Daevys v Official Trustee - [2010] FMCA 906

FEDERAL MAGISTRATES COURT OF AUSTRALIA

DAEVYS v OFFICIAL TRUSTEE

[2010] FMCA 906

BANKRUPTCY – Application for annulment – whether the debtor’s petition presented by the applicant should have been accepted considered.

Bankruptcy Act 1966 (Cth), ss.55, 153B

Re Gada Abbas; ex parte Official Trustee in Bankruptcy [1995] FCA 1263

Applicant:

STUART DAEVYS

Respondent:

OFFICIAL TRUSTEE

File Number:

SYG 2096 of 2010

Judgment of:

Driver FM

Hearing date:

18 November 2010

Delivered at:

Sydney

Delivered on:

18 November 2010

REPRESENTATION

The Applicant appeared in person

Solicitors for the Respondent:

Ms S Nash
Sally Nash & Co

ORDERS

The Court directs that the name of the respondent be changed to the Official Trustee.
The annulment application is dismissed.
The respondent trustee’s costs of the annulment application be costs in the administration of the estate.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 2096 of 2010

STUART DAEVYS

Applicant

And

OFFICIAL TRUSTEE

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me an application under s.153B of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) for the annulment of the bankruptcy of Stuart Daevys. The application is supported by two affidavits by Mr Daevys, the first filed on 24 September 2010 and the second filed on 15 November 2010 which is responsive to an affidavit by Alan Ma filed on 29 October 2010. The application is opposed by the respondent, the Official Trustee. That opposition is supported by the affidavit of Mr Ma, which has annexed to it a bundle of documents concerning the administration of the bankrupt estate.
Mr Daevys presented a debtor’s petition on 2 March 2004 which as accepted. On 23 February 2006 Thelma Laurie Pritchard died. There were funds passing to Mr Daevys from that deceased estate which were not provided to the Official Trustee for the purposes of the administration of the bankruptcy. Mr Daevys was discharged from bankruptcy on 2 March 2007. On 23 November 2009 Mr Daevys instituted proceedings in the Family Court against his spouse seeking to adjust property interests in real estate at Mt White. That interest had not been disclosed to the trustee and Mr Daevys gave a different residential address to the trustee. The interest became the subject of concern to the trustee who instituted other proceedings. On 24 September 2010 the present annulment application was made. Mr Daevys was cross‑examined on his affidavit and both parties made submissions.
A few things are clear. The first is that Mr Daevys made a calculated decision to seek the protection of bankruptcy in view of litigation commenced against him and a company with which he was associated, which, so he judged, had potentially very serious consequences. In the event leave was given in those proceedings for the proceedings to be continued and Mr Daevys pursued the proceedings on his own behalf. He was initially successful, but unsuccessful on appeal and the proceedings were ultimately settled without any benefit flowing to either party. Mr Daevys is concerned about the administration of the bankrupt estate and in particular he is concerned that his apparent interest in the real estate, which was not disclosed to the trustee in bankruptcy, will be absorbed inappropriately in the payment of debts (for which proofs of debt have been lodged) and in payment of the trustee’s fees (and possibly interest).
Section 153B provides:
(1) If the Court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.
(2) In the case of a debtor's petition, the order may be made whether or not the bankrupt was insolvent when the petition was presented.
There are potentially two issues to resolve – first, whether the petition should have been presented or accepted and, if not, the exercise of the Court’s discretion to annul. Issues relevant to that discretion in both the annulment of creditor’s petitions and debtor’s petitions have been dealt with in earlier proceedings. Relevant factors include whether the bankrupt had the benefit of advice or representation before the bankruptcy commenced, the commercial morality of the bankrupt prior to the administration of the estate and the conduct of the bankrupt during the course of the bankruptcy, whether the bankrupt was, at the time of the bankruptcy, insolvent, and whether there is any proposal for the payment of fees and charges incurred by the trustee in the course of the administration.
In this case, the annulment application falls at the first hurdle in that Mr Daevys has been unable to persuade me that the debtor’s petition should not have been presented or accepted. I was taken in submissions to the decision of the Federal Court in Re Gada Abbas; ex parte Official Trustee in Bankruptcy [1995] FCA 1263. I am unable to distinguish this case from the case of Abbas, save that the process of accepting a debtor’s petition is now an administrative rather than a judicial one. The petition in this case was in proper form when presented. Although Mr Daevys has asserted that he was at the time labouring under some form of mental disability, he was able to pursue ongoing litigation on his own behalf with some success. The scant medical evidence that he presented was too general to be persuasive.
It is tolerably clear, in my view, that the Official Receiver was entitled to accept the petition pursuant to s.55 of the Bankruptcy Act. Mr Daevys was personally present at the time and had lodged a statement of affairs. It is noteworthy that the statement of affairs was deficient in that Mr Daevys did not disclose his interest in the property at Mt White in which he is currently living. Mr Daevys conceded, in evidence, that this was an intentional non-disclosure.
It is also noteworthy that a substantial sum flowed to Mr Daevys from the deceased estate, which was not provided to the Official Trustee, although a small amount was ultimately recovered. As to solvency, the assets disclosed by Mr Daevys appear to me to have been inchoate as they comprised essentially intellectual property. Mr Daevys is concerned at the non-pursuit of people he describes as debtors that might have realised some or all of that inchoate property, but given the apparent uncertainties in relation to such pursuit, it does not appear to me that the trustee was wrong not to take recovery action.
The only asset from which the current estimated creditor’s claims of $95,257.95 and the trustee’s costs of the administration could be paid is from the sale of the property at Mt White, which Mr Daevys is seeking to prevent by this present application.
I have concluded that the debtor’s petition was properly accepted and it follows that the annulment application should be dismissed, and that further steps should be taken to realise the asset comprised in the real estate.
I will order that the annulment application is dismissed.
I will further order that the respondent trustee’s costs of the annulment application be costs in the administration of the estate.

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Driver FM

Date: 23 November 2010