Case: Macchia v Nilant [2001] FCA 7 ; (2001) 110 FCR 101
Outcome: considered
The fundamental purpose of s 178 of the Act is to give the court the power in a supervisory role, to review acts, omissions or decisions of a trustee in bankruptcy made in the course of the administration of a bankrupt's estate on the application of any person with appropriate standing. Its operation is to be understood in its historical context ( Macchia v Nilant [2001] FCA 7 ; (2001) 110 FCR 101 ('Macchia') at 119 per French J), and in the context of the broader relationship between the court and the trustee in bankruptcy as an officer of the court ( Macchia at 116). For present purposes it is sufficient to note the following points about the scope of the section: 1. Under the section, the court is fulfilling a supervisory role judicially, rather than an administrative role standing in the shoes of the trustee. As such, grounds for judicial review must be established by an applicant Re Wheeler; Ex parte Wheeler v Halse (1994) 54 FCR 166 (' Wheeler' ) at 170 per Lee J, and the exercise of the court's power is wholly in its discretion. The court has the 'widest possible discretion as to the appropriate order which should be made in the particular case' ( Re Tyndall; Ex parte Official Receiver (1977) 17 ALR 182 (' Re Tyndall ') at 186 per Deane J). 2. The impugned act, omission or decision of the trustee in bankruptcy need not be absurd, unreasonable, or taken in bad faith before it is subject to review or a resultant order of the court under the section ( Re Tyndall at 186 per Deane J). Indeed, the act, omission or decision of the trustee may be subject to review even though it was commercially sound at the time it was made: Macchia at 116 per French J. At the same time the trustee's opinion will be a relevant factor in the exercise of the court's discretion, and there is no presumption that the court will intervene in a given case. The fact that the court might have taken a different course to the trustee in bankruptcy at the relevant time is not, without more, a basis to disturb the trustee's decision: Re Tyndall at 186 per Deane J; Macchia at 116 per French J. 3. The court is able to take into account information which was not available to the trustee at the time of an impugned act, omission or decision ( Gray v Clout (1990) 27 FCR 141, 144 per Pincus J). 4. The exercise of the discretion 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 186 per Deane J. 5. The section does not provide an avenue for a bankrupt to pursue his or her personal interests at the expense of creditors ( Cummings v Claremont Petroleum NL [1996] HCA 19 ; (1996) 185 CLR 124 at 139 per Brennan CJ, Gaudron and McHugh JJ) nor does it 'create a cause of action which sounds in damages', either in tort or under the general law ( Macchia at 119). Both of these propositions reflect the purpose of the section which is to give the court a supervisory role with respect to a trustee in bankruptcy in the administration of the bankrupt's estate. 6. Ultimately the question is what result would be 'just and equitable' in the circumstances of the case. 29 Section 179 is governed by similar, but not identical, considerations to those which are relevant to s 178. Unlike s 178, which relates to the review of specific acts, omissions or decisions of a trustee in bankruptcy in the administration of a bankrupt's estate, s 179 reflects the more general aspect of the court's supervisory role and allows it to carry out an inquiry into the 'conduct' of a trustee in relation to a bankrupt's estate or affairs (s 179(1)). As with s 178 the section is to be understood in the context of the role of the trustee in bankruptcy as an officer of the court. The section is typically employed where an allegation of misconduct or error by a trustee in bankruptcy arises ( Macchia at 120 per French J). 30 Section 179 requires the court to engage in a process which may involve two stages. 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. 3. As with s 178, s 179 is not a vehicle for a bankrupt or other person to seek damages which go beyond the making good of any loss to the bankrupt's estate caused by improper administration by the trustee in bankruptcy: Re Tyndall at 121 per French J.