Official Receiver, in the matter of Mottershead
[2024] FCA 823
•3 July 2024
FEDERAL COURT OF AUSTRALIA
Official Receiver, in the matter of Mottershead [2024] FCA 823
File numbers: WAD 52 of 2024
WAD 53 of 2024
WAD 54 of 2024Judgment of: FEUTRILL J Date of judgment: 3 July 2024 Date of publication of reasons: 25 July 2024 Catchwords: BANKRUPTCY – referral of debtor’s petitions against a partnership for directions under s 56C(1)(b) and s 56C(3) of the Bankruptcy Act 1966 (Cth) – consideration of principles applicable for specifying the time for commencement of the bankruptcy under s 56C(5) of the Bankruptcy Act Legislation: Bankruptcy Act 1966 (Cth) ss 40(1)(daa), 56A-56G, 56C(1), 56C(1)(b), 56C(3), 56C(5); Pt IV, Div 3 Cases cited: Official Receiver v Chan [2024] FCA 542 Division: General Division Registry: Western Australia National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Number of paragraphs: 13 Date of hearing: 3 July 2024 Counsel for the Applicant: Mr D Welsh Solicitor for the Applicant: Australian Government Solicitor ORDERS
WAD 52 of 2024 IN THE MATTER OF WILLIAM HALE MOTTERSHEAD
OFFICIAL RECEIVER
Applicant
ORDER MADE BY:
FEUTRILL J
DATE OF ORDER:
3 JULY 2024
THE COURT ORDERS THAT:
1.Pursuant to s 56C(3) of the Bankruptcy Act 1966 (Cth), the Official Receiver be directed to accept the debtor’s petition of William Hale Mottershead against the partnership WH & SE Mottershead & Sons.
2.Pursuant to s 56C(5) of the Bankruptcy Act, the time of commencement of the bankruptcy of William Hale Mottershead be 9 March 2024.
3.There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
WAD 53 of 2024 IN THE MATTER OF CHARLES MILES MOTTERSHEAD
OFFICIAL RECEIVER
Applicant
ORDER MADE BY:
FEUTRILL J
DATE OF ORDER:
3 JULY 2024
THE COURT ORDERS THAT:
1.Pursuant to s 56C(3) of the Bankruptcy Act 1966 (Cth), the Official Receiver be directed to accept the debtor's petition of Charles Miles Mottershead against the partnership WH & SE Mottershead & Sons.
2.Pursuant to s 56C(5) of the Bankruptcy Act, the time of commencement of the bankruptcy of Charles Miles Mottershead be 9 March 2024.
3.There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
ORDERS
WAD 54 of 2024 IN THE MATTER OF SHEILA ELIZABETH MOTTERSHEAD
OFFICIAL RECEIVER
Applicant
ORDER MADE BY:
FEUTRILL J
DATE OF ORDER:
3 JULY 2024
THE COURT ORDERS THAT:
1.Pursuant to s 56C(3) of the Bankruptcy Act 1966 (Cth), the Official Receiver be directed to accept the debtor's petition of Sheila Elizabeth Mottershead against the partnership WH & SE Mottershead & Sons.
2.Pursuant to s 56C(5) of the Bankruptcy Act, the time of commencement of the bankruptcy of Sheila Elizabeth Mottershead be 9 March 2024.
3.There be no order as to costs.
Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.
REASONS FOR JUDGMENT
REVISED FROM THE TRANSCRIPTFEUTRILL J:
I have before me three applications for referral of debtor’s petitions for the Court to direct the Official Receiver to accept or reject those petitions as required in s 56C of the Bankruptcy Act 1966 (Cth).
Part IV Div 3 of the Bankruptcy Act makes provision for a debtor to present a petition against himself or herself to the Official Receiver. It contains mechanisms for the Official Receiver to accept or reject the petition. The presentation of the petition is an act of bankruptcy in accordance with s 40(1)(daa) of the Bankruptcy Act. If the presentation is accepted, the debtor becomes bankrupt, and ss 56A-56G make specific provisions relating to partnerships.
Relevantly for the applications before me, s 56C provides as follows:
56C Referral to the Court of a debtor’s petition against a partnership
(1)The Official Receiver must refer a debtor’s petition against a partnership to the Court for a direction to accept or reject the petition if either or both of the following conditions are met:
...
(b)there is at least one creditor’s petition pending against at least one of the members of the partnership (not counting a creditor’s petition against all the members of the partnership and no-one else).
...
(3)After a petition has been referred to the Court, the Court must direct the Official Receiver:
(a)to accept the petition in the form in which it was referred to the Court; or
(b)to accept the petition after amending it as directed by the Court; or
(c)to reject the petition.
...
(5)If the Court directs the Official Receiver to accept (either with or without amendments) a petition referred to the Court, the Court must specify the time of the commencement of the bankruptcy of each of the persons who becomes a bankrupt as a result of the acceptance of the petition.
The applications for referral have been served on the debtors and the Deputy Commissioner of Taxation, who, as will be explained, has served bankruptcy notices on two of the debtors and commenced proceedings seeking sequestration orders against them in the Federal Circuit and Family Court of Australia (Division 2).
None of the debtors and the Deputy Commissioner of Taxation has sought to be heard on the applications. The Deputy Commissioner of Taxation does not oppose the Court directing the Official Receiver to accept the debtor’s petitions. The Official Receiver, quite properly, has filed affidavit material and written submissions and made brief oral submissions to assist the Court in determining what orders to make on the applications.
The materials before the Court include the affidavits of Daniel Isaac Welsh, affirmed 5 April 2024, in identical terms, filed in each of the proceedings dealing with service of the referral applications on the Deputy Commissioner of Taxation. Identical affidavits of Mr Welsh affirmed 19 April 2024 were also filed in each proceeding dealing with matters relevant to the referral applications and contain some of the facts to which I will refer shortly. In the WAD 52 of 2024 proceeding, an affidavit of Andrew Paul Gilbert sworn 4 April 2024 dealing with service on William Hale Mottershead. In the WAD 53 of 2024 proceeding, an affidavit of Mr Gilbert sworn 4 April 2024 dealing with service on Charles Miles Mottershead. In the WAD 54 of 2024 proceeding, an affidavit of Mr Gilbert sworn 4 April 2024 dealing with service on Sheila Elizabeth Mottershead. I also have, relevantly, the Official Receiver’s amended outline of submissions filed 6 June 2024.
The relevant background to the referral applications is as follows. On 22 September 2023 the Deputy Commissioner of Taxation served Charles Mottershead with a bankruptcy notice. On 23 November 2023 the Deputy Commissioner of Taxation served Sheila Mottershead with a bankruptcy notice. On 15 February 2024 the Deputy Commissioner of Taxation filed two creditor’s petitions against each of Charles Miles Mottershead in the PEG 48 of 2024 proceeding and Sheila Elizabeth Mottershead in the PEG 46 of 2024 proceeding. No creditor’s petition has been filed against William Hale Mottershead.
On 9 March 2024 each of the Mottersheads lodged bankruptcy forms with the Official Receiver applying to become bankrupt as members of a business partnership with the name ‘WH & SE Mottershead & Sons’. The Official Receiver duly made applications for referral in accordance with s 56C of the Bankruptcy Act on 15 March 2024.
Upon a review of the materials filed with the referrals, there is no indication of any factual circumstances that may give rise to a concern that any of the debtor’s petitions were presented to the Official Receiver for some collateral or illegitimate purpose which may result in an abuse of process. Likewise, there is nothing to suggest that the debtors are using the debtor’s petition process to obtain some sort of perceived advantage relating to the date of the commencement of their respective bankruptcies. In these circumstances, I am satisfied that the Official Receiver should accept the petitions.
As already noted in the excerpt from s 56C(5), if the Court directs the Official Receiver to accept the debtor’s petitions, the Court must specify the time of commencement of the bankruptcy. By operation of the provisions of the Bankruptcy Act and the bankruptcy notices, in the case of Charles Mottershead, he would be regarded as having committed an act of bankruptcy 21 days after the service of the bankruptcy notice on him, which was 13 October 2023. In the case of Sheila Mottershead, for the same reason, on 14 December 2023.
In the case of William Mottershead, as mentioned above, by petitioning the Official Receiver on his own behalf, he committed an act of bankruptcy on presentation of his petition on 9 March 2024. Any of these dates could be selected as the date for commencement of the bankruptcy. However, as Colvin J explained in Official Receiver v Chan [2024] FCA 542 at [11]-[14], where there are joint petitioners who are not in partnership, there are sound reasons for selecting the same commencement dates for the administration of the estates. The same logic applies to petitions where there are members of a partnership who necessarily will have joint debtors and creditors in association with the partnership business. In Chan, Colvin J also reasoned at [14]-[15] as follows:
14Usually, a bankruptcy commences on the date when the relevant administrative act occurs or the judicial order is pronounced. That is to say, it speaks prospectively. There may be significance as to when the relevant act of bankruptcy that founds a creditor's petition actually occurred. Therefore, it is usual for that date to be noted when making a sequestration order on a creditor's petition. However, when it comes to a debtor's petition by joint debtors, in the usual case, the petitioning debtors become bankrupt upon the Official Receiver endorsing the petition as having been accepted: s 57(5).
15In the absence of any evident reason why there should be a deferment of the date of bankruptcy by reason of the need to seek a direction as to whether to accept a debtor's petition (or some reason why there should be an earlier date), it seems to me that it will usually be appropriate to specify a date at or about when the endorsement would have occurred if it had not been necessary to seek the direction. …
His Honour, in that case, went on to observe that he proposed to specify the date that the debtor’s petition was presented to the Official Receiver as a commencement date for the bankruptcy of each debtor.
I agree with those observations with all necessary amendments to make them applicable to s 56C of the Bankruptcy Act. It follows that I intend on specifying 9 March 2024 as the date of commencement for each of the bankruptcies on the applications for referral before the Court.
I certify that the preceding thirteen (13) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Feutrill. Associate:
Dated: 25 July 2024
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