Re Margaret Nancy Cummings and John Gerard Cummings Ex Parte: Diana Denise Newman, Controlling Trustee of the Estates of Margaret Nancy Cummings and John Gerard Cummings [1991] FCA 4 (18 January 1991)

FEDERAL COURT OF AUSTRALIA

Re: MARGARET NANCY CUMMINGS and JOHN GERARD CUMMINGS
Ex Parte: DIANA DENISE NEWMAN, Controlling Trustee of the Estates of MARGARET
NANCY CUMMINGS and JOHN GERARD CUMMINGS
No. W X113 of 1990
FED No. 14
Bankruptcy

COURT

IN THE FEDERAL COURT OF AUSTRALIA
GENERAL DIVISION
BANKRUPTCY DISTRICT OF THE STATE OF WESTERN AUSTRALIA
French J.(1)

CATCHWORDS

Bankruptcy - controlling trustee - conflict of interest - attempts to obtain replacement of trustee - deed of assignment - approved by creditor - extension of time for execution by new trustee.

Bankruptcy Act 1966, ss.33, 216, 223

Re Lawrence; ex parte Burns (1985) 9 FCR 9

HEARING

PERTH
18:1:1991

No appearance for the debtors.

Counsel for the Trustee: Miss E. Henderson

Solicitors for the Trustee: Northmore Hale Davy and Leake

ORDER

The time for execution of the deed of assignment of Margaret Nancy Cummings be extended to midnight on the 18th February 1991.

The time for execution of the deed of assignment of John Gerard Cummings be extended to midnight on the 18th February 1991.

There be liberty to the trustee to apply on the question of costs if not determined by the creditors at their next meeting.

NOTE: Settlement and entry of Orders is dealt with in Rule 124 of the Bankruptcy Rules.

DECISION

On 31 October 1990 Diana Denise Newman was appointed under s.188 of the Bankruptcy Act 1966 as controlling trustee of the affairs of John Gerard Cummings and his wife Margaret Nancy Cummings, both farmers of York, Western Australia. On the same day she was appointed as controlling trustee for their son Trevor John Cummings, a farmer of Lake Grace. Miss Newman consented to the appointment in each case.

2. Miss Newman is a chartered accountant and a partner in the firm of Bird Cameron Partners. Following her appointment as controlling trustee she became aware that a member of her firm's country staff had assisted the Cummings to prepare their 1989 income tax returns. She so informed the creditors at their first meeting, which was held on 30 November 1990. She took the view that her firm's previous involvement created a conflict of interest, and that she should not continue to act as trustee after the cessation of her appointment as controlling trustee. Miss Newman attempted, without success, to obtain consent from another trustee to act in her place. She chaired the first meeting of creditors on 30 November 1990 at which resolutions were passed that Mr Trevor Cummings file his debtor's petition in bankruptcy within 7 days and that "the creditors wished Mr John Gerard Cummings and Mrs Margaret Nancy Cummings to enter into a deed of arrangement pursuant to Part X of the Bankruptcy Act". The meeting was adjourned to enable the trustee to provide unsecured creditors with an up to date statement of Mr and Mrs Cummings' financial position and to seek legal advice on their proposed deed of arrangement.

3. Mr Trevor Cummings filed his debtor's petition on 12 December. At an adjourned meeting of the creditors of John and Margaret Cummings only, held on 20 December 1990, it was resolved that they be required to execute deeds of assignment under Part X of the Bankruptcy Act. Miss Newman informed the meeting that another trustee who had initially agreed to act in her place had subsequently indicated that he no longer wished to act, and had said that in view of the cash position of the estates their administration would be best serviced by the Official Trustee in Bankruptcy. It was resolved by the creditors that the trustee of the deed of assignment to be executed by Mr and Mrs Cummings should be the Official Trustee in Bankruptcy.

4. On 3 January 1991 Miss Newman received advice from her solicitors that the Official Trustee is not empowered to act as trustee of a deed of assignment under Part X. Having regard to the requirement that s.216 of the Act provides that a deed of assignment is to be executed by the debtor and trustee within 21 days from the day on which the special resolution requiring its execution is passed, Miss Newman filed an application on 9 January 1991 for the following orders:-
1. That the time for execution of the deed of

assignment of Margaret Nancy Cummings by a registered
trustee be extended beyond the 21 day limit stipulated in
s.216(1) of the Act.
2. That the time of execution of the deed of assignment
of John Gerard Cummings by a registered trustee be extended
beyond the 21 day limit stipulated s.216 (1) of the Act.

5. It is intended to call a further meeting of creditors to enable a registered trustee to be nominated who could execute the deeds of assignment. The application does not specify the period for which an extension of time is sought. However, I was informed from the bar table that 21 days should be sufficient, as at the time the application came on for hearing a registered trustee has been found who is prepared to consent to act as trustee under the deed of assignment and to execute it.

6. Section 216 of the Bankruptcy Act 1966 provides:

"(1)A deed of assignment or a deed of arrangement shall be
executed by the debtor and the trustee within 21 days from
the day on which the special resolution requiring the debtor
to execute the deed was passed;
(2) The execution of the deed by the debtor and by the
trustee shall be attested by a witness".

Section 33(1)(c) allows the Court to extend time limits prescribed by the Act:

"33(1) The Court may -
.
.
.
(c) extend before its expiration, or if this Act does
not expressly provide to the contrary, after its expiration,
any time limited by this Act, or any time fixed by the Court
or the Registrar under this Act (other than the time fixed
for compliance with requirements of a bankruptcy notice),
for doing an act or thing or abridge any such time."

7. The authority of the court to extend the time limited by s.216(1) is clear - Re Lawrence; ex parte Burns (1985) 9 FCR 9. Further, it is evident that this is an appropriate case for the extension of time, so that the controlling trustee may call a further meeting of creditors under s.223(1)(a) and a new registered trustee may be appointed to execute the deed of assignment and act as trustee for its purposes.

8. On the question of costs, I was asked to make an order that the costs of this application be paid out of the estate. I think the preferable course is for the meeting of creditors to deal with the question as a matter relating to the trustee's remuneration, but I will allow liberty to the trustee to apply in the event that the question of the costs of the application cannot be satisfactorily resolved in that way.

9. The terms of the orders I propose to make are the following:-

1. The time for execution of the deed of assignment of
Margaret Nancy Cummings be extended to midnight on the 18th
February 1991.
2. The time for execution of the deed of assignment of
John Gerard Cummings be extended to midnight on the 18th
February 1991.
3. There be liberty to the trustee to apply on the
question of costs if not determined by the creditors at
their next meeting.