Official Receiver v Lockhart - [2006] FMCA 942

FEDERAL MAGISTRATES COURT OF AUSTRALIA

OFFICIAL RECEIVER v LOCKHART

[2006] FMCA 942

BANKRUPTCY – Distribution of dividends to creditors – bankrupt failing to file a statement of affairs – leave to proceed with distribution – relevant considerations – application granted ex parte.

Bankruptcy Act 1966 (Cth), ss.140(3), 140(4), 146

Lockhart v Deputy Commissioner of Taxation [2005] FMCA 641
Official Trustee in Bankruptcy v Raeffael [2003] FCA 328
Re Rees; Stubberfield v Stubberfield [1999] FCA 1862
Re Shaw; ex parte Official Trustee in Bankruptcy [1999] FCA 968
Re Sturt; ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1

Applicant:

OFFICIAL RECEIVER FOR AND ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY, THE TRUSTEE OF THE PROPERTY OF PETER BOWDEN LOCKHART, A BANKRUPT

Respondent:

PETER BOWDEN LOCKHART

File Number:

SYG 94 of 2006

Judgment of:

Smith FM

Hearing date:

28 June 2006

Delivered at:

Perth

Delivered on:

28 June 2006

REPRESENTATION

Counsel for the Applicant:

Ms L Mobilia

Solicitors for the Applicant:

Carles Solicitors

Counsel for the Respondent:

No appearance

ORDERS

The Applicant shall publish one advertisement in the Public Notices section of The Australian newspaper and one advertisement in the West Australian newspaper within 14 days. The advertisement is to give notice of the Applicant’s intention to declare a dividend in the bankrupt estate of the Respondent and allow creditors 14 days to lodge proof of debts in the bankrupt estate.
No less that 14 days following the publication of the advertisements described in Order 1 above, the costs, charges and expenses of the administration of the bankruptcy of the Respondent and a distribution of dividends amongst creditors who prove their debts in the estate shall proceed in accordance with Part VI Division 5 of the Bankruptcy Act 1966 as if the Respondent had filed a Statement of Affairs and those creditors had been stated to be creditors in it.
The Respondent not be entitled to any surplus funds remaining after payment of the dividends to creditors until he has lodged his 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 Statement of Affairs.
The costs of and incidental to this Application be paid out of the bankrupt estate of the Respondent.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 94 of 2006

OFFICIAL RECEIVER FOR AND ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY, THE TRUSTEE OF THE PROPERTY OF PETER BOWDEN LOCKHART, A BANKRUPT

Applicant

And

PETER BOWDEN LOCKHART

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me an application for orders under s.146 of the Bankruptcy Act 1966 (Cth). That section provides for the court to allow the distribution of dividends among the creditors of a bankrupt estate without the applicant having filed a statement of affairs.
The purpose for which the power is exercised has been explained in several cases. Gyles J in Official Trustee in Bankruptcy, Re Shaw [1999] FCA 968 said:
The purpose of the section, as I can so glean it, 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.
The need to address prejudice to the known creditors of the bankrupt resulting from delay in the administration of the estate, was also referred to by Spender J in Re Rees; Stubberfield v Stubberfield [1999] FCA 1862.
In Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1, Sackville J referred to Gyles J’s opinion, and to relevant provisions of the Act, before concluding at [10]:
The statutory scheme makes it clear that a principal object of the legislation is to ensure the distribution of dividends to creditors as soon as is feasible.
At [19] his Honour said:
Of course, on any application under s146 of the Bankruptcy Act the Court must be satisfied that it is appropriate to make an order. The Court may need to be satisfied, for example, that creditors have been notified of the application and have had an opportunity to be heard (although ordinarily the application would be made in the interests of creditors). As in this case, the Court might require evidence that the trustee has taken appropriate steps to ascertain whether there are creditors, other than those who have come to its attention by filing a proof of debt or otherwise.
In Re Shaw (supra) at [7], Gyles J also considered whether creditors should be identified and notified prior to the making of an order. He noted that there had already been an advertisement in a newspaper of the proposal to distribute, and also referred to the duty on a trustee to do what is required by the Act in the course of a distribution. One obligation is the giving of notices under s.140(3) and (4). I shall return to that issue further below.
In Official Trustee in Bankruptcy v Raeffael [2003] FCA 328, Allsop J referred to a situation where the bankrupt had not been notified of the application to the court, and considered whether a condition should be attached to the order that further attempts be made to notify the bankrupt. His Honour ultimately concluded that it was not appropriate to put the estate to further expense in that respect. On the history, which I will recount below, I have reached the same conclusion in the present case.
The present application is supported by several affidavits, the chief of which is that of Sharon Renee Faulkner, sworn 18 April 2006. It is unnecessary for me to recount the whole of the history set out in that affidavit.
In brief, a sequestration order was made against the bankrupt on

17 January 2005 on a petition brought by the Deputy Commissioner of Taxation. There is no doubt that the respondent bankrupt received actual notice of the sequestration order and of a letter requesting that he complete a statement of affairs in compliance with his obligations under the Bankruptcy Act. Notice was effected by personal service which has been proved by affidavit. It is also confirmed by the fact that the applicant brought an application for annulment.
The application was brought in this Court on 31 January 2005. The applicant sought to rely upon the fact that he had forwarded a bank cheque to the Deputy Commissioner of Taxation in the amount of $32,128.53 in purported payment of the debt owed to the Australian Taxation Office. However, a greater debt was claimed by the ATO. The applicant did not, despite correspondence with him in the course of the annulment proceeding, ever file a statement of affairs. This provided a significant reason why McInnis FM dismissed the annulment application on 17 May 2005 (see Lockhart v Deputy Commissioner of Taxation [2005] FMCA 641). His Honour referred at [13] to the impossibility of making an assessment of the true state of the debtor’s financial affairs in order to make the assessment of whether or not it could properly be claimed that he was solvent.
Following his failure in that application, the bankrupt appears to have ceased to operate the post box at which documents had previously been served upon him, and to have moved address without informing his trustee. There is, before me, extensive evidence of attempts to serve the applicant with notice of the present application. Upon that evidence McInnis FM, on 18 May 2006, dispensed with the requirement for personal service, and permitted service by post to the last postal address used by the applicant. I am satisfied on an affidavit of service that service has been effected in accordance with his order.
It is, however, clear that the applicant did not actually receive notice of this application, since the posted items were returned marked "left address/unknown". Notwithstanding this, I consider that it is appropriate for me to proceed with the present application ex parte.
Ms Faulkner’s affidavit refers to the cheque received by the Deputy Commissioner of Taxation, which has been forwarded to the trustee, and would appear to constitute the only asset which the trustee has been able to identify and take possession of. She deposes that there have been "various searches and inquiries", which have "failed to locate further assets in the bankrupt estate". She refers to the Commissioner of Taxation's currently admitted debt in the sum of $51,050. She deposes to the fact that the Deputy Commissioner is the, "only known creditor of the bankrupt estate" and refers to a "Baycorp Advantage individual commercial report". This shows very minimal interest in the applicant by credit providers, and no other information of relevance. It would seem, therefore, that the only creditor with an interest in this estate is the Deputy Commissioner, and that the small fund available to the trustee should pass to that creditor without further delay.
I do, however, think that it would be desirable for a notice of intention to distribute a dividend to be published in newspapers circulating both in Perth and nationally, and I shall include such a requirement as a condition of my order today. This will allow any other creditors to come forward before a dividend is finally declared.
Ms Faulkner’s affidavit deposes that: "the administration of the bankrupt's estate has been completed save for the publication of the notice and the payment of a dividend to creditors". It is Ms Faulkner's opinion that the delay in administering the estate and paying a dividend to creditors is causing prejudice to creditors in that they are being deprived of their dividends. Since there is only one identified creditor, this reference must be to the Deputy Commissioner.
In my opinion, in the circumstances shown in the evidence before me it is clear that the applicant is avoiding contact with his trustee, as well as avoiding his other responsibilities as a bankrupt person, and it is appropriate that the estate should be wound up in its current state notwithstanding the absence of a statement of affairs.
I therefore propose to make orders in terms of the minute of proposed orders with amendments, which has been initialled by me and dated today.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Smith FM

Associate: Iliya Marovich-Old

Date: 6 July 2006