Re Dixon and Mellos as the Controlling Trustees of the Estate of Urwin
[2017] FCCA 2180
•21 August 2017
FEDERAL CIRCUIT COURT OF AUSTRALIA
| RE DIXON AND MELLOS AS THE CONTROLLING TRUSTEES OF THE ESTATE OF URWIN | [2017] FCCA 2180 |
| Catchwords: BANKRUPTCY – Application for an extension of time for the holding of a meeting of creditors under Part X of the Bankruptcy Act 1966 (Cth). |
| Legislation: Bankruptcy Act 1966 (Cth), ss.33(1), 188, 190, 194 Insolvency Law Reform Act 2016 (Cth), s.76 |
| Cases cited: Application by Benjamin Peter Piggott [2009] FMCA 1061 |
| Applicants: | STEPHEN ROBERT DIXON AND NICK MELLOS AS THE CONTROLLING TRUSTEES OF THE ESTATE OF GARY KENNETH URWIN |
| File Number: | SYG 2625 of 2017 |
| Judgment of: | Judge Barnes |
| Hearing date: | 21 August 2017 |
| Delivered at: | Sydney |
| Delivered on: | 21 August 2017 |
REPRESENTATION
| Solicitors for the Applicants: | O’Neill Partners Commercial Lawyers |
ORDERS
The time for holding the meeting of creditors of Gary Kenneth Urwin under section 194 of the Bankruptcy Act 1966 (Cth) be extended to 24 August 2017.
| FEDERAL CIRCUIT COURT OF AUSTRALIA AT SYDNEY |
SYG 2625 of 2017
| STEPHEN ROBERT DIXON AND NICK MELLOS AS THE CONTROLLING TRUSTEES OF THE ESTATE OF GARY KENNETH URWIN |
Applicants
REASONS FOR JUDGMENT
(revised from transcript)
This is an application under s.33(1)(c) of the Bankruptcy Act 1966 (Cth) (the Act) to extend the time by which controlling trustees must hold a meeting of a debtor’s creditors under Part X of the Act. The Applicants, Stephen Robert Dixon and Nick Mellos, consented to exercise the powers conferred by a controlling trustee authority signed by Gary Kenneth Urwin. Mr Mellos and Mr Dixon signed the authority on 19 July 2017 and, as evidenced by a certificate of appointment, were appointed controlling trustees on that date under s.188 of the Act.
Section 194(1)(a) of the Act relevantly provides that the meeting of the debtor’s creditors that must be called by the controlling trustees under an authority under s.188 “must be held: (a) not more than 25 working days after the relevant consent or approval was given.” Section 194(3) provides that for the purposes of s.194(1) a “working day” is “a day that is not a Saturday, Sunday or public holiday in the place where the meeting is to be held.” The controlling trustees seek a one day extension of time within which to hold a meeting of Mr Urwin’s creditors.
While s.194 is to be repealed under the Insolvency Law Reform Act 2016 (Cth), the repeal (and other associated provisions) will not come into effect until 1 September 2017 (see the Insolvency Law Reform (Transitional Provisions) Regulation 2016 (Cth) reg.5(2)(w)). Hence this provision remains in effect for the purpose of these proceedings.
I am satisfied that the Court has power under s.33(1)(c) of the Act to extend the time for the controlling trustees to call and to hold a meeting of creditors (see Pretorius v Daltons Carpet Tiles Pty Ltd (1984) 1 FCR 346; [1984] FCA 10; Re Gowing; Ex parte Deputy Registrar in Bankruptcy (1985) 11 FCR 111; [1985] FCA 288 (albeit in relation to the powers of a registrar) and the discussion of those authorities in Application by Benjamin Peter Piggott [2009] FMCA 1061 as well as Horne, in the matter of Kakavas [2010] FCA 1410 at [4]). The issue is therefore whether I should exercise such discretion.
The application is supported by an affidavit affirmed by Mr Dixon on 18 August 2017. Mr Dixon’s evidence explains the background to and reason for this application, including the fact that there is a creditor’s petition on foot against Mr Urwin who (on the present information available) is said to have debts in the order of over $20 million. As controlling trustees have been appointed, the creditor’s petition cannot proceed, at least until after the meeting of creditors. The reason for this application is that when calculating the date by which the meeting of creditors had to be called and held, Mr Dixon mistakenly had regard to the definition of “business day” in s.5 of the Act. “Business day” is defined to mean a day which is not a Saturday, Sunday, public holiday or a “bank holiday” in the place concerned (that being New South Wales where the creditors’ meeting is to be held). Monday 7 August 2017 was a bank holiday in New South Wales. Bank holidays are not excluded from the definition of “working day” in s.194(3) of the Act. The correct last day for the holding of the meeting is Wednesday 23 August 2017. The time available for calling a meeting of creditors was miscalculated using the definition of “business day” in s.5 of the Act rather than the definition of “working day” in s.194(3) so that Monday 7 August 2017 was incorrectly excluded. As a result, the meeting of creditors was arranged for 24 August 2017.
Acting on this understandable mistake, the trustee gave notice at least 10 days before the date on which the meeting of creditors was fixed to the Official Receiver, the debtor and to each creditor pursuant to reg.10.04 of the Bankruptcy Regulations 1996 (Cth). The notice included a copy of the controlling trustees’ report and other necessary documents and stated that the meeting of creditors would be held on Thursday 24 August 2017. Such notices were issued on 14 August 2017. However on 17 August 2017 Mr Dixon received an email from the Australian Financial Security Authority (AFSA) advising that it had carried out a routine review which indicated that the proposed meeting day of 24 August 2017 was more than 25 working days from the date of 19 July 2017 on which the authority became effective.
In these circumstances (as referred to in the email from AFSA), the controlling trustees commenced the present action seeking an extension of time from the Court.
In Piggott, Lucev FM (as he then was) discussed the factors to be taken into account in exercising the discretion in a case such as this. It was suggested that it was appropriate to apply principles similar to those ordinarily applied by courts in determining whether to extend time and thus to have regard to the fact that relevant time limits ought not to be lightly ignored; the length of the delay and whether there was acceptable reason for it; the merits of the substantive matter; and whether there was any prejudice suffered by an affected party.
Unlike the situation in Piggott (or in Horne), in this case the application has been brought before the time for holding the creditors’ meeting expired. While acknowledging that relevant time limits ought not to be lightly ignored, this is not a case in which the time limit was ignored. Rather, there was a miscalculation. The need for an extension of time is the result of a simple human error.
There has not been any delay in terms of the holding of the meeting, but an extension of time would permit one extra day. The trustees acted as soon as possible when made aware of the issue. This matter was bought before me as duty judge, as was appropriate in the circumstances. I heard the application on an ex parte basis as a matter of urgency.
There is an authority in place. It is the controlling trustees’ obligation to hold a meeting of creditors (see s.190 of the Act). Notice has already been given to the Official Receiver, the debtor and each creditor in writing together with the accompanying information. In other words, everyone is expecting the meeting to be held on Thursday 24 August 2017. If it is held on that date, the requisite 10 day period of notice will have been afforded to those involved.
As to the merits of the proposed personal insolvency agreement, that is a matter for the meeting of creditors. I note that the trustees have advised creditors that, having regard to the very small dividend likely if the personal insolvency agreement proceeds (compared to a likely nil dividend if the debtor is declared bankrupt), they are of the opinion that while there would be a return to creditors from the personal insolvency agreement, it would be nominal and uncommercial considering the rate and timing of the estimated return. They recommended that it would be in the creditors’ interests to reject the proposal. There is no suggestion that this attitude is in any way reflected in or relevant to the miscalculation that has necessitated the institution of these proceedings. The Applicants seek either a one day extension of time or (if the meeting must be held no later than 23 August 2017), abridgement of the time for giving notice under reg.10.04 of the Bankruptcy Regulations.
It is for the creditors to determine at the meeting whether to accept or reject the proposed personal insolvency agreement. They ought to have the opportunity to do so. There is no evidence that any prejudice would be suffered by any affected party should the extension of time be granted. I am told from the bar table that there has not been any suggestion, concern, complaint or communication from any creditor evidencing a wish to change the date of the proposed meeting.
The extension of time is for one day only. The process followed by the controlling trustees (with this exception) appears to have substantially complied with the requirements of Part X of the Act. In the absence of any material prejudice to creditors who might be affected by an extension of time, I consider that it is in these circumstances appropriate to grant the extension of time sought (which would in effect be regularising the notification which the creditors have already received).
I considered the alternative proposition of an abridgement of the time for notification, so that the meeting could be “brought forward” by one day to satisfy the requirements of s.194(1) of the Act. However I consider it more appropriate in this case to extend the time, rather than to change the anticipated meeting time from Thursday to Wednesday of this week.
I note that I have been told that no costs will be sought or claimed by the controlling trustees in relation to these proceedings. I consider this appropriate. The order sought should be made.
I certify that the preceding sixteen (16) paragraphs are a true copy of the reasons for judgment of Judge Barnes
Associate:
Date: 8 September 2017
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