Official Receiver in Bankruptcy v De Vries

[2011] FMCA 670

FEDERAL MAGISTRATES COURT OF AUSTRALIA

OFFICIAL RECEIVER IN BANKRUPTCY v DE VRIES & ORS [2011] FMCA 670

BANKRUPTCY – Application for annulment of bankruptcy where debtors’ petition ought not to have been accepted – where sequestration order had been made.

Bankruptcy Act 1966 (Cth), s.153B

Applicant: OFFICIAL RECEIVER IN BANKRUPTCY

First Respondent: ANTHONY DE VRIES

Second Respondent: DAVID SOLOMONS

Third Respondent: MARK JULIAN ROBINSON

File Number: SYG 1491 of 2011

Judgment of: Barnes FM

Hearing date: 9 August 2011

Delivered at: Sydney

Delivered on: 9 August 2011

REPRESENTATION

Solicitors for the Applicant: Sally Nash & Co

First Respondent: Submitting appearance

Second Respondent: Submitting appearance

Third Respondent: Submitting appearance

ORDERS

1. The bankruptcy of Anthony Kenneth Fairclough and Martina Fairclough created by acceptance of a Debtors Petition on 11 August 2008 be annulled on the ground that the Debtors Petition ought not to have been accepted by the Official Receiver.

2. The Court dispenses with compliance with Part 7.03 and 7.04 of the Bankruptcy Rules.

3. Liberty to apply to Antony De Vries, David Solomons and Mark Julian Robinson for any order as result of orders made in this application.

4. The Applicant pay its own costs of this application.

5. The applicant remove the entry of the acceptance of the Debtors Petition of Anthony Kenneth Fairclough and Martina Fairclough from the National Personal Insolvency Index.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 1491 of 2011

OFFICIAL RECEIVER IN BANKRUPTCY

Applicant

And

ANTHONY DE VRIES

First Respondent

DAVID SOLOMONS

Second Respondent

MARK JULIAN ROBINSON

Third Respondent

REASONS FOR JUDGMENT

(Revised from Transcript)

1. This is an application filed on 14 July 2011 by the Official Receiver in Bankruptcy seeking orders that the bankruptcy of Anthony Fairclough and Martina Fairclough (the bankrupts) be annulled on the ground that their debtors’ petition ought not to have been accepted.  The application is supported by an affidavit sworn on 11 July 2011 by Michael Parkinson, the Acting Business Manager of the Insolvency Trustee Service of Australia. 

2. There are three respondents, each of whom entered a submitting appearance save as to costs.  The first and second respondents (Mr De Vries and Mr Solomons) signed a consent to act as trustees in relation to the bankrupts’ joint debtors’ petition which was accepted by the Official Receiver on 11 August 2008.  The third respondent, Mr Robinson, was appointed Trustee in Bankruptcy of the bankrupts’ estates when a sequestration order was made by this court against the estates of the bankrupts on 11 August 2008. 

3. The Official Reciever submitted that the debtors’ petition ought not to have been accepted by him in circumstances where a joint creditor’s petition had been served on the Official Receiver with a hearing date of 11 August 2008.  The debtors’ petition was filed with the Official Receiver on 8 August 2008 and accepted on 11 August 2008, which was the same day on which a sequestration order was made.  The evidence is that while the Official Receiver was served with a copy of the creditor’s petition this was “not noted”. 

4. Mr Parkinson’s evidence is also that the Official Receiver would normally have notified the court and the petitioning creditor of the filing and acceptance of a debtors’ petition in such circumstances but that it appears this did not occur.  The Official Receiver is unable to explain the lapse in procedure in the present case. 

5. The Official Receiver now seeks to rectify the situation by an annulment of the bankruptcy that resulted by way of acceptance of the debtors’ petition and by a direction to update the National Personal Insolvency Index in circumstances where it is said to be apparent that Mr Robinson has substantially administered the bankruptcy pursuant to the sequestration order. 

6. It was submitted that there appeared to be no additional costs pertaining to the two bankruptcies.  In correspondence annexed to Mr Parkinson’s affidavit, Mr De Vries and Mr Solomons did question how the Official Receiver proposed dealing with their professional and out-of-pocket expenses.  The Official Receiver’s response to that was that it appeared that the administration for which they were appointed had not had any activity in relation to realisations and that only limited work had been done and out-of-pocket and professional expenses incurred.  The Official Receiver indicated a willingness to consider a claim for costs under the Compensation for Detriment Caused by Defective Administration scheme. 

7. In circumstances where a submitting appearance save as to costs has been entered by the trustees in relation to the bankruptcy as a result of the debtors’ petition being accepted, it is appropriate to give liberty to Mr De Vries and Mr Solomons to make any application for costs as a result of orders that the court makes.  Mr Robinson entered a similar submitting appearance.  It would seem appropriate that he be given the same liberty to apply in order to address the possibility that he might wish to seek costs occasioned by what has occurred. 

8. In these circumstances I am satisfied that it is appropriate to dispense with compliance with the requirements in Part 7 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) that any trustee provide a full report and that there be notification of creditors in relation to the application for an annulment. 

9. I am satisfied under s.153B of the Act that the debtors’ petition ought not to have been accepted by the Official Receiver and that the court ought to exercise its discretion to annul the resulting bankruptcy.

10. The Official Receiver has acknowledged that it was appropriate to make the application because it was due to an error in his office that the second bankruptcy occurred.  The Official Receiver is unable to explain why this occurred.  The bankrupts ought not to be put to the expense of making an application to have one of their bankruptcies annulled.  In these circumstances, the annulment order sought ought to be made. 

11. The applicant also seeks orders that he be directed to rectify the National Personal Insolvency Index entry and to pay his own costs of the application.  In the circumstances that is undoubtedly appropriate. 

I certify that the preceding eleven (11) paragraphs are a true copy of the reasons for judgment of Barnes FM

Date:  30 August 2011