Official Receiver in Bankruptcy v Palmer

[2011] FMCA 683

FEDERAL MAGISTRATES COURT OF AUSTRALIA

OFFICIAL RECEIVER IN BANKRUPTCY v PALMER & ORS [2011] FMCA 683

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

Bankruptcy Act 1966 (Cth), s.153B

Clyne v Deputy Commissioner of Taxation and Another (1984) 6 FCR 418; [1984] FCA 346
Official Trustee In Bankruptcy v Mundy [2006] FMCA 1649

Applicant: OFFICIAL RECEIVER IN BANKRUPTCY

First Respondent: CHRISTOPHER JOHN PALMER

Second Respondent: OFFICIAL TRUSTEE IN BANKRUPTCY

Third Respondent: DEPUTY COMMISSIONER OF TAXATION

File Number: SYG 1492 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 save as to costs

Second Respondent: Submitting appearance save as to costs

Third Respondent: Ms M Agbinya of the Australian Taxation Office

ORDERS

1. The bankruptcy created by the sequestration order made against the estate of Antoinette L Boyd on 20 June 2006 be annulled. 

2. The court dispenses with compliance with Part 7 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) insofar as that Part requires the Trustee to prepare a report in relation to the bankruptcy. 

3. Liberty to Christopher John Palmer to apply for any order as a 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 sequestration order in relation to Antoinette L Boyd from the National Personal Insolvency Index. 

6. The operation of these orders be stayed for a period of seven (7) days. 

7. Liberty to the third respondent, the Deputy Commissioner of Taxation, to apply on 24 hours notice.  

FEDERAL MAGISTRATES
COURT OF AUSTRALIA
AT SYDNEY

SYG 1492 of 2011

OFFICIAL RECEIVER IN BANKRUPTCY

Applicant

And

CHRISTOPHER JOHN PALMER

First Respondent

OFFICIAL TRUSTEE IN BANKRUPTCY

Second Respondent

DEPUTY COMMISSIONER OF TAXATION

Third Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

1. This is an application filed on 14 July 2011 seeking annulment of a sequestration order made on 20 June 2006 against the estate of Antoinette L Boyd under s.153B of the Bankruptcy Act 1966 (Cth). The application is brought by the Official Receiver in Bankruptcy.

2. There are three respondents.  Christopher John Palmer, the first respondent, has entered a submitting appearance save as to costs.  Mr Palmer signed a consent to act as trustee in relation to the bankruptcy created by the sequestration order that was lodged with the Official Receiver.  The second respondent, the Official Trustee in Bankruptcy, also entered a submitting appearance save as to costs. 

   
   

   The third respondent, the Deputy Commissioner of Taxation has appeared and does not oppose the orders that are sought by the applicant but seeks a stay of the orders for seven days. 

3. The application is supported by an affidavit sworn by Michael Parkinson, the acting business manager of the Insolvency Trustee Service of Australia (ITSA), on 14 June 2011 explaining the basis on which an annulment is sought. 

4. A creditor’s petition was presented in relation to Antoinette L Boyd on or about 25 January 2006.  A debtor’s petition in relation to Antoinette Lee Boyd was filed and accepted by the Official Receiver on 31 May 2006.  Subsequently on 20 June 2006 a sequestration order was made against Ms Boyd on the basis of the creditor’s petition.  It appears that the Official Receiver failed to give notice of the debtor’s petition to the Court and to the solicitors for the petitioning creditor in accordance with its usual practice.  It is not in dispute that the debtor’s petition and the creditor’s petition related to the same person, notwithstanding that Ms Boyd’s middle name was not referred to in the sequestration order and different addresses (one in Victoria and one in New South Wales) appear on the extracts from the NPII in relation to the debtor’s petition and the sequestration order. 

5. The sequestration order was made in circumstances where one might have expected that a final search of the National Personal Insolvency Index would have disclosed the debtor’s petition.  It appears that it did not do so.  There is evidence from Mr Parkinson that this may have been because when the debtor’s petition was filed an error occurred in the correct spelling of the bankrupt’s name (in that the “i” and the “o” in her first name Antoinette were reversed).  The current extract from the National Personal Insolvency Index has Ms Boyd’s name spelt correctly. 

6. Ms Boyd has now been discharged from bankruptcy by law.  However the matter came to the attention of the applicant in circumstances where when Ms Boyd made an application for a home loan a search of the NPII revealed that she had gone bankrupt twice. 

7. The applicant does not seek costs and accepts that it was due to an error in its office that the second bankruptcy was not picked up and rectified earlier.  The bankrupt ought not to be put to the expense of making the application to have one of the bankruptcies annulled. 

8. Orders are sought annulling the sequestration order on the basis that the sequestration order ought not to have been made. Section 153B of the Act provides that if the court is satisfied that a sequestration order ought not to have been made or, in the case of a debtor’s petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the court may make an order annulling the bankruptcy.

9. It is open to the Official Receiver to bring such proceedings in circumstances such as those presently before the court on the basis that the sequestration order ought not to be made.  It was made in circumstances where the debt on which the sequestration order was brought would have been provable in the bankruptcy that followed as a result of the debtor’s petition, in circumstances where the search of the NPII apparently relied on in connection with the making of the sequestration order (the court’s file in relation to the sequestration order is before me and the final search was tendered in evidence) failed to reveal the other bankruptcy.  (See Clyne v Deputy Commissioner of Taxation and Another (1984) 6 FCR 418; [1984] FCA 346 and Official Trustee In Bankruptcy v Mundy [2006] FMCA 1649).

10. The sequestration order ought not to have been made. The submissions prepared by the solicitor for the applicant make the point that an annulment is a discretionary order. I am of the view that in the circumstances of this case the court ought to exercise its discretion to annul the sequestration order under s.153B of the Bankruptcy Act.

11. I have borne in mind that on an application for an annulment it is a requirement under Part 7 of the Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth) that there be a report by the Trustee.  However in the circumstances of this case I am of the view that it is appropriate to dispense with the requirement of compliance with that part of the Rules. 

12. I have been asked to give liberty to Mr Palmer (who consented to act as trustee in connection with the sequestration order) to apply for any order as a result of orders made in this application.  It is appropriate to make such an order, albeit it is not entirely clear what, if anything, Mr Palmer has had to do in relation to administration of this estate which was substantially carried out by the Official Trustee in Bankruptcy on the debtor’s petition. 

13. Similarly, I consider it appropriate to stay the orders for seven days on the application of the Deputy Commissioner of Taxation (the DCT).  

    
    

    I am told from the bar table that the DCT only became aware of these proceedings relatively recently and wishes to ensure that there are no outstanding matters that ought to be raised with the court. 

14. I am also asked by the applicant to direct him to remove the entry of the sequestration order from the National Personal Insolvency Index. 

    
    

    I consider that it is appropriate to make such a direction.  The NPII ought to be rectified. 

15. I am satisfied that the sequestration order ought not to have been made and that it is appropriate to annul the bankruptcy.  I will make the orders that are sought, but will stay the operation of those orders for a period of seven days.

I certify that the preceding fifteen (15) paragraphs are a true copy of the reasons for judgment of Barnes FM

Date:  31 August 2011