Owners Corporation Plan No RP012515 v Molnar
[2023] FedCFamC2G 517
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Owners Corporation Plan No RP012515 v Molnar [2023] FedCFamC2G 517
File number(s): MLG 163 of 2022 Judgment of: JUDGE MANSINI Date of judgment: 16 June 2023 Catchwords: BANKRUPTCY – application for review of Registrar’s sequestration order – where application made 130 days out of time – consideration of factors relevant to the discretion – application dismissed. Legislation: Bankruptcy Act 1966 (Cth) ss.43, 153B, 244, 245, 252A, 252B, 252C
Federal Circuit and Family Court of Australia Act 2021 (Cth) ss.254, 256
Bankruptcy Regulations 2021 (Cth) reg.102(1)
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) rr.1.04, 2.02(3), 7.01, 7.02, 7.03, 7.05 and Sch 1
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) rr.1.07, 2.05(2), 3.05, 21.02
Cases cited: AHZ21 v Minister for Immigration, Citizenship and Multicultural Affairs [2022] FCA 884
Allesch v Maunz [2000] HCA 40
Bechara v Bates [2021] FCAFC 34
Bell v Commonwealth Bank Australia [2013] FCCA 483
BQQ15 v Minister for Home Affairs [2019] FCAFC 218
Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344
Kent (a bankrupt); Ex Parte, Bunting [2022] FedCFamC2G 630
Owners Corporation Strata Plan 79827 v Watson [2017] FCCA 2962
Parker v R [2002] FCAFC 133
Robson (as former trustee of the bankrupt estate of Samsakopoulos) v Body Corporate for Sanderling at Kings Beach CTS 2942 [2021] FCAFC 143
Vlad v Lopez (No.2) [2017] FCCA 2032
Division: Division 2 General Federal Law Number of paragraphs: 74 Date of last submissions: 24 February 2023 Date of hearing: 15 February 2023 Place: Melbourne Solicitor for the Applicant: LFS Legal Solicitor for the Respondent: Diamonds Solicitors Solicitor for the Interested Party: Robert James Lawyers ORDERS
MLG 163 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: OWNERS CORPORATION PLAN NO.RP012515
ApplicantAND: ALLAN MCMONNIES IN HIS CAPACITY AS EXECUTOR OF THE ESTATE OF KOSARA MOLNAR
Respondentand: DAVID CHARLES QUIN IN HIS CAPACITY AS TRUSTEEE OF THE BANKRUPT ESTATE OF KOSARA MOLNAR
Interested Party
order made by:
JUDGE MANSINI
DATE OF ORDER:
16 June 2023
THE COURT ORDERS THAT:
1.The application for an extension of time be dismissed.
2.Costs be reserved.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
REASONS FOR JUDGMENT
JUDGE MANSINI
IN SUMMARY
Before the Court is an application for an extension of the time in which to make an application for judicial review of a sequestration order.
The sequestration order was made by a Registrar of this Court against Kosara Molnar (the Bankrupt) on 8 September 2022, pursuant to s.43 of the Bankruptcy Act 1966 (Cth) (Act).
For the reasons that follow, I have determined that the application was made 130 days outside the statutory timeframe and it is not an appropriate case to make a direction to the contrary essentially permitting an extension of the time for filing.
Accordingly, the application is dismissed and costs be reserved.
CONTEXT
Factual
The matter involves the following parties and interested persons:
(1)Owners Corporation Plan No. RP012515 is the Applicant Creditor in the originating bankruptcy proceedings. By the amended creditor’s petition dated 28 June 2022 (filed 29 June 2022), the Applicant Creditor sought a sequestration order against the estate of Kosara Molnar for failure to pay the outstanding levies, fees and interest owed to it over the property situated at Unit 22, 231 Dandenong Road, Windsor VIC 3181 in the amount of $12,526.06.
(2)Kosara Molnar, the Bankrupt, is the named Respondent Debtor in the originating bankruptcy proceedings. Kosara Molnar passed away on 24 August 2015. She remains the registered proprietor of the unencumbered property situate at Unit 22, 231 Dandenong Road, Windsor VIC 3181 (the Property).
(3)Mr Allan McMonnies is the executor of the deceased estate of Kosara Molnar (Executor), as appointed by the last will and testament made on 5 May 2008. On 15 December 2022, the Executor obtained a grant of probate of the last will and testament of Kosara Molnar. The Executor makes this application now before the Court but was not a party to the originating bankruptcy proceedings.
(4)Mr David Charles Quin is the trustee of the bankrupt estate of Kosara Molnar (Trustee in Bankruptcy). A consent to act as trustee was filed on 23 December 2021 and the Trustee in Bankruptcy was appointed upon the sequestration order made on 8 September 2022 and an interested party to the proceeding presently before this Court.
Procedural
Originating bankruptcy proceedings
On 23 December 2021, a creditor’s petition was filed by the Applicant Creditor for failure of the Bankrupt/Respondent Debtor to pay outstanding levies, fees and interest owed to the Applicant Creditor. The Applicant Creditor also filed an affidavit evidencing service of the bankruptcy notice, an affidavit verifying paragraphs 1, 2 and 3, an affidavit of search of paragraph 4 and consent of the Trustee in Bankruptcy to so act as trustee.
On 23 February 2022 and 11 April 2022, the Applicant Creditor filed what would appear to be duplicates to the creditor’s petition dated 23 December 2021.
On 24 May 2022, the Applicant Creditor filed an application for substituted service with a supporting affidavit of their legal practitioner.
On 25 May 2022, the Applicant Creditor filed an amended creditor’s petition.
On 23 June 2022, orders were made by a Registrar of this Court for substituted service of the creditor’s petition on the Bankrupt/Respondent Debtor by mail to the Property, by handing an envelope addressed to the Respondent Debtor to a person apparently over the age of 16 years apparently residing at the Property, or otherwise by placing the envelope in the letterbox at the Property, and by email addressed to the Respondent Debtor.
On 29 June 2022, the Applicant Creditor filed a further amended creditor’s petition. This further amended creditor’s petition would appear to be a duplicate of the amended creditor’s petition dated 25 May 2022.
On 7 September 2022, the Applicant Creditor filed an affidavit evidencing service of the further amended creditor’s petition consistent with the substituted service order, an affidavit of search and an affidavit of debt which evidence service to have occurred.
On 8 September 2022, a Registrar of this Court made a sequestration order against the Respondent Debtor in the following terms:
1. The estate of Kosara Molnar be sequestrated under the Bankruptcy Act 1966 (Cth).
2. The applicant creditor's costs fixed in the sum of $5,913.10 be paid from the estate of the respondent debtor in accordance with the Bankruptcy Act 1966 (Cth).
The Court notes that the date of the act of bankruptcy is 20 December 2021.
The Court also notes that a consent to act as trustee signed by David Charles Quin has been filed under section 156A of the Bankruptcy Act 1966 (Cth).
On 10 October 2022, a member of the Trustee in Bankruptcy’s staff contacted the Executor and advised him of the sequestration order.
On 24 October 2022, the Executor’s solicitor sent an email to the Trustee in Bankruptcy advising that the Executor would be applying for a grant of probate of the Bankrupt’s will.
On 7 December 2022, the Executor’s solicitor made an application for the grant of probate.
On 15 December 2022, the grant of probate was issued in the Supreme Court of Victoria.
The present application
On 23 December 2022, the Executor lodged an application using the Court’s form B3: interim application.
On 6 February 2023, a form B3A: application for review (dated 19 January 2023) (Application) and an affidavit of the Executor (sworn 17 January 2023) were accepted for filing. Relevantly:
(a)The Application identified the exercise of power sought to be reviewed as all of the orders of Registrar Edwards made on 8 September 2022 and the specific relief sought in the following terms:
1. An order extending the time within which this Application for Review may be brought.
2.An order pursuant to s 153B of the Bankruptcy Act 1966 and, or in the alternative s 252B of the Bankruptcy Act 1966, that the sequestration order dated 8 September 2022 made by Registrar Edwards in the proceeding ought not to have been made on the grounds that Kosara Molnar was deceased at the time the sequestration order was made and that substituted service of the creditors petition in this proceeding on her was ineffective.
(b)The Executor’s Affidavit identified the relief sought in the following terms:
Under the circumstances I seek an order pursuant to s 153B of the Bankruptcy Act 1966 (Cth) and, or in the alternative s 252B of the Bankruptcy Act 1966, that the sequestration order dated 8 September 2022 made by Registrar Edwards in the proceeding be set aside.
On 9 February 2023, the Trustee in Bankruptcy filed a notice of appointment as lawyer.
On 14 February 2023, the Trustee in Bankruptcy filed an affidavit.
On 15 February 2023, the Applicant Creditor filed a notice of appearance, a notice stating their grounds in opposition to the Application and a supporting affidavit of their lawyer.
On 15 February 2023, the matter proceeded to hearing of the Application before the Court as presently constituted. The Executor, Applicant Creditor and Trustee in Bankruptcy were respectively represented by counsel. At the hearing, in response to a question arising from the opposition to the Application, counsel for the Executor was invited to withdraw this Application and make an application for annulment. The Executor’s representative declined to do so and wished to continue with the present Application. The proceeding on that day concluded with the parties being ordered to file and serve written submissions addressing the threshold issue of the Court’s discretion to extend the time in which to make the Application.
On 21 February 2023, the Executor filed written submissions in relation to the threshold extension of time issue. On 24 February 2023, the Applicant Creditor and Trustee in Bankruptcy filed written submissions in response.
All parties consented to the threshold extension of time issue being determined on the papers. Being satisfied it is an appropriate case, the following reasons have been prepared with regard to all of the materials before the Court.
THIS APPLICATION FOR REVIEW
Statutory framework
The jurisdiction to make a sequestration order is found at s.43 of the Act:
(1)Subject to this Act, where:
(a) a debtor has committed an act of bankruptcy; and
(b) at the time when the act of bankruptcy was committed, the debtor:
(i) was personally present or ordinarily resident in Australia;
(ii) had a dwelling-house or place of business in Australia;
(iii)was carrying on business in Australia, either personally or by means of an agent or manager; or
(iv) was a member of a firm or partnership carrying on business in Australia by means of a partner or partners or of an agent or manager;
the Court may, on a petition presented by a creditor, make a sequestration order against the estate of the debtor.
(2)Upon the making of a sequestration order against the estate of a debtor, the debtor becomes a bankrupt, and continues to be a bankrupt until:
(a) he or she is discharged by force of subsection 149(1); or
(b)his or her bankruptcy is annulled by force of subsection 74(1) or 153A(1) or under section 153B.
The power to make a sequestration order is a power delegated to Registrars of this Court pursuant to s.254 Federal Circuit and Family Court of Australia Act 2021 (Cth) (FCFCOA Act) and Schedule 1 Part 1 item 5 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth). Where a Registrar has exercised delegated powers of this Court, a party to a proceeding may within the time prescribed by “the Rules of Court” or within any further time allowed in accordance with those rules, apply to the Court for review of that exercise of power: s.256(1) of FCFCOA Act.
The term “Rules of Court” is defined at s.7 of the FCFCOA Act to mean Rules of Court made under Chapter 3, encompassing both the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth) (Bankruptcy Rules) and the Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth) (GFL Rules). In bankruptcy proceedings, both the Bankruptcy Rules and the GFL Rules may be taken to apply. However, pursuant to r.1.04 of the Bankruptcy Rules, the Bankruptcy Rules take primacy and apply to a proceeding in which the Bankruptcy Act applies unless the Court otherwise orders.
The Bankruptcy Rules and the GFL Rules prescribe a different time limit for the making of an application under s.256 for review of an exercise of a delegated power:
(a)Under the Bankruptcy Rules, the time limit is 21 days but subject to any direction by the Court or a Judge to the contrary: r.2.02(3); and
(b)Under the GFL Rules, the time limit is 7 days but which may be extended by the Court on any terms that the Court thinks fit or with the consent of the parties to the proceeding: r.21.02(1).
Relevant to the relief sought by the Application, s.153B(1) of the Bankruptcy Act provides that if the Court is satisfied that a sequestration order ought not to have been made then the Court may make an order annulling the bankruptcy. And s.252B of the Bankruptcy Act provides for the Court to annul bankruptcy in a deceased estate, if the Court is satisfied that a sequestration order ought not to have been made.
CONSIDERATION
The respective contentions
Executor
In relation to the threshold extension of time issue, the initial application form lodged on 23 December 2022 indicated that the Executor sought an order extending the time for an application for review to be brought. However the Executor ultimately submitted that, whilst this is an application for review, it is nevertheless in substance an application for an annulment under s.153B of the Bankruptcy Act which can be brought at any time.
In the alternative, that the Court can allow the Application to proceed in the form it was brought by exercising the power under r.1.07 of the GFL Rules to dispense with any of those rules or under r.3.05 of the GFL Rules to extend or shorten a time fixed by those rules. It was contended that the Court should do so having regard to the overarching purpose to facilitate the just resolution of disputes according to law and as quickly, inexpensively and efficiently as possible: pursuant to r.1.04 of the GFL Rules.
In relation to the substantive Application, the Executor contended that the relief it sought was appropriate on the basis that the sequestration orders ought not to have been made because the Respondent Debtor was deceased at the time of the sequestration order and substituted service was ineffective. More specifically, the Executor submitted (by way of affidavit) that:
·At all material times the Bankrupt/Respondent Debtor was deceased and thus not ordinarily resident in Australia;
·The debt owed by the Respondent Debtor was a debt for fees and charges levied under s.28(1) of the Owners Corporation Act 2006 (Vic) and that the Applicant Creditor at all times held a security for the payment of the debt owing to it;
·The Bankrupt/Respondent Debtor was not liable for any debt or default by Jason Sandor David Szoeke; and
·No bankruptcy notice was served on the late Bankrupt/Respondent Debtor at any time.
Additionally, the Executor argued that the deceased estate was not served with the creditor’s petition and Court documents and could not know about the sequestration order. The Executor’s representative also complained about performance of substituted service, specifically that the affidavit of service only deposed to the process server leaving the documents in the letterbox of the Property and did not depose to having attempted to serve any occupant over the age of 16 years at the premises.
Opposing parties
In respect of the threshold extension of time issue, the Applicant Creditor and the Trustee in Bankruptcy mutually (but respectively) submitted that the Application is an application for review and therefore attracted the application of r.2.02(3) of the Bankruptcy Rules. They contended that the Court’s authority to extend the 21-day statutory time for filing is found in s.256 of the FCFCOA Act and r.2.02(3) of the Bankruptcy Rules. The Applicant Creditor relied on the evidence of the Trustee in Bankruptcy as proof that the Executor was aware of the sequestration order on about 10 October 2022 yet the Application in this Court was not filed until 23 December 2022. The Applicant Creditor also submitted that the Executor had attempted to circumvent the statutory time limitation by seeking to evolve the Application into an application for an annulment.
In relation to the substantive Application, the Applicant Creditor contended that the Executor as a non-party to the originating proceedings was not able to pursue such application without leave of the Court and the Court should not entertain such an abuse of process.
Was the Application filed late?
The substantive matter before the Court is, on its face, an application for review of the Registrar’s sequestration orders made pursuant to the delegated power at s.254 of the FCFCOA Act (and dated 8 September 2022). This was further confirmed by the Executor’s counsel at the hearing on 15 February 2023 at which no amendment to the Application was sought.
The Court’s jurisdiction to review the exercise of such delegated power is found at s.256 of the FCFCOA Act which expressly provides that a party to proceedings may so apply for review within the time prescribed by the Rules of Court or within any further time allowed in accordance with the Rules of Court.
There was no question that the Bankruptcy Act applied to the present proceeding to the extent that it substantively involved a sequestration order. As concerns any lacuna in the Bankruptcy Rules, the “other Rules of the Court” apply to the extent that they are relevant and not inconsistent with the Bankruptcy Rules: r 1.04(2) the Bankruptcy Rules. The Bankruptcy Rules and the GFL Rules are (and, at the relevant times, were) inconsistent to the extent that:
(a)Each proscribes a timeframe for filing an application for review of a Registrar’s powers - of different duration; and
(b)Each affords a discretion on the Court to essentially allow an extension of the time for filing contrary to the proscribed timeframe - expressed in different terms.
Accordingly, in respect of the proscribed timeframe for filing the Application and the jurisdiction to make a direction to the contrary, r.2.02(3) of the Bankruptcy Rules prevails subject to the Court ordering otherwise.
In my view, the general powers of this Court in bankruptcy as conferred by s.30 of the Bankruptcy Act or the generic provision for some other order under r.2.02(3) of the Bankruptcy Rules can properly be engaged as to come to the aide of the Executor. That is because the general power is framed in terms of allowing the Court to make orders as it considers necessary for the purposes of carrying out or giving effect to “this Act” whereas the power of review of a delegated power is given by the FCFCOA Act. And, even were this conclusion incorrect, I would not consider it appropriate in the present case to exercise the general power at s.30 of the Bankruptcy Act or at r.2.02(3) of the Bankruptcy Rules to overcome the specific regime that has been provided for filing of applications and making of contrary directions in proceedings for review of an exercise of delegated power to which the Bankruptcy Act applies.
For completeness, the power to dispense with Rules of the Court under r.1.07 of the GFL Rules or to extend or shorten a timeframe only relate to those GFL Rules, not the Bankruptcy Rules.
In the present case:
(a)The delegated power was exercised on 8 September 2022, therefore an application to review the exercise of the delegated power was due to be filed by 29 September 2022;
(b)The Application was first attempted to be lodged on 23 December 2022 but not accepted for filing in accordance with r.2.01of the Bankruptcy Rules until 6 February 2023.
It follows that the Application was filed 130 days after the expiry of the 21-day timeframe. As such, there can be no review of the sequestration order unless a contrary direction is made by this Court.
Whether to make a contrary direction and extend the time for filing
Neither the statute nor the Bankruptcy Rules specify particular criteria which must be satisfied to engaged the Court’s discretion to issue a direction to the contrary of the proscribed timeframe in r.2.02(3) of the Bankruptcy Rules. In this way, the exercise of the Court’s discretion is generally unfettered although the Court may apply the orthodox guidance of the authorities in considering the non-exhaustive factors set out by the Federal Court in Hunter Valley Developments Pty Ltd v Cohen (1984) 3 FCR 344; (1984) 58 ALR 305; (1984) 7 ALD 315 (Cohen) at 348-349 (Wilcox J), namely:
(a)the extent of the delay;
(b)the explanation for the delay;
(c)the prejudice to the respondent; and
(d)the prospects of success of the underlying application.
See also Parker v R [2002] FCAFC 133; BQQ15 v Minister for Home Affairs [2019] FCAFC 218 at [33].
The principles for extending the time set out in Cohen, although a case concerning migration law, are accepted as relevant to and have been adopted in the context of an application for review of a Registrar’s sequestration order in bankruptcy: Vlad v Lopez (No.2) [2017] FCCA 2032 at [77] (Lucev J). See also Owners Corporation Strata Plan 79827 v Watson [2017] FCCA 2962 at [18] (Manousaridis J); Bell v Commonwealth Bank Australia [2013] FCCA 483 at [3] (Reithmuller J)].
I turn now to consider these factors in turn.
Delay and explanation
In this case the period of delay was 130 days.
The Executor emphasised that the Bankrupt/Respondent Debtor was deceased at all relevant times and it was unaware of the creditor’s petition due to substituted service not having been properly effected. The Executor did not offer any other explanation for its delay in filing the Application.
The Applicant Creditor submitted that the delay in this case is substantial and that the Executor failed to provide any proper basis as to why there was such lengthy delay in making the application
The Trustee in Bankruptcy submitted that the sole reason that the Bankrupt/Respondent Debtor was not aware was due to the Executor’s own delay – including the failure to take any steps in the intervening 7 years and 1 month to apply for probate of the deceased estate – for which extraordinary delay no reason had been proffered by the Executor. Further, that the Executor ought not be permitted to rely on his own failings as a reason to set aside the sequestration order. And, even if 10 October 2022 should be the date from which time is taken to run (because it is the date the Executor first became aware of the sequestration order), the Executor would have been required to make an application to set aside the sequestration order by 31 October 2022.
Taking the Executor’s case at its highest, they have only offered an explanation for that part of the delay which related to the period from 30 September 2022 (the day after the Applicant was required to have been filed in accordance with the Bankruptcy Rules) until at or around 10 October 2022 (when the Executor became aware of the Registrar’s sequestration order). Indeed, on 24 October 2022, the Executor expressed their intention to file for probate but did not do so until 7 December 2022. Even after probate was granted on 15 December 2022, it was a further 8 days before the first attempt was made to lodge this Application.
The first lodgement attempt was made on 23 December 2022 but the Application was not filed in such form as to be accepted by the Court’s Registry for filing until 6 December 2022. In my view, this part of the delay was not acceptably explained.
The duration of the 130-day delay in the present case was lengthy. Even if the Court were to accept there to be a reasonable explanation for those parts of the delay that related to the period prior to learning of the sequestration order on 10 October 2022 and the further period from first lodgement attempt on 23 December 2022, there remains a substantial and entirely unexplained delay.
Taking all of the above matters into account, I consider the explanation for the delay to weigh against the exercise of the discretion in the present case.
Prejudice to the opposing parties and public interest
The Executor did not address the prejudice the other parties may suffer in any of its written materials or oral submissions.
The Applicant Creditor contended that it will suffer severe prejudice were the time for filing this Application for review extended because the Trustee in Bankruptcy had placed on hold its work to administer the bankrupt estate. As such, a date for the sale of the Property remains unknown.
The Trustee in Bankruptcy also contended it would suffer prejudice in that the Application is increasing the costs and expenses borne out of the administration of the estate, including among the other known creditors of South East Water Corporation and City of Stonnington. The Trustee in Bankruptcy also submitted that significant costs have been incurred by both the Applicant Creditor and the Trustee in Bankruptcy due to the failure of the Executor to administer the deceased estate since 2015 and that the benefit to the beneficiaries of the deceased estate in instituting this Application rather than engaging with the Trustee in Bankruptcy for an orderly sale of the Property was not clear.
Finally, the Trustee in Bankruptcy contended that the costs incurred as a result of this Application are significant especially because of the failure to bring the proceeding in time and the failure to file material as to solvency. Meaning that, even if an extension of time were granted, the Executor has no prospects of success at any subsequent hearing de novo unless further material is filed and further costs are thereby incurred by the parties.
Having regard to the above matters, it may be accepted that there is a prejudice to the opposing parties limited to their cost and inconvenience. Such prejudice may conceivably be rectified by imposing terms as to costs were a contrary direction (extending the time for filing the Application) to be made: see, for example, Owners Corp Strata Plan 79827 v Watson [2017] FCCA 2962 at [18].
I consider prejudice is a neutral factor in weighing whether to exercise the discretion in the present case and the public interest to weigh slightly against.
In addition, there is an obvious public interest in bringing finality to litigation and ensuring the expeditious determination of bankruptcy proceedings by permitting a trustee to perform their role in administering a sequestrated estate. To the extent that the object of the FCFCOA Act is to facilitate the just resolution of disputes effectively and efficiently, this is not an appropriate case where it is in the interests of justice to dispense with statutory compliance for an extension of time application.
Does the Respondent have a sufficiently arguable case?
The time limitation reflects the Parliament’s intention that an applicant should have only a relatively short time in which to apply for judicial review of decision to grant a sequestration order. While the discretion of the Court is broad, if it is proper to conclude that a claim is bound to fail, the Court should not permit the application to proceed and accordingly decline to extend time.
The cases make clear that, for the purposes of an extension of time application, the Court is concerned with whether the grounds available to an applicant are reasonably arguable.
The Executor submitted that, because the Bankrupt/Respondent Debtor was at all relevant times deceased, the sequestration order should never have been made as the Bankrupt had no actual notice of the matter. Further, that the presumption of service of the bankruptcy notice under regulation 102(1) of the Bankruptcy Regulations 2021 (Cth) (Bankruptcy Regulations) is fully rebutted by the knowledge of her passing - that is, she was not personally present, ordinarily resident in nor carrying in business in Australia as alleged in the creditor’s petition.
Further, the Executor contended that an annulment of the bankruptcy would allow the Executor to undertake the administration of the deceased estate including the payment of its debts, “without the unnecessary expenses which accompany dealing with matters in insolvency”.
The Executor’s Application, were it to proceed, would face a number of hurdles.
First, the Executor was not a party to the originating proceeding and is not able to bring the Application as of right. It may be accepted that the Executor would appear to have an interest in the matter of the sequestration order and could apply for leave of the Court. On the materials presently before the Court, the historical context indicates that the Executor did not efficiently attend to the matter of probate as to discharge its duties to any beneficiaries of the Bankrupt/Respondent’s Debtor’s deceased estate. Any such beneficiaries of the deceased estate are not specifically named or identified before this Court and, without more, there is a legitimate question as to whether any question of primacy would be resolved in favour of the Executor.
Second, the Executor plainly sought relief under s.153B of the Bankruptcy Act which is properly an application for an annulment. It is not controversial that the Court has the power to grant an annulment of a bankruptcy of a deceased estate: ss.252A, 252B, 252C of the Bankruptcy Act. However, relief in the form of annulment (as distinct from setting aside a sequestration order) would not flow from this Application as it was made and as it was pressed. The Full Federal Court in Robson (as former trustee of the bankrupt estate of Samsakopoulos) v Body Corporate for Sanderling at Kings Beach CTS 2942 [2021] FCAFC 143 (Robson) assessed whether an annulment can be ordered in cases where an application is made for the review of a Registrar’s sequestration order and held at [84], [150]-[152]:
84. A decision made by a judge in order to give effect to a condition attaching to the delegation of judicial power to the effect that the creditor's petition be dismissed is of a different character to an annulment. The judge on review does not treat the earlier exercise of delegated judicial power as if it never existed. On review, the Court gives effect to a condition that attached to the delegation and its exercise. When the decision is made by the judge on review it speaks as a judicial decision made with operative effect at that point in time. Speaking generally as to the review of the exercise of delegated judicial power, it may be that the nature of the judicial power being exercised is such that an order can be made which speaks now for then by changing the effect of what has gone before. In such cases, the Court may be able to make an order that takes effect from a date that is earlier than the date on which the order is made by the judge on review (especially where the decision concerns procedural orders).
…
150. It can be seen that there is the potential for some conceptual confusion to arise where an application for an annulment is made in the alternative on an application for review, especially if an extension of time in which to file an application for review is required For that reason, it may well be preferable for any annulment to be sought by separate application on which the bankrupt will move if the application for review or the application to extend time is unsuccessful. In any event, even if the claim for annulment is brought in the alternative on the review application, that does not alter the fact that the two applications are fundamentally different in their legal character.
151. On the one hand, the review application invokes a condition that attaches to the delegation of judicial power. Once the condition requiring a review of the exercise of delegated judicial power is invoked, the Court must undertake a new hearing of the application…
152. On the other hand, in the present context the application to annul the bankruptcy is brought by the bankrupt. It seeks the exercise of a statutory discretion in favour of the bankrupt. It depends upon the existence of the sequestration order. The bankrupt must prove what is required and must persuade the Court to exercise its discretion to annul the bankruptcy.
In any event, even had the Executor sought to amend the Application, there is no evidence before this Court that any of the requirements of an application for annulment have been complied with, namely: an application for annulment must set out the grounds on which the annulment is sought, be served on the trustee at least 7 days before the date fixed for hearing of the application, and give notice of the application to each person known to the applicant to be a creditor of the bankrupt or a creditor of the estate of the deceased person, in accordance with the correct procedural form and serve the notice on each creditor at least 7 days before the date fixed for hearing of the application: rr.7.01-7.04 of the Bankruptcy Rules.
Third, to the extent that this Application was properly a review of the sequestration order, it would proceed de novo. On the evidence before the Court, the Applicant Creditor has proven its debt. The Trustee in Bankruptcy submitted that the Application has no prospects of success as the only potential variation on a hearing de novo would be that the Court may make an order sequestrating the Bankrupt/Respondent Debtor’s deceased estate. The Executor did not make any persuasive argument to the contrary.
For completeness, to the extent that the Executor contended that the sequestration order ought be set aside because the Respondent Debtor was not on notice of the hearing before the Registrar, the relevant and uncontroversial facts before the Court include that: at all relevant times prior to the making of the sequestration order, the opposing parties were not aware of the Bankrupt/Respondent Debtor’s passing and could not have been aware of the Executor’s role or obligations as the Executor had not attended to the matter of probate; and the Court has received an affidavit of the Applicant Creditor (dated 24 May 2022) of the steps taken to effect service of the filed materials and Court’s orders in accordance with the substituted service order of 23 June 2022; and the Executor did not challenge the Registrar’s decision to make the substituted service order and can not now contend that service was not effected on the Bankrupt/Respondent Debtor.
Taking into account all of the relevant factors on the materials before this Court, I am not persuaded that the present Application is reasonably arguable. I consider the merit to weigh against the exercise of the discretion to make a contrary direction and essentially allow an extension of the time for filing.
CONCLUSION
For the above reasons, weighing all of the considerations above, I am not satisfied that it is in the interests of the administration of justice that there be a contrary direction under r.2.02(3) of the Bankruptcy Rules as to allow an extension of the 21-day period for filing an application for review of the delegated power exercised under s.254 of the FCFCOA Act and pursuant to s.256 of the FCFCOA Act. The application will be dismissed and costs be reserved.
I certify that the preceding seventy-four (74) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Mansini. Associate:
Dated: 16 June 2023
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