Re Bankrupt Estate of Aldo Williams; Ex Parte Kerr
[2012] FMCA 644
•23 July 2012
FEDERAL MAGISTRATES COURT OF AUSTRALIA
| RE BANKRUPT ESTATE OF ALDO WILLIAMS; EX PARTE KERR | [2012] FMCA 644 |
| BANKRUPTCY – Administration of bankrupt estate – release of unclaimed funds held from previous bankruptcy – completion of administration in absence of a statement of affairs – concerns about competency of bankrupt. |
| Bankruptcy Act 1966 (Cth), ss.146, 153A, 254(2), 254(3) Federal Magistrates Court Rules 2001 (Cth), r.16.05(2)(a) |
| Official Receiver v Lockhart [2006] FMCA 942 |
| Applicant: | DAVID JOHN KERR |
| File Number: | SYG 1336 of 2012 |
| Judgment of: | Smith FM |
| Hearing date: | 23 July 2012 |
| Delivered at: | Sydney |
| Delivered on: | 23 July 2012 |
REPRESENTATION
| Counsel for the Applicant: | Ms S Nash |
| Solicitors for the Applicant: | Sally Nash & Co |
ORDERS
THE COURT DECLARES THAT:
Under s.254(3) of the Bankruptcy Act 1966 (Cth) the applicant as trustee of the property of Aldo Williams, a bankrupt, NSW 6154/11/7 is entitled to monies paid to the Commonwealth by the Official Receiver in respect of the bankrupt estate of Aldo Williams NSW 3069/07/9.
THE COURT ORDERS THAT:
Under s.146 of the Bankruptcy Act 1966 (Cth) that the distribution of dividends to those creditors who have proved their debts in the bankrupt estate of Aldo Williams proceed in accordance with Division 5 of Part VI of the Bankruptcy Act 1966 (Cth), as if the bankrupt had filed a Statement of Affairs and that creditors had been stated to be those creditors in it pursuant to s.146 of the Bankruptcy Act 1966 (Cth), as amended.
That the trustee’s costs be paid from the bankrupt estate of Aldo Williams.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 1336 of 2012
| DAVID JOHN KERR |
Applicant
REASONS FOR JUDGMENT
(revised from transcript)
This judgment addresses an ex parte application by a trustee, Mr Kerr, concerning his administration of the bankrupt estate of Mr Aldo Williams.
Mr Williams lives in a home unit which he owns at Brookvale, supported by an aged pension. He lost confidence in his body corporate, and refused to pay strata levies. He was made bankrupt upon such a debt in 2007. That bankruptcy was annulled in April 2008 by his trustee in bankruptcy issuing a certificate under s.153A of the Bankruptcy Act 1966 (Cth), upon the full payment of his creditors. This was achieved from Mr Williams’ savings, which also presumably were used to pay the costs of the bankruptcy administration.
A small surplus from his savings remained in the hands of that trustee. After an unsuccessful attempt to distribute this money to Mr Williams, it was paid as ‘unclaimed moneys’ pursuant to s.254(2) of the Bankruptcy Act to the Commonwealth. It is there being held in an account, possibly earning a very small amount of interest. I am informed by Mr Kerr’s solicitor that in February 2012 an amount of $7,064.33 was so held.
From late 2009, if not earlier, Mr Williams continued not to pay his strata levies, and the body corporate once again obtained judgment and petitioned successfully for a sequestration order in relation to Mr Williams’ estate. The second sequestration order was made on 30 September 2011. Mr Kerr, the present applicant, was appointed trustee of the bankrupt estate consequent upon that sequestration order.
Mr Kerr informs the Court that he is aware only of the indebtedness owed to the body corporate, which at the time of the petition was in the amount of $11,856.72. It is reasonable to infer that a proof for debt for around that amount has been lodged, or is expected to be lodged. Mr Kerr is unaware of any other possible creditor.
Mr Williams has been sent the usual correspondence, requiring him to complete a statement of affairs and to assist Mr Kerr to administer his estate in bankruptcy. However, no statement of affairs has been forthcoming, and the evidence shows that Mr Williams is unable or unwilling to complete one. Mr Kerr has sent people from his office, one of whom speaks Italian, to visit Mr Williams. They did so on 23 and 26 March 2012, and compiled two file notes recounting their meetings with Mr Williams and their observations of his situation in his home unit.
Reading the file notes, it appears to me that Mr Williams probably does not understand his present situation, so far as the proper financial management of his affairs is concerned. He claims not to be in a fit state even to complete a statement of affairs with the assistance of Mr Kerr’s officers. This is notwithstanding that, no doubt, they explained to him that it was in his interests to complete a statement of affairs, since it might allow his bankruptcy to be brought to an end by way of another annulment under s.153A or otherwise by lapse of time.
I am informed from the bar table that as well as the residue from the last bankruptcy administration, Mr Williams’ current estate may include money in another bank account, and he also has an asset in his ownership of the title to the home unit. All of these assets have vested in Mr Kerr, and the trustee’s title in relation to the home unit is protected by a caveat. Mr Kerr is endeavouring to manage the estate so as to avoid, if possible, a need to realise that asset. However, unless Mr Williams does complete the statement of affairs and assist the finalising of his current bankruptcy, some uncertainty over the title to the home unit may continue indefinitely into the future.
Mr Kerr’s ex parte application today was framed broadly, and raises the possibility that the Court might need in the future to make orders which address the disposition of the home unit or the annulment of the bankruptcy. However, after discussion with Mr Kerr’s solicitor, this relief was not sought. Hopefully, a future application to the Court will not be needed, but if it is, it is better brought at a time when Mr Kerr has progressed further in his administration of Mr Williams’ estate, and can report more fully to the Court.
The balance of Mr Kerr’s application essentially seeks an order under s.254(3), which would enable recognition of the vesting of Mr Williams’ entitlement to the unclaimed moneys as an asset available to creditors in Mr Williams’ current estate in bankruptcy. Although the evidence before me is not detailed as to the exact amount currently held and how it got there, I am satisfied that there is such an asset which should be realised in the course of Mr Kerr’s administration, and that the Court should assist this by making a declaration under s.254(3).
Mr Kerr’s application also seeks an order under s.146, which provides:
146Distribution of dividends where bankrupt fails to file statement of affairs [see Table B]
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.
Authorities which have considered the exercise of this power were summarised by me in Official Receiver v Lockhart [2006] FMCA 942. They point to the purpose served by the power under s.146, being to allow a trustee to address prejudice to the known creditors of the bankrupt resulting from delay in the administration of the estate due to the failure of a bankrupt to lodge a statement of affairs.
In the present situation, I am satisfied that the only probable creditor in this estate, is the body corporate. I accept that it is appropriate in the present circumstances for Mr Kerr to be permitted to proceed to complete his administration in the normal manner, including by way of dividend and final dividend, according to the relevant provisions of Division 5 of Part VI of the Bankruptcy Act, as if Mr Williams had lodged a statement of affairs. Mr Williams should continue to be encouraged to complete a statement of affairs, but I am satisfied that his failure to do so should not hold up the administration of his current estate in bankruptcy.
It is appropriate that I make an order confirming that Mr Kerr’s expenses of the present application should be drawn from the estate.
I am satisfied that it is appropriate to make the above orders, notwithstanding that Mr Kerr’s application has been brought ex parte, and has not been formally served on Mr Williams and his known creditor. This is because the relief appears clearly to be of an uncontroversial nature, which is for the benefit of all persons interested in the matter. I note that a copy of the application was sent by post to Mr Williams, but I do not consider that I should make any assumption that this was received by Mr Williams, and certainly not that it was comprehended by him.
I consider that the interests of Mr Williams and any other person with an interest in Mr Williams’ bankruptcy, would be sufficiently met by their rights under Federal Magistrates Court Rules r.16.05(2)(a) to apply to set aside or vary the orders which I propose to make. I note that Mr Kerr’s solicitor has undertaken to provide a copy of the orders and of this judgment to Mr Williams and his creditor.
In all the circumstances, I do not consider that any additional orders directing how Mr Kerr should proceed in his administration or otherwise are necessary at this stage. Nor that it is necessary to reserve any liberty to apply for supplementary orders.
In conclusion, I consider that I should record that I found the observations of Mr Kerr’s officers as to Mr Williams’ current living conditions to be of concern, and deserving of attention by a relevant authority providing social welfare services for pensioners in his area. In particular, they suggest that his mental condition and physical environment raised doubt whether he is properly looking after his personal needs as well as his financial affairs. For example, it appears that he may be “living without electricity” and has become reclusive.
The situation in which this has been discovered points to what may be a lacuna in the legal or administrative processes available to trustees in bankruptcy, when they are required to administer in insolvency an estate of a person unable properly to manage their financial affairs, if not also their personal affairs. I am informed from the bar table that trustees currently lack any formal avenue for invoking State protective or guardianship legislation and agencies, and that it is unclear to them what alternative avenues are available to raise concerns when they come to their notice. Yet it may not be infrequent that a trustee in bankruptcy is the first and only person who becomes fully aware of a bankrupt’s significant needs for personal support or assistance from a welfare agency.
All that I can suggest to Mr Kerr is that he could consider referring the observations of his officers recorded on their visits to a social‑work unit within Centrelink or at the local authority. In my opinion, it would be a responsible and humane exercise of the duties of a trustee in bankruptcy to consider taking such a step in the present case.
I certify that the preceding twenty (20) paragraphs are a true copy of the reasons for judgment of Smith FM
Date: 3 August 2012
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