Smith (Bankrupt), in the matter of Smith v Joiner (Trustee) (No 2)
[2024] FedCFamC2G 477
•29 May 2024
FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA
(DIVISION 2)
Smith (Bankrupt), in the matter of Smith v Joiner (Trustee) (No 2) [2024] FedCFamC2G 477
File number: MLG 1686 of 2023 Judgment of: JUDGE SYMONS Date of judgment: 29 May 2024 Catchwords: BANKRUPTCY – application by trustee for orders and directions under s 90-15(1) of the Insolvency Practice Schedule (Bankruptcy) – whether funds received by bankrupt following date of bankruptcy are after-acquired property or income – where interested persons claim interest in funds based on an alleged breach of contract – where annulment of bankruptcy is foreshadowed – where ordinarily any surplus funds would be returned to the bankrupt – where instead the interested persons seek an order under s 154(3) of the Bankruptcy Act 1966 (Cth) that any surplus funds be paid directly to them – whether just and equitable to make order – whether trustee should be relieved of obligation to take further steps, including tracing, in the administration of the estate – directions given and orders made Legislation: Bankruptcy Act 1966 (Cth), ss 19, 58, 109, 116, 133, 134, 139L, 153, 153A, 153B, 154, 181A; sch 2 (Insolvency Practice Schedule (Bankruptcy)), ss 5-15, 5-30, 90-15, 90-20, 90-30.
Bankruptcy Regulations 2021 (Cth), reg 25.
Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth), r 7.06.
Federal Circuit and Family Court of Australia (Division 2) (General Federal Law) Rules 2021 (Cth), rr 6.04, 6.14, 13.06.
Cases cited: Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273.
Mansfield v Thousand Angeles Island Pty Ltd (in liq), in the matter of Thousand Angeles Island Pty Ltd (in liq) (No 2) [2021] FCA 283.
Lucan (Trustee) v State of New South Wales, in the matter of the Bankrupt Estate of Williams [2022] FCA 751
Newcombe v Inspector-General in Bankruptcy (2004) 85 ALD 402; [2004] AATA 1320.
Pirina, in the matter of Fund Options (Australia) Pty Ltd (in liquidation) [2020] FCA 1256.
Re Hawkins; Ex parte Worrell (1996) 71 FCR 371.
Smith v Joiner [2024] FedCFamC2G 219.
Division: Division 2 General Federal Law Number of paragraphs: 98 Date of last submissions: 17 April 2024 Date of hearing: 17 April 2024 Place: Melbourne The applicant: Did not appear Counsel for the Respondent: Mr Taylor Solicitor for the Respondent: Hall & Wilcox Solicitor for the First and Second Interested Persons: Mr McCormick of HWL Ebsworth The Third Interested Person: Did not appear ORDERS
MLG 1686 of 2023 FEDERAL CIRCUIT AND FAMILY COURT OF AUSTRALIA (DIVISION 2)
IN THE MATTER OF WADE DARCY SMITH, BANKRUPT
BETWEEN: WADE SMITH
Applicant
AND: MATTHEW LESLIE JOINER
Respondent
CATCH.COM.AU ACN 149 779 939
First Interested Person
BUNNINGS GROUP LIMITED ACN 008 672 179
Second Interested Person
JOSHUA SANDS
Third Interested Person
ORDER MADE BY:
JUDGE SYMONS
DATE OF ORDER:
29 MAY 2024
THE COURT ORDERS THAT:
1.The Respondent is justified in treating the following items and their proceeds (Property) as after acquired property of the Applicant vesting in the Respondent pursuant to s 58(1)(b) of the Bankruptcy Act 1966 (Cth) (Act):
(a)the sum of $893,603.97 collected by the Respondent from the Applicant’s Macquarie Bank account ending 9963, the sum of $5,022.75 collected by the Respondent from the applicant’s Heritage account ending 5568, and all accretions thereto;
(b)the balance of the "Sale Proceeds" as defined by the orders of Judge Symons on 6 March 2024; and
(c)three personalised motor vehicle registration plates titled WAD3, JOSHN, W4DE.
2.The Respondent may sell the property listed in subparagraph 1(c).
3.The Respondent is justified in applying the Property to the "bankrupt’s debts", as defined in section 153A of the Act and as identified in Annexure A to these orders.
4.The Respondent is justified in taking no further steps to investigate or recover possible interests of the bankrupt estate arising in:
(a)a Mercury 90 horsepower 4 stroke EFI Outboard Motor purchased by Nathan Collins from Sugar City Marine between about 17 January 2023 and 3 February 2023 using funds supplied by the Applicant; and
(b)subject to paragraphs 5 and 6, any possible traceable proceeds of funds transferred from the Applicant’s bank accounts to bank accounts held with Bank of Queensland in the name of Joshua Sands and bearing account numbers 124 899 610 906 029 and 124 899 680 117 882.
5.Within 7 days of the date of these orders, the Respondent provide to Bunnings and Catch any documents regarding his investigations of matters the subject of paragraph 4(b) above, to the extent that information is disclosable pursuant to the Privacy Act (1988) Cth, and is not:
(a)the subject of a valid claim for legal professional privilege; or
(b)already included in the Respondent's affidavit material filed in the proceedings.
6.The Respondent is justified in taking steps necessary to enter into a written instrument (Deed) assigning to Bunnings and Catch any chose in action in relation to the matters the subject of paragraph 4(b), as more particularly identified in the affidavit of Matthew Leslie Joiner dated 14 March 2024.
7.Save for the matters identified in these orders, the Respondent is justified in not taking any further steps in relation to the bankrupt estate other than any required statutory reporting.
8.Pursuant to s 154(3) of the Act, upon the annulment of the bankruptcy of the Applicant pursuant to s 153A of the Act, the surplus proceeds of the Property not applied to paying the “bankrupt’s debts” shall be delivered to the solicitors for Catch.com.au Pty Ltd and Bunnings Group Pty Ltd to be divided between them as they see fit.
9.The Respondent’s costs of the proceeding are costs in the Applicant’s bankruptcy.
THE COURT NOTES THAT:
A.In respect of paragraph 6, the Respondent does not warrant that:
(a)he has a chose in action against Mr Sands; and/or
(b)to the extent any such chose in action exists, that it has any value.
B.In respect of paragraph 8, the Respondent undertakes to pay the “bankrupt’s debts” as defined in section 153A of the Bankruptcy Act, and as identified in Annexure A to these orders, within 150 days of the date of this order.
Annexure A
Bankrupt’s Debts
Amount ($)
AFSA realisation fees and interest charges
97,048.79
Legal fees and costs
162,918.97
Counsel's fees and costs
50,476.50
Auctioneer's commission
5,192.00
Auctioneer's disbursements
8,023.37
Joshua Sands (For contribution to Motor Vehicle purchase)
3,000.00
Trustee's Disbursements
22,424.00
Trustee's Remuneration
280,848.16
Admitted Creditor Claims
49,370.00
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).
REASONS FOR JUDGMENT
JUDGE SYMONS:
INTRODUCTION
This proceeding commenced as an application brought by Mr Smith to annul his bankruptcy under s 153B(1) of the Bankruptcy Act 1966 (Cth) (Act). However, in circumstances where Mr Smith, through his conduct, essentially abandoned this application, what remains for determination is the respondent trustee’s application seeking directions under s 90-15(1) of the Insolvency Practice Schedule (Bankruptcy) (IPS (Bankruptcy)) in relation to the administration of Mr Smith’s bankrupt estate (estate).
BACKGROUND
Mr Smith (formerly known as Mr Collins) was declared bankrupt on 5 February 2021 when the Official Receiver accepted his Debtor’s Petition. While the Official Receiver was initially responsible for the administration of the estate, the position changed on 20 February 2023, when the respondent, Mr Joiner, was nominated and then appointed trustee under s 181A of the Act. The catalyst for this appointment was the discovery by the Official Trustee of a sum of $893,603.97 in a bank account belonging to Mr Smith. Mr Joiner now holds that sum (together with interest) awaiting the outcome of this decision.
On 2 October 2023 Mr Smith filed his annulment application.
On 9 November 2023, the Court held a directions hearing at which both Mr Smith and Mr Joiner (through his legal representative) appeared. The Court made orders including that Mr Joiner serve the annulment application on all known creditors and that otherwise, the annulment application be listed for hearing on 8 February 2024. As far as Mr Smith was concerned, the orders provided that he file an outline of submissions and any expert reports by no later than 15 December 2023. This date was later extended to 19 December 2023. Mr Smith did not file any material responsive to these orders and indeed, the last document appearing on the Court file filed by him is an affidavit deposing to service of his annulment application on Mr Joiner on 8 November 2023.
On 17 November 2023 Mr Joshua Sands filed a Notice of Appearance. In an affidavit filed on 20 November 2023, Mr Sands deposed to having a financial interest in property (namely a motor vehicle and personalised plates) that were in the possession of Mr Joiner. Mr Sands was joined as an Interested Person to the proceeding.
On 24 November 2023, Catch.com.au (Catch) and Bunnings Group Limited (Bunnings) each filed a Notice of Appearance. In their joint affidavit filed on 5 December 2023, Catch and Bunnings deposed (through their legal representative) that they each had potential money claims against Mr Smith that would be frustrated if any surplus funds were returned to Mr Smith upon the annulment of his bankruptcy. Catch and Bunnings were joined as Interested Persons to the proceeding.
On 19 December 2023, Mr Joiner filed his interlocutory application seeking directions under s 90-15 of the IPS (Bankruptcy) (directions application). The application was supported by an affidavit of lawyer, Georgia Gamble, dated 18 December 2023 (First Gamble affidavit).
On 21 December 2023, the Court made orders listing the directions application for hearing together with the annulment application on a new date of 17 April 2024. Orders were made for the parties (and interested persons) to file and serve any evidence and submissions concerning the directions application. As far as Mr Smith was concerned, the orders provided that he file any evidence by 5 February 2024 and any submissions by 15 March 2024. This last date was later extended to 22 March 2024 (together, the December orders). Mr Smith did not file any material.
On 23 February 2024, Mr Joiner filed an application in a proceeding seeking directions, on an urgent basis, that he be justified in immediately selling three motor vehicles that were in his possession, but which had become uninsurable (interim sale application). On 6 March 2024, having first given the parties an opportunity to file submissions, the Court made orders authorising the sale of the motor vehicles and published reasons for judgment (Smith v Joiner [2024] FedCFamC2G 219). The proceeds of the sale of the motor vehicles (less Mr Joiner’s reasonable fees, costs and expenses incurred in procuring their sale) (Sale Proceeds) have been held by Mr Joiner pending the outcome of this decision.
THE HEARING ON 17 APRIL 2024
Failure of Mr Smith to appear
The annulment application and the directions application remained listed for hearing on 17 April 2024. On this date Mr Taylor of counsel appeared on behalf of Mr Joiner. Both Catch and Bunnings participated through their lawyer, Mr McCormick. There was no appearance from or on behalf of Mr Smith or, for that matter, from Mr Sands.
Before the hearing got underway, I had my associate make efforts to contact Mr Smith by calling the phone number listed on his originating application. Two attempts were made to call the number and neither went through.
Evidence of steps taken by Mr Joiner to communicate with and serve documents on Mr Smith
The failure of Mr Smith to appear at hearing was not altogether surprising. This is because, in addition to the failure of Mr Smith to file any material after 8 November 2023, there was evidence before the Court, taken from an affidavit of Georgia Gamble filed on 15 April 2024 (Second Gamble affidavit) of the following.
First, that Mr Smith had not sent or replied to, any correspondence which related to the proceeding since an email he sent on 7 December 2023, in response to an email from Ms Gamble attaching an affidavit of Mr Joiner filed 5 December 2023 (First Joiner affidavit). Mr Smith took issue with the contents of that affidavit and provided his comments. The email was sent from the address “[email protected]”. At this time Mr Smith appeared to also be using the email address “[email protected]”.
Second, upon filing the directions application on 15 December 2023, Ms Gamble provided an unsealed copy of the application and an unsigned copy of the First Gamble affidavit, to the email address “[email protected]”. When Ms Gamble attempted to follow up with sealed copies three days later (on 18 December 2023), Ms Gamble received an automatic reply which stated that her second email could not be delivered to “[email protected]” on the basis that “user no longer on system”. The next day, Ms Gamble also received the same undeliverable reply from Mr Smith’s email address when attempting to send a communication to all parties regarding a form of draft consent orders. The evidence of Ms Gamble suggests that up until 18 December 2023, Mr Smith’s email account was capable of receiving the emails sent between the parties.
Third, Ms Gamble made attempts on 19 December 2023 to send an email to nine[1] further email addresses which she understood to belong to Mr Smith (based on the trustee’s records). That email requested Mr Smith urgently advise the Court and the parties of his updated email address for service of documents and also attached sealed copies of the directions application and the First Gamble affidavit. An undeliverable reply was received for five of the addresses, but otherwise Ms Gamble did not receive any response to this email.
Fourth, on 14 February 2024, Ms Gamble emailed Mr Sands a copy of the documents referred to in paragraph [15] and requested he confirm whether Mr Smith had received the documents. Ms Gamble took this step because in an email sent by Mr Smith on 27 February 2023 to the trustee, Mr Smith identified Mr Sands as his “Housemate”. The email was sent to “[email protected]” being the email address identified in Mr Sands’ Notice of Appearance. Mr Sands did not respond to the email.
Fifth, on 26 February 2024, Ms Gamble emailed the parties (including Mr Smith at “[email protected]”) sealed copies of the interim sale application and the affidavit in support. That email did not return an undeliverable reply, indicating the email was capable of being received. The following further emails did not return an undeliverable reply:
·On 1 March 2024, Ms Gamble emailed a sealed copy of the trustee’s written submissions directed at the interim sale application (interim submissions);
·On 8 March 2024, Ms Gamble emailed a sealed copy of the trustee’s submissions directed at the 17 April 2024 listing (hearing submissions).
However, on 13 March 2024, Ms Gamble attempted to provide by email to Mr Smith the relevant documents[2] for the upcoming hearing on 17 April 2024. An undeliverable reply was received in respect of the address “[email protected]”.
[2] Namely, the directions application and the First Gamble affidavit, the Fourth Joiner affidavit filed 14 March 2024, the December orders and the hearing submissions.
On 4 April 2024, Ms Gamble emailed the parties about a matter in this proceeding unrelated to the present application. She received an undeliverable reply from the email address “[email protected]” and “[email protected]”.
Attempts at personal service
Ms Gamble deposed to having made various attempts to effect personal service including by:
(a)On 19 February 2024, engaging a company (Pickles) to personally serve Mr Smith, on the advice of the trustee that this process server had successfully served documents on Mr Smith previously.
(b)On 6 March 2024, an agent of Pickles attended the Wyndham Vale address identified by Mr Smith as his address for service and spoke to an individual. The individual did not confirm his identity, however a courier who delivered a package to the address in the agent’s presence, confirmed to the agent that the person who accepted the package identified themselves as Mr Smith. Ms Gamble provided photos to the agent to assist in identifying Mr Smith.
(c)On 12 March 2024, an agent of Pickles attended the Wyndham Vale address and was unsuccessful in an attempt to serve Mr Smith.
(d)On 20 March 2024, an agent of Pickles attended the Wyndham Vale address and was unsuccessful in an attempt to serve Mr Smith.
(e)On 26 March 2024, Ms Gamble was advised that the agent, having reviewed the photos provided of Mr Smith, confirmed the individual who was the subject of the service attempt on 6 March 2024 was Mr Smith.
(f)On 15 April 2024, Pickles confirmed:
·An agent had left copies of the directions application, the first Gamble affidavit and the first Joiner affidavit at the Wyndham Vale address on 2 April 2024;
·An agent had left copies of the interim application, affidavit of Mr Joiner filed on 25 February 2024 (Third Joiner affidavit), affidavit of Mr Joiner filed on 14 March 2024 (Fourth Joiner affidavit) and both the interim submissions and the hearing submissions at the Wyndham Vale address on 10 April 2024.
Other means of service
On 6 February 2024, Ms Gamble posted a letter to Mr Smith at the Wyndham Vale address, enclosing copies of the directions application and First Gamble affidavit, the December orders, and the First Joiner affidavit. From 13 February 2024, that letter remained “Awaiting Collection” at a Werribee Post office. On 20 February 2024, the letter was returned and marked “Return to Sender Not @ this Address”.
On 5 March 2024, Ms Gamble used the form function on the website “wadesmith.com.au” (which the trustee believed to be connected to Mr Smith) to send the following message:
MLG1686/2023: IN THE MATTER OF WADE DARCY SMITH (Proceeding) I refer to the Proceeding. I am a solicitor at Hall & Wilcox, solicitors for Matthew Joiner - the trustee of your bankrupt estate and the Respondent in the Proceeding. We have attempted to serve on you various documents which have been filed in the Proceeding. There is a hearing scheduled in the Proceeding for 17 April 2024. At the hearing, the Court will determine matters which affect your rights and interests. We request you urgently advise the Court and the parties of your updated email address and postal address for service of documents in the Proceeding.
Regards.
The same message was also sent by text message to the contact number identified on the website.
Steps taken by Catch and Bunnings to serve material on Mr Smith
Catch and Bunnings filed an affidavit of lawyer Mr McCormick on 16 April 2024 in which its author deposed to steps taken on behalf of his clients to serve the following documents on Mr Smith and on Mr Sands:
·an affidavit of Lachlan McMormick filed 5 December 2023 (First McCormick affidavit);
·an affidavit of Claire MacMillan filed 23 February 2024 (MacMillan affidavit); and
·written submissions filed 5 April 2024.
Mr McCormick produced evidence that the first McCormick affidavit had been served on Mr Smith by sending it to the email address [email protected] on 5 December 2024. On that occasion, Mr McCormick did not receive an automatic undeliverable notification. However, when Mr McCormick sent the Macmillan affidavit and the written submissions to Mr Smith at the same email address as well as the address [email protected] on 23 February 2024 and 5 April 2024, respectively, he received an undeliverable notification. Mr McCormick recorded his agreement with the observation of Ms Gamble that up until 18 December 2023, Mr Smith had engaged with the Court and the parties in respect of the proceeding.
What consequences should attend the failure of Mr Smith to appear at hearing?
Mr Joiner relied on the evidence contained in the Second Gamble affidavit to seek an order pursuant to rules 6.04 and 6.14 of the Federal Circuit and Family Court of Australia (Division 2) General Federal Law Rules 2021 (Cth) (Rules) for substituted and/or deemed service on Mr Smith of each of the documents filed by him in the proceeding since 19 December 2023 when the directions application was filed. Mr Joiner submitted that in light of the matters set out in the Second Gamble affidavit, the Court should conclude that Mr Smith was attempting to evade service, that Mr Joiner had taken all reasonable steps to serve the documents on Mr Smith and the existence of the documents had more than likely come to Mr Smith’s attention. I accepted this submission and made orders on 16 April 2024 that there had been deemed service on Mr Smith of the suite of documents identified in the Second Gamble affidavit and by the steps identified in that affidavit.
Mr Joiner submitted that the same matters relied upon to obtain the service order, coupled with the fact that Mr Smith had not appeared at the hearing on 17 April 2024, provided a basis for the Court to be satisfied that Mr Smith had knowledge that his annulment application and the directions application would be heard on this date, that Mr Smith had been provided with the material upon which Mr Joiner relied both to resist the annulment application and to prosecute his directions application, and that he had essentially abandoned the former application and chosen not to participate in or defend the latter application.
Mr Joiner invited the Court to proceed first with the directions application – a course available to the Court under r 13.06(1)(e) of the Rules on the default of appearance by Mr Smith – and to then dismiss Mr Smith’s annulment application, also in default of his appearance and by engaging r 13.06(1)(c) of the Rules. Catch and Bunnings joined in this proposal.
I decided, having regard to the matters documented above concerning efforts to communicate with and serve documents on Mr Smith and the protracted failure of Mr Smith to engage with the proceeding (either his annulment application or the directions application) or to communicate with the Court, that it was appropriate to proceed in the manner indicated. At the conclusion of the hearing, I made an order that save for the directions hearing being determined, Mr Smith’s originating application filed on 2 October 2023 (being the annulment application) be otherwise dismissed.
THE DIRECTIONS APPLICATION
Mr Joiner relied on the following material in support of the directions application:
(a)Hearing submissions;
(b)Interim application filed on 19 December 2023;
(c)First Joiner affidavit;
(d)First Gamble affidavit;
(e)Second Joiner affidavit;
(f)Fourth Joiner affidavit;
(g)Supplementary submissions filed on 16 April 2024.
The directions application is concerned with the following items and their proceeds (together, the Property):
(a)The sum of $893,603.97 collected by Mr Joiner from Mr Smith’s Macquarie Bank account ending 9963 (the Fund);
(b)The sum of $5,022.75 collected from Mr Smith’s Heritage account ending 5568;
(c)The balance of the Sale Proceeds (see [9] above); and
(d)Three personalised motor vehicle registration plates: WAD3, JOSHN, W4DE.
Direction as to legal character of the Property
In his capacity as trustee, Mr Joiner seeks an order under s 90-15(1) of the IPS (Bankruptcy) (being Sch 2 of the Act) that the Property is “after-acquired property” of Mr Smith vesting in Mr Joiner pursuant to s 58(1)(b) of the Act.
Under s 90-15 of the IPS (Bankruptcy): The Court has the power to “make such orders as it thinks fit in relation to the administration of a regulated debtor’s estate”: s 90-15(1). The Court may exercise this power on its own initiative or on an application under s 90-20, including by a person with a “financial interest” in the administration of the regulated debtor’s estate: ss 90-15(2), 90-20(1)(a). The trustee of a bankrupt estate is a person with a “financial interest” of this nature: ss 5-15(a), 5-30(a)(iii). The types of order the Court may make include “an order determining any question arising in the administration of the estate”: s 90-15(3)(a).
The power conferred under s 90-15 of the IPS (Bankruptcy) is discretionary. In the decision of Mansfield v Thousand Angeles Island Pty Ltd (in liq), in the matter of Thousand Angeles Island Pty Ltd (in liq) (No 2) [2021] FCA 283 Farrell J applied a set of principles (identified in his Honour’s earlier decision of Pirina, in the matter of Fund Options (Australia) Pty Ltd (in liquidation) [2020] FCA 1256 at [41]-[42]) as a useful guide on applications of the kind now pressed by Mr Joiner. Although they were first identified in the context of an external administration (and therefore employ the language of this jurisdiction) they were said to apply having regard to the equivalence of the bankruptcy jurisdiction. To the extent they bear on this current application I have reproduced these passages below.
41.….The Court will generally make orders where it is just to do so and there is sufficient utility to the external administration: see GDK Projects Pty Ltd, in the matter of Umberto Pty Ltd (In liq) v Umberto Pty Ltd (in liq) [2018] FCA 541 at [33] (Farrell J) ; Walley, in the matter of Poles & Underground Pty Ltd (Administrators Appointed) [2017] FCA 486 at [32]-[41] (Gleeson J).
42.The following principles enunciated by Brereton J in Re One.Tel Limited [2014] NSWSC 457 at [32]-[35] and [55] have been widely applied in guiding the determination of applications for directions in the nature of judicial advice:
32……The jurisdiction is analogous to the judicial advice jurisdiction under (NSW) Trustee Act, s63. The effect of a direction under s 511 [of the Corporations Act] is to sanction a course of conduct on the part of the liquidator so that he or she may adopt that course free from the risk of personal liability for breach of duty [Purchas, [36]; Re Timbercorp Limited (in liq) [2011] VSC 189, [3]; Re S&D, [88]].
33 While the ability of a liquidator to approach the Court for directions is intended to facilitate the liquidator’s functions and should be interpreted widely to give effect to that intention [Re One-Tel Networks Holdings Pty Ltd [2001] NSWSC 1065; (2001) 40 ACSR 83], it is insufficient to justify giving such directions that the liquidator wants reassurance about a commercial decision; some such issue as a question of law or procedure, of power, propriety or reasonableness, is required to justify approaching the court for directions, as was explained by Goldberg J (in the context of a voluntary administrator’s application for directions under s 447D) in Re Ansett Australia Limited and Korda [2002] FCA 90; (2002) 115 FCR 409; 40 ACSR 433, [65]:
34 In Sanderson v Classic Car Insurances Pty Limited (1985) 10 ACLR 115, Young J said (at 117) that the cases in which directions might properly be given fell into four categories, namely guidance on matters of law, guidance on questions of legal procedure…However, these categories are not exhaustive…
…
55As with judicial advice to trustees, the court is usually conservative in the advice it gives to liquidators under s 479(3) and s 511 [of the Corporations Act], and such advice is conventionally expressed in terms that “the liquidator would be justified” in adopting a particular course of action. The jurisdiction to give such directions is concerned with affording protection to the liquidator in connection with proposed future action, not with ratifying action that the liquidator has already taken. This view of the jurisdiction is supported by the following observations of McLelland J, as he then was, in Re GB Nathan & Co Pty Ltd 5 ACSR 673, at (678):
…the only proper subject of a liquidator’s application for directions is the manner in which the liquidator should act in carrying out his functions as such, and that the only binding effect of, or arising from, a direction given in pursuance of such an application (other than rendering the liquidator liable to appropriate sanctions if a direction in mandatory or propitiatory from is disobeyed) is that the liquidator, if he has made full and fair disclosure to the court of the material facts, will be protected from liability for any alleged breach of duty as liquidator to a creditor or contributory or to the company in respect of anything done by him in accordance with the directions.
In their joint written submissions filed on 5 April 2024, Catch and Bunnings indicated that they would neither consent to nor oppose a direction of the kind sought by Mr Joiner being made, despite there being some suggestion in earlier correspondence exchanged between Mr Joiner and both of these entities, that they had an equitable interest in (parts of) the Property, namely the Fund referred to at [30(a)] above.
However, by the end of the hearing on 17 April 2024, Mr Joiner and Catch and Bunnings approached the Court with a consent position by which it was agreed that such a direction should be made. Despite there being agreement on the issue, the Court is nonetheless required to determine for itself whether it is appropriate to make such a direction, particularly in circumstances where there is no contradictor. This requires resolution of the question of whether the Property is after acquired property or income.
In order to understand the way in which the issue arises it is necessary to set out some of the factual background which was summarised in the comprehensive hearing submissions and derived principally from information contained in the Trustee’s report (filed pursuant to r 7.06 of the Federal Circuit and Family Court of Australia (Division 2) (Bankruptcy) Rules 2021 (Cth)[3], the First Gamble affidavit and the Second Joiner affidavit which annexed spreadsheets produced by Bunnings and Catch and which, according to Mr Joiner set out (in respect of Bunnings):[4]
(a)the customer orders placed with Mr Smith (via the business name Mr Smith operated under, “Electro Saver”) through Bunnings Marketplace;
(b)the customer orders fulfilled by Mr Smith;
(c)the customer orders placed with Mr Smith which were not fulfilled by him and the amount paid by customers which were refunded by Bunnings; and
(d)the customer orders placed with Mr Smith which were refunded by Bunnings.
[3] First Joiner affidavit, Annexure A; CB 225-554.
[4] Second Joiner affidavit at [10]; CB 940.
The Catch spreadsheet, according to Mr Joiner, set out:[5]
(a)the customer orders placed with Mr Smith (via the business name he operated under, “Saver King”) through Catch;
(b)the customer orders fulfilled by Mr Smith; and
(c)the customer orders placed with Mr Smith which were not fulfilled by him and the amounts paid by customers which were refunded by Catch.
[5] Second Joiner affidavit at [13]: CB 941.
While they were not presented as an agreed statement of facts, I did not understand Bunnings or Catch to take issue with anything recorded in the following two paragraphs taken from the hearing submissions which I substantially reproduce.[6]
[6] Hearing submissions at [29] –[30]; CB 8.
Both Bunnings and Catch operate online retail marketplaces. In each case, Mr Smith applied to Bunnings/Catch to be a seller and was approved. He then listed goods, with sales completed through the online marketplace and sales proceeds initially paid to and held by the marketplace. The goods sold were, or were intended to be, shipped directly by the seller to the retail purchaser. The marketplace subsequently paid the sale proceeds, less a commission, to the seller.
Mr Smith made numerous sales, paid by relevant customers to the marketplace at the time of sale, the vast majority of which went unfulfilled. Despite that, substantial amounts of money were paid by each marketplace to Mr Smith, particularly by Bunnings, for unfulfilled orders. Equally, substantial money was retained by each marketplace without payment to the seller, and refunded to the customers. Bunnings/Catch claim for monies refunded to customers for which Bunnings/Catch had already paid Mr Smith.
Payments were made by the marketplaces to Mr Smith in the total sums of Bunnings $1,039,234.66 and Catch $131,842.54.
Bunnings quantifies its loss and damage as follows:[7]
(a)the amount paid to Mr Smith (being $1,039,234.66);
(b)minus the amount of the orders actually fulfilled by Mr Smith (being $18,029);
(c)minus the amount of the orders refunded by Mr Smith (being $132,864);
(d)leaving an amount of $888,341.66
[7] MacMillan affidavit at [17]; CB 1120.
Catch quantifies its loss and damage as follows:[8]
(a)the amount paid to Mr Smith (being $131,842.54);
(b)minus the amount of the orders actually fulfilled by Mr Smith (being $38,570.17);
(c)leaving an amount of $93,272.37;
(d)plus a component for commission, tax, invoices, and order amounts (of $6,827.83), totalling $100,100.20.
[8] MacMillan affidavit at [18]; CB 1121.
I note that while Mr Joiner has made an assessment of Catch’s claim as being the slightly lower amount of $97,627.18[9], this difference is not material to the resolution of the directions application.
[9] Hearing submissions at [34]; CB 9.
How should the Property be characterised?
The competing characteristics before the Court are that the Property is “after-acquired” property, or it is “income”. Different consequences attend these characterisations.
Section 58 of the Act deals with the vesting of property upon bankruptcy.
It provides, relevantly:
(1) Subject to this Act, where a debtor becomes a bankrupt:
(a) the property of the bankrupt, not being after-acquired property, vests forthwith in the Official Trustee, or if at the time when the debtor becomes a bankrupt, a registered trustee becomes the trustee of the estate of the bankrupt, in that registered trustee; and
(b) after-acquired property of the bankrupt vests, as soon as it is acquired by, or devolves on, the bankrupt, in the Official Trustee or, if a registered trustee is the trustee of the estate of the bankrupt, in that registered trustee.
…
(6) In this section, after-acquired property, in relation to a bankrupt, means property that is acquired by, or devolves on, the bankrupt on or after the date of the bankruptcy, being property that is divisible amongst the creditors of the bankrupt.
By contrast, if the Property is “income” earned post-bankruptcy then generally speaking and subject to the bankrupt having an income contribution liability, such income does not vest in the trustee.
Mr Joiner submits that the Property – comprising the Fund and assets purchased with the Fund – do not in this instance constitute income. To understand this submission, it is necessary to consider the manner in which “income” has been defined in case law given that pursuant to s 139L(1) of the Act “income”, in relation to a bankrupt, has its ordinary meaning, subject to a number of qualifications that do not have obvious application in this case.
In Newcombe v Inspector-General in Bankruptcy (2004) 85 ALD 402 at [43]-[44] Dep Pres D G Jarvis of the Administrative Appeals Tribunal said:
[43] The meaning given to “income” by s 139L of the Act does not make express provision for deductions in respect of the expenses of deriving income except in s 139L(a)(vii). This provision deals with circumstances where a third party derives income as a result of the personal services of a bankrupt, as would be the position if the bankrupt were employed by a company or trust, which then contracts with a third party to provide the services of the bankrupt to perform the contract. Section 139L(a)(vii) provides that the following item is included in the concept of income:
(vii) the amount of any money, or the value of any other consideration, received by a person other than the bankrupt from another person as a result of work done or services performed by the bankrupt, less any expenses (other than expenses of a capital nature) necessarily incurred by the first-mentioned person in connection with the work or services…
[44] The above provision recognises that the amount received is to be reduced by expenses necessarily included in connection with the work or services, but excludes a deduction for expenses of a capital nature. I consider that the above exclusion from the concept of income referred to in the particular situation dealt with in this paragraph of s 139L(a) provides an indication that the concept of income is intended to involve making a deduction for expenses necessarily included in connection with the bankrupt’s work or services, but not a deduction for expenses of a capital nature…
To further aid in the assessment of the character of the Property I accept that “income” is a very wide word, in respect of which it is necessary to assess the character in which money is paid or received: Re Hawkins; Ex parte Worrell (1996) 71 FCR 371 at 376-377 (Spender J). I also accept and proceed on the basis that the ordinary concept of income includes salaries, wage or a profit or gain made in the ordinary course of carrying on a business, undertaking or profession: Westlaw AU, Australian Bankruptcy Law and Practice (Online), ‘Meaning of income’ [139L.0.25].
Against this background, Mr Joiner submits that when assessing the character in which the money from Bunnings and Catch was received by Mr Smith, it should not be understood as a gain made in the ordinary course of carrying on a business or undertaking including because that would (on the authority of Newcombe) usually comprise a net amount of gross revenue less expenses, if such expenses were essential to earning income.
Mr Joiner says that to the contrary, the Fund is an accumulation of amounts received in breach of Mr Smith’s contracts with Bunnings and Catch. While it was provided to Mr Smith in return for the sale of goods, no goods were provided. Mr Joiner submits that there is no conceptual basis for ascribing the character of “income” to the Funds and neither is there a reason grounded in policy for conferring a benefit on Mr Smith where the capacity of the Act to recognise income as standing outside the purview of the trustee is designed to allow the bankrupt to continue to earn a living and to thereby continue to be a contributing member of society. Mr Joiner submits that these policy objectives have not been realised in the case of Mr Smith.
Bunnings and Catch, as I have indicated earlier, acquiesce in the order (or direction) sought by Mr Joiner and at hearing did not independently advance submissions directed at the character of the Fund.
I am satisfied, having regard to the evidence that is before the Court and the submissions advanced by Mr Joiner of the following:
First, that the direction sought is one in the nature of guidance on a matter of law and does not encroach on the commercial decision-making of Mr Joiner (as trustee). It is a direction that the Court is empowered to make under s 90-15 of the IPS (Bankruptcy).
Second, I consider that on the facts of this case, there is sufficient utility to the external administration to make a direction of the kind sought by Mr Joiner. Self-evidently, the character of the Fund (as either after-acquired property or income) has consequences for the future administration of the estate and the steps to be taken by Mr Joiner.
Third, the Fund is properly characterised as “after-acquired property” rather than “income”. The circumstances in which Mr Smith obtained the money from Bunnings and Catch bears no relationship, in fact, with the carrying on of a business or a process by which revenue is offset by expense. While ostensibly at least, Bunnings and Catch made payments in recognition of a contractual relationship in which Mr Smith offered a market-place service, the particular payments made were not referable to any service offered or product delivered by Mr Smith and certainly no cognisable undertaking by him.
I will make a direction in substantially the form proposed by Mr Joiner and Bunnings and Catch save that it will be framed using the language conventionally adopted, namely, that the trustee “is justified” in treating the Property as after-acquired property, including for the purpose of s 58(1)(b) of the Act.
A direction of this kind recognises that the assets derived from the Fund – namely the motor vehicles (now liquidated) and the motor vehicle registration plates – also vest in Mr Joiner.
What consequences follow from the direction?
The evidence before the Court is that after application of the Property to pay the bankruptcy creditors (an amount of $49,370) and to pay what are broadly described as “the realisation costs” but which principally comprise the trustee’s remuneration in an amount of $288,871[10] and legal fees, there will be a surplus of an amount of approximately $340,000 and Mr Smith’s bankruptcy will be annulled under s 153A of the Act. Ordinarily, this surplus would be paid to the bankrupt, Mr Smith: s 154(1)(c).
[10] Creditors approved remuneration capped at $339,848.85.
However, Mr Joiner and Bunnings and Catch invite the Court to depart from the usual course and to instead make an order authorising the payment of the surplus directly to Bunnings and Catch. The source of power for such an order is said to be s 154(3) of the Act which provides (in the context of a provision that is headed “Effect of annulment”):
(3) If an application is made to the Court by a person claiming an interest in property referred to in paragraph (1)(c), the Court after hearing such persons as it thinks fit, may make an order either unconditionally or on such conditions as the Court considers just and equitable, for the vesting of property in, or delivery of the property to, a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested or delivered, or to a trustee for that person.
Mr Joiner submits that the limited authority that exists on s 154(3) provides little guidance on matters of principle. He submits that in the absence of direct authority it is appropriate for the Court to have regard to the authorities that have considered the similarly framed s 133(9) of the Act to assist in the interpretation of s 154(3).
Section 133(9) appears as part of the section titled “Disclaimer of onerous property” which in turn appears in Division 4 (Realization of property) of Part VI (Administration of Property) of the Act. It states:
….
(9) The Court may, on application by a person either claiming an interest in, or being under a liability not discharged by this Act in respect of, disclaimed property, and after hearing such persons as it thinks fit, make an order, on such terms as the Court considers just and equitable, for the vesting of the property in, or delivery of the property to, a person entitled to it or a person in whom, or to whom, it seems to the Court to be just and equitable that it should be vested or delivered, or a trustee for that person.
Mr Joiner brought to the attention of the Court the judgment of Goodman J in Lucan (Trustee) v State of New South Wales, in the matter of the Bankrupt Estate of Williams [2022] FCA 751 where at [25] and [28]-[29] his Honour observed (in respect of s 133(9)):
25 The jurisdiction conferred by s 133(9) is dependent upon a person claiming an interest in the disclaimed property, not the vindication of the claim: see Walsh v State of Queensland [2019] FCA 871; (2019) 369 ALR 725 at 733 [32] (Logan J).
…
28 First, the word “interest” is not defined in s 133 or elsewhere within the Bankruptcy Act. Secondly, the structure of s 133(9) is consistent with a broad concept of interest. In this regard, s 133(9):
(1) contemplates two classes of applicants:
(a) a person claiming an interest in the disclaimed property; and
(b) a person under a liability not discharged by the Act in respect of the disclaimed property; and
(2) it provides for the following kinds of orders:
(a) the vesting of the property in a person entitled to it (or their trustee);
(b) the delivery of the property to a person entitled to it (or their trustee);
(c) the vesting of the property in a person to whom it seems to the Court to be just and equitable that it should be vested (or their trustee); and
(d) the delivery of the property to a person to whom it seems to the Court to be just and equitable that it should be delivered (or their trustee).
29Thus, s 133(9) contemplates that an order may be made, not only where an applicant is a person entitled to the property (or their trustee); but also where an applicant is a person in whom or to whom it seems to be just and equitable that the property should be vested or delivered (or their trustee). As the class of persons in whose favour an order may be made is not limited to persons entitled to the property, this suggests that the class of applicants who satisfy the criterion “a person claiming an interest in the disclaimed property” should not be narrowly construed.
Mr Joiner submits that the following approach, exemplified in the decision of Lucan, should be applied, by analogy, to s 154(3) of the Act and the circumstances of this case.
First, the Court must be satisfied that Bunnings and Catch have made an application under s 153(4).
To this end, and to put the matter beyond doubt, Mr McCormick on behalf of Bunnings and Catch, sought leave at the hearing on 17 April 2024 to make an oral application for an order under s 154(3). I granted leave to Bunnings and Catch to do so.
Second, the person making the application must claim an interest in the property (being the “remainder” of the property of the bankrupt); in this case the surplus of approximately $340,000. Mr Joiner submits that the requirement that the applicant have a “claim”, as distinct from a proven entitlement, means that the Court is not required to form a view as to whether an interest in the property does in fact exist or to seek to characterise any such interest.
Mr Joiner submits however that the Court can be reasonably confident, having regard to the work undertaken by him, that Bunnings and Catch have a very strong claim to the surplus of the Fund.
Third, as far as the Court must be satisfied that it is “just and equitable” to make an order to deliver or vest the property, these words are of the “widest significance” and do not limit the jurisdiction of the Court to any case. The words give the Court a wide discretion and are to be applied in their ordinary meaning as calling for the exercise of judgement in the conventional way (referring to Eddy Lau Constructions Pty Ltd v Transdevelopment Enterprise Pty Ltd [2004] NSWSC 273 at [45]-[47]).
Mr Joiner submits that it would be just and equitable to make an order delivering the surplus to Bunnings and Catch because the key parties are before the Court in this proceeding, a draft statement of claim has been produced by Bunnings and Catch[11] and because Mr Smith has indicated his desire to return funds to the retail customers[12] and in circumstances where Bunnings and Catch have in effect stepped into the shoes of those customers because of the refunds paid by them.
[11] MacMillan affidavit, annexure “CEM-1”; CB 1129-1140.
[12] Mr Joiner relies on Mr Smith’s statements appearing at [27] and [48] of his affidavit dated 6 November 2023 in which he refers to a conversation with Mr Joiner on 19 February 2023 in which he (Mr Smith) “explain(s) the situation and that customer funds urgently need to be returned to the customers” and that “I am unable to refund any customers until the funds are returned to me”.
Unsurprisingly, in this proceeding, Bunnings and Catch are primarily interested in the fate of the remainder (or surplus) of Mr Smith’s estate.
As noted earlier, they have put in evidence before the Court a draft statement of claim which pleads a proposed cause of action against Mr Smith in contract, relying, in the case of Bunnings on terms of a “Bunnings Marketplace Seller Agreement” executed by Mr Smith and Bunnings on around 17 November 2022 (also in evidence[13]) and, in the case of Catch, the terms of a “Catch Marketplace Seller Participation Agreement” executed by Mr Smith and Catch on around 11 November 2022 (also in evidence[14]).
[13] First Gamble affidavit, annexure “GMG-1”; CB 649 -661.
[14] First Gamble affidavit, annexure “GMG-1”; CB 910- 925.
While Bunnings and Catch adopt the submissions made by Mr Joiner on the application and interpretation of s 154(3) of the Act, they emphasise the following considerations:
First, there is conflicting evidence as to what Mr Smith intends to do with the surplus but, in any case, those funds should not be made available to Mr Smith due to:
(a)the manner in which he appears to have received those funds, namely, by claiming from, and being paid amounts by, Bunnings and Catch for orders that he had not fulfilled; and
(b)the lack of candour displayed by Mr Smith in his responses provided to Mr Joiner and to the Official Trustee at various times, including around the origins of the Fund.
Second, while Bunnings and Catch both indicate a preparedness to proceed with a claim against Mr Smith (in the event that the surplus is not paid directly to them), they foreshadow that efforts to prosecute such claim will be frustrated, or at least made more difficult and costly, because of the attitude and conduct of Mr Smith, manifest in the later stages of this proceeding, including in relation to service of documents.
I am satisfied that it appropriate to make an order under s 154(3) of the Act that, upon the annulment of the bankruptcy of Mr Smith pursuant to s 153A of the Act, the surplus proceeds of the Property not applied to paying Mr Smith’s debts, be delivered to the solicitors for Catch and Bunnings to be divided between them as they see fit.
In making such an order I am satisfied, for the reasons extensively canvassed at the beginning of this judgment, that Mr Smith has been on notice (actual or imputed) that an application for an order under s 154(3) of the Act might be made and that Bunnings and Catch have asserted claims against Mr Smith that they say would be frustrated if any surplus funds were returned to Mr Smith upon the annulment of his bankruptcy. This was the reason that both entities were joined as interested persons.
I find that the claim of an interest in property asserted by Bunnings and Catch is sufficient to engage s 154(3) given the lack of prescription as to the type of interest that is required by that provision and the evident focus on claim as distinct from entitlement.
An appreciation for this distinction does not however mean that the relative strength or merit of any such claim is irrelevant. While avoiding the temptation to undertake a determination of the underlying claim, it does appear to me that the evidence before the Court (incomplete though it might be) does vindicate the assessment of Mr Joiner, that it is a claim of obvious merit. This is a consideration that in my view informs the question of whether it is just and equitable to make an order under s 154(3) and in this case, alongside the savings in time and cost that would invariably follow if funds were paid directly to Bunnings and Catch, tips the scales in favour of an affirmative exercise of the discretion. My view is reinforced by the fact that having advertised for other interested parties, Bunnings and Catch were the only entities who answered Mr Joiner’s call.
In making this order I wish to record that while I was initially disposed to making an order that would have seen the surplus funds held on trust by Mr Joiner or paid into Court, to be distributed to Bunnings and Catch only on the happening of a specified contingency (referable to the successful prosecution of their respective claims against Mr Smith) I do not consider that such an approach would best accord with the evident purpose and flexibility of s 154(3) and the broad mandate of the Court to craft an order that in the circumstances is just and equitable.
The balance of orders sought by consent
The minute of proposed consent orders provided by Mr Joiner, Bunnings and Catch contained several less contentious orders that I will turn to briefly consider.
The first is an order that Mr Joiner may sell the three personalised motor vehicle registration plates titled WAD3, JOSHN, W4DE. Strictly speaking and as a consequence of the direction as to the character of the Property (which comprehends the motor vehicle registration plates) such an order is not necessary; Mr Joiner has the power to sell these registration plates under s 134(1)(a) of the Act.
I will make the order to put the position beyond doubt.
The second order sought by consent is that Mr Joiner is justified in applying the Property to the “bankrupt’s debts”, as defined in section 153A of the Act, with the “bankrupt’s debts” being those identified and quantified in Annexure A to the orders.
Again, as a standalone proposition, it would follow as a matter of course after resolution of the character of the Property, that Mr Joiner would be justified in applying it to Mr Smith’s debts. This is a course sanctioned by, amongst other provisions, ss 109 and 116(1)(a) of the Act and regulation 25 of the Bankruptcy Regulations 2021 (Cth).
I will make the order, including by reference to Annexure A, to again, put the position beyond doubt and to provide certainty as to the quantum of the “bankrupt’s debts”, a matter which, as far as Mr Joiner’s remuneration was concerned, had earlier been the subject of some disagreement as between the trustee and the interested persons, Bunnings and Catch. This issue has now been resolved and does not require judicial determination.
The third order (or direction) sought by consent is that Mr Joiner is justified in taking no further steps to investigate or recover possible interests of the bankrupt estate arising in a Mercury 90 horsepower 4 stroke EFI Outboard Motor purchased by a Nathan Collins and, subject to one qualification to which I will return shortly, what are described as “any possible traceable proceeds of funds transferred from the applicant’s bank accounts to bank accounts held with Bank of Queensland in the name of Joshua Sands and bearing account numbers 124 899 610 906 029 and 124 899 680 117 882”.
As far as the Outboard Motor is concerned, the position of Mr Joiner is simply that while his preliminary investigations suggests that this was acquired by Mr Smith for a related party (Mr Collins) for the price of $18,040.90 and using funds that may be subject to tracing claims made by Bunnings and Catch,[15] he wishes to be relieved of any further obligation to investigate the provenance of these funds in circumstances where he does not consider that the Outboard Motor has sufficient value to warrant its recovery and/or sale and where the Fund is of sufficient value to repay creditors and recover the trustee’s costs and remuneration.
[15] First Joiner affidavit, annexure A; CB 235-236.
I am satisfied that a direction of this kind is appropriate and would promote the ability of Mr Joiner to discharge his duties as trustee which include the duties enumerated at ss 19(1)(j) and (k) to, respectively, administer the estate as efficiently as possibly by avoiding unnecessary expense and to exercise powers and perform functions in a commercially sound way.
As far as the proposed direction concerning Mr Sands is concerned, it will be recalled that Mr Sands was joined as an interested person to this proceeding following his assertion of an interest in a motor vehicle and personalised plates. I note that Mr Sand’s interest in a motor vehicle is accounted for as part of the “bankruptcy debts” identified in the Annexure A document.
However, beyond this interest, Mr Joiner points to evidence before the Court which suggests that Mr Smith and Mr Sands have lived together for a long period and are closely associated. In the Fourth Joiner affidavit, Mr Joiner deposes to the work done by his staff to investigate funds transfers between Mr Smith and Mr Sands. The tracing exercise conducted on Mr Joiner’s instructions identified that funds totalling $338,215 were transferred from Mr Smith’s bank account to accounts operated by Mr Sands or designated by narration as being directed to Mr Sands, between 3 November 2022 and 5 January 2023.[16]
[16] Fourth Joiner affidavit, Annexure “MLJ-1”; CB 1148 -1149.
Mr Joiner has deposed that further tracing will be costly. It is his evidence that an estimate of costs to undertake a full tracing of the funds held in Mr Smith’s Macquarie account is between $67,135 and $90,270[17] and is firmly of the view (a view embraced by Bunnings and Catch) that further costs in the administration should be minimised. He seeks to be excused from any obligation to make further inquiries into Mr Sands’ financial affairs in the circumstances where the bankruptcy debts will be satisfied without the necessity for further recovery of funds.
[17] Second Joiner affidavit at [32]; 945.
Bunnings and Catch do not oppose the making of such a direction insofar as it limits the further obligation on Mr Joiner to conduct inquiries and/or undertake tracing, but seek an order that Mr Joiner is justified in taking steps necessary to enter into a written instrument assigning to it any chose in action in relation to any possible traceable proceeds of funds transferred from Mr Smith’s bank accounts to bank accounts in the name of Mr Sands and which were identified in the preliminary tracing exercise referred to at [93] above.
Bunnings and Catch quite rightly note that the amount identified through the preliminary investigation is not insignificant and wish to preserve their position in respect of what might ultimately prove to be a further source of indemnity against their claimed loss against Mr Smith.
I consider that an order of the kind actively sought by Bunnings and Catch (and consented to by Mr Joiner) should be made. An assignment of any chose in action concerning Mr Sands was not explicitly signalled in any of the material filed in the proceeding. However, the material filed by Mr Joiner leaves no doubt that the relationship between Mr Smith and Mr Sands is subject to scrutiny and suspicion. There is evidence before the Court that Mr Sands was served with all material that illuminated the position of Mr Joiner (and of Bunnings and Catch) but in any case, an order for assignment does not finally determine the rights as between Mr Sands and Bunnings and Catch but simply relocates the basis for their assertion.
I consider that in all other respects, it is appropriate to order that Mr Joiner (as trustee) is justified in not taking any further steps in relation to the bankrupt estate other than any required statutory reporting.
I certify that the preceding ninety-eight (98) numbered paragraphs are a true copy of the Reasons for Judgment of Judge Symons. Associate:
Dated: 29 May 2024.
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