The decision in Lahood v Ernst & Young; In the matter of Dave Lahood Pty Ltd (in liq) [2015] FCA 89 was published today.

In the decision Justice Forster recited the matters the court will consider when an applicant seeks orders for an inquiry into a bankruptcy trustee’s conduct under s179 of the Bankruptcy Act, being:

1. That the court will not ordinarily initiate an inquiry under s179 unless satisfied that a proper case for an inquiry has been demonstrated;
2. That there needs to be a reasonable cause to believe that a trustee may have failed to act in relation to a bankruptcy in the manner required under the Bankruptcy Act;
   
3. That the court still holds a broad discretion as to whether an order should be made;
4. That if the court considers an inquiry is unlikely to reveal misconduct it should not make an order; and
5. That the court should consider that the applicant may have other remedies to pursue against a trustee.

His Honour express concern  at ordering an inquiry where there was no evidence of wrongdoing and where the costs of the inquiry would be borne by an estate which was expected to otherwise be in surplus.

ERA Legal appeared for the defendants in the matter.

For further information please contact Daren Anderson.