Re Bruce Raymond Woolford v John William O'Brien [1989] FCA 4 (30 January 1989)

FEDERAL COURT OF AUSTRALIA

Re: BRUCE RAYMOND WOOLFORD
And: JOHN WILLIAM O'BRIEN
No. T 804
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF NEW SOUTH WALES AND THE AUSTRALIAN CAPITAL TERRITORY
Neaves J.(1)

CATCHWORDS

Bankruptcy - Trustee - Person registered as qualified to act as trustee - Inquiry into conduct of trustee - Trustee permitting other person to exercise substantially the whole of his powers as trustee - Uncertainty as to what was resolved at a meeting of creditors - Deeds subsequently executed by trustee - Failure to comply with statutory provisions - Whether trustee unfit to remain registered as person qualified to act as trustee - Whether public interest required that registration be suspended - Extenuating circumstances.

Bankruptcy Act 1966 (Cth), ss.155(5B), 179, 188, 203, 204, 212B, 243(3)

HEARING

CANBERRA
30:1:1989

Counsel for the applicant: Mr P.W. Neil

Solicitor for the applicant: Australian Government Solicitor

Counsel for the respondent: Mr C.A. Porter, Q.C.

and Mr J. Chippindall

Solicitors for the respondent: Kemp Strang & Chippindall

ORDER

Upon inquiry into the conduct of the respondent, a person registered under s.155 of the Bankruptcy Act 1966 (Cth) as qualified to act as a trustee under the Act, finds that the respondent failed properly to carry out the obligations which he assumed by consenting to exercise the powers conferred upon him by an authority under s.188 of the Act signed on 26 July 1984 by one David John Broad and the obligations which he assumed as trustee of an arrangement under Part X of the Act in relation to the said David John Broad.

Declares in the strongest terms its disapproval of the conduct of the respondent.

Orders that the respondent pay the costs of the application on a solicitor and client basis.

Note: Settlement and entry of orders is dealt with in rule 124 of the Bankruptcy Rules.

DECISION

The proceeding before the Court is an application by Bruce Raymond Woolford, a Deputy Registrar in Bankruptcy, that an inquiry be made by the Court into certain conduct of John William O'Brien, a person who is, and has since 21 April 1971 been, registered under s.155 of the Bankruptcy Act 1966 (Cth) ("the Act") as qualified to act as a trustee under that Act. The application is made pursuant to s.179 (read with s.243(3)) and s.212B of the Act, the conduct in question being conduct in relation to what is described in the application as Mr O'Brien's administration of the purported composition entered into by one David John Broad and conduct in relation to an authority under s.188 of the Act signed by Mr Broad on 26 July 1984. The application also seeks an order pursuant to s.155(5B) of the Act that Mr O'Brien's registration as a person qualified to act as a trustee under the Act be cancelled or, in the alternative, suspended for such period as the Court should consider

2. It was conceded at the outset by senior counsel for Mr O'Brien that sufficient grounds had been shown to justify the holding of the inquiry. Upon that concession being made, the Court proceeded to examine Mr O'Brien's conduct in relation to the above matters.

3. It is necessary to begin the narrative of relevant facts and events with a reference to a company called Sound Advice Pty Limited of which Mr Broad and his mother, Myree Constance Broad, were the sole shareholders and directors. Mr Broad was the major shareholder, his mother being the holder of one share only. The company's business consisted in operating a number of shops where records, tapes and sound accessories were sold by retail.

4. Early in 1983 it became apparent to Mr Broad that the company was in serious financial difficulties. He sought advice from his solicitor, John Beresford Currie of the firm of Currie & Currie, as a result of which an appointment was arranged for him to attend upon John Edward Star of Star Green & Co., Chartered Accountants. A meeting between Mr Broad and Mr Star took place on 4 March 1983. Mr Broad was advised that the company was insolvent, that it should cease incurring further liabilities and that the necessary steps should be put in hand to effect a voluntary winding up.

5. A meeting of shareholders of Sound Advice Pty Limited was held on 15 March 1983. At that meeting it was resolved, by special resolution, that the company be wound up voluntarily and, by ordinary resolution, that John Edward Star and Martin John Green be nominated as liquidators.

6. Immediately following that meeting, a meeting of creditors of the company was held. At that meeting it was resolved that Messrs Star and Green be appointed joint liquidators of the company. A committee of inspection was also appointed.

7. Amongst the creditors of the company were E.M.I. (Australia) Limited, Polygram Record Services Pty Limited, Festival Records Pty Limited and TDK (Australia) Pty Limited. The debts owing to these companies by Sound Advice Pty Limited were the subject of personal guarantees. In the case of each of the companies the debt was guaranteed by Mr Broad. In the case of Polygram Record Services Pty Limited, Festival Records Pty Limited and TDK (Australia) Pty Limited, the guarantee was given by Mr Broad and his mother jointly. The debt owing to EMI (Australia) Limited was also the subject of a guarantee given by one Phillip Marcus Clark who had, at the time the guarantee was given, been a shareholder and director of Sound Advice Pty Limited.

8. A meeting of the committee of inspection took place on 18 March 1983. In his evidence, Mr Star said he had no recollection of what had occurred at the meeting. However, according to a minute signed by him and dated 18 March 1983, certain proposals involving the realisation of assets of Mr Broad and the postponement of the realisation of an asset of his mother were discussed at that meeting. It is unnecessary to set out the whole of the proposals as recorded by Mr Star but they included the following:

"3. David Broad who owns the property at 2/38
Newbridge Road, Darling Point, will forthwith
sign (sic) total interest in the property to the
Liquidators for the benefit of both his
guaranteed and company creditors. The
Liquidators will grant a period of one month
within which the property can be sold at
$130,000.00 to parties associated with David
Broad. Thereafter the property has to be sold
by auction. Likewise David Broad is to sell his
boat and motor vehicle both of which are subject
to lease or hire purchase. Any equity derived
from sale is to be paid to the Liquidators.
4. The total proceeds from the sale of David
Broad's property, the sale of the Mercedes 1973
motor vehicle of which he is lessee and the
motor boat either leased or owned by David Broad
shall be collected by the Liquidators less the
costs of realising the same and paid to the
guaranteed creditors and company as detailed
below. The liquidators shall not sell David
Broad's property below $130,000.00 without the
approval of the Committee of Inspection of the
Company.
5. David Broad and Myree Broad will agree to
pay to the company upon receipt of their
priority dividend, the same amount.
6. David Broad and Myree Broad will agree to
release the company from any other indebtedness
and the company will likewise agree to release
them from any indebtedness.
7. The guaranteed creditors will in turn agree
to release David Broad, Myree Broad and Phillip
Marcus Clark from all monies due under the
guarantees subject to the terms of this
agreement."

A proposal for the distribution of the amount realised from the sale of Mr Broad's assets was also set out in the minute but it need not be detailed here. It is to be noted that the real property owned by Mr Broad was wrongly described in this, and in a number of other documents, as being situate at Newbridge Road, Darling Point. The correct address was 2/38 New Beach Road, Darling Point.

9. According to Mr Broad, the proposal concerning the realisation of the home unit property at 2/38 New Beach Road, Darling Point was somewhat different. His evidence was that there was no time limit placed on the sale of the property and that there was no suggestion of a sale by auction. There is no evidence before the Court from any of the members of the committee of inspection as to what the proposal concerning Mr Broad's assets was.

10. It appears from the minute signed by Mr Star that, although some members of the committee of inspection agreed to the proposals in principle, it was necessary that the proposals be referred to the companies concerned for final approval. The evidence does not establish that unconditional approval was given by the companies represented on the committee of inspection or by the general body of creditors of Sound Advice Pty Limited. The evidence suggests, however, that some steps were put in hand towards the preparation of a deed to give effect to the proposals. Other avenues of implementation were also explored. The solicitors for Mr Broad, Currie & Currie, and the solicitors retained by the liquidators, Cowley Hearne, appear to have been involved.

11. In the event, however, the proposals concerning Mr Broad's assets had not been carried into effect prior to 20 March 1984 when a further meeting of the creditors of Sound Advice Pty Limited was held. A report by the liquidators upon the company's affairs, signed by Mr Star and dated 2 March 1984, was circulated to the creditors prior to the meeting. That report showed a deficiency as at 15 March 1983 of $288,542, a deficiency which the liquidators reported had been largely unexplained. The report also disclosed that the latest financial statements in the hands of the liquidators were those for the year ended 30 June 1981. The liquidators expressed the opinion that the books and records might not have been properly kept and the further opinion that poor management had contributed significantly to the company's downfall. Under the sub-heading "Proposed Settlement with the Broads", the following appeared:

"The equity in Mr Broad's home at 2/38 Newbridge
(sic) Road, Darling Point, which was
independantly valued by Stanley Thompson
Valuations Pty Limited on our instructions in
March, 1983 at $130,000, was to be paid to
ourselves, less any indebtedness secured over
property, ($40,000), for distribution amongst Mr
Broad's guaranteed creditors and the company.
For the purpose of this distribution the
company's claim was to be agreed at the size of
the deficiency as per the Report as to Affairs,
namely $288,542. One of the guaranteed
creditors, EMI (Aust.) Pty Limited, who also had
a guarantee from another party, was to maintain
the right to enforce that guarantee, however
that party required the right to rank in this
distribution should EMI (Aust.) Pty Limited be
successful in enforcing the guarantee against
him."

The reference to any indebtedness secured over the home unit property was a reference to moneys, secured by mortgage, owing to Westpac Banking Corporation Limited. It appears that no steps were taken by the liquidators prior to the meeting of creditors on 20 March 1984 to have the valuation of the property, which had been made a year earlier, reviewed.

12. It is convenient to mention at this point in the narrative that towards the end of 1983 a partnership had been formed between Mr O'Brien, Mr Star, Mr Green and a Mr C.J. Palmer, the partnership carrying on business under the name "O'Brien Star Green". That partnership continued until 31 December 1984 when it was dissolved.

13. At the meeting of creditors of Sound Advice Pty Limited held on 20 March 1984, a meeting chaired by Mr Star, a resolution was passed that -

"The Liquidators be authorised to settle with
the Broads as proposed in the report to
creditors and that no further action be taken in
respect to recovery of possible preference
payments."

The latter was a reference to possible claims which the liquidators might have in relation to certain payments made to one of the guaranteed creditors and to Westpac Banking Corporation Limited and to a possible claim against Mr Broad in relation to those payments. The minutes of that meeting also recorded that the chairman "advised the meeting that agreements relating to the settlement would be available within the next three weeks and it was hoped that the first distribution would be made within six months thereof".

14. Mr Broad's solicitors, Currie & Currie, sought counsel's advice concerning the implementation of the proposals and correspondence ensued between the solicitors and O'Brien Star Green.

15. According to Mr Broad, Mr Star subsequently informed him that the implementation of the proposed settlement could not be carried out informally "due to inherent legal problems". Mr Broad said that Mr Star advised him that he should appoint a trustee of his personal estate under Part X of the Act. Mr Star, in his evidence, did not agree that he advised Mr Broad that the matter should be dealt with under Part X of the Act. Mr Star's belief was that that advice was given by Mr Broad's solicitors.

16. According to Mr O'Brien, Mr Star spoke to him in May or June 1984 concerning the liquidation of Sound Advice Pty Limited. Mr Star, he said, referred to the guarantees given by Mr Broad to a number of creditors of the company and informed him that the creditors had agreed to take the equity in a house property owned by Mr Broad in settlement of their guarantees. Mr Star further said that he had hoped to work the matter out informally but had been told that a composition was needed. According to Mr O'Brien, Mr Star asked him if he would be disposed to act as the trustee in respect of such a composition. Mr O'Brien also said that he was informed by Mr Star that Mr Broad had no creditors other than those who were guaranteed creditors of Sound Advice Pty Limited. Mr Star, in his evidence, was unable to recall the contents of any conversation he had with Mr O'Brien on the subject.

17. Mr O'Brien's evidence was that the proposed composition appeared to be simple and that he had every reason to believe that Mr Star would be able to administer the matter. In reaching that conclusion, he appears to have assumed that Mr Star had relevant experience in relation to matters arising under Part X of the Act. If Mr Star is to be believed, Mr O'Brien's assumption was ill-founded. Mr O'Brien further said he did not consider there was a prospect of a conflict of interest and he informed Mr Star that he was prepared to act as trustee. It may be mentioned that Mr Star was not, at that time, registered under s.155 of the Act as a person qualified to act as a trustee under that Act. He did become so registered but not until 2 April 1985.

18. It is common ground that at no time prior to December 1986 did Mr O'Brien meet Mr Broad or have any discussion with him. Mr O'Brien said in evidence that his failure to interview Mr Broad prior to becoming involved in the matter was contrary to his usual practice. He sought to explain his failure to do so by saying that other matters took up his attention at the time. He claimed that this was the only instance of his failing to interview the debtor in any arrangement under Part X of the Act of which he became the trustee. There is no evidence before the Court to the contrary.

19. On 27 June 1984 Mr Star wrote to Currie & Currie enclosing a draft statement of affairs prepared in relation to Mr Broad and requesting that the statement be checked so that arrangements could be made for the signature of an authority under s.188 of the Act "for the purpose of effecting the proposed Deed of Arrangement or Compromise" The draft statement of affairs had been prepared by Mr John Vouris who was at the time employed by O'Brien Star Green and who was working under Mr Star's direction and supervision. Mr Vouris had previously been involved, with Mr Star, in the administration of the liquidation of Sound Advice Pty Limited.

20. Subsequently there were discussions between Mr Broad and Mr Star concerning the inclusion in the statement of affairs of a reference to an interest which Mr Broad had in his father's estate in New Zealand.

21. On 26 July 1984, Mr Broad, pursuant to s.188 of the Act, signed an authority authorising Mr O'Brien, to call a meeting of his creditors for the purposes of Part X of the Act and to take control of his property in accordance with that Part. Mr O'Brien consented in writing to exercise the powers conferred on him by the authority. The signature of Mr Broad to the authority and the signature of Mr O'Brien to the consent were each attested by a witness (see sub-s.188(2)), that of Mr Broad being attested by Mr Star.

22. A circular letter dated 27 July 1984 and signed by Mr Star "for John O'Brien" was sent to Mr Broad's creditors. It referred to the proposal contained in the liquidators' report dated 2 March 1984 to the creditors of Sound Advice Pty Limited. The circular further referred to the circumstance that Mr Broad had been asked to sign an authority under s.188 of the Act "for the purpose of implementing a Deed of Compromise along the lines of the proposed settlement".

23. A meeting of Mr Broad's creditors was held on 16 August 1984. Mr O'Brien was aware that the meeting was to be held. He did not attend the meeting but authorised Mr Star to do so on his behalf. A statement of Mr Broad's affairs, verified by statutory declaration declared by him on 16 August 1984 before Mr Vouris, was presented to the meeting. Mr Vouris, in his evidence, agreed that he had previously gone through the statement of affairs with Mr Broad. The statement disclosed an amount of $472,566 owing to unsecured creditors and showed the value of his property, other than property over which a security was held, as nil. This latter statement should be qualified by noting that the statement of affairs disclosed that Mr Broad had an interest in his father's estate in New Zealand, the estimated value being shown as "Unknown". The statement also disclosed an amount of $80,000 as the amount by which the secured debts to creditors was less than the value of the security held. According to the statement of affairs the unsecured creditors and the amounts of their respective debts were as follows -

$
EMI (Australia) Limited 89,037
Polygram Record Services Pty Ltd 38,942
Festival Records Pty Limited 406
TDK (Australia) Pty Limited 11,121
Sound Advice Pty Ltd (In Liquidation) 288,544
P. Marcus Clark 44,518
$472,566

This total is understated by $2 if the amounts of the individual debts are correctly stated. However, it seems that the debt said to be due to Sound Advice Pty Limited (In Liquidation) was overstated by that amount.

24. The debts shown in Mr Broad's statement of affairs as being due to the companies other than Sound Advice Pty Limited were due under the guarantees given to those companies by Mr Broad. The debt due to Phillip Marcus Clark represented one half of the debt due by Sound Advice Pty Limited to E.M.I. (Australia) Limited and was apparently included on the basis that, if Mr Clark paid the whole of the debt due to that company, he would be entitled to claim against Mr Broad for one half of the amount so paid. There is no evidence to suggest that Mr Clark made any such payment. It may also be noted that the debts the subject of the guarantees had been taken into account in arriving at the amount of $288,542 shown as being a debt due to Sound Advice Pty Limited. The basis upon which the conclusion was reached that that company was a credtior of Mr Broad in that sum is nowhere explained. That sum was, as already appears, equal to the deficiency in the company as at 15 March 1983.

25. The statement of affairs also disclosed Westpac Banking Corporation Limited as a secured creditor for an amount in excess of $40,000. The value of the property over which the security was held was shown to be $130,000 and to be based on a valuation made in March 1983. It appears that the security was a mortgage over the home unit known as 2/38 New Beach Road, Darling Point though no specific mention was made of that property. As will appear, the statement of affairs failed to disclose moneys held by Mr Broad in an account with the National Australia Savings Bank Limited and moneys held on term deposit with the National Australia Bank Limited.

26. What precisely was resolved at the meeting on 16 August 1984 is a matter of considerable obscurity. It appears that the meeting was attended by Mr Star, Mr Vouris, Mr and Mrs Broad and representatives of three of the creditors, E.M.I. (Australia) Limited, Polygram Record Services Pty Limited and TDK (Australia) Pty Limited. Mr Star chaired the meeting.

27. By virtue of sub-s.204(7) of the Act, where the creditors of a debtor, at a meeting called in pursuance of an authority under s.188, by special resolution, required the debtor to execute a deed of arrangement or accepted a composition, the chairman of the meeting was required forthwith to sign a certificate as to the resolutions passed at the meeting and forthwith to cause the certificate to be filed in the office of the Registrar in Bankruptcy. Under sub-s.203(1) of the Act, the chairman of a meeting of creditors called in pursuance of an authority under s.188 was required to cause minutes of the proceedings at the meeting to be prepared and to sign the same not later than 14 days after the date of the meeting. Sub-section 203(4) required the controlling trustee, or the solicitor who called the meeting, within 21 days after the day on which the meeting was held, to cause a copy of the minutes to be filed in the office of the Registrar in Bankruptcy.

28. An undated document purporting to be a certificate of the resolutions passed at the meeting was signed by Mr Star and filed in the office of the Registrar in Bankruptcy but not until 5 September 1984. It certified that at the meeting held on 16 August 1984 "the following ordinary resolution was passed". Immediately thereafter appeared the words "SEE ATTACHED SHEET". That sheet, however, set out a number of special resolutions as well as a number of ordinary resolutions. Under the heading "SPECIAL RESOLUTIONS" the following appeared:

"IT WAS RESOLVED THAT CREDITORS ACCEPT A
COMPOSITION WITH THE DEBTOR PROVIDING FOR THE
FOLLOWING:-
1. 'The Debtor covenants that he will
forthwith arrange for the said home unit
premises to be sold at public auction,
such auction to take place within two
(2) calendar months of the date hereof
and with a reserve price of no less than
One hundred and thirty thousand dollars
($130,000)'.
2. 'The Debtor covenants to pay the whole
of the nett proceeds of sale (after
deduction only of agents commission and
legal costs incurred on sale) to the
Trustee for payment amongst the
creditors who shall include Sound Advice
Pty Ltd (In Liquidation) and Phillip
Marcus Clarke in the sums of $288,542
and $44,518 respectively.'
3. 'In the event that the Debtor pays to
the Trustee the sum of One hundred and
thirty thousand dollars ($130,000.00) to
be dealt with in accordance with Clause
2 hereof, within fourteen (14) days of
the date hereof, the Debtor will
thereafter be absolved from further
compliance with the terms of this
Agreement.'
4. 'Upon payment to each creditor pursuant
to Clause 2 hereof the Debtor shall be
released from all debts and obligations
owed by him to such creditors."

One of the ordinary resolutions set out on the sheet was in the following terms:

"Mr John William O'Brien be nominated as Trustee
of the Composition."

The reference in the first of the above special resolutions to "the said home unit premises" may be taken to be a reference to the home unit known as 2/38 New Beach Road, Darling Point. It may also be noted that the affidavit of Mr Broad sworn herein on 3 December 1987 annexes, as Annexure "S", a copy of a document purporting to be a copy of a certificate of the resolutions passed at the meeting of creditors held on 16 August 1984. That document, which is undated but bears Mr Star's signature, differs in some respects from the document set out above. A copy does not appear to have been filed in the office of the Registrar in Bankruptcy.

29. On 9 October 1984, a document expressed to be the minutes of the meeting of creditors held on 16 August 1984, signed by Mr Star as chairman, was filed in the office of the Registrar in Bankruptcy in purported compliance with the requirements of sub-s.203(4) of the Act. That document recorded that a special resolution was passed at the meeting in the following terms -

"All creditors voted in favour of and therefore
IT WAS RESOLVED: 'That David John Broad be
required to enter into a Composition with his
creditors and the Composition shall consist of:-
Mr David Broad irrevocably assigning all his
interest in the property at 2/38 New Beach Road,
Darling Point to the Trustee. The Trustee will
sell the property forthwith and the net proceeds
from same will be distributed pro rata to the
following creditors whose claims are estimated
as follows:-
EMI (Aust) Pty Limited $ 89,037
Polygram Record Services Pty Ltd$ 38,942
Festival Records Pty Ltd $ 406
TDK $ 11,121
Sound Advice Pty Limited (In $288,542
Liquidation)
Co-guarantor of EMI's debt $ 44,518"

The document also recorded that an ordinary resolution was passed nominating Mr O'Brien as "Trustee of the Composition".

30. A mere reading of the documents to which reference has been made demonstrates a lack of consistency between the resolutions certified by Mr Star to have been passed at the meeting of 16 August 1984 and the resolutions set out in the copy minutes, also certified by Mr Star, of that meeting. No satisfactory explanation of the lack of consistency has been offered. It may also be noted that what is recorded in the minutes as having been agreed does not amount to a composition as defined in the Act (see s.187(1)).

31. Mr Vouris gave evidence that he attended the meeting of creditors on 16 August 1984 for the purpose of recording the minutes of the meeting and generally to assist Mr Star. He said that at the meeting he took notes of the resolutions passed and that, on that or the following day, he dictated full minutes of the meeting. He said that a typescript of the minutes, which he had checked for accuracy, was then handed by him to Mr Star for his approval and signature. He could not recall any further involvement with the minutes. Mr Vouris also said that he prepared a certificate of the resolutions passed at the meeting. His recollection was that neither the certificate of resolutions filed in the office of the Registrar in Bankruptcy on 5 September 1984 nor the copy of the minutes filed in that office on 9 October 1984 accurately reflected what had been resolved at the meeting on 16 August 1984.

32. Mr Vouris offered the explanation that the minutes which he had prepared and handed to Mr Star had been altered. His recollection of what had occurred at the meeting was that the creditors agreed that Mr Broad should be given a period of two months within which to arrange a sale of the property for a price of $130,000, failing which the property was to be sold at auction. He said that the documents he prepared accurately reflected that agreement. Neither Mr Vouris' handwritten notes nor the minutes which he said he prepared are in evidence. Somewhat surprisingly, he said that he had made no search for those documents and had not been requested to make such a search. Mr Vouris further said that he became aware that the minutes and certificate of resolutions as filed differed from the documents he had prepared, about a week after the documents he had prepared had been handed to Mr Star for approval and signature. However, having appreciated the difference, he appears to have taken no action in relation thereto. He appears not even to have mentioned the matter to Mr O'Brien when the latter made enquiries of him before writing a letter dated 12 February 1986 to Mr M.Murray, a Deputy Registrar in Bankruptcy. Reference will be made to that letter later in these reasons.

33. Mr Star's evidence as to what occurred at the meeting was vague and unhelpful. When first asked what the creditors had agreed at the meeting, he said he did not know. Although re-iterating that he was not certain what had been resolved, he proferred that, to the best of his recollection, Mr Broad was to have a certain period, which he could not specify, within which to sell the property at $130,000 failing which the property was to be sold at auction. I have already referred to Mr Vouris' recollection. Mr Broad's recollection was that the creditors agreed to his arranging for the home unit to be sold for a minimum price of $130,000 and that there was no requirement that the sale be by auction either in the first instance or in the event of a sale by private treaty not being effected within a specified period. None of the other persons present at the meeting gave evidence.

34. Mr Star gave the following evidence in relation to the minutes of the meeting:

"What happened was the minutes of the meeting,
from my memory, were recorded by John Vouris who
prepared them, brought them in to me at some
time later. I checked them - I asked that they
be checked by John O'Brien, and subsequently to
that, I think it was at the last moment before
the minutes were due to be lodged, they were
brought back to me - this was late on the last
day, and I signed them and from memory I did not
check them, and it was my fault at that stage."

Mr Star said that his purpose in asking that the minutes be checked by Mr O'Brien was to ensure that what had been done was correct as he "was not experienced in the bankruptcy area". He further said that, although he had had some experience in individual insolvencies, the meeting of 16 August 1984 was one of the first meetings, if not the first meeting, under Part X of the Act which he had chaired.

35. In giving the above evidence, Mr Star was clearly suggesting, without expressly saying so, that Mr O'Brien, or some person on his behalf, had altered the minutes in such a way as not to record accurately what had occurred at the meeting and that he had failed to appreciate this at the time because he had not read the document which was to be filed in the office of the Registrar in Bankruptcy when it was presented to him for signature. He further suggested he was constrained from reading the document because of the pressure of time to have the copy minutes filed before the expiration of the prescribed time. Later in evidence Mr Star said that he could not recall whether it was the copy of the minutes, or the certificate of resolutions passed, or both, that he had signed without reading. In evaluating his evidence, it is relevant to notice that neither the certificate of resolutions passed nor the copy minutes were filed within the prescribed time. The copy of the minutes was filed more than four weeks after the prescribed time, namely 21 days after the date of the meeting, had elapsed. Mr Star's evidence concerning the preparation and filing of the documents in question is implausible and I do not accept it.

36. Mr O'Brien said that Mr Star informed him of the result of the meeting of 16 August 1984. He said he believed he had seen minutes of the meeting but he had no recollection of ever seeing minutes of that meeting which differed from those in the document filed in the office of the Registrar in Bankruptcy on 9 October 1984. He considered it would have been unusual for him to have received a draft of the minutes. He stated quite categorically that he would not have amended any minutes shown to him - at the most he would have referred them back for clarification if he had thought they were ambiguous. He could not remember seeing a certificate of the resolutions passed at the meeting. He agreed that he had not given the matter sufficient attention at the time.

37. Not only was 5 September 1984 the date upon which the certificate of resolutions passed at the meeting held on 16 August 1984 was filed in the office of the Registrar in Bankruptcy, it was also the date of a deed made between Mr Broad and Mr O'Brien. The coincidence of those events is, I think, of some significance. The deed, which was expressed to be made pursuant to Part X of the Act, recited that Mr Broad had executed an authority under s.188 of the Act, that at a meeting of creditors held on 16 August 1984 the creditors by special resolution required him "to execute a Deed of Arrangement in accordance with Part X of the Bankruptcy Act" and that Mr Broad was the registered proprietor of the property known as 2/38 New Beach Road (wrongly stated to be Newbridge Road), Darling Point. The operative clauses of the deed were as follows -

"1. The Debtor covenants that he will
forthwith arrange for the said home unit
premises to be sold at public auction, such
auction to take place within two (2) calendar
months of the date hereof and with a reserve
price of no less than One hundred and thirty
thousand dollars ($130,000).
2. The Debtor covenants to pay the whole of
the nett proceeds of sale (after deduction only
of agents commission and legal costs incurred on
sale) to the Trustee for payment amongst the
creditors who shall include Sound Advice Pty Ltd
(In Liquidation) and Phillip Marcus Clarke in
the sums of $288,542 and $44,518 respectively.
3. In the event that the Debtor pays to the
Trustee the sum of One hundred and thirty
thousand dollars ($130,000.00) to be dealt with
in accordance with Clause 2 hereof, within
fourteen (14) days of the date hereof, the
Debtor will thereafter be absolved from further
compliance with the terms of this Agreement.
4. Upon payment to each creditor pursuant to
Clause 2 hereof the Debtor shall be released
from all debts and obligations owed by him to
such creditor."

The reference to "the said home unit premises" in clause 1 was a reference to the property known as 2/38 New Beach Road, Darling Point. The references to "the Trustee" were references to Mr O'Brien. Mr Star witnessed Mr O'Brien's signature on the deed. The deed took no account of the debt of Westpac Banking Corporation Limited secured by mortgage over the home unit premises.

38. The deed was prepared by Cowley Hearne, the solicitors who had been retained by the liquidators of Sound Advice Pty Limited and who were retained by O'Brien Star Green to advise in relation to Mr Broad's affairs. I am satisfied that the instructions for the preparation of the deed were given by Mr Star. In this connection, Mr O'Brien gave evidence that, a short time after the meeting held on 16 August 1984, Mr Star had informed him that a deed was necessary to carry the composition into effect and that he, Star, had instructed a firm of solicitors to prepare the deed. There is no evidence before the Court as to the terms of the instructions given to Cowley Hearne. It does not even appear whether the instructions were in writing.

39. The operative clauses of the deed and the terms of the special resolutions set out in the certificate of resolutions passed at the meeting on 16 August 1984 are, except in one minor respect, identical. I have no doubt that the certificate was prepared by adopting the terms of the deed. The language of the resolutions and the circumstance that each resolution is enclosed within quotation marks support that conclusion. The result of doing this, however, was that the periods of two months referred to in the first and third of the special resolutions and in clauses 1 and 3 of the deed had different commencing dates, namely 16 August 1984 and 5 September 1984 respectively.

40. If Mr Vouris' evidence as to what was resolved at the meeting held on 16 August 1984 is to be believed, Mr Star, when giving instructions to Cowley Hearne for the preparation of the deed and when representing to Mr O'Brien that the deed was necessary to carry the agreed composition into effect and that it was in order for execution by him, must have been well aware that the deed did not reflect what had been resolved at the meeting. A similar conclusion must be reached if Mr Broad's version of what was resolved at the meeting held on 16 August 1984 is accepted.

41. It is also difficult to reconcile Mr O'Brien's stated belief that the only form of minutes he saw were minutes in the form filed in the office of the Registrar in Bankruptcy on 9 October 1984 with his execution, without demur, of the deed dated 5 September 1984. Mr O'Brien, in his evidence, acknowledged the inconsistencies in the documents and agreed that, had he carefully read the documents, he would have queried not only the contents of the deed but the necessity for a deed at all.

42. In early October 1984 Mr Broad instructed his solicitor, Mr John Currie, to act for him on the proposed sale for $130,000 of the property known as 2/38 New Beach Road, Darling Point to one Claude Edward Ross. Mr Ross was described as being of 1674 North Beverley Glen Boulevarde, Bel-Air, California, U.S.A. Mr Currie was informed that no real estate agent was involved in the sale. He was handed a copy of the deed dated 5 September 1984. According to Mr Broad, he informed Mr Currie that, although the deed provided for the sale of the property at auction, Mr Star had informed him that there would be no objection to a sale by private treaty so long as the sale price was not less than $130,000. Mr Currie advised Mr Broad that it was doubtful whether an accounting to Mr O'Brien for the net proceeds of sale arising from the proposed transaction would release him from the debts owing to his creditors but that he would need to confirm this with Mr Star. Mr Currie also said that a variation of the terms of the deed might be necessary to enable the proposed sale to proceed.

43. Currie & Currie addressed a letter dated 16 October 1984 to O'Brien Star Green, for the attention of Mr O'Brien, reading as follows:

"Mr Broad has handed us a copy of the Deed dated
5th September, 1984 made between you and
himself. He informs us that you have advised
him that notwithstanding the terms of the Deed
he is at liberty to sell the unit privately as
opposed to public auction as provided by the
Deed.
He has found a purchaser for $130,000 and we
should be pleased if you could, as a matter of
urgency, confirm that if he sells the property
for such sum to such purchaser and pays the
whole of the net proceeds in accordance with
Clause 2 that (sic) he will be released from his
debts."

44. The solicitors addressed a letter dated 19 October 1984 to Mr Broad in the following terms:

"We confirm you have asked us to act in
connection with the sale to Claude Edward Ross
of your unit at 38 New Beach Road, Darling
Point. We have inspected the terms of a Deed
made between you and John William O'Brien and
have grave doubts that the payment to them of
the net sale price will give you a release from
your creditors. The deed provides that the
property will be auctioned and that the auction
will take place within two months from the date
of the deed, namely 5th September, 1984. We can
only suggest that you obtain independant advice
if you wish to proceed.
If you are prepared to proceed without obtaining
independant advice and on the clear
understanding you may not obtain a release from
your creditors then you might sign and return
the copy of this letter."

Mr Broad instructed the solicitors to proceed.

45. On 2 November 1984 the solicitors addressed a further letter to O'Brien Star Green, for the attention of Mr O'Brien, reading as follows:

"We refer to our conversation with your Mr Star
and confirm that you will forthwith vary the
Deed made between Mr Broad and Mr O'Brien to
permit the approved sale of the unit at New
Beach Road, Darling Point although such sale has
not been by auction. We are in a position to
complete the sale for $130,000.00 less costs on
the sale and less monies owing to the
Mortgagee."

46. A contract for the sale of the unit to Mr Ross was subsequently signed by Mr Broad: it was not signed by Mr Ross. The transaction was, in fact, a sham. Mr Ross was a fictitious person invented by Mr Broad with a view to effecting a purported sale of the property at a price of $130,000 while effectively retaining title to, and possession of, the property. It is not suggested that any of the persons involved other than Mr Broad knew that the purported sale of the property was a sham transaction.

47. On or about 6 November 1984 Currie & Currie received a bank cheque in their favour drawn on the National Australia Bank Limited in the sum of $130,000, being an amount equal to the amount shown in the contract as the purchase price of the property. Mr Broad arranged for the issue of that cheque on 18 October 1984, the source of the funds to purchase the cheque being, as to $94,040.25, an account with the National Australia Savings Bank Limited in the name of Tony Ryan and, as to the balance, a term deposit of $64,000 with the National Australia Bank Limited in Mr Broad's name.

48. The name Tony Ryan was simply a pseudonym of Mr Broad who used the account, as he admitted, to hide from the creditors of Sound Advice Pty Limited moneys belonging to that company. Of the sum of $94,040.25, $80,000 was admitted by Mr Broad to represent moneys of Sound Advice Pty Limited. The term deposit of $64,000 represented the balance of an amount of $70,384.49 received by Mr Broad on or about 15 May 1984 from his father's estate in New Zealand.

49. By letter dated 28 November 1984 signed by Mr Star and addressed to Cowley Hearne, Solicitors, the solicitors were requested to take immediate steps to have the deed dated 5 September 1984 amended to reflect the circumstance that Mr Broad had the sum of $130,000 available for payment to Mr O'Brien. A further deed bearing date 14 December 1984 was made between Mr Broad and Mr O'Brien. Its text should be set out in full. Excluding formal parts, it provided -

"WHEREAS:
A. The Debtor has executed an authority
under Section 188(1) of the Bankruptcy
Act, 1966 authorising the Trustee to
call a meeting of the Debtor's creditors
(hereinafter referred to as 'the
creditors').
B. At a meeting of the creditors held on 16
August, 1984, the creditors by Special
Resolution required the debtor to
execute a Deed of Arrangement in
accordance with Part X of the Bankruptcy
Act, 1966.
C. The Debtor is the registered proprietor
of the whole of the land contained in
Certificate of Title Volume 12047 Folio
175, being Lot 4 in Strata Plan 6969 and
known as 2/38 Newbridge Road, Darling
Point (hereinafter referred to as 'the
property').
D. The Debtor has sold the property for the
consideration of one hundred and thirty
thousand dollars ($130,000.00) and
acknowledges that the sum of the net
proceeds of sale being the sum of one
hundred and thirty thousand dollars
($130,000.00) less moneys owing pursuant
to the mortgage of the property and less
rate adjustments is available for
payment to the trustee as hereinafter
provided.
E. The Debtor and the Trustee executed a
Deed of Arrangement on 5 September,
1984.
F. The said Deed was ineffective to enable
the arrangement proposed by the
Creditor's Special Resolution to be put
into effect.
G. The Debtor and the Trustee desire to
substitute this Deed for the Deed of
Arrangement executed on 5 September,
1984.
NOW THIS DEED WITNESSES as follows:
1. The Debtor covenants to pay the net
proceeds of sale to the Trustee for
payment amongst the creditors who shall
include Sound Advice Pty Limited (in
Liquidation) and Phillip Marcus Clarke
in the sums of two hundred and
eighty-eight thousand five hundred and
forty-two dollars ($288,542.00) and
forty four thousand five hundred and
eighteen dollars ($44,518.00)
respectively.
2. In the event that the Debtor pays to the
Trustee the said proceeds of sale to be
dealt with in accordance with Clause 1
within fourteen (14) days of the date
hereof, the Debtor shall thereupon be
released from all debts and obligations
owed by him to the creditors."

50. It is to be noted that the home unit premises were again referred to as being situate in Newbridge Road instead of New Beach Road, Darling Point. Mr Star witnessed Mr O'Brien's signature to the deed.

51. According to Mr O'Brien, he was told by Mr Star that the second deed was necessary, that it had been settled by solicitors and that it was in order. Mr O'Brien said he signed it without giving any attention to its details. He made no inquiries either of Mr Star or any other person concerning the sale of the home unit premises. He was not aware that Mr Broad had himself purchased the property or of the circumstances in which he came into possession of funds sufficient to enable him to do so.

52. By letter dated 24 December 1984 Currie & Currie forwarded to O'Brien Star Green a cheque in the sum of $94,829.76, being the balance of the sum of $130,000 after having accounted to Westpac Banking Corporation Limited for the sum of $35,170.24 in discharge of its mortgage over the home unit premises. The cheque was received in the office of O'Brien Star Green on 27 December 1984 but it was not banked until 12 January 1985. In his evidence, Mr O'Brien explained the delay in banking the cheque in this way: he was on holidays when the cheque arrived in his office and in his absence there was no-one with authority to open an appropriate bank account to which the proceeds of the cheque could be credited.

53. By a circular letter dated 10 January 1985 signed by Mr Star "for John O'Brien", creditors were informed that, subject to obtaining a clearance from the Australian Taxation Office under s.215 of the Income Tax Assessment Act 1936 (Cth), it was intended to pay a first and final dividend forthwith. In the event, no dividend was paid as a clearance could not be obtained from the Australian Taxation Office.

54. In September 1985, James John Jolliffe, a Deputy Registrar in Bankruptcy, pursuant to sub-s.175(4) of the Act, caused an audit to be carried out of Mr O'Brien's accounts and records in relation to Mr Broad's estate. The audit was conducted by Messrs Madden and Woolford. In the course of conducting the audit, Mr O'Brien was interviewed on 20 November 1985.

55. During the course of that interview, as recorded in the notes made by Mr Woolford at the time, Mr O'Brien said, inter alia, that the records relating to the estate were held by Mr Star who had full carriage of the matter even following the dissolution of the partnership, O'Brien Star Green; that trustee's fees had been paid in full to Mr Star as he had done the work; and that the minutes of the meeting of 16 August 1984 were "mucked up". In relation to the latter point and subsequent events, Mr Woolford's notes record the following:

"7. He said the minutes were 'mucked up'.
When pressed to clarify this he
indicated that normally creditors
intentions are canvassed prior to a
meeting and an offer worked out if
possible. In this case the creditors
had signalled their intention to accept
a special resolution which had been
drafted by a firm of solicitors prior to
the meeting. He believed the firm to be
Currie & Currie who were Broad's
solicitors.
When O'Brien saw the resolution passed
by the meeting he realised, he said,
that it had been 'mucked up' as it was
not in fact a Composition.
8. He said that following this resolution
he arranged for a deed to be executed
which would reflect the intention of the
meeting. Two attempts were necessary.
9. The final deed called for the debtor to
sell a property by private treaty and
pay the proceeds into the trustee. He
agreed that this deed did not reflect
the terms of the special resolution
particularly in that the resolution
called for the trustee to take
possession and sell the property.
10. He attempted to justify this course of
action by saying that (if) he had taken
possession of the property and sold it
he would have been liable to stamp duty.
By allowing the debtor to sell he saved
the creditors this cost.
11. He agreed that it aroused suspicion that
the property was sold for the same price
as the valuation of some 20 months
earlier to an American citizen.
12. He said that he would have obtained an
updated valuation of the property prior
to sale but was unable to recall doing
so. He said that such records would be
held on the file. He agreed, however,
that the file contained no such
reference to the valuation of the
property. He had no explanation.
13. The Statement of Affairs he said would
have been prepared by his staff and
signed by the debtor prior to the
meeting. He said that no attempt at
verification was made by him.
14. Asked to explain the delay in depositing
proceeds of sale of the home unit
property in a trust account O'Brien said
he was on holiday and possibly the
cheque stayed in the safe. He went on
to say this should not happen as they
bank daily. He undertook to obtain the
bank deposit voucher and make it
available to us."

Mr O'Brien did not dispute the accuracy of Mr Woolford's notes but said that other things were said at the interview which were not there recorded. In particular, Mr O'Brien said that he informed Mr Madden and Mr Woolford at the interview that he had never met Mr Broad. In his affidavit sworn on 27 July 1988 and filed herein, Mr O'Brien said that he was not aware that there were any irregularities in the administration of the estate of Mr Broad until he was interviewed on 20 November 1985.

56. By letter dated 9 January 1986, Mr M. Murray, a Deputy Registrar in Bankruptcy, wrote to Mr O'Brien requesting certain information in relation to the sale of the home unit premises. By letter dated 12 February 1986, Mr O'Brien replied as follows:

"I refer to your letter of the 9th January, 1986.
I have now had the opportunity to discuss this
matter with the member of staff who handled it
at the time.
The proposal in the Deed in respect of David
John Broad originated in Report to the
Creditors of Sound Advice Pty Limited (in
Liquidation). At that time Mr Broad was
offering to his guarantee creditors to account
to a trustee for the difference between the then
value of his home unit at Darling Point and the
amount of the mortgage: namely $130,000.00
value less $40,000.00 mortgage resulting in
$90,000.00 equity. Creditors were being offered
the sum of $90,000.00 less commission and legal
costs. Guarantee creditors approved this
informally and unanimously at a meeting of the
creditors of Sound Advice Pty Limited (in
Liquidation) in March, 1983.
I was then appointed Controlling Trustee to
implement this proposal for those same creditors
(including Sound Advice Pty Limited (in
Liquidation)) through the formal procedures in
Part X.
I understand from Mr Broad that he then
introduced a purchaser of his property at
Darling Point without the intervention of an
agent. I have been informed by Mr Broad that
that purchaser was an independent third party
not previously known to Mr Broad. The sale was
effected by Mr Broad's solicitors and I took no
part in that sale.
I received an amount of $94,000.00 from Mr
Broad's solicitors. This was effectively
approximately $7,000.00 in excess of the amount
that creditors were expecting under the original
proposal as agents commission was not payable
and the amount paid to me by Mr Broad was
$4,000.00 greater in any event than the amount
he had agreed to pay.
Thus I received an amount in excess of the
amount which Mr Broad had offered at his meeting
of creditors to make available to his creditors
which they had accepted.
I trust this satisfied your queries. Please do
not hesitate to contact me if I can be of
further assistance."

Counsel for the applicant offered some criticism of this letter for its lack of candour and as having the potential to mislead those who were conducting the audit. There is no doubt that the language in which the letter is cast suggests, contrary to the fact, that Mr O'Brien had personally spoken to Mr Broad and had personal knowledge of the steps taken in the administration of the Part X arrangement. I am, however, prepared to accept Mr O'Brien's assurance that he had no intention to mislead.

57. Consequent upon the reports which resulted from the audit, steps were taken to have Messrs Broad, Star, Currie and O'Brien examined before the Court pursuant to ss.179(3) and 212B(3) of the Act.

58. On 3 November 1986, Mr O'Brien instituted a proceeding in the Court for declarations that the deeds dated 5 September 1984 and 14 December 1984 were void and for the sequestration of Mr Broad's estate. The application was heard on 16 December 1986. The deeds were declared void pursuant to sub-s.222(2) of the Act and a sequestration order was made against Mr Broad's estate. The Official Trustee in Bankruptcy became the trustee of that estate.

59. The events as narrated above reflect no credit on those in O'Brien Star Green who were directly involved. For Mr O'Brien himself, the situation presents something of a dilemma. Either the deed dated 5 September 1984 gave effect to the arrangement to which the creditors agreed at the meeting on 16 August 1984 or it did not. If it did not, one cannot escape the conclusion that there was, at the very least, gross carelessness on the part of Mr Star and Mr Vouris for which Mr O'Brien, as the trustee, must bear responsibility. On the other hand, if the deed dated 5 September 1984 gave effect to what the creditors had resolved, Mr Star and Mr O'Brien not only failed to carry out the agreed arrangement but, by their involvement with the deed dated 14 December 1984, were party to making, without further reference to the creditors, a substantial variation to the arrangement to which they had agreed. Whichever of those alternatives reflects what, in truth, was the situation, there is involved a very serious failure properly to carry out the duties which devolved upon Mr O'Brien when he consented to become the trustee of the arrangement under Part X of the Act.

60. The most serious aspect of the matter is that Mr O'Brien, with virtually no direct intervention in the matter by himself and without any real or effective supervision over what Mr Star was doing, permitted Mr Star to exercise the whole of the powers conferred by the authority under s.188 of the Act signed by Mr Broad and to conduct the whole, or substantially the whole, of the administration of the resulting Part X arrangement. The circumstance that Mr O'Brien assumed, contrary to the fact, that Mr Star was experienced in bankruptcy matters and, more particularly, in arrangements with creditors under Part X of the Act, only served to compound the dangers inherent in the course which was followed.

61. Mr O'Brien had no appreciation of what had been involved in the administration of the liquidation of Sound Advice Pty Limited. He made no detailed inquiries in that regard, he failed to interview Mr Broad in relation to his personal affairs and he made no evaluation of the proposed composition. He did not ensure that the valuation of Mr Broad's home unit premises was brought up to date. In the result, the creditors were deprived of that to which they were entitled, namely an independent assessment by him of the merits or demerits of the various courses that were open to them so that they might be in a position to make an informed decision as to which of the available courses would best serve their interests. And, even if the creditors opted to allow Mr Broad to negotiate the sale of the home unit premises, suitable safeguards should have been put in place to ensure, so far as possible, that any sale by Mr Broad was a genuine transaction.

62. Little more need be said concerning the recording of what took place at the meeting of creditors held on 16 August 1984. It borders on the unbelievable that the Court cannot even now be given reliable information as to what was resolved at that meeting. The situation here disclosed demonstrates the need for adequate notes to be made and preserved by those conducting meetings of creditors under Part X of the Act. In this regard it must be observed that the failure of Mr Star to ensure that this was done cannot be excused by his lack of experience in relation to Part X arrangements. He had had considerable experience in the conduct of meetings of creditors in his role as official liquidator. While on the subject, the need to maintain adequate records is not confined to recording what occurs at meetings of creditors. It extends to recording contemporaneously every significant step (including important conversations) in the administration of a Part X arrangement. The matter is highlighted in the present case by the absence of any record of the instructions given to Cowley Hearne for the preparation of the deed executed on 5 September 1984.

63. Mr O'Brien's only direct involvement in the matter was the execution of the two deeds. In executing those deeds without demur or inquiry, he clearly did not give proper attention to what he was being asked by Mr Star to do. The substantial variation in the Part X arrangement as recorded in the two deeds should have required, at the very least, further inquiry on Mr O'Brien's part.

64. The applicant also drew attention to the delay, which remains unexplained, in filing in the office of the Registrar in Bankruptcy the certificate of the resolutions passed at the meeting held on 16 August 1984 and the copy of the minutes of that meeting. Reliance was also placed by the applicant on the delay by Mr O'Brien in having the proceeds of the sale of the home unit property paid into an account with a bank and in filing his accounts with the Registrar in Bankruptcy.

65. It is, I think, clear that, at the time Mr O'Brien informed Mr Star that he was prepared to act as trustee of a Part X arrangement concerning Mr Broad, he formed the view that the matter was a simple one unlikely to give rise to difficulties and that Mr Star was capable of doing the necessary work. He further formed the view that, although Mr Star was directly involved in the liquidation of Sound Advice Pty Limited, there was no conflict of interest in him, O'Brien, accepting the trusteeship or in Mr Star being involved in the administration of the Part X arrangement. Indeed, it is difficult, despite Mr O'Brien's denial in the witness box, to resist the conclusion that he always intended that he should take no active part in the matter, leaving it to Mr Star to conduct the meeting of creditors and administer any Part X arrangement that might eventuate. Even if, as he asserts, he intended at the time that he would carry out those functions, that intention was short lived.

66. In his evidence, Mr O'Brien frankly acknowledged that he had not properly carried out the obligations which he assumed by consenting to exercise the powers conferred upon him by the authority under s.188 of the Act signed by Mr Broad or the obligations which he assumed as trustee of the Part X arrangement. In extenuation, however, he gave evidence of family problems which occurred during 1984 and the first half of 1985, that is to say, at the time of the events with which the present application is concerned. A detailed account of these problems appears in the evidence and I do not think it necessary to recount them here. Suffice it to say that the problems were serious and were such as to cause him distress and worry over a considerable period of time, resulting in his spending less time than usual in the conduct of his accountancy practice. It may also be accepted that they were likely to cause him to be distracted even while engaged in his usual business activities. They, therefore, constitute one of the factors to be taken into account.

67. Mr O'Brien was, however, at pains to stress during the course of his evidence that the sole reason for his acknowledged failure properly to carry out his obligations in relation to Mr Broad's affairs was the existence of the family problems to which reference has been made. I must say, however, that I have some reservation in accepting that that was the situation. My reservation stems from the circumstance that it was not until his affidavit sworn herein on 27 July 1988 was filed and served that any indication was given that family problems were relied upon as providing extenuating circumstances. No mention was made of them to either Mr Madden or Mr Woolford in the course of their audit of his accounts and records in relation to Mr Broad's estate and no mention was made of them in the course of Mr O'Brien's public examination even though he was then represented by experienced counsel. If those family problems played so dominant a role, one would have expected them to have been mentioned at a much earlier stage. Again, no explanation has been offered.

68. In considering what action the Court should take in the light of the serious situation disclosed by the evidence, I have taken into account that Mr O'Brien has had extensive experience as a registered trustee under the Act, having been the trustee of approximately 350 bankrupt estates and of the order of 100 administrations under Part X of the Act, and that, except in relation to Mr Broad's affairs, no serious breach of his duties as such trustee has been relied upon by the applicant. In other words, Mr O'Brien's conduct in relation to Mr Broad's affairs is, on the evidence, to be seen as an isolated instance. I have also taken into account the several affidavits filed on his behalf speaking as to his character and reputation. I note, too, Mr O'Brien's undertaking to reimburse Mr Broad's estate the sum of $2,474.60 paid by way of remuneration in respect of work done for which the creditors received no value whatsoever.

69. A most important factor to be weighed in the scales is the undoubted interest which the public has in seeing that only suitably qualified, experienced and reliable persons who will faithfully carry out the responsibilities attendant upon the office are registered as, and remain, trustees under the Act.

70. Taking all these matters into account, I do not think it can be said that Mr O'Brien is now unfit to be a registered trustee under the Act. He has, in relation to this particular matter been guilty of a serious dereliction of his duty. To act as he did was not to act as a prudent trustee. My mind has fluctuated whether the public interest - which is, after all, the overriding consideration - requires that the Court suspend his registration as a trustee under the Act for a period. However, in all the circumstances, I think the public interest will be sufficiently served by the public exposure of the situation that obtained in relation to the Part X arrangement concerning Mr Broad and by the Court expressing, in the strongest terms, its disapproval of what took place in relation thereto. I, therefore, propose to make no order for the cancellation or suspension of Mr O'Brien's registration as a trustee under the Act. But taking that course implies no criticism of those who initiated or conducted the audit of Mr O'Brien's accounts and records concerning Mr Broad's estate or of the applicant in instituting this proceeding. The initiation of the audit and the subsequent proceedings arising out of it were entirely justified. As a further mark of the Court's disapproval of what occurred, I order that Mr O'Brien pay the costs of the application on a solicitor and client basis.

71. I cannot, however, part with the matter without recording that Mr Star was a most unsatisfactory witness. He was, in my view, less than frank in many of his answers. At times he bordered on the obtuse. I am satisfied that, had he wished to do so, he could have thrown a good deal more light on the events which occurred. The comment made by senior counsel for Mr O'Brien that his performance as a witness gave the appearance of a pretended amnesia was quite apt. It may be doubted whether, if the facts surrounding his conduct in relation to the Part X arrangement concerning Mr Broad had been known at the time, he would have been regarded as a person suitable to be registered as a trustee under the Act.