Juratowitch (Trustee), in the matter of Matuszak (Bankrupt)

[2024] FedCFamC2G 1410

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Juratowitch (Trustee), in the matter of Matuszak (Bankrupt) [2024] FedCFamC2G 1410

File number(s):

MLG 1353 of 2024

Judgment of:

JUDGE MANSINI

Date of judgment:

19 December 2024

Catchwords:

BANKRUPTCY – application by trustee under s.146 of the Bankruptcy Act 1996 (Cth) for distribution of dividends in circumstances where no statement of affairs filed – factors relevant to the exercise of discretion – orders that the distribution of dividends proceed as if bankrupt had filed a statement of affairs as required by the Act – application granted with an order that the Trustee retains their costs of these proceedings.

Legislation:

Bankruptcy Act 1966 (Cth) ss.19, 32, 54, 77CA, 140, 145, 146

Cases cited:

Barnett v Zang [2017] FCA 924

McLean (Trustee) v Erbas [2019] FCA 1763

Quin as Trustee of the Bankrupt Estate of Phillip Chill [2020] FCCA 2652

Division:

Division 2 General Federal Law

Number of paragraphs:

42

Date of hearing:

10 December 2024

Place:

Melbourne

Counsel for the Applicant:

Mr Hallett

Solicitor for the Applicant:

B2B Lawyers

ORDERS

MLG 1353 of 2024

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

IN THE MATTER OF THE BANKRUPT ESTATE OF FRANK GREGORY MATUSZAK

BETWEEN:

DANIEL PETER JURATOWITCH

Applicant

ORDER MADE BY:

JUDGE MANSINI

DATE OF ORDER:

19 DECEMBER 2024

THE COURT ORDERS THAT:

1.Pursuant to section 146 of the Bankruptcy Act 1966 (Cth) (Act), and subject to orders 2 to 4, the distribution of a first and final dividend to creditors of the bankrupt estate of Frank Gregory Matuszak (Bankrupt Estate), who have proved their debts before the time of distribution at order 3, proceed in accordance with Division 5 of Part VI of the Act as if Frank Gregory Matuszak had filed a statement of affairs and those creditors had been stated to be creditors in it.

2.By 4:00pm on 2 January 2025, the Trustee shall cause a notice of intention to declare a first and final dividend in the Bankrupt Estate to be published in The Age newspaper.

3.The Trustee shall not distribute a first and final dividend in the Bankrupt Estate until at least 21 days have elapsed after publication of the notice pursuant to order 2.

4.Any interested persons have liberty to apply within 14 days after publication of the notice pursuant to order 2.

5.The Trustee’s costs of and incidental to this application be paid from the Bankrupt Estate.

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 Mansini         

IN SUMMARY

1. On application of the trustee of the bankrupt estate of Frank Gregory Matuszak (Bankrupt Estate), Mr Daniel Peter Juratowitch (Trustee), the Court makes orders pursuant to s.146 of the Bankruptcy Act 1966 (Cth) (Act). Those orders permit the distribution of a first and final dividend amongst those creditors of the Bankrupt Estate who prove their debts to proceed in accordance with Division 5 of Part IV of the Act as if Frank Gregory Matuszak (Bankrupt) had filed a statement of affairs and those creditors had been stated to be creditors in his bankruptcy. The reasons for judgment follow.

   CONTEXT

2. On 18 December 2014, an order was made for the sequestration of the Bankrupt Estate. The order was made upon petition of ACM Group Limited (ACN 127 181 097). Also on 18 December 2014, the Trustee was appointed trustee of the Bankrupt Estate.

   Attempts to obtain a statement of affairs

3. On 18 December 2014, the Trustee sent a letter to the Bankrupt regarding the appointment and the Bankrupt’s obligation to complete and file a statement of affairs, extracted in part below:

   Dear Sir

   BANKRUPT ESTATE OF FRANK GREGORY MATUSZAK

   I advise that you were declared bankrupt pursuant to a Sequestration Order made by the Federal Circuit Court of Australia on 18 December 2014 and that I was appointed Trustee of the estate. A copy of the Sequestration Order is attached for your reference.

   As a result of the Sequestration Order your estate is required to be administered in accordance with the provisions prescribed under the Bankruptcy Act 1966 ("the Act"). You are obliged to comply with the relevant provisions of the Act to the extent that any failure may comprise an offence for which the punishment may be a fine or imprisonment or both. Breaches of the relevant provisions may also result in the period of bankruptcy, ordinarily 3 years from the date your Statement of Affairs is filed with the Official Receiver, being extended to up to 8 years. Further information in relation to your obligations and the consequences of bankruptcy may be obtained from Australian Financial Security Authority ("AFSA") or by visiting the AFSA website at Alternatively, further information may also be obtained by contacting this office.

   STATEMENT OF AFFAIRS

   Attached for your attention is a form of Statement of Affairs which is required. to be completed and filed with the office of the Official Receiver within 14 days and a copy is required to be furnished to the Trustee. It should be noted that the period of your bankruptcy will commence only when the Statement of Affairs is filed with the Official Receiver. The address of the Official Receiver for filing your Statement of Affairs is Level 16, 300 La Trobe Street, Melbourne, VIC, 3000.

   […]

4. On 19 December 2014, the office of the Trustee received a phone call from the Bankrupt. The Bankrupt was then advised of his obligation to complete and filed a statement of affairs.

5. On 7 January 2015, the Trustee sent a letter to the Bankrupt regarding his obligation to complete and file a statement of affairs, extracted in part below:

   Dear Sir

   BANKRUPT ESTATE OF FRANK GREGORY MATUSZAK

   NO. VIC 3698/14/2

   I refer to my letter dated 18 December 2014 and confirm the following:

   You were declared bankrupt on 18 December 2014 by Order of the Federal Circuit Court of Australia. As a result of the Sequestration Order your estate is required to be administered in accordance with the provisions prescribed under the Bankruptcy Act, 1966. You are obliged to comply with the relevant provisions to the extent that any failure may comprise an offence.

   Attached for your attention is a form of Statement of Affairs ("SOA") which is required to be completed and filed with the office of the Official Receiver within 14 days of receipt of notification of the bankruptcy and a copy is required to be furnished to the Trustee. It should be noted that the period of your bankruptcy will commence only when the SOA is filed with the Official Receiver. Please deliver a copy of the SOA to this office forthwith.

   Your continual failure to file a SOA and lack of co-operation has impeded my investigation of your conduct, dealing and examinable affairs. Consequently you may remain bankrupt indefinitely and potentially exposed to criminal prosecution.

   Enclosed for your attention is a fact sheet 'ITSA Enforcement' from the Australian Financial Security Authority ("AFSA") website request that you complete the attached form and contact this office forthwith to discuss the outstanding matters.

   […]

6. On 22 January 2015, the office of the Trustee telephoned the Bankrupt regarding his failure to complete and file a statement of affairs.

7. On 31 March 2016, the office of the Trustee telephoned the Bankrupt regarding his failure to complete and file a statement of affairs.

8. On 30 November 2016, the Trustee sent a letter to the Bankrupt requesting completion of his annual statement of income. By that letter, the Trustee made specific reference to the failure of the Bankrupt to complete and file a statement of affairs.

9. Between November 2016 and November 2020, the Bankrupt was required by the Trustee to pay income contributions towards his estate. In his attempts to have these contributions paid, the Trustee sent multiple correspondences to the Bankrupt regarding his outstanding liability. The Bankrupt subsequently failed to voluntarily pay his income contribution liability or complete and file a statement of affairs.

10. On 19 May 2022, the Trustee sent a letter sent to Bankrupt's lawyers after learning that the Bankrupt had received a distribution into his bank account from a deceased estate. The Bankrupt's lawyers were then advised that the Bankrupt had failed to complete and file his statement of affairs.

11. On 5 July 2022 the office of the Trustee had a phone call with an employee of the office of the Bankrupt’s lawyers. In that phone call the Trustee’s office confirmed that the Bankrupt was required to complete and file a statement of affairs.

12. Since 31 March 2016, the Bankrupt has not responded to any of the Trustee’s communications.

13. It is also the evidence of the Trustee that the Australian Financial Security Authority (AFSA) has twice commenced enforcement proceedings against the Bankrupt in respect of his failure to file a statement of affairs (the Bankrupt having been issued a s.77CA notice from the AFSA in its capacity as the Official Receiver). No statement of affairs has been filed in response to either enforcement action.

14. In response to the Bankrupt’s failure to respond to the various correspondence of the Trustee, an application was filed and served for the possession of the Bankrupt’s real property. In evidence were orders of this Court dated 9 June 2015 ordering the Bankrupt to vacate a property located in the suburb of Jacana. The Bankrupt failed to respond to this application and the Sherrif was required to assist in retaining possession of the property.

    Administration of the Bankrupt Estate

15. On 10 September 2024, the Trustee deposed that the administration of the Bankrupt Estate is complete save for:

    (a)The payment of an outstanding income contribution by the Bankrupt in the sum of $7,229.13; and

    (b)The distribution of funds on hand to creditors.

16. The known creditors of the bankrupt estate whose debts have been proven in the Bankrupt Estate as at the Trustee’s affidavit of 10 September 2024 are as follows:

    (a)ACM Group Limited in the sum of $18,694;

    (b)Citigroup Pty Ltd in the sum of $8,049;

    (c)Commonwealth Bank of Australia in the sum of $14,186,

    (together, the known creditors).

    Notice of this application to creditors

17. On 24 August 2022, a notice of intention to declare a first and final dividend was issued to the known creditors.

18. As of September 2024, the estimated available funds held in the Bankrupt Estate for distribution to creditors is $21,682.28 after the deduction of legal fees and the Trustee’s disbursements and remuneration. 

    Procedural history

19. On 17 September 2024, the present application was filed with the Court by the Trustee in their ongoing capacity as official trustee of the Bankrupt Estate. It did not name the Bankrupt as respondent and there is no evidence of any attempt to serve the Bankrupt.

20. On 10 December 2024, this matter came before the Court for hearing whereby the Trustee was represented by Counsel and there were no other appearances.

21. At the time of this judgment, the Court records reflect no opposition or indeed any other communication by or on behalf of the Bankrupt or any other interested person.

    LEGAL FRAMEWORK

22. Division 5 of Part VI of the Act provides a framework to enable, where possible, an efficient distribution of dividends to creditors from the proceeds of property identified, recovered and realised by the appointed trustee. The trustee has an overarching and specific obligation to ensure the efficient administration and to declare and distribute dividends amongst the creditors who have proved their debts with all convenient speed: ss.19(1) and 140 of the Act.

23. Relevant to the present application, the starting point is that upon sequestration the bankrupt person is obliged to make out and file a statement of their affairs with the Official Receiver, and to furnish a copy on the appointed trustee: s.54(1) of the Act. The obligation is to be discharged within 14 days of the day on which the person is notified of the bankruptcy.

24. Additionally the Official Receiver may, at its discretion, give a written notice essentially requiring a bankrupt to give them a statement of their affairs within 14 days: s.77CA of the Act.

25. Whether all (or a sufficient amount) of a bankrupt’s property has been realised to enable a final dividend to be declared, a trustee shall declare and distribute a final dividend: s.145(1) of the Act.

26. In circumstances of a failure to file a statement of affairs as required by the legislation the Court is empowered to order, at its discretion, the distribution of dividends amongst the creditors who have proved their debts. Specifically, s.146 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.

27. The authorities on the purpose and application of s.146 were summarised in Quin as Trustee of the Bankrupt Estate of Phillip Chill [2020] FCCA 2652 per Kelly J at [31] to [32]:

    In Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968, Gyles J held at [4] that the purpose of s 146 was “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.” In Barnet (Trustee), in the matter of Zhang (Bankrupt) v Zhang [2017] FCA 924 at [22], Lee J observed that s 146 was “intended to facilitate the distribution of dividends among the creditors of the bankrupt in circumstances where the trustee has not had the benefit of a statement of affairs prepared by the bankrupt”: citing Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1 at 4 [14] per Sackville J.

    In Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1 at [19], Sackville J held that Court must be satisfied that it is appropriate to make an order. His Honour stated: “The Court may need to be satisfied, for example, that creditors have been notified of the application and have had an opportunity to be heard (although ordinarily the application would be made in the interests of creditors). As in this case, the Court might require evidence that the trustee has taken appropriate steps to ascertain whether there are creditors, other than those who have come to its attention by filing a proof of debt or otherwise.” This reasoning was endorsed in Zhang [2017] FCA 924.

28. The trustee must give a reasonable period of written notice of the intention to declare a dividend to anyone who claims or might claim to be a creditor but has not lodge a proof of debt, with such notice to specify a reasonable period within which creditors may lodge their proofs of debts: s.140(3) and (4) of the Act.

29. In McLean (Trustee) v Erbas [2019] FCA 1763 at [7], Anderson J observed that “where a bankrupt has not provided a statement of affairs, a trustee of bankrupt estate may be uncertain as to the identity of the creditors in the estate and therefore unable to meet the statutory requirements for distributing a dividend to creditors.”

    CONSIDERATION

    Application heard ex parte

30. It was unnecessary for the Bankrupt to be named as a party to the application or served with it: Barnett v Zang [2017] FCA 924 at [28]-[29]. Absent an objector, the evidence of the applicant goes unchallenged. The Trustee did not contend that the Bankrupt was notified in the present case nor does the evidence before the Court establish as much.

31. With regard to the protracted period of almost 10 years since compliance with s.54(12) of the Act was first due and the evidence of attempts made to notify the Bankrupt, the Trustee requested that the Court proceed, consistent with its duty to administer the estate as efficiently as possible (which includes by avoiding unnecessary expense and in a commercially sound way): s.19(1)(j)-(k) of the Act.

32. In all of the circumstances, the Court determined to proceed to hear the Trustee’s application ex parte.

    Section 146 application

33. On the evidence before the Court, the Bankrupt has failed to file a statement of affairs as required by the Act. Almost 10 years (some 9 years and 11 months) has elapsed since the Bankrupt was first requested to file a statement of affairs. The Trustee has caused multiple letters and phone calls to be sent and made to the Bankrupt about the obligation to file a statement of affairs, over the span of nearly a decade. Some of those communications were with the lawyers of the Bankrupt. I am satisfied that the Bankrupt was notified, and reminded repeatedly, of the Bankrupt’s obligation to file the statement of affairs and, notwithstanding those attempts made by the Trustee, he has not done so.

34. For completeness, the Bankrupt has not appeared before this Court or effectively challenged the obligation to file a statement of affairs.

35. Accordingly, the jurisdiction to make an order pursuant to s.146 of the Act is engaged.

    Discretionary considerations

36. The delay in distribution of funds from the Bankrupt Estate operates to the prejudice of the known creditors. The prejudice arises by reason of the failure of the Bankrupt to file a statement of affairs which would, but for an order under s.146, present as an obstacle to the declaration and payment of a final dividend that the Trustee is otherwise in a position to pay in the most part. There is no countervailing reason why a final dividend ought not be paid or why relief ought not be given under s.146 so as to permit finalisation of the administration of this Bankrupt Estate.

37. As to the terms of an order the Court may make, absent a statement of affairs completed by the Bankrupt, there is some uncertainty as to the identity of the creditors in the Bankrupt’s Estate. As at 10 December 2024, the Trustee had identified 3 creditors and if so ordered would continue its efforts by placing a further advertisement in The Age newspaper. As the matter has proceeded ex parte, it is appropriate that there be such public advertisement and that there be a short period within which any creditor or interested person has liberty to apply before the Trustee proceeds to declare and distribute the first and final dividends in the Bankrupt Estate. I am otherwise satisfied that the Trustee has taken proper steps to notify the known creditors, together with those who might yet have been ascertained, of their opportunity to file a proof of debt and to do so before a final dividend is declared. 

38. Distribution of a dividend from the Bankrupt Estate is subject to the anterior entitlement that the Trustee retains an amount sufficient for payment of the costs of administration of the Bankrupt Estate (which includes, by way of disbursements, their legal costs in these proceedings): s.140(2) of the Act.

39. On the evidence there is no apparent reason why the Court would not exercise its discretion to make any orders under s.146 in addition to a costs order as sought. An order should also be made that the Trustee’s costs of this application be taxed and paid from the Bankrupt Estate in accordance with s.32 of the Act.

    DISPOSITION

40. Had the Bankrupt completed the statement of affairs in a timely way as required by the Act, the matter would have been finalised some years ago and significant additional costs would have been avoided. The Trustee was obliged to take steps appropriate to administer the estate as efficiently as possible, including by avoiding any unnecessary expense and performing functions in a commercially sound way.

1. In this case, the Trustee took all reasonable steps to obtain a statement of affairs that the Bankrupt failed to file and there is no lawful or valid justification or explanation for that failure. Had the Trustee not taken the step in filing this application, the costs of administration of the Bankrupt Estate would only have increased.

2. For the above reasons, the Court will make orders for public advertisement of notice of intention to declare a first and final dividend in the Bankrupt Estate. Absent any application by an interested person within 14 days and once 21 days have elapsed, the declaration or distribution of a first and final dividend in the Bankrupt Estate may proceed. There will also be an order as to the Trustee’s costs.

I certify that the preceding forty-two (42) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini.

Associate:

Dated:       19 December 2024