Consideration
45 The first claim made by the applicants by their application is for a declaration that the Inspector-General in Bankruptcy has failed to make any inquiry and investigation pursuant to s 12(1)(b) of the Act with respect to the administration of the applicants' bankrupt estate and the conduct of the Trustee in relation to the Welona proof of debt. Nothing was put before me to suggest that any utility would result from the making of a declaration in such terms. It is not disputed by the respondents that the Inspector-General in Bankruptcy has not made any inquiry or investigation of the kind referred to in the claim. Assuming, without deciding that the claim falls within s 21 of the Federal Court of Australia Act 1976 (Cth), the claim is, in my view, frivolous or vexatious within the meaning of O 20 r 2(1)(b) of the Federal Court Rules and should be dismissed.
46 The second claim of the applicants is for an order that the Inspector-General in Bankruptcy be compelled and directed to conduct an inquiry and investigation pursuant to s 12(1)(b) of the Act with respect to the administration of the applicants' bankrupt estate by the Trustee and conduct of the Trustee concerning the Welona proof of debt. Counsel for the applicants was not able to identify any source of power in the Court, as opposed to the Minister, to make an order in the terms claimed. No reasonable cause of action is disclosed in relation to this claim and it will be dismissed.
47 The third, fourth and fifth claims of the applicants are for declarations that they were and remain affected within the meaning of Section 178 of the Act by certain acts, omissions and decisions respectively of the Trustee. Again counsel for the applicants was not able to suggest that any utility would flow from the making of the declarations sought. It is not usual for a court to make a declaration as to a party's locus standi to institute proceedings. It may be that the claims are frivolous or vexations within the meaning of O 20 r 2(1)(b) of the Federal Court Rules. However, I prefer to deal with these claims together with the sixth claim which calls for consideration of whether the applications are relevantly "affected by an act, omission or decision of the trustee" within the meaning of s 178 of the Act. It may be noted, however, that the formulation of claims three, four and five has been of value in identifying the conduct of the Trustee concerning which the applicants make complaint.
48 The sixth claim of the applicants is for an order pursuant to s 178 of the Act that the Trustee make good any loss or damage incurred by the applicants' bankrupt estate by reason of the acts, omissions or decisions of the Trustee. The motions before me were argued on the basis that the acts, omissions or decisions of the Trustee referred to in the sixth claim are those itemised in claims three to five. All of the acts, omissions and decisions of the Trustee referred to in claims three to five relate in some way to the Welona proof of debt. There is a judgment of this Court, in respect of which the High Court has refused leave to appeal, as to the amount for which the Welona proof of debt is to be admitted in the applicants' bankruptcies. Welona has not been joined in this proceeding. No application has been made, or even foreshadowed, to have the judgment of this Court concerning the Welona proof of debt set aside. The liability of the applicants' bankrupt estates to make payment to Welona derives from the judgment of this Court and not from any act, omission or decision of the Trustee in the course of the administration of the applicants' bankrupt estate.
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. It is not necessary for me to decide whether the Court could make an order under s 178 for compensation for loss or damage suffered by a bankrupt estate if it considered it just and equitable to do so in a case in which its jurisdiction under s 178 was properly invoked. In my view, the jurisdiction of the Court under s 178 is not properly invoked in this case as the applicants do not seek review by the Court of any act, omission or decision of the Trustee. The sixth claim of the applicants, and claims three, four, five and seven which are ancillary to it, will be dismissed as disclosing no reasonable cause of action.
50 For completeness I add that s 178 may not be invoked to obtain an order in relation to Messrs Bowen, Bell, Garrett and orders for the purpose of establishing "who tampered with and falsified the photographs evidence and whether or not at relevant times there was knowledge of that fact."
51 The eighth, ninth, tenth and eleventh claims of the applicant are made in reliance on s 179 of the Act. The motions before me were argued on the basis that the grounds put forward by the applicant as justifying an inquiry into the conduct of the Trustee are those identified in the applicants' third, fourth and fifth claims.
52 The first ground is that the Trustee permitted the receipt of false evidence in the proceeding before Sweeney J. The applicants' submissions in respect of this ground point to Mr Wilson's "lost" photographs, certain file notes and reports of the Trustee and certain file notes and correspondence of the Trustee's solicitor in the proceeding before Sweeney J. The file notes, reports and correspondence of the Trustee and the Trustee's solicitor record instructions concerning the state of repair of the Hotel when the applicant's took possession of it and conclusions reached by the respective authors of the documents that the Hotel was at that time in a poor state of repair. The material does not tend to suggest, in my view, that the Trustee permitted the receipt of false evidence in proceeding before Sweeney J in the sense that the Trustee sought to mislead Sweeney J.
53 I have referred above to the fact that the applicants were represented in the proceeding before Sweeney J by solicitors and counsel. The statement referred to earlier, which the transcript of the hearing before Sweeney J shows to have been made by the applicant's counsel at the commencement of the hearing before his Honour, indicates the roles that the respective parties before Sweeney J understood themselves to be playing. As is mentioned above, at the time of the hearing before Sweeney J, the Trustee had admitted Welona's proof of debt in an amount which the applicants contended was too high and Welona contended was too low. The Trustee placed before the Court the material upon which the Trustee's decision had been taken. It was for the two disputants, the applicants on the one hand and Welona on the other, to seek to discredit or otherwise challenge the import of that material and to produce additional evidence as they saw fit. Counsel for the applicants was free to, and did, cross examine the Trustee's witness and those called by Welona. No impediment was placed in the way of the applicants calling such witnesses in the proceeding before Sweeney J as they thought appropriate.
54 It is not clear why Mr Wilson did not give secondary evidence to Sweeney J of the matters shown by the "lost" photographs. Indeed, assuming the accuracy of the conclusions that Mr Whitfield has now reached concerning the photographic evidence before Sweeney J and the Full Court, it is not clear why the applicants and the applicants' legal representatives before Sweeney J and the Full Court did not identify certain of the photographs received in evidence as photographs taken by Mr Wilson. Since such photographs were referred to in an affidavit filed and served by Mr Garrett, it seems clear that there was no deliberate attempt by the Trustee to keep the photographs from the applicants or their legal representatives. Indeed, it seems fair to conclude that since some of the "lost" photographs ended up in the registry in an envelope containing Exhibit 8, they were almost certainly in court during the hearing before Sweeney J - and probably on the bar table.
55 I am not satisfied that on the evidence before me, there are substantial grounds, or indeed any reasonable grounds, for believing that the Trustee deliberately permitted the receipt of false evidence in the proceeding before Sweeney J. It may be, although I have no way of knowing, that a witness or witnesses called by the Trustee may have given evidence which his Honour accepted which, had the hearing been conducted differently, his Honour might not have accepted. This, however, does not of itself raise any suggestion of impropriety against the Trustee.
56 I am similarly not satisfied that on the evidence before me, there are any reasonable grounds for believing that the Trustee "assisted in the preparation of false evidence" in the proceedings before Sweeney J.
57 A further ground upon which the applicants contend that an inquiry should be held into the Trustee's conduct is that:
"3(iii) The Official Trustee engaged in conduct that was false and misleading and/or the Official Trustee made negligent and/or reckless and willful [sic] misstatements to the Applicants in relation to the Official Trustee's loss of material evidence of the Applicants comprising photographs relating to issues the subject of the proof of debt by Welona Pty Limited dated 10 August, 1988."
58 Plainly it would have been desirable for Mr Garrett to have made a proper record of the photographs that came into his possession which included the person from whom he obtained them, the date upon which he received them, and if any of them subsequently left his possession, when they left his possession and into whose possession they went. He should have taken steps to ensure that photographs from different sources were not mixed together but remained separately identified. However, I do not believe, nor did any party contend, that an inquiry under s 179 of the Act (or indeed s 178) could be justified by reason of administrative sloppiness of this kind which took place some years ago.
59 The applicants appear, some years after the events with which this application is concerned, to have devised an elaborate conspiracy theory concerning the photographs which came into Mr Garrett's possession and the use that has been made of them. I have tried carefully to understand the theory. To the extent that I understand it, it seems to me to lack support from the evidence in crucial respects. I accept that some of the photographs which were received in evidence before Sweeney J may have been taken in 1983, rather than in 1985 which was the unchallenged evidence given to his Honour. However, I do not accept that the evidence before me establishes that the Trustee sought to mislead his Honour or the applicants with respect to the photographs or that the Trustee improperly "tampered" with any of the photographs.
60 The applicants further put forward as a ground for an inquiry into the conduct of the Trustee under s 179 of the Act that the Trustee engaged a third party to assist Welona in establishing the proof of debt. This ground is, in my view, entirely misconceived. Section 134 of the Act provides, so far as is here relevant:
"134(1) Subject to this Act, the trustee may do all or any of the following things:
…
(i) obtain such advice and assistance as he or she considers desirable relating to the administration of the estate or to the conduct or affairs of the bankrupt …."
61 In view of the difficulties involved in forming an opinion as to the amount for which Welona's proof of debt should be admitted, it was plainly appropriate for the Trustee to seek professional advice and assistance from an expert such as Mr Bell, a chartered architect. No impropriety was involved in the Trustee seeking Welona's agreement to meet the cost of such evidence and assistance.
62 A further ground upon which the applicants contend that an inquiry should be held into the conduct of the trustee is that:
"4(i) The Official Trustee failed to diligently or properly examine the claims of Welona Pty Limited contained in its proof of debt dated 10 August, 1988."
63 The Court has a broad discretion in deciding whether to order an inquiry under s 179 of the Act. The claims of Welona contained in its proof of debt were carefully examined before Sweeney J in a proceeding in which the applicants were represented by solicitors and counsel. Welona's entitlement pursuant to its proof of debt is now authoritatively established by an order of this Court made in the exercise of its jurisdiction under the Act. No useful purpose would now be served, in my view, by an inquiry into the conduct of the Trustee in examining the Welona proof of debt. Nor am I satisfied that the evidence before me demonstrates reasonable cause to believe that the Trustee may have failed to act in respect of the Welona proof of debt in the manner required by the Act and the general law.
64 I have dealt above with the issue of the Trustee's custody of photographs given to Mr Garrett. I am not satisfied that the conduct of the Trustee concerning the photographs warrants the holding of an inquiry under s 179 of the Act.
65 The applicants complain that the Trustee failed and continues to fail to refer the conduct of Welona and its directors -
"for possible contraventions of Section 263(1)(d), 263A and 263B of the Bankruptcy Act, 1966 in relation to its proof of debt of 10 August 1988".
66 As the Full Court pointed out in Turner v Official Trustee in Bankruptcy (unreported, Full Federal Court, 27 November 1998) any question of prosecution in respect of the matters alleged by the applicants against Welona and its directors is for the appropriate prosecuting authorities and not the Trustee.
67 A yet further ground advanced by the applicants for an inquiry into the conduct of the Trustee is that the Trustee -
"wrongfully admitted in part and wrongfully rejected in part"
the Welona proof of debt. For the reasons given earlier concerning the allegation that the Trustee failed diligently or properly to examine the claims of Welona made by its proof of debt, I am satisfied that no useful purpose would be served by an inquiry into the conduct of the Trustee in making his decision concerning the Welona proof of debt. Moreover no reasonable cause to believe that the Trustee acted other than in the manner required by the Act and the general law has been shown.
68 I am satisfied, having regard to each of the grounds put forward by the applicants as justifying a case for an inquiry into the conduct of the Trustee, and having also considered the cumulative effect of such grounds, that a case has not been made under s 179 of the Act for inquiry into the Trustee's conduct. I do not accept the applicants' contention that s 178 provides an alternative statutory basis for an inquiry by the Court into the Trustee's conduct.
69 The real interest of the applicant is to seek to go behind the judgment of this Court concerning the Welona proof of debt, without addressing the substantial difficulties which would attend an application to have the judgment set aside (see Monroe Schneider Associates (Inc) v No. 1 Raberem Pty Ltd (1992) 37 FCR 234 and Bourke v Beneficial Finance Corporation Ltd (1993) 47 FCR 264). The principle that there should be finality in litigation is an important principle. It will, in my view, be a rare case in which the Court will order an inquiry under s 179 of the Act into subject matter which has been conclusively determined by a judgment of the Court given under the Act.
70 The application further seeks a declaration that the Trustee:
"12 … by its conduct in engaging a third party to assist the creditor Welona Pty Limited in establishing its purported claims in its proof of debt dated 10 August, 1988, acted ultra vires Section 134 of the Bankruptcy Act, 1966 in performing its duty to examine the proof of debt of Welona Pty Limited dated 10 August, 1988 pursuant to Section 102 of the Bankruptcy Act, 1966."
71 Nothing before me suggests that the Trustee engaged Mr Bell to assist Welona to establish its claims in its proof of debt. As is mentioned above, s 134(1)(i) empowered the Trustee to obtain such advice and assistance as the Trustee considered desirable relating to the administration of the applicants' bankrupt estates. In any event, I am not satisfied that there would be any utility in the circumstances in the making of such a declaration. Assuming, without deciding, that the claim comes within the terms of s 21 of the Federal Court of Australia Act 1976 (Cth), the claim should, in my view, be dismissed as being frivolous or vexatious within the meaning of O 20 r 2(1)(b) of the Federal Court Rules.
72 The final claim made by the application is for an order that:
"13 … the Official Trustee in Bankruptcy be restrained from dissipating, disposing or otherwise dealing with the assets of the Applicants including the property comprising the bankrupt estate of the Applicant's situate at 140 Main Street, Wooli in the State of New South Wales in payment or satisfaction of any moneys purportedly owing pursuant to the proof of debt of Welona Pty Ltd dated 10 August 1988."
73 The amount for which Welona's proof of debt is to be admitted in the applicants' bankrupt estate is fixed by a judgment of this Court. No proper basis has been identified by the applicants for any order which would restrain the Trustee from taking appropriate steps under the Act to pay to Welona the amount due to it under the Act by reason of the Court's judgment. This claim will be dismissed as disclosing no reasonable course of action or alternatively as being frivolous or vexatious within the meaning of O 20 r 2(1) of the Federal Court Rules.
74 In summary, claims 1, 2, 3, 4, 5, 6, 7, 12 and 13 of the application should be dismissed. As to claims 8, 9, 10 and 11, I find that a case has not been made for inquiry into the Trustee's conduct. Claim 14 is purely consequential upon the other claims.
75 The appropriate order in the circumstances is that the proceeding be dismissed. I will hear counsel on the question of costs.
I certify that the preceding seventy-five (75) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Branson.