Swain v The Official Trustee - [2003] FMCA 13

FEDERAL MAGISTRATES COURT OF AUSTRALIA

SWAIN v THE OFFICIAL TRUSTEE

[2003] FMCA 13

BANKRUPTCY – Trustees costs and expenses – order by consent.

Bankruptcy Act 1966, s.153B

Re Williams [1968] 13 FLR 10
Re Frank [1987] 16 FCR 396)
Re Bond [1978] 22 ALR 287

Applicant:

SUSANNE MARY SWAIN

Respondent:

THE OFFICIAL TRUSTEE

File No:

HZ 40 of 2002

Delivered on:

20 January 2003

Delivered at:

Melbourne

Hearing Date:

20 January 2003

Judgment of:

McInnis FM

REPRESENTATION

Counsel for the Applicant:

Mr G. Williams by video link

Solicitors for the Applicant:

Walsh Day Williams

Counsel for the Respondent:

Mr A. Perkins by audio link

Solicitors for the Respondent:

Piggott Wood & Baker

ORDERS

That the bankruptcy of Susanne Mary Swain be annulled.
That the applicant shall pay the respondent's costs, charges and expenses of the administration of the bankruptcy, including the remuneration and expenses of the trustee, in an amount to be agreed between the parties.
I grant liberty to the parties to apply in default of agreement in relation to order 2 hereof.

FEDERAL MAGISTRATES
COURT OF AUSTRALIA AT
HOBART

HZ 40 of 2002

SUSANNE MARY SWAIN

Applicant

And

THE OFFICIAL TRUSTEE

Respondent

REASONS FOR JUDGMENT

(Revised from transcript)

This is an application by SUSANNE MARY SWAIN, the applicant, for the annulment of bankruptcy which had resulted from what I understood to have been a debtor's petition, although it appears in the application to be incorrectly referred to as a creditor's petition. I note also the application refers to rule 153B and is meant to refer to section 153B. To the extent that both of those matters are errors, I will grant leave to the applicant to amend the application accordingly.
The notice of annulment application relies upon two affidavits by the applicant; the first an affidavit sworn 28 October 2002, the second sworn on 16 January 2003. This application is being conducted by video-link to the applicant's legal representative in Launceston and by audio link to the respondent's legal representative in Hobart, both links to the hearing of this matter by the court in Melbourne.
The respondent has filed an affidavit constituting a trustees report in accordance with the requirements of the Rules, being an affidavit sworn by Phillip David Anstey on 17 January 2003. The applicant has consented to that affidavit being relied upon and filed by way of a trustee's report despite it being filed late and not being filed at least five days prior to this final hearing.
The application before the court is therefore able to proceed on the basis that I have been prepared to order that all times be abridged to enable the application to proceed and be determined this day. The respondent does not oppose the order sought by the applicant for annulment of the bankruptcy, but does seek an order in relation to the trustee's costs and expenses which are said to have arisen in relation to the administration of the bankruptcy.
In support of the application the applicant in her affidavit sworn 28 October 2002 refers to the circumstances in relation to the bankruptcy which I rely upon in this matter. The applicant was married to Martin Watson Swain on 19 April 1997. The parties had been living together since April 1994. It is said they separated on 20 November 2001 and at the time of separation had owned a house in Franmarie Street, Launceston which had been purchased on 13 January 1996 financed by a joint loan and the property was, as I understand it, a property registered in both parties' names as joint tenants.
It is said that on 13 September 2000 the applicant left Mr Swain and moved to a property in Burnie and certain discussions occurred in relation to the financial affairs of the parties. The applicant moved to a property situate at 66 Moody Street, Burnie (the Moody Street property). That property was purchased on 23 July 2001.
In her second affidavit sworn 16 January 2003 the applicant refers to the circumstances whereby the Moody Street property was purchased. It was a property again, as I understand it, in the joint names of both herself and Martin Watson Swain. As I understand it, although I have few details, there are family law proceedings between the applicant and Mr Swain which are currently pending. I have not been provided in the affidavit material with any further detail. Although it is said in the affidavit material that there had been a resumption of cohabitation between the parties in February 2002, it is not completely clear as to whether or not the parties continue to reside in the same dwelling. It is not, however, presently relevant in this application that I should consider that matter further.
What is submitted, however, is that at the time when the debtor's petition was filed and the applicant became bankruptcy she had in fact assets at that time which would clearly be greater than or be able to address the issue of amounts then said to be owing to creditors. There are in fact four creditors: Harris Scarfe of Wilson Street, Burnie in Tasmania; Clarke's Home Hardware, PO Box 63, Cooee, Tasmania; KW Ewington of 16 Ewington Road, Flowerdale in Tasmania; and Alliance Recoveries of Locked Bag 5031, Parramatta.
Letters providing a copy of the notice of annulment application have been provided to the court and the applicant's solicitor has undertaken to file an affidavit confirming service of the notice upon each and every one of the creditors.
It is said that prior to filing of the debtor's petition that the applicant had received a notice from one of the creditors that an amount due under a mortgage of the Franmarie property had not been paid when due on 13 December 2001. A notice was received indicating that there should be payment made and demand indeed was made apparently for payment of $39,000 and that the applicant had a period of 48 hours to pay that amount. The applicant, it is said in her affidavit, had contacted the collections agency responsible for recovering that debt, but was not told at that time, as subsequently revealed, that Mr Swain had made arrangements to pay the outstanding debt by instalments. The applicant apparently received advice from a financial services agency to file a debtor's petition and become bankrupt.
As I understand it, that in fact occurred on the presentation of the debtor's petition, number 967 of 2001, on 19 December 2001. There seems to be some suggestion it was filed on 14 December 2001. For the present purposes I accept what the trustee indicates in the affidavit to which I have referred that in fact it was 19 December 2001.
In any event, it is very clear that shortly after the filing of the debtor's petition a tragic event occurred when the son of the applicant suffered an electric shock as a result of what is alleged to have been faulty wiring in a rented home and in fact the child died as a result of those injuries, as I understand it, soon after. Again, the date is not clear.

I assume it was January 2002, although the affidavit refers to ‘January 2001’. It is clear from the affidavit that a funeral occurred, however, on 1 February 2002.
It is not necessary for me then to indicate against the backdrop of that tragic event reasons why perhaps the applicant has not pursued with a degree of vigour the consideration of her personal financial circumstances including the background for the debtor's petition and indeed the appropriateness of that petition.
It is sufficient, in my view, to consider the law in relation to the power the court has concerning the annulment by the court of the bankruptcy. There is no doubt that annulment of a bankruptcy is a significant matter and a matter which gives rise to a discretion on the part of the court which must be exercised carefully. Section 153B of the Bankruptcy Act provides the following:
“If the court is satisfied that a sequestration order ought not to have been made, or in the case of a debtor's petition, that the petition ought not to have been presented or ought not to have been accepted by the Official Receiver, the Court may make an order annulling the bankruptcy.”
As I indicated, it is clear the court has a discretion whether or not to make the orders sought (see Re Williams [1968] 13 FLR 10, Re Frank [1987] 16 FCR 396). It is equally clear that events occurring after the making of a sequestration order may be taken into account on an annulment application (see Re Bond [1978] 22 ALR 287). A court in circumstances of this kind will not necessarily grant orders simply because there is no opposition or indeed simply because creditors may consent. In the present case there is no indication of consent, though I am satisfied that there has been appropriate service of the notice of annulment.
I am satisfied, however, on the affidavit material before me that it would appear that the debtor's petition, in a sense, was misconceived as facts were not then known to the applicant which subsequently became known, namely that there had been in place an arrangement to deal with the debt by way of payment of instalments by Mr Swain. I am further satisfied on the affidavit material before me, and particularly in relation to the Moody Street property, which is jointly held and that at all relevant times it would appear, notwithstanding the demands by creditors, that the applicant was indeed solvent.
The combination of those two factors, the solvency and the misapprehension or false belief as to the correct financial arrangements at the time, together with the personal circumstances which tragically occurred in relation to the applicant after bankruptcy, lead me to conclude that applying the law that I have referred to, and in particular applying section 153B of the Bankruptcy Act, that this was indeed a debtor's petition which at the time ought not to have been presented or indeed it ought not to have been accepted by the official receiver. In those circumstances it is my view that it is appropriate that I should exercise my discretion and make an order that the bankruptcy of Susanne Mary Swain be annulled.
At the request of the Trustee and with the consent of the Applicant

I make a further order in relation to the Trustee’s costs and expenses.

I certify that the preceding eighteen (18) paragraphs are a true copy of the reasons for judgment of McInnis FM

Associate:

Date: 20 January 2003