Re Hughes, Justin Owen & Ors v Kennedy, David & Ors [1996] FCA 161

Re Hughes, Justin Owen & Ors v Kennedy, David & Ors [1996] FCA 161

The controlling trustee, David Kennedy, breached his duty by failing to obtain legal advice before rejecting AMP's claim for voting purposes; his subsequent active participation in defending the correctness of his decisions and the composition’s reasonableness justified an order for costs against him personally from the date of filing the defence. He is disentitled to reimbursement or indemnity from the composition funds for costs incurred after adopting a partisan position.

Parties
Applicant: Australian Mutual Provident Society; First Respondent: David Kennedy; Second Respondent: Justin Owen Hughes; Third Respondent: Marlene Elizabeth Hughes
Jurisdiction
Australia
Judgment Date
05 March 1996
Procedural Posture
Bankruptcy Application / Judgment and Costs Order After Settlement on Substantive Issues
Outcome
Composition declared void; creditor status and debt declared; sequestration order made against Justin Owen Hughes; costs awarded against David Kennedy personally from 21 December 1995; Kennedy denied reimbursement from composition funds from that date.
Legal Topics
Composition Set Aside, Costs of Proceedings, Trustee Liability, Creditor Voting Rights
Bankruptcy Composition Set Aside Costs of Proceedings Trustee Liability Creditor Voting Rights

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Parties

Australian Mutual Provident Society

Applicant

David Kennedy

First Respondent

Justin Owen Hughes

Second Respondent

Marlene Elizabeth Hughes

Third Respondent

Procedural Posture

Bankruptcy Application / Judgment and Costs Order After Settlement on Substantive Issues

Legal Issues

  1. 1 Whether the composition approved at the meeting of creditors is void
  2. 2 Whether AMP was a creditor entitled to vote at the composition meeting
  3. 3 Whether the controlling trustee (David Kennedy) is personally liable for costs for failing to obtain legal advice and for his conduct in the proceedings

Ratio Decidendi

The controlling trustee, David Kennedy, breached his duty by failing to obtain legal advice before rejecting AMP's claim for voting purposes; his subsequent active participation in defending the correctness of his decisions and the composition’s reasonableness justified an order for costs against him personally from the date of filing the defence. He is disentitled to reimbursement or indemnity from the composition funds for costs incurred after adopting a partisan position.

Court Disposition

Composition declared void; creditor status and debt declared; sequestration order made against Justin Owen Hughes; costs awarded against David Kennedy personally from 21 December 1995; Kennedy denied reimbursement from composition funds from that date.

Orders

  • Declare the composition approved at the creditors meeting on 28 March 1994 is void.
  • Declare the applicant is a creditor of Justin Owen Hughes in the sum of $694,256.12 on 28 March 1994.