FEDERAL COURT OF AUSTRALIA

Official Trustee in Bankruptcy, in the matter of Shaw

[1999] FCA 968

BANKRUPTCY – administration of property – application under s 146 of the Bankruptcy Act 1966 (Cth) for distribution of dividends where bankrupts failed to file statements of affairs – where evidence as to existence of persons other than those who have proved debts who are or might be creditors of the bankrupts – joint estate to be exhausted by proved joint debts

Bankruptcy Act 1966 (Cth), ss 110, 140(3), 145(3), 146

Re Winter, Ex Parte Deputy Official Receiver (unreported, Federal Court of Australia, 9 April 1991, Hill J), followed

OFFICIAL TRUSTEE IN BANKRUPTCY, IN THE MATTER OF GEORGE THOMAS SHAW AND LEILA SHAW

N7622 of 1999

GYLES J

SYDNEY

23 JUNE 1999

THE COURT ORDERS THAT:

1.                  The distribution of dividends to the creditors who have proved their debts shall proceed in accordance with Division 5 of Part VI of the Bankruptcy Act, as if the bankrupts had filed statements of affairs in accordance with the prescribed form and those creditors had been stated to be creditors in it.

2.                  The applicant’s costs of this application be an expense of the joint estate.

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

EX TEMPORE REASONS FOR JUDGMENT

1                     This is an application under s 146 of the Bankruptcy Act 1966 (Cth) (“the Act”) for an order that distribution of dividends amongst the creditors who have proved their debts shall proceed in accordance with Division 5 of Part VI of the Act as if the bankrupts had filed a statement of their respective affairs and those creditors had been stated to be creditors in them. 

2                     In the first place, I find that each of the bankrupts has failed to file a statement of affairs as required by the Act.  They were duly notified of the sequestration and nonetheless failed to file a statement of affairs.  Thus the Court has jurisdiction to make the order, if it thinks appropriate. 

3                     I have found no real assistance in the authorities as to the principles which should guide me.  Indeed, the only authority that has been discovered is an ex tempore judgment of Hill J given in 1991 - Re Winter, Ex parte Deputy Official Receiver (unreported, Federal Court of Australia, 9 April 1991, Hill J).  The discretion is not restricted by any statutory criteria, and so depends upon what may be gleaned from the section and the statute as a whole.

4                     The purpose of the section, as I can so glean it, is to give the Court the means of ensuring that the absence of a statement of affairs does not prejudice those with an interest in the bankrupt's affairs.  I am satisfied that the principal purpose of the section has been satisfied in this case because the Trustee has examined each of the bankrupts, and the transcripts are before me.  It seems to me that that step provides a satisfactory alternative to the filing of a statement of affairs or, at least, the most satisfactory alternative which is available.  The only hesitation I have in relation to this matter is that the examinations contain evidence as to the identity of persons other than those who have proved debts who are or might be creditors of the bankrupts.  The Trustee's view is that, based upon the material in the examination, all of those potential creditors are either post-bankruptcy creditors or creditors of the separate estates of each of the bankrupts.

5                     The evidence reveals that the only asset available for distribution is the proceeds of a property held as joint tenants by the bankrupts.  As the sequestration orders were made at the one time, no issue arises in this case, as has arisen in some other cases, as to whether the joint tenancy was severed and, if so, what the consequences are.  The creditors who have proved their debts are, in the view of the Trustee, joint creditors and the Trustee proposes to apply     s 110 of the Act in administering the estates.  The effect of this, upon the evidence, is that the joint estate will be more than exhausted by the claims which have been admitted by the joint creditors, thus leaving no separate estates.

6                     My concern was that without any particular notice having been given to the creditors identified, giving them the opportunity of perhaps showing that they were creditors of the joint debtors, there may be some prejudice to them.  It has been put to me that as the joint estate is administered separately from the separate estates, there is no requirement under the Act that there be any notice to any creditor otherwise than under s 140(3) and s 145(3).  In other words, until there is some proposal to distribute there is no necessity to give any notice.  I also note that in the present case there was an advertisement in the Sydney Morning Herald of the proposal to distribute.

7                     The answer to the problem, in any event, lies in the fact that, in my view, the proper order to make if I am satisfied about the situation is in terms of the section.  That is what was done by Hill J in Re Winter (supra).  If I do that, then the Trustee remains liable to do what is required by the Act and appropriate to be done by a Trustee and it will be his responsibility to give those notices that are required to be given to creditors pursuant to ss 140 and 145. 

8                     In all the circumstances, I order that the distribution of dividends to the creditors who have proved their debts shall proceed in accordance with Division 5 of Part VI of the Act as if the bankrupts had filed statements of affairs in accordance with the prescribed form and those creditors had been stated to be creditors in it.  Insofar as it may be necessary, I order that the applicant’s costs of this application be an expense of the joint estate.