Donovan v Brown

Case [2021] FCA 494

FEDERAL COURT OF AUSTRALIA

Donovan v Brown [2021] FCA 494

File number: WAD 299 of 2020
Judgment of: JACKSON J
Date of judgment: 10 May 2021
Catchwords: BANKRUPTCY AND INSOLVENCY - creditors' petition for sequestration order of debtor's estate - debtor claimed to have sufficient assets to satisfy debt - no evidence that assets available or readily realisable - irregularities in petition and service found to be formal defects only - sequestration order made
Legislation:

Bankruptcy Act 1966 (Cth) ss 43, 47, 52, 306

Federal Court (Bankruptcy) Rules 2016 (Cth) rr 4.02, 4.05

Federal Court Rules 2011 (Cth) rr 1.34, 2.15, 4.05, 10.31
Cases cited:

ANZ Banking Group Ltd v Elferkh [1999] FCA 1049; (1999) 92 FCR 195

Kitay, in the matter of Frigger (No 2) [2018] FCA 1032

Kleinwort Benson Australia Ltd v Crowl (1988) 165 CLR 71

Metledge v Hopkins [2020] FCA 561
Division: General Division
Registry: Western Australia
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Number of paragraphs: 41
Date of hearing: 10 May 2021
Counsel for the Applicants: Mr AJ Dique
Solicitor for the Applicants: Hammond Legal
Counsel for the Respondent: The respondent appeared in person
Counsel for the Supporting Creditor: Ms BA Taylor
Solicitor for the Supporting Creditor: Edwards Mac Scovell Legal

ORDERS

WAD 299 of 2020
BETWEEN:

CLARENCE DONOVAN

First Applicant

JOAN DONOVAN

Second Applicant
AND:

CHRISTOPHER MICHAEL BROWN

Respondent

EMPIRE CAPITAL PARTNERS PTY LTD (ACN 159 992 328)

Supporting Creditor

ORDER MADE BY:

JACKSON J

DATE OF ORDER:

10 MAY 2021

THE COURT ORDERS THAT:

1.The court makes a sequestration order under the Bankruptcy Act 1966 (Cth) against the estate of Christopher Michael Brown.

2.The applicants' costs, including any reserved costs, are fixed in the sum of $4,036.09, to be paid from the bankrupt estate of Christopher Michael Brown in accordance with the Act.

THE COURT NOTES THAT:

1.The date of the act of bankruptcy is 27 November 2020.

2.John Gervase Shanahan has consented to act as the trustee of the estate of Christopher Michael Brown by way of a notice of consent to act as trustee signed on 27 April 2021 and filed on 30 April 2021, which has not been revoked.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


REASONS FOR JUDGMENT

(edited from the transcript)

JACKSON J:

  1. By creditors' petition, the applicants, Clarence and Joan Donovan, seek a sequestration order against the estate of the respondent, Christopher Michael Brown.  The basis of the petition is a judgment debt in the Magistrates Court of Western Australia for $82,020.50, that being the amount owing after Mr Brown has paid $10,000 of the debt.

  2. The petition was listed for hearing today.  Mr Brown sought an adjournment.  For reasons I will express shortly, I refused the adjournment.  That being so, there are two issues before the court:  whether the petition should be dismissed on the basis that Mr Brown will be able to gain access to assets which will satisfy…

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AGLC
Donovan v Brown [2021] FCA 494
Case
[2021] FCA 494
Decision Date

CaseChat Overview and Summary

The Federal Court considered a petition for a sequestration order against Christopher Michael Brown, filed by his creditors. The petition was based on Brown's alleged inability to pay his debts. Brown contested the petition, claiming he had sufficient assets to satisfy the debt, but did not provide evidence of available or readily realisable assets. The court identified formal defects in the petition and service of documents, specifically regarding the service of a consent to act as trustee. Despite these defects, the court concluded that the deficiencies were formal only and did not impede the creditors' ability to proceed.

The legal issues the court had to address were whether the formal defects in the service of the consent to act as trustee were substantial enough to dismiss the petition, and if the court should exercise its discretion to allow the sequestration order to proceed. The court found that although the consent was not served in strict compliance with the rules, the email address used was confirmed by Brown to be valid for service. The court exercised its discretion under r 1.34 of the Federal Court Rules to allow the sequestration order to proceed despite the defect in service. The court was satisfied that the formal requirements for a sequestration order had been met and that there were no reasons to prevent the court from exercising its discretion to make the order.

The court granted the sequestration order against Brown's estate, noting that the act of bankruptcy occurred on 27 November 2020. The court also appointed John Gervase Shanahan as the trustee of Brown's estate, who had consented to act in that capacity. The creditors' costs, including any reserved costs, were fixed at $4,036.09, to be paid from Brown's bankrupt estate. The court noted that entry of orders was governed by Rule 39.32 of the Federal Court Rules 2011.

Orders

Orders of the court

1. The court makes a sequestration order under the Bankruptcy Act 1966 (Cth) against the estate of Christopher Michael Brown.

2. The applicants' costs, including any reserved costs, are fixed in the sum of $4,036.09, to be paid from the bankrupt estate of Christopher Michael Brown in accordance with the Act.

THE COURT NOTES THAT:

1. The date of the act of bankruptcy is 27 November 2020.

2. John Gervase Shanahan has consented to act as the trustee of the estate of Christopher Michael Brown by way of a notice of consent to act as trustee signed on 27 April 2021 and filed on 30 April 2021, which has not been revoked.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

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Decision

Reasons for decision

The exception to which I said I would come is that r 4.05(d) of the Federal Court (Bankruptcy) Rules requires that a copy of any consent to act as trustee of the debtor's estate is served on the debtor at least five days before the hearing of the petition. There is an affidavit showing that the consent was sent to Mr Brown by email. But he has not filed a notice of address for service and has not filed any notice authorising service by electronic communication as required by r 10.31(d) of the Federal Court Rules to permit service by email. However the email address used is one which Mr Brown has used to communicate with the court and which he has specifically confirmed to my Chambers could be used for that purpose. I am satisfied that sending the consent to act as trustee to him by email is likely to have brought the consent to his attention, and that this is a case where I should exercise the discretion under r 1.34 of the Federal Court Rules to dispense with the requirement that it be served in any other way.Conclusion The result is that the formal requirements for a sequestration order have been met. No reason having been given why the court should not exercise its discretion to make the order, it will be made.

Ratio Decidendi

Legal Principle Established

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