Williamson v Michell (Trustee)

Case [2019] FCA 481

FEDERAL COURT OF AUSTRALIA

Williamson v Michell (Trustee) [2019] FCA 481

File number: VID 118 of 2018
VID 691 of 2018
Judge: MOSHINSKY J
Date of judgment: 10 April 2019
Catchwords:

BANKRUPTCY – annulment – application by bankrupt for annulment of bankruptcy– where bankruptcy founded on debtor’s petition – where accompanying statement of affairs contained false statements – where bankrupt sought to rely on own abuse of process as basis for annulment – whether discretion to annul bankruptcy enlivened – whether, if discretion to annul bankruptcy was enlivened, the bankruptcy should be annulled – solvency of bankrupt – other discretionary considerations – application for annulment dismissed

BANKRUPTCY – application to review trustee’s decisions to admit portions of certain proofs of debt – whether decisions of trustee should be reversed or varied
Legislation:

Bankruptcy Act 1966 (Cth), ss 5, 55, 73, 82, 83, 84, 102, 104, 153B

Corporations Act 2001 (Cth), ss 9, 95A, 588FB, 588FC, 588FDA, 588FE, 588FF, 588G, 588M
Cases cited:

Beaman v Bond (2017) 254 FCR 480

Bulic v Commonwealth Bank of Australia Ltd (2007) 5 ABC(NS) 122; [2007] FCA 307

BWK Elders (Australia) Pty Ltd v White (2004) 3 ABC(NS) 70; [2004] FCA 1611

Cheung v Burness (Trustee) [2018] FCA 1145

Clyne v Deputy Commissioner of Taxation (1984) 154 CLR 589

Coshott v Burke (2012) 10 ABC(NS) 459; [2012] FCA 517

Francis v Eggleston Mitchell Lawyers Pty Ltd (2014) 12 ABC(NS) 25; [2014] FCAFC 18

Heinrich v Commonwealth Bank of Australia [2003] FCAFC 315

Marek v Tregenza (1963) 109 CLR 1

Ozer v Australian Liquor Marketers Pty Ltd [2000] FCA 291

Re Lawson (1939) 11 ABC 137

Shaw v Yarranova Pty Ltd (2017) 252 FCR 267

Taylor v Rudaks (2007) 166 FCR 451
Date of hearing: 19 and 20 November 2018
Registry: Victoria
Division: General Division
National Practice Area: Commercial and Corporations
Sub-area: General and Personal Insolvency
Category: Catchwords
Number of paragraphs: 86
Counsel for the First and Second Applicants: Mr L Watts
Solicitor for the First and Second Applicants: Belleli King & Associates
Counsel for the Respondent: Mr M McKillop
Solicitor for the Respondent: Piper Alderman

ORDERS

VID 118 of 2018
BETWEEN:

GREGORY JOHN WILLIAMSON

First Applicant

GAIL ELIZABETH WILLIAMSON

Second Applicant
AND:

STEPHEN JOHN MICHELL (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATES OF GREGORY JOHN WILLIAMSON AND GAIL ELIZABETH WILLIAMSON)

Respondent

JUDGE:

MOSHINSKY J

DATE OF ORDER:

10 APRIL 2019

THE COURT ORDERS THAT:

1.The application be dismissed.

2.In relation to costs, the matter be listed for mention at 9.30 am on 15 April 2019.

Note:   Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.


ORDERS

VID 691 of 2018
BETWEEN:

GREGORY JOHN WILLIAMSON

First Applicant

GAIL ELIZABETH WILLIAMSON

Second Applicant
AND:

STEPHEN JOHN MICHELL (IN HIS CAPACITY AS TRUSTEE OF THE BANKRUPT ESTATES OF GREGORY JOHN WILLIAMSON AND GAIL ELIZABETH WILLIAMSON)

First Respondent

SIMON WALLACE-SMITH IN HIS CAPACITY AS LIQUIDATOR OF PAKENHAM AUTOMOTIVE PTY LTD (IN LIQUIDATION)

Second Respondent

JUDGE:

MOSHINSKY J

DATE OF ORDER:

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Details
AGLC
Williamson v Michell (Trustee) [2019] FCA 481
Case
[2019] FCA 481
Decision Date

CaseChat Overview and Summary

The matter before the court involved an application by Mr and Mrs Williamson for the annulment of their bankruptcy, as well as an application to review certain decisions made by the trustee in relation to proofs of debt in the Williamsons' bankruptcy estates. The Williamsons, who were the bankrupts, sought to have their bankruptcies annulled on the basis that they had been brought about through their own abuse of the process, and that the accompanying statements of affairs contained false statements. The trustee, the first respondent, opposed the application for annulment and also opposed certain decisions to admit portions of proofs of debt lodged by the second respondent.

The central legal issues in this case were whether the court had the discretion to annul the bankruptcies, and if so, whether it should do so. Additionally, the court needed to decide whether certain decisions of the trustee regarding the admission of proofs of debt should be reversed or varied. The court considered the relevant statutory provisions, case law, and the evidence presented by both parties.

The court found that the Williamsons' conduct did not justify the annulment of their bankruptcies. The court held that the conduct of the bankrupt and whether an annulment would be conducive to commercial morality and the interests of the public were relevant considerations in determining whether an order annulling a bankruptcy should be made. However, the court concluded that the Williamsons' conduct did not warrant annulment. Furthermore, the court found that the Williamsons had not established any grounds for the trustee's decisions to admit portions of certain proofs of debt to be reversed or varied. The court emphasised that its function under s 104 of the Bankruptcy Act was to determine, in light of the material before the court, whether the applicant for review had a debt that should be admitted to proof or had established that a debt admitted to proof ought not to have been.

The court dismissed the Williamsons' application for the annulment of their bankruptcies, varied one of the trustee's decisions regarding the admission of a proof of debt, and reversed another decision. The court also listed the matter for mention in relation to costs.

Orders

Orders of the court

1. The first respondent’s interlocutory application dated 22 October 2018 (seeking an adjournment of the proceeding sine die) be dismissed.

2. In respect of the bankrupt estate of Gregory John Williamson, the decision of the first respondent dated 27 September 2018 to admit a portion of a proof of debt lodged by the second respondent (namely to admit the proof of debt to the extent of $111,220) be varied such that the proof of debt is admitted to the extent of $54,885.10 and otherwise rejected.

3. In respect of the bankrupt estate of Gail Elizabeth Williamson, the decision of the first respondent dated 27 September 2018 to admit a portion of a proof of debt lodged by the second respondent (namely to admit the proof of debt to the extent of $33,442.63) be reversed, such that the proof of debt is rejected in full.

4. In relation to costs, the matter be listed for mention at 9.30 am on 15 April 2019.

Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011.

Background

Background to the litigation

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Evidence

Evidence Before The Court

In Coshott v Burke (2012) 10 ABC(NS) 459; [2012] FCA 517, Rares J said at [56]:The function of the Court under s 104 is not to consider the correctness or otherwise of the trustee’s decision in light of the material before the trustee, but to determine in light of the material before the Court whether the applicant for review has a debt that should be admitted to proof or has established that a debt admitted to proof ought not to have been. The court can take into account inconsistencies in the material provided to the trustee and the evidence before the Court: Re DK Rogers; Ex parte v CMV Parts Distributors Pty Ltd (1989) 20 FCR 561 at 562-563 per Von Doussa J; Re Payne; Ex parte Hurst [1986] FCA 439; BDT Holdings Pty Ltd v Piscopo [2009] FCA 151 at [4] per myself. An application to review a trustee’s decision under s 104 is an original proceeding that the Court hears de novo: see too Tanning Research Laboratories Inc. v O’Brien (1990) 169 CLR 332 per Brennan and Dawson JJ, with whom, on this matter, Toohey J agreed at 354.The evidence There was an order made that evidence in one proceeding be evidence in the other proceeding. Mr and Mrs Williamson rely on the following affidavit evidence:(a)affidavits of Mr Williamson dated 1 December 2017, 19 April 2018 and 5 June 2018;(b)affidavits of Mrs Williamson dated 1 December 2017 and 19 April 2018;(c)affidavit of Susan Williamson (the sister of Mr Williamson) dated 18 April 2018;(d)affidavit of Peter Goodin dated 24 April 2018;(e)affidavits of David Ng dated 26 April 2018, 7 November 2018 and 14 November 2018; and(f)affidavits of Dean Williamson (the son of Mr and Mrs Williamson) dated 7 May 2018 and 18 June 2018. There was cross-examination of Mr and Mrs Williamson and Susan Williamson. The other deponents were not required to attend for cross-examination. Both Mr and Mrs Williamson commenced their evidence by admitting to several false statements in their sworn affidavit evidence. Mr Williamson also admitted to procuring false evidence from another person for the purposes of these proceedings. In light of these matters, I do not accept the evidence given by Mr Williamson or Mrs Williamson unless it is corroborated by third-party evidence. The Trustee relies on the following affidavits:(a)affidavits of the Trustee dated 3 April 2018, 2 May 2018, 18 October 2018, 26 October 2018 and 14 November 2018; and(b)affidavit of Warren White (a chartered accountant who is responsible for the day-to-day conduct of the administrations) dated 15 November 2018. By the affidavit dated 26 October 2018, the Trustee indicated his reliance on a number of affidavits filed in a proceeding brought by the Liquidator against Mr and Mrs Williamson (proceeding No. VID 412 of 2012) (the Liquidator’s Proceeding). No objection was taken to this approach. The main affidavit of the Trustee is that dated 3 April 2018, which annexes a large number of documents. Consistently with the approach taken in the affidavit and submissions, I will refer to the annexures to this affidavit as the Exhibit Book.

Decision

Reasons for decision

In Shaw v Yarranova Pty Ltd (2017) 252 FCR 267, the Full Court of this Court (North, Perry and Charlesworth JJ) said (at [112]) that “the conduct of the bankrupt is a relevant consideration in determining whether an order annulling a bankruptcy should be made, as is whether an annulment will be conducive of or detrimental to commercial morality and the interests of the public”. See also Marek v Tregenza (1963) 109 CLR 1; Re Lawson (1939) 11 ABC 137.Review of trustee’s decision regarding proof of debt Section 82 of the Bankruptcy Act specifies the types of claims that are capable of proof in a bankruptcy. In particular, s 82(1) provides:Subject to this Division, all debts and liabilities, present or future, certain or contingent, to which a bankrupt was subject at the date of the bankruptcy, or to which he or she may become subject before his or her discharge by reason of an obligation incurred before the date of the bankruptcy, are provable in his or her bankruptcy. Section 83 provides that a creditor is not taken to have proved a debt until it is admitted and s 84 sets out the manner of proving a debt. A claim by a liquidator against a bankrupt estate of a former director under s 588M(2) of the Corporations Act 2001 (Cth) (recovery of compensation for loss resulting from insolvent trading) is a claim capable of proof under s 82: Taylor v Rudaks (2007) 166 FCR 451. The Trustee submitted, and Mr and Mrs Williamson did not dispute, that a claim by a liquidator against a bankrupt estate under s 588FF(1) of the Corporations Act in relation to an uncommercial transaction is also capable of proof under s 82 of the Bankruptcy Act. In the absence of any dispute between the parties on this point, I am prepared to proceed on this basis. In any event, in view of the conclusions I reach below in relation to the Proof of Debt Proceeding it is unnecessary to determine this point. Section 102(1) provides that the trustee shall examine each proof of debt and the grounds of the debt sought to be proved and, subject to the power of the Court to extend time, shall, not later than 14 days after the expiration of the period specified in the notice of intention to declare a dividend as the period within which creditors may lodge their proofs of debt, either: admit the proof of debt in whole; admit it in part and reject it in part; reject it in whole; or require further evidence in support of it. Section 104 of the Bankruptcy Act provides as follows:(1)A creditor, or the bankrupt, may apply to the Court for review of a decision of the trustee under subsection 102(1), (3) or (4) in respect of a proof of debt.(2)The Court may, upon the application, confirm, reverse or vary the decision of the trustee.(3)Subject to the power of the Court to extend the time, an application under this section to review a decision shall not be heard by the Court unless it was made within 21 days from the date on which the decision was made. In Coshott v Burke (2012) 10 ABC(NS) 459; [2012] FCA 517, Rares J said at [56]:The function of the Court under s 104 is not to consider the correctness or otherwise of the trustee’s decision in light of the material before the trustee, but to determine in light of the material before the Court whether the applicant for review has a debt that should be admitted to proof or has established that a debt admitted to proof ought not to have been. The court can take into account inconsistencies in the material provided to the trustee and the evidence before the Court: Re DK Rogers; Ex parte v CMV Parts Distributors Pty Ltd (1989) 20 FCR 561 at 562-563 per Von Doussa J; Re Payne; Ex parte Hurst [1986] FCA 439; BDT Holdings Pty Ltd v Piscopo [2009] FCA 151 at [4] per myself. An application to review a trustee’s decision under s 104 is an original proceeding that the Court hears de novo: see too Tanning Research Laboratories Inc. v O’Brien (1990) 169 CLR 332 per Brennan and Dawson JJ, with whom, on this matter, Toohey J agreed at 354.The evidence

Ratio Decidendi

Legal Principle Established

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