Moretti v Zablotsky

[2022] FedCFamC2G 586

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA

(DIVISION 2)

Moretti v Zablotsky [2022] FedCFamC2G 586

File number(s):	SYG 858 of 2022
Judgment of:	JUDGE LAING
Date of judgment:	22 July 2022
Catchwords:	BANKRUPTCY – application pursuant to s 146 of the Bankruptcy Act 1966 (Cth) – failure to file a statement of affairs – factors relevant to the exercise of discretion – application granted subject to certain events occurring.
Legislation:	Bankruptcy Act 1966 (Cth) s 54, 77CA, 146
Cases cited:	Application of the Trustee of the Property of Hoppe, a Bankrupt [2021] FCCA 484
Division:	Division 2 General Federal Law
Number of paragraphs:	18
Date of hearing:	22 July 2022
Place:	Sydney
Solicitor for the Applicant	Mr M. Williams (Grace Lawyers Pty Limited) appeared in person
Solicitor for the Respondent	No appearance

ORDERS

SYG 858 of 2022

FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)

BETWEEN:

RICHARD MORETTI

Applicant

AND:

ELENA ZABLOTSKY

Respondent

ORDER MADE BY:	JUDGE LAING
DATE OF ORDER:	22 JULY 2022

THE COURT ORDERS THAT:

1.Subject to the orders below, pursuant to s 146 of the Bankruptcy Act 1966 (Cth), the Applicant, being the Trustee of the Bankrupt Estate of Elena Zablotsky, is permitted to distribute dividends amongst the creditors of Elena Zablotsky who have proved their debts in accordance with Part VI, Division 5 of the Bankruptcy Act 1966 (Cth) as if Elena Zablotsky had filed a statement of affairs and those creditors had been stated to be creditors in it.

2.The distribution authorised by Order 1 not to be effected before 5 August 2022.

3.The costs of the application be the costs of the bankrupt Elena Zablotsky and be paid from the bankrupt estate.

4.Elena Zablotsky and any creditor have liberty to apply to discharge Orders 1, 2 and 3, such liberty to be exercised by making an application by no later than 3 August 2022.

5.The applicant notify SS Lawyers Pty Ltd and Australia and New Zealand Banking Group Limited of these orders by 26 July 2022.

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).

EX TEMPORE REASONS FOR JUDGMENT
(Revised from Transcript)

JUDGE LAING

1. The trustee of the estate of Elena Zablotsky (Trustee) applies for an order under s 146 of the Bankruptcy Act 1966 (Cth) (Act), which provides:

   Distribution of dividends where bankrupt fails to file statement of affairs

   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.

2. The trustee was appointed trustee in bankruptcy of the estate of Elena Zablotsky as a result of a sequestration order made on 23 September 2021. This followed the issue of a Creditors Petition, which set out an underlying debt that was based upon a Local Court Judgment obtained by SS Lawyers Pty Ltd (Applicant Creditor).

3. The application that is before me was filed on 16 June 2022. It has come before me for hearing today. There was no appearance for Ms Zablotsky. This is unsurprising, when considered in light of the evidence that I will refer to shortly that details the various unsuccessful attempts that have been made by the trustee in endeavouring to locate a current address for Ms Zablotsky.

   Attempts to locate Ms Zablotsky

4. There is in evidence an affidavit sworn by the Trustee on 15 June 2022. That evidence reveals that various efforts have been made to ascertain the place or places at which documents may be communicated to Ms Zablotsky. Such documents have included a letter from the trustee explaining to Ms Zablotsky that she had become bankrupt and needed to complete a statement of affairs pursuant to s 54 of the Act (Trustee’s Correspondence). The Trustee’s Correspondence has been sent to various addresses that were located on banking records, Court documents and through the Applicant Creditor. No response has been received.

5. The trustee has also applied to the Official Receiver for the issuance of a Notice pursuant to s 77CA of the Act. Whilst this was issued and sent to potential addresses that were also utilised by the trustee in attempting to locate Ms Zablotsky, the Official Receiver subsequently notified the trustee that they had been unable to serve the Notice.

6. Other steps that the trustee has taken to try and locate Ms Zablotsky have included obtaining a “SKIP trace Report” from Sharmans Investigations and Process Serving. This report sets out attempts made to locate Ms Zablotsky, which were unsuccessful in locating a current address.    

7. Attempts have additionally been made to contact Ms Zablotsky at phone numbers known to the Applicant Creditor. Those attempts have been unsuccessful.

8. Based on the above, I accept that reasonable attempts have been made to locate Ms Zablotsky.

   Principles

9. The situation is therefore one in which the bankrupt, Ms Zablotsky, has not lodged her statement of affairs and the trustee and others have been unable to locate any current address or means of contact with her.

10. The principles applicable to such a situation were considered by Judge Manousaridis in Application of the Trustee of the Property of Hoppe, a Bankrupt [2021] FCCA 484:

    4. That raises the question whether notice to the bankrupt is a necessary prerequisite to my making an order under s 146 of the Act. The official trustee, in his written submissions, refers to the case of Roufeil (Trustee); in the matter of Jarvie (Bankrupt) [2015] FCA 232 at [12] as authority for the proposition that there is no requirement under the Act that the bankrupt be named as a respondent to the application. That may be accepted, but as a matter of general principle it surely cannot be the case that a trustee’s not being able to locate a bankrupt can be a cause or reason for not proceeding with an application made under s 146 of the Act. Section 146 of the Act, after all, has been inserted in the Act, one would have thought, to deal precisely with the circumstances where a bankrupt cannot be found or does not cooperate and otherwise engage with the duties that a bankrupt has to file and prepare a statement of affairs. I am satisfied that the mere failure by the trustee to notify the bankrupt of today’s application is no bar to my hearing and proceeding with the application and making an order, if the making of such order is otherwise appropriate.

    5. I then begin with the principles I should apply when considering the application. These were stated by Gleeson J when siting in the Federal Court in Roufeil. In that case her Honour said there are two issues in relation to an application under s 146 of the Act that need to be determined. The first is whether the bankrupt has failed to file a statement of affairs as required by the Act; and, second, assuming that the first question is answered in the affirmative, whether the court in the exercise of its discretion should order the distribution of dividends among the creditors, who have proved their debts…

    8. The next set of principles deals with the principles that should govern the exercise of the discretion. In Re Sturt; Ex parte Official Trustee in Bankruptcy [2001] FCA 1649 at [14], it was said that s 146 of the Act:

    . . . is 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.

    9. In Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968 at [4], it was said that the purpose of s 146 of the Act 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.

    10. Relevant factors in the exercise of the discretion conferred by s 146 of the Act include whether the creditors have been notified of the application and have had the opportunity to be heard, and whether the trustee has taken steps to ascertain whether there are creditors other than those who have come to a trustee’s attention by filing a proof of debt.

    Consideration

11. It is clear enough from the above evidence that Ms Zablotsky has failed to file a statement of affairs as required by the Act. This is despite numerous attempts by the trustee to communicate with her regarding this requirement.

12. The question is then whether I should make the orders sought by the trustee in the exercise of my discretion.

13. In this regard, the trustee has filed evidence detailing his efforts to locate creditors. This has included steps such as writing to major banking institutions, conducting PPSR, ASIC and property searches as well as making inquiries of RMS and searches of share registries, betting agencies and cryptocurrency indexes. The ATO has also been notified of the trustee’s appointment.

14. Additionally, a Notice of Intention to Declare a First and Final Dividend has been published in the Australian and Daily Telegraph newspapers and has been sent to the ANZ Bank. The only creditors located by the trustee are the Applicant Creditor and ANZ Bank.

15. I am satisfied that reasonable attempts have been made to identify the relevant creditors.

16. I was informed by Mr Williams, who appeared for the trustee, from the bar table that the two creditors identified were generally aware that the application before me was being made but that he was not certain that they been notified of the hearing today.  The absence of evidence that the creditors have been notified of the listing and given the opportunity to appear may tend against the exercise of the discretion.

17. However, I have had regard to and accept the trustee’s evidence that the administration of the estate is complete save as for the distribution of funds and that the failure of Ms Zablotsky to file a statement of affairs and resulting delay is causing financial prejudice to the creditors. This is in circumstances where the amount available for distribution is limited and not expected to cover the full amount of the debts owed. 

    Conclusion

18. In these circumstances, I consider it appropriate to make orders to the effect sought by the trustee but delay their effect until 5 August 2022 after notification has occurred to the creditors. The creditors will then have the liberty to apply to the Court in the event that they wish to be heard on the application. However, given that on the face of the materials the application brought before the Court appears to be in their interests, it may well be that no such application is made. 

19          I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of Judge Laing.

Associate:

Dated:       28 July 2022