Pattison (Trustee), in the matter of Abdulrahman (Bankrupt) (No 2) [2011] FCA 899

REASONS FOR JUDGMENT 1 Before the Court is an application by Paul Anthony Pattison under s 180 of the Bankruptcy Act 1966 (Cth) (the Act), for the Court to accept his resignation as trustee of the bankrupt estates listed in annexure A of these reasons. 2 Mr Pattison is currently appointed as trustee of 272 bankrupt estates. The first hearing of the application occurred on 30 June 2011. Mr Pattison sought dispensation of the requirement under r 8.02(2)(b) of the Federal Court (Bankruptcy) Rules 2005 (Cth) for personal service of the application and supporting documents on all 272 bankrupt estates. The Court ordered that personal service be dispensed with, but that Mr Pattison serve a copy of his affidavit and a letter explaining the nature of his application and the date of the adjourned hearing by ordinary mail on the bankrupts. In an affidavit sworn on 8 July 2011, Mr Pattison explained that he had complied with that order and service was effected on each of the bankrupts by close of business on 1 July 2011. 3 In support of his application for the Court to accept his resignation, Mr Pattison filed an affidavit sworn on 17 June 2011 giving his reasons for seeking the order. He explained that he has practised as a registered trustee in bankruptcy since 1986, and practised as a sole practitioner from October 1997, supported by a staff of up 43 employees who practised in both personal and corporate insolvency administrations. The staff involved in that business were employed by Pattison Consulting Pty Ltd (Pattison Consulting). Pattison Consulting also provided administrative services to Mr Pattison as an insolvency practitioner. The revenue flow from the practice suffered a downturn as a result of the advantageous financial circumstances in the last decade. As a result of pressure from creditors, Mr Pattison placed Pattison Consulting into voluntary liquidation on 22 April 2010. He also reduced his overheads by relinquishing premises in the CBD, shifting to offices in Box Hill, and reducing his staff numbers. 4 Arising from the liquidation of Pattison Consulting, the Australian Securities and Investments Commission (ASIC) commenced investigations and Mr Pattison voluntarily agreed to resign his corporate insolvency appointments. He gave an undertaking to the Court not to take any further appointments until further order or agreement with ASIC. These events affected Mr Pattison's ability to continue his personal bankruptcy practice. He explains in his affidavit: 4.7 Since 7 March 2011 I have continued to conduct my remaining bankruptcy practice, as a sole practitioner and on minimal overheads. However, since I have now come to the view that I do not have adequate financial or staff resources now or in the foreseeable future to conduct a practice as trustee in bankruptcy to administer the number of administrations currently under my control as identified in Annexure "A" to the Application. 5 In response to the notice of this application provided by Mr Pattison to the bankrupt estates, a number of the bankrupts appeared at the hearing today to oppose the application. Mr Dennis Maher argued that he recently commenced an application in this Court against Mr Pattison, and that he wished to pursue that application. He handed the Court a copy of the application in proceeding VID 733/2011. In that application, Mr Maher relies on s 30 and s 82 of the Act, and contends that several debts, which have apparently been regarded by Mr Pattison as provable in Mr Maher's bankruptcy, are not provable. The application in effect seeks orders that the debts involved are not provable debts in the bankruptcy. 6 The question raised by Mr Maher's application does not depend on Mr Pattison's continuance as trustee. If the Court accepts the resignation of Mr Pattison then a substitute trustee will assume the appointment. That trustee will then be in a position to assess the question raised by Mr Maher's application. In oral submissions, Mr Maher said he wished to amend the application in order to commence proceedings against Mr Pattison personally. Mr Pattison does not seek a release from any liabilities incurred in the conduct of his office as trustee. Consequently, Mr Maher is at liberty to commence proceedings, as he may be so advised, whether Mr Pattison continues as a registered trustee, or not. It follows that the matters raised by Mr Maher are not justified objections to the order sought by Mr Pattison. 7 Mr Kristoffer Crichton was the second opponent to the order who appeared at the hearing today. He opposed the order and sought to raise matters about the administration of his bankrupt estate before the Court. For example, Mr Crichton sought an order from the Court that the trustee produce the proofs of debt in his bankruptcy. He said that his bankruptcy came about as a result of criminal conduct. He said it came about because of a transaction involving a contract of sale which was fraudulent. He sought an order from the Court that the contract of sale be produced. He explained that his bankruptcy had so far been handled by two trustees and he argued that it was unreasonable that he should be put to the trouble of dealing with a third trustee. He also argued that Mr Pattison has knowledge of his bankruptcy and this was a reason he should not be permitted to resign. 8 The Court took some trouble to explain to Mr Crichton that this hearing was not the occasion to conduct an inquiry into his bankruptcy. One can understand Mr Crichton's frustrations. However, he has avenues under the Act to vindicate any rights which flow from those frustrations. Buried amongst the general concerns about the administration of his estate, the only argument which carried some weight was the argument that Mr Pattison has knowledge of the bankrupt estate, and that Mr Crichton desires to know more about the administration than he presently does. Against that argument, however, is the evidence of Mr Pattison that he is not in a commercial position to administer the estates. That consideration is so overwhelming in the circumstances that it renders Mr Crichton's concern of little relevance. 9 Further, Mr Bigmore QC, who appeared on behalf of Mr Pattison, said that Mr Pattison is prepared to provide an undertaking to the Court that he will make available within a short time the files and funds in his possession concerning the bankrupt estates, and assist the Official Trustee as reasonably required, and at no cost to him, in the transition from his resignation to the appointment of a new trustee. That undertaking provides sufficient answer to Mr Crichton's concerns. 10 The fact that the Inspector General consents to the application is also a matter of significance. Although the evidence of Mr Pattison's commercial incapacity to continue as a trustee of the bankrupt estates presents an almost unarguable case in favour of the Court accepting his resignation, the Court is given some assurance in taking that course by the consent of the Inspector General to the order. The fact that the Inspector General consents to the order indicates to the Court that the official charged with the proper administration of the Act has an informed view that the course proposed is a proper course. 11 The proposed order by consent also includes an undertaking by counsel for Mr Pattison to disclaim any possessory lien in respect of the bankrupt estate files and funds held in trust by Mr Pattison, or under his control in respect of the administrations, and an undertaking to cease to carry out, or consent to, or otherwise accept an appointment as a registered trustee until such time as he produces evidence in a form acceptable to the Inspector General to a committee formed pursuant to Div 1, Part VIII of the Act, or to the Court, demonstrating his practical and financial capacity to adequately and properly to carry out his duties as a registered trustee. 12 These undertakings, together with Mr Pattison's undertaking to provide the files and funds in his possession within in a short time, and assist the Official Trustee in the transition from his resignation, justify the orders sought. I certify that the preceding twelve (12) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice North.