Baycorp Collections PDL (Australia) Pty Ltd v Greer - [2014] FCCA 1437

FEDERAL CIRCUIT COURT OF AUSTRALIA

BAYCORP COLLECTIONS PDL (AUSTRALIA) PTY LTD v GREER

[2014] FCCA 1437

Catchwords:
BANKRUPTCY – Application to set aside sequestration order – application requiring extension of time – debtor clearly always solvent – debtor failing to attend properly to her affairs – bankruptcy annulled on terms.

Legislation:
Bankruptcy Act 1966 (Cth), ss.52(1), 153, 153B, 154

Kyriackou v Shield Mercantile Pty Ltd (No.2) [2004] FCA 1338
Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589
Fitzpatrick v Kidney [2007] FMCA 1422
McQuade and Gronow, Australian Bankruptcy Law and Practice

Applicant:

BAYCORP COLLECTIONS PDL (AUSTRALIA) PTY LTD (A.C.N. 199 478 778) AS ASSIGNEE FROM COMMONWEALTH BANK OF AUSTRALIA (A.C.N. 123 123 124)

Respondent:

JULIE A GREER

File Number:

MLG 1593 of 2013

Judgment of:

Judge Burchardt

Hearing date:

26 May 2014

Date of Last Submission:

26 May 2014

Delivered at:

Melbourne

Delivered on:

27 May 2014

REPRESENTATION

Counsel for the Applicant:

Mr Freire

Solicitors for the Applicant:

Adams Maguire Seer

Counsel for the Respondent:

Ms McCredden

Solicitors for the Respondent:

White Cleland Pty. Ltd.

ORDERS

The bankruptcy of Ms Julie A. Greer is annulled pursuant to s.153B of the Bankruptcy Act 1966.
Save as noted in the undertaking, there be no order as to costs.

BY THE UNDERTAKING OF MS JULIE A. GREER:

Ms Greer hereby undertakes through her solicitor Mr Anthony Di Benedetto to authorise the Trustee to pay the Respondent Creditor’s judgment debt and accrued interest together with the costs ordered on 20 February 2014 (as agreed or taxed) of and incidental to the bankruptcy proceedings together with the costs of the Respondent Creditor arising for the application for review and annulment filed 26 May 2014 in the sum of $2,000 from the property of Ms Greer and prior to remitting any funds to Ms Greer.

FEDERAL CIRCUIT COURT
OF AUSTRALIA

AT MELBOURNE

MLG 1593 of 2013

BAYCORP COLLECTIONS PDL (AUSTRALIA) PTY LTD (A.C.N. 119 478 778) AS ASSIGNEE FROM COMMONWEALTH BANK OF AUSTRALIA (A.C.N. 123 123 124)

Applicant

And

JULIE A GREER

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

On 25 September 2013 the creditor filed a Petition. This was based on a judgment given in a Victorian Magistrates’ Court, as long ago as 23 February 2009, in favour of a third party who subsequently assigned the debt for $9,514.46 plus costs and interest. The act of bankruptcy committed by the bankrupt was a failure to comply with a Bankruptcy Notice, served on 1 May 2013.
There are no issues, as far as I am aware, and indeed, on the materials I do not think there could be any issues, as to the matters required to be satisfied as to service, the assignment of the debt by the Commonwealth Bank of Australia to the creditor and the like. Indeed, unless I have completely misunderstood the submissions of the parties, there is no question that the matters required to be proved by s.52(1) of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) are satisfied.
On 20 February 2014 Registrar Burns made a Sequestration Order, but the applicant, who I will call the debtor, filed her application for review on 1 May 2014.
She seeks an extension of time within which to seek to review the decision of the Registrar and seeks that the Sequestration Order be set aside or, in the alternative, that it be annulled, pursuant to s.153B of the Bankruptcy Act. Ms Greer’s affidavit, filed on 1 May 2014, deposes the following at paragraphs 3-5, inclusive:
“3.    I have over the last 12 months experienced high levels of anxiety, stress and sleeplessness arising from the uncertainty of tenure of my employment. I was put on notice by my employer on or about 1 August 2013 that my hours of work would be significantly reduced and in fact this has been the case in that I was working 40 hours to 50 hours per week to now 8 hours per week. As a consequence I have consumed significantly more alcohol (white wine) than usual and have used alcohol to assist with inducing sleep. Specifically, I had not paid due attention to my mail.
4.    On 3 and 11 February 2014 I had 2 close friends die. One suddenly, in a tragic motorcycle accident and that caused some distraction.
5.    As a further consequence of the condition set out at paragraph 3 and 4 above, I failed to comply with the requirements of the bankruptcy notice served on me on 1 May 2013 and also failed to attend the Hearing in this matter of 20 February 2014”.
I would point out, without being in any way disrespectful or overly critical of Ms Greer, that the matter she describes as precipitating her anxiety and consequential difficulties took place in August 2013 and she had been served with the Bankruptcy Notice several months before that. Clearly her affairs have been awry for some time.
The applicant’s affidavit further deposes that she was never insolvent, that she owns her home with a mortgage of $41,000, that she has $175,000 in the bank and a further $9,327 in a joint account and that she had not filed tax returns for what was described in the affidavit as “a few years”. It is further deposed that she cooperated with the Trustee and provided a Statement of Affairs promptly, that her salary was $38,000 per year and that the estimated value of her home was $700,000 and that she had no other debts.
On 22 May 2014 the Trustee wrote a letter to the Court. It reveals that apart from possibly the Australian Taxation Office (“ATO”) and the creditor in this application, there are no other creditors. The Trustee objected to the Sequestration Order being set aside, but neither consented to nor objected either to an extension of time or the annulment of the bankruptcy. The letter sought fees in the sum of $5,776.50 plus GST and included a schedule annexed to the letter, which showed that the costs, first, are not obviously unreasonable and, secondly, almost entirely created before 1 May 2014, the date of the application for review. The annexures would suggest that the Trustee thereafter incurred virtually no expenses at all.
On 22 May 2014 there was an affidavit filed by Mr Di Benedetto. It is hearsay in parts, but for the present nothing turns on that. Mr Di Benedetto deposed that on 4 March 2014 the applicant attended his office because her bank account had been frozen. The Statement of Affairs was forwarded to the Trustee extremely promptly on 6 March 2014.
The Trustee replied on 20 March 2014 and included a number of documents which had previously been created. One of those was a report which indicated that the costs of the administration of the bankruptcy would be $30,000 to $50,000, but this was a total for the three year period of administration, it was not an indication that those sort of sums had already been engendered. And, indeed, from the $5,000 bill finally presented it is clear that that is the case.
On 8 April 2014 the document marked exhibit “AD-2” was sent by Mr Di Benedetto’s firm to the Trustee. This asserted that the applicant was solvent, that the Trustee’s fees of $30,000 to $50,000 were excessive and foreshadowed an intention to set aside. There followed correspondence between the Trustee and the applicant’s solicitors, which necessarily propounded their respective positions and might be thought, perhaps, to be slightly self serving.
Exhibit “AD-6” is a letter from White Cleland, dated 20 May 2014, and it indicates that a grand total of $28,397.68 is owing, including costs of $13,126.54. The balance is the original judgment plus interest and costs. On 26 May 2014 Mr Di Benedetto filed a further affidavit. Exhibit “AD-3” to that affidavit is a letter from A.M. Associates, the accountants for the applicant. This indicates that the non-lodgment of taxation returns for about a decade, a rather longer period than the applicant’s original affidavit might have suggested, are not likely to be problematic and there is not likely to be a resultant debt of any moment. That is not certain, because the returns have neither been lodged nor assessed, but that is the state of the evidence.
The first issue that arises in the circumstances is whether I should extend time for the review. I indicated fairly rapidly yesterday that I would extend time. The explanations given by the applicant are readily understandable and she ought be excused in the circumstances.
The second issue is whether the bankrupt’s Sequestration Order should be set aside. It should be noted that the applicant is clearly correct to say that her assets always greatly exceeded her debts. It was not, however, initially clear whether there might or might not be some significant obligation to the ATO, but in my view it is now sufficiently clear that that is not likely to be of any moment.
Second, the applicant acted reasonably promptly and cooperated with the Trustee. There was some delay while the solicitors were arguing, but the provision of the Statement of Affairs was almost instant. That is entirely to her favour, bearing in mind the difficulties that so often arise with the provision of Statements of Affairs.
However, to the contrary effect, the matters referred to in s.52(1) of the Bankruptcy Act were always satisfied. The applicant admits being served with the Bankruptcy Notice; it is clear that she ignored it. As I mentioned, this was at a time when the difficulties with her ill health and the like were not as pronounced as they unfortunately subsequently became.
She was served with the Creditor’s Petition. She clearly ignored it, and she clearly had notice of the hearing before the Registrar on 20 February 2014. Her affidavit in paragraph 5 says she “failed to attend”. She plainly took that decision either wittingly or at the very least with insouciance.
The applicant has failed to properly conduct her affairs and that failure is wholly her own. There is nothing improper in the conduct of the creditor in seeking a Sequestration Order on a longstanding debt of this sort. As the applicant’s affairs were then known, it was not clear she was solvent, because her position with her tax was not ascertained. So even if all this information had been with the creditor, it might reasonably be thought that the application could have continued.
In these circumstances, I will not set aside the Sequestration Order and deprive the Trustee of the charges and disbursements that are protected by s.154 of the Bankruptcy Act. The Trustee’s conduct is not shown to be unreasonable. As a matter of the impression, the costs incurred are not excessive. This is not a case like Kyriackou v Shield Mercantile Pty Ltd (No.2) [2004] FCA 1338, where the Trustee has forged ahead spending very substantial amounts of money, even though an application was lodged within time.
Although I am not in any way overly critical of the applicant for the delay that took place before the application for an extension of time was lodged, the fact is it was well outside the prescribed period. At the time the applicant’s position in respect of tax was not known, as it has been now, through the affidavit of Mr Di Benedetto, filed on 26 May 2014. Even now the relevant evidence is arguably hearsay and not conclusive, albeit I have already indicated that I am prepared for present purposes to give the applicant the benefit of the doubt.
The second point is whether there should be an annulment, pursuant to s.153 of the Bankruptcy Act. The Trustee neither opposes nor agrees. That position is not surprising, because the Trustee has the benefit of s.154, which will enable the Trustee to levy their fees, subject to any process of taxation under the rules, out of the remaining assets of the estate, which are substantial.
The creditor, scarcely surprisingly, is much less agreeable. The creditor wants the debt paid first and wants costs, also as taxed or agreed. I would say that as a matter of very preliminary impression, the costs involved in the process of a relatively straightforward Bankruptcy Notice and Creditor’s Petition seem somewhat high, but that is not a matter for me in the ultimate.
As I have already indicated, no criticism can be advanced against the creditor in circumstances where the applicant owes the debt, ignores the Bankruptcy Notice, the Creditor’s Petition and the hearing before the Registrar. Section 153B involves two matters: the first is that the Sequestration Order ought not to have been made. I accept the applicant’s solvency leads to my being satisfied that this was a case in which the Sequestration Order ought not, with the benefit of hindsight, have been made.
The second matter is the residual discretion of the Court to annul. This may be done on terms. If one looks at McQuade and Gronow, Australian Bankruptcy Law and Practice, at paragraph 153B(30), one sees – this is at page 11-4073:
“The exercise of the discretion may be subject to terms:…”
And there is reference to Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589 or 55 ALR 143.
“… eg where the trustee in bankruptcy has expended time and trouble upon the unrealised assets resulting in a benefit, by imposing a condition that he or she should be paid for that benefit:…”
In the same paragraph there is reference to a decision of Neville FM, as his Honour then was, and it reads:
“… Neville FM imposed a condition that the applicant pay the amount of the disputed debt and the trustee’s remuneration, costs and charges into Court...”
The case referred to is Fitzpatrick v Kidney [2007] FMCA 1422. Just for completeness, I will refer to the passage in Clyne, at [600], where the plurality of the High Court said without much ado – and I might say this is in the case of an annulment:
“Further, there is no doubt that the court has power to impose conditions on the making of an order for annulment and it would have been competent for the court to order that any costs properly incurred by Mr Andrew should be paid out of the bankrupt’s estate.”
Mr Andrew, I think, from memory, was the Trustee, but the Court’s observation is not limited in any way. I would indicate that if the applicant were prepared to execute an irrevocable authority to the Trustee to pay the creditor’s debt and to pay the costs as taxed or agreed, I would be prepared to annul the bankruptcy, pursuant to s.153B. I would leave the Trustee’s costs to s.154 and any process of taxation.
Although the applicant will ultimately succeed in the application, subject to meeting the terms I am imposing, the reality is that this hearing has been necessary, entirely because of the various defaults of the applicant. It is clear that the creditor should have its costs.
I note the undertaking given, which will be recorded on the Court’s order.

I certify that the preceding twenty-nine (29) paragraphs are a true copy of the reasons for judgment of Judge Burchardt

Associate:

Date: 8 July 2014