Palmer v Delic (No.2)
[2014] FCCA 2708
•26 November 2014
FEDERAL CIRCUIT COURT OF AUSTRALIA
| PALMER v DELIC (No.2) | [2014] FCCA 2708 |
| Catchwords: BANKRUPTCY – Personal Insolvency Agreement – insolvent deceased Estate – whether a person other than a creditor or legal personal representative can present a petition for the insolvent deceased Estate to be administered in bankruptcy – whether s.30 of the Bankruptcy Act 1966 (Cth) permits the Controlling Trustee of a Personal Insolvency Agreement to have standing to present a petition to have the insolvent deceased Estate administered in bankruptcy where the Controlling Trustee applies only in that capacity and not as a creditor or Legal personal representative of the deceased Estate. |
| Legislation: Bankruptcy Act 1966 (Cth) ss.30, 222, 244, 247, Part V, Part X, Part XI. |
| Palmer v Delic (No.1) [2014] FCCA 2637 |
| Applicant: | CHRISTOPHER JOHN PALMER |
| Respondent: | ANGELA VINKA DELIC, AS LEGAL PERSONAL REPRESENTATIVE OF DENNIS JAKOV DELIC |
| File Number: | SYG 2804 of 2014 |
| Judgment of: | Judge Emmett |
| Hearing dates: | 20 October, 21 November 2014 |
| Date of Last Submission: | 21 November 2014 |
| Delivered at: | Sydney |
| Delivered on: | 26 November 2014 |
REPRESENTATION
| Counsel for the Applicant: | Mr Geoffrey McDonald |
| Solicitors for the Applicant: | Gavin Parsons and Associates |
| No appearance by or on behalf of the respondent on 20 October 2014. |
| Solicitor for the Respondent on 21 November 2014: | Yvonne Chan (Era Legal) |
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2804 of 2014
| CHRISTOPHER JOHN PALMER |
Applicant
And
| ANGELA VINKA DELIC, AS LEGAL PERSONAL REPRESENTATIVE OF DENNIS JAKOV DELIC |
Respondent
REASONS FOR JUDGMENT
This is an application by the appointed Controlling Trustee of the Estate of the now deceased debtor, Dennis Jakov Delic, to determine if the applicant has standing to present a petition to administer the deceased debtor’s Estate in bankruptcy.
The debtor died around 20 January 2014. Prior to his death, the debtor had entered into a Personal Insolvency Agreement pursuant to which the applicant was appointed the Controlling Trustee (“the PIA”).
The applicant as Controlling Trustee of the PIA, executed on 29 April 2013, sought orders setting aside the PIA. On 20 October 2014, orders were made by me setting aside the PIA pursuant to ss.222(5) and 222(6) of the Bankruptcy Act 1966 (Cth) (“the Act”) and ex-tempore reasons given. However, in settling those reasons and in the light of these reasons for judgment, those Orders were set aside by me on 26 November 2014 in Palmer v Delic (No.1) [2014] FCCA 2637.
In submissions filed on 28 October 2014, the applicant sought the following declaration, orders and direction:
“1. A Declaration that subsection 30(1)(b) of the Act empowers the Court to make an order under subsection 222(10) for the administration of the deceased estate of Dennis Jakov DELIC under Part XI of the Act for reasons that, in this case, such an order is necessary for the purposes of carrying out and giving effect to the Act.
2. An order that the deceased estate of Dennis Jakov DELIC be administered under Part XI of the Act.
3. An order that Christopher Palmer be appointed trustee to administer the estate of Dennis Jakov DELIC, deceased, under Part XI of the Act.
4. A Direction that the Applicant comply with any obligations of an applicant under section 247 of the Bankruptcy Act, arising upon the making of any order under that section, as if he was the applicant under that section.”
I understand these orders to be an amendment to some of the final orders sought by the applicant in the application filed on 9 October 2014. In Palmer v Delic (No.1) [2014] FCCA 2637, the orders sought in the application filed on 9 October 2014 are dealt with on a final basis. These reasons for judgment deal only with the declaration, orders and direction sought above.
Relevantly, s.222 of the Act states as follows:
“Court may set aside personal insolvency agreement
(5) If a personal insolvency agreement is in force, the Court may, on application by:
(a) the Inspector-General; or
(b) the trustee; or
(c) a creditor;
make an order setting the agreement aside if the Court is satisfied that:
…
(e) the debtor has:
(i) omitted a material particular from the statement of the debtor's affairs given under subsection 188(2C) or (2D); or
(ii) included an incorrect and material particular in that statement; or
…
(6) The Court must not make an order under subsection (5) unless it is satisfied that it would be in the interests of the creditors to do so.
…
Ancillary orders
(8) If the Court makes an order under subsection (1), (2) or (5), the Court may make such other orders as the Court thinks fit.
…
Application for sequestration order
(10) The trustee or a creditor may include in an application under subsection (1), (2) or (5) an application for a sequestration order against the estate of the debtor. If the Court, on the first-mentioned application, makes an order under this section setting the personalinsolvency agreement aside, it may, if it thinks fit, immediately make the sequestration order sought.
(11) The making of an application by thetrustee or a creditor for a sequestration order under this section is taken, for the purposes of this Act, to be equivalent to the presentation of a creditor's petition against the debtor, but the provisions of subsection 43(1), subsection 44 and 47, subsections 52(1) and (2) and Part XIA do not apply in relation to such an application.
Court may dispense with service on debtor of notice of application
(12) The Court may, if it thinks fit, dispense with service on the debtor of notice of an application by the Inspector-General, the trustee or a creditor under this section, either unconditionally or subject to conditions.”
When an application is made under s.222(5) of the Act to set aside a PIA, one may make a sequestration order where appropriate (see: Re John Codrington; Ex Parte: Don Mckay Tourist & Charter Pty Limited v John Codrington [1989] FCA 349, per Burchett J; Robertson and Anor v Moran and Ors [2011] FMCA 496, per Smith FM).
I accept that, prior to his death, it was the applicant’s intention to set aside the PIA and to seek a sequestration order pursuant to s.222(10) of the Act. However, the debtor, Mr Delic, passed away before any such application for a sequestration order was made.
Section 222(10) of the Act clearly relates to the making of a sequestration order following the setting aside of a PIA, where the debtor is still alive. Section 222 is part of Part X of the Act, which deals with “Personal Insolvency Agreements”.
The applicant seeks to invoke s.30 of the Act as giving the Court power to appoint him as Administrator of the deceased debtor’s Estate in bankruptcy on the basis that the Estate is insolvent.
Relevantly, s.30 of the Act is as follows:
“General powers of Courts in bankruptcy
(1) The Court:
(a) has full power to decide all questions, whether of law or of fact, in any case of bankruptcy or any matter under Part IX, X or XI coming within the cognizance of the Court; and
(b) may make such orders (including declaratory orders and orders granting injunctions or other equitable remedies) as the Court considers necessary for the purposes of carrying out or giving effect to this Act in any such case or matter.
(2) The Court may direct such inquiries to be made and accounts to be taken for the purposes of any proceeding before the Court as the Court considers necessary and may, when directing an account to be taken, or subsequently, give special directions as to the manner in which the account is to be taken or vouched.”
The power of the Court to deal with the affairs of a deceased person arises under Part XI of the Act which provides for the administration of Estates of deceased persons in bankruptcy. Under Part XI, the Court does not make a sequestration order.
Pursuant to s.244 of Part XI of the Act a creditor may petition for the administration of such an Estate. Relevantly, s.244 of the Act is as follows:
“Administration of estates under this Part upon petition by creditor
(1) Subject to this section, where:
(a) a debt of not less than $5,000 was owing by a deceased person at the time of his or her death to a creditor, or debts amounting in the aggregate to not less than that amount were so owing to any 2 or more creditors;
(b) a debt incurred by the Legal personal representative of a deceased person of not less than $5,000 is owing to a creditor, or debts so incurred amounting in the aggregate to not less than that amount are owing to any 2 or more creditors; or
(c) a debt of not less than $5,000, or debts amounting in the aggregate to not less than that amount, which a deceased person would have been liable to pay to a creditor or any 2 or more creditors if he or she had not died becomes or become owing after his or her death;
the creditor or creditors to whom the debt or debts is or are owing may present a petition to the Court for an order for the administration of the estate of the deceased person (in this section referred to as the deceased debtor ) under this Part.
…
(12) If the Court is not satisfied with the proof of any of those matters or is of the opinion that for other sufficient cause the order sought ought not be made, it may dismiss the petition.
(13) Where proceedings have been commenced in a court for the administration of a deceased person's estate under a law of a State or Territory, a petition for an order under this section in relation to the estate shall not be presented by a creditor except by leave of the Court and on such terms and conditions (if any) as the Court thinks fit.”
Section 247 of Part XI of the Act provides for a petition to be presented by the person administering the deceased debtor’s Estate to administer the Estate under Part XI of the Act. Relevantly, s.247 of the Act is as follows:
“Petition for administration under this Part by person administering deceased person's estate
(1) Subject to this section, a person administering the estate of a deceased person may present a petition for an order for the administration of the estate under this Part, accompanied by a statement, in duplicate, of the deceased person's affairs and of his or her administration of the deceased person's estate.
(1A) Upon hearing the petition, the Court may make, or refuse to make, the order sought as it thinks fit.”
The respondent was the wife of the deceased before his death and is the person administering the Estate of the deceased debtor and is joined to the proceeding in her capacity as his legal personal representative. The respondent did not appear on 20 October 2014.
The applicant deposed, and I accept, that, based on correspondence annexed to his affidavit and communications referred to, it was the applicant’s belief that the respondent consented to the orders sought to have the deceased debtor’s Estate administered in bankruptcy, including the appointment of the applicant as Trustee.
Based on supporting annexures to the applicant’s affidavit, I accept that the Statement of the Debtor’s Affairs, summarised in accordance with the matters raised in reg.11.01 of the Bankruptcy Regulations 1996 (Cth), is as follows:
“41. In my opinion, a statement of the Debtor’s affairs, summarised in accordance with the matters raised in Bankruptcy Regulation 11.01 is as follows;
(a) Capital account is NIL
(b) Assets of the Debtor transferred to beneficiaries is NIL
(c) Income account is NIL
(d) Unsecured debts is in the List of Creditors, which I annex hereto and mark “N” and which totals for All Creditors: $4,138,675.42 and $6,189,084.63 and $4,100,503.00 respectively for “Statement of Affairs”, “Advised” and “Claimed”
(e) Secured debts is NIL
(f) Current hire purchase, credit purchase, lease purchase or similar agreements is NIL
(g) Any other assets and liabilities is NIL”
The applicant also deposed that it was his belief that the Estate of the deceased debtor is insolvent and should therefore be administered pursuant to Part XI of the Act. The applicant further deposed that it was his belief that it is in the best interests of the creditors to set aside the PIA and for the applicant to be appointed to administer the deceased debtor’s Estate in bankruptcy under Part XI of the Act.
I accept that the deceased debtor’s Estate is insolvent and that an Administrator may be appointed pursuant to Part X of the Act. Further, I accept that where an Estate is clearly insolvent, as in this case, recourse to procedures to administer the Estate in bankruptcy under the Act is appropriate (see: Meinhardt (Hong Kong) Ltd v William Lindsay Meinhardt (Deceased) & Ors (No 2) [2006] FCA 1323 at [48] – [52])
It is clear that the Act contemplates a petition being presented by either a creditor or the legal personal representative of the deceased in respect of an insolvent deceased debtor’s Estate in relation to the administration of the Estate in bankruptcy under the Act.
However, the applicant does not apply as a creditor and is not the legal personal representative of the deceased.
As stated above, the applicant relies on s.30 of the Act as giving power to the Court to appoint him as the Administrator of the deceased debtor’s Estate despite the fact that he does not seek that appointment, either as a creditor or as the legal personal representative of the deceased debtor’s Estate, as provided for in ss.244 and 247 of the Act.
I do not read s.30 of the Act as providing that power to the Court.
Section 30 of the Act is facilitative of powers with which the Court is already vested, such as the appointment of an administrator to the insolvent Estate of a deceased person. It is not a source of further power in itself. Section 30 of the Act enables the Court to make such declarations or orders as are necessary to give effect to the exercise of that power.
Section 30(1)(a) of the Act provides that the Court has full power to decide all questions, whether of law or fact, relevantly, in any matter under Part XI of the Act coming within the cognizance of the Court. Clearly s.30(1)(a) of the Act does not give power to the Court to decide matters that come before it under Part XI of the Act beyond the matters specified in Part XI of the Act. The Act clearly limits the presentation of a petition in respect of an insolvent deceased Estate to a creditor or a Legal personal representative.
Section 30(1)(b), as stated above, simply enables the Court to grant appropriate relief based on the findings that it has made and to which it has applied the relevant bankruptcy law in Part XI of the Act.
Part XI of the Act confines the person who may present a petition for administration of a deceased’s insolvent Estate to a creditor or legal personal representative.
I am not persuaded that s.30 of the Act of itself creates a power in the Court under the Act to appoint a person, other than those specified in ss.244 and 247 of the Act, to present a petition to administer the Estate of a deceased debtor in bankruptcy under the Act. It cannot give standing to a person who otherwise does not have standing under the Act to apply for appointment to present such a petition.
Presently, the applicant does not present a petition as a creditor of the deceased debtor's Estate. It is possible that such a course is open to the applicant, although currently there is no evidence before this Court as to whether the applicant is a creditor. Certainly, he does not bring the present application in that capacity.
It may also be open to the Australian Taxation Office, or any other creditor, to present a petition to administer the Estate in bankruptcy and to have the applicant appointed as trustee to conduct whatever investigations he has power to conduct in that role under the Act, such as those available under Part V of the Act.
In the present circumstances, the applicant has no interest that would give him standing to present a petition to administer the Estate of the deceased debtor in bankruptcy.
Accordingly, the declaration, orders and directions referred to in paragraph 4 above should not be made.
I certify that the preceding thirty-two (32) paragraphs are a true copy of the reasons for judgment of Judge Emmett
Associate:
Date: 26 November 2014
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