Harrison (Trustee), in the matter of Adorni v Adorni
[2023] FedCFamC2G 656
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Harrison (Trustee), in the matter of Adorni v Adorni [2023] FedCFamC2G 656
File number(s): SYG 1359 of 2022 Judgment of: JUDGE OBRADOVIC Date of judgment: 27 July 2023 Catchwords: BANKRUPTCY – Application for an order pursuant to s.146 of the Bankruptcy Act 1966 (Cth) – application for an order that trustee is justified to distribute to creditors – failure to file Statement of Affairs – where assets exceed liabilities – orders made as sought Legislation: Bankruptcy Act 1966 (Cth) s 146, sch 2 Cases cited: Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968
Re Sturt; ex parte Official Trustee in Bankruptcy [2001] FCA
Warren Mckeon Dickson Pty Ltd v Adorni [2013] FCCA 2267
Division: Division 2 General Federal Law Number of paragraphs: 24 Date of last submission/s: 2 May 2023 Date of hearing: 2 May 2023 Place: Parramatta Counsel for the Applicant: Ms Castle Solicitor for the Applicant: SLF Lawyers Solicitor for the Respondent: In person ORDERS
SYG 1359 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF BEVERLEY ADORNI, BANKRUPT
BETWEEN: BRETT RICHARD GEOFFREY HARRISON IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATE OF BEVERLEY ADORNI
Applicant
AND: BEVERLEY ADORNI
Respondent
order made by:
JUDGE OBRADOVIC
DATE OF ORDER:
27 JULY 2023
THE COURT ORDERS THAT:
1.Pursuant to section 90-15 of the Insolvency Practice Schedule (Bankruptcy) in schedule 2 of the Bankruptcy Act 1966 (Cth) (“Act”) the Applicant is justified in declaring and distributing dividends amongst the creditors of the Bankrupt Estate of Beverley Adorni (subject to an order for administration under Part IV of the Act), in accordance with Part VI, Division 5, of the Act.
2.Pursuant to section 146 of the Act the distribution of dividends amongst creditors who have proved their debts in the Bankrupt Estate of Beverley Adorni shall proceed in accordance with Part IV, Division 5 of the Act as if the Bankrupt had filed a Statement of Affairs and those creditors had been stated to be creditors in it.
3.The Applicant’s costs of, and incidental to, this application be paid out of the Bankrupt Estate of Beverley Adorni.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE OBRADOVIC:
INTRODUCTION
This is an application made by the Trustee of the bankrupt estate of Ms Beverley Adorni (“Trustee”) for, inter alia, the following orders:
(a)Pursuant to s.90-15 of the Insolvency Practice Schedule, being sch.2 of the Bankruptcy Act 1966 (Cth) (“Act”), that the Trustee is justified in declaring and distributing dividends amongst the creditors of the bankrupt estate;
(b)Pursuant to s.146 of the Act, that the distribution to creditors proceeds as if Ms Adorni had filed a Statement of Affairs and those creditors had been stated to be creditors in it; and
(c)Costs.
The application was listed for hearing on 2 May 2023. Ms Adorni arrived late to that hearing and gave a narration of her past financial woes and hopes for the future, as well as her criticisms of the Trustee, which were many. Ms Adorni also claimed that she had not been properly served with certain documents. The Trustee disputes this and the Court accepts that Ms Adorni has been validly served with all relevant documents.
Notwithstanding, in the interests of procedural fairness, the Court, on 2 May 2023, made orders directing Ms Adorni to file and serve any evidence and submissions with respect to the orders sought by 23 May 2023, and the Court reserved its judgment to be delivered on a later date.
The Trustee relies upon the following in support of their application:
(a)Affidavit of Brett Richard Geoffrey Harrison sworn 12 September 2022;
(b)Affidavit of Angela Smith sworn 12 September 2022;
(c)Affidavit of Jonathon Jackson sworn 7 October 2022; and
(d)Affidavit of Hannah Ricketts sworn 20 April 2023.
Ms Adorni has been given ample opportunity to file any material in the proceedings and she has failed to do so.
RELEVANT FACTS
Ms Adorni first became bankrupt in 2013 (“First Bankruptcy”) after she failed to comply with a bankruptcy notice in the amount of $22,434. At that time, the trustee found that she was the registered proprietor of four real properties and had reserves of cash well in excess of the proved debts.
Ms Adorni failed to file a Statement of Affairs in the First Bankruptcy and the trustee was forced to approach the Court to seek orders pursuant to s.146 of the Act. Judge Manousaridis of the then Federal Circuit Court made orders on 23 December 2013 that from 21 February 2014, the administration of the bankruptcy and distribution to creditors shall proceed as if Ms Adorni had filed a Statement of Affairs.
In the present bankruptcy, the act of bankruptcy occurred on 12 August 2021 and a sequestration order was made on 3 February 2022.
Prior to becoming a bankrupt, Ms Adorni was the registered proprietor of four real properties:
(a)Unit 5, 31 Crows Nest Road, Waverton NSW 2060 (“Waverton Property”);
(b)11 Strathallen Avenue, Northbridge NSW 2063 (“Strathallen Property”);
(c)379 Sailors Bay Road, Northbridge NSW 2063 (“Sailors Bay Property”); and
(d)66 Amherst Street, Cammeray NSW 2060.
Ms Adorni had failed to pay strata fees for the Waverton Property and had accumulated a debt of $27,961 to the Owners Corporation which resulted in the bankruptcy.
Ms Adorni resides in the Strathhallen Property.
On 10 May 2022, the Trustee sold the Waverton Property and, on completion of the sale, water and council rates were paid, the amount of $27,961 was paid to the Owners Corporation and an amount of $363,472 was paid to Revenue NSW for outstanding land tax liabilities. After payment of all creditors, there was a surplus balance of $498,184 which is retained by the Trustee.
The Trustee also made other payments as required including, inter alia, insuring the real properties, paying outstanding Council rates and repairing the fence of the Sailors Bay Property.
Apart from the Trustee’s fees, there does not appear to be any further proved debts of the bankrupt estate save for a small debt owing to Sydney Water. The Australian Taxation Office has notified the Trustee that it does not presently have a claim but that it may have one once Ms Adorni’s personal tax returns from 2014 – 2022 are filed.
The Trustee wishes to finalise the administration of Ms Adorni’s bankrupt estate and transmit the three remaining properties to her as well as any surplus funds held after payment of all creditors and fees. The Trustee is unable to do so as the bankruptcy cannot be finalised unless Ms Adorni files a Statement of Affairs.
The Trustee has gone to great lengths to inform Ms Adorni of the bankruptcy and her obligation to file a Statement of Affairs, including multiple requests to file a Statement of Affairs, service of relevant documents and engagement with Ms Adorni’s family. The Court is satisfied that she is aware of her obligation to do so.
Despite this, Ms Adorni has not filed a Statement of Affairs and has failed to cooperate at all with the Trustee in his administration of the estate.
RELEVANT LEGAL PRINCIPLES
Section 146 of the Act states:
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.
The Court’s power to grant relief pursuant to s.146 of the Act is a discretionary one.
The purpose of the section is to give the Court the means of ensuring that an absence of a Statement of Affairs does not prejudice those with an interest in the estate.[1] It also intends to facilitate a distribution to creditors where the trustee does not have the benefit of a Statement of Affairs.[2]
[1] Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968 [4].
[2] Re Sturt; ex parte Official Trustee in Bankruptcy [2001] FCA 1649 [14].
The following principles are relevant to whether the Court should exercise its discretion:
(a)It is not necessary to establish a wilful refusal or neglect to file a Statement of Affairs, a mere omission to file is sufficient;[3]
(b)The Court may require evidence that creditors are aware of the application or that the trustee has taken appropriate steps to ascertain whether there are other creditors;[4] and
(c)The interests of creditors and of the bankrupt will be considered, at least in estates where there is a surplus of assets over liabilities.[5]
[3] Ibid [14].
[4] Ibid [19].
[5] Warren Mckeon Dickson Pty Ltd v Adorni [2013] FCCA 2267 [25].
DETERMINATION
The Court is satisfied that:
(a)All reasonable steps have been taken by the Trustee to notify Ms Adorni of the requirement to provide a Statement of Affairs and of this application;
(b)Ms Adorni has, to date, failed to provide any assistance to the Trustee and it is highly likely that she will not provide any assistance in the near future;
(c)Apart from the fees due to the Trustee, there are no further proved debts of the bankrupt estate save for a small debt owing to Sydney Water;
(d)All reasonable steps have been taken to investigate whether there are other creditors; and
(e)Ms Adorni will benefit from the making of orders for dividends because that will allow the administration of the estate to be finalised.
Having regard to the evidence filed and the submissions made, the Court is satisfied that it should exercise its discretion in favour of the Trustee.
As such, orders as set out at the forefront of these Reasons for Judgment will be made.
I certify that the preceding twenty-four (24) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Obradovic. Deputy Associate:
Dated: 27 July 2023
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