Rudaks (Trustee), in the matter of Migali (Bankrupt) v Migali
[2022] FedCFamC2G 754
Federal Circuit and Family Court of Australia
(DIVISION 2)
Rudaks (Trustee), in the matter of Migali (Bankrupt) v Migali [2022] FedCFamC2G 754
File number(s): ADG 76 of 2022 Judgment of: JUDGE BROWN Date of judgment: 30 August 2022 Catchwords: BANKRUPTCY – failure of bankrupt to lodge a statement of affairs – application under s 146 of the Bankruptcy Act (Cth) – matters to be considered – application granted with costs Legislation: Bankruptcy Act 1966 (Cth) s 146 Cases cited: Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968
Re Stuart; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1
Palmer as Trustee of the Estate of Lazar [2020] FCCA 2157
Division: Division 2 General Federal Law Number of paragraphs: 19 Date of hearing: 30 August 2022 Place: Adelaide Counsel for the Applicant: Ms McGettigan Solicitor for the Applicant: O’Loughlins Lawyers Counsel for the Respondent: No appearance ORDERS
ADG 76 of 2022 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
BETWEEN: MARIS ANDRIS RUDAKS AS TRUSTEE OF THE PROPERTY OF PETER MIGALI
Applicant
AND: PETER MIGALI
Respondent
order made by:
JUDGE BROWN
DATE OF ORDER:
30 AUGUST 2022
THE COURT ORDERS THAT:
1.By reason of the Bankrupt’s failure to file a Statement of his Affairs, the Applicant in his capacity as trustee of the Bankrupt’s Estate may distribute a dividend to creditors who have proved their debts in the Bankrupt’s Estate pursuant to section 146 of the Bankruptcy Act 1966 (Cth) as if the Bankrupt has filed a Statement of Affairs and those creditors who have proved their debts had been stated to be creditors in the Bankrupt’s Statement of Affairs.
2.The Applicant’s costs of the within Application be costs in the Bankrupt Estate.
Note: The form of the order is subject to the entry in the Court’s records.
Note: The Court may vary or set aside a judgment or order to remedy minor typographical or grammatical errors (r 17.05(2)(g) Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth)), or to record a variation to the order pursuant to r 17.05 Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth).
EX TEMPORE REASONS FOR JUDGMENT
JUDGE BROWN:
The reasons for judgment in this matter are being delivered orally following the hearing between the parties concerned. These reasons have been corrected of errors of expression and syntax in an attempt to make the orally delivered reasons amenable to being read.
Maris Andris Rudaks (“Mr Rudaks”) is the trustee of the bankrupt estate of Peter Migali (“Mr Migali”). Mr Rudaks, applies for an order under section 146 of the Bankruptcy Act 1966 (Cth),[1] which provides as follows:
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 have been stated to be creditors in it.
[1] Hereinafter referred to as “the Act”.
The trustee was appointed by virtue of a sequestration order which was made by a registrar of the court on 24 August 2021. It is the evidence of the trustee that he has received two proofs of debt, from creditors of the bankrupt, totalling an amount of $232,962.48.[2]
[2] Outline of submissions of applicant filed 29 August 2022 at [3.2].
Thereafter, the trustee has made the necessary efforts to ascertain if there are other creditors of the estate. In particular, he has placed an appropriate advertisement calling for creditors of the bankrupt to come forward. In this context, Mr Rudaks has deposed he has received no response to the advertisement and no further creditors have come forward.
Mr Rudaks has deposed as to his efforts to correspond with Mr Migali regarding his obligations under the Act, particularly in respect of Mr Migali’s obligation to file a statement of his affairs. This obligation arises as a consequence of the provision of section 54 of the Act.
It is the effect of Mr Rudaks’ evidence that his correspondence, with Mr Migali has proved to be fruitless. As a consequence, Mr Rudaks has referred the matter to the Australian Financial Security Authority (AFSA) for its investigation. As a consequence, Mr Migali has been prosecuted for failing to comply with his obligations under the Act, but notwithstanding all those effort a statement of affairs has not been filed by him.
I am satisfied that Mr Rudaks has done all that is reasonably necessary, up to this stage, in his administration of the estate, to finalise Mr Migali’s estate and pay his creditors but has been hampered in his efforts by the absence of a statement of affairs and a general lack of cooperation from Mr Migali, who has been psychologically distressed by his bankruptcy. [3]
[3] See Annexure Mar 16 to affidavit of Maris Rudaks filed 29 August 2022.
In all these circumstances, I have no doubt that Mr Rudaks has done everything reasonably open to him to persuade Mr Migali to file the necessary statement of affairs but has met with resistance from him.
At the present time, Mr Rudaks holds a sum of $111,968.17, which relates to the proceeds of sale of a piece of real property owned previously by the bankrupt, which vested in the trustee pursuant to the provisions of section 58 of the Act.[4]
[4] See outline of submissions of applicant filed 29 August 2022 at [3.6].
Mr Rudaks has further deposed that he has contacted the creditors of Mr Migali known to him, particularly the liquidator of the major corporate creditor regarding the current application. He has not received any further communication from any other creditor.[5]
[5] See affidavit of Maris Rudaks filed 29 August 2022 at [11].
There is also an outstanding issue in regards to a Chrysler motor vehicle, previously owned by the applicant, which has also vested in the trustee. The bankrupt is entitled to have a motor vehicle up to a certain value, but the vehicle in question has slightly more value. Unfortunately attempts to reach an accommodation, in respect of the vehicle, involving its sale to a person association with Mr Migali, between the trustee and the bankrupt have proved fruitless.
It is in this context that Mr Rudaks has brought his current application, which is directed towards him being able to finalise the estate and pay the creditors, whom have been identified to him, notwithstanding the lack of cooperation from Mr Migali and his failure to provide a statement of his affairs, which in theoretical terms, may reveal further creditors.
The object of the section is to facilitate the distribution of dividends, amongst creditors of the bankrupt, in circumstances where the trustee has not had the benefit of the statement of affairs prepared by the bankrupt.[6] Mr Rudaks, as a consequence of his actions, has been able to identify two creditors and has realised relevant assets previously owned by the bankrupt.
[6] See Re Stuart; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1 at [14].
In addition, I am satisfied that the relevant application has been properly served on the bankrupt, in accordance with the court’s rules by electronic means and he has failed to appear today and to take any steps in opposition to the application.
The purpose of the section has been characterised as one directed towards giving the court the means of ensuring that the absence of the statement of affairs does not prejudice those with an interest in the bankrupt’s affairs.[7]
[7] Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968 per Giles J.
In Palmer as Trustee of the Estate of Lazar,[8] Judge Mansourides identified the following factors relevant to the exercise of the discretion arising under section 146, namely:
·whether the creditors have been notified of the application and have had the opportunity to be heard, and;
·whether the trustee has taken steps to ascertain whether there are creditors, other than those who have come to the trustee’s attention by filing a proof of debt.
[8] Palmer as Trustee of the Estate of Lazar [2020] FCCA 2157.
I am satisfied the trustee has taken all reasonable steps to identify the creditors of the bankrupt, and the creditors whom he has identified are entitled to be given the dividends to which they are entitled. In this context, Mr Rudaks has taken all steps reasonable to ascertain any additional creditors and the creditors of whom he is aware have been informed of this application.
In all these circumstances, it is appropriate that an order be made authorising the trustee to make the dividend available to him, notwithstanding the failure of Mr Migali to provide a statement of his affairs. It is appropriate that Mr Rudaks’ costs of this application come out of the estate.
For all these reasons, the orders of the court will be as set out at the commencement of these reasons for judgment.
I certify that the preceding nineteen (19) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Brown. Associate:
Dated: 30 August 2022
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