Official Receiver v Howard

[2007] FMCA 786

FEDERAL MAGISTRATES COURT OF AUSTRALIA

OFFICIAL RECEIVER v HOWARD & ANOR [2007] FMCA 786

BANKRUPTCY – Failure to file a Statement of Affairs – distribution of dividend amongst creditors.

Bankruptcy Act 1966, ss.54(1), 54(2), 77, 77C, 146, 267B

Harrison v Del Santo [2007] FMCA 470
Official Trustee in Bankruptcy v Raeffaele [2003] FCA 328
Official Trustee in Bankruptcy v Thor [2006] FMCA 1637
Re Sturt; Ex Parte Official Trustee in Bankruptcy (2001) 117 FCR 1; [2001] FCA 1649
Rees v Stubberfield [1999] FCA 1862

Applicant: OFFICIAL RECEIVER FOR AND ON BEHALF OF OFFICIAL TRUSTEE IN BANKRUPTCY

First Respondent: PETER ANDREW HOWARD

Second Respondent: KAREN TRACEY SMITH

File Number: PEG 45 of 2007

Judgment of: Lucev FM

Hearing date: 23 April 2007

Date of Last Submission: 23 April 2007

Delivered at: Perth

Delivered on: 23 April 2007

REPRESENTATION

Counsel for the Applicant: Mr Donoghue

Solicitors for the Applicant: Carles Solicitors

Respondents: No Appearance

ORDERS

1. The costs, charges and expenses of the administration of the bankruptcy of the Respondents and a distribution of dividends amongst creditors who prove their debts in the estates shall proceed in accordance with Part VI Division 5 of the Bankruptcy Act 1966 (Cth) as if the Respondents had filed Statements of Affairs and those creditors had been stated to be creditors in them.

2. The Respondents not be entitled to any surplus funds remaining after payment of the dividends to creditors until they have lodged their duly completed Statement of Affairs in the required form in the office of the Official Receiver for the State of Western Australia and the Applicant has dealt with the claims of any further creditors disclosed in the Statements of Affairs.

3. The costs of and incidental to the Application be fixed in the sum of $2,284.70 and paid out of the bankrupt estates of the Respondents.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 45 of 2007

OFFICIAL RECEIVER FOR AND ON BEHALF OF OFFICIAL TRUSTEE IN BANKRUPTCY

Applicant

And

PETER ANDREW HOWARD

First Respondent

KAREN TRACEY SMITH

Second Respondent

REASONS FOR JUDGMENT

(Revised from Transcript)

Application

1. The Applicant seeks an order under s.146 of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”) that a distribution of dividends amongst creditors who have proved their debts in the joint and separate bankrupt estates of the Respondents shall proceed in accordance with Part VI, Division 5 of the Bankruptcy Act and relies on the following documents: 

   a)the affidavit of Kevin Arthur Fraser sworn 19 March 2007;

   b)the affidavit of Shane Hedley Shaw sworn 10 April 2007; and

   c)the affidavit of Christopher Michael Donoghue sworn 19 April 2007.

The Law

1. Section 54(1) of the Bankruptcy Act provides that where a sequestration order is made, the person against whose estate it is made must file a Statement of Affairs within 14 days of being notified of the bankruptcy. 

2. Section 54(2) of the Bankruptcy Act provides that where a sequestration order is made against two or more joint debtors, each of those persons must, in addition to complying with s.54(1) in relation to their affairs, file a Statement of the Joint Affairs of those persons within 14 days of being notified of the bankruptcy.

3. Section 146 of the Bankruptcy Act provides that where a bankrupt fails to file a Statement of Affairs, the Court may order a distribution of dividends among creditors who have proved their debts as if the bankrupt had filed a statement of their affairs and those creditors had been named in it.

Evidence

1. The affidavit of Mr Shaw deposes to service on the Respondents of the application and supporting affidavit. The affidavit of Mr Donoghue deposes to service of notice of the hearing date of the application on the only known creditor of the bankrupt estates and contains a letter of response from that creditor. The Court notes that that creditor, the Deputy Commissioner of Taxation (“DCOT”), does not oppose the orders sought by the Official Receiver.  The Court also notes, that the matter having been called outside today, there is no appearance by either of the Respondents.

2. The affidavit of Mr Fraser in support of the application provides evidence of: 

   a)the Respondents' bankruptcy;

   b)the Official Trustee's attempts to obtain a Statement of Affairs from the Respondents;

   c)the Respondents’ being successfully prosecuted under s.267B of the Bankruptcy Act for their respective failures to provide information pursuant to a notice given under s.77C of the Bankruptcy Act;

   d)the Respondents' failure to respond to file a Statement of Affairs;

   e)the Respondents' failure to file Statements of Affairs following their convictions under s.267B of the Bankruptcy Act;

   f)the failed attempts to identify creditors of the bankrupt estate other than the petitioning creditor;

   g)details of the only known assets of the bankrupt estates;

   h)that the administration of the bankruptcies of the Respondents is complete, save for the distribution of a dividend to the DCOT, being the only known creditor who has proved a debt; and

   i)that the delay is causing prejudice to that creditor.

3. The approach of this Court in respect of matters such as this is summarised in Official Trustee in Bankruptcy v Thor [2006] FMCA 1637 (“Thor”), where the Court referred to a series of matters which this Court should relevantly consider in order to determine whether an order pursuant to s.146 should be made, namely, the following:

   a)the Respondents' bankruptcy;

   b)the Official Trustee's attempts to obtain a Statement of Affairs from the Respondents;

   c)the Respondents' failure to respond and to file a Statement of Affairs;

   d)failed attempts to identify creditors of the bankrupt estate other than the petitioning creditor;

   e)details of the only known assets of the bankrupt estate;

   f)that the administration of the bankruptcy is complete, save for the distribution of a dividend to the DCOT, being the only known creditor who has proved a debt, that being the case in Thor's case as well as in this case; and

   g)that the delay is causing prejudice to creditors.

4. That approach has since been followed by this Court in Harrison v Del Santo [2007] FMCA 470 at para. 8 per Nicholls FM and is, of course, based on the well known decision of the Federal Court in Re Sturt; Ex Parte Official Trustee in Bankruptcy (2001) 117 FCR 1 at p 5, [2001] FCA 1649 at para. 19 (“Sturt”). 

5. The affidavit of Mr Donoghue deposes to notice having been given to the DCOT of the hearing date and annexes correspondence from the DCOT advising that it does not oppose the application, as already indicated. The affidavit of Mr Fraser deposes to advertising in The West Australian newspaper in order to ascertain further separate creditors of the female Respondent's bankrupt estate and the joint estate of her and the male Respondent. No further creditors were identified as a result of the advertising.

6. While the advertisement does not specifically call for claims from the male Respondent's separate creditor, as there are no funds in his estate to distribute, it does refer to a sequestration order against him and is sufficient notice of his bankruptcy. The affidavit of Mr Fraser encloses individual commercial reports obtained from Baycorp Advantage which also fail to reveal any further creditors of the Respondents.  The Court finds that the Applicant has advised all known creditors of the hearing and has taken appropriate steps to identify any further creditors on the bankrupt estates of the Respondents.  The Respondents have been made fully aware of their bankruptcies and of their obligations under the Bankruptcy Act.

Findings

1. The Court finds that the Respondents' conduct contravenes their obligations under ss.54 and 77 of the Bankruptcy Act and indicates that their failures to file Statements of Affairs are deliberate. The Court has jurisdiction to make orders under s.146 of the Bankruptcy Act, even if it does not accept that the Respondents' failure to file their Statement of Affairs is deliberate: Thor at para. 14, and Sturt FCR at p. 4, FCA at paras. 14 and 15. 

2. The Court accepts that the failure by the bankrupts to file their Statement of Affairs has prejudiced the DCOT as a creditor, as it has incurred further costs to and delayed the administration of the bankrupt estates:  Rees v Stubberfield [1999] FCA 1862.

3. The Court accepts that any further attempts to compel the Respondents’ to file Statements of Affairs or notify them of the orders made pursuant to this application would also incur further costs and delay and result in further disadvantage to the DCOT as creditor. The Court again notes the absence of the Respondents from the hearing today. In those circumstances, the Court adopts, with respect, the rationale outlined in the Official Trustee in Bankruptcy v Raeffaele [2003] FCA 328 at para. 7. The Court applies the rationale to the circumstances of this case and finds that there is no necessity for the Court to make any orders conditional upon further attempts to notify the bankrupts or stay the effects of those orders.

4. For all of the above reasons there will be orders made pursuant to s.146 of the Bankruptcy Act in terms of the Applicant's minute of proposed orders.

I certify that the preceding fourteen (14) paragraphs are a true copy of the reasons for judgment of Lucev FM

Associate:  Jacky Semler

Date:  23 May 2007