Bendigo and Adelaide Bank Limited v Feldman - [2013] FCCA 241

FEDERAL CIRCUIT COURT OF AUSTRALIA

BENDIGO & ADELAIDE BANK LIMITED v FELDMAN

[2013] FCCA 241

Catchwords:
BANKRUPTCY – Creditor’s petition – deceased estate – letters of administration ad colligendum bona.

Legislation:
Bankruptcy Act 1966 (Cth) s.244
Federal Circuit Court (Bankruptcy) Rules 2006 (Cth) r.11.02

Cases cited:
Gonzalez v Marmentini, Executrix of Estate of the late Raber [1998] FCA 911
Meinhardt (Hong Kong) Limited v William Edward Meinhardt (Deceased) & Ors [2006] FCA 1106
Passmore v Underdown (Deceased) [2010] ALMD 4853; [2010] FCA 70
Re Cohen [1975] VR 187

Applicant:

BENDIGO & ADELAIDE BANK LIMITED (ACN 068 049 178)

Respondent:

DEREK JOSEPH FELDMAN

File Number:

MLG 1630 of 2012

Judgment of:

Judge Riley

Hearing date:

4 April 2013

Date of Last Submission:

4 April 2013

Delivered at:

Melbourne

Delivered on:

4 April 2013

REPRESENTATION

Counsel for the Applicant:

Mr Gration

Solicitors for the Applicant:

Turks Legal

Counsel for the Respondent:

No appearance

Solicitors for the Respondent:

The respondent was not represented

ORDERS

Service of the creditor’s petition filed on 16 December 2012 be dispensed with.
The estate of the late Derek Joseph Feldman, who died on 13 October 2010, be administered in bankruptcy.

FEDERAL CIRCUIT COURT OF AUSTRALIA
AT MELBOURNE

MLG 1630 of 2012

BENDIGO & ADELAIDE BANK LIMITED (ACN 068 049 178)

Applicant

And

DEREK JOSEPH FELDMAN

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

This is a creditor’s petition for orders that service of the petition be dispensed with and that the estate of the late Derek Joseph Feldman be administered in bankruptcy.
The respondent debtor died on 13 October 2010 in Australia. There is before the court material indicating that an abbreviated inquiry into the circumstances of his death was undertaken by the Coroner’s Court. It was found that he died of ischaemic heart disease in the setting of drowning at Napier Park Reserve in Glen Waverley on 13 October 2010.
The petitioning creditor is the Bendigo & Adelaide Bank Limited.

The material before the court indicates that the deceased entered into a managed investment scheme known as the Great Southern Plantation Scheme. He borrowed approximately $201,000 for that purpose from a finance company by the name of Great Southern Finance.

It seems that the scheme collapsed and that, at the time of his death, the debtor owed about $88,000 under the terms of the finance agreement.
The affidavit material before the court shows that Great Southern Finance assigned its loan to the Adelaide Bank which subsequently merged with the Bendigo Bank to become the Bendigo & Adelaide Bank Limited, the petitioning creditor.
The debtor being deceased, he is obviously not able to respond to this proceeding. There is material before the court that indicates that probate has not been granted. The only letters of administration that have been granted are of a limited nature. It seems that the deceased conducted a real estate agency at the time of his death. Orders were made by Osborn J in the Supreme Court of Victoria on 2 December 2010 which granted letters of administration ad colligendum bona to the deceased’s wife, Cynthia Feldman, for the limited purpose of vesting in her all the deceased’s right, title and interest in the real estate agency owned and operated by him, known as Derek Feldman & Co. Property Consultants, and immediately to exercise all rights and entitlements arising therefrom, including but not limited to the right to sell the rent roll of the real estate agency and do all things that may be necessary to complete the sale thereof forthwith, to prepare and sign all accounts, returns and business activity statements on behalf of the deceased, the estate and the real estate agency and to pay income tax and goods and services tax as required, to deal with the debts of the deceased and his estate including the real estate agency including, but not limited to income tax, capital gains tax, goods and services tax, including stamp duty on any funds that may come into her possession as administrator of the deceased’s estate and to deal with the assets and liabilities of the company, DFA Property Consultants Proprietary Limited.
The petitioning creditor served Cynthia Feldman with a copy of the creditor’s petition and affidavit in support. Ms Feldman was legally represented at a directions hearing before a registrar.

The court has today been provided with a letter from Ms Feldman’s legal representatives dated 2 April 2013, which indicates that:
a)given Ms Feldman’s difficult financial circumstances, she has instructed her solicitors not to incur any further expense in participating in this matter;
b)Ms Feldman has no intention of making a general application to the Supreme Court for the administration of the estate of her husband; and
c)given that the firm’s only concerns with the present application to this court were jurisdictional issues which the solicitors expected the court to address of its own motion, Ms Feldman would be happy to abide any orders that might be made today.
The jurisdictional question that Ms Feldman’s solicitors referred to is the question that arises under s.244(13) of the Bankruptcy Act 1966 which provides that:
Where proceedings have been commenced in a court for the administration of a deceased person’s estate under a law of a State or Territory, a petition for an order under this section in relation to the estate shall not be presented by a creditor except by leave of the Court and on such terms and conditions (if any) as the Court thinks fit.
The petitioning creditor submits that the application for letters of administration ad colligendum bona does not fall within that subsection. The petitioning creditor relied on the decision of Gillard J in Re Cohen [1975] VR 187. In that case, at page 188 and following, his Honour sets out the nature of a grant of administration ad colligendum bona. His Honour explained that the grant is a limited grant for the purposes of preserving perishable or precarious assets in circumstances of urgency where the normal grant of administration could not be achieved in time.
The petitioning creditor also relied on the decision of Emmett J in Gonzalez v Marmentini, Executrix of Estate of the Late Raber [1998] FCA 911. In that case, Emmett J considered the requirements of s.244(13) of the Bankruptcy Act1966. His Honour said:
Counsel for the respondent submitted that the expression “proceedings for the administration of a deceased person’s estate” should be understood as meaning proceedings whereby a plaintiff seeks to be admitted as executor or administrator of a deceased estate. I do not consider that the language of s244(13) should be understood in that way. The purpose of s244(13) is to ensure that there are not two courts administering an insolvent estate or administering the estate generally. It is not concerned with the grant of probate or letters of administration by a Court of Probate.
Formerly, orders for the general administration of a trust were made as of course when sought by a trustee or a beneficiary. However, the procedure of general administration became so characterised by unacceptable delay and expense that legislative changes were made designed to encourage the resolution of disputes by means other than the making of orders for general administration. Before the commencement of the Supreme Court Act 1970 (NSW), for example, the rules of that Court with respect to such administration proceedings were governed by the Equity Act 1901 (NSW).
It is no longer the practice for an order for general administration to be made if the matters in issue can be disposed of without such an order. Nevertheless, under the present Rules of the Supreme Court of New South Wales, the making of an order for general administration in an appropriate case might still occur. For example, Pt 68, r8(2) of the Supreme Court Rules provides as follows:
When it appears to the Court that an order for the administration of an estate or the execution of a trust under the direction of the Court is necessary to prevent proceedings by creditors of the estate or by persons claiming to be entitled under the will or on the intestacy of the deceased or to be beneficially entitled under the trust, the Court:
(a) may make the order; and
(b)may further order that no steps shall be taken under the order, or under any account or inquiry directed, without the leave of the Court.
It is an order such as is contemplated by Pt 68 of the Supreme Court Rules, which I consider was in contemplation when s244(13) was enacted. Administration suits in Australia are in fact rare for the reasons which I have briefly indicated. The purpose of s244(13) is to ensure that where an order for the administration of an estate has been made by the Supreme Court of a State or Territory, the effect of which is to prevent any dealings with the estate, otherwise than under the direction of the Court, the Bankruptcy Court will not, in conflict with such an order, seek to administer the estate.
Justice Emmett was clearly distinguishing between letters of administration and administration under the direction of the court. It was the latter that his Honour considered was the subject of s.244(13) of the Bankruptcy Act 1966.
Justice Emmett’s decision in Gonzalez was considered by Jessup J in Meinhardt (Hong Kong) Limited v William Edward Meinhardt (Deceased) & Ors [2006] FCA 1106. In that case, Jessup J was urged to find that Gonzalez was plainly wrong. However, at paragraphs 16 and following of Meinhardt, Jessup J addressed that argument and concluded that he was some considerable distance from forming the view that the judgment in Gonzalez was wrong, much less plainly wrong. Consequently, Jessup J followed Gonzalez in Meinhardt.

I note that Siopis J in Passmore v Underdown (Deceased) [2010] ALMD 4853; [2010] FCA 70 also followed Gonzalez.
Consequently, it seems to me that there is clear authority binding on this court that, in the circumstances that have arisen in this case, there was no need for leave to be granted by the court under s.244(13) of the Bankruptcy Act 1966 before the proceedings under s.244 of the Bankruptcy Act 1966 commenced.
In relation to the basic requirements of s.244 of the Bankruptcy Act 1966, the evidence before the court shows that there was, in fact, a debt of more than $5,000 owing by the deceased person at the time of his death to the petitioning creditor. There is also evidence that the petitioning creditor is a secured creditor. However, the petitioning creditor has said in the petition that it is willing to surrender its security for the benefit of creditors generally, in the event an order for the administration of the estate in bankruptcy is made. The petition sets out the particulars of the security, being a charge over the respondent debtor’s interest in the Great Southern Plantations 2004 Managed Investment Scheme.
The petition in this case is verified by a person who has knowledge of the facts. There is an affidavit sworn by Stephen Flamer Smith on 11 December 2012. He says that he is a senior legal officer employed by the applicant creditor and has access to the books and records of the applicant creditor. His affidavit sets out that there was a liquidated sum due. At paragraph 18, it explains that the deceased debtor was personally present in Australia at the time of his death.
There is a requirement to serve a sealed copy of the petition on the legal personal representative of the debtor, or if there is no legal personal representative, upon such person as the court directs. In this case, there is no legal personal representative. Cynthia Feldman was granted letters of administration ad colligendum bona for limited purposes. She has, in fact, been served. It seems that Cynthia Feldman is the person most likely to be in a position to become the legal personal representative of the respondent debtor if she wished to take that step. However, she does not.
Subsection 244(10) of the Bankruptcy Act 1966 states that:
The Court may, if it is satisfied that there is no legal personal representative of the deceased debtor and that there are special circumstances that justify its so doing, by order dispense with service of the petition, either unconditionally or subject to conditions.
In this case, the evidence shows that there is no legal personal representative of the deceased debtor. The petitioner submits that the special circumstances that justify the court in dispensing with service in this case, are that there is no suggestion that anyone else has an interest in the respondent debtor’s estate. Cynthia Feldman has been served. She did have legal representation and those legal representatives have now said that their only issue with the orders sought are the jurisdictional matters that have already been addressed and that otherwise, their client would abide the order of the court. In those circumstances, it seems to me that it is appropriate to dispense with any further service.
Under s.244(11) of the Bankruptcy Act 1966:
At the hearing of the petition, the Court shall require proof of:
a) the matters stated in the petition (for which purpose the Court may accept the affidavit verifying the petition as sufficient);
b) service of the petition, unless service has been dispensed with; and
c)the fact that the debt or debts to which the petition relates, is or are still owing;
and if it is satisfied with the proof of those matters, may make an order that the estate be administered under this Part.
There is an affidavit of service of the petition on Cynthia Feldman. Otherwise, service of the petition will be dispensed with. There is also an affidavit sworn today showing that the debt to which the petition relates is still owing. I am just satisfied that those affidavits establish the relevant matters.
I also note r.11.02(4) of the Federal Circuit Court (Bankruptcy) Rules 2006, which requires an affidavit of search of the personal insolvency index. There is an affidavit sworn today indicating that the personal insolvency index has been searched and that there are no relevant matters, other than the creditor’s petition in this proceeding.
It does not seem to me that there is any other sufficient cause pursuant to which the sequestration order ought not be made. In all the circumstances, I consider it is appropriate to make the orders sought in the petition.

I certify that the preceding twenty-one (21) paragraphs are a true copy of the reasons for judgment of Judge Riley.

Associate:

Date: 8 May 2013