Tonks as trustee of the Bankrupt Estate of Lane v Lane - [2016] FCCA 1074

FEDERAL CIRCUIT COURT OF AUSTRALIA

TONKS AS TRUSTEE OF THE BANKRUPT ESTATE OF LANE v LANE

[2016] FCCA 1074

Catchwords:
BANKRUPTCY – Application to distribute dividends amongst creditors – failure by bankrupt to file a statement of affairs – s.146 Bankruptcy Act 1966 (Cth).

Legislation:

Bankruptcy Act 1966, ss.54, 77CA, 80, 146

Rees v Stubberfield [2001] FMCA 72
Roufeil (Trustee), in the matter of Jarvie (Bankrupt) [2015] FCA 232

Applicant:

BRADLEY JOHN TONKS AS TRUSTEE OF THE BANKRUPT ESTATE OF IAN MICHAEL LANE

Respondent:

IAN MICHAEL LANE

File Number:

SYG 3442 of 2015

Judgment of:

Judge Barnes

Hearing date:

22 April 2016

Delivered at:

Sydney

Delivered on:

22 April 2016

REPRESENTATION

Solicitors for the Applicant:

Mr Roser

Solicitors for the Respondent:

No appearance

ORDERS

Pursuant to section 146 of the Bankruptcy Act 1966 (Cth) the distribution of dividends amongst the creditors who have proved their debts in the bankrupt estate of Ian Michael Lane proceed in accordance with Division 5 of Part VI of the Act as if the bankrupt had filed a statement of affairs and those creditors had been stated to be creditors in it.

FEDERAL CIRCUIT COURT
OF AUSTRALIA
AT SYDNEY

SYG 3442 of 2015

BRADLEY JOHN TONKS AS TRUSTEE OF THE BANKRUPT ESTATE OF IAN MICHAEL LANE

Applicant

And

IAN MICHAEL LANE

Respondent

REASONS FOR JUDGMENT

This is an application filed on 21 December 2015 for an order pursuant to s.146 of the Bankruptcy Act 1966 (Cth) that the distribution of dividends amongst the creditors who had proved their debts in the bankruptcy of Ian Michael Lane proceed in accordance with the Bankruptcy Act as if Mr Lane had filed a statement of his affairs and those creditors had been stated to be creditors in it.
The application was brought by Bradley John Tonks, as trustee of the bankrupt estate of Ian Michael Lane. In support of the application, Mr Tonks relies on affidavits sworn by him on 16 December 2015 and 19 April 2016; an affidavit of Ajla Vedziu affirmed on 3 September 2015; an affidavit of Pamela Braithwaite sworn on 19 April 2016; and affidavits of John Vitanza of 6 April 2016 and Ian Hewer of 21 April 2016.
In his affidavit of 6 April 2016 Mr Vitanza attested to personal service on the bankrupt, Mr Lane, of the affidavits that had been filed in support of these proceedings and a copy of the application. I am satisfied that Mr Lane was put on notice of these proceedings and of the hearing date.
While, technically, an application for an order under s.146 of the Bankruptcy Act may proceed on an ex parte basis, it is generally thought to be advisable to put the bankrupt on notice and to give him an opportunity to be heard on the issue of whether in fact he has failed to provide a statement of affairs as required by the Act. Mr Lane has not availed himself of that opportunity, notwithstanding personal service as attested to by Mr Vitanza and also subsequent service of other documents again including notification of the hearing date, time and place, on a person apparently over the age of 16 years at the home address at which he was ultimately located (after initial difficulties which included service of the more recent evidence and reiterated the date, time and place of the hearing) as attested to by Mr Hewer.
I am satisfied that appropriate steps have been taken to notify Mr Lane of the application and the hearing and hence that it is appropriate that it should be heard in his absence.
Under s.146 of the Bankruptcy Act it is necessary for me to be satisfied that Mr Lane has failed to file a statement of his affairs as required under s.54 of the Bankruptcy Act. There is clear evidence in Mr Tonks’ affidavits that he has not received a statement of affairs from Mr Lane. Mr Tonks also provided considerable detail as to the attempts he made, as trustee of Mr Lane’s bankrupt estate, to obtain a statement of affairs.
Mr Lane was made bankrupt on 3 April 2014. Mr Tonks gives detailed evidence about letters sent to Mr Lane at his then last-known address advising him of his obligation to complete a statement of affairs; about attempts to contact Mr Lane by way of telephone; of service on Mr Lane of a copy of a letter in this respect of 4 April 2014; as well as in relation to applications for the issue of s.77CA notices submitted to AFSA. AFSA issued such notices which were served on the bankrupt in June 2014.
Notwithstanding these steps, Mr Lane did not lodge a statement of affairs. It appears that after a secured creditor took possession of his home, Mr Lane moved. He did not inform the trustee of his new address (as he was required to do under s.80 of the Bankruptcy Act). There is also evidence that while AFSA had indicated an intention to initiate a prosecution of Mr Lane for his failure to lodge a statement of affairs (as attested to in the affidavit of Ajla Vedziu), as at September 2015 it was unable to locate Mr Lane in order to proceed with such a prosecution.
However, after these proceedings were commenced, further steps were taken by the trustee to locate the bankrupt, which were successful. The bankrupt was advised by mail and by personal and other service of his obligation to file a statement of affairs and of these proceedings.
In all these circumstances, I am satisfied on the affidavit evidence before me that Mr Lane has failed to file a statement of affairs as required, notwithstanding that he was made aware of the obligation from very early in his bankruptcy and that such awareness was reinforced in recent times (including in circumstances where he was advised that the filing of a statement of affairs would avoid the expense occasioned by the need for the trustee to proceed with the s.146 application).
It is also necessary to consider whether it is appropriate to make the order sought by the trustee. As indicated, the bankrupt has failed to file a statement of affairs notwithstanding considerable attempts made by the trustee in that regard. He has not responded to such request. There is evidence that the trustee has made inquiries in order to identify assets and liabilities of the bankrupt. There has been a call for proofs of debt to which there has been a response, as detailed in Mr Tonks’ affidavit. The trustee also arranged for the insertion of an advertisement in The Australian newspaper which also included notification of the proceedings today. Details of creditors identified are set out in detail in the most recent affidavit of Mr Tonks and also in the affidavit of Ms Braithwaite.
The trustee proposes to declare a dividend. He attests that the delay is causing prejudice to the creditors in circumstances where it appears that there are sufficient funds in the estate to enable all or most of the amounts claimed in the proofs of debt to be met. I am told from the bar table that it is “line ball” (having regard to the other expenses of the administration) as to whether there will be any funds available to be returned to Mr Lane in circumstances where the costs of the administration of his bankrupt estate have been increased by his failure to file a statement of affairs.
However in all the circumstances, I am satisfied that the delay is causing prejudice to creditors to whom a distribution cannot be made because of the bankrupt’s failure to provide a statement of affairs in the absence of the order sought. I am satisfied (having regard to the principles in Rees v Stubberfield [2001] FMCA 72 and Roufeil (Trustee), in the matter of Jarvie (Bankrupt) [2015] FCA 232) that it is appropriate to make the order that is sought. To delay the administration of the estate would serve no useful purpose.

I certify that the preceding thirteen (13) paragraphs are a true copy of the reasons for judgment of Judge Barnes

Associate:

Date: 6 May 2015