Krawec v Wheaton

[2018] FCCA 3248

FEDERAL CIRCUIT COURT OF AUSTRALIA

KRAWEC v WHEATON [2018] FCCA 3248

Catchwords:
BANKRUPTCY – Sequestration order made by Registrar – application to review decision made by Registrar – bankrupt found to be solvent – whether Registrar’s order should be set aside – whether sequestration order should be annulled – sequestration order annulled.

Legislation:

Bankruptcy Act 1966 (Cth), ss.153B, 154

Cases cited:

Wheaton v Krawec [2018] FCA 312

Applicant: ANNA SOPHIA KRAWEC

Respondent: ANTHONY JOHN WHEATON

File Number: LNG 62 of 2017

Judgment of: Judge Riethmuller

Hearing date: 5 November 2018

Date of Last Submission: 9 November 2018

Delivered at: Melbourne

Delivered on: 9 November 2018

REPRESENTATION

Solicitors for the Applicant: Fitzgerald & Browne Lawyers

The Respondent appeared In Person

ORDERS

1. The debt to the Applicant creditor (together with any interest that is accrued thereon) be met from the estate of the Respondent bankrupt.

2. The Applicant creditor’s costs fixed in the sum of $4,589.00 be paid from the estate of the Respondent bankrupt as part of the costs and expenses of the administration of the estates under s.154(1)(b) of the Bankruptcy Act 1966.

3. Upon the payment of the debt and expenses referred to in Orders 1 and 2 herein, the sequestration order made 17 April 2018 be annulled. 

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT LAUNCESTON

LNG 62 of 2017

ANNA SOPHIA KRAWEC

Applicant

And

ANTHONY JOHN WHEATON

Respondent

REASONS FOR JUDGMENT

(Delivered Ex Tempore)

1. The bankrupt, Anthony John Wheaton, applied on 23 April 2018 to review a decision of a Registrar made on 17 April 2018 sequestrating him.

2. At the time that the Registrar made the order, the Registrar had before him evidence that the bankrupt had not complied with a Bankruptcy Notice requiring payment of in excess of $29,000 that had been served on the bankrupt by post.  There was also evidence:

   a)that the bankrupt had unsuccessfully applied to the Court to set aside the Bankruptcy Notice in August 2017,

   b)that the bankrupt had been served with the creditor’s petition;

   c)that the debt remained outstanding; and

   d)evidence of search and consent to act as trustee. 

3. The bankrupt filed no material in the proceedings before the Registrar.  As a result, it was practically inevitable that the Registrar would declare him bankrupt.

4. The application to review the Registrar’s sequestration order is based upon the bankrupt’s claims that he is solvent. 

5. The review application was listed before me on 10 August 2018, however was not able to be reached on that day as another matter that was also listed that day proceeded.  It was only on that day that the bankrupt completed his statement of financial affairs for the trustee. 

6. The trustee advises that he has made the appropriate enquires and concluded that the bankrupt has only two debts: (i) the debt payable to the petitioning creditor, and (ii) a debt on a credit card.  The bankrupt did not dispute the credit card debt. 

7. The bankrupt does not dispute that the orders relied upon in the Bankruptcy Notice have been made nor does he challenge the interest calculations. 

8. The bankrupt remains absolutely opposed to paying the debt to the petitioning creditor and any costs of these proceedings.

9. The bankrupt makes a range of vexatious and unfounded claims against the creditor’s legal advisers and the trustee.  I do not traverse these claims as the barrage of emails (rejected by the registry) are not formally before me.  I have nonetheless reviewed them as requested by the bankrupt to determine whether they include matters relevant to this application that may be hidden in the prolix form of the documents.  I can find nothing that that appears relevant for the purpose of this judgment.  The bankrupt makes many claims of conspiracies and criminal conduct but does not provide any proper basis for these claims.  

10. Relevant to the matter today is the statement by the trustee that the bankrupt’s assets exceed his debts, and that the entirety of the debts together with the costs of the administration can be met by the funds vested in the trustee as a result of the sequestration order. 

11. As a result I am persuaded that the bankrupt is solvent.

12. I note that these proceedings are a de novo review of the decision of the Registrar.  On the material now before the Court it appears that the bankrupt is solvent and therefore he ought not be bankrupt.  Thus it is appropriate to either set aside the order of the Registrar or annul the bankruptcy.

13. Whilst the review of a registrar’s decision is not an appeal (and as such the proceedings and reasons of the Registrar do need examination in determining whether the bankrupt should be sequestrated), the conduct of the parties is relevant in order to determine whether the Registrar’s decision should be set aside or the bankruptcy annulled under s.154 of the Bankruptcy Act 1966.

14. In this case, a number of factors indicate that it is more appropriate to annul the bankruptcy rather than setting aside the order of the Registrar.  First, the bankrupt did not place material before the Registrar to demonstrate he is solvent.  Secondly, the bankrupt chose to commit an act of bankruptcy by not paying the debt when served with the Bankruptcy Notice (nor making payment even after his special leave application was dismissed in the High Court when he challenged the orders that supported the Bankruptcy Notice).  The bankrupt’s claim that he did not have to meet the costs orders until such time as his appellate rights were exhausted is not correct at law: a judgement debt must be paid unless stayed by court order even if there is an appeal pending.  Thirdly, the bankrupt admitted that he owed the debt (subject to his High Court challenge) in proceedings challenging the Bankruptcy Notice before Kerr J: see Wheaton v Krawec [2018] FCA 312 at [13]. Fourthly, the bankrupt failed to provide a statement of financial affairs to the trustee until August this year. Fifthly, the trustee now has the funds that were held in the bankrupt’s name to distribute in accordance with the Act. Sixthly, the trustee has incurred expenses carrying out his obligations under the Act. Finally, the debt to the petitioning creditor and the credit card company remain outstanding.

15. In substance the whole of the bankruptcy proceedings were caused by the bankrupt’s conduct in not paying the judgment debts, and not disclosing relevant information in a timely manner, thus causing considerable expense to the creditor and the trustee. In the circumstances of this case it is appropriate that the bankruptcy be annulled under s.153B of the Act.

16. The effect of an annulment order is set out in s.154 of the Act. Importantly, all acts done by the trustee are taken to have been validly done: see s.154(1)(a). The trustee may apply the money of the bankrupt towards costs and expenses: see s.154(1)(b).

17. In this case the creditor makes application for orders that the debt be paid. Such orders are provided for in s.154(3) of the Act. The creditor does have ‘an interest in’ the property held by the trustee in the sense contemplated by this section as the trustee holds the property for the purpose of applying it to the debts of the bankrupt. I find that it is just and equitable that the creditor’s debt (and any interest that has accrued) be met from the bankrupt’s estate.

18. The whole of the costs of these proceedings were caused by the conduct of the bankrupt.  There is nothing about the conduct of the creditor in these proceedings which tells against the creditor being paid their costs.  This is not a case where the proceedings were commenced and ultimately a court determined the debt was not due and owing. 

19. In the circumstances I will make orders for the debt to the petitioning creditor to be met from the funds held by the trustee, and that the bankruptcy thereafter be annulled.  The costs of the proceedings should form part of the costs of administering the estate.

I certify that the preceding nineteen (19) paragraphs are a true copy of the reasons for judgment of Judge Riethmuller

Associate: 

Date:  3 December 2018