FEDERAL COURT OF AUSTRALIA
Barnes v Lion Finance Pty Ltd [2015] FCA 951
Citation: Barnes v Lion Finance Pty Ltd [2015] FCA 951 Parties: LINDSAY HAROLD BARNES v LION FINANCE PTY LTD (ACN 095 926 766) and ROBERT SCOTT WOODS AND DAVID JOHN FRANK LOMBE (AS TRUSTEES OF THE BANKRUPT ESTATE OF LINDSAY HAROLD BARNES) File number: VID 359 of 2014 Judge: BEACH J Date of judgment: 28 August 2015 Catchwords: BANKRUPTCY AND INSOLVENCY – annulment of bankruptcy – s 153B of Bankruptcy Act 1966 (Cth) – whether bankrupt was solvent at time of sequestration order – whether creditor’s petition served on bankrupt – whether sequestration order ought to have been made – discretion – annulment on conditions – application granted Legislation: Acts Interpretation Act 1901 (Cth) s 29(1)
Bankruptcy Act 1966 (Cth) ss 52(2), 153B(1), 309
Bankruptcy Regulations 1996 (Cth) reg 16.01
Federal Circuit Court Rules 2001 (Cth) r 6.14Cases cited: Boles v Official Trustee in Bankruptcy (2001) 183 ALR 239
Bulic v Commonwealth Bank of Australia Ltd (2007) 5 ABC(NS) 122
Eykamp v Deputy Commissioner of Taxation [2010] FCA 797
Francis v Eggleston Mitchell Lawyers Pty Ltd (2014) 12 ABC(NS) 25
Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315
Hudson v Whalan [1999] FCA 189
Re Frank; Ex parte Piliszky (1987) 16 FCR 396
Re Raymond; Ex parte Raymond (1992) 36 FCR 424
Rigg v Baker (2006) 155 FCR 531
Sandell v Porter (1966) 115 CLR 666
Yang v L & H Group (a limited partnership) [2015] FCA 932Date of hearing: 30 July 2015 Place: Melbourne (delivered in Sydney) Division: GENERAL DIVISION Category: Catchwords Number of paragraphs: 67 Counsel for the Applicant: The Applicant appeared in person Counsel for the First Respondent: Ms A Umbers Solicitor for the First Respondent: CLH Lawyers Solicitor for the Second and Third Respondents: Ms D McCredden of White Cleland Pty Ltd
IN THE FEDERAL COURT OF AUSTRALIA
VICTORIA DISTRICT REGISTRY
GENERAL DIVISION
VID 359 of 2014
BETWEEN: LINDSAY HAROLD BARNES
ApplicantAND: LION FINANCE PTY LTD (ACN 095 926 766)
First RespondentROBERT SCOTT WOODS AND DAVID JOHN FRANK LOMBE (AS TRUSTEES OF THE BANKRUPT ESTATE OF LINDSAY HAROLD BARNES)
Second and Third Respondents
JUDGE:
BEACH J
DATE OF ORDER:
28 AUGUST 2015
WHERE MADE:
MELBOURNE (DELIVERED IN SYDNEY)
THE COURT ORDERS THAT:
1.Upon the second and third respondents filing with the Court a notice in the form annexed by no later than 60 days from the date of this order confirming that the following events have occurred:
(a)The petitioning creditor’s debt has been paid or compromised;
(b)The applicant’s other debts known to the second and third respondents as at the date of this order have been paid or compromised;
(c)The second and third respondents have been paid their reasonable remuneration and expenses incurred in their capacity as trustees of the applicant’s estate,
the bankruptcy of the applicant is annulled pursuant to s 153B of the Bankruptcy Act 1966 (Cth).
2.The second and third respondents shall provide to the…
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- Case
- [2015] FCA 951
- Decision Date
CaseChat Overview and Summary
The court evaluated three arguments supporting the annulment: Mr. Barnes' solvency, the invalid service of the creditor's petition, and the need to adjourn the hearing of the petition. The court rejected the solvency and invalid service arguments but agreed that the hearing should have been adjourned. Given Mr. Barnes' solvency and the procedural flaw, the court exercised its discretion to annul the bankruptcy on conditions. The court determined that annulment should occur only if certain conditions were met, including the payment or compromise of debts, the reimbursement of trustees' expenses, and the filing of a notice confirming these conditions by the trustees within 60 days. The trustees were directed to assist Mr. Barnes in meeting these conditions, and the court reserved the right to vary any conditions imposed.
The court's decision to annul the bankruptcy on specific conditions underscores its discretionary power under s 153B of the Bankruptcy Act 1966 (Cth). The court found that while Mr. Barnes was solvent and the petition was not validly served, these issues did not mandate the annulment without conditions. Instead, the court imposed conditions to ensure the proper administration of the estate and the protection of creditors' interests. The orders required the trustees to provide necessary assistance to facilitate the conditions for annulment, with the court retaining the authority to adjust these conditions as needed.
Orders
Orders of the court
1. Upon the second and third respondents filing with the Court a notice in the form annexed by no later than 60 days from the date of this order confirming that the following events have occurred:
(a) The petitioning creditor’s debt has been paid or compromised;
(b) The applicant’s other debts known to the second and third respondents as at the date of this order have been paid or compromised;
(c) The second and third respondents have been paid their reasonable remuneration and expenses incurred in their capacity as trustees of the applicant’s estate,
the bankruptcy of the applicant is annulled pursuant to s 153B of the Bankruptcy Act 1966 (Cth).
2. The second and third respondents shall provide to the applicant such reasonable assistance as they consider necessary in order to facilitate the events referred to in order 1 being effected.
3. The applicant pay the respondents’ costs of and incidental to this application.
4. If the condition for annulment referred to in order 1 is not triggered, then the costs of the respondents referred to in order 3 shall be treated as part of the costs and expenses of the administration of the applicant’s estate.
5. There be liberty to apply.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
Background
Background to the litigation
Full text does not contain this section.
Evidence
Evidence Before The Court
Full text does not contain this section.
Decision
Reasons for decision
Ratio Decidendi
Legal Principle Established
In granting an annulment application, the Court may do so on terms, including that:·the trustee’s costs and expenses to the date of the annulment be paid or secured;·any outstanding debt be paid or secured.SHOULD THE SEQUESTRATION ORDER HAVE BEEN MADE? There are three arguments in support of the proposition that the sequestration order ought not to have been made that arise from the material, namely:(a)First, Mr Barnes was able at the time of the sequestration order to pay his debts as and when they fell due; accordingly s 52(2)(a) of the Act was satisfied;(b)Second, there was no valid service of the creditor’s petition;(c)Third, the hearing of the petition ought to have been adjourned. On that analysis, the sequestration order would not have been made. I reject the first and second bases, but uphold the third basis in the unusual circumstances of the case.(a) Whether Mr Barnes was solvent As to the first basis, it is said that Mr Barnes was solvent at the time of the sequestration order and that, accordingly, the sequestration order ought not to have been made. But there is a difficulty with this conclusion, even if one was to accept the premise. The question of solvency arises under s 52(2)(a). But that provision provides that if that limb is satisfied, the court may dismiss the petition. The dismissal is not mandated. Satisfaction of s 52(2)(a) does not establish that the court was bound not to make the sequestration order. In other words, even if the premise was established, I am not satisfied that the conclusion for establishing the condition required by s 153B(1) would be made good. But this first basis is problematic on the facts in any event. The issue to be considered is whether Mr Barnes at the time of the sequestration order had sufficient assets that could be readily realised or drawn upon by sale, mortgage or pledge, to meet his liabilities or generally an ability to pay his debts as and when they fell due (see Sandell v Porter (1966) 115 CLR 666 at 670 per Barwick CJ but taking into account the extended scope of the debtor’s “resources” to be considered as discussed in Eykamp v Deputy Commissioner of Taxation [2010] FCA 797 at [7] per Buchanan J and Rigg v Baker at [104] and [106] per Cowdroy J and the flexibility inherent in the concept of readily realisable). Mr Barnes has said that as at 22 October 2013 he was in a position to pay his debts. In his statement of affairs he disclosed that he had unsecured debtors in the amount of $234,553.63 and a secured debt of $50,000. The Trustees have stated that as at the date of the sequestration order Mr Barnes’ total unsecured debts were $238,765. Mr Barnes’ assets as at 22 October 2013 that could be drawn upon were largely represented by the equity in the Property. He is the sole owner of the Property. The Property is a 3 bedroom residence. The Trustees have estimated the value of the Property at $685,000 with the amount owed to the Commonwealth Bank as mortgagee of $46,746.45 as at 30 October 2013.