Rawson v Palmer - [2007] FMCA 912

FEDERAL MAGISTRATES COURT OF AUSTRALIA

RAWSON v PALMER

[2007] FMCA 912

BANKRUPTCY – Review of trustee’s decision to reject a proof of debt – application filed out of time – refusal of an extension of time.

Bankruptcy Act 1966 (Cth), s.104

Applicant:

CONSTANCE VIVA RAWSON

Respondent:

CHRISTOPHER JOHN PALMER

File Number:

SYG1350 of 2007

Judgment of:

Driver FM

Hearing date:

13 June 2007

Delivered at:

Sydney

Delivered on:

13 June 2007

REPRESENTATION

The Applicant appeared in person

Solicitors for the Respondent:

Mr P Day
Woods & Day, Solicitors

ORDERS

The Court directs that the respondent’s representative have photocopy access to the file.
Leave for an extension of time to file and serve the review application is refused.
The application to review the decision of the trustee is dismissed.
The trustee’s costs of the application be treated as costs of the administration of the estate and are to be paid out of the bankrupt estate in accordance with the Bankruptcy Act 1966 (Cth).

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
SYDNEY

SYG1350 of 2007

CONSTANCE VIVA RAWSON

Applicant

And

CHRISTOPHER JOHN PALMER

Respondent

REASONS FOR JUDGMENT

(revised from transcript)

I have before me an application made pursuant to s.104 of the Bankruptcy Act 1966 (Cth) (“the Bankruptcy Act”) seeking review of a decision of the trustee in bankruptcy rejecting a proof of debt. The application was filed on 27 April 2007. The trustee’s decision was made on 27 February 2007 and was notified by the trustee to the applicant on the same day. The application is supported by two affidavits made by the applicant, the first filed on 27 April 2007 and the second filed on 22 May 2007. In addition, I accepted two letters from the applicant to the trustee dated 23 and 24 May 2007 as an exhibit (exhibit A1).
The application is opposed by the trustee on the basis that it is made out of time and that the applicant has not provided sufficient evidence to support the proof of debt. The trustee relies upon his own affidavit filed in court by leave on 12 June 2007. None of the deponents were cross-examined on their affidavits.
The first question is whether the Court should grant an extension of time for the filing of the application. Section 104(3) of the Bankruptcy Act provides that:
(3)Subject to the power of the Court to extend the time, an application under this section to review a decision shall not be heard by the Court unless it was made within 21 days from the date on which the decision was made.
The language of that subsection strongly indicates that an extension of time should not be lightly granted. Bankrupt estates need to be administered efficiently and promptly. A time limitation is provided so that trustees and other creditors are not left in doubt for significant periods about what the claims on an estate are. That point has particular force in this case given that the available assets in the administration of the estate appear to have been realised and that the trustee is in a position to distribute the realised moneys to the creditors.
In considering whether to grant an extension of time, I must take into account the explanation of the applicant for the delay, the prospects of the review application and the interests of the administration of justice. The applicant told me from the bar table and the affidavit evidence confirms that she was engaged in a course of correspondence with the trustee over a period commencing some time before and continuing well after the decision of the trustee the subject of this present proceeding.
The trustee was dissatisfied with the material submitted by the applicant in support of her proof of debt. That is why the proof of debt was rejected. The applicant spent considerable time seeking additional documentary evidence of loans by her to her daughter. The position is that the applicant is the bankrupt’s mother. The available material establishes that the bankrupt was in financial difficulties many years before she eventually became bankrupt. The applicant, the bankrupt’s mother, as any good mother would, sought to assist her daughter by making money available to her for various purposes. The documentary evidence supports at least in part the asserted provision of money by the applicant to her daughter.
The applicant has obviously scoured her personal records seeking anything which evidences what she says were loans made by her to her daughter at an interest rate of five per cent. She appears to have located everything that could be located by April and put it before the trustee. He was not persuaded to alter the decision he made. The notice sent by the trustee to the applicant on 27 February 2007 pointed out to the applicant the time limit applicable under s.104(3) of the Act. Notwithstanding so being put on notice, the applicant sought to persuade the trustee, and perhaps herself, of the force of her claimed proof of debt, rather than coming to court. She appears to me to be an honest woman and was seeking to evidence what she says were loans in circumstances where she had her own doubts as to whether the alleged loans could be proven. She told me from the bar table frankly that it was not until late April that she came to the view that she might have sufficient to prove her claims. Given the state of the administration of the bankrupt estate and the fact that the applicant was put on notice promptly by the trustee of the time limit in s.104, in my view the efforts made by the applicant to change the mind of the trustee are not a sufficient reason for the Court to grant an extension of time.
I find that the applicant has not advanced a sufficient explanation for her delay in bringing the proceedings.
Even if I were wrong in that view, I would refuse an extension of time on the basis that there is in substance no serious question to be tried. The available material establishes that the applicant did make available significant sums to her daughter many years ago over time. She told me from the bar table that she hoped that her daughter would pay her back when she was able to do so. She says that she told her daughter that interest would apply to what she described as a loan but the documentary record of that asserted interest obligation is scant indeed.
Some of the money came from the applicant’s brother and he is in no doubt that he was not expecting to be paid any interest. He said so in an email to the applicant on 24 October 2006 annexed to the applicant’s first affidavit. The applicant’s brother described the advances made as a loan made because of family relationship. I asked the applicant whether she would have taken her daughter to court to enforce recovery of the moneys advanced. There was really no question that she would. This was a family arrangement made on an informal basis.
There was a general expectation by the applicant that she might at some point recover the moneys she had advanced to her daughter but she had no intention of seeking to enforce recovery by resort to legal action. Only a very small part of the moneys advanced – about $3,000 – was ever repaid. If there had been any intention to enforce recovery, one would have expected to see that over the period of about 20 years when the moneys were first advanced. I think it highly likely that the applicant would not be able to enforce recovery against her daughter of the moneys advanced, both because the terms of the alleged loans are undocumented, and to the extent that there was any oral agreement or understanding, the terms of it appear to have been that the bankrupt as the debtor was permitted to repay the money as and when she could.
In addition, the New South Wales statute of limitations would appear to impose a serious and additional obstacle to any recovery action given that the relevant payments were made well outside the general six-year limitation period.
There is doubt even about the amount that was actually advanced. Exhibit A1 shows that the applicant herself was flexible about the amount that might be accepted as a proof of debt. A letter dated 23 May 2007 claims $113,773.34 plus interest at the rate of five per cent per annum. The letter the following day claims $87,560. This of itself shows the significant doubt about the amount that would have been due to the applicant if she had been able to enforce recovery of the alleged loans. Something far more concrete than what was presented would need to have supported a proof of debt acceptable to the trustee. In my view it would be highly likely that if an extension of time were granted, the application would fail.
I have also considered whether the interests of justice require the granting of an extension of time. The applicant is an elderly woman in her eighties. She has acted as most parents would over time to support her daughter in a time of need. Now that her daughter is bankrupt, she sought to gain some benefit of the liquidation of her daughter’s assets in the bankruptcy.
The applicant told me that she has made no provision for her daughter in her will on the reasonable basis that she has already done enough for her daughter during her life. That is understandable. It is unfortunate that the applicant will probably see nothing in repayment of her generosity to her daughter. However, there is insufficient to persuade the trustee or the Court that the moneys advanced by the applicant to her daughter were legally recoverable.
In the circumstances, I find that the interests of justice do not support the granting of an extension of time. I therefore order that the extension of time be refused and that the application to review the decision of the trustee be dismissed.
The application having been dismissed, the trustee seeks an order that the trustee’s costs of the application be paid out of the bankrupt estate. The applicant did not express any opposition to such an order. An order in those terms would be consistent with principle and practice. I will order that the trustee’s costs of the application be treated as costs of the administration of the estate and paid from the estate in accordance with the Bankruptcy Act.

I certify that the preceding seventeen (17) paragraphs are a true copy of the reasons for judgment of Driver FM

Associate:

Date: 15 June 2007