Palmer as trustee of the Bankrupt Estates of Capocchiano and Capocchiano v Capocchiano

[2018] FCCA 580

FEDERAL CIRCUIT COURT OF AUSTRALIA

PALMER AS TRUSTEE OF THE BANKRUPT ESTATES OF CAPOCCHIANO AND CAPOCCHIANO v CAPOCCHIANO & ANOR [2018] FCCA 580

Catchwords:
BANKRUPTCY – Application for order under s.146 of the Bankruptcy Act 1966 (Cth) (Act) that the distribution of dividends proceed as if bankrupt had filed a statement of affairs as required by the Act – application granted.

Legislation:

Bankruptcy Act 1966 (Cth), s.146

Cases cited:

Barden as Trustee of the Bankrupt Estate of Stein v Stein [2017] FCCA 3041
Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968
Re Sturt; Ex parte Official Trustee in Bankruptcy [2001] FCA 1649
Roufeil (Trustee), in the matter of Jarvie (Bankrupt) [2015] FCA 232

Applicant: CHRISTOPHER JOHN PALMER AS TRUSTEE OF THE BANKRUPT ESTATES OF FRANK CAPOCCHIANO AND ITALIA CAPOCCHIANO

First Respondent: FRANK CAPOCCHIANO

Second Respondent: ITALIA CAPOCCHIANO

File Number: SYG 1060 of 2016

Judgment of: Judge Manousaridis

Hearing date: 26 February 2018

Date of Last Submission: 26 February 2018

Delivered at: Sydney

Delivered on: 26 February 2018

REPRESENTATION

Solicitors for the Applicant: Ms C Perry of Pure Legal

No appearance by or on behalf of the Respondents

ORDERS

1. Subject to Order 4, pursuant to Section 146 of the Bankruptcy Act 1998 (Cth), the Applicant, being the Trustee of the Bankrupt Estates of Frank Capocchiano and Italia Capocchiano, distribute dividends among the creditors of Frank Capocchiano and Italia Capocchiano who have proved their debts in accordance with Division 5 of the Bankruptcy Act 1996 (Cth) as if Frank Capocchiano and Italia Capocchiano had filed a statement of their affairs and those creditors had been stated to be creditors in it.

2. The distribution authorised by Order 1 not to be effected before 12 March 2018.

3. The costs of the application be the costs of the bankrupt Estate of Frank Capocchiano and Italia Capocchiano and be paid from the bankrupt estate.

4. Frank Capocchiano and Italia Capocchiano and any creditor have liberty to apply to discharge Orders 1, 2 and 3, such liberty to be exercised by making an application by no later than 9 March 2018.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 1060 of 2016

CHRISTOPHER JOHN PALMER AS TRUSTEE OF THE BANKRUPT ESTATES OF FRANK CAPOCCHIANO AND ITALIA CAPOCCHIANO

Applicant

And

FRANK CAPOCCHIANO

First Respondent

ITALIA CAPOCCHIANO

Second Respondent

REASONS FOR JUDGMENT

1. The trustee of the estates of Frank Capocchiano and Italia Capocchiano applies for an order under section 146 of the Bankruptcy Act 1966 (Cth) (Act) which provides:

   Where a bankrupt has failed to file a statement of his or her affairs as required by this Act, the court may, on the application of the trustee upon such terms as it thinks fit, order that distribution of dividends amongst the creditors who have proved their debts shall proceed in accordance with this division as if the bankrupt had filed a statement of his or her affairs and those creditors had been stated to be creditors in it. 

2. The trustee was appointed trustee in bankruptcy of the estates of Mr and Mrs Capocchiano as a result of a sequestration order made on 17 December 2015. The application that is before me was filed on 29 December 2017, and came before me for directions on 5 February 2018. 

3. There was no appearance by or on behalf of Mr and Mrs Capocchiano on that day.  On application by the trustee and on the material that was relied upon by the trustee, I made orders for substituted service of the application and other documents, and listed the application for final hearing before me at 9.30 am on 26 February 2018, that is today.  When the matter was called today, there was no appearance by or on behalf of Mr and Mrs Capocchiano.

4. The orders I made on 5 February 2018 required that the application, the affidavit of Christopher John Palmer, that is to say, the trustee, sworn on 18 December 2017, and the sealed copy of the orders that I made on that day, be served by email to the two email addresses specified in the order. There was handed up in court today an affidavit made by Christine Louise Perry, the solicitor for the trustee, deposing to the service of the application, the affidavit of Christopher John Palmer, sworn 18 December 2017 and a sealed copy of the orders made on 5 February 2018 to Mr and Mrs Capocchiano at the two email addresses specified in the orders I made on 5 February 2018. 

5. In those circumstances, the trustee today applies for me to proceed to hear the matter and make orders.  In support of that application, the trustee, through Ms Perry, read the affidavit of Christopher John Palmer, sworn 18 December 2017, tendered the exhibit referred to in that affidavit, read her affidavit of service, and tendered two emails, both dated 23 February 2018, to creditors of the estate. 

6. I then turn to the principles I should apply in considering this application.  The starting point is the decision of Gleeson J in Roufeil (Trustee), in the matter of Jarvie (Bankrupt).[1] In that case her Honour said there were two issues in relation to an application under s.146 of the Act that needed to be determined. These were, first, whether the bankrupt has failed to file a statement of affairs as required by the Act, and, second, assuming that the question is answered in the affirmative, whether the Court in the exercise of its discretion should order distribution of dividends among the creditors that have provided a proof of debt.

   [1] [2015] FCA 232

7. The evidence before me satisfies me that commencing on or about 23 December 2015 the trustee on a number of occasions requested Mr and Mrs Capocchiano to complete and send to the trustee a statement of their affairs, and that, despite those requests, Mr and Mrs Capocchiano failed to do so. I am also satisfied, particularly given the time that has passed, that there is no prospect Mr and Mrs Capocchiano will provide a statement of affairs. That means that the precondition for the exercise of the discretion conferred by s.146 of the Act is satisfied.

8. Section 146 of the Act “is intended to facilitate the distribution of dividends among the creditors of the bankrupt in circumstances where the trustee has not had the benefit of a statement of affairs prepared by the bankrupt”.[2] The purpose of s.146 of the Act 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”.[3] Relevant factors to the exercise of the discretion conferred by s.146 of the Act include whether the creditors have been notified of the application and have had the opportunity to be heard, and whether the trustee has taken steps to ascertain whether there are creditors other than those who have come to the trustee’s attention by filing a proof of debt.

   [2] Re Sturt; Ex parte Official Trustee in Bankruptcy [2001] FCA 1649 at [14]

   [3] Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968

9. The evidence reveals, and I am satisfied, that the trustee has identified two creditors, both of whom have filed proofs of debt which the trustee has accepted.  The trustee in his affidavit has set out investigations he has carried out to ascertain the existence of other creditors.  These included undertaking ASIC director searches to identify any other companies of which the respondents may be directors and shareholders, undertaking business name searches, inquiries with the Taxation Office, undertaking property searches, inquiries to determine banking accounts obligations, inquiries to determine the ownership of shares in public companies, and also a search of the Personal Property Securities Register.  The trustee has also placed advertisements in the Sydney Morning Herald on 4 December 2017 and also in the Illawarra Mercury on the same date. The result of these inquiries and the advertisements is that no other creditors have appeared on the scene.  I am also satisfied that the trustee has notified the two creditors of today’s proceedings. 

10. There is one matter to note, however. There is in evidence, as I have noted before, emails to each of the two creditors stating that the application is listed for hearing me at 10.15 am.  That is an error.  The matter was listed before me at 9.30 am. It is most unlikely that this will occasion any difficulty, but I will address any potential difficulty by reserving liberty to apply to the creditors to apply to set aside any orders I might make today.

11. In these circumstances, I am satisfied that the trustee has undertaken all reasonable steps to ascertain the identity of the creditors of Mr and Mrs Capocchiano, and that the trustee has given those creditors whom he has identified reasonable notice of his intention to apply for the orders the trustee seeks in this application. I am otherwise satisfied that I should make an order under s.146 of the Act in the form of the draft form of orders provided to me by Ms Perry. I note that that form has, to some extent at least, been framed to follow orders that I have made in another case, and in particular, Barden as Trustee of the Bankrupt Estate of Stein v Stein.[4] 

    [4] [2017] FCCA 3041

12. I accordingly propose to make the orders sought. 

I certify that the preceding twelve (12) paragraphs are a true copy of the reasons for judgment of Judge Manousaridis

Date: 14 March 2018