Maxwell-Smith v Donnelly

[2006] FCAFC 150

Federal Court of Australia (Full Court)|2006-10-27|Before: Wilcox J, Conti JJ

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Source facts

Court

Federal Court of Australia (Full Court)

Decision date

2006-10-27

Before

Wilcox J, Conti JJ

Source

Original judgment source is linked above.

Judgment (26 paragraphs)

[1]

REASONS FOR JUDGMENT THE COURT: 1 This is an appeal from a judgment of Wilcox J of 21 March 2005 dismissing an application by the appellants, Mr and Mrs Maxwell-Smith, under s 179(1) of the Bankruptcy Act 1966 (Cth) ("the Act"). The appellants are former bankrupts whose bankruptcies were annulled in 2004. The trustee of their estates was Mr Donnelly. The appellants sought an order for an inquiry into the trustee's administration of their estates, having regard to his conduct (or that of his employees) and that of his legal representatives. The history of the matter is set out in some detail in two earlier judgments (Maxwell-Smith v S & E Hall, in the matter of Maxwell-Smith [2004] FCA 840; Maxwell-Smith v S & E Hall Pty Ltd [2003] FCA 953). The judgment of Wilcox J is Maxwell-Smith v Donnelly [2005] FCA 332. 2 The debt upon which the bankruptcy notice was based arose from a costs order against the appellants in the Supreme Court of New South Wales. In that Court, the appellants had sought, unsuccessfully, to challenge a decision of what was then known as the Building Disputes Tribunal in relation to a dispute with the builder of their house at Tura beach. A bankruptcy notice was issued on 4 December 2002 and served on the appellants on 13 February 2003. 3 On 22 April 2003, the Federal Magistrates Court dismissed an application by Mr Maxwell-Smith to set aside the bankruptcy notice. An appeal against that judgment by the Maxwell-Smiths to this Court was unsuccessful. Judgment was given on 10 September 2003: Maxwell-Smith v S & E Hall Pty Ltd [2003] FCA 953. Though the appeal was dismissed with costs, the following additional orders were made: 3. The parties write to my Associate within 14 days from today indicating whether they agree to mediation taking place. 4. Subject to the parties agreeing to mediation as provided by order 3, the matter be the subject of mediation on the following basis: a) The matter be referred to a Registrar for a further directions hearing on a date to be fixed. The matter is referred with a view to reaching a mediated settlement or, failing that, a clarification of issues and appropriate further directions. b) The Registrar conducting the directions hearing may exercise all necessary powers of the Court set out in s 35A(1) of the Federal Court Act and O 10 of the Federal Court Rules c) All discussions before the Registrar are to be on a "without prejudice" basis. 5. Subject to further order, orders 1 and 2 [dismissing the appeal with costs] are not to be entered within one month of today. On the same day, the solicitors acting for the builder, who had issued the notice and later became the petitioning creditor, sent a facsimile to the Court indicating their client did not agree to mediation. The solicitors were Sautelle White Lawyers. The appellants subsequently communicated to the Court their willingness to participate in mediation. On 15 September 2003 a Registrar of this Court heard the creditor's petition and made sequestration orders against the appellants' estates. Mr Donnelly was appointed trustee. 4 The appellants later applied to have the bankruptcies annulled. The Registrar who made the sequestration orders was unaware that the appellants did not know that there would be no mediation, and believed nothing of substance would happen at the hearing because mediation was still a prospect. The appellants were denied procedural fairness and the sequestration orders ought not to have been made. For that reason, orders annulling the bankruptcies were made on 2 July 2004.

[2]

The judgment below 5 On 2 December 2004 the appellants filed an amended application in this Court in the following terms: 1. The Respondent M.C. Donnelly did not avoid unnecessary expenses while acting as the trustee in our estate caused in the Creditor's petition N-7192 of 2003. (Section 19 of the Act) 2. The Respondent M.C. Donnelly abused his power as the trustee to examine vexatiously and oppressive [sic] and also refused to give his approval for a reasonable request made by the Federal Police on behalf of the Applicant Inge Maxwell-Smith to make a coastal cruise with her sick grandchild. (Section 81 of the Act) 3. M.C. Donnelly's legal representatives distorted relevant information during the Court proceeding in the Application for Annulment (N-198 of 2004) 4. The Applicant Inge Maxwell-Smith claims compensation for $300,000.00 for aggravated damages caused by the actions of M.C. Donnelly to her and to her family. 6 Wilcox J heard this application as an application under s 179(1) of the Act, which provides: (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 other order as it thinks proper. 7 In his reasons, his Honour noted the annulment of the bankruptcies had no effect on the appellants' liability to pay the costs of the administration, provided they were properly incurred (s 154(1)(b) of the Act). The total amount claimed by the trustee exceeded $92,000, which his Honour noted was an amount greater than claimed by the petitioning creditor. His Honour also noted that the sum was large given the bankruptcies had subsisted for only 10 months but that due to a lack of good communication between the trustee and the appellants the administration had probably been unusually difficult. 8 At the hearing, Wilcox J invited Mrs Maxwell-Smith on behalf of the appellants, to identify conduct of the trustee which could be said to enliven the power conferred by s 179(1) to order an inquiry. In his reasons, his Honour described six categories of conduct. 9 The first was that the trustee had unnecessarily incurred expense by taking steps to seek out creditors other than the petitioning creditor in circumstances where the appellants had deposed that the builder was their only creditor. In concluding this criticism was unfair, his Honour noted that experience indicated that often, the information given to a trustee by a bankrupt was inadequate or incorrect. 10 The second category related to the expenses incurred by the trustee in relation to a second property in Jindabyne in which the appellants shared an interest with two of their children. His Honour noted that the trustee had taken title of the Jindabyne property at about the same time as the application for annulment was filed but noted that it seemed this application for registration was instigated prior to learning of the applications for an annulment. His Honour concluded that despite the fact that the appellants owned, unencumbered, the Tura beach property which would have satisfied the judgment creditor's debt, it was both normal and proper for the trustee to seek to have the appellants' interests in the second property put in his name. 11 The third category concerned the costs involved in issuing warrants for the arrest of the appellants for failure to attend examination summonses. His Honour concluded it was difficult to criticise the trustee's behaviour despite the fact that, in the event, it had been unnecessary for the warrants to be executed. 12 The fourth category related to the trustee taking out insurance policies over the two properties in circumstances where they were already insured. This resulted in a duplication of expense where it would have been open to the appellants to cancel the pre-existing policies. His Honour was unable to find that the trustee was at fault given the poor communication between the parties. 13 The fifth category related to circumstances rectifying the assessment of local council rates with regards to the Tura beach property. After the property was transferred to the trustee, the rates levied did not make provision for the aged person's rebate even though there was evidence the rebate could still be allowed if it was demonstrated that the appellants still lived in the property. The problem was eventually rectified. His Honour noted that there may have been an omission on the part of Ms Gallucci that resulted in unnecessary expense but could not characterise it as misconduct. Ms Gallucci was an employee of the trustee and had immediate responsibility for administering the estates. 14 The sixth category related to circumstances where Mrs Maxwell-Smith was not able to take a cruise with her disabled grandchild because her name appeared on an Australian Federal Police Portwatch list. This issue is discussed in more detail later. 15 Essentially, his Honour was unpersuaded by the claims that unnecessary expense had been incurred. He was fortified in this finding by the conclusion of the Inspector-General in Bankruptcy who had inquired into, considered and dealt with several written complaints of the appellants concerning the trustee's administration and had found no basis for finding expenses had been incurred unnecessarily. His Honour concluded there was no basis for ordering an inquiry into the trustee's administration, noting there had been a full discussion of the appellants' complaints at the hearing of the application. 16 His Honour concluded the appropriate course was that the trustee should prepare a detailed account of costs that should be taxed by an appropriate officer of the Court. His Honour ordered that the application be dismissed and that the costs of the application be trustee's costs in the administration of the former bankrupts' estates.

[4]

Submissions 18 The appellants filed three documents which could be characterised as submissions on 27 June 2005, 19 September 2005 and 9 November 2005, without any legal assistance. The respondents filed an outline of submissions on 7 November 2005. A hearing was conducted on 9 November 2005 by reference to those submissions. The appellants were not legally represented. On 23 November 2005 this Court issued a referral certificate pursuant to Order 80 of the Federal Court Rules. Mr Brennan of counsel agreed to represent the appellants on a pro bono basis. On 4 May 2006, he filed submissions on their behalf. It is by reference to these submissions that the appeal should be determined. The respondent filed submissions in response to those on 30 May 2006. Mr Brennan filed a short reply on 5 June 2006. 19 In summary, the appellants sought an order that there be an inquiry under s 179(1) of the Act into Mr Donnelly's conduct because, they submitted, he did unnecessary work, preferred the interests of the creditor to their interests and acted in bad faith in a number of respects. They submitted that while in the position of trustee, Mr Donnelly acted unconscionably and does not deserve the costs he seeks. 20 The appellants referred to the duties of a trustee as described in Adsett v Berlouis (1992) 37 FCR 201 (at 208-209): The discharge of a public duty imposed by the Act is to be performed conformably with the requirements of that duty, but also conformably with the trustee's obligation to administer the estate in such a manner as to maximise the return from estate assets, and thereby to maximise satisfaction of the creditor's claims and any possible surplus for the bankrupt. … The trustee is bound to execute the trust with fidelity and reasonable diligence and ought to conduct its affairs in the same manner as an ordinary prudent man of business would conduct his own affairs. The appellants referred to a number of aspects of Mr Donnelly's conduct which they submitted demonstrated his adversarial attitude towards them and a failure to fulfil his duty as trustee. Some conduct was additional to that raised before Wilcox J. 21 The trustee's submissions in response filed on 30 May 2006 noted the terms of the referral certificate and that pro bono counsel for the appellants had not filed a notice of motion for the purpose of amending the application or notice of appeal, for which the referral certificate had allowed. The trustee also submitted that in the absence of any amendment, many of the issues raised in his submissions were not within the proper bounds of the appeal. The trustee's submissions went on to address the six matters considered by Wilcox J and in the interests of finalising the appeal, the eight other matters raised in the submissions prepared by Mr Brennan. 22 In reply, Mr Brennan submitted that the central argument was that there was a failure by the primary judge, in the exercise of his Honour's discretion, to consider the fiduciary duties of the trustee and that the words in the appeal document were wide enough to refer to all the conduct complained of by the appellants. 23 The following summarises the submissions of the appellants and trustee on each of the issues raised in the initial submissions of Mr Brennan. We have tended to repeat the language used by the parties in the submissions.

[9]

Insurance 30 The trustee took out an insurance policy over the Tura Beach property and the Jindabyne property, notwithstanding that they were already insured. See [12] above. The appellants submitted that the trustee took insurance out late on the estate, and that despite backdating it, the estate was not properly protected for 6 months, exposing the estate to risk. The appellants submitted that in these circumstances, the professional charges for arranging insurance were excessive. The cost to organise the insurance of $1183.53 was $396.40. The time taken to renew the insurance was 1.2 hours charged at $150.30 (plus $45 to review an email and send a new email giving instructions to renew insurance) (a total of $591.70). The appellants submitted that the trustee's conduct fell short of his fiduciary responsibility in hiding the fact of when the insurance was taken out. The appellants submitted the import of the claim is not the amount but the serious breach of trust in not properly insuring the property (having had to backdate the insurance). 31 The trustee submitted that the primary judge accepted the submission that insuring real estate belonging to the trustee was normal and usual procedure and no basis was advanced to show that this conclusion was incorrect. 32 The appellants also submitted that the letter purportedly sent to them from the trustee on 17 August 2006 filed on behalf of the trustee was not the letter they in fact received. The letter they had received did not discuss the need for insurance. They submitted that the first they heard of the insurance was in a letter from the trustee of 16 June 2005. 33 The trustee noted this and responded that the primary judge had observed that it had been open to the appellants to cancel their existing policies and obtain a refund of the premiums paid and that if this is not what had happened it would be difficult for him to find the trustee was at fault. The trustee submitted no error had been identified in this finding and no factual basis was adduced demonstrating misconduct or that the time spent renewing the insurance was "ludicrous".

[10]

Portwatch 34 On 20 May 2004, following the bankruptcy but before the annulment, Mrs Maxwell-Smith had planned to take her disabled grandson on a cruise as a respite for her son. The appellants submitted that the trustee's failure to advise Mrs Maxwell-Smith of the Portwatch organised by Ms Gallucci, which prevented the former leaving on a cruise with her disabled son, was consistent with the trustee's generally adversarial attitude. The appellants submitted Ms Gallucci's timesheet indicated she organised the Portwatch the day before the scheduled trip and that the only communication made to Mrs Maxwell-Smith before that was to say there was no problem with Portwatch. The appellants further submitted that the refusal to allow the trip, even when contacted by both the Australian Federal Police and the ship captain was "bloody-minded". In so doing, the appellants submitted, the trustee was acting outside his allowable discretion and all professional fees associated with this should be disallowed. They also submitted that there should be accounting for the loss of the value of the trip paid and other incidental expenses. 35 The trustee submitted that there was no obligation on the trustee to notify the bankrupt of the operation of a Portwatch list and noted that there was a legislative scheme in place for the review of decisions not to grant permission to bankrupts to leave the country. The trustee submitted that the onus lay on the appellant, Mrs Maxwell-Smith, to obtain permission to leave, a fact contained in information the appellants had been sent after the sequestration orders were made. The trustee noted the primary judge's conclusion that the refusal of permission was as much the appellants' fault as the trustee's and that, as there was no financial aspect to the complaint, there would not be any point in having an inquiry in relation to the matter. 36 Further, in response to the criticism that the trustee was "hostile", the trustee suggests Mrs Maxwell-Smith's failure to request permission from the trustee when she had the opportunity "might well be characterised as indicative of a generally adversarial attitude, bloody mindedness and high handed conduct on her part towards the trustee and his administration". The trustee also submitted that "the scheme" and the Act was at odds with the appellants' submission that it was outside the allowable discretion of the trustee to refuse permission in the circumstances. The trustee submitted no regard should be had to the appellants' submissions in relation to the lost value of the trip and incidentals as no evidence was adduced in this regard and the primary judge found there was no financial aspect to the matter. The trustee further noted his understanding that the trip was "the subject of substitution by the tour operator".

[19]

Consideration 52 The authorities concerning the exercise of the power to order an inquiry have recently been conveniently gathered together in Moore v Macks [2006] FMCA 594. The learned Federal Magistrate described what he called the threshold requirement before an inquiry could be ordered under s 179 (at [13] to [18]): The threshold requirement In ReAlafaci; Registrar in Bankruptcy v Hardwick(1976) 9 ALR 262 Riley J observed in relation to a request by the Registrar in Bankruptcy for an inquiry in relation to the conduct of a trustee at p 268: Before the application is heard, therefore, the trustee will know the grounds on which the court will be asked, inter alia, to inquire into his conduct and the facts on which the Registrar proposes to rely in supply of his application that the court do so inquire. I do not wish to be taken as presuming to lay down any rule as to the procedure to be followed in, or the approach to be made by the court to, a case of this sort; but it seems to me that in such a case there is a preliminary question to be decided by the court -- namely on the grounds and facts before it, has a case been made for inquiry into the trustee's conduct? If the answer to that question is 'yes', the next question is -- what is to be the scope of the inquiry? It may be that the material already before the court sufficiently defines the scope of the inquiry; on the other hand, the court may find it necessary to define the subjects for inquiry -- eg in the form: 'Did the trustee do (or fail to do) so and so?' -- and to give directions before proceeding to inquire. In Re Gault; Gault v Law (1982) 57 FLR 165 the Federal Court was asked to conduct an inquiry in relation to the trustee of the bankrupt's estate. In fact, the case involves the second such request for an inquiry made many years after the first request had been made and refused. Ellicott J referred to Re Alafachi(above) at p 173 and said: It was with his Honour's comments in mind that I required the applicant to give particulars of the misconduct he relied on to found his application. The court has a broad discretion in deciding whether to order an inquiry. In my opinion it is not required to order an inquiry unless it is satisfied that sufficient grounds had been made out. For instance, the court should be loathe 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. It should also be borne in mind that a debtor applicant may have other remedies to pursue, for example in an action for breach of trust. In Registrar in Bankruptcy v Bradley (1983) 72 FLR 231 Beaumont J was considering an application by the Registrar in Bankruptcy for a s 179 inquiry. His Honour referred to the passages from Re Alafachiand Gault (above) and said at p 233: In my opinion, the balance of convenience in this case indicates that a preliminary inquiry of the type urged by the respondent was the appropriate course to be adopted provided that, in the event that the matter goes forward to an inquiry on a final hearing, the evidence taken and submissions made in the preliminary inquiry are to be regarded as evidence and submissions in the final inquiry: in other words, the preliminary inquiry should be treated as part of the final inquiry. It is as if the respondent were to move for the dismissal of the proceedings as an abuse of process and then to fail in that application, in which event the material before the court in the summary application is to be treated as part of the material before the court upon the final hearing of the proceeding. Finally, in Wilson & Anor v The Commonwealth of Australia & Anor[1999] FCA 219 Branson J discusses the nature of proceedings pursuant to s 179 of the Act in addition to proceedings under s 178 of the Act. At [44] Her Honour summarises the law in relation to s 179 as follows: Although it is not a rule of universal application, the court will not ordinarily initiate an inquiry under s 179 unless it is satisfied that a proper case for an inquiry has been demonstrated ... There will ordinarily be a proper case or an inquiry where there is a reasonable cause to believe that a trustee may have failed to act in relation to a bankruptcy in the manner required by the Act or the General law. However, as Ellicott J pointed out in Re Gault at 173: The court has a broad discretion in deciding whether to order an inquiry. In my opinion it is not required to order an inquiry unless it is satisfied that sufficient grounds have been made out. Section 178 of the Act provides: (1) If the bankrupt, a creditor or any other person is affected by an 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. (2) The application must be made not later than 60 days after the date on which the person became aware of the trustee's act, omission or decision.

[20]

There can be no doubt then that the court is not obliged to embark upon an inquiry pursuant to s 179 simply because it is asked to do so. I have to be satisfied before embarking upon the inquiry that sufficient grounds have been demonstrated for the inquiry to be conducted. I will only be able to determine that if the applicant has revealed the basis claimed for the inquiry and the trustee given the opportunity to respond. 53 The power to order an inquiry is a discretionary one. In addition, as just discussed, it is a discretionary power which is not ordinarily exercised. A clear case must be made out to warrant an inquiry. 54 In an appeal from the exercise of a discretionary power, it is necessary for the appellant to demonstrate that the primary Judge erred in some material respect. The principles are set out in the well-known passage from the judgment of the High Court in House v King (1936) 55 CLR 499 at 504: The manner in which an appeal against an exercise of discretion should be determined is governed by established principles. It is not enough that the judges composing the appellate court consider that, if they had been in the position of the primary Judge, they would have taken a different course. It must appear that some error has been made in exercising the discretion. If the judge acts upon a wrong principle, if he allows extraneous or irrelevant matters to guide or affect him, if he mistakes the facts, if he does not take into account some material consideration, then his determination should be reviewed and the appellate court may exercise its own discretion in substitution for his if it has the materials for doing so. It may not appear how the primary judge has reached the result embodied in his order, but, if upon the facts it is unreasonable or plainly unjust, the appellate court may infer that in some way there has been a failure properly to exercise the discretion which the law reposes in the court of first instance. In such a case, although the nature of the error may not be discoverable, the exercise of the discretion is reviewed on the ground that a substantial wrong has in fact occurred. With the exception of one matter, which we will discuss shortly, we are satisfied that the approach of Wilcox J does not reveal error of the type of which the High Court spoke in House v King. 55 One complexity in this appeal is that the appellants were not represented before Wilcox J and provided his Honour with a large volume of material, but did not identify with clarity and precision in one document only, what conduct of the trustee the appellants criticised or challenged for the purposes of seeking an inquiry. It is apparent from the transcript of the proceedings before Wilcox J, that his Honour patiently and carefully sought to elicit from Mrs Maxwell-Smith what was the conduct about which the appellants made complaint. It is that conduct which his Honour discussed in his reasons for judgment. In the absence of the identification of further conduct of the trustee which might compel a conclusion that there should be an inquiry in relation to that conduct, we do not think it is appropriate to consider in this appeal the conduct relied on by Mr Brennan in his submissions which was not relied on below. This conclusion is fortified by the appellants making no application to amend either the originating process or the notice of appeal. Any such application would have enabled us to focus on whether raising additional matters was fair to all parties and appropriate in all the circumstances. 56 The one matter which was discussed by his Honour which warrants further consideration, is the attempt of Mrs Maxwell-Smith to commence a cruise with her grandson on 20 May 2004. It is appropriate to set out precisely what his Honour said about this matter (at [16] to [18]): Finally, Mrs Maxwell-Smith feels extremely strongly about the fact that the trustee failed to give permission for her to depart, with her disabled grandchild, on an overseas cruise on 20 May 2004. Apparently, Mrs Maxwell‑Smith intended to speak to the trustee about this matter on 18 May. Although she saw Mr Donnelly on that day, she omitted to do so. She saw him again on 19 May, but again failed to raise the matter with him. She then apparently assumed there would not be a problem, because of something said to her by Ms Gallucci. So she presented herself and her grandson to the ship on 20 May but was denied entry. Despite an attempt by the captain of the ship to resolve the matter, Mrs Maxwell-Smith eventually had to be excluded from the ship because of the fact that she was on a Portwatch list maintained by the Australian Federal Police. I understand the embarrassment and anguish of Mrs Maxwell-Smith over this matter. Perhaps it could have been better handled by Mr Donnelly, but I have to say it seems to me the fault lay at least as much on the side of Mrs Maxwell-Smith, as on the trustee. She ought to have taken up the matter with Mr Donnelly well before the cruise was due to depart. In any event, this particular complaint has no financial aspect. There would be no point in having an inquiry in relation to that matter. 57 It is convenient to deal first with aspects of the submissions made by Mr Brennan. It was submitted that it is apparent from Ms Gallucci's timesheets that Portwatch was organised the day before Mrs Maxwell-Smith was to commence her cruise. That submission involves a misapprehension of the evidence. The timesheets reveal that it was 13 April 2004 that Ms Gallucci contacted the Australian Federal Police, not 19 May 2004. In any event, in an affidavit of Mr Donnelly of 14 April 2004 (being a report made to the court in earlier proceedings but annexed to an affidavit of Mrs Maxwell-Smith's of 18 January 2005 filed in the inquiry application), Mr Donnelly deposed to the fact that a Portwatch had been requested of the Federal Police in order to prevent the bankrupts from departing Australia and that the Federal Police had been informed that permission had not been granted by the trustee for the bankrupts to travel overseas. Whether it was on 13 April 2004 or sometime earlier, the evidence points to a conclusion that Portwatch had been in place for some weeks before Mrs Maxwell-Smith's scheduled departure date. Also Mr Brennan submitted that the trustee had not produced any letter sent to the bankrupts advising them that Portwatch was in place. In a sense, that is true. But the affidavit just referred to had annexed to it letters sent to the bankrupts on 17 September 2003 which enclosed a "Bankruptcy Information Sheet" which stated that the bankrupt was "not permitted to travel overseas without the written consent of your trustee" (the annexures are not in the appeal papers but are referred to in another affidavit of Mr Donnelly (of 7 June 2004) which is in the appeal papers). 58 However, Mr Brennan went on to submit that the only communication Ms Gallucci made to Mrs Maxwell-Smith before the scheduled departure date was to say that there was no problem with Portwatch. This submission is consistent with evidence before Wilcox J and submissions made by Mrs Maxwell-Smith to his Honour. In an affidavit of 28 May 2004 of Mrs Maxwell-Smith (another annexure to her affidavit of 18 January 2005 filed in the application for an inquiry), she said the following about this incident: 25. On the 20th April we attended the Court and Justice Moore ordered that the application be fixed for hearing on 17th June, later to be amended to 11th June. On that day we were served with Affidavits from the trustee, which made us aware that Registrar Lackenby had ordered that the Warrants for our arrest were to be executed and a Ports watch had been requested of the Federal Police in order to prevent us from departing Australia. 26. On the 18th May 2004 I attended the office of MC Donnelly to deliver some documents. The abusive treatment I received from Donnelly made me ill and I left his premises without giving him these documents. 27. I returned the following day to deliver these documents and Donnelly was again very intimidating. My inquiries about the Portswatch and the Warrants for our arrest were answered by Gallucci, that these were taken out but not executed. 28. It left me confident that I could take a short cruise and undertake my role as the nursing grandmother to look after my disabled grandson for what was to be the last opportunity for him to undertake such a physical [sic] demanding exercise. 29. During a visit to my family in Coffs Harbour in April, I was asked by my son to take his disabled child for a brief coastal cruise in company with another two of my young grandchildren on board of the Australian ship Pacific Sky. The disabled child suffers from Muscular Dystrophy and is bound to a wheelchair. This fatal disease causes a waste of muscles and makes body movements more difficult as time passes by. At early adulthood the lungs cease to function and causes death. 30. On 20th May my family brought the three young children to Darling Harbour and we boarded the ship for a nine-day cruise starting from and returning to Sydney. One minute before departure, the Federal Police came on board and forced me and the three children under my care off the ship. 31. The Captain of the ship attempted to convince the Federal Police that he would take full responsibility for my return to Sydney. The Federal Police got in touch with the Trustee's office to ask for permission to let me undertake this harmless cruise. The request was refused. 59 These matters were addressed by Mrs Maxwell-Smith in her submissions to Wilcox J dated 14 March 2005. She said: 56. Donnelly's greatest abuse of power was his refusal to let me take my disabled grandson and his siblings on a harmless cruise. Donnelly is empowered under the law to refuse a bankrupt to go overseas if it endangers the rights of the creditors in the estate. In this case he held our home in Tura Beach and our 50% share of the family property in Jindabyne, which covered the claim of the single creditor very comfortably. There was no need to refuse me to take part in this harmless cruise. In any case, I could not have disembarked from this ship, because of my disabled grandson. On top of that, the captain of the ship assured Donnelly that he would keep my passport in his custody until I returned to Sydney. His refusal was vindictive. {Memorandum of Fees 0804 page 10 (27) Gallucci conversations with the Federal Police and Donnelly on 20th May '04} 57. This abuse caused irreparable damage to me, my husband, our children and our grandchildren. I can be blamed for not handing in my passport, but considering what the bankruptcy order did to my mental state, it is not surprising that I did not find it important at the time. 58. My son approached me in April '04 to take his place to take the disabled boy on this short cruise for his birthday. I was aware that a portwatch was executed and I had intention to ask Donnelly for his permission on the 18th May, when I was in his office two days prior to the departure of the ship. Donnelly treated me rudely and was intimidating towards me and made me sick. I left his office before I realised that I had not even served him the intended documents. {Memorandum of Fees No. 0804 page 10 (27) all items on 18th May'04} 59. I returned on the 19th May to serve him these documents and Donnelly said, "unless you have any more papers to serve to me, I don't want to speak with you any-more" and he left me alone with Gallucci. I walked to the lift in a distressed state, but Gallucci assured me that the portwatch and the warrants had been taken out, but had not been executed and I felt relieved and was confident to take my grandchildren on the cruise the next day. {Memorandum of Fees No. 0804 page 10 (27) all items on 19th May '04 and INDEX - 16} 60. On the day of departure the Federal Police came on board and insisted that I had to leave the ship. My grandchildren and I became very distressed and the Federal Police and the Captain of the ship approached Donnelly and requested his permission for me to go on this harmless cruise. The departure of the ship was delayed for half an hour but Donnelly bluntly refused to give his permission. {Memorandum or Fees no. 0804 page 10 (27) entries on 20th May '04 & INDEX 16} 61. 1 was escorted off the ship together with my grandchildren. The Cruise Company got in touch with my sons, one of whom was already on the way back to Coffs Harbour. I finished up in Hospital during the night in a very distressed condition. On the way home to following day, I finished up in hospital in Goulburn. I feel that I have been treated like a criminal ever since we have been declared bankrupt. (INDEX - 41) 60 No affidavit was filed by the trustee in the proceedings before Wilcox J denying the version of events given by Mrs Maxwell-Smith. The only affidavit of Ms Gallucci before his Honour was an affidavit of 7 April 2004 sworn in the annulment proceedings. She gave very brief oral evidence in chief but did not address events surrounding the cruise. While the submission of Mrs Maxwell-Smith is a mixture of both submission and assertions of fact, in the absence of a denial by Ms Gallucci and any evidence from Mr Donnelly explaining why he refused permission (there was none), the evidence of Mrs Maxwell-Smith together with the submission raised, in our opinion, a serious issue concerning the conduct of the trustee in refusing his consent to her travelling. 61 We do not accept, with respect, that the matter can be disposed of in the way suggested by Wilcox J. His Honour does not deal with whether an inquiry might be warranted in which the basis on which the trustee refused to grant consent can be investigated. It is not true to say that Mrs Maxwell-Smith had to be excluded from the ship because of the fact that she was on a Portwatch list maintained by the Australian Federal Police. She was excluded from the ship because it would have been an offence for her to travel without the consent in writing of the trustee: s 272(1)(c) and the trustee, on Mrs Maxwell-Smith's version of events, had the opportunity to give that consent but did not in a context where the captain of the vessel gave certain assurances designed to have Mrs Maxwell-Smith return to Australia. 62 The principles governing the giving of consent by a trustee to a bankrupt to travel were articulated by Deane J in Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182 (at 190-191): It is only in recent years that the Commonwealth bankruptcy legislation has made it an offence for a bankrupt to travel overseas without the consent of his trustee and has required a bankrupt to surrender his passport to his trustee once a sequestration order is made. Bankruptcy does not, of itself, involve any criminal offence. A citizen should be free to travel if and when his commercial activities or personal desires prompt him so to do. Restrictions upon such travel under the bankruptcy legislation must be seen as being aimed at insuring the proper administration of the bankruptcy laws and of bankrupt estates under such laws and not as a penalty imposed upon a citizen as a consequence of inability to pay debts leading to the making of a sequestration order. In some cases, the possibility that the bankrupt has committed offences under the Act and is seeking to abscond from possible prosecution will be extremely relevant. There has not, however, in this case been any suggestion that the bankrupt is endeavouring to abscond to avoid possible prosecution. In some cases the financial rewards to be derived by the bankrupt's estate from such overseas travel will clearly outweigh [sic] any inconvenience in the administration of that estate resulting from the bankrupt's departure from the jurisdiction. It can be seen that relevant considerations in deciding whether to give consent may be the possibility of a bankrupt absconding to avoid prosecution or inconvenience caused to the administration of the bankrupt's estate. In the present case it is not apparent why the trustee refused to grant permission to Mrs Maxwell-Smith to travel. There may be a number of reasons having regard to the circumstances. However, if he was aware of various matters to which Mrs Maxwell-Smith referred in her material (her affidavit and her submissions) then a real issue arises about whether it was appropriate for him to have refused permission. 63 In our opinion, Wilcox J gave insufficient consideration to the matters raised by Mrs Maxwell-Smith in support of an inquiry at least as it related to this question of travel. To use the language of the High Court in House v King set out at [54], his Honour did not take into account a material consideration, namely that the trustee may have misconceived his powers in refusing Mrs Maxwell-Smith permission to travel. The trustee's refusal is a matter, in our opinion, which warrants further investigation and it is appropriate that an inquiry be ordered to investigate that specific matter. It is, with respect, not enough to say, as Wilcox J did, that there was no financial aspect to this complaint. It was characterised by the appellants as an abuse of power. Whether that characterisation is apt or even relevant is a matter that should not be addressed at this stage. It is a matter for the judge who conducts the inquiry. 64 An inquiry can be conducted on a particular matter:Re Alafaci; Registrar in Bankruptcy v Hardwick(1976) 9 ALR 262. In our opinion, there should be an inquiry into whether the trustee refused Mrs Maxwell-Smith permission to travel on or about 20 May 2005 and, if so, was that refusal appropriate in all circumstances. 65 Because we have not expressed disagreement with the conclusions of Wilcox J on matters other than the appellants' contention relating to Mrs Maxwell-Smith's travel, it should not be assumed that we accept every comment his Honour made about the trustee's conduct or that, by implication, the fees, costs and disbursements presently charged by the trustee should be accepted in any taxation without careful consideration. We doubt, for example, that the trustee is entitled to payment for convening and attending a creditors' meeting after the bankruptcies were annulled. However these are matters for consideration during any taxation. 66 As the appellants have partially succeeded in this appeal and partially not, there should be no costs order in the appeal and none in the proceedings below. I certify that the preceding sixty-six (66) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Court.