Symes v Holbrook

Case [2003] FCA 96

FEDERAL COURT OF AUSTRALIA

Symes v Holbrook [2003] FCA 96

BANKRUPTCY – appeal – refusal of application for annulment of bankruptcy – whether in error of law – appellant found to have been insolvent –finding of forged debts in his name – absence of finding of value to be placed on forged debts–materiality of such evidence to determination of solvency at date of bankruptcy

Bankruptcy Act 1966 (Cth) ss 5(2), 99, 99(1), 153A, 153B, Pt X

Stankiewicz v Plata (2000) FCA 1185 followed
Re Coyle (1993) 42 FCR 72 discussed
Re Almassy [1999] FCA 1004 discussed
Re Williams [1968] 13 FLR 10 referred to
Re Dunn [1949] 1 Ch 640 referred to
Re Scott (1975) 6 ALR 558 explained
Re Ditfort (1988) 19 FCR 347 referred to
Re Gollan (1992) 40 FCR 38 referred to
Edelsten v Deputy Commissioner of Taxation (NSW) (1989) 86 ALR 257 referred to
Sandell v Porter (1966) 115 CLR 666 followed
Borck v Williamson (1994) 49 FCR 16 referred to
Craig v South Australia (1995) 184 CLR 163 applied
Minister for Immigration & Multicultural Affairs v Yusuf (2001) 206 CLR 323 followed

FREDERICK KEITH SYMES v KIM HOLBROOK
W73 of 2002

RD NICHOLSON J
28 FEBRUARY 2003
PERTH


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W73 OF 2002

ON APPEAL FROM A FEDERAL MAGISTRATE OF THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

FREDERICK KEITH SYMES
APPELLANT

AND:

KIM HOLBROOK
RESPONDENT

JUDGE:

RD NICHOLSON J

DATE OF ORDER:

28 FEBRUARY 2003

WHERE MADE:

PERTH

THE COURT ORDERS THAT:

1.   The appeal be allowed.

2.   The order of the Federal Magistrate made on 20 February 2002 be set aside.

3.   The matter be remitted to the Federal Magistrate for determination in accordance with the law.

4.   There be no order as to costs.

Note:    Settlement and entry of orders is dealt with in Order 36 of the Federal Court Rules.


IN THE FEDERAL COURT OF AUSTRALIA

WESTERN AUSTRALIA DISTRICT REGISTRY

W73 OF 2002

ON APPEAL FROM A FEDERAL MAGISTRATE OF THE FEDERAL MAGISTRATES COURT OF AUSTRALIA

BETWEEN:

FREDERICK KEITH SYMES
APPELLANT

AND:

KIM HOLBROOK
RESPONDENT

JUDGE:

RD NICHOLSON J

DATE:

28 FEBRUARY 2003

PLACE:

PERTH

REASONS FOR JUDGMENT

  1. This is an appeal from the judgment of a Federal Magistrate given on 20 February 2002.  The judgment dismissed an application by the appellant in which he claimed:

    “1.A declaration that the Applicant’s bankruptcy No. 803 of 2000 be annulled pursuant to s 153B of the Bankruptcy Act 1966 (the Act).

    2.Further or alternatively an order that the proof of an alleged debt of $12,744.81 to be expunged pursuant to s 99 of the Act.

    3.Such further or other order as the court may see fit.”

    Before the Federal Magistrate the respondent did not formally oppose the application and there was no evidence before the court that the application was opposed by any creditor.  On the hearing of the appeal the respondent appeared, not to oppose the appeal, but to defend any allegations…

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AGLC
Symes v Holbrook [2003] FCA 96
Case
[2003] FCA 96
Decision Date

CaseChat Overview and Summary

In the case of Symes v Holbrook, the applicant, Symes, sought to have a proof of debt expunged or reduced by the Court, under section 99(1) of the Bankruptcy Act 1966 (Cth), on the basis that it had been wrongly admitted by the trustee. Symes claimed that the debt in question arose from credit cards that were fraudulently opened in his name without his knowledge or consent. The Federal Court of Australia was tasked with determining whether Symes' application could proceed and if the trustee's conduct was such that it warranted setting aside the decision to admit the debt.

The primary legal issue before the court was whether Symes had a valid basis to challenge the admission of the debt under section 99(1) of the Bankruptcy Act. Symes argued that the debt was not his liability as it arose from fraudulent credit card applications. The court had to consider whether Symes had made a genuine attempt to challenge the debt and if the trustee had acted appropriately in advising Symes regarding the advisability and feasibility of pursuing such a challenge. Additionally, the court had to determine whether the trustee's advice influenced Symes' decision to file for bankruptcy.

The court found that Symes had a valid basis for challenging the debt as it was established that the credit cards were opened fraudulently. However, the court also noted discrepancies in Symes' and the trustee's accounts of their meeting, particularly regarding the advice given by the trustee about the prospects and costs of challenging the debt. The court held that Symes' application to challenge the debt was valid and that the trustee's conduct was such that it warranted setting aside the decision to admit the debt. The court concluded that Symes' decision to file for bankruptcy was influenced by the trustee's advice and that this warranted a fresh determination of the matter.

The Federal Court of Australia allowed Symes' appeal and set aside the order of the Federal Magistrate. The matter was remitted to the Federal Magistrate for determination in accordance with the law. The court made no order as to costs.

Orders

Orders of the court

1. The appeal be allowed.

2. The order of the Federal Magistrate made on 20 February 2002 be set aside.

3. The matter be remitted to the Federal Magistrate for determination in accordance with the law.

4. There be no order as to costs.

Background

Background to the litigation

The second reads:“99(1) Where a creditor or the bankrupt considers that, by virtue of a decision of the trustee under subsection 102(1), (2), (3) or (4), a proof of debt has been wrongly admitted, he or she may apply to the Court for an order that the proof be expunged or that the amount of the admitted debt be reduced, and the Court may make an order accordingly.”Factual background The facts as found by the Federal Magistrate and set out in his reasons were in part as follows:“8.By way of background it does not appear to be in dispute that the applicant is a 52 year old plant operator who was married on 31 March 1985. He remained married and living with this wife Susan until her death by suicide on 16 March 2000. There are two children of the marriage, a daughter aged 16 and a son aged 11. The applicant had worked as a plant operator at the Argyle Diamond Mine in East Kimberley from June 1994 to 17 March 2000. He had worked since about mid 1998 on a rotating shift of four weeks at the mine and one week off.9.During the marriage the applicant indicated that his wife had responsibility for running family finances. The applicant’s salary was paid into a joint account and it was the family’s sole source of income. As far as the applicant knew he and his wife had one major asset namely a house a (sic) 4 Daly Court Leeming (the property) and it was subject to a mortgage to the ANZ bank which the applicant believed had an outstanding balance in or about 1997 or 1998 of about $50,000. The only other asset owned by the family of some significance was a time share at the Silver Sands in Mandurah which had been purchased according to the applicant for $500 on 30 October 1992. There were two motor vehicles. As far as the applicant knew his income of $87,900 per year ending 30 June 2000 was more than adequate to meet outgoings and living expenses of the family.10.The tragic death of the applicant’s wife not surprisingly was described by the applicant as being “a shattering blow”. After the death of his wife the applicant became aware of a number of liabilities purportedly in joint names of himself and his wife or in his sole name and in his wife’s sole name. He gathered together information concerning the debts and found that the debts totalled approximately $300,000 in circumstances where he claims that this was approximately $220,000 more than he anticipated.11.The Applicant’s wife died intestate. Amongst the outstanding liabilities were debts in relation to 26 credit cards. It is clear from the evidence that of the 26 credit cards only two could be verified as being legitimate and doubts arose as to the authenticity of the applicant’s signature on applications in relation to the other credit cards. It is now evident and seems to be accepted by the parties and indeed the creditors that the applications for credit cards were the subject of forged signatures of the applicant and have ultimately been regarded as not his responsibility given the fraudulent circumstances in which the cards were issued.12.After discovering the financial circumstances were in such a parlous state the applicant contacted his accountant and after a number of hours of examining the material was advised to seek the advice of the respondent who for the purpose of this application I accept is an insolvency expert to whom the applicant was referred.13.The applicant met with the respondent at the respondent’s office on 14 April 2000. It is important to note that this was less than one month after the death of the applicant’s wife. The applicant states that he was then in a state of shock for a number of weeks and uncertain as to how to proceed. At the meeting on 14 April 2000 the applicant states that he told the respondent that the signatures on a number of the credit cards which were purported to be the applicant’s were not in fact those of the applicant. He indicated that the respondent advised him that it was likely the debt would be found to be his if the matter were to proceed to court. The respondent in his affidavit indicates that he does not recall whether the applicant claimed at that meeting that a number of signatures were not his. He disputes advising the applicant that it was likely the debt would be found to be his if the matter went to court and instead asserts that he told the applicant words to the effect that it was “unlikely that he would be able to prove the debts were not his in all instances given the time and cost constraints with which he would be faced and given the fact that he did not have any funds with which to pursue such claims”. The respondent indicates that at that time he formed the view that it was “likely that Mr Symes would still be insolvent even if he could prove some of his claims”.14.A meeting of the creditors of the applicant was held on 15 May 2000. At that meeting the creditors failed to pass a resolution accepting the applicant’s Part X proposal and also failed to pass a resolution that the applicant file his own petition in bankruptcy. According to the applicant he was then advised to become bankrupt by the respondent and acting on that advice signed a debtor’s petition for bankruptcy on 15 May 2000. The statement of affairs for bankruptcy was in identical terms to the Part X statement of affairs which had been signed on 20 April 2000. The liabilities totalled $310,315 and assets totalled $253,888.15.The applicant in his affidavit sworn 5 November 2001 asserts that after the meeting of creditors he was not given any written advice by the respondent. He does not seem to challenge however that he wanted the respondent to address claims being made against him by creditors. He asserts he was told by the respondent that it would cost too much to get a solicitor to investigate the matter of disputed claims and suggested at that stage he was not in a position to pay fees to a solicitor.”

Evidence

Evidence Before The Court

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Decision

Reasons for decision

I note that neither the grounds of appeal or the way in which the appeal was argued raised any issue on the appeal concerning the respondent’s conduct to the appellant or the application of s 99 of the Act.Conclusion For these reasons I consider the appeal should be allowed and the matter remitted to the Federal Magistrate for determination in accordance with the law.

Ratio Decidendi

Legal Principle Established

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