FEDERAL MAGISTRATES COURT OF AUSTRALIA
| ROBERTSON & ANOR v MORAN & ORS | [2011] FMCA 496 |
| BANKRUPTCY – Personal insolvency agreement – application to set aside – agreement not calculated to benefit creditors generally – large unsecured indebtedness – token contribution under agreement – dominant related creditors benefiting from continuing business activities of debtor – controlling trustee recommended against acceptance of agreement – further investigation of debtor’s business affairs warranted – application set aside – sequestration order made. |
| Bankruptcy Act 1966 (Cth), ss.40(1)(i), 81, 109(1)(a), 115(1), 115(1B), 188, 188(2C), 222, 222(1), 222(1)(c), 222(1)(d), 222(5), 222(5)(e), 222(6), 222(10), 222(12) Bankruptcy Legislation Amendment Act 2004 (Cth) Federal Magistrates Court (Bankruptcy) Rules 2006 (Cth), r.4.06 |
| First Applicant: | ALEXANDER ROBERTSON AS TRUSTEE FOR THE ALEX ROBERTSON SUPERANNUATION FUND |
| Second Applicant: | SPINITU PTY LIMITED (ACN 003 361 573) ON ITS OWN ACCOUNT AND AS TRUSTEE FOR THE ROBERTSON RETIREMENT FUND |
| First Respondent: | RUSTY JOHN MORAN |
| Second Respondent: | MATTHEW HOWARD PAUL DANIEL |
| Third Respondent: | ADAM SHEPARD (TRUSTEE) |
| File Number: | SYG 830 of 2010 |
| Judgment of: | Smith FM |
| Hearing dates: | 4, 5 and 6 May 2011 |
| Delivered at: | Sydney |
| Delivered on: | 20 July 2011 |
REPRESENTATION
| Counsel for the Applicants: | Ms A Stenmark SC and Mr D Eardley |
| Solicitors for the Applicants: | Watkins Tapsell |
| Counsel for the First and Second Respondents: | Mr J Lockhart SC and Mr C Colquhoun |
| Solicitors for the First and Second Respondents: | David Begg and Associates |
| Solicitors for the Third Respondent: | Somerset Ryckmans |
ORDERS
The matter is adjourned for the making of final orders.
| FEDERAL MAGISTRATES COURT OF AUSTRALIA AT SYDNEY |
SYG 830 of 2010
| ALEXANDER ROBERTSON AS TRUSTEE FOR THE ALEX ROBERTSON SUPERANNUATION FUND |
First Applicant
| SPINITU PTY LIMITED (ACN 003 361 573) ON ITS OWN ACCOUNT AND AS TRUSTEE FOR THE ROBERTSON RETIREMENT FUND |
Second Applicant
And
| RUSTY JOHN MORAN |
First…
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- AGLC
- Robertson v Moran [2011] FMCA 496
- Case
- [2011] FMCA 496
- Decision Date
CaseChat Overview and Summary
The key legal issues before the court were whether the creditors had been provided with adequate information to make an informed decision and whether the voting process was conducted fairly. The court had to determine if the trustee had discharged his duty to provide full and frank disclosure of all material facts to the creditors. It was also necessary to assess whether the voting process was conducted in a manner that allowed all creditors to participate fully and fairly.
The court considered the reports provided by the trustee, Mr Shepard, and found that they contained sufficient information for the creditors to make an informed decision. The court found that the trustee had provided a realistic assessment of the potential costs and benefits of pursuing a bankruptcy versus accepting the PIA. The court also noted that the trustee had not received any objections to his reports from the creditors, which indicated that they were satisfied with the information provided. Regarding the voting process, the court found that all creditors who wished to participate in the vote were allowed to do so, and that the trustee had not acted improperly in permitting certain creditors to vote against the PIA. The court concluded that the creditors had made an informed decision and that the voting process was fair.
The Federal Circuit Court dismissed the appeal and ordered the matter to be adjourned for the making of final orders. The court found that the creditors had been provided with adequate information to make an informed decision and that the voting process was conducted fairly. The court did not find any grounds for setting aside the approval of the PIA. The final orders of the court will be made at a later date, but the outcome of this appeal suggests that the creditors' decision to approve the PIA will stand.
Orders
Orders of the court
1.
The matter is adjourned for the making of final orders.
Background
Background to the litigation
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Evidence
Evidence Before The Court
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Decision
Reasons for decision
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Ratio Decidendi
Legal Principle Established
Mr Shepard warned creditors about the expense of investigating Mr Moran’s affairs: 3Likelihood of Recoveries / Commercial Considerations / Funding Should the debtor be made bankrupt and recovery action was to be considered against the Debtor’s companies and potential antecedent transactions, in the first instance I would recommend the examination of directors and all relevant parties pursuant to Section 81 of the Act. I estimate the cost of same would approximate not less than $20,000 - $50,000. In the event that a decision was subsequently taken to pursue recoveries, legal fees (assuming matters would be defended) might approximate $20,000 - $100,000, the funding of which may be required from unsecured creditors depending on recoveries in the administration. Litigation funding may be available to a Trustee depending on establishing the commercial merits of any action to the satisfaction of a litigation funder. Creditors and any potential litigation funders would also need to consider the capacity of any party, against which proceedings may be contemplated, to pay in the event of a successful outcome. Any creditor who would consider funding should in connection with any possible recovery action should advise us of same in writing prior to the meeting of creditors. (emphasis in original) Mr Shepard’s concluding recommendation to Mr Moran’s creditors was: 5Statement by Controlling Trustee as to whether the interests of creditors would be better served by Bankruptcy or acceptance of the debtor’s proposal At the meeting of creditors to be held on Thursday 25 March 2010, creditors will be asked to make a decision by passing a resolution with respect to the Debtor’s future. I note should the Debtor be bankrupted, I estimate that a dividend would not be anticipated for unsecured creditors, subject to any recoveries from the Trustee’s investigation. Should the proposed Personal Insolvency Agreement complete as proposed by the Debtor, unsecured creditors should receive a dividend of approximately 0.47 cents in the dollar dependent upon the extent of creditor claims. However, I note that the dividend rate is reduced to 0.33 cents in the dollar when taking into account my actual disbursements. I am not prepared to forgo my actual disbursements incurred in the administration. I consider that it would be in the creditors’ interests for the creditors to reject the proposal for Personal Insolvency Agreement in that I have not received sufficient information and had time to satisfy my inquiries regarding the affairs of the Debtor. (emphasis in original) The minutes of the reconvened creditors’ meeting on 25 March 2010 do not record Mr Shepard as qualifying or supplementing his written reports, except to present a calculation estimating a dividend under the PIA of $0.42 in the dollar. All the creditors who voted not to accept Mr Shepard’s recommendation, but to approve the PIA, were represented by Mr Dean‑Willcocks. For reasons which are unclear, Mr Shepard admitted a representative of Mr Robertson and Spinitu Pty Ltd to vote against the PIA, but in amounts which largely discounted their claims to interest. Kingsway Group Pty Ltd, a creditor for $404,622, was also separately represented, and voted against the PIA. The other three, smaller creditors, who voted against the PIA had given proxies to Mr Shepard to that effect.