FOREMAN v Vince
[2006] FMCA 128
•3 February 2006
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| FOREMAN v VINCE | [2006] FMCA 128 |
| BANKRUPTCY – Application for annulment of bankruptcy affected by own petition –consideration of whether sequestration order ought not to have been made on the basis that at time petition presented debtor was solvent – notice to creditors – onus on applicant to satisfy court that creditor aware of proceedings – discretion to annul bankruptcy based on all the circumstances of the case – application dismissed. |
| Bankruptcy Act 1966 (Cth), s.153B Federal Magistrates Court Rules 2001, regs.35.01, 35.02, 35.03, 35.04, 6.06, 6.07 |
| Re: Kathleen Wong (Debtor) Ex Parte: Kathleen Wong (Applicant/Debtor) Patricia May Elizabeth Robins trading as P.M.E. Robinson and Co (Respondent/Creditor) No. NB515 of 1995 Fed No. 805/95 Bankruptcy |
| Applicant: | SHIRLEY FOREMAN |
| Respondent: | PETER ROBERT VINCE |
| File Number: | MLG1491 OF 2005 |
| Judgment of: | Connolly FM |
| Hearing date: | 30 January 2006 |
| Date of Last Submission: | 30 January 2006 |
| Delivered at: | Melbourne |
| Delivered on: | 3 February 2006 |
REPRESENTATION
| Counsel for the Applicant: | Self-represented |
| Solicitors for the Applicant: | N/A |
| Counsel for the Respondent: | Mr Andrew White |
| Solicitors for the Respondent: | Serry White & Co. |
ORDERS
That the application dated 17 January 2006 be dismissed.
That the applicant pay the Trustee’s cost, such costs to be agreed, failing agreement to be taxed in accordance with the Bankruptcy Act 1996 (Cth)
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG1491 of 2005
| SHIRLEY FOREMAN |
Applicant
And
| PETER ROBERT VINCE |
Respondent
REASONS FOR JUDGMENT
The proceedings
Pursuant to the applicant’s amended application filed 17 January 2006 the applicant seeks orders:
a)That the applicant’s bankruptcy No. VB2777 of 1999 be amended pursuant to s.153B of the Bankruptcy Act 1966 on the ground that the debtor’s petition ought not to have been presented because at the time the applicant was solvent and has been solvent at all times since.
b)That the Trustee’s report be dispensed with on the basis that correspondence in relation to the amended application has been provided by the Trustee.
The application is supported by the following:
i)The applicant’s affidavit sworn 23 November 2005 and filed 24 November 2005.
ii)The applicant’s affidavit sworn on 16 January 2006 and filed 17 January 2006 (the affidavit with respect to service of documents on creditors).
iii)The applicant’s affidavit sworn 16 January 2006 and sworn 17 January 2006.
iv)The applicant’s affidavit sworn 19 January 2006 and filed 19 January 2006.
The Trustee Peter Robert Vince filed the following:
i)The affidavit of Peter Robert Vince sworn 18 January 2006 and filed 20 January 2006. This affidavit annexes a report prepared by the Trustee.
ii)Submissions of the Trustee respondent.
The law
Section 153B of the Bankruptcy Act 1966 is as follows:
“Annulment by Court
(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.”
The relevant rules of the Federal Magistrates Court Rules 2001 are here set out as follows:
“FEDERAL MAGISTRATES COURT RULES 2001 - REG 35.01
Application of Part
This Part applies to:
(a) an application for annulment of a bankruptcy; or
(b) an application for annulment of the administration of the estate of a deceased person.
FEDERAL MAGISTRATES COURT RULES 2001 - REG 35.02
Requirements of application
(1) The application must set out the grounds on which the annulment is sought.
(2) The application must be served on the trustee at least 28 days before the hearing date fixed for the application.
FEDERAL MAGISTRATES COURT RULES 2001 - REG 35.03
Notice to creditors
(1) The applicant must give notice of the application to each person known to the applicant to be a creditor of the bankrupt, or estate of the deceased person.
(2) The notice must be in accordance with Form 155.
(3) The applicant must serve the notice on each creditor at least 14 days before the hearing date fixed for the application.
FEDERAL MAGISTRATES COURT RULES 2001 - REG 35.04
Report by trustee
(1) The trustee must prepare a report, for the periods before and after the bankruptcy, or the administration of the estate of the deceased person.
(2) If the report is in relation to a bankrupt, the report must include information about:
(a) the bankrupt’s conduct; and
(b) the bankrupt’s examinable affairs; and
(c) the administration of the bankrupt’s estate.
(3) If the report is in relation to the estate of a deceased person, the report must include information about the administration of the deceased person’s estate.
(4) The report must be in the form of an affidavit and be filed at least 5 days before the hearing date fixed for the application.
FEDERAL MAGISTRATES COURT RULES 2001 - REG 6.06
When is service by hand required
(1) Service by hand is required for an application starting a proceeding or a subpoena requiring attendance of a person.
(2) However, service by hand is not required if:
(a) there are current proceedings for which there is a notice of address for service for the person to be served; or
(b) the Court directs that an application may be served in another way; or
(c) a lawyer accepts service for a party and subsequently files an address of service; or
(d) a lawyer accepts service for a person other than a party.
FEDERAL MAGISTRATES COURT RULES 2001 - REG 6.07
Service by hand
(1) A person serving a document by hand on an individual must give a copy of the document to the person to be served.
(2) However, if the person to be served does not take the copy
of the document, the person serving it may put it down in
the presence of the person to be served and tell the person what it is.
(3) In a family law or child support proceeding, the person serving a document must not be the party on whose behalf it is served.
The history
The applicant is the debtor named in bankruptcy number VB2777 of 1999 which was affected by her own petition dated 8 July 1999. She became bankrupt on 8 July 1999 upon the presentation of her petition which was accepted on 13th July 1999. On 14 July 2002 the bankruptcy was discharged. The Trustee, Peter Robert Vince, was appointed on 13 July 1999. The statement of affairs filed by the applicant shows liabilities totalling $18,365 and assets totalling $394,995 of which about $390,000 was in superannuation. At the time that the applicant presented her position she attests to being over 60 and in any event there was a non preserved component of $162,183.16. Her current financial position is that she swears that she has assets, superannuation and bank accounts totalling $483,222 and that her taxable income for the year 2005 was $29,229. The debts, contained in the petition, are as follows:
i)Judith Bilske $16,000
ii)Buxton Real Estate $2,000
iii)T A Brennan $150
iv)Home Buyers Protection Service $215
Proofs of debts were received from the creditors as follows:
i)Judith Bilske $23,826.57
Proof of debt received 23 August 1999.
ii)Buxton Real Estate $2,215
Proof of debt received 19 August 1999.
iii)T A Brennan $150
Proof of debt received 23 August 1999.
iv)Home Buyers Protection Service $215
Proof of debt received 23 August 1999.
None of these creditors have been paid the amounts claimed apart from T.A. Brennan. All of these debts relate to the purchase of the property at 2/34 Black Street Brighton and the liability for all the amounts claimed is disputed by the applicant who says that there is a good defence to each claim and those matters are contained substantially in her affidavit sworn 23 November 2005.
In her affidavit sworn 23 November 2005 the applicant says at paragraph 14:
“I presented the petition with the aim of disputing the claims listed in my statement of affairs. In particular, I believed the claimants would be required not only to fully and clearly prove their claim but also clarify the underlying transaction. My Trustee in Bankruptcy obtained from each creditor a Proxy for a Meeting of Creditors and Proof of Debt. A Creditors Meeting was held. The administrators of my estate communicated with Mr. Slocombe and Ms. Bilske’s solicitor. My estate did not pay a dividend.”
In her affidavit sworn 16 January 2006, the applicant says at 4-6:
“On 6 July 1999, prior to presenting my petition, I had a meeting with Mr Butler, then manager, financial services, National Bank, when he (Mr. Butler) verified that my superannuation was protected.
I have had no legal advice relating to bankruptcy.
At the time I presented my petition I knew I was not insolvent and that I had the funds to finance a court case. But my attention was entirely focussed, and remained focussed, on obtaining information on claims and recovering my deposit. I had no awareness that presenting my petition might not accord with bankruptcy purpose and I would not have presented the petition if I had such knowledge.”
The Applicant provides the reasons for the delay in seeking the annulment in paragraphs 17 and 18 of her affidavit sworn
23 November 2006:
“After acceptance of my bankruptcy I continued to investigate the claims. I have continued to do so up to the present time. I was unaware of any option available to me other than to obtain legal support. On this understanding, I consulted a considerable number of solicitors and sought assistance from relevant authorities.
I have only recently become aware of annulment and the possibility it might be available to me even after discharge. Although in the context of s. 153A of the Bankruptcy Act 1966, Barrett J in his review of annulment after discharge, commented in Roberts v Wayne Roberts Concrete Constructions Pty Ltd [2004] NSWSC 734 at paragraph 40: “…There is therefore no reason of logic or policy why annulment should be confined to cases where discharge has not occurred.”
Conclusions and findings
The first issue to be determined is whether the sequestration order ought not to have been made on the basis that at the time the petition was presented the applicant was solvent. On the evidence provided by the applicant with respect to her age and entitlement to the proceeds of her superannuation fund she clearly had assets at her disposal of at least $160,000 and perhaps in excess of $300,000. While the Trustee neither opposes nor supports the application for annulment, it would appear by way of paragraph 10 and 13 of his submissions that he agrees with the proposition that the applicant was solvent at the time of presentation of the debtor’s petition on 13 July 1999 and could clearly have accessed her superannuation to satisfy her liabilities.
Sackville J in Re: Kathleen Wong (Debtor) Ex Parte: Kathleen Wong (Applicant/Debtor) Patricia May Elizabeth Robins trading as P.M.E. Robinson and Co (Respondent/Creditor) No. NB515 of 1995 Fed No. 805/95 Bankruptcy sets out some of the relevant matters to be considered when exercising the discretion whether or not to make an order annulling the bankruptcy at 21-22:
“However, in determining whether the sequestration order ‘ought not to have been made’, it is appropriate to take into account the evidence relating to the applicant’s financial position at the time the order was made. In particular, if the applicant was clearly solvent, ordinarily the Court would dismiss the petition even if she were unwilling to pay her debt: Re Gollan; Ex parte Gollan (1992) 40 FCR 38; Re D’Onofrio; Ex parte Blyth (1983) 76 FLR 136. The evidence of the Official Trustee shows that very shortly after the sequestration order, the applicant had unrealised assets with an estimated value of $245,000, including unencumbered real estate, against liabilities comprising the single debt due to the creditor. Had that evidence been before the Court, as was held in Re Gollan, the appropriate course would have been to dismiss the petition. It follows that the applicant has shown that the sequestration order ought not to have been made.
Discretion
That, however, is not the end of the matter. Even where the Court is satisfied that a sequestration order ought not to have been made, it has a discretion whether or not to make an order annulling the bankruptcy: Re Frank, at 401; Re Williams (1968) 13 FLR 10 (Fed Ct Bkpcy/Gibbs J), at 23. The Court is to consider all the circumstances of the case, including any delay by the bankrupt and the interests of creditors. See generally Re Finn; Ex parte Finn v Amoco Australia Ltd (1982) 58 FLR 54 (FCA/Fitzgerald J). In my view the circumstances of the present case are such that I ought not to exercise my discretion in favour of the applicant, unless appropriate arrangements are made to pay the costs and expenses of the bankruptcy and to pay the debt due to the creditor.”
An affidavit of service of the four creditors has been sworn and filed by the applicant indicating the date and mode of service of each of the creditors. I am satisfied that each of the first three creditors referred to in the affidavit of service have had appropriate notice of the annulment application. However, I am not satisfied that Ms JE Bilske would necessarily have had the application brought to her attention. While it may be a matter of contention whether the Form 155 notice is an application starting a proceeding or not and as a result required to be served by hand, in my view there is an onus on the applicant to satisfy the Court that the creditor is aware of the proceedings and able to be involved particularly having regard to the fact that the debt has not been paid. There is no explanation as to how or when the applicant became aware of the creditor’s current address.
The Applicant in paragraphs 8 to 15 of her affidavit of 23 November 2005 set out reasons why she should not be liable for the debt to
Ms. Bilske. However, the Trustee in paragraph 6 and 7 of his affidavit says:
“In relation to my Report prepared, I have obtained legal advice in relation to the forfeiture of the deposit claim made by Judith Bilske in relation to the Bankrupt’s purchase of the property at 2/34 Black Street, Brighton dated 9 June 1999, pursuant to which the Bankrupt paid a part deposit of $20,000.00 and from which the Bankrupt was not able to settle. I note the Contract of sale provided a deposit for 10% of the purchase price $36, 000.00 and a balance of the deposit forfeited to the Vendor of $16,000.00 remained due and outstanding. I am instructed by and informed by my Solicitors that the whole of the deposit, including the unpaid part of the deposit forfeited to a Vendor as the Vendor’s absolute property and where a full deposit is not paid, a Purchaser becomes indebted to the Vendor for the balance as a debt, which is recoverable, irrespective of the fact that a subsequent sale may be for the same or a greater sum than the original Contract.
I am further informed and advised by my Solicitors, that if a Vendor relies upon General Condition 6(3)(b)(ii) of Table A of the Seventh Schedule of the Transfer of Land Act 1958, then the Vendor is not entitled to any resulting expenses which do not exceed the Purchaser’s deposit forfeited. I therefore conclude that the Bankrupt remained indebted to Judith Bilske for the sum of $16,000.00, being the balance of the deposit not paid and for no other amount in relation to the Judith Bilske claim.
It is clear that the Trustee is of the view that the debt is a legitimate and valid debt. In my view there is a heavy onus on the applicant to establish that either the debt has been paid or is clearly not legally enforceable. At its highest the applicant has raised some doubts as to the legal enforceability of what is outstanding to Ms. Bilske. It also appears that the applicant’s reason for the lengthy delay was based on her misunderstanding of the law.
The other factor that weighs heavily when considering whether to exercise my discretion in her favour is the effluxion of six and a half years and the detrimental effect that it may have on the creditors in establishing their debts. They may well have lost or destroyed documentary evidence and there is no doubt that memories concerning such events would have diminished. Further, there is a strong argument that the debts are now statute barred. These factors may well explain why none of the creditors responded to the Form 155 when all four were prepared to file proofs of debt with a degree of alacrity in August 1999. In all the circumstances of this case I am not disposed to exercise my discretion to annul the Bankruptcy and I propose to dismiss the application with costs.
I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of FM Connolly FM
Associate: Nadia Morales
Date: 3 February 2006
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