Official Trustee in Bankruptcy v Mundy

[2006] FMCA 1649

FEDERAL MAGISTRATES COURT OF AUSTRALIA

OFFICIAL TRUSTEE IN BANKRUPTCY v MUNDY [2006] FMCA 1649

BANKRUPTCY – Annulment of second sequestration order.

Bankruptcy Act 1966 (Cth), s.153B
Federal Magistrates Court Rules, 2001 r.6.04
Federal Magistrates Court (Bankruptcy) Rules 2006 rr.7.03, 7.04(1)

Clyne v Deputy Commissioner of Taxation and Others (1984) 154 CLR 589; (1984) 55 ALR 143
Official Receiver (NSW), in the matter of D'Elboux [2002] FCA 510
Re Almassy (1999) 92 FCR 597; [1999] FCA 1004
Re Ditford; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347; [1988] FCA 490
Re Ginnane; Ex parte Ginnane (1994) 60 FCR 429; [1994] FCA 426
Re Gollan; Ex parte Gollan (1992) 40 FCR 38; (1992) 113 ALR 475; [1992] FCA 1044
Stankiewicz v Plata [2000] FCA 1185

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

Respondent: DANNY SEAN MUNDY

File Number: PEG 225 of 2006

Judgment of: Lucev FM

Hearing date: 3 November 2006

Date of Last Submission: 3 November 2006

Delivered at: Perth

Delivered on: 3 November 2006

REPRESENTATION

Counsel for the Applicant: Ms L. Mobilia

Respondent: No Appearance

ORDERS

1. That the bankruptcy of the Respondent, pursuant to the sequestration order made against him on 21 December 2005 in proceedings numbered PEG 214 of 2005, administration number WA 1456/5/8, be annulled forthwith pursuant to s.153B of the Bankruptcy Act 1966 (Cth);

2. That the costs of this Application be fixed and paid out of the bankrupt estate of the Respondent, administration number QLD 4058/5/3; and

3. That the costs be fixed in the sum of $2,583.25.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
PERTH

PEG 225 of 2006

OFFICIAL RECEIVER FOR AND ON BEHALF OF THE OFFICIAL TRUSTEE IN BANKRUPTCY

Applicant

And

DANNY SEAN MUNDY

Respondent

REASONS FOR JUDGMENT

The application

1. The Respondent was bankrupted by sequestration order on 12 October 2005 and once again by sequestration order on 21 December 2005. 

2. The Applicant now seeks an order that the bankruptcy of the Respondent under the second sequestration order on 21 December 2005 be annulled under s.153B of the Bankruptcy Act 1966 (Cth) (“Bankruptcy Act”).

Affidavits before the Court

1. The Court has before it the affidavits of:

   a)Sharyn Renee Faulkner (“Ms Faulkner”), sworn 1 September 2006 and 6 September 2006; 

   b)

   Leisa Mobilia (“Ms Mobilia”) sworn 27 September 2006 and

   
   

   31 October 2006; and

   c)Darren Jon Brace, being an affidavit of service originally sworn 25 September 2006 and later re-sworn on 11 October 2006.

Service on the respondent

1. I note that the Respondent has not been personally served but as my interchange with Ms Mobilia indicates and as her affidavit of the

   
   

   31 October 2006 indicates, it is apparent that the Respondent is aware of these proceedings, proposes to take and is taking no part in them but does not intend to oppose the Application in any event.

2. I am therefore satisfied in the circumstances that the Respondent has had sufficient notice of these proceedings and has been sufficiently served with the relevant documents for the purposes of the Federal Magistrates Court Rules 2001, and in particular, r.6.04.

3. Having so found, I note that the Trustee's report required under r.7.04(1) of the Federal Magistrates Court (Bankruptcy) Rules, 2006 (“FMC Bankruptcy Rules”) is attached to the affidavit of Ms Faulkner, sworn 1 September 2006.

4. I also note that the Respondent's known creditors have been advised of the Application as required by r.7.03 of the FMC Bankruptcy Rules, and that advice is set out in the affidavit of service, Form 11, sworn by Ms Mobilia on 27 September 2006.

5. I note that no objections to the current Application have been raised by creditors.

Relevant legislative provisions and principles

1. I refer to s.153B of the Bankruptcy Act which provides:

   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.

2. The Applicant must show in these proceedings that the second sequestration order made on 21 December 2005 ought not to have been made. 

3. In Re Almassy (1999) 92 FCR 597 at 599-600; [1999] FCA 1004 at para 15, Mansfield J held that the expression “ought not to have been made” in s.153B of the Bankruptcy Act when applied to a sequestration order requires that some matter upon which the order was made was incorrect.

4. The true facts which may be considered include those known at the hearing of the annulment application to have existed at the time the sequestration order was made but exclude facts that occurred since the order was made: Re Ditford; Ex parte Deputy Commissioner of Taxation (1988) 19 FCR 347 at 350; [1988] FCA 490; Re Ginnane; Ex parte Ginnane (1994) 60 FCR 429 at 445 and 456; [1994] FCA 426; Re Gollan; Ex parte Gollan (1992) 40 FCR 38 at 40-41; (1992) 113 ALR 475 at 477-478; [1992] FCA 1044, and Stankiewicz v Plata [2000] FCA 1185 at paras. 19 and 20.

5. In Clyne v Deputy Commissioner of Taxation and Others (1984) 154 CLR 589; (1984) 55 ALR 143 (“Clyne”), the High Court held that a sequestration order be set aside as being beyond power. In that case the debtor had filed a debtor's petition (and become bankrupt) prior to the hearing of a creditor's petition. The High Court unanimously held that while the statutory bankruptcy continued, the Federal Court lacked the power to make a sequestration order against the estate of a debtor (where the creditor's petition was founded on a debt incurred before the presentation of the debtor's petition) without first annulling the bankruptcy resulting from the debtor's petition. At CLR at 596, ALR at 149-150 the High Court having reviewed the cases said:

   Those cases suggest no persuasive reason for holding that a person who is already bankrupt may be made bankrupt again on a petition found on a debt provable in the existing bankruptcy.

6. In Official Receiver (NSW), in the matter of D'Elboux [2002] FCA 510 at paras. 7 and 8, Hill J referred to Clyne and stated at para.8 that:

   The case is important because it demonstrates that, other than a case where two bankruptcies arise and involve different debts, a second bankruptcy cannot arise.

Facts to be considered

1. It appears from the facts in this case that the Respondent has become bankrupt twice in error.

2. I refer to the affidavit of Ms Faulkner sworn 6 September 2006, annexing two copies of the National Personal Insolvency Index relating to the Respondent, showing the Respondent becoming a bankrupt by sequestration order on 12 October 2005 and again by sequestration order on 21 December 2005.

3. The Respondent has confirmed that he has incurred no fresh debt between the dates of the two bankruptcies and I refer to the affidavit of Ms Mobilia sworn 31 October 2006.

4. The affidavit of Ms Faulkner sworn 6 September 2006 also shows:

   a)that the Respondent had been made bankrupt by a previous sequestration order at the time the second sequestration order was made;

   b)that the Respondent was made bankrupt twice in error due to a search of the National Personal Insolvency Index by the petitioning creditor failing to reveal that the Respondent was already bankrupt;

   c)that the debt found in the bankruptcy notice which produced the second sequestration order was incurred prior to the making of the first sequestration order; and

   d)that a Baycorp Advantage Individual Commercial Report, evidences that there are no new entries in relation to the debts of the Respondent following the first sequestration order.

5. I think it is self evident that had the Court been aware that the Respondent had already become bankrupt by the first sequestration order that the second sequestration order would not and could not have been made. I refer in that regard again to the High Court's decision in Clyne.

6. The petitioning creditor who obtained the second sequestration order has been notified of the current Application and has not raised any objections to the Application, and I refer to Ms Mobilia's affidavit of Form 11 sworn 27 September 2006.

7. A consequence of the two bankruptcies is that the Official Trustee must administer two estates and charge two sets of statutory fees and charges. 

8. I accept that this will reduce, or is likely to reduce, any dividend to creditors and make any annulment of bankruptcy more difficult. 

9. Having regard to the matters that the Applicant has put before me today, both as submissions and by way of affidavits, I am satisfied that the facts show that the second sequestration order ought not have been made.

Orders

1. In those circumstances, I make the following orders:

   (a)that the bankruptcy of the Respondent, pursuant to the sequestration order made against him on 21 December 2005 in proceedings numbered PEG 214 of 2005, administration number WA 1456/5/8, be annulled forthwith pursuant to s.153B of the Bankruptcy Act 1966 (Cth);

   (b)that the costs of this Application be fixed and paid out of the bankrupt estate of the Respondent, administration number QLD 4058/5/3; and

   (c)that the costs be fixed in the sum of $2,583.25.

I certify that the preceding twenty-four (24) paragraphs are a true copy of the reasons for judgment of Lucev FM

Associate: 

Date: