Owners Corporation PS334337A v Hoiles
[2012] FMCA 218
•19 March 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| OWNERS CORPORATION PS334337A v HOILES | [2012] FMCA 218 |
| BANKRUPTCY – Application of trustees under s.146 of the Bankruptcy Act 1966 (Cth) for distribution of dividends – no statement of affairs received in relation to deceased’s estate – application acceded to – costs charges and expenses incurred by applicants including in period between initial bankruptcy and subsequent bankruptcy of a deceased estate be paid in priority by bankrupt deceased estate. |
| Bankruptcy Act 1966 (Cth) ss.109(1), 146, 246 |
Re Universal Distributing Company Ltd (in liq) (1933) 48 CLR 171
| Applicant: | OWNERS CORPORATION PS334337A |
| Respondent: | GRAEME HOILES |
| File Number: | MLG 902 of 2010 |
| Judgment of: | Hartnett FM |
| Hearing date: | 19 March 2012 |
| Delivered at: | Melbourne |
| Delivered on: | 19 March 2012 |
REPRESENTATION
| Counsel for the Applicant: | Mr Brown |
| Solicitors for the Applicant: | Gadens Lawyers |
| The Respondent: | No appearance |
UPON APPLICATION MADE TO THE COURT by the trustees, Messrs Paul Andrew Burness and Andrew James Jess, Mr Brown of Counsel appearing for the applicants and there being no appearance by or on behalf of the respondent or any creditor
THE COURT ORDERS THAT:
The costs charges and expenses incurred by the applicants, including the remuneration and expenses of the applicants, between 25 November 2010 and 2 May 2011 in relation to the applicants’ appointment as joint and several trustees of the bankrupt estate of Graeme Hoiles be paid in priority by the bankrupt deceased estate of Graeme Hoiles pursuant to s.109(1) of the Bankruptcy Act 1966 (Cth) (‘the Act’).
The applicants proceed to distribute dividends amongst creditors who have proved their debts as if the bankrupt or the bankrupt’s legal representative had filed a statement of affairs and those creditors had been stated to be creditors in it, pursuant to s.146 of the Act.
The applicants’ costs of the application be paid in accordance with the Act with priority.
IT IS DIRECTED THAT:
The Proposed Form of Order dated 8 March 2012 and marked ‘Exhibit A’ be placed upon the Court file.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT MELBOURNE |
MLG 902 of 2010
| OWNERS CORPORATION PS334337A |
Applicant
And
| GRAEME HOILES |
Respondent
REASONS FOR JUDGMENT
The application before the Court this day is one made by Mr Burness and Mr Jess in their capacity as joint and several trustees of the bankrupt estate of Graeme Hoiles, deceased. The application is necessitated primarily because of the need to prove the estate in the absence of a receipt by the trustees of any statement as to affairs in relation to the Hoiles estate. The application is supported by an affidavit of Paul Andrew Burness, sworn 10 February 2012, together with exhibits marked “PAB1” to “PAB14”, and a further affidavit of Paul Andrew Burness sworn 15 March 2012. The earlier affidavit of Mr Burness, together with the sealed application returnable at this Court in the first instance on 8 March 2012, was served on the various creditors as set out in the affidavit of service of Jeremy Forder, an office service clerk employed by Gadens Lawyers, solicitors for the plaintiff, with such affidavit of service being sworn 21 February 2012. At the hearing of the matter on both 8 March 2012 and this day, the matter was called outside the court room, and on each occasion there was no answer to the call. The application has proceeded without opposition. I propose to make the orders as sought by the trustees.
The orders will allow the applicants to proceed to distribute final dividends amongst creditors who have proved their debts, as if the bankrupt or the bankrupt’s legal representative had filed a statement of affairs, and those creditors had been stated to be creditors in it. In addition, the orders will provide that the costs, charges and expenses incurred by the applicants, including the remuneration and expenses of them between 25 November 2010 and 2 May 2011 in relation to their appointment as joint and several trustees of the bankrupt estate of Graeme Hoiles, be paid in priority by the bankrupt deceased estate of Graeme Hoiles pursuant to s.109(1) of the Bankruptcy Act 1966 (Cth) (‘the Act’).
Background
On 22 June 2010, a creditor of Mr Hoiles, Owners Corporation PS334337A filed a creditor’s petition against Mr Hoiles. The debt the subject of the proceedings related to outstanding owners corporation fees in respect of Mr Hoiles’ residential property located at 12/1 Young Street Seaford in the State of Victoria.
On 25 November 2010, the trustees were appointed joint and several trustees of the bankrupt estate of Mr Hoiles, pursuant to a sequestration order made by Registrar Luxton. On or about 30 November 2010, Mr Burness forwarded a circular to creditors of Mr Hoiles’ bankrupt estate.
During the course of the administration of Mr Hoiles’ bankrupt estate, it became apparent that Mr Hoiles had passed away on or about 14 November 2010, being some days before the making of the sequestration order, but after the service of the creditor’s petition pursuant to an order for substituted service.
Having become aware that Mr Hoiles had passed away prior to the sequestration order, the trustees requested that the petitioning creditor, Owners Corporation, confirm the validity of the sequestration order.
On or about 31 January 2011, Mr Burness forwarded a circular to the creditors of Mr Hoiles’ bankrupt estate to advise them that:
a)Mr Hoiles had passed away prior to the sequestration order being made;
b)the trustees had contacted the petitioning creditor to inform it of this development;
c)in the interim, the trustees had limited their investigations in the administration of the bankrupt estate; and
d)the creditors would be updated in due course.
On 31 March 2011, an application for review of the sequestration order was filed, and on 2 May 2011, Federal Magistrate Riley made orders such that:
a)the sequestration order be set aside and the creditor’s petition be reinstated;
b)Owners Corporation have leave to amend the creditor’s petition to seek administration of Mr Hoiles’ estate under ss.244 and 245 of the Act; and
c)Mr Hoiles’ estate be administered under part XI of the Act.
On 12 May 2011, the trustees were appointed joint and several trustees of Mr Hoiles’ deceased bankrupt estate. The trustees continued with their administration of Mr Hoiles’ estate, performing various works as set out in Mr Burness’ affidavit sworn 10 February 2012, paragraphs 16 to 19 inclusive.
On or about 21 July 2011 Mr Burness forwarded a circular to the creditors of Mr Hoiles’ bankrupt estate to inform them of the orders which were made by the Court on 2 May 2011 and the results of their investigations. The circular also set out the assets which the trustees had located in respect of the estate and included a list of creditors.
On or about 15 November 2011, Mr Burness forwarded a further circular to creditors of Mr Hoiles’ deceased estate which set out further information obtained in relation to Mr Hoiles’ assets, and which included a resolution proposed in respect of the remuneration of the trustees to administer the deceased estate, and various other matters set out in the circular.
Neither trustee has received a statement as to affairs in relation to Mr Hoiles’ bankrupt deceased estate or in respect of Mr Hoiles’ bankrupt estate. As they have not received such statement, they have been unable to ascertain precisely which creditors may be entitled to prove in the estate. To assist in that determination and as a further step, on 16 and 17 November 2011, the trustees placed advertisements in ‘The Australian’ and ‘Herald Sun’ newspapers respectively stating it was the trustees’ intention to pay a first and final dividend to creditors in respect of Mr Hoiles’ deceased estate, and called for proofs of debt from any creditors who may be entitled to prove in the estate. No additional creditors were located as a result of those searches.
Mr Burness’ evidence before the Court is that notwithstanding a statement of affairs has not been received in relation to Mr Hoiles’ bankrupt estate, the trustees are confident that all creditors have now been identified and that they are in a position to make a distribution to creditors and finalise the bankruptcy.
The deceased bankrupt estate is likely to be in a position to pay all creditors in full, and all fees and expenses incurred by the trustees, including those incurred in the period between the initial sequestration order and the subsequent Part XI of the Act order. Considerable work was done by the applicants during this period. The work done by the applicants in this period was for the benefit of creditors and was work done toward the preservation and realisation of the assets of the estate. The creditors have had full notice of the applicants’ intention to seek such remuneration and the applicants have received no objection from any creditor of the estate. The amount claimed is as set out in the affidavits of Mr Burness, and thus the quantum has also been precisely disclosed. I find the remuneration and expenses of the trustees relating to the conduct of the work performed by them should be paid as a first claim from the assets of the fund that the work related to (in Re Universal Distributing Company Ltd (in liq) (1933) 48 CLR 171).
Orders sought under section 146 of the Act
As indicated above in these reasons, the applicants have never received a statement of affairs, either from Mr Hoiles or the legal representative of Mr Hoiles. Indeed the applicants have been unable to identify any legal representative of Mr Hoiles. Under a Part XI administration, the statement of affairs of the deceased person is to be completed and filed by the deceased person’s legal representative, pursuant to s.246 of the Act. Where a statement of affairs has not been so filed, the trustee must apply to the court for an order permitting the distribution of final dividends to creditors of the estate pursuant to s.146 of the Act.
The supporting affidavits of Mr Burness sets out the efforts made by the applicants to identify a legal representative and obtain a statement of affairs, and in the absence of a statement of affairs, to identify all creditors of Mr Hoiles’ deceased estate. On the basis of the evidence before it, it is reasonable for this Court to make an order pursuant to s.146 and accede to the application of the trustees.
The costs of the application should be paid in accordance with the Act with priority.
I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Hartnett FM
Date: 27 March 2012
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