JONES (TRUSTEE), IN THE MATTER OF MCGINLEY

[2016] FCCA 155

FEDERAL CIRCUIT COURT OF AUSTRALIA

JONES (TRUSTEE), IN THE MATTER OF MCGINLEY [2016] FCCA 155

Catchwords:
BANKRUPTCY – Personal insolvency agreement – application for an order pursuant to s.33(1)(c) of the Bankruptcy Act 1966 (Cth) that the time limit for the controlling trustee to call a meeting of the debtor’s creditors under s.194(1) of the Bankruptcy Act 1966 (Cth) be extended – whether s.33(1)(c) of the Bankruptcy Act 1966 (Cth) allows the Court to extend time after the expiration of the time limit prescribed in s.194(1) of the Bankruptcy Act 1966 (Cth) – whether applicant’s explanation for delay satisfactory – whether there is any prejudice to the debtor’s creditors in extending time – whether the merits of the application are such that it is fair and equitable in the circumstances to extend time – application for the extension of time granted.

Legislation:
Bankruptcy Act 1966 (Cth) ss.33, 188, 189A, 194

Cases Cited:
Pretorius v Daltons Carpet Tiles Pty Ltd (1984) 1 FCR 346
Re Gowing & Anor, ex parte Deputy Registrar in Bankruptcy (1985) 11 FCR 111
Hunter Valley Developments Pty Ltd v Cohen, Minister for Home Affairs and Environment [1984] FCA 176

Applicant: MICHAEL GREGORY JONES (AS CONTROLLING TRUSTEE OF THE ESTATE OF DAVID CHARLES MCGINLEY)

File Number: SYG 177 of 2016

Judgment of: Judge Emmett

Hearing date: 1 February 2016

Date of Last Submission: 1 February 2016

Delivered at: Sydney

Delivered on: 4 February 2016

REPRESENTATION

Solicitor for the Applicant: Ms Monica Daley
(ERA Legal)

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 177 of 2016

JONES (TRUSTEE), IN THE MATTER OF MCGINLEY

MICHAEL GREGORY JONES (AS CONTROLLING TRUSTEE OF THE ESTATE OF DAVID CHARLES MCGINLEY) 

Applicant

REASONS FOR JUDGMENT

1. This is an application by the applicant pursuant to s.33(1)(c) of the Bankruptcy Act 1966 (Cth) (“the Act”) for an extension of the statutory time limit in s.194(1) of the Act to call and hold a creditors’ meeting.

2. The applicant is the controlling trustee of the property of David Charles McGinley (“the Debtor”) pursuant to an authority signed by the Debtor on 14 December 2015 in accordance with s.188 of the Act.

3. The applicant seeks Orders that the time limit for the applicant to call and hold a meeting of the Debtor’s creditors be extended so as to allow the applicant a further fifteen working days from the date of any Order made by the Court to call a meeting of the debtor’s creditors.

4. Section 194(1)(b) of the Act relevantly provides that a meeting of creditors is to be called and held not more than thirty working days after the relevant consent or approval was given. The Debtor provided his approval on 14 December 2015. In the circumstances, the applicant was required to have called and held the meeting on or before 29 January 2016, being thirty working days after the Debtor signed the authority pursuant to s.188 of the Act. The application seeking an extension of time was not filed in this Court until 30 January 2016.

5. Section 33(1) of the Act provides as follows:

   “33 Adjournment, amendment of process and extension and abridgment of times

   (1) The Court may:

   (a) upon such terms as it thinks fit, at any time adjourn any proceeding before it, either to a fixed date or generally;

   (b) at any time allow the amendment of any written process, proceeding or notice under this Act; or

   (c) extend before its expiration or, if this Act does not expressly provide to the contrary, after its expiration, any time limited by this Act, or any time fixed by the Court or the Registrar under this Act (other than the time fixed for compliance with the requirements of a bankruptcy notice), for doing an act or thing or abridge any such time.”

6. The applicant’s solicitor, Ms Daley, submitted that the Court can rely on s.33(1)(c) of the Act as giving power to the Court to extend time after the expiration of the time limit on 29 January 2016.

7. It is well established that the time limit in s.194 of the Act for the calling of a meeting of creditors can only be extended by an Order made under s.33(1)(c) of the Act (see Pretorius v Daltons Carpet Tiles Pty Ltd (1984) 1 FCR 346 per the Full Court of the Federal Court of Australia).

8. Further, I accept that the Court has power to extend time to call and hold a meeting of creditors after the expiration of the time limit in s.194 of the Act (see Re Gowing & Anor, ex parte Deputy Registrar in Bankruptcy (1985) 11 FCR 111 per Beaumont J).

9. Statutory time limits ought not to be lightly ignored. An application for an extension of time must show an acceptable explanation for the delay and that it is fair and equitable in the circumstances to extend time (see Hunter Valley Developments Pty Ltd v Cohen, Minister for Home Affairs and Environment [1984] FCA 176 per Wilcox J).

10. In considering whether it is fair and equitable to do so, the Court must consider, inter alia:

    a)any prejudice to a party;

    b)the merits of the substantial application;

    c)considerations of fairness as between the applicant and other persons; and

    d)any public interest.

11. In support of the application, the applicant read two affidavits of the applicant, the first sworn 29 January 2016 and the second sworn 1 February 2016.

12. The first affidavit annexed a copy of the authority signed by the Debtor pursuant to s.188 of the Act and dated 14 December 2015. The first affidavit also annexed a draft copy of a report to creditors prepared pursuant to s.189A of the Act (“the Draft s.189A Report”).

13. The Draft s.189A Report provided the background of the applicant’s investigations, a summary of the statement of affairs of the debtor, including identification of: unsecured creditors; related entity companies; related entity trusts; prior transfers of assets and money paid to creditors; relevant income contributions by the Debtor; the proposal from the Debtor; options available to the creditors; and the applicant’s recommendation to creditors. Additionally, the Draft s.189A Report proposes a meeting of creditors to be convened on 19 February 2016, prior to which a further report to creditors will be prepared and provided. The Draft s.189A Report also provides details of the applicant’s remuneration.

14. The applicant’s second affidavit provides a detailed explanation for the failure of the applicant to call the requisite meeting within the statutory time limit. That explanation is as follows:

    “5. On 14 December 2015, when David Charles McGinley signed an authority pursuant to section 188 of the Bankruptcy Act 1966 (Cth) (the Act) (the Authority), I allocated the administration of that estate (the Debtor's Estate) to one of my teams of staff. That team facilitated the lodgement of the Authority.

    6. On 16 December 2016, a second team took over the administration of the Debtor's Estate. This second team was responsible for ensuring that the relevant timeframes were met, and the section 189A report to creditors issued, however this second team was not given sufficient direction from the initial team.

    7. During the December 2015 and January 2016 period, I experienced the following difficulties:

    (a) Jones Partners received an unusually high number of new jobs which required my personal attention;

    (b) A high number of staff were on leave;

    (c) The staff not on leave were less experienced than those on leave.

    8. As a consequence of the difficulties outlined in the previous paragraph, the Debtor's Estate did not receive the level of attention that it required.

    9. As deposed to in my affidavit of 29 January 2016, the staff employed by me to assist in the administration of the Debtor's Estate informed me that they had acted on the basis that I was required only to give notice of the Creditors' Meeting on or before 29 January 2016, rather than to have called the meeting by that date.

    10. I am aware that section 194 of the Act requires me to call the meeting within the specified timeframe. I acknowledge that I should have been more aware of the administration of the Debtor's Estate and the key dates in that administration; however I was required to rely on my staff due to being heavily committed elsewhere.

    11. Although Jones Partners do not receive a high volume of Personal Insolvency Agreements (PIA) pursuant to section 188 of the Act, I have previously administered such agreements without issue.

    12.  I was appointed controlling trustee of the property of another debtor on 26 November 2015. I can confirm that all timeframes were met in the administration of that estate, and the creditors' meeting held within the required timeframe.

    13. Accordingly, I am of the view that the delay in calling the meeting in the Debtor's Estate is a one off and occurred as a result of the following:

    (a) The administration of the Debtor's Estate was moved to a second team with limited handover;

    (b) The staff responsible for calling the meeting were less experienced and misunderstood the timeframe prescribed by section 194 of the Act;

    (c) I was heavily committed elsewhere and was not able to monitor the administration of the Debtor's Estate as much I would have liked.

    14. As soon as I realised the error that had been made I sought legal advice and immediately instructed my solicitor to make this application.

    15. I am confident that I and my team have appropriate systems in place to ensure that such a delay does not occur again.

    16. I will take particular care to ensure that I am aware of the timing of creditors' meetings going forward.”

15. In the circumstances, I accept the applicant’s submission that the applicant has not ignored the time limits and that the length of the delay is minimal and essentially was due to an administrative oversight.

16. In his first affidavit, the applicant also deposes that the Debtor’s creditors would not be prejudiced by the relatively short delay in holding the creditors’ meeting for the following reasons:

    “8. I do not believe that there is any prejudice suffered by the Debtor’s creditors as a result of the delay in holding the Creditors’ Meeting for the following reasons.

    (a) the proposal by the Debtor contained in the s189A Report will not change;

    (b) because the s189A Report has not been issued, the Debtor’s creditors have not yet had an opportunity to consider the Debtor’s proposal or my recommendation;

    (c) the costs of this application will be borne by me, not by the Debtor’s creditors.”

17. Further, the applicant deposed that no prejudice would be suffered by the Debtor as a result of the delay in holding the creditors’ meeting because no action would be taken by the applicant or the creditors until a creditors’ meeting could be held and the costs of this application would not be borne by the Debtor’s creditors.

18. On the other hand, if time was not extended, then a meeting of the creditors would not be able to be convened for another six months due to the requirements of s.188(4) of the Act.

19. Based on the evidence before me, I am satisfied that the applicant’s explanation for his failure to call and hold the meeting in accordance with the statutory time limit is acceptable, it being based on an administrative oversight or failure, in respect of which detail was provided. Further, upon the applicant discovering the delay, immediate steps were taken to seek legal advice and to approach the Court to extend time to the applicant to call and hold the creditors’ meeting.

20. Based on the evidence before me, I am satisfied that it is fair and equitable in the circumstances that time be extended to the applicant to call and hold the meeting of creditors.

21. Based on the evidence before me, I accept that the Draft s.189A Report recommends that the creditors accept the Debtor’s proposal for the execution of the Personal Insolvency Agreement and that the Debtor’s proposal will not change.

22. Further, I am satisfied that there may be a prejudice to the creditors if the Court does not extend time to the applicant to call and hold the creditors’ meeting because the applicant would be prevented from calling and holding such a meeting for a further six months after 14 December 2015, pursuant to s.188(4) of the Act.

23. Moreover, the applicant does not seek an order with respect to the costs of this application and does not intend to recoup those costs from the Estate of the Debtor.

24. Accordingly, I am satisfied that it is in the best interests of the creditors and the Debtor that time be extended to 26 February 2016 for the applicant to call and hold a meeting of creditors. There should be no order as to costs.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Judge Emmett

Associate: 

Date:  4 February 2016