Parr v Dobby

[2006] FMCA 379

FEDERAL MAGISTRATES COURT OF AUSTRALIA

PARR v DOBBY [2006] FMCA 379

BANKRUPTCY – Annulment – debtor solvent – abuse of process – bankruptcy annulled.

Bankruptcy Act1966, ss.153B, 303
Property Law Act1974 (Qld), Part 19

Applicant: SOPHIE ADAM PARR

Respondent: JAMES ANTHONY DOBBY

File Number: BRG644 of 2005

Judgment of: Jarrett FM

Hearing date: 10 February 2006

Date of Last Submission: 10 February 2006

Delivered at: Brisbane

Delivered on: 10 February 2006

REPRESENTATION

Counsel for the Applicant: Dr Kellie

Solicitors for the Applicant: Price & Roobottom

The Respondent appeared in person

Solicitors for the Official Trustee in Bankruptcy: Tress Cox

Solicitor for the Official Trustee in Bankruptcy: Mr Murphy

ORDERS

1. That the bankruptcy of James Anthony Dobby consequent upon the presentation of his own petition on 29 September 2005 be annulled pursuant to s.153B of the Bankruptcy Act1966.

2. That the costs charges and expenses of the Official Receiver in Bankruptcies Administration of the first respondent estate in bankruptcy be agreed upon or taxed and such costs charges and expenses shall be a first charge on the respondent's interest after the secured creditor on the property at 10 Boree Street, Ashmore.

3. That the first respondent shall execute such documents as may reasonably be required by the Official Receiver in Bankruptcy to perfect the charge created by paragraph 2 hereof and to the extent of any deficiency in such property it may be recoverable against the first respondent as a debt.

4. That subject to order (2) hereof, the property of the respondent shall forthwith vest in the applicant as trustee for the applicant and the respondent to hold such property pending the order of the Supreme Court of Queensland in Application No BS6508 of 2005.

5. That the respondent pay the applicant's and the Official Receiver in Bankruptcy's costs of and incidental to this application to be agreed and failing agreement to be taxed.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
BRISBANE

BRG644 of 2005

SOPHIE ADAM PARR

Applicant

And

JAMES ANTHONY DOBBY

Respondent

REASONS FOR JUDGMENT

1. This is an application pursuant to s.153B of the Bankruptcy Act1966 for annulment of the respondent's bankruptcy.  The respondent opposes the application.  By leave, the respondent's Trustee in Bankruptcy, the Official Trustee in Bankruptcy, appears on this application.  The Official Trustee opposes certain of the orders for costs of the applicant's proposals, but otherwise neither opposes nor supports the order for annulment.

2. The background of the matter appears to be as follows.  The parties commenced a de facto relationship in or around January 1990.  The relationship was characterised by periods of separation, which the applicant alleges was due to domestic violence by the respondent towards her.  They separated from April 1992 to August 1993 and from September 1998 to April 1999.  The parties have one child who was born in September 1996.  The parties separated on a final basis on or about October 2004.

3. During the course of the relationship the parties accumulated certain property between them.  They bought and sold businesses in addition to certain real property.  In October 1996, a discretionary trust was formed which was thereafter used as the parties' vehicle for wealth creation.

4. After separation and in about August 2005 the applicant filed proceedings in the Supreme Court of Queensland for an adjustment order in respect of their property pursuant to Pt 19 of the Property Law Act1974 (Qld). That matter came before the Supreme Court of Queensland on 2 September 2005 at which time the respondent disclosed the sale of certain of the parties' property without prior notice to the applicant. He foreshadowed an intention to apply for bankruptcy at that time.

5. The net values of the parties' property at the time of the proceedings in the Supreme Court was estimated at about $760,000 of which approximately $25,000 was in beneficiaries' accounts in the family trust.  The remaining assets largely comprised the family home on the Gold Coast, the proceeds of sale of the family business and some other land.

6. On 12 September 2005, the matter returned to the Supreme Court.  An order was made restraining the respondent from dealing with the proceeds of certain real property and a business that had been sold by him.  The respondent was required to account for the sale proceeds.

7. On 28 September 2005, an order requiring the respondent to account for the sale proceeds was extended to 4 October 2005.  Documents produced to the Supreme Court of Queensland under subpoena from the National Australia Bank and the ANZ Bank revealed that between 19 August 2005 and 25 August 2005 the respondent withdrew in excess of $235,000 in cash.  On 25 August 2005 the respondent withdrew $180,000 in cash from those accounts.

8. The respondent says that the money withdrawn by him from the bank accounts was gambled away by him soon after its withdrawal.  He says that the money no longer exists.  At least that is the evidence that appears in the applicant's case.  The respondent has not sworn to those assertions before me.

9. In the application presently pending before the Supreme Court of Queensland, the applicant seeks orders for certain real property to be transferred to her, that other property be sold and the net proceeds of sale after certain deductions distributed between the parties.  She also seeks orders that each of the parties retain certain other property to the exclusion of the other. 

10. The relief sought by the applicant in the Supreme Court is extensive and is set out in exhibit A to her affidavit filed on 24 October 2005. 

    
    

    I will not repeat the orders she seeks in detail.

11. The orders sought by the applicant in the Supreme Court are opposed by the respondent.

12. On 29 September 2005, the respondent lodged with Insolvency Trustee Service Australia a debtor's petition.  His petition was accepted by the Official Receiver.  There is therefore a bankruptcy in place in respect of the respondent's estate.

13. I am satisfied having regard to the affidavit of David Arthur Reardon filed on 25 January 2006 that all of the respondent's creditors have been served with the annulment application.  No creditor has sought to appear on the hearing of the application.

14. The applicant says that she has standing to bring these proceedings as a person aggrieved or interested in the matter within the meaning of that term as set out in s.303 of the Act. She argues that the respondent's petition ought not to have been presented within the meaning of that phrase as used in s.153B(1) of the Act.

15. In her written submissions and in submissions made in the course of the application it was suggested that the applicant was relying on the provisions of s.153B(1) of the Act and that the petition ought not to have been accepted by the Official Receiver without an examination of the debtor's solvency at that time.  It is plain enough, however, that the power to annul a bankruptcy on the basis that the petition ought not to have been accepted by the Official Receiver is really limited to cases where it can be shown by persuasive evidence that the procedural requirements of the Act have not been met.  No attempt to do that was made in his case and it seems to me that the case is more properly one where what is sought to be argued is that the petition ought not to have been presented.

16. The applicant asserts that the respondent's conduct in presenting the petition in the circumstances that he did was an abuse of process because:

    a)He was not insolvent at the time he presented the petition, so there was no basis for presenting the petition; and

    b)The timing of the presentation of the petition so soon after the commencement of proceedings in the Supreme Court of Queensland for de facto property adjustment and his alleged gambling of the parties' funds is such as to lead to a clear inference that the petition was filed to frustrate those proceedings.

17. I am satisfied that the applicant has standing to bring these proceedings. The authorities make it plain that a spouse pursuing a property adjustment order pursuant to s.79 of the Family Law Act1975 has standing to bring an annulment application against a bankrupt spouse.  It would be anomalous if a person pursuing similar relief pursuant to the various State acts allowing for property adjustment between de facto spouses could do so and a spouse pursuing relief under the Family Law Act1975 could not do so.

18. I am satisfied on balance that at the time the respondent presented his petition he was solvent.  His petition reveals real property worth $565,000 in respect of which there is a secured creditor that is owed $310,000.  The applicant owns one half of that property.  He also has cash of $512.68.  He discloses unsecured creditors totalling $40,420.23.  He therefore has an excess of assets over liabilities of $87,592.45.  I pay no attention to the respondent's superannuation.

19. The $87,592.45 does not take into account any of the cash removed by the respondent from the parties' banking accounts referred to above.  As I have earlier remarked on that issue, it is relevant to note that in these proceedings the respondent has not sworn to having gambled away or otherwise dealt with that money.  The only inference open on the evidence is that the respondent still has possession of those funds.

20. I am satisfied that the circumstances in which the petition was presented in this case by reason of the pending proceedings in the Supreme Court and the apparent solvency of the respondent demonstrates that the petition is an abuse of the process provided for by the Bankruptcy Act. It is to be borne in mind, of course, that the respondent presented a debtor's petition rather than there being a creditors petition presented for his sequestration. Nonetheless, it is clear enough on the authorities that the presentation of a debtor's petition in circumstances that might otherwise amount to an abuse of process will be seen by the Courts as an abuse of process of the processes set up in the statute and thus attract the jurisdiction of the Court to grant an annulment.

21. On the part of the Official Receiver it was argued that some detailed consideration needed to be given to the position of the respondent's creditors.  That is always a relevant consideration when considering an annulment application.  In this case, none of the creditors chose to appear.  I am satisfied that if an annulment order was made there would be no particular prejudice to any of the creditors. 

22. The scheme set up by Pt 19 of the Property Law Act1974 requires the Court making any adjustment orders under that Part to take into account the assets and liabilities of each of the parties and the circumstances in which those liabilities were incurred.  In that way the interests of the creditors in this case will be taken into account.

23. For those reasons I propose the following orders.

I certify that the preceding twenty-three (23) paragraphs are a true copy of the reasons for judgment of Jarrett FM

Associate:  S. Haysom

Date:  17 March 2006