Donnelly v Official RECEIVER
[2009] FMCA 1173
•17 November 2009
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| DONNELLY v OFFICIAL RECEIVER | [2009] FMCA 1173 |
| BANKRUPTCY – Annulment under s.153B – where trustee’s costs remain unpaid. |
| Bankruptcy Act 1966, s.153B |
| Swain v Official Trustee [2003] FMCA 13 Kathleen Wong; Ex Parte Wong v Robinson BC9502840 |
| Applicant: | KERRY GARTH DONNELLY |
| Respondent: | OFFICIAL RECEIVER |
| Interested Party: | PAUL LEROY AS TRUSTEE OF THE BANKRUPT ESTATE OF KERRY GARTH DONNELLY |
| File Number: | SYG 1956 of 2009 |
| Judgment of: | Raphael FM |
| Hearing date: | 17 November 2009 |
| Date of Last Submission: | 17 November 2009 |
| Delivered at: | Sydney |
| Delivered on: | 17 November 2009 |
REPRESENTATION
| Counsel for the Applicant: | Mr G Ng |
| Solicitors for the Applicant: | DarganKelly Lawyers |
| Solicitors for the Interested Party: | ERA Legal |
ORDERS
The Applicant causes to be paid the sum of $16,280.83 in cleared funds to Paul Leroy as Trustee of the Bankrupt Estate of Kerry Garth Donnelly on or before 1 December 2009.
Provided that Order 1 is complied with, the Bankruptcy of Kerry Garth Donnelly be annulled pursuant to s153B of the Bankruptcy Act 1966 (Cth) on 1 December 2009.
In the event the payment is not made the proceedings be listed for further directions on 8 December 2009.
The parties are to bring in Minutes of Order annulling the bankruptcy in the event that payment is made.
The Court notes that in the event that payment is made there will be no order as to costs.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1956 of 2009
| KERRY GARTH DONNELLY |
Applicant
And
| OFFICIAL RECEIVER |
Respondent
| PAUL LEROY AS TRUSTEE OF THE BANKRUPT ESTATE OF KERRY GARTH DONNELLY |
Interested Party
REASONS FOR JUDGMENT
There comes before me an application under s.153B of the Bankruptcy Act 1966 (the “Act”) for the annulment of a bankruptcy which came about by way of the filing of a debtor’s petition. The only significant issue in the matter is whether I should make orders requiring the bankrupt to pay the agreed costs of the Trustee before the annulment takes place or whether I should annul the bankruptcy and make an order for the payment of those agreed costs which, if they are not paid, the Trustee would be entitled to enforce either by way of lien on the property of the bankrupt that he has in his possession or by a separate action.
In the helpful submissions of the Applicant that were provided to the court on 12 October 2009 the court was told that the Applicant filed his own debtor’s petition because he wrongfully believed that he was indebted to the Deputy Commissioner for Taxation in respect of the taxation liabilities of a trust. He had apparently received some inappropriate advice from so called “specialist in insolvency matters”. If the bankrupt had not failed to defend the proceedings in which the judgment was obtained then it is understood that he would not have been insolvent at the time he filed the debtor’s petition.
I am satisfied from reading the affidavits of Mr Donnelly, which were filed in the case, and the submissions which I have referred to, that this is an appropriate case where the court would order that the bankruptcy be annulled pursuant to s.153B on the grounds that the petition ought not to have been presented. I have considered the authorities cited and agree with the advocate for the applicant that Swain v Official Trustee [2003] FMCA 13, a decision of McInnis FM, is probably the most apt. I have also considered the decision of Kathleen Wong; Ex Parte Wong v Robinson BC9502840, an unreported decision of Sackville J on
15 September 1995 where his Honour, whilst agreeing to an annulment, felt that this should be conditional upon the debtor making arrangements for the payments of the Trustee’s costs. What his Honour did in that case was to adjourn the case for 14 days so that appropriate arrangements could be made. His Honour said in his conclusion:
“I propose to defer making these orders for 14 days to give the applicant an opportunity, should she be so advised, to make appropriate arrangements for payment of outstanding fees, expenses and charges of the bankruptcy, and for payment of the balance of the debt due to the creditor. Arrangements would also need to be made in relation to the costs of the current application. If, at the expiration of the 14 days, appropriate arrangements are made, I would be prepared to make an order annulling the bankruptcy. If they are not, I shall make orders dismissing the application and ordering that the costs of the trustee and the creditor should be paid out of the applicant’s estate.”
Earlier, his Honour had said:
“I think it is undesirable that either the trustee or the creditor, having regard to the applicant’s course of conduct, should have to resort to further court proceedings, to recover the expenses of the bankruptcy or the balance of the debt.”
Whilst it is not entirely clear, I take from the extracted sections of his Honour’s judgment that, when he referred to arrangements, he expected arrangements that would establish the payment of the debt with certainty as opposed to some general agreement to pay the debt.
I followed the decision of Sackville J when this matter was first before me. I adjourned it so that arrangements could be made for the payment of the amount due and for agreement as to the amount due to the Trustee. Agreement has been reached as to the amount due and the parties have also agreed that the debt will be paid by 1 December. The only outstanding issue is whether or not I should annul the bankruptcy now with an order that the debt be paid by 1 December or whether I should wait until after 1 December to ensure that the debt is paid before the bankruptcy is annulled.
The applicant debtor argues for the latter, the trustee for the former. I have a concern about making an order that a bankrupt pays money to a Trustee whilst that person is still a bankrupt. How does that person obtain the money? On the other hand I agree with the views expressed by Sackville J that it would be inappropriate for this court merely to set up a situation whereby the Trustee has to bring further proceedings in order to obtain these costs and expenses. I believe that that view is the stronger. I will make the following orders:
i)The Applicant causes to be paid the sum of $16,280.83 in cleared funds to Paul Leroy as Trustee of the Bankrupt Estate of Kerry Garth Donnelly on or before 1 December 2009.
ii)Provided that Order 1 is complied with, the Bankruptcy of Kerry Garth Donnelly be annulled pursuant to s153B of the Bankruptcy Act 1966 (Cth) on 1 December 2009.
iii)In the event the payment is not made the proceedings be listed for further directions on 8 December 2009.
iv)The parties are to bring in Minutes of Order annulling the bankruptcy in the event that payment is made.
The Court notes that in the event that payment is made there will be no order as to costs.
I certify that the preceding six (6) paragraphs are a true copy of the reasons for judgment of Raphael FM
Associate:
Date: 26 November 2009
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