Trollope v Rambaldi as Trustee of the Bankrupt Estate of Barry Barton Trollope [2009] FCA 74 (12 February 2009)

Last Updated: 12 February 2009

FEDERAL COURT OF AUSTRALIA

Trollope v Rambaldi as Trustee of the Bankrupt Estate of Barry Barton Trollope [2009] FCA 74

GRANT TROLLOPE, BRIELY DAVIS, KAINE TROLLOPE, BARRY BARTON TROLLOPE, and 3631 NEPEAN HIGHWAY PTY LTD ACN 086 769 137 v
GESS MICHAEL RAMBALDI as Trustee of the Bankrupt Estate of BARRY BARTON TROLLOPE, ANDREW REGINALD YEO, WADE BALLANTYNE, RIMA MOUCHAILEH, SHAUN MATTHEWS, and CHRIS SCHMIDT

VID 933 of 2007

RYAN J
12 FEBRUARY 2009
MELBOURNE

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 933 of 2007

BETWEEN:	GRANT TROLLOPE First Applicant BRIELY DAVIS Second Applicant KAINE TROLLOPE Third Applicant BARRY BARTON TROLLOPE Fourth Applicant 3631 NEPEAN HIGHWAY PTY LTD ACN 086 769 137 Fifth Applicant
AND:	GESS MICHAEL RAMBALDI as Trustee of the Bankrupt estate of BARRY BARTON TROLLOPE First Respondent ANDREW REGINALD YEO Second Respondent WADE BALLANTYNE Third Respondent RIMA MOUCHAILEH Fourth Respondent SHAUN MATTHEWS Fifth Respondent CHRIS SCHMIDT Sixth Respondent

JUDGE:	RYAN J
DATE OF ORDER:	12 FEBRUARY 2009
WHERE MADE:	MELBOURNE

THE COURT ORDERS THAT:

1. The application be dismissed.
2. The applicants pay the respondents’ costs, to be taxed in default of agreement.
   

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

IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY	VID 933 of 2007

BETWEEN:	GRANT TROLLOPE First Applicant BRIELY DAVIS Second Applicant KAINE TROLLOPE Third Applicant BARRY BARTON TROLLOPE Fourth Applicant 3631 NEPEAN HIGHWAY PTY LTD ACN 086 769 137 Fifth Applicant
AND:	GESS MICHAEL RAMBALDI as Trustee of the Bankrupt estate of BARRY BARTON TROLLOPE First Respondent ANDREW REGINALD YEO Second Respondent WADE BALLANTYNE Third Respondent RIMA MOUCHAILEH Fourth Respondent SHAUN MATTHEWS Fifth Respondent CHRIS SCHMIDT Sixth Respondent

JUDGE:	RYAN J
DATE:	12 FEBRUARY 2009
PLACE:	MELBOURNE

REASONS FOR JUDGMENT

1. By amended application dated 1 November 2007, the applicants seek orders under ss 178 and 179 of the Bankruptcy Act 1966 (Cth) (“the Act”). The application arises out of the execution of a search warrant (“the warrant”) issued by Middleton J on 3 October 2007 pursuant to s 130 of the Act. The warrant was issued at the instance of the first respondent, Gess Michael Rambaldi (“the Trustee”). It was addressed to the Commissioner of the Australian Federal Police (“the AFP”), all other members and special members of the AFP, to all constables of police throughout the Commonwealth and to any other person specified in Schedule 1. It recited;

‘ON the basis of an application made by the trustee of the estate of BARRY BARTON TROLLOPE under subsection 130(1) of the Bankruptcy Act 1966 for the issue of a warrant under subsection 130(2) of the Act in relation to premises of TS&B Retail Systems Pty Ltd situated at "Estate One/Building 4", 77-125 Princes Highway, Dandenong South, Victoria (Premises), I, JUSTICE MIDDLETON, issue this warrant authorising you, COMMISSIONER MICK KEELTY, together with any other person to whom this warrant is addressed:

1. between the hours of 9.00am and 5.00pm to enter on or into the Premises, using such force as is necessary for the purpose and is reasonable in the circumstances; and

2 to search the Premises for relevant property; and

3. to break open, and search for relevant property, any cupboard, drawer, chest, trunk, box, package or other receptacle, whether a fixture or not, on or in the Premises; and

4, to take possession of, or secure against interference, any relevant property found on or in the Premises; and

5. to deliver to the trustee, or to a person authorised in writing by the trustee for the purpose, any property of which possession is taken under the warrant.

THIS warrant ceases to have effect at the end of 9 October 2007.’

Schedule 1 contained the following list of persons:

‘1. Andrew Yeo of the office applicant;
2. Wade Ballantyne of the office of the applicant;
3. Carmela Gangemi of the office of the applicant;
4. Rima Mouchaileh of the office of the applicant;
5. Shaun Matthews of the office of the applicant;
6. Abdul Laksassi, an I.T. employee of the applicant;
7. Chris Schmidt, an I.T. employee of the applicant; and

8. Wayne Kelcey, Partner of Cornwall Stodart or such other solicitor of Cornwall Stodart as nominated by Mr Kelcey.’
   

“Relevant property” is defined in s 130(1) of the Act as being;

‘(a) any of the property of the bankrupt;
(b) property that may be connected with, or related to, the bankrupt’s examinable affairs; or
(c) books (including books of an associated entity of the bankrupt) relevant to any of the bankrupt’s examinable affairs.’

2. Early on the morning of 5 October 2007, members of the Trustee’s staff began to execute the warrant at the premises of T S & B Retail Systems Pty Ltd (“TS&B”) at Building 4, 77-125 Princes Highway, Dandenong South. The members of the Trustee’s staff in attendance were Andrew Yeo, who is also a registered trustee under s 155C of the Act, Wade Ballantyne, Rima Mouchaileh, Shaun Matthews and Chris Schmidt. As well, Mr Wayne Kelcey, a member of the firm of Cornwall Stoddart, was in attendance to provide advice about potentially privileged documents. Mr Kelcey’s advice was to be provided independently of Piper Alderman, the solicitors retained by the Trustee in proceedings in this Court numbered VID 1425 of 2006 and generally in procuring the warrant and in relation to the administration of the bankrupt estate of the fifth respondent, Barry Trollope (“the Bankrupt”). Members of the Victoria Police were also present but took no part in executing the warrant.
3. On arrival at the premises, Mr Yeo spoke to the first applicant, Grant Trollope, and the Bankrupt who requested that the search be deferred until they could obtain legal advice. After some momentary hesitation, Mr Yeo allowed a telephone call to be made to Mr Peter Kennedy of Madgwicks, the solicitors for the applicants. After himself speaking to Mr Kennedy, Mr Yeo invited the latter to speak to Mr Kelcey and proceeded to assist Grant Trollope to send a copy of the warrant by facsimile to Madgwicks. I infer that Mr Kennedy requested Mr Kelcey to defer the conduct of the search until a solicitor from Madgwicks could attend at TS&B’s premises. I further infer that Mr Kelcey declined that request without intimating to Mr Yeo that he had done so.
4. The Trustee’s staff then began moving through the premises and bringing in boxes for the reception of seized documents. Mr Yeo then requested Grant Trollope to indicate where in the premises privileged material might be located. In response, Grant Trollope indicated his own office and another office, being Mr Sarjeep Arya’s designated office. Mr Ballantyne and Ms Mouchaileh then conducted a search of Grant Trollope’s office and Mr Yeo and Mr Matthews similarly searched Sajeep Arya’s office.
5. At about 10.30 am on 5 October Ms Watt, a solicitor employed by Madgwicks and Mr Lhuede of Piper Alderman attended before Goldberg J of this Court. In the course of that hearing, Ms Watt indicated that she appeared for Grant Trollope, the Bankrupt, and TS&B. She acquainted his Honour with the fact that the warrant numbered VID 1425 of 2006 was then being executed at TS&B’s premises and that the principal proceedings (“the Portsea proceedings”) between the Trustee and the Bankrupt were pending in this Court. Ms Watt went on to say;

‘... we have spoken to Mr Wayne Kelcey, a partner of Cornwall Stodart, who is also a member – a person allowed by the search warrant to search the premises. We have asked him to cease until I could attend the premises, which is in Dandenong, and identify privileged material. He has refused to cease searching – cease executing the search warrant, and our concern is the search warrant allows the trustee and six members of his staff to search and possibly come across privileged material. And, clearly, our clients can’t identify the privileged material as they are not lawyers.’

6. Mr Lhuede of Piper Alderman, who then appeared for the respondents, told Goldberg J of the arrangements which were then being effected in relation to the execution of the warrant. His Honour then observed;

‘Well, what I think is very important is that if TS & B Retail Systems, or any of its directors, officers of employees, want to claim that material that is being identified or pulled out of drawers or taken is the subject of legal professional privilege, that should be put in the custody of the solicitor straight away ... who is out there.’

7. His Honour then indicated his expectation that Mr Kelcey should put any documents identified as subject to a claim of legal professional privilege “in sealed envelopes and deliver them into the custody of the Court at this stage marked for my attention.” Ms Watt then intimated that her clients were concerned to have legal representatives present during the execution of the warrant. In response to a question from his Honour as to whether any representative of Madgwicks was then on the way to TS&B’s premises, Ms Watt replied;

‘No. We attended here to attempt to stay it. As it is in Dandenong, we felt that it would take possibly an hour to get out there, and we were told that they would not stay it until we attended the premises to identify privileged material, or at least assist our clients in identifying privileged material.’

8. His Honour then indicated that he proposed to stand the matter down for five minutes to enable Mr Lhuede to contact Mr Kelcey and find out whether he was undertaking the process and implementing the safeguards to which Mr Lhuede had referred. His Honour further indicated that if, as he understood, the purpose of the exercise was to search for and seize property to preserve it;

‘... so long as everything is preserved and the opportunity to make claims for legal professional privilege can be made in due course, there is no reason, on that view, why the search shouldn’t continue, so long as the opportunity to preserve the protection of legal professional privilege is maintained.’

9. The matter was then adjourned from 10.47 am to 10.59 am. On its resumption, Mr Lhuede said that he had been advised by Mr Kelcey and Mr Yeo that they would close the doors on the offices of Grant Trollope and Barry Trollope “in respect of which a global claim for privilege has been made” and would “put those aside for a time limit” to enable lawyers for TS&B Retail, Grant Trollope and Barry Trollope;

‘to attend, whereupon they can have an opportunity to then identify themselves what they wish to claim privilege for. In the meantime, the warrant will be executed with respect to the rest of the premises. Now, we have envisaged that the Trollopes may then seek to claim that various parts of that are also globally covered by privilege. We will invite them to assist with the identification of anything they wish to seek privilege in respect of. If it is claimed globally, we will simply just have to wait until lawyers can get out there, but we are not inclined to wait for the rest of the day because, obviously, the Victorian police officers have other commitments, and we do wish to have this process undertaken today, if possible.’

10. After a further submission by Ms Watt, his Honour said;

‘... for the moment, I am not disposed to make any specific order, having regard to what Mr Lhuede has told me on his instructions that come from a solicitor of the court who has obligations to the court not to mislead the court, and – I am not suggesting, for one moment, that has occurred. Quite to the contrary. What I think should happen is I think you, or a representative of your firm, should go to the premises straight away. What I am not disposed to do is – if the situation be, as Mr Lhuede says, on his instructions, that a global claim for privilege is made in respect of the contents of an office, I am not prepared to accept that that is an appropriate claim to make without documents being looked at, either by the people out there or in conjunction with their legal advisers. The warrant – it is not suggested at the moment that the warrant was otherwise than properly issued. What you are concerned about is to preserve legal professional privilege in relation to particular documents.
The protocol that Mr Lhuede has explained is designed to do that, but if claims are made which would otherwise frustrate the execution of the warrant, probably the only other alternative might be to consider just taking all the documents and putting them into the custody of the court, and then making them available for inspection. But I would expect – I would hope that a commonsense approach would be taken to the concern about legal professional privilege by your clients.’

11. Ms Watt then invited his Honour to stand the matter over generally to a date to be fixed and indicated her intention to go immediately by taxi to TS&B’s premises. At 11.10 am the matter was adjourned indefinitely.
12. Consistently with the indication given at the end of the hearing, Ms Watt arrived at Dandenong South at about 12.30 pm. She then had a conversation with Mr Kelcey and Mr Yeo and was informed that a full search of Grant Trollope’s office had been completed before the undertaking had been given to Goldberg J. She was also shown a collection of documents which had been set aside as apparently privileged and had identified for her documents in the Bankrupt’s office which had not yet been searched. As the search proceeded, Mr Yeo identified further apparently privileged documents which were handed to Mr Kelcey who put them aside and left them at the premises. Ms Watt also examined documents in an area designated as “the Boardroom” and in the Bankrupt’s office and allowed members of the Trustee’s staff to peruse those which she considered not to be subject to legal professional privilege.
13. After a time, concern was expressed as to whether this process could be completed by the time of 5.00 pm stipulated in the warrant for the end of the search. It was then decided that all uninspected documents should be placed in sealed boxes and conveyed by Mr Kelcey into the custody of this Court. Some documents which had been seized by the Trustee’s staff before Ms Watt’s arrival were taken to the Trustee’s office and photocopied over the weekend of 6 and 7 October 2007. Some of those documents were delivered to Ms Watt and acknowledged by the Trustee’s staff or identified by her as being subject to legal professional privilege.
14. A register of documents was compiled in the course of executing the search warrant. That register was constructed by Ms Watt. Two folders of documents were claimed by Grant Trollope to be subject to legal professional privilege.
15. By way of the amended application, the applicants seek the following orders against the respondents, pursuant to ss 178 and 179 of the Act:

‘(1) (on the application of the fourth applicant only) for the conduct of an inquiry into the conduct of the first respondent as trustee of the bankrupt estate of Barry Barton Trollope;
(2) further or in the alternative to (1), for the removal of the first respondent as said trustee;
(3) alternatively to (1) and (2), requiring the first respondent to transfer his rights as applicant in relation to Federal Court proceeding no. VID 1425 of 2006 to another registered trustee in bankruptcy, on suitable conditions;
(4) alternatively to (1) to (3), enjoining the second to sixth respondents from having any further involvement with the administration by the first respondent of the bankrupt estate of Barry Barton Trollope’

16. Under the heading Details of Claim in the amended application, the applicants seek, as well as the orders mentioned in [15] above, the following orders:

‘6. any other order pursuant to section 178 of the Bankruptcy Act 1966 (Cth) as the Court considers just and equitable;

7. An order that the first respondent (both personally and as trustee of the bankrupt estate of Barry Barton Trollope) pay the applicants’ costs of the proceeding.’
   
17. Further, there is a claim for interlocutory relief in these terms:

‘8. (on the application of the fourth applicant only) for the production by the first respondent to the fourth applicant of any affidavits relied upon by the first respondent in obtaining a search warrant issued by the Honourable Justice Middleton pursuant to section 130 of the Bankruptcy Act on 3 October 2007.’

The submissions of the parties

18. In relation to the first order sought, the fourth applicant relies on the following grounds: the manner of the conduct of the search by the second to sixth respondents on 5 October 2007; the alleged viewing of documents by the second to sixth respondents during the search process which were subject to legal professional privilege as they related to the Portsea proceedings; and the seizure of some of, or all of, those documents.
19. In support of the second order sought, the fourth applicant relies on the same grounds as above, and submits that, when considering an application under s 178 of the Act, the Court is empowered and obliged to make such an order as it considers just and equitable. The applicants submit that the application for the removal of a trustee is a two-step process, which requires the Court first to decide whether it ought to conduct an inquiry. If the Court decides to conduct an inquiry, the Court must then decide whether the Trustee should be removed or whether any other order should be made.
20. The applicants further contend that a trustee is obliged to discharge the functions of his office personally, and refer to the recent case of Australian Securities and Investment Commission v Edge (2007) 211 FCR 137, where Dodds-Streeton J observed, at 179 [203]:

‘The appointment of an agent is, however, permitted only in circumstances where it is unreasonable to expect the liquidator to perform the relevant task personally. A general delegation of the company’s affairs, or the retention of a liquidation which the liquidator is disabled from performing, is impermissible.’

In that case, her Honour was considering, amongst other things, whether a liquidator was entitled to delegate the performance of his functions to another insolvency practitioner.

21. As to the third and fourth orders sought, the applicants rely upon the same grounds as were invoked to support the first and second orders.
22. The applicants also seek an order that the first respondent pay the applicants’ costs of the proceeding.
23. The respondents contend that the grounds of the application are related only to the manner of the search and the alleged viewing and seizure of privileged documents and their effect on the Portsea proceedings. The respondents submit that no relief by way of removal of the Trustee has been sought on the ground that he has failed in any respect to discharge his duties personally, and that no evidence has been adduced in support of any such ground.
24. The respondents also contend that no claim has been made to recover the documents seized pursuant to the search warrant. The respondents submit, as well, that the only basis of the claim is a concern that the Trustee’s staff had an opportunity to read privileged documents. The respondents further point out that it has not been suggested to any of the Trustee’s staff who were present at the search or associated with it that any particular document was read. The respondents invite a finding that no privileged documents have been read or used, and, accordingly, there has been no prejudicial effect on the applicants’ position in the Portsea proceedings.
25. In opposing the first order sought by the Bankrupt, the Trustee contends that no inquiry should be ordered, and that the onus is on the fourth applicant to establish the grounds or case for an inquiry; see Moore v Macks [2007] FCA 10 at [30]. According to the Trustee, no allegation of misconduct or error on the part of the Trustee personally has been made; see Trkulja v Morton [2005] 3 ABC (NS) 231 at [4]. It is agreed by both parties that the Trustee was not present during the execution of the search warrant on 5 October 2007, and that he has not reviewed any privileged material. The respondents argue that the applicants have failed to identify or establish any grounds for an inquiry into the Trustee’s conduct, and that the Court should therefore not conduct such an inquiry. The respondents further submit that to order an inquiry would subject the Trustee and creditors to unnecessary expense and trouble, see Re Gault [1981] 57 FLR 165, at 173, and that the cost of removing the Trustee and engaging a new Trustee would be both unnecessary and wasteful in the circumstances.
26. In relation to the allegations about the execution of the search warrant, the respondents submit that the applicants seek to restrain the Trustee, or alternatively the second to sixth respondents, from acting in the Portsea proceedings. The respondents point out that the search warrant was addressed to the Australian Federal Police, the second to sixth respondents, and to Wayne Kelcey, partner of Cornwall Stodart, and that each of these persons was authorised to take possession of property at TS & B’s premises and to deliver the said property to the Trustee. The relevant property was documents relating to the Bankrupt’s role in TS&B Retail Systems Pty Ltd.
27. The respondents acknowledge that s 130 of the Act does not contain detailed provisions for the execution of search warrants and the procedure to be followed. However, they point out that JMA Accounting Pty Ltd v Commissioner of Taxation [2004] FCAFC 274; (2004) 139 FCR 537, at 544 [27], establishes that the obligation of those executing a warrant “was to conduct the search in a reasonable fashion. Whether or not they were acting reasonably depended upon the circumstances of the case.” The respondents submit that the Court is entitled to take into account such matters as the nature and volume of the documents to be examined, the location of the documents, and the circumstances of the search, including the fact that the applicants made a blanket claim for privilege. According to the respondents, there is no obligation to halt a search to allow a solicitor to attend to make a claim for privilege, particularly where those in control of the premises being searched were able themselves to make the claim. Further, the respondents claim that “provided their proposal for protecting any claim for privilege is a reasonable one ... All that the officers were required to do was to ensure that the proposal was implemented”; see JMA Accounting at 544 [22].
28. In response to the applicants’ complaints about the handling of privileged documents, the respondents submit that the seizure of a document without reading it will not infringe legal professional privilege; see Allitt v Sullivan [1988] VR 621 and JMA Accounting at 542 [13]. The respondents also submit that legal professional privilege will not be infringed by making a copy of a privileged document if it is not read (see JMA Accounting at 542 [14] and 544 [23]), and that a bona fide examination may be undertaken where no one is present to claim the privilege or where there is a blanket claim to privilege which is demonstrably unsustainable; see JMA Accounting, at 542 [15].
29. According to the respondents, it is clear from the evidence that the second to sixth respondents did not read the documents, and that the documents, including computer records, were covered by the warrant and were not seized unreasonably.
30. The respondents submit that there is no authority for the assertion that a search must be halted to allow an occupier of a premises to call a solicitor or to wait for the solicitor to attend. This submission has been developed by asserting that Grant Trollope and the Bankrupt were able themselves to identify privileged documents, and chose not to render assistance in the search, notwithstanding their obligations as occupiers of the premises to provide “all reasonable facilities and assistance”, in connection with the search, and not to “obstruct or hinder” the search; see ss 265A(3)(b) and 265A(2) of the Act.
31. In the respondents’ submission the conduct of the search is relevant only as a circumstance leading to the reading or use of privileged documents, and that no challenge has been made to the search warrant, and no claim has been made for the return of the documents. In relation to the claim for the removal of the Trustee and an injunction restraining the second to sixth respondents from further involvement in the administration by the Trustee of the Bankrupt estate, the respondent submits that the relief sought is disproportionate to the perceived harm resulting from the search. The applicants have conceded, so the argument went, that no document was actually read, and it follows that no detriment has been suffered as the privileged documents have been returned to the applicants. The respondents also submit that the relief sought seeks to deprive the Trustee of the services of his chosen staff and advisers in relation to the Portsea proceeding, when the respondents have made no use of the allegedly privileged material and the granting of the injunction would inflict unnecessary cost and significant inconvenience on the Trustee and the Bankrupt’s creditors.

Consideration

(a) The conduct of the Trustee

32. In Moore v Macks [2007] FCA 10, Besanko J considered that s 179 of the Act may involve the Court in an investigation in two stages. His Honour went on to observe, at [30];

‘... First, the court must consider whether there is a basis to inquire into the conduct of a trustee in bankruptcy. Secondly, if an inquiry is undertaken, the court must consider what, if any, order should be made as a result of the inquiry. I note the following salient points with respect to the operation of the section in the case of the first stage. It is not necessary for me to consider the second stage because I do not think that there is a basis to inquire into the conduct of the trustee in bankruptcy.

1. The question of whether to order an inquiry is in the broad discretion of the court, and the court should be reluctant to do so unless there are “substantial grounds for believing that the trustee erred in his administration” (Re Gault, Gault v Law (1981) 57 FLR 165 (‘Re Gault’) at 173 per Ellicott J, cited in Macchia at 120 per French J). This requirement has also been put in terms of ‘sufficient grounds’ (Re Gault at 173 per Ellicott J), and ‘a proper cause to believe that a trustee may have failed to act in relation to a bankruptcy in the manner required by the Act or the general law’ (Wilson v Commonwealth of Australia [1999] FCA 219 at [44] per Branson J). The onus is on the applicant to establish the grounds or case for an inquiry.
2. As with s 178, the exercise of the court’s discretion to order an inquiry is subject to the principle that the court will not unduly interfere with the day-to-day administration of a bankrupt’s estate by a trustee in bankruptcy: Re Tyndall at 120 per French J.’
   
33. Section 179(1) of the Act provides:

‘The Court may, on the application of the Inspector-General, a creditor or the bankrupt, inquire into the conduct of a trustee in relation to a bankruptcy and may do one or both of the following:
(a) remove the trustee from office; and
(b) make such order as it thinks proper.’

34. The application for an inquiry in the present case has been made on the application of the Bankrupt and has focused entirely on the execution of the search warrant at the premises of TS&B and the treatment by agents of the Trustee of the documents obtained as a result of the execution of that warrant. The Trustee was not personally present during the execution of the warrant and I am not satisfied, on the evidence, that anything was done during it with his authority which would warrant his removal as Trustee of the estate of the Bankrupt or the making of any other order in respect of the Trustee’s conduct in relation to the bankruptcy.
35. Nor do I consider that Australian Securities and Investment Commission v Edge (supra) affords any support for the present applicants’ claim for an inquiry into the conduct of the Trustee. In that case the administrator of a company had engaged in repeated contraventions of the Corporations Act 2001 (Cth) and the Corporations Regulations and the applicant Commission sought an inquiry into whether he should be permitted to retain money which he had drawn after procuring a resolution of creditors purporting to authorise his remuneration at fixed hourly rates. The evidence revealed that the administrator had delegated a substantial part of the administration to another firm of insolvency practitioners. It was in that context that Dodds-Streeton J observed in the passage quoted at [20] above that a “general delegation” of the administration was impermissible. In the present case there was nothing remotely approaching a general delegation of the administration of the Bankrupt’s estate. All that the Trustee did was to arrange for members or staff of his same firm, one of whom, Mr Yeo, was himself a registered trustee, to attend on the execution of the search warrant. In my view, it would have been unreasonable to expect the Trustee to have attended personally at the premises of TS&B. Indeed, having regard to the presence of Mr Yeo and the retention of Mr Kelcey to provide independent legal advice, the personal attendance of the Trustee would have unwarrantably inflated the costs of executing the warrant.
36. In particular, it has not been demonstrated that any of the conditions stipulated by Middleton J for the execution of the search warrant was not complied with. Even if some of the persons to whom the warrant was addressed had been over-zealous in its execution (and I make no finding to that effect), there can be no suggestion that any actions of the agents of the Trustee were taken in bad faith or otherwise than for the purpose for which the issue of the warrant was presumably obtained. I therefore decline to inquire into the conduct of the Trustee in connection with the execution of the warrant or generally in relation to his administration of the Bankrupt’s estate.

(b) Should the Trustee be required to transfer to another registered Trustee his rights as applicant in Federal Court proceedings numbered VID 1425 of 2006?

37. The applicants have not pointed to any privileged document which has actually been read by any of the second to sixth respondents. It follows that the Court is unable to identify any detriment which has been occasioned to the applicants in the conduct of their defence to the Portsea litigation. In my view, a similar approach should be taken to an application to prevent a trustee in bankruptcy, or a trustee’s staff, from continuing to prosecute a particular legal action as courts have traditionally taken in deciding whether to restrain a legal practitioner from acting in litigation where that legal practitioner has obtained an advantage which could operate unfairly on another party to the litigation. The relevant authorities include GT Corporation Pty Ltd v Amare Safety Pty Ltd [2007] VSC 123, H. Starke & Sons Pty Ltd v Von Stanke, O’Meara (2006) 95 SASR 425, Xat Ky v Australvic Property Management Pty Ltd [2007] FCA 1541 and Geelong School Supplies Ltd v Dean (2006) 237 ALR 612. Those authorities indicate that the discretion to grant an injunction is to be exercised sparingly and where, as it would be perceived by a fair-minded reasonable observer, the risk to the proper administration of justice would outweigh the denial to the opposing litigant of his or her choice of legal representative and the cost and inconvenience of being compelled to change counsel or solicitors. See also Bureau Interprofessional Des Vins De Bourgogne v Red Earth Nominees Pty Ltd [2002] FCA 588, where I reviewed some of the cognate authorities on an application to restrain a firm of solicitors from continuing to act in proceedings because a solicitor employed by that firm had obtained information confidential to another party in the litigation as a result of having, whilst a partner in another firm, advised that party. I there assessed, at [60], whether there was a real risk of relevant confidential information coming into the hands of the firm by which the solicitor was then employed. In the light of that assessment, the injunction was refused.
38. The applicants’ failure to demonstrate that any of the Trustee’s staff or agents actually read and absorbed the contents of any privileged document militates strongly against the Court’s precluding the Trustee or any of the nominated members of his staff or his agents from participating further in the Portsea litigation.
39. For a person engaged in the execution of a search warrant merely to look at a document for the purpose of determining whether it might be covered by a wide claim of legal professional privilege is not an abuse of the power conferred by the issue of the warrant. Thus, in JMA Accounting Pty Ltd v Commissioner of Taxation (supra) a Full Court of this Court observed, at 542 [14]-[15];

‘[14] A good deal of JMA’s argument on this aspect of the appeal depended upon acceptance of the proposition that legal professional privilege will be infringed if a copy of a privileged document is taken, whether or not the original or the copy is read. That proposition is simply wrong. Moreover, there will be circumstances in which it will be proper for the officer exercising the s 263 power to look at a privileged document, including a document for which privilege is claimed, for the purpose of determining whether it might be covered by the privilege. The document should not be looked at closely; merely enough to enable the officer to decide whether the document may be copied.
[15] In Allitt v Sullivan [1988] VR 621 Brooking J referred to this as a “lawful violation” of the privilege. The circumstances in which an officer will be entitled to undertake a bona fide examination of a document for this limited purpose will include cases where no one is present to claim the privilege and when there is a blanket claim for privilege and it is reasonably apparent that the claim is not sustainable.’

40. As noted at [13] above, it was eventually agreed on 5 October 2007 that all documents seized in the course of executing the search warrant which had not been examined in assessing the claim of privilege were to be packed into boxes and delivered into the custody of this Court. In the meantime, the applicants had been less than fully cooperative in making reasonably specific claims of privilege or in otherwise facilitating the execution of the warrant. Moreover, a review of all the events surrounding the treatment of the documents in question supports the conclusion that the opportunity to preserve legal professional privilege insisted on by Goldberg J as recounted at [8] above was maintained.
41. These considerations have led me to the clear conclusion that there should be no injunction restraining the Trustee from continuing to prosecute the Portsea proceedings. It also follows, even more strongly in my view, that none of the second to sixth respondents should be restrained from having any further involvement in the administration of the bankrupt estate of the Bankrupt.

(c) The claim for production of the affidavits relied upon for the issue of the search warrant of 3 October 2007.

42. Section 130 of the Act provides a facility for the trustee of a bankrupt’s estate to apply to an eligible judge for the issue of a warrant if the trustee has reasonable grounds for suspecting that there is on or in any premises “relevant property” being property of the bankrupt or property connected with, or related to, the bankrupt’s examinable affairs or books (including books of an associate entity of the bankrupt) relevant to any of the bankrupt’s examinable affairs. Sub-section (4) of s 130 provides;

‘Where an eligible judge issues a warrant under subsection (2), he or she shall set out on the affidavit furnished in accordance with subsection (3):
(a) on which of the grounds specified in the affidavit; and
(b) on which other grounds (if any);
he or she has relied to justify the issue of the warrant.’

43. An eligible judge, in deciding whether or not to issue a warrant is not acting judicially but is performing, as persona designata, an administrative function reposed in him or her by the Act. The scheme of s 130 contemplates that a trustee’s application for the issue of a warrant is to be made ex parte. In my view, it is entirely in the discretion of the eligible judge whether to require notice of the application to be given to the bankrupt or any other person or to permit inspection by the bankrupt or other person of the affidavit or affidavits on which the application for the warrant is made. In many cases, the purpose of seeking the warrant would be frustrated if the bankrupt or other occupier of the subject premises were put on notice of the impending search and enabled to relocate or destroy relevant property or books. Moreover, I do not consider it open to another judge exercising the judicial power of the Court to review, or impose conditions upon, the exercise by an eligible judge of the administrative discretions conferred by s 130. In any event, in the present case, this issue has been overtaken by the judgment of Tracey J in Trollope v Middleton (2008) 169 FCR 507 which was published after argument in the instant application had been completed.
44. In that case, Tracey J held that a decision of an eligible judge to issue a warrant under s 130 of the Act was a decision “in connection with the issue of a search warrant” and therefore within Sch 2 of the Administrative Decisions (Judicial Review) Act 1977 (Cth) (“the AD(JR) Act). Accordingly, his Honour held that there was no obligation on Middleton J pursuant to s 13 of the AD(JR) Act to furnish reasons for his decision to issue the subject warrant. Significantly, there appears to have been no suggestion in that case that the applicant was entitled, or should be allowed, to inspect the affidavit on which Middleton J had made the following notation as required by s 130(4) of the Act;

‘In accordance with s 130(4) of the Bankruptcy Act 1966 the following are the grounds on which I have relied to justify the issue of the warrant:

• there are reasonable grounds for believing there is on the premises identified in the affidavit relevant property;
• there are reasonable grounds for believing that the bankrupt has failed to disclose his true role in TS&B Retail;
• the books relevant to the bankrupt's examinable affairs will disclose that role;
• the above grounds are specified in this affidavit and are those upon which I have relied to justify the issue of the warrant;
• I am satisfied that the trustee/applicant has reasonable grounds for suspecting that there is on or in the premises relevant property, and in particular books relevant to the bankrupt's examinable affairs, and thus can apply under s 130(1).’
  

45. For these reasons, the Bankrupt’s claim in paragraph 8 of the amended application for the interlocutory relief there specified will be refused.

Conclusion

46. It will be apparent from the reasons outlined above that each of the attacks by the applicants on the conduct of the Trustee or his employees or agents has failed. The amended application must therefore be dismissed with costs.
    

I certify that the preceding forty-six (46) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Ryan.

Associate:

Dated: 12 February 2009

Counsel for the Applicants:	Mr J L Evans (30 October, 8 and 27 November 2007); Mr McLean 7, 11, 12 and 17 December 2007
Solicitor for the Applicants:	Madgwicks
Counsel for the Respondents:	Mr J Peters SC with Ms C Gobbo
Solicitor for the Respondents:	Piper Alderman
Dates of Hearing:	30 October, 8 and 27 November, 7, 11, 12 and 17 December 2007
Date of Judgment:	12 February 2009