessed income and a defined amount known as the actual income threshold amount. The term "contribution assessment period" was defined in s 139K prior to the 1996 amendments thus: "139K …"contribution assessment period", in relation to a bankrupt, means a period that: (a) begins on: (i) the commencement of the bankruptcy or the commencement of this Division, whichever is the later; or (ii) an anniversary of that commencement, being an anniversary that occurs during the bankruptcy; and (b) ends one year after that commencement or that anniversary, as the case requires, or if the bankrupt is discharged within that year, ends upon the discharge." The "actual income threshold amount" at the time that an assessment is made is defined by reference to a base income threshold amount where the bankrupt does not have any dependants or that amount with progressive percentage increases for up to four dependants (s 139K). The base income threshold amount is calculated according to Pension Rate Tables in the Social Security Act 1991. Income is broadly defined in s 139L but the definition need not be set out here as nothing turns on it. 20 The obligation of the trustee to make an assessment of the bankrupt's likely income and contribution was created by s 139W. As it stood prior to 1996 that section provided as follows: "139W(1) As soon as practicable after the start of each contribution assessment period in relation to a bankrupt and before the bankrupt is discharged, the trustee is to make an assessment of the income that is likely to be derived by the bankrupt during that period, of the actual income threshold amount that is applicable in relation to the bankrupt when the assessment is made and of the contribution (if any) that the bankrupt is liable to pay in respect of that period under section 139S. (2) If at any time, whether during or after a contribution assessment period but before the bankrupt is discharged, any one or more of the following paragraphs applies or apply: (a) the trustee is satisfied that the income that is likely to be derived, or was derived, by the bankrupt during that period is or was greater or less than the amount of that income as assessed by the last preceding assessment in respect of that period; (b) the base income threshold amount increased after the making of the last preceding assessment in respect of that period and before the end of that period; (c) the trustee is satisfied that the number of the bankrupt's dependants who were wholly or partly dependent on the bankrupt for economic support increased or decreased after the making of the last preceding assessment and before the end of that period; the trustee is to make a fresh assessment of the income that is likely to be derived, or was derived, by the bankrupt during that period, of the actual income threshold amount that is applicable in relation to the bankrupt when the assessment is made and of the contribution (if any) that the bankrupt is liable to pay in respect of that period. (3) The powers of the trustee under subsection (2) may be exercised on the trustee's own initiative or at the bankrupt's request, but the trustee is not required to consider whether to exercise those powers at the bankrupt's request unless the bankrupt satisfies the trustee that there are reasonable grounds for the trustee to do so. (4) As soon as practicable after the making of an assessment the trustee must give to the bankrupt written notice setting out particulars of the assessment." 21 The trustee's assessment is subject to review by the Inspector‑General on the Inspector‑General's own initiative or at the request of the bankrupt if that request is made for reasons that appear to the Inspector‑General to be sufficient to justify such a review. (s 139ZA(1)). 22 A request for review of such a decision must be in writing and lodged with the Official Receiver's Office accompanied by a copy of the notice of assessment and any documents the bankrupt relies upon in support of the request (s 139ZA(3)). The Inspector‑General is required to decide whether to review the decision within sixty days after the request is lodged (s 139ZA(5)). On a review of a decision the Inspector‑General has all the powers of the trustee and may either confirm the decision or set it aside and make a fresh assessment under subs 139W(2) (s 139ZD). Applications may be made to the Administrative Appeals Tribunal for the review of a decision by a trustee to make an assessment or a decision of the Inspector‑General on the review of such a decision or a decision of the Inspector‑General refusing a request to review such a decision (s 139ZF). 23 The time at which a contribution is payable is such time as the trustee determines (s 139ZG(1)). Section 139ZG establishes the total of any unpaid contributions or instalments as recoverable by the trustee as a debt due to the estate of the bankrupt. There is a minimum notice period of fourteen days before payment can be required. This is provided for in s 139ZI as follows: "139ZI(1) If the trustee makes a determination under section 139ZG in respect of a person, the trustee must give to the person written notice setting out particulars of the determination. (2) A notice given to a person under subsection (1) may be contained in a notice of assessment. (3) The time at which a payment is to be made by a person as a result of a determination made under section 139ZG must not be earlier than 14 days after notice in relation to the determination is given to the person under subsection (1) of this section."

Statutory Framework - Discharge and Deferment of Discharge 24 Part VII deals with discharge and annulment of bankruptcy. Division 2 deals with discharge by operation of law. Automatic discharge is covered in s 149 and relevantly provides: "149(1) Subject to section 149A, a bankrupt is, by force of this subsection, unless sooner discharged in accordance with Division 3, discharged from bankruptcy in accordance with this section. … (3) If the bankrupt became a bankrupt before the commencement of section 27 of the Bankruptcy Amendment Act 1991, and subsection (2) does not apply in relation to the bankrupt, the bankrupt is discharged at: (a) the end of the period of 3 years from the date on which the bankrupt filed his or her statement of affairs; or (b) the commencement of that section; whichever is the later." Subsections (2), (4) and (5) are not applicable to this case. Automatic extension of a bankruptcy occurs when objections are made. Section 149A provides for such extension: "149A(1) If an objection to the discharge of a bankrupt has taken effect in accordance with section 149G, then, unless the objection is withdrawn or cancelled, the reference in whichever of subsections 149(2), (3) and (4) applies in relation to the bankrupt to the period of 3 years from the date on which the bankrupt filed his or her statement of affairs is taken to be a reference to the prescribed number of years from the prescribed date. (2) For the purposes of subsection (1): (a) the prescribed number of years is: (i) if the objection was made on a ground, or on grounds that included a ground, referred to in paragraph 14D(1)(a), (b), (c), (d), (e), (f), (g) or (h) - 8 years; or (ii) in any other case - 5 years; and (b) the prescribed date is: (i) if the objection was made on a ground, or on grounds that included a ground, referred to in paragraph 149D(1)(a) or (h) - the date on which the bankrupt returned to Australia; or (ii) in any other case - the date from which the bankrupt filed his or her statement of affairs. (3) If the objection is withdrawn or cancelled: (a) the objection is taken never to have been made; and (b) if: (i) the period specified in whichever of subsections 149(2), (3) and (4) applies in relation to the bankrupt has ended; and (ii) no other objection against the discharge of the bankrupt is in effect; and (iii) the bankrupt has not been discharged in accordance with Division 3; the bankrupt is taken to be discharged under section 149 immediately the objection is withdrawn or cancelled." 25 Section 149B as it stood prior to the 1996 amendments provided: "149B Subject to the following provisions of this Subdivision, at any time before a bankrupt is discharged from bankruptcy under section 149, the trustee or Official Receiver may file with the Registrar a written notice of objection to the discharge." 26 Section 149C sets out the form of the Notice of Objection which requires specification of the grounds of objection, reference to the evidence or other materials that, in the opinion of the trustee, establishes that ground or each of those grounds and the reasons of the trustee for objecting to the discharge on that or those grounds. 27 Section 149D sets out the grounds of objection which, relevantly for present purposes, are as follows: "149D(1) The grounds of objection that may be set out in a notice of objection are as follows: … (d) the bankrupt, when requested in writing by the trustee to provide written information about the bankrupt's property, income or expected income, failed to comply with the request; … (f) the bankrupt failed to pay to the trustee an amount that the bankrupt was liable to pay under section 139ZG; … (n) the bankrupt failed, whether intentionally or not, to disclose to the trustee the bankrupt's beneficial interest in any property." 28 There is a mechanism for review of the trustee's decision to file a notice of objection. This is provided by ss 149K to 149Q comprising subdivision C of Division II of Part VII of the Act. The scheme is similar to that for review of the trustee's income and contribution assessments mentioned earlier. The bankrupt may apply to either the Inspector-General or the Administrative Appeals Tribunal for review of such decisions. A decision by the Inspector-General in relation to a requested review of the trustee's decision to lodge a notice of objection is also subject to review by the Administrative Appeals Tribunal.

The Statutory Provisions Relied Upon 29 The amended application relies upon s 41(7) of the Bankruptcy Act in relation to the claim for an order setting aside the bankruptcy notice of 7 March 2000. That is a claim which falls outside the proceedings in Mr Macchia's bankruptcy albeit it arises from a costs order generated in the course of that bankruptcy. The question whether the notice should be set aside in these proceedings can be put to one side for the moment. The other relief claimed depends upon ss 178 and 179. Reliance is placed primarily upon s 179. Section 178 is invoked in the alternative as a back-up basis for the claim for damages. It is convenient to deal first with the scope of operation of s 178. Control of the Trustee's Conduct - Section 178 30 Provision for a bankrupt, creditors or other person "aggrieved by any act or decision of the trustee" to apply to a court for an order in respect of such act or decision was introduced into the English bankruptcy law by s 90 of the Bankruptcy Act 1883 (UK). It had been held under the Bankruptcy Act 1869 (UK) that an undischarged bankrupt could not file a bill in equity to set aside orders made and transactions effected in the administration of the estate even if fraud were alleged against the assignee - Motion v Moojen (1872) LR 14 Eq. 2020; Payne v Dicker (1871) 24 LT 492. Section 90 of the 1883 Act was enacted "…in part to remedy the injustice created by the disability of the bankrupt to sue, even where he had been gravely wronged by his assignee, for which the 1869 Act afforded no remedy" - Williams & Muir Hunter on Bankruptcy 19th Ed (1979) Stevens - p 426. 31 The remedy was limited. So far as the time and manner of sale of property of the bankrupt was concerned the court would not interfere unless the trustee was acting in a way that was "so utterly unreasonable and absurd that no reasonable man could so act" - Re Peters; Ex parte Lloyd (1882) 47 LT 64 at 65 (Jessell MR; Brett and Holker LJJ agreeing). The section would not, in the absence of fraud, "justify interference in the day-to-day administration of the estate, nor entitle the bankrupt to question the exercise by the trustee in good faith of his discretion, nor to hold him accountable for an error of judgment" - Re A Debtor; Ex parte The Debtor v Dodwell (The Trustee) [1949] 1 Ch 236 at 241 (Harman J). The trustee was trustee of the bankrupt's property not for the bankrupt but for the creditors (ibid at 240). A similar approach, based on these authorities, was taken to the exercise of a company liquidator's discretion in Leon v York-O-Matic Ltd (1966) 1 WLR 1450. Notwithstanding the evident purpose of s 90 of the 1883 Act and its successor, s 80 of the 1914 Act, there is said to have been no reported case in the United Kingdom under either of those statutes in which a bankrupt successfully invoked the intervention of the court against the trustee - Fletcher, The Law of Insolvency 2nd Ed (1996) Sweet and Maxwell, p 179. Each of the three cases cited above, and, no doubt, many cases in which the section was invoked, concerned decisions about the sale of property, a matter of commercial judgment and discretion with which courts would be loath to interfere. A further limitation derived from the requirement that the applicant be "aggrieved" by the decision complained of. That term described a person "against whom a decision has been pronounced which has wrongfully deprived him of something or wrongfully refused him something or wrongfully affected his title to something" - Re Sidebotham (1880) 14 Ch D 458 at 465 (James LJ). This term has been replaced by the word "dissatisfied" in s 303(1) of the Insolvency Act 1986 (UK), a change seen as substantially broadening the range of matters in respect of which the court's intervention may be invoked - Fletcher op cit at 179 fn 57, albeit Dodwell and like cases limiting that intervention seem still to be regarded as good law - Halsbury's Statutes 4th Edition Vol 4 (1998 Reissue) p 972. 32 The various bankruptcy statutes of the Australian States after federation contained provisions derived from the UK statutes of 1883 and 1914. These were reflected in s 148 of the first Commonwealth bankruptcy law, the Bankruptcy Act 1924 (Cth). It was in the same terms as s 80 of the 1914 UK Act save that the word "matter" was substituted for the word "premises". Section 148 provided: "If the bankrupt or any of the creditors or any other person is aggrieved by any act or decision of the trustee, he may apply to the Court and the Court may confirm, reverse, or modify the act or decision complained of, and may make such order in the matter as it thinks just." 33 In Re Hall (1957) 20 ABC 21 at 29 Clyne J said of it: "Under this section the bankrupt may be aggrieved by an act as well as a decision of a trustee. Under this section, the court is given control over the acts and decisions of trustees and will no doubt not interfere unless the trustee is acting unreasonably or in bad faith. In my opinion, the bankrupt under this section need not be a person aggrieved because he has been wrongfully deprived of some legal right." In Re Carson; Ex parte Carson (1960) 19 ABC 108 he considered the application of s 148 to a proposed sale of property. He cited with approval what Harman J said in Dodwell. A bankrupt could bring an application under s 148 where his property was sold at an inadequate price and there had been fraud on the part of the trustee or collusion between the trustee and the purchaser or where the trustee had acted in a manner utterly unreasonable and absurd. (at 123). The section could not be used to set aside a completed contract entered into by the trustee other than on the ground of fraud or collusion with a purchaser - In Re Chirnside; Digby v Union Trustee Co of Australia Ltd [1929] VLR 217 at 222 (Irvine CJ) at 223-4 (Cussen J). Such a case arose in Re Hawkesford (1937) 10 ABC 26 where Lukin J removed the trustee and set aside a sale. He assessed damages but the report does not disclose an order for damages. The Full Court in Willoughby v Official Trustee in Bankruptcy (WA) [2000] FCA 757 disapproved Chirnside on the assumption that it conflicted with Re Carson. The conflict may have been more apparent than real but, in any event, is academic having regard to the scope of the present provision, s 178, with which the Full Court was concerned. 34 The language of s 148 was adopted and applied to provide for court supervision of company liquidators under s 279 of the Uniform Companies Acts. A similar approach was taken to the construction of s 279 as had been taken to s 148 and its British ancestors - Re Teller Home Furnishings Pty Ltd (In liq) [1967] VR 313 at 318 (Gowans J). In Re Mineral Securities Australia Ltd (In Liq) [1973] 2 NSWLR 207 Street CJ in Eq. expressed some reservation about the universality of the test laid down in Re Peters; Ex parte Lloyd and Leon v York-O-Matic and adopted a less restrictive approach to the operation of the section. Ultimately, every challenge had to come back to some more broadly stated question such as whether the liquidator's action had such importance and could be seen to have such defects as to justify the court exercising its supervisory power (at 231). The company liquidator, like the court appointed receiver-manager, was an officer of the court making decisions, in effect, under the authority of the court itself and subject to review and control by the court should a proper case be made out requiring such intervention. The control was not to be too freely exercised. If there were a defect in the manner in which the receiver-manager was conducting his duties arising out of want of good faith or an erroneous approach in law or in principle the court would entertain an application for appropriate directions or some form of remedial order. But if a challenge were based on want of prudence and wisdom on the part of the liquidator a far heavier onus rested upon the party seeking to challenge the decision in question. 35 Sir Thomas Clyne chaired the Committee appointed by the Attorney‑General of the Commonwealth to Review the Bankruptcy Law of the Commonwealth which reported in 1962. That report led to the enactment of the 1966 Act. The Committee apparently saw no significant difference between s 148 of the 1924 Act and cl 178 of the Bill scheduled to its Report that became s 178 of the 1966 Act. The report's commentary on the proposed new ss 178 and 179 and associated provisions were brief and appeared at par 253:- "253 The Committee is of opinion that the existing provisions concerning control over trustees (sections 147‑149) are generally satisfactory and recommends only minor changes in them, the details of which will appear from a perusal of clauses 177‑179". 36 In spite of the Clyne Committee's reference to "minor changes" effected by the control provisions of the 1966 Act, the differences in wording between s 148 of the old Act and s 178 of the new were seen as "critical" by Deane J in Re Tyndall (1977) 30 FLR 6 at 9. No longer was it necessary for the applicant for relief to be "aggrieved" by the act, omission or decision complained of albeit that person must be "affected" by it. Nor was the court any more to be confined to considering first whether to "confirm, reverse or modify the act or decision complained of". The wording of s 178 was such "as to confer upon the court the widest possible discretion as to the appropriate order which should be made in the particular case" (10). It was no longer limited to those cases in which the trustee's decision was absurd or unreasonable or taken in bad faith. This expansive approach was moderated by the caveat that the court would follow well established policy under bankruptcy legislation that it "should not unduly interfere with the day-to-day administration of a bankrupt's estate by a trustee" (10). The earlier passing observation of Riley J in Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 at 267 that s 178 subjected the acts, omissions or decisions of the trustee to the control of the court by way of appeal, seems a little restrictive in the light of Re Tyndall. The width of the section was demonstrated in Re Stelnicki (1982) 62 FLR 430 when Cox J enjoined, for twenty eight days, the sale of property of a bankrupt who had a substantial surplus of assets over liabilities. Although it was not a case in which any error had been shown in the commercial judgment of the trustee, it was "just and equitable that the bankrupt have the opportunity to discharge the relatively small deficiency without further of his stock-in-trade being exposed for sale by auction". 37 The observations of Deane J about the width of the discretion under s 178 were approved by the Full Court in Re Dingle; Westpac Banking Corporation v Worrell (1993) 47 FCR 478 at 485. Nevertheless the Court emphasised that the powers under s 178, like those under s 30 of the Act are discretionary and: "It should not be thought that the Court will always intervene." The wide view was also approved by the Full Court in McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547 at 552-553. In that case s 178 was invoked to challenge a trustee's decision to lodge a notice of objection under s 149 as it stood prior to the coming into effect of the Bankruptcy Amendment Act 1991 on 1 July 1992. The former s 149 conferred on the bankrupt a right to seek a decrease of the statutory extension of the bankruptcy which was the consequence of lodgment of an objection. It did not provide any basis for challenging the objection itself. The Full Court held that s 178 was available for that purpose for objections lodged prior to 1 July 1992. Sections 149 and 150 amounted to a code in relation to the reduction of the statutory extension, but had nothing to say about review of the decision to make the objection. The new provisions, ss 149K to 149Q on the other hand, specifically covered the issue of reviewing a decision to lodge an objection. As noted earlier in the statutory framework, applications for such review have been able to be made to the Inspector-General or the Administrative Appeals Tribunal since July 1992. Although characterising these provisions also as a code, the Full Court expressly refrained from stating a view on whether there remained any place for s 178 in the review of a decision to object to a bankrupt's discharge (554).

38 Section 178 confers a "supervisory jurisdiction over the conduct of the trustee" - Cummings v Claremont Petroleum NL (1996) 185 CLR 124 at 133 (Brennan CJ, Gaudron and McHugh JJ). It confers a power to "in substance" review the decision of the trustee - McGoldrick at 556. The power is necessarily judicial - Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 at 170 (Lee J). In the latter case Lee J said that the Court could not, in an application under s 178, be asked to perform the administrative function of a trustee administering an estate in bankruptcy. It is given original jurisdiction, the exercise of which might entail "orders of a supervisory character in so far as the determination of questions of law raised by the application require those orders to be made" (169). The applicant "must show a ground on which the trustee's administration of the affairs of the bankrupt is to be reviewed". That proposition must be read with the generic concept of review in the original jurisdiction of the Court as one which can, according to context, enliven "the jurisdiction of the court in respect of the whole matter" raising issues of either or both law and fact - State of Western Australia v Strickland (2000) 99 FCR 33 at 49-50, citing inter alia, Re Tyndall. Some functions which are administrative in character when exercised by an administrator have the chameleon quality of becoming judicial when exercised by a court - Federal Commissioner of Taxation v Munro (1926) 38 CLR 153 at 175-9 (Isaacs J); R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1971) 123 CLR 361 at 363 (Kitto J); Cominos v Cominos (1972) 127 CLR 588 at 606 (Mason J). In relation to s 178 it is unnecessary, for the purpose of enlivening the court's jurisdiction, to find that the trustee has done anything wrong. His decision may, on the material before him, have been quite correct and reasonable - Gray v Clout (1990) 27 FCR 141 at 144 (Pincus J). On the other hand, it is not to the point that the judge who hears a review application might have acted differently - Healey v Prentice(No 2) [2000] FCA 1598 (Madgwick J). It is not necessary here to discern the outer limits of s 178 but rather to emphasise its importance in providing for wide ranging supervision by the Court of trustees who are appointed to administer the interests of bankrupts in the interests of creditors and, in so doing, to have regard also to the interests of the bankrupts - Haskins v Insolvency and Trustee Service Australia (Full Court, 3 October 1996, unreported).

39 Trustees are, according to the weight of authority, properly to be regarded as officers of the Court - Adsett v Berlouis (1992) 37 FCR 201 at 208. Given the nature and importance of the office, the general supervisory function of the Court is not lightly to be excluded in respect of particular classes of decision notwithstanding that specific provision is made by other parts of the Act for their reversal or modification. The mechanism which s 99 provides for challenging, in the Court, a trustee's decision to accept a proof of debt has been regarded as not excluding the operation of s 178 - Madden v Madden (1995) 58 FCR 590 at 596 (Whitlam J) and on appeal in Madden v Madden (1996) 65 FCR 354 at 377 (Einfeld J). Einfeld J was the only judge to express a view on the matter in the Full Court, Foster J, with whom Sheppard J agreed, preferring to leave it open (at 398).

40 Whatever may be the correct position in respect of challenges to decisions about proofs of debt, the availability of an administrative mechanism to review the trustee's decision to file an objection should not be taken as manifesting, by implication, a legislative intention to preclude judicial challenge under s 178. There are enough examples of such parallel processes in Commonwealth statutes to prevent any argument being mounted that a multiplicity of remedies is so novel or unusual that it could not have been contemplated by the legislature even when provided in the one statute. It is important to bear in mind however that relief under s 178 is discretionary and that the availability of a comparatively speedy and inexpensive means of administrative review in relation to an objection decision will be a factor of considerable importance in deciding whether the Court should entertain an application under s 178 or grant relief thereunder in relation to such a decision.

41 There is a question raised in this case whether the Court has jurisdiction to entertain an application under s 178 by a person discharged from bankruptcy. The definition of "bankrupt" in s 5(1) is not limited to persons who are undischarged bankrupts. So much is made plain in the judgments of Fisher and Lockhart JJ in Official Receiver in Bankruptcy v Todd (1986) 70 ALR 119 at 121 and 125. As Lockhart J said at 125: "The definition of "bankrupt" in s 5(1) is not subject to any temporal constraints. Once a sequestration order has been made against the estate of a person or once a person has become a bankrupt by virtue of the presentation of a debtor's petition, that person fulfills the description required by the statutory definition. The description applies to him as aptly after, as it does before, he is discharged from bankruptcy or his bankruptcy is annulled." Conflicting views have been expressed about whether s 178 may be invoked by undischarged bankrupts. One view is that where a bankrupt estate has been finalised and the bankrupt discharged, the section cannot be invoked - Watson v Healey (1996) 64 FCR 301 at 304 (Lee J). The obiter suggestion was made in that case that the section could not be invoked by a discharged bankrupt whether or not the administration had been finalised. But in Cheesman v Waters (1997) 143 ALR 78, Merkel J thought Watson v Healey wrong. The jurisdiction of the Court to control the trustee was said to be at least coextensive with the powers of the trustee to act, omit to act or take a decision which might affect the bankrupt (albeit one who has been discharged). Various trustee's powers which survive discharge were referred to (ss 81, 134, 135, 148, 152, 170(2), 171 and 184). On one view, of course, this may be consistent with the ratio of Watson v Healey which concerned an estate whose administration was finalised. More recently in Bellin v Pattison (Trustee) [1999] FCA 51, Kenny J referred to Watson v Healey as: "…authority for the proposition that a discharged bankrupt whose estate has been fully administered and finalised by his trustee cannot commence litigation in the bankruptcy jurisdiction of this Court but, where he alleges a breach of duty by his trustee, must pursue any remedy conferred by common law or equity in a court with common law or equitable jurisdiction." (at [20]) This observation was obiter as the applicant in that case had not been discharged. Her Honour referred to Cheesman but not on this point. An appeal against the decision of Merkel J was dismissed - Cheesman v Waters (1997) 77 FCR 221, but the standing question was not discussed. In Todd the question for the Full Court was whether the trustee's power to summons a bankrupt and others to give evidence before the Registrar, survived discharge of the bankrupt. That question was answered in the affirmative by Fisher and Lockhart JJ on what may be described as the "once a bankrupt always a bankrupt" approach to the definition of "bankrupt" in s 5(1). Relevantly to the present case Fisher J observed, by parity of reasoning, at 122: "It could not be suggested that the analogous power of the court to examine under s 179(3) a trustee, engaged in the administration of an estate in bankruptcy, was limited to a time prior to discharge of the bankrupt." 42 In my respectful opinion, for the same reasons as expressed by Fisher J in Todd, the supervisory jurisdiction of the Court conferred by s 178 extends to conduct of the trustee under the Act after the discharge of the bankrupt. So extended, it cannot be said that the section is unavailable to a person who has been discharged from bankruptcy. If the trustee's conduct post-discharge, exercising powers that may affect the bankrupt, is to be subject to the supervisory jurisdiction then the bankrupt should be able to approach the Court in relation to any such exercise. This does not mean that s 178 provides an unlimited charter for bankrupts or any other persons after discharge to, at any time, seek a review of a decision of the trustee taken whether before or after discharge. The Court must determine whether any order proposed would be just and equitable and in so doing may have regard, inter alia, to the lapse of time which has occurred since the conduct complained of. The remedy is in that sense discretionary. 43 The question remains whether a bankrupt can invoke s 178 (and for that matter s 179) to bring a general law claim for damages against a trustee. These control sections provide for the supervision by the Court of the discharge by trustees of functions and duties conferred upon them by the Act. Together with s 176 they provide mechanisms for preventing or correcting breaches or failures to perform those duties and allow, to a limited extent, for regulation of the manner of their exercise. The trustee's duties are to administer the estate in accordance with the Act and Rules in the interests of the creditors and the bankrupt. Certain of the powers and duties are also to be exercised in the public interest. It is the trustee's obligation to administer the estate so as to maximise the return from its assets and so maximise the return to creditors and any possible surplus for the bankrupt - Adsett v Berlouis at 208-9. Where a trustee has been guilty of a breach of duty in relation to the bankrupt's estate or affairs the Court may make an order, under s 176, directing the trustee to make good any loss the estate has sustained because of that breach of duty. Such an order could also no doubt be made under s 178. A trustee who has failed to act diligently and prudently in regard to the bankrupt's estate may also be removed under s 179 and could be ordered under that provision to make good the losses suffered by the estate - Re Alafaci at 285 (Riley J). If a trustee's breach of duty causes such loss to the estate that the bankrupt is deprived of the benefit of a surplus then no doubt the trustee could be directed, under s 178 or s 179, to make good the loss - see Re Stelnicki where a sale by the trustee of the bankrupt's property was enjoined for twenty eight days to prevent unnecessary loss to the bankrupt. Section 176 would not be available to the bankrupt in such a case because it requires application to be made by the Inspector-General or by a creditor. 44 In my opinion, however, ss 178 and 179 do not extend to provide statutory mechanisms for pursuing claims for damages for torts said to have been committed against a bankrupt in the administration of the estate or otherwise under the general law. That is not to say that conduct which attracts remedial intervention under these control provisions may not also give rise to causes of action in tort or otherwise. Nor does it preclude the possibility that orders may be made under these sections based upon common law or equitable rights. But the sections are not mechanisms by which bankrupts or others can pursue claims for damages for malfeasance in public office or for negligence or for the tortious breach of statutory duties. Broad as it is, the essentially supervisory function of ss 178 and 179 does not extend to such wide ranging application. In Re Gault; Gault v Law (1982) 57 FLR 165, Ellicott J found a breach of trust to have been committed by the trustee of a deed of arrangement under Part X of the Act, to which s 179 was applicable, but declined to order an inquiry under that section. His Honour observed that the applicant debtor was "free to pursue such rights (if any) as he may have against the respondent for breach of trust whether under the Bankruptcy Act or the general law" (at 196). I do not doubt that there is some overlap between the orders that may be made under these sections and general law remedies and that the orders may involve the grant of what amounts to relief for a general law cause of action. But whatever the extent of that overlap, it does not, in my opinion, extend to claims for damages for losses unrelated to the bankrupt estate itself. The power of the Court to make orders under s 30 is in aid of its jurisdiction under the Act and does not extend that jurisdiction. The same, in my opinion, is true of the "broad inherent powers" which a court of bankruptcy has to deal with matters arising in its jurisdiction of an administrative kind - Muir v Bradley (1984) 57 ALR 155 at 157 (Beaumont J). In so saying, I acknowledge that it may well be the case that the Court has jurisdiction under s 39B(1A) of the Judiciary Act 1903 (Cth) to entertain a common law claim arising out of the exercise of powers conferred by the Act. For such a claim arguably involves a matter arising under a law of the Commonwealth. That case has not however been argued here and, in any event, should be brought, if it is to be brought, not as an action in the bankruptcy jurisdiction of the Court but in accordance with the rules governing the exercise of its general jurisdiction. 45 In Wilson v Commonwealth [1999] FCA 219 Branson J said at [49]: "The applicants have not sought to invoke s 178 of the Act in an endeavour to obtain review of any act, omission or decision of the Trustee by which they are presently affected. The claims made by them for declarations concerning s 178 do not disguise the fact that the applicants are in truth seeking to use s 178 as a statutory base for a claim for damages. Section 178 does not create a cause of action which sounds in damages." I respectfully agree that s 178 does not create a cause of action which sounds in damages. That agreement is, however, subject to the observations already made about the nature and basis of the remedies which may be available under both ss 178 and 179. I note also that in Cheesman Merkel J, at first instance, and the Full Court on appeal, were dealing with a claim for damages by the bankrupt. But the question whether such relief could be granted under s 178 was not agitated before their Honours. In the event it remained academic because no breach of duty nor loss was established. 46 The history and purposes of s 178 stamp it, like s 179, as a supervisory provision in relation to the discharge of the trustee's duties under the Act. It provides what is in substance a power to review acts, omissions or decisions of the trustee. It does not provide a basis upon which a bankrupt can claim damages generally for any alleged breach of duty by the trustee.

Inquiry, Removal and Remedy - Section 179 47 The statutory predecessor of s 179 was s 149(1) of the Bankruptcy Act 1924 (Cwth) which in turn was derived from s 81 of the Bankruptcy Act 1914 (UK). Under the latter section the Board of Trade was obliged to "take cognizance of the conduct of trustees" and inquire into their non-performance of their duties or their non-compliance with statutory requirements. This could be done by the Board of its own initiative or on the complaint of a creditor. The 1924 Commonwealth Act use similar language in s 149(1) which provided: "149(1) The Court shall take cognisance of the conduct of trustees, and in the event - (a) of any trustee not faithfully performing his duties and not duly observing all the requirements imposed on him by statute, rules, regulations, or otherwise, with respect to the performance of his duties; or (b) of any complaint being made to the Court by any creditor or by the bankrupt in regard thereto, the Court shall inquire into the matter, and may take such action and make such order as is deemed expedient." The section, it will be noted, vested the inquiry function in the Court and gave bankrupts standing to make complaints to it. Apart from the case of Re Hawkesford, mentioned earlier, there does not appear to be any reported judgment in the Australian Bankruptcy Cases dealing with any application of s 149 to circumstances analogous to those now before the Court. 48 As Branson J observed in Wilson, each of s 178 and s 179 "…has an important role to play as part of the Court's armoury of powers of supervision and control of trustees… However, their roles are not the same." [38] Whereas s 178 allows the bankrupt, a creditor or any other person affected by conduct of the trustee in the course of administration of a bankrupt estate to challenge that conduct by seeking judicial review, s 179 serves a different purpose reflecting the position that trustees are subject to the general control of the Court - [43] and [44]. In Re Alafaci, Riley J said of the section: "Its terms are wide and general. The court may inquire into any aspect of the conduct of a trustee in relation to a bankruptcy, and is enabled to deal with the situation which it finds by making "such order as it thinks proper". A case of misfeasance, negligence or wilful default on the part of a trustee may emerge otherwise than from the accounts submitted by him in accordance with s 175 or an audit of those accounts; if it does, or if it appears that for any other reason the trustee's conduct should be inquired into, I see no reason why s 179 should not be set in motion, or why the court cannot under s 179 order the trustee to make good, if such an order is what the court "thinks proper"." (267) It is to be noted that at that time s 176 empowered the Court to order that the trustee make good any loss that the estate had sustained by reason of the "misfeasance, negligence or wilful default of the trustee" where such was disclosed by the accounts of the estate or by an audit. 49 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 at 268. 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 (Full Court, 27 November 1998, unreported). The Full Court there quoted with approval the observation of Ellicott J in Re Gault that: "…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." (173) The policy consideration referred to by Deane J in Re: Tyndall that "the court should not unduly interfere with the day-to-day administration of a bankrupt's estate by a trustee" applies also to the operation of s 179 - Turner at pp 2-3. 50 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 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 (Beaumont J, 23 April 1996, unreported) cited with approval by Merkel J in Cheesman at first instance, p 114. 51 As with s 178, s 179 may be invoked by a person who has been discharged from bankruptcy. Such a person is still a bankrupt for the purposes of the section - Todd at 122 (Fisher J). But for the same reasons as I have expressed in relation to s 178, s 179 will not provide an avenue for a claim for damages under the general law.

Whether the Court Should Direct an Inquiry 52 Mr Macchia's case for an inquiry into Mr Nilant's conduct turns upon the objection to discharge lodged on 3 July 1996 and the two objections lodged on 19 March 1997. The circumstances of each objection have been outlined earlier in these reasons. 53 The objection of 3 July 1996 was based in the alternative upon non-payment of contribution assessments done on 15 February 1995 and 20 June 1996. A contribution assessment under s 139W as it stood prior to December 1996, was required to be done "as soon as practicable after the start of each contribution assessment period" in relation to the bankrupt. A reassessment could be done after a contribution assessment period if any one of a number of conditions applied including that the trustee was satisfied that the income derived by the bankrupt during that period was greater or less than the amount previously assessed. There is and was a minimum notice period of fourteen days before payment could be required (s 139ZI(3)). 54 Under the pre-1996 Act the initial assessment was required to be prospective - Challen v Bendeich [1999] FCA 845. The initial assessment for the 1992/93 and 1993/94 years was done on 15 February 1995 under which a contribution of $10,451 was determined pursuant to s 139ZG. The reassessment was done on 20 June 1996 and the contribution determined thereunder assessed at $8,985. Section 139W(2) allowing for reassessment after the contribution period was, in my opinion, posited upon an initial assessment during the relevant period. No valid initial assessment having been made, the re-assessment of 20 June 1996 was not valid. Moreover, as appears from the Notice of Objection of 3 July 1996 the notice of contribution dated 20 June 1996 required payment by 28 June 1996, at least eight days less than the fourteen days required by s 139ZI(3), depending upon the date of its actual service. The notice of contribution was therefore deficient in two respects and the notice of objection fatally flawed. And, although the point was not specifically taken, it was deficient in the further respect that it asserted a ground of objection in the alternative namely: "THAT the bankrupt failed to pay the trustee any part of the amount that the bankrupt was liable to pay under Section 139ZG of the Act, being $10,451 or alternatively $8,985. Pursuant to Section 149D(1)(f) of the Act this is a ground for objection to the bankrupt's automatic discharge from bankruptcy." 55 Accepting that the trustee could reasonably have taken the view, albeit erroneous, that the initial assessment could be retrospective, his failure to comply with the notice requirements of the Act and his attempt to rely upon assessments in the alternative, was cavalier. Grounds for objection are set out in s 149D. The trustee who is considering entering an objection has an obligation to apply his mind carefully to the question whether there is sufficient reason or basis for that objection upon one or more of the available grounds. It is not necessary that he be satisfied that the ground exist upon the basis of any absolute standard. But he must turn his mind to the problem and ought not to enter the objection unless reasonably satisfied of the correctness of what the ground implies - Van Reesema v Official Trustee in Bankruptcy (1983) 69 FLR 424 at 435 (Sheppard J). Although they were published after the events with which the Court is now concerned, the trustee, in this case, would do well to have regard to the Personal Insolvency National Standards published by the Insolvency and Trustee Service Australia in a special edition of New Directions in Bankruptcy in July 1999. In particular, par 5.8 under the heading "Contributions" states that: "The trustee should act fairly and reasonably in determining the time for payment of the contribution assessment pursuant to S139ZG. To avoid causing hardship to a bankrupt by requiring payment in full within the CAP or prior to discharge consideration can be given to an extension of the period in which payments are required to be finalised." In s 9, dealing with Objections to Discharge, par 9.1 provides: "9.1 The trustee must maintain the credibility of the personal insolvency system and enter an objection as soon as possible after notice of the occurrence of the event which justifies the objection. 9.2 The trustee must exercise discretionary judgment when entering an objection and in doing so, must consider the materiality of the evidence in support of the objection. The trustee must address the relevance of the bankrupt's conduct and make a judgment as to whether that conduct provides a basis or reason for the bankruptcy to be extended." The standards quoted and the other elements of the standards relating to contributions and objections highlight the seriousness of the trustee's task in respect of each of those matters. 56 By March 1997 Mr Nilant had become aware of the possibility that the Bankruptcy Act as it stood prior to December 1996 did not allow an original assessment to be made after the end of a contribution assessment period. As appears from an affidavit which he swore on 21 March 1997 in the proceedings before Lee J, he therefore considered whether there were any other grounds of objection which might ensure that an after acquired asset, being an interest in a North Perth property forming part of the deceased estate of Mr Macchia's mother was preserved for the benefit of the bankrupt estate. 57 The first objection of 19 March 1997 was based upon an alleged failure by Mr Macchia to respond to a written request by Mr Nilant to provide information about the deceased estate of his mother and the property at 31 Gill Street, North Perth. The clearest such request appears in the first of those letters dated 13 April 1995 addressed to Mr Macchia's solicitors which said: "I believe Mr Macchia may have an inheritance from the deceased estate of his late mother, who I understand passed away in recent weeks. Accordingly the Bankrupt Estate may be entitled to after acquired property. Clearly this entitlement needs to be clarified at this stage. Perhaps you can make enquiries and forward me a copy of the Will of the late Mrs Macchia, and in any event, advise who is administering the deceased estate." The second objection of 19 March 1997, was based upon Mr Macchia's alleged failure to disclose to Mr Nilant his beneficial interest in the deceased estate of his mother and the property known as 31 Gill Street, North Perth. In the event according to the second objection, the trustee ascertained that Mr Macchia's mother died intestate. On that basis it appeared to Mr Nilant that Mr Macchia had an interest in the Gill Street property. 58 The substance of the objections of 19 March 1997 may be debatable. The purpose they served appears to have been wider than that which was necessary to justify their lodgment. The trustee's purpose, as identified by Mr Macchia, was evidently directed to maximising, from after acquired property, the assets available to the estate. While that purpose is consonant with the general duty of the trustee it must not be allowed to distract from the specific considerations necessary to justify the issue of an objection. Nor does it justify the use of the objection as a tactical tool in a battle of wits with the bankrupt. In this case, however, the criticisms which can be made of the trustee do not, in my opinion, establish a basis for an inquiry under s 179. I accept that the objection of 3 July 1996 was invalid and that in certain respects, namely the shortfall in the notice period and the reliance upon alternative assessments, it betrayed a lack of proper attention by the trustee to the requirements of the Act. As appears from the affidavit evidence of Mr Nilant, the objection was subject to review by the Inspector-General and was confirmed on 19 September 1996. No further review was sought in respect of that objection in the Administrative Appeals Tribunal nor of the later objections of 19 March 1997 which appear to have had no practical effect, standing or falling as they did, with the objection of July 1996. Ultimately upon being apprised by his solicitor of the effect of the decision in Challen v Bendeich the trustee withdrew all objections. This was on the basis that the objection of 3 July 1996 having been invalid, Mr Macchia would have been discharged from bankruptcy in January 1997 and the two subsequent notices of objection would therefore also have been invalid. 59 Mr Nilant's counsel argued that Mr Macchia could not complain of any loss suffered by his "extended" bankruptcy because, the objection being invalid, it had never been extended. This is a singularly unattractive proposition. Even if a bankruptcy is not extended in law because the objection apparently extending it turns out to have been invalid, the apparent extension may generate commercial loss and unnecessary anxiety. In this case there is evidence that Mr Macchia lost employment opportunities because of his apparently continuing bankruptcy. The point however is one upon which no decision is necessary. In my opinion, while Mr Nilant's conduct of the bankruptcy is open to criticism in relation to the objection notice he lodged on 3 July 1996, that conduct is not sufficient to warrant an inquiry. I come to that conclusion having regard, to the lack of any additional useful information likely to emerge from such a proceeding and the lack of any apparent benefit to be derived from it. The objections have been withdrawn and Mr Macchia is discharged from bankruptcy. The primary objective of these proceedings is to put him in a position to raise a claim for damages against the trustee which he can use as a set-off to support an order setting aside the trustee's bankruptcy notice. For reasons I have already expressed, that is not a legitimate use of s 179. The section is concerned with the supervision of the trustee, not with providing a general jurisdiction for awarding relief by way of damages for alleged breaches of duty to the bankrupt. There is no apprehended improper exercise of post-discharge power by the trustee that would warrant any formal removal order even assuming such an order were open at this stage. No ground for an inquiry under s 179 is made out.

Conclusion 60 For the preceding reasons, the application in so far as it seeks relief under ss 178 and 179 of the Act is dismissed. As to whether the application can proceed so far as it claims an order setting aside the bankruptcy notice, I will hear the parties. 61 This is a case in which the trustee's conduct has undoubtedly contributed to the apparent extension of Mr Macchia's bankruptcy well beyond the date at which he was entitled to automatic discharge. Nothing in this judgment precludes the possibility that he has a remedy under the general law. It may, however, be in the interests of both parties to bring this saga to an end now, perhaps on the basis that the bankruptcy notice is not proceeded with, but that is a matter for their further consideration. 62 I will hear the parties as to costs. I certify that the preceding sixty-two (62) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice French.

Bankruptcy Act 1966(Cth)ss 30, 139W, 139ZG, 139ZI, 149, 149A, 149D, 176, 178, 179

Judiciary Act 1903(Cth)s 39B(1A)

Macchia v Nilant [2001] FCA 7 BANKRUPTCY - trustee - duties - control of trustee - supervisory jurisdiction of court - application for inquiry and claim for damages by discharged bankrupt - whether discharged bankrupt has standing under ss 178 and 179 - whether claim for damages under general law available under those sections - invalid notices of objection by trustee - apparent extension of bankruptcy - objections based on pre-December 1996 contribution assessments - assessments invalid as retrospective - insufficient time for payment - notice of objection relying on non-payment of contribution assessments expressed in the alternative - subsequent notices of objection based on failure to provide information - whether issued for improper purposes - duty of trustee in assessing contributions and issuing objections to discharge - National Standards - relief claimed essentially damages to support setting aside of bankruptcy notice based on earlier costs order in favour of trustee - relief unavailable under ss 178 and 179 - no utility in inquiry.

Bankruptcy Act 1966 (Cth) ss 30, 139W, 139ZG, 139ZI, 149, 149A, 149D, 176, 178, 179 Judiciary Act 1903 (Cth) s 39B(1A) Macchia v Nilant (Lee J, 11 April 1997, unreported) cited Nilant v Macchia (1997) 78 FCR 419 cited Challen v Bendeich [1999] FCA 845 cited Re Macchia; Ex parte Macchia v Nilant (2000) 172 ALR 158 cited Nilant v Macchia [2000] FCA 1528 cited Motion v Moojen (1872) LR 14 Eq 2020 cited Payne v Dicker (1871) 24 LT 492 cited Re Peters; Ex parte Lloyd (1882) 47 LT 64 discussed Re A Debtor; Ex parte The Debtor v Dodwell (The Trustee) [1949] 1 Ch 236 discussed Leon v York-O-Matic Ltd (1966) 1 WLR 1450 discussed Re Sidebotham (1880) 14 Ch D 458 cited In Re Hall (1957) 20 ABC 21 cited Re Carson; Ex parte Carson (1960) 19 ABC 108 cited In Re Chirnside; Digby v Union Trustee Co of Australia Ltd [1929] VLR 217 cited Re Hawkesford (1937) 10 ABC 26 discussed Willoughby v Official Trustee in Bankruptcy (WA) [2000] FCA 757 cited Re Teller Home Furnishings Pty Ltd (In Liq) [1967] VR 313 cited Re Mineral Securities Australia Ltd (In Liq) [1973] 2 NSWLR 207 discussed Re Tyndall (1977) 30 FLR 6 discussed Re Alafaci; Registrar in Bankruptcy v Hardwick (1976) 9 ALR 262 discussed Re Stelnicki (1982) 62 FLR 430 cited Re Dingle; Westpac Banking Corporation v Worrell (1993) 47 FCR 478 discussed McGoldrick v Official Trustee in Bankruptcy (1993) 47 FCR 547 discussed Cummings v Claremont Petroleum NL (1996) 185 CLR 124 cited Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 cited State of Western Australia v Strickland (2000) 99 FCR 33 cited Federal Commissioner of Taxation v Munro (1926) 38 CLR 153 cited R v Trade Practices Tribunal; Ex parte Tasmanian Breweries Pty Ltd (1971) 123 CLR 361 cited Cominos v Cominos (1972) 127 CLR 588 cited Gray v Clout (1990) 27 FCR 141 cited Healey v Prentice (No 2) [2000] FCA 1598 cited Haskins v Insolvency and Trustee Service Australia (Full Court, 3 October 1996, unreported) cited Adsett v Berlouis (1992) 37 FCR 201 cited Madden v Madden (1995) 58 FCR 590 discussed Madden v Madden (1996) 65 FCR 354 discussed Official Receiver in Bankruptcy v Todd (1986) 70 ALR 119 followed Watson v Healey (1996) 64 FCR 301 discussed Cheesman v Waters (1997) 143 ALR 78 discussed Bellin v Pattison (Trustee) [1999] FCA 51 cited Cheesman v Waters (1997) 77 FCR 221 discussed Re Gault; Gault v Law (1982) 57 FLR 165 discussed Muir v Bradley (1984) 57 ALR 155 cited Wilson v Commonwealth [1999] FCA 219 followed Turner v Official Trustee in Bankruptcy (Full Court, 27 November 1998, unreported) applied Re Challen (A Bankrupt) Ex parte Brown (Beaumont J, 23 April 1996, unreported) cited Van Reesema v Official Trustee in Bankruptcy (1983) 69 FLR 424 cited

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