Starkey (Trustee) v Rondo Building Services Australia

REASONS FOR JUDGMENT 1 This is an application pursuant to O 52 r 17 of the Federal Court Rules, seeking a stay of an order made by Federal Magistrate Rimmer on 10 March 2005 where her Honour ordered that the respondent in the proceedings in the Federal Magistrates Court, Graham Lindsay Starkey as trustee of the estate of Peter John Dance, be removed as trustee and that Mr Nick Combis be appointed as trustee in his place. That order was made on 10 March 2005 after a hearing on 11 May 2004. 2 The reasons for judgment of her Honour appear not to have addressed a number of other matters that were contained in the application by Rondo Building Services Pty Ltd to the Federal Magistrates Court seeking declarations, amongst other things, about the admission of a number of proofs of debts or, in the alternative, a declaration that a meeting of creditors held on 20 November 2003 was not conducted in accordance with Part IV of the Bankruptcy Act 1966 (Cth), and costs. 3 As appears from her Honour's reasons, there was a meeting of creditors held on 20 November 2003 to consider a motion to remove Mr Starkey as trustee. An ordinary resolution requires a majority in value of creditors voting on the resolution. That resolution was defeated, with creditors in value of $711,698.84 voting against the resolution, and creditors in value of $512,246.36 voting in favour of it. Twelve creditors voted against the resolution and two in favour. 4 The learned Magistrate said at par 58 of her Honour's reasons: 'I accept that if Mr Starkey remains as trustee of this bankrupt estate he would in fact be likely to be quite impartial as he is a professional in his field. That is not what has led me to the conclusion that in this matter there is sufficient prior connection between the trustee Mr Starkey and the bankrupt Peter John Dance. This has occurred through the entities Casaron and Spuncod. I am satisfied that an impartial fair-minded person would harbour doubt as to the impartiality in the exercise of the trustee's very important duties, obligations and functions as the Trustee of the bankrupt estate. I accept that Mr Starkey himself has a strong belief that he would act with impartiality as he is a person who is highly professional in undertaking his role as trustee. Paragraph 59: 'In so finding, I make it clear that I do not for a moment suggest that there has in fact been any wrong doing on the part of the trustee Mr Starkey. However, the fact remains that two very large and truly at arms length creditors have significant concerns as to this issue.' 5 It was, as I understand it, for that reason that her Honour made the order removing Mr Starkey as trustee and appointing Mr Nick Combis in his place. 6 An appeal has been lodged from that order, as well as a notice of contention on behalf of Rondo Building Services Pty Ltd and a cross-appeal by that company. The cross-appeal is in respect of the order made by Federal Magistrate Rimmer that there be no order as to costs of the application, heard on 11 May 2004 and the subject of reasons handed down on 10 March 2005. 7 It is apparent from what I have set out above that the appeal is, at the very least, arguable. The test in whether to order a stay of that order, the subject of the appeal, requires me to consider whether Mr Starkey has demonstrated 'a reason or an appropriate case to warrant the exercise of a discretion in his favour', the test referred to by the Full Court in Powerflex Services Pty Ltd v Data Access Corporations (19960) 137 ALR 498. Notwithstanding that the appeal will be heard in the near future, it seems to me that this is an appropriate case to warrant the exercise of a discretion staying the order of Federal Magistrate Rimmer replacing Mr Starkey as trustee. 8 I reach that conclusion because, in my view, the case is strongly arguable. Secondly, Mr Starkey has acted in the estate for a considerable period. Mr Combis has only been in the position of trustee since 10 March 2005. There is the possibility of duplication of work by the trustee appointed pursuant to Federal Magistrate Rimmer's order, although the evidence suggests that the estate is impecunious and there will be a degree of caution to be exercised by whoever is the trustee pending the resolution of the appeal and cross-appeal. 9 The appeal, as I say, is strongly arguable, particularly having regard to the significant number of creditors who expressed their opinion at a meeting of creditors only two months prior to the application made in the Federal Magistrates Court. It seems to me that if I were to grant a stay, there will be little or no prejudice to any other party, and there is the possibility that a stay will obviate any unnecessary expenditure on costs or duplication of costs already incurred. 10 That is the primary consideration. I think it is also to be noted, although the weight to be given to it is not very great, that a large number of creditors have written to the solicitors for Mr Starkey indicating their support for a stay of the order pending the appeal, and expressing their confidence in his impartiality as trustee of Mr Dance's estate. 11 I therefore order that the order of Federal Magistrate Rimmer of 10 March 2005 that 'the respondent [Graham Lindsay Starkey as trustee of the estate of Peter John Dance] be removed as trustee of the estate of Peter John Dance and that Mr Nick Combis be appointed as trustee in his place' be stayed pending the determination of the appeal by Mr Starkey against that order. 12 I order that the costs of the notice of motion, which ultimately sought a stay of that order, be costs in the appeal.