Gleeson v Jones

[2017] FCCA 2483

FEDERAL CIRCUIT COURT OF AUSTRALIA

GLEESON v JONES [2017] FCCA 2483

Catchwords:
BANKRUPTCY – Failure of bankrupt to file a statement of affairs – application to distribute dividends from bankrupt estate to proven creditors in accordance with Div.5 of Pt.VI of the Bankruptcy Act 1966 (Cth) – discretion of Court to make an order under s.146 of the Bankruptcy Act 1966 (Cth) – application allowed – orders made under s.146 of the Bankruptcy Act 1966 (Cth).

Legislation:

Bankruptcy Act 1966, ss.54, 109, 146, div.5 of pt.VI

Cases cited:

Re Shaw; Ex parte Official Trustee in Bankruptcy [1999] FCA 968
Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1; [2001] FCA 1649

Applicant: BRUCE GLEESON

Respondent: MURRAY JONES

File Number: SYG 2061 of 2017

Judgment of: Judge Smith

Hearing date: 10 October 2017

Date of Last Submission: 10 October 2017

Delivered at: Sydney

Delivered on: 20 October 2017

REPRESENTATION

Counsel for the Applicant: Ms I Hoskinson of Counsel

Solicitors for the Applicant: Daniela Fazio Lawyers Pty Ltd

No appearance by or for the respondent.

ORDERS MADE BY THE COURT

1. The distribution of dividends to those creditors who have proved their debts in the bankrupt estate of Murray Jones proceed in accordance with Div.5 of Pt.VI of the Bankruptcy Act1966 (Cth), as if the bankrupt had filed a statement of affairs and that creditors had been stated to be those creditors in it pursuant to s.146 of the Bankruptcy Act1966 (Cth), as amended.

2. An order that the applicant's costs and expenses of these proceedings be paid from the bankrupt estate of Murray Jones in priority pursuant to sub-s.109(1)(a) of the Bankruptcy Act1966 (Cth).

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 2061 of 2017

BRUCE GLEESON

Applicant

And

MURRAY JONES

Respondent

REASONS FOR JUDGMENT

1. The respondent became a bankrupt on 7 July 2015 pursuant to a sequestration order made in this Court. On the same day, Bruce Gleeson was appointed as trustee of the respondent’s bankrupt estate.

2. The trustee has commenced these proceedings, seeking an order under s.146 of the Bankruptcy Act 1966 (Cth) (Act) that a distribution of dividends be made to the creditors of the bankrupt estate who have proved their debts, and an order that the costs of the application be paid from the estate of the respondent.

3. The respondent was notified of the time and date of the hearing but did not appear at the hearing. The hearing was conducted in the respondent’s absence and on that day I made the orders sought in the application. These are the reasons for those orders.

4. Section 146 of the Act provides:

   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 amongst 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.

5. The purpose of that provision 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: Re Shaw; Ex parte Official Trustee in Bankruptcy [1999] FCA 968 at [4]. In Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1; [2001] FCA 1649 (Sturt), Sackville J found that view of the purpose of s.146 of the Act was supported by other provisions in div.5 of pt.VI of the Act and continued, at [10]:

   … Section 140(1) of the Bankruptcy Act requires the trustee “with all convenient speed” to declare and distribute dividends amongst the creditors who have proved their debts. Section 140(2) provides that, subject to the retention of such sums as are necessary to meet the cost of administration or to give effect to the provisions of the Bankruptcy Act, the trustee shall distribute as dividends all moneys in hand. Section 145 provides that, when the trustee has realized all the property of the bankrupt, or so much of it as can be realized without needlessly protracting the trusteeship, he or she shall declare and distribute the final dividend. These duties are subject to certain conditions, such as the requirement in s 140(3) that, before declaring the first dividend, the trustee must give written notice of the intention to declare a dividend to anyone known to be a creditor, but who has not lodged a proof of debt. Nonetheless, the statutory scheme makes it clear that a principal object of the legislation is to ensure the distribution of dividends to creditors as soon as is feasible.

6. There are two issues that arise: first, whether the respondent has failed to file a statement of his affairs as required by the Act; and secondly, if so, should the Court exercise its discretion to make an order under s.146 of the Act? The answer to each question is yes.

First issue: has the respondent failed to file a statement of his affairs as required by the Act?

1. Section 54 of the Act provides:

   Bankrupt’s statement of affairs

   (1)Where a sequestration order is made, the person against whose estate it is made shall, within 14 days from the day on which he or she is notified of the bankruptcy:

   (a)make out and file with the Official Receiver a statement of his or her affairs; and

   (b)furnish a copy of the statement to the trustee.

   Penalty: 50 Penalty units

   (Emphasis in original)

2. Shortly after his appointment as trustee, Mr Gleeson sent a draft statement of affairs to the respondent at his known address. When there was no response to that, he caused the statement of affairs to be sent to the respondent by email but the transmission failed. Mr Gleeson’s staff called the respondent’s mobile telephone on numerous occasions without success. Another letter with the draft statement of affairs was sent to the respondent and a text message sent to his mobile telephone. Finally, early on Sunday, 22 August 2015, a process server spoke to the respondent at his home and left a copy of the draft statement of affairs there.

3. I was satisfied on that evidence that the respondent was notified of the bankruptcy by at least 22 August 2015.

4. No completed statement of affairs has ever been furnished by the applicant to the trustee.

5. In those circumstances, I was satisfied that the respondent has failed to file a statement of his affairs as required by the Act.

Second issue: should the Court exercise its discretion to make an order under s.146 of the Act?

1. In determining whether it is appropriate to make an order under s.146 of the Act, the Court must have regard to the circumstances of the case and bear in mind the purpose of the provision.

2. Matters which have been found to be relevant to this issue include:

   a)whether the creditors have been notified of the application and have had an opportunity to be heard;

   b)what steps have been taken to identify those creditors;

   c)the known assets in the estate; and

   d)whether the bankrupt has had the opportunity to address the issues.

3. The discretion under s.146 of the Act is not restricted to circumstances where the bankrupt has, through his or her own fault, failed to file a statement of affairs: Sturt at [14]. However, even if the discretion were so constrained, it would not matter in these proceedings. I was satisfied that the respondent knew about his obligation to file a statement of affairs but has deliberately failed to fulfil that obligation.

4. Mr Gleeson has given evidence by affidavit that details the following matters:

   a)he has attempted to identify all of the creditors of the respondent’s estate. He has identified three creditors, each of which has lodged a proof of debt. In addition to these, one of Mr Gleeson’s employees was told by the respondent that the Gold Coast Council was a creditor. The Council’s debt was repaid from the proceeds of sale of the real property which formed part of the bankrupt estate;

   b)the net proceeds from the sale of the real property is likely to be the only asset realised by Mr Gleeson for the benefit of unsecured creditors;

   c)the estate has sufficient funds to pay all of the creditors, the trustee’s remuneration and expenses including the costs of these proceedings as well as to return an estimated $28,800 to the respondent after the annulment of the bankruptcy.

5. In addition, evidence was given by an employed solicitor of the solicitor acting for the trustee that she had served each of the creditors of the estate with a copy of the application in these proceedings and the evidence of Mr Gleeson. Only one creditor responded. It indicated that it did not wish to be heard on the application. The solicitor also attempted to serve the respondent with these documents by email; however, the delivery failed. Subsequently, an employee of Mr Gleeson contacted the respondent by text message asking him for his current residential and email addresses. The respondent replied to the effect that he would not provide the information requested until he had spoken to his solicitor. Mr Gleeson’s employee then informed the respondent by text message indicating that he had not heard from a solicitor and that he held documents he wished to provide to him “to assist with the speedy finalisation of your bankrupt estate”. He again asked the respondent for his residential address.

6. The respondent has not provided any current (or other) residential address in response to this request.

7. On 15 September 2017, Mr Gleeson’s employee advised the respondent by text message of the time and date of the final hearing of the application. The applicant did not appear at the final hearing.

8. I accepted all of the evidence relied on by the trustee. I was satisfied that the creditors and the respondent have had the opportunity to address the Court and that making an order under s.146 of the Act would achieve the purpose of that provision.

9. In those circumstances I was satisfied that it was appropriate to make an order under s.146 of the Act and accordingly made the order sought.

I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Judge Smith

Date:     20 October 2017