Cull (Trustee), in the matter of Houghton (Bankrupt)

[2025] FedCFamC2G 709

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Cull (Trustee), in the matter of Houghton (Bankrupt) [2025] FedCFamC2G 709

File number(s):

MLG 571 of 2025

Judgment of:

JUDGE J YOUNG

Date of judgment:

19 May 2025

Catchwords:

 BANKRUPTCY – application of trustee under s 146 of the Bankruptcy Act 1966 (Cth) for distribution of dividends – where no statement of affairs filed by the Bankrupt with the Official Receiver – application heard ex parte – orders that the distribution of dividends proceed as if the Bankrupt had filed a statement of affairs as required by the Act – application granted.

Legislation:

 Bankruptcy Act 1966 (Cth) ss 19(1), 54(1), 109, 140, 145, 145(3), s 145(6), 146, 153A, 254(2), 254(2)(a).

Bankruptcy Regulations 2021 (Cth) reg 72

Cases cited:

Barnet v Zhang [2017] FCA 924

David Ian Mansfield As Trustee of The Bankrupt Estate of Maria Fokas v Fokas [2019] FCCA 134

Quin as Trustee of the Bankrupt Estate of Philip Chill [2020] FCCA 2652

Division:

Division 2 General Federal Law

Number of paragraphs:

43

Date of hearing:

15 May 2025

Place:

Melbourne

Counsel for the Applicant:

Mr Segal

Solicitor for the Applicant:

Scanlan Carroll Lawyers

ORDERS

MLG 571 of 2025

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

IN THE MATTER OF CAROLINE MARGARET HOUGHTON, BANKRUPT

INNIS ANOTHY CULL AS TRUSTEE OF THE BANKRUPT ESTATE OF CAROLINE MARGARET HOUGHTON

Applicant

ORDER MADE BY:	JUDGE J YOUNG
DATE OF ORDER:	19 MAY 2025

THE COURT ORDERS THAT:

1.Pursuant to s 146 of the Bankruptcy Act 1966 (Cth) (Act), and subject to Orders 2 to 4 herein, the Applicant, as Trustee of the Bankrupt Estate of Caroline Margaret Houghton (Bankrupt Estate), distribute a first and final dividend amongst the creditors who proved their debts in the Bankrupt Estate in accordance with Div 5 of Part VI of the Act as if Caroline Margaret Houghton had filed a statement of affairs and those creditors had been stated to be creditors in it.

2.By 4:00pm on 2 June 2025, the Applicant give notice to each person who to his knowledge might be a creditor of the Bankrupt Estate, but who has not, as at the date of this Order, proved their debt, of the intention to declare a first and final dividend in the Bankrupt Estate.

3.The Applicant shall not distribute a first and final dividend in the Bankrupt Estate until at least 21 days have elapsed after the date upon which the notice pursuant to Order 2 is given.

4.Any interested persons have liberty to apply within 14 days after the date upon which the notice pursuant to Order 2 is given.

5.The Applicant’s costs of and incidental to this Application be part of the costs of the Applicant’s administration of the Bankrupt Estate and are to be paid out of the Bankrupt’s Estate as a priority payment in accordance with s 109 of the Act.

6.After distribution of a first and final dividend pursuant to Order 1, and deduction of expenses and remuneration pursuant to Order 5, the Applicant deal with all surplus moneys in accordance with s 254(2) of the Act and reg 72 of the Bankruptcy Regulations 2021 (Cth).

Note: The form of the order is subject to the entry in the Court’s records.

Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).

REASONS FOR JUDGMENT

JUDGE J YOUNG

INTRODUCTION

1. Before the Court is an Application by the trustee of the bankrupt estate of Caroline Margaret Houghton (Bankrupt Estate) pursuant to s 146 of the Bankruptcy Act 1966 (Cth) (Act) filed on 24 February 2025. The trustee, Mr Innis Anthony Cull (Trustee), seeks orders permitting the distribution of a first and final dividend amongst those creditors of the Bankrupt Estate who prove their debts in accordance with Division 5 of Part IV of the Act as if Ms Caroline Margaret Houghton (Bankrupt) had filed a statement of affairs and those creditors had been stated to be creditors in her Bankruptcy.

   RELEVANT BACKGROUND

2. On 16 June 2022, an order was made for the sequestration of the Bankrupt Estate and for Mr Cull and Mr Andrew Yeo to be appointed as trustees.

3. On 6 September 2024, the Federal Court of Australia made orders removing Mr Yeo as joint trustee, rendering Mr Cull sole trustee.

4. The petitioning creditor with respect to the Bankrupt Estate was B P Australia Pty Ltd, which was owed a debt in the sum of $34,433.92.

5. The only asset in the Bankrupt Estate was a property located at A Street, B Suburb, NSW (the Property) which was sold by mortgagee sale.

6. On 10 January 2024, the Property settled and secured creditors and mortgagee costs were paid from the sale of the Property. The Bankrupt Estate subsequently received surplus funds of $345,260.47.

7. On 14 March 2024, the surplus funds were transferred to the Bankrupt Estate. From that amount the following costs were paid:

   (a)statutory realisation charge in the amount of $25,687.00;

   (b)legal costs in the amount of $9,992.46; and

   (c)petitioning creditor costs in the amount of $13,156.20.

8. Following the above distributions, an amount of $296,424.81 remains in the Bankrupt Estate and is available for other unsecured creditors and costs associated with this Application.

   Attempts to communicate with the Bankrupt

9. The evidence before the Court is as follows.

10. On 21 June 2022, 11 July 2022 and 14 March 2024, the Trustee sent a letter to the Bankrupt by post to the Property and by email, notifying her of her obligation to complete a statement of affairs. The Bankrupt did not respond and a statement of affairs was not filed.

11. On 29 February 2024, following the sale of the Property, Ms Amanda Harrington of Scanlan Carroll received a telephone call from Mr Mark Gabriel, who claimed he was the partner of the Bankrupt and that he owned part of the Property. Mr Gabriel sought to determine the status of payment of the proceeds from the sale.

12. The Trustee attempted to contact Mr Gabriel on the following occasions:

    (a)three telephone calls between 14 March 2024 and 2 April 2024;

    (b)via text message on 3 April 2024;

    (c)via text message on 3 May 2024; and

    (d)by telephone on 12 June 2024.

13. On each of the abovementioned occasions these phone calls and text messages went unanswered by Mr Gabriel.

14. The Trustee instructed Scanlan Carroll Lawyers to contact TG Legal & Technology (TG Legal), the solicitor of the mortgagee from the sale of the Property, in an attempt to obtain up-to-date contact details for the Bankrupt. On 18 April 2024, TG Legal advised that they were unable to release such contact details due to privacy.

15. On 20 September 2024, the Trustee attempted to telephone the Bankrupt on her last known mobile number. The telephone did not ring but the Trustee was able to leave a message and did so informing the Bankrupt that he was the trustee of her estate, he wished to discuss finalisation of her estate and returning surplus funds to her.

16. Neither the Bankrupt nor Mr Gabriel have contacted the Trustee in response to the Trustee’s attempts to contact them.

17. The Trustee has otherwise been unable to make any further determination as to the Bankrupt’s whereabouts.

18. The Bankrupt has at no time filed a statement of affairs.

    Identification of and notice to creditors

19. The Trustee deposed to making various enquiries and actions to identify creditors of the Bankrupt, including:

    (a)a letter to Equifax to obtain a copy of the bankrupt’s credit file;

    (b)a search of the ASIC register to identify company officeholdings and shareholdings;

    (c)a search of the Personal Property Securities Register;

    (d)a freedom of information request to the Australian Taxation Office;

    (e)a letter to all major banking institutions;

    (f)letters to the Office of the Sherrif of NSW, the Commonwealth Department of Public Prosecutions and the NSW State Revenue Office; and

    (g)a letter to the Bankrupt’s former accountant, E. Elias & Associates Sydney Pty Ltd.

20. As a result of the Trustee’s enquiries, the Trustee deposes to having received proofs of debt totalling $134,623.73 from the following creditors:

    (a)B P Australia Pty Ltd in the amount of $33,877.04;

    (b)Pioneer Credit Solutions Pty Ltd in the amount of $38,024.11;

    (c)Deputy Commissioner of Taxation in the amount of $54,810.27;

    (d)E. Elias & Associates Sydney Pty Ltd in the amount of $2,150.00; and

    (e)HSBC Bank Australian Limited in the amount of $5,762.31 (collectively, Known Creditors).

21. The Trustee further deposes to having determined the following potential creditors that have proofs outstanding, totalling $38,697.77:

    (a)Commonwealth Bank of Australia in the amount of $115.72;

    (b)St George Bank in the amount of $4,117.05;

    (c)Credit Corp Services in the amount of $3,929.00;

    (d)The Trustees of the Roman Cath in the amount of $9,217.00; and

    (e)Caltex Australia Petroleum Pty Ltd in the amount of $21,319.00 (collectively, Potential Creditors).

22. On 14 June 2024, the Trustee caused a Notice of Intention to Declare a First and Final Dividend to Creditors (Notice) to be published in The Australian newspaper. The Trustee deposes that no contact from creditors or proofs of debt have been received in response to the Notice.

23. On 16 December 2024, the Trustee provided a Report to Creditors which sought approval of the Trustee’s anticipated future renumeration and internal disbursements which is estimated to be $90,259.40 including GST, which has been approved by the creditors.

24. In addition, Scanlan Carroll Lawyers, solicitors for the Trustee, depose to unbilled work in progress which has already been completed and incurred in relation to the Application before the Court, in the amount of approximately $23,000, and are seeking distribution dividends pursuant to s 146 of the Act.

    PROCEEDINGS IN THIS COURT

25. On 24 February 2025, the Trustee filed the Application with the Court seeking orders pursuant to s 146 of the Act.

26. The Application was supported by the following material:

    (a)an affidavit of the Trustee filed on 24 February 2025; and

    (b)an affidavit of Ms Alexandra Vrdoljak of Scanlan Carroll Lawyers filed on 1 April 2025.

27. At the hearing, the Applicant was represented by Mr Segal of Counsel, there being no appearance by the Bankrupt.

    LEGAL PRINCIPLES

28. Where a sequestration order is made, the person against whose estate it is made is obliged, within 14 days of being notified of the bankruptcy, to make and file a statement of affairs with the Official Receiver and to furnish a copy of that statement on the trustee: s 54(1) of the Act.

29. Part VI of the Act deals with the administration of property and enables (where possible) the efficient distribution of dividends to creditors from the proceeds of property that is identified, recovered and realised by the trustee.

30. A trustee is required to declare and distribute dividends “with all convenient speed” amongst the creditors who have proved their debts: s 140 of the Act. This requirement is in addition to a trustee’s overarching duty of efficient administration pursuant to s 19(1) of the Act.

31. Section 145 of the Act provides that a trustee shall declare and distribute a final dividend when the trustee has realised all the property of the bankrupt (or so much as can be realised in the trustee’s opinion without needlessly prolonging the trusteeship). Before declaring and distributing a final dividend, a trustee shall give notice to any creditor or potential creditor who has not proved their debt that if that person does not prove their debt within the period specified, the trustee will declare a final dividend without regard to that person’s claim: s 145(3) of the Act. The trustee shall not declare the dividend “until after the expiration of 21 days after the expiration of the period specified in the notice”: s 145(6) of the Act.

32. When a bankrupt fails to file a statement of affairs as required by the Act, the Court is empowered to order the distribution of dividends amongst creditors who have proved their debt. Specifically, s 146 of the Act provides:

    Where a bankrupt has failed to file a statement of his or her affairs as required by this Act, the Court may, on the application of the trustee, upon such terms as it thinks fit, order that distribution of dividends amongst the creditors who have proved their debts shall proceed in accordance with this Division as if the bankrupt had filed a statement of his or her affairs and those creditors had been stated to be creditors in it.

33. In Quin as Trustee of the Bankrupt Estate of Philip Chill [2020] FCCA 2652, Kelly J summarised the authorities on the purpose and application of s 146, at [31] – [32]:

    In Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968, Gyles J held at [4] that the purpose of s 146 was “to give the Court the means of ensuring that the absence of a statement of affairs does not prejudice those with an interest in the bankrupt’s affairs.” In Barnet (Trustee), in the matter of Zhang (Bankrupt) v Zhang [2017] FCA 924 at [22], Lee J observed that s 146 was “intended to facilitate the distribution of dividends among the creditors of the bankrupt in circumstances where the trustee has not had the benefit of a statement of affairs prepared by the bankrupt”: citing Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1 at 4 [14] per Sackville J.

    In Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1 at [19], Sackville J held that Court must be satisfied that it is appropriate to make an order. His Honour stated: “The Court may need to be satisfied, for example, that creditors have been notified of the application and have had an opportunity to be heard (although ordinarily the application would be made in the interests of creditors). As in this case, the Court might require evidence that the trustee has taken appropriate steps to ascertain whether there are creditors, other than those who have come to its attention by filing a proof of debt or otherwise.” This reasoning was endorsed in Zhang [2017] FCA 924.

    CONSIDERATION

    Application heard ex parte

34. This Application was heard ex parte. It is unnecessary for the Bankrupt to be named as a party to the Application or for her to be served with it: Barnet v Zhang [2017] FCA 924, [28] – [29]. Absent an objector, the applicant’s evidence is unchallenged.

35. In all of the circumstances, and with particular reference to the matters in paragraphs [10] – [19] above and the period of almost three years since compliance with s 54(1) was required, the Court determined to proceed ex parte.

    Section 146 application

    Has the Bankrupt failed to file a statement of affairs?

36. On the evidence before the Court, the Bankrupt has failed to file a statement of affairs as required by the Act. Nearly three years have passed since the Bankrupt was first requested to file a statement of affairs. In that period the Trustee sent a number of letters to the Property and to the Bankrupt’s email address seeking a statement of affairs. I am satisfied that the Bankrupt has been notified and reminded on multiple occasions of her obligation to file a statement of affairs and, notwithstanding those attempts made by the Trustee, she has not done so.

37. Accordingly, the jurisdiction to make an order pursuant to s 146 of the Act is enlivened.

    Discretionary considerations

38. As submitted by the Trustee, the delay in distribution of funds from the Bankrupt Estate operates to the prejudice of the Known Creditors. The prejudice arises by reason of the failure of the Bankrupt to file a statement of affairs which would, but for an order under s 146, present as an obstacle to the declaration and payment of a final dividend that the Trustee is otherwise in a position to pay. There is no countervailing reason why a final dividend ought not be paid or why relief ought not be given under s 146 so as to permit finalisation of the administration of the Bankrupt Estate.

39. As to the terms of an order the Court may make, absent a statement of affairs completed by the Bankrupt, there is some uncertainty as to the identity of the creditors in the Bankrupt’s Estate. As at 23 February 2025, the Trustee has identified five Known Creditors and identified a further five Potential Creditors. The Trustee deposes that each of these Potential Creditors will be notified of his intention to declare and distribute a final dividend but does not propose any orders to facilitate this. As this matter proceeded ex parte, I consider it appropriate that there be an order that the Trustee notify each of the Potential Creditors before the first and final dividend in the Bankrupt Estate is declared and distributed. I am otherwise satisfied that the Trustee has taken proper steps to notify the Known Creditors, together with those who might yet be ascertained, of their opportunity to file a proof of debt and to do so before a final dividend is declared and distributed.

40. The evidence of the Trustee is that there is a surplus available. The Trustee anticipates that there will be a surplus of funds totalling between $14,000 and $43,000, subject to the number of Potential Creditors who may file a proof of debt. In those circumstances, the Trustee seeks that any surplus be paid to Australian Financial Security Authority pursuant to s 254(2)(a) of the Act and there be a declaration that upon payment of the surplus money the Applicant be at liberty to annul the bankruptcy under s 153A of the Act.

41. The Trustee further seeks costs of and incidental to this Application to be met from the surplus out of the Bankrupt Estate as a priority payment in accordance with s 109 of the Act.

42. In all the circumstances, I consider it is appropriate to make the orders sought by the Trustee and that the orders sought are within the scope of the terms and purpose of s 146 of the Act: David Ian Mansfield As Trustee of The Bankrupt Estate of Maria Fokas v Fokas [2019] FCCA 134 at [6]-[9]. However, given the terms of s 153A of the Act, I do not consider that a declaration to the effect sought by the Trustee is necessary.

    DISPOSITION

43. Accordingly, for the reasons set out above, I make the orders set out at the commencement of this judgment.

I certify that the preceding forty-three (43) numbered paragraphs are a true copy of the Reasons for Judgment of Judge J Young.

Associate:

Dated:       19 May 2025