Official Trustee (Qld), in the matter of Dunwoody v Chelmscliff Pty Ltd [1999] FCA 1759 (29 November 1999)

Last Updated: 17 December 1999

FEDERAL COURT OF AUSTRALIA

Official Trustee (Qld), in the matter of Dunwoody v Chelmscliff Pty Ltd

[1999] FCA 1759

IN THE MATTER OF JOHN ERNEST DUNWOODY (A BANKRUPT); THE OFFICIAL TRUSTEE IN BANKRUPTCY v CHELMSCLIFF PTY LTD ACN 083 544 901

QG 7516 of 1998

DRUMMOND J

29 NOVEMBER 1999

BRISBANE

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 7516 OF 1998

IN THE MATTER OF JOHN ERNEST DUNWOODY (A BANKRUPT)

RE:	JOHN ERNEST DUNWOODY (A BANKRUPT)
EX PARTE: AND:	THE OFFICIAL TRUSTEE IN BANKRUPTCY Applicant CHELMSCLIFF PTY LTD ACN 083 544 901 Respondent

JUDGE:	DRUMMOND J
DATE OF ORDER:	29 NOVEMBER 1999
WHERE MADE:	BRISBANE

THE COURT ORDERS THAT:

1. The Official Trustee in Bankruptcy as trustee of the property of John Ernest Dunwoody (a bankrupt) be substituted as applicant in the application.

2. Paragraphs 5 and 6 of the notice of motion filed 22 November 1999 be dismissed.

3. The costs of the notice of motion filed 22 November 1999 be reserved.

4. The notice of motion, in so far as it relates to paragraphs 2 and 3 and to costs, be adjourned to Monday, 10 April 2000.

5. Any additional material the Official Trustee wants to rely on, on 10 April 2000, be filed and served by Friday, 24 March 2000.

6. Any additional material Chelmscliff Pty Ltd wants to rely on in reply on 10 April 2000, be filed and served by Tuesday, 4 April 2000.

Note: Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.

IN THE FEDERAL COURT OF AUSTRALIA
QUEENSLAND DISTRICT REGISTRY	QG 7516 OF 1998

IN THE MATTER OF JOHN ERNEST DUNWOODY (A BANKRUPT)

RE:	JOHN ERNEST DUNWOODY (A BANKRUPT)
EX PARTE: AND:	THE OFFICIAL TRUSTEE IN BANKRUPTCY Applicant CHELMSCLIFF PTY LTD ACN 083 544 901 Respondent

JUDGE:	DRUMMOND J
DATE:	29 NOVEMBER 1999
PLACE:	BRISBANE

REASONS FOR JUDGMENT

1 In this matter the Official Trustee applies to be substituted as the applicant in the originating application in place of Messrs Jefferson and Stevenson, the original trustees of the bankrupt. There will be an order in terms of par 1 of the notice of motion for that substitution.

2 The motion also seeks orders joining Bechrose Pty Ltd as second respondent to the application and an amendment to the originating application to include a cost order against Bechrose. Interlocutory relief is sought against Bechrose and that is the matter that has been of central concern today.

3 The Official Trustee's concern about the auction proposed to be held by Bechrose of a certain property which was once owned by the bankrupt is twofold: the Official Trustee asserts that it has some concerns that the bankrupt himself may be interested in Bechrose's mortgage. The second foundation for the application for interlocutory relief is the Official Trustee's stated concern with what I will call the bona fides of the proposed sale by Bechrose as mortgagee of the property. The interlocutory relief sought includes an order that a receiver be appointed, in effect, to take control of the sale of the property.

4 It is apparent from the submissions by counsel for the Official Trustee that it has concerns about whether Bechrose is truly at arm's length from the bankrupt. There is, and this is a matter canvassed in my judgment of August 1999, evidence indicating a connection between Mr Hickman, a director of Bechrose, Bechrose and the bankrupt. But the Official Trustee has no firm evidence to suggest that the bankrupt has any interest in Bechrose's mortgage. The Official Trustee is seeking interlocutory relief now to enable him to find out, by using his statutory powers of investigation, whether there is any evidence suggesting that that is the position. That the Court has power to make interlocutory orders in bankruptcy not for the purpose of protecting rights asserted by the Official Trustee but to protect such rights, if any, that the Official Trustee may be able to discover by his contemplated investigation is supported by Pincus J in Re Bayliss; Ex parte The Official Trustee in Bankruptcy (1987) 73 ALR 455.

5 Mr Hickman has gone on oath to state in an unequivocal way that the source of the funds that Bechrose used to acquire the securities originally granted to Westpac Banking Corporation Ltd by Chelmscliff, the company that purchased the property from the bankrupt, all came from sources unconnected with the bankrupt which he identifies. I regard the fact that Mr Hickman has assumed the responsibility of going on oath and stating in an unequivocal way the source of the funds that Bechrose used to acquire the Westpac securities as a very significant matter when one has regard to the lack of evidence that the Official Trustee has available to him to suggest that the bankrupt may, contrary to what Mr Hickman says, have an interest in the mortgage.

6 So far as the criticisms of the conduct of the proposed sale by Bechrose of the farm property are concerned, it seems to me that there is a failure by the Official Trustee to demonstrate any substantial ground for thinking that Bechrose will not conduct the sale with proper attention to its responsibilities. The Official Trustee concedes that the real estate agent charged with the sale of the property is a reputable person capable of undertaking such sale, that the auction sale process is an appropriate vehicle to effect the sale, that the reserve price is a price set by valuers the Official Trustee himself selected and the process of confidentiality of the reserve price currently in place was the process requested by the Official Trustee.

7 In view of all that and the express desire of the Official Trustee to freeze things so that it can conduct investigations to satisfy himself of the nature of the relationship, if any, between Bechrose as selling mortgagee and the bankrupt, it seems to me that the undertakings offered by Bechrose are sufficient protection for the Official Trustee.

8 The Official Trustee is also prepared to give a cross undertaking, in effect, as to non-disclosure of the reserve price fixed by Herron Todd White in respect of the auction.

9 In these circumstances I am not prepared to exercise what I regard as the extraordinary jurisdiction to intervene in transactions involving others than the bankrupt for the purpose of giving the trustee in bankruptcy the opportunity to exercise his statutory powers of investigating transactions to see if there something colourable about any of the relevant transactions.

10 I will therefore, on the undertakings that I have referred to by Bechrose, dismiss par 5 and 6 of the motion. I have already made an order in relation to par 1 of the motion substituting the Official Trustee. So far as pars 2 and 3 of the motion are concerned, since the Official Trustee states that he intends to pursue his investigations, including the investigations concerning Bechrose, I think the proper course is to adjourn the motion as to those paragraphs.

I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Drummond.

Associate:

Dated: 14 December 1999

Counsel for the Applicant:	Mr JS Douglas QC
Solicitor for the Applicant:	James Conomos Lawyers
Counsel for the Respondent:	There was no appearance.
Counsel for Bechrose Pty Ltd:	Mr H Fraser QC and Mr T Sullivan
Solicitors for Bechrose Pty Ltd:	Bennett & Philp
Counsel for the Creditors:	P McQuade
Solicitors for the Creditors:	Beckey, Knight & Elliott
Date of Hearing:	29 November 1999
Date of Judgment:	29 November 1999