Hungerford v Inspector-General in Bankruptcy [1931] HCA 14; (1931) 44 CLR 450 (29 April 1931)

HIGH COURT OF AUSTRALIA

Hungerford and Another Appellants; and The Inspector-General in Bankruptcy Respondent.

In re Norman and Another.

H C of A

appeal from the Court of Bankruptcy.

29 April 1931

Gavan Duffy C.J., Rich, Starke and Dixon JJ.

Abrahams, for the appellants.

Loxton K.C. (with him Badham), for the respondent.

Abrahams, in reply.

Loxton K.C.

The following written judgments were delivered:—

April 29

Gavan Duffy C.J.

For the reasons appearing in the judgment to be delivered by my brother Dixon, I agree that the appeal should be allowed.

Rich J.

I have read the judgment of my brother Dixon, and agree with it.

Starke J.

The question is whether rule 356 of the Bankruptcy Rules applies to the remuneration of trustees under deeds of arrangement within Part XII. of the Bankruptcy Act. The rule is found under Part VIII. of the Bankruptcy Rules ("Trustees and Special Managers"), and runs thus: "Where the creditors resolve that the remuneration of the trustee shall be a sum of money, the sum of money shall be fixed in accordance with the scale in the Sixth Schedule." On its face, the rule seems wide enough to cover the remuneration of trustees under deeds of arrangement (compare Act, sec. 199). But the Act itself contains several provisions relating to the remuneration of trustees. Thus sec. 133 deals with the remuneration of the trustee of a bankrupt's estate, and the rule seems specially authorized by sub-sec. 2 of that section. Then sec. 184 deals expressly with the remuneration of a trustee under a deed of assignment pursuant to Part XI. of the Act. And sec. 203 deals expressly with the remuneration of a trustee of a deed of arrangement under Part XII. of the Act. It provides (sub-sec. 1): "The remuneration of a trustee of a deed of arrangement shall from time to time be fixed as determined by the creditors, and shall be such a sum of money as is fixed by the creditors or shall be in the nature of a commission, the commission not to exceed five pounds per centum on the amount realized by the trustee after the deduction of the expenses of realization, subject to the creditors, by resolution, fixing a higher commission on the collection of book debts." Now, rule 356 is inconsistent with secs. 184 and 203, which enable the creditors to fix the remuneration, subject, in the case of remuneration by commission, to the rates limited by those sections, and it cannot stand with them. But it is specially authorized in cases within sec. 133. Consequently its provisions do not extend to the remuneration of trustees under deeds of arrangement. On the question whether the rule is ultra vires sec. 223 if it extends to deeds of arrangement, perhaps I may refer to Gibson v. Mitchell[1] without expressing any opinion. Again, the position of Hungerford and Spooner as trustees under the deed of inspectorship was conceded during the argument, and it is unnecessary to say whether that concession was right or wrong, for in neither case could the order below be sustained. Lastly, some reliance was placed upon clause 18 (b) of the deed of arrangement as fixing the remuneration of the trustees or inspectors. But that clause is merely an authority to the trustees to fix remuneration subject to the same restrictions as are contained in sec. 203 of the Act. Those restrictions only apply to remuneration in the nature of commission.

Some reference was made during the argument to the jurisdiction or authority under which the order appealed against was made. The learned Judge in Bankruptcy treated the matter as a reference under rule 7. Counsel pointed to sec. 206 (cf. In re Ellis[2]). The combined effect of sec. 199 (3) and sec. 148 is, however, wide enough, I think, to found the jurisdiction of the Court of Bankruptcy.

The appeal should be allowed.

Dixon J.

The appellants were appointed inspectors under a deed of inspectorship which was registered as a deed of arrangement under Part XII. of the Bankruptcy Act 1924-1930. They now concede that they occupy the position of trustees of the deed of arrangement and, as trustees, they transmitted to the Registrar in Bankruptcy an account of their receipts and payments pursuant to the provisions of sec. 146 as applied to deeds of arrangement by sec. 199 (3). Pursuant to sec. 146 (2) the Registrar caused the account to be audited by the prescribed officer. The account contained three items upon the disbursement side amounting in all to £136 10s. charged for remuneration by the trustees. Upon these items being questioned by or on behalf of the Registrar because, among other reasons, the remuneration of the trustees had not been fixed or determined by the creditors pursuant to sec. 203, a meeting of creditors appears to have been held and the trustees produced to the Registrar minutes of a resolution purporting to fix the remuneration so as to justify these charges. Without determining whether a meeting had been regularly summoned at which such a resolution was duly passed, the Registrar submitted to the Judge in Bankruptcy questions designed to ascertain whether the charges for remuneration were allowable. In adopting this course the Registrar purported to act under rule 7 of the Bankruptcy Rules 1928. The Judge in Bankruptcy (Judge Lukin) held that because the remuneration charged exceeded the scale of remuneration contained in the Sixth Schedule to the Bankruptcy Rules, a resolution of the creditors fixing such an amount could have no operation. He appears also to have considered that a provision in the deed, upon its true interpretation, limited the remuneration of the trustees to a sum not greater than five per cent upon the amount realized by the trustees, a sum exceeded by the remuneration charged. His Honor made an order directing the Registrar to disallow in the trustees' account the sums charged and ordering the trustees forthwith to refund such sums to the estate, and reserving liberty to the trustees to apply to the Court for the fixing by the Court of the remuneration due to them. From this order the trustees now appeal to this Court. The provision relied upon by the learned Judge to confine the trustees' remuneration within the limits imposed by the Sixth Schedule is rule 356 of the Bankruptcy Rules 1928. It provides that where the creditors resolve that the remuneration of the trustee shall be a sum of money, the sum of money shall be fixed in accordance with the scale in the Sixth Schedule. This rule is clearly directed to sec. 133 (2), which relates to the remuneration of trustees in bankruptcy, and provides that notwithstanding anything contained in sub-sec. 1 which enables the creditors to fix a percentage commission, the remuneration of the trustees shall, if the creditors so resolve, be a sum of money fixed in accordance with the prescribed scale. Sec. 199 (3) enacts that the provisions so far as applicable of Part VIII., in which sec. 133 occurs, shall apply in relation to every trustee of a deed of arrangement, but the enactment composed of sec. 133 (2) and rule 356 is not "applicable" to the case of deeds of arrangement, because sec. 203 deals explicitly with the remuneration of a trustee of a deed of arrangement.

Sec. 203 (1) is as follows: "The remuneration of a trustee of a deed of arrangement shall from time to time be fixed as determined by the creditors, and shall be such a sum of money as is fixed by the creditors or shall be in the nature of a commission, the commission not to exceed five pounds per centum on the amount realized by the trustee after the deduction of the expenses of realization, subject to the creditors, by resolution, fixing a higher commission on the collection of book debts." The terms in which rule 356 is expressed are general enough to apply directly to a trustee under a deed of arrangement as well as to a trustee in bankruptcy; but they cannot receive an interpretation by which they would directly refer to a trustee of a deed of arrangement because, so construed, the rule would not be authorized by sec. 223, which empowers the Governor-General to make rules. So far as material, sec. 223 provides that the Governor-General may make rules or regulations not inconsistent with this Act for prescribing all matters, forms and things which by this Act are required or permitted to be prescribed or which are necessary or convenient to be prescribed for giving effect to this Act or for the conduct of any business relating to the administration thereof. Sec. 203, unlike sec. 133, imposes no limitations upon the sum of money, as distinguished from the commission, which the creditors may fix. If rule 356 applied to sec. 203 and required that the creditors should fix a sum of money in accordance with its scale, it would attempt to supplement the legislation by a new and additional provision qualifying the discretion given to the creditors by Parliament, and would involve an inconsistency. Such a provision cannot be justified under a power to prescribe matters which are necessary or convenient to be prescribed for giving effect to the Act. It does not give effect to the Act: it makes an additional and different provision upon a subject dealt with by the Act. Nor can it be considered necessary or convenient for the conduct of any business relating to the administration of the Act. For these reasons rule 356 has no application to trustees of deeds of arrangement.

But the deed of arrangement contained an express provision dealing with the remuneration of the trustees, and the learned Judge considered that it imposed a limit which had been exceeded. The provision authorized the trustees to apply moneys they might receive in payment, inter alia, of such sums by way of remuneration as the creditors might from time to time authorize, not exceeding the rates provided by sec. 203. This language appears to mean no more than that the creditors may authorize a remuneration, subject to the restrictions imposed by sec. 203. Upon this interpretation the restrictions imposed by the clause are no more and no less than those provided by sec. 203. The construction adopted by the learned Judge is founded upon the view that as the only rates mentioned in the section are percentages, the provision meant to adopt these percentages as limitations not merely upon the commission allowable, but upon any lump sum which might be fixed. This interpretation not only ignores the evident purpose of the reference to sec. 203, namely, to avoid collision with its restrictions, but fails to appreciate the meaning of the expression "the rates provided by sec. 203." The expression refers to the provision in sec. 203 of rates limiting the trustees' remuneration. That limitation is confined to remuneration by way of a percentage commission. In the case of remuneration by lump sums there are no "rates provided by sec. 203."

For these reasons the order appealed from cannot be supported and should be discharged.

The question was not raised whether such an order could be made in the exercise of the power given by rule 7, and it is unnecessary to consider the nature and extent of that power. But, having regard to the form the proceedings took and the incompleteness of the facts submitted by the Registrar, no order should be made by this Court in lieu of that of the Court of Bankruptcy, and the matter should be remitted to the Court of Bankruptcy to be dealt with as may be just.

Appeal allowed. Order of Judge Lukin discharged. Matter remitted to the Court of Bankruptcy to be dealt with as may be just. No order as to costs.

Solicitors for the appellants, Hill, Thomson & Sullivan.

Solicitor for the respondent, W. H. Sharwood, Commonwealth Crown Solicitor.

[1] [1928] HCA 37; (1928) 41 C.L.R. 275.

[2] (1925) Ch. 564.