Cunningham v Green
[2011] FMCA 515
•22 June 2011
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| CUNNINGHAM v GREEN | [2011] FMCA 515 |
| BANKRUPTCY – Application by respondent trustee in bankruptcy for distribution of dividends – failure by bankrupt to file statement of affairs – obligations imposed upon trustees pursuant to s.146 of the Bankruptcy Act 1966 (Cth). |
| Bankruptcy Act 1966 (Cth), ss.51(1), 140(1), 146 |
| Official Trustee in Bankruptcy v Thor [2006] FMCA 1637 Re Shaw; Ex parte Official Trustee in Bankruptcy [1999] FCA 968 Re Sturt; Ex parte Official Trustee in Bankruptcy [2001] FCA 1649 |
| Applicant: | JOHN WILLIAM CUNNINGHAM |
| Respondent: | TONI JOY GREEN |
| File Number: | BRG 471 of 2011 |
| Judgment of: | Burnett FM |
| Hearing date: | 22 June 2011 |
| Date of Last Submission: | 22 June 2011 |
| Delivered at: | Brisbane |
| Delivered on: | 22 June 2011 |
REPRESENTATION
| Counsel for the Applicant: |
| Solicitors for the Applicant: | Ferguson Cannon Lawyers |
| There was no appearance by the Respondent |
ORDERS
That pursuant to s.146 of the Bankruptcy Act 1966 (Cth) a distribution of dividends be made available to those creditors of the bankrupt estate of the Respondent who prove their debts in accordance with Part VI Division 5 of the Bankruptcy Act 1966 (Cth), as if the bankrupt had filed a statement of affairs in accordance with the prescribed form and those creditors had been stated to be creditors in it.
That the costs of the Applicant be taxed from the bankrupt estate of the Respondent.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT BRISBANE |
BRG 471 of 2011
| JOHN WILLIAM CUNNINGHAM |
Applicant
And
| TONI JOY GREEN |
Respondent
REASONS FOR JUDGMENT
(Revised from transcript)
This application by the respondent, Toni Joy Green’s trustee in bankruptcy, John William Cunningham, seeks orders pursuant to s.146 of the Bankruptcy Act 1966 (Cth) (the Act) for the distribution of dividends to be made to creditors of the bankrupt estate of the bankrupt in favour of those whose debts have been proved in accordance with Part VI Division 5 of the Act. Section 146 provides that 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 among 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.
In this instance the bankrupt was sequestrated by order of the court made on 11 February 2009. The applicant trustee was also appointed on that date. Following appointment, the trustee made numerous requests and attempts for the bankrupt to complete and file a statement of affairs. Notwithstanding those efforts, no statement of affairs has been filed. In addition, the Insolvency and Trustee Service Australia also attempted to locate the bankrupt to prosecute her for failing to make out her statement and file her statement of affairs pursuant to s.51(1) of the Act. It seems nothing has come of those efforts.
The applicant has attempted to identify the creditors of the bankrupt estate and as best as can be ascertained by reference to general advertising, those creditors have been identified. The assets of the estate also have been identified. The only asset appears to be cash in the amount of $14,423.83. The estate is obviously a small estate with a limited number of creditors. The administration of the estate is complete, save for the distribution of the dividend to the creditors who have proven in the estate. Given that the sequestration order was made almost two and a half years ago and given the size of the estate, it is fair to infer that the delay in finalising its administration is not only inordinate, but it is also causing prejudice to the creditors, who in this instance are owed only relatively small sums of money.
The principal creditors who have been identified at this time by the trustee are the petitioning creditor, Schultz Toomey O’Brien Lawyers; (a proof of debt has been admitted for them in the sum of $5,000.00); and, the Westpac Banking Corporation (a proof of debt has been allowed of $241.31). There are no other proofs of debt. The power of the court may only be utilised under s.146 if the bankrupt has failed to file a statement of affairs. That is the case here. The bankrupt has been afforded numerous opportunities over a substantial period to do so, but notwithstanding those opportunities, has failed to do so. It seems in those circumstances it is appropriate that the court consider this application.
Further I am mindful of the obligations imposed upon trustees pursuant to s.140(1) of the Act, which require it deal “with all convenient speed” to declare and distribute dividends among creditors who have proved their debts. It follows that the exercise of the power under s.146 in this instance is to complement the duty imposed under s.140. In Re Shaw; Ex parte Official Trustee in Bankruptcy[1] it was held that the purpose of s.146 is:
“… 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.”
[1] [1999] FCA 968
Further, in Re Sturt; Ex parte Official Trustee in Bankruptcy[2] it was held:
“Section 146 is 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.”
[2] [2001] FCA 1649
Concerning the level of satisfaction required of the court, the observations of the court in Official Trustee in Bankruptcy v Thor[3] provide relevantly as follows:
“Of course, on any application under section 146 of the Bankruptcy Act the court must be satisfied that it is appropriate to make an order. 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.”
[3] [2006] FMCA 1637
Clearly in this case the creditors have and continue to be prejudiced as a result of the bankrupt’s failure to complete his statement of affairs. In that regard I am mindful of the quantum of their claims and the quantum of the debt of the bankrupt’s estate. The creditors have been notified of this application, and I am satisfied that the applicant has taken sufficient steps to locate any other remaining creditors.
It follows in the circumstances that I ought make orders in terms of the draft which has been submitted and which I will initial and place with the papers.
I certify that the preceding nine (9) paragraphs are a true copy of the reasons for judgment of Burnett FM
Date: 14 July 2011
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