FEDERAL COURT OF AUSTRALIA

Roufeil (Trustee), in the matter of Jarvie (Bankrupt) [2015] FCA 232

IN THE MATTER OF THE BANKRUPT ESTATE OF RUSSELL ALAN JARVIE

THE COURT ORDERS THAT:

1.    Pursuant to s 146 of the Bankruptcy Act 1966 (Cth), the applicant, as trustee of the bankrupt estate of Russell Alan Jarvie, distribute dividends amongst the creditors who have proved their debts in the bankrupt estate of Russell Alan Jarvie in accordance with Division 5 of Part VI of the Bankruptcy Act 1966 (Cth) as if Russell Alan Jarvie had filed a statement of affairs and those creditors had been stated in it.

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

IN THE MATTER OF THE BANKRUPT ESTATE OF RUSSELL ALAN JARVIE

REASONS FOR JUDGMENT

1    On 19 February 2015, I made an order pursuant to s 146 of the Bankruptcy Act 1966 (Cth) (“Act)”, that the applicant (“trustee”), as trustee of the bankrupt estate of Russell Alan Jarvie (“Mr Jarvie”), distribute dividends amongst the creditors who have proved their debts in the bankrupt estate in accordance with Division 5 of Part VI of the Act as if Mr Jarvie had filed a statement of affairs and those creditors had been stated in it.

2    These are my reasons for making that order.

3    The trustee’s application is dated 9 February 2015 and was filed on 11 February 2015. The application was supported by the following affidavits:

(1)    Affidavit of the trustee sworn 9 February 2015;

(2)    Affidavit of Tomas Lee, an employee of PKF Lawler Partners working under the supervision of the trustee, sworn 10 February 2015;

(3)    Affidavit of Mr Lee sworn 17 February 2015;

(4)    Affidavit of Nicholas Dale, solicitor for the trustee sworn 17 February 2015.

4    Section 146 of the Act provides:

Where a bankrupt has failed to file a statement of his or her affairs as required by this Act, the Court may, on the application of the trustee, upon such terms as it thinks fit, order that distribution of dividends amongst the creditors who have proved their debts shall proceed in accordance with this Division as if the bankrupt had filed a statement of his or her affairs and those creditors had been stated to be creditors in it.

5    There are two issues for determination:

(1)    Has Mr Jarvie failed to file a statement of his affairs as required by the Act?

(2)    If yes, should the Court in the exercise of its discretion order that distribution of dividends amongst the creditors who have proved their debts in the bankrupt estate should proceed in accordance with Division 5 of Part VI of the Act as if Mr Jarvie had filed a statement of affairs and those creditors had been stated in it.

Background facts

6    The applicant was appointed trustee of the bankrupt estate on 9 May 2014. On about 16 February 2015, the trustee was due to receive half the proceeds from the completion of the sale of a parcel of land at 72A and 72-78 Bells Line of Road, North Richmond in the state of New South Wales. The trustee estimated that this recovery, after payment of adjustments and costs of sale, would be between about $650,000 and $680,000. The trustee estimated that there would be funds available for distribution to creditors of approximately $500,000 after reserving funds to provide for future costs and expenses in the bankrupt estate.

7    The trustee has taken steps to identify the creditors of the bankrupt estate and has called for creditors’ claims. He has received proofs of debt from most creditors whom he expects will have admissible claims. There are two such creditors who have not lodged proofs of debt, being a doctor for unpaid medical bills of $446 and the Deputy Commissioner of Taxation. It appears that Mr Jarvie did not lodge income tax returns for the years ended 30 June 2011, 2012, 2013 and 2014. The trustee has made a provision for tax liabilities which he expects the Deputy Commissioner will ultimately claim in the estate and which he considered to be a conservative provision taking into account interest and penalties.

8    The trustee has received twelve proofs of debt with claims totalling $1,594,289. He has admitted nine claims fully or partially to the extent of $871,517. Seven claims are still under consideration. The trustee has rejected part of one claim to the extent of $460.

9    The trustee’s stated intention is to declare a first and interim dividend and to pay the dividend only to those creditors whose claims have been admitted (totalling $871,517). His intention is to preserve the rights of those creditors whose claims are still under consideration or yet to be proved, by calculating the dividend rate for creditors receiving the interim dividend by dividing the amount available for distribution by all possible creditors’ claims and thereby reserving sufficient funds to pay them an equalising dividend if their claims are admitted.

10    The trustee has identified that Mr Jarvie was the registered proprietor of three parcels of land apart from the properties the sale of which has just been completed. Two of these properties have been sold. The trustee is awaiting information and advice which will enable him to determine certain creditor claims before deciding whether it will be necessary to sell the other property.

Application made ex parte

11    Neither Mr Jarvie nor any of the known creditors of the bankrupt estate appeared at the hearing of the application.

12    There is no requirement under the Act that any party be named as a respondent to the application. Accordingly, there was no obligation on the trustee to serve the application on Mr Jarvie or any of the known creditors of the bankrupt estate arising out of their status as a necessary party to the proceeding.

13    Even so, when the application was first before the Court on 12 February 2015, I was informed by the trustee that notice of the application had been given to all known creditors and the application had been sent to Mr Jarvie.

14    After considering the evidence in support of the application, I decided that, although service of the application on Mr Jarvie was not required, more efforts should be made by the trustee to bring the application to the attention of Mr Jarvie. Having regard to Rees v Stubberfield [1999] FCA 1862, I considered that further efforts should be made in order to give Mr Jarvie a reasonable opportunity of being heard on the issue of whether he had failed to file a statement of affairs as required by the Act. This was not an easy task because Mr Jarvie has not provided the trustee with a reliable address for receiving communications and efforts by the Official Trustee to serve documents on Mr Jarvie have been unsuccessful. The efforts which I identified as reasonable in the circumstances were duly made by the trustee, and I am satisfied that all appropriate steps have been taken to notify Mr Jarvie of the application. Accordingly, I was satisfied that the application should be heard in Mr Jarvie’s absence.

Has Mr Jarvie failed to file a statement of his affairs as required by the Act?

15    Section 54(1) of the Act provides:

(1)    Where a sequestration order is made, the person against whose estate it is made shall, within 14 days from the day on which he or she is notified of the bankruptcy:

(a)    make out and file with the Official Receiver a statement of his or her affairs; and

(b)    furnish a copy of the statement to the trustee.

16    The trustee has not received a statement of Mr Jarvie’s affairs.

17    On 14 May 2014, the trustee caused to be sent by registered mail a letter addressed to Mr Jarvie at 72A Bells Line of Road North Richmond, in New South Wales. The letter was later received at the trustee’s office marked “Return to sender”.

18    The trustee deposes to a conversation with Mr Jarvie on 26 May 2014, to the following effect:

On 26 May 2014 – while I was at 72-78 Bells Line of Road, North Richmond – during one of the conversations which occurred between Mr Jarvie and myself, the following was said:

I said:    “Are you aware of your obligation to submit a Statement of Affairs?”

Mr Jarvie said:    “Yes, I know what I have to do. I have been bankrupt before.”

19    According to the trustee, he had a further conversation with Mr Jarvie on 28 May 2014 at his office on Level 9, 1 O’Connell Street, Sydney:

On 28 May 2014 while at my office on Level 9, 1 O’Connell Street, Sydney, during a meeting at which Mr Jarvie, myself and others were present, a conversation occurred between Mr Jarvie and I in which the following was said:

I said:    “Mr Jarvie, you are required to submit a Statement of Affairs to [the Australian Financial Security Authority (“AFSA”)]. We obtain a copy from AFSA but have not yet received it”.

Mr Jarvie said:    “I need to look at records you took under that warrant so that I can do my Statement of Affairs, and also my mother’s.”

I said:    “You should be able to do the Statement of Affairs from your own knowledge without looking at records which you say I’ve got, but we are putting together a complete inventory of all books and records. We will send it to you and if you need access to anything on the list, tell us and you can come in and look at the books and records.”

20    The trustee’s evidence includes a facsimile purporting to be from Mr Jarvie to the trustee dated 27 May 2014 which includes the following:

I have started filling in the Statement of Affairs, some things I am not quite sure about may need legal advice

21    There is a further facsimile purporting to be from Mr Jarvie to PKF Lawler Accountants dated 2 June 2014 which includes the following:

I also need documents you took from my property so as I can finalise statement of affairs

…

I need an itemised list of everything you have taken under the warrant. I have a computer up and running but noticed that my USB memory stick with all my information has been taken, how do you expect me to complete any statement of affairs.

22    By letter dated 3 June 2014 addressed to Mr Jarvie at a facsimile number, the trustee wrote relevantly:

4. Statement of Affairs (“SOA”)

You stated in our meeting that you were unable to complete the SOA for yourself and Mrs Patricia Jarvie due to books and records being held by me.

I restate my opinion that you ought to have the knowledge to complete your SOA without the complete books and records which allegedly are in my possession. Nevertheless, I have attached a complete listing of books and records in my possession.

Should you require access to any of the books and records listed, please contact Ms Lam of my office to obtain copies.

23    It seems that the trustee was unable to send the 3 June 2014 letter to the nominated facsimile number. On 5 June 2014, the letter was sent to Mr Jarvie at “79 PO Box, Richmond NSW 2753”.

24    By letter dated 17 June 2014, addressed also to “79 PO Box, Richmond NSW 2753”, the trustee directed Mr Jarvie to attend the trustee’s office not later than 27 June 2014. The letter stated relevantly:

The meeting is necessary in order to discuss the matters you raised in your letter dated 11 June 2014 and other matters in relation to the administration of your bankruptcy, including the completion of your Statement of Affairs, your recent correspondence and meetings with tenants of real properties vesting in the Bankrupt Estate and your request for books and records currently in my possession.

25    On 18 June 2014, the trustee received a letter from Mr Jarvie which said, relevantly:

I am sending you this mail today to keep in touch and to let you know that I have been to Richmond to collect my mail.

I still need a complete, itemised list of everything that was taken on the 19th May 2014, under your warrant that was signed by Mr Roufel [sic], as the list of documents you have provided me with is incomplete. I know for certain that there are a lot of documents not listed that are no longer in my possession and I know that of some of those documents are in Mr Taylor’s possession. As you know, being furnished with a complete and comprehensive list of all documents and items taken under your warrant is my right under the Bankruptcy Act.

This is becoming increasingly important so that I can complete my statement of affairs and I also need my medical records so I can go in for my surgery.

26    On 27 June 2014, the trustee wrote to Mr Jarvie at 4 Jopling Street, North Ryde. The letter stated relevantly:

Initial Letter and Statement of Affairs

Please find enclosed a copy of my letter dated 13 May 2014 (“the Initial Letter”). The original Initial Letter was posted on 13 May 2014 and returned to my office marked as “refused”.

In reference to paragraph A of the Initial Letter, I note that, to date, you have not yet filed your Statement of Affairs with the Official Receiver as required within 14 days from the date on which you are notified of your bankruptcy. I understand that you were provided with a copy of the Sequestration Order made on 9 May 2014 by Mr Nicholas Dale of Gillis Delaney Lawyers on 19 May 2014.

I also note that you were previously made bankrupt in 2006 and your verbal statement to me on 26 May that you have knowledge of the Act.

You should be aware that your period of bankruptcy has not yet commenced as you have not yet filed your Statement of Affairs. Please attend to this matter as a priority.

I confirm again that I will grant you access to any documents or information in my possession that you need to complete your Statement of Affairs by making the documents or information available for your inspection at my office. I note that I previously stated this to you during our meeting at my office on 28 May 2014 and in my letter dated 3 June 2014.

27    The letter records that a copy was sent to Mr Jarvie at PO Box 79 Richmond without enclosures, while enclosures were sent to the North Ryde address “per your request”.

28    On 25 August 2014, the trustee wrote to Mr Jarvie at PO Box 79 Richmond, referring to a letter dated 20 August 2014. The trustee’s letter stated, relevantly:

You have not yet filed your Statement of Affairs which you should do without any further delay.

29    By letter dated 19 September 2014, AFSA informed the trustee that the Official Receiver’s process server had made numerous unsuccessful attempted to contact Mr Jarvie for the purpose of issuing a s 77CA notice, which requires a bankrupt to give the Official Receiver a statement of affairs within 14 days after receiving the notice.

30    By letter dated 2 October 2014, AFSA informed the trustee that a s 77CA notice requiring Mr Jarvie to file a statement of affairs was unable to be served.

31    The trustee deposes to a further conversation with Mr Jarvie on 3 December 2014 at his office. In that conversation, Mr Jarvie informed the trustee that he had lodged a complaint against the trustee with AFSA. The conversation included the following:

Miss Lam said:    “Where are you living at the moment? We would like to arrange a meeting with you to discuss your creditors and proofs.”

He said:    “I live with friends, I have many and will stay with whoever”.

I said:        “What are your friends’ addresses?”

He said:    “I am moving all the time.”

I said:    “So you are not living at Kurrajong Heights?”

He said:    “No, the place is not liveable. The team you sent in didn’t do their job and it is your responsibility.”

I said:        “I didn’t damage the place”.

He said:    “But you took over the property and that is your tenant. You took the chips from him.”

I said:    “Verbiage aside, importantly, we would like to meet with you to go through your creditors’ proofs of debt.”

He said:    “It does not interest me, it’s not my problem. I do not care about money, you have already paid people anyhow.”

Miss Lam said:    “We have not made any distributions.”

He said:    “You paid someone $10,000”.

Miss Lam said:    “That was to Narelle Maher, and she was a secured creditor.”

He said:    “Well you have been paying people.”

I said:    “I will have to put you in the witness box then to answer my questions”.

He said:    “You will have to serve me with documents first; try and find me.

I said:        “Are you refusing to assist me in my administration?”.

He said:    “I don’t care. I will meet with you, the AFSA officer and Simon Lipp. I will tell them about your nasty letters saying you won’t give me any money and there might not be enough to pay all my creditors. I am going to see Barry now.”

Miss Lam said:    “So there is no way to contact you other than through Simon Lipp?”

He said:    “No.”

I said:        “Well then, you best not waste my time.”

32    The trustee gave affidavit evidence that he had formed the view that Mr Jarvie is unlikely to submit a statement of affairs and that he will not receive any reliable assistance from Mr Jarvie to settle a list of his creditors. On the available evidence, I am satisfied that the trustee’s view on these matters is a reasonable one.

33    On that evidence, I am satisfied that Mr Jarvie was aware from early on in his bankruptcy that he was required to file a statement of affairs under the Act and that he has failed to do so.

Should the Court order that distribution of dividends amongst the creditors who have proved their debts shall proceed in accordance with Division 5?

34    On the basis of the trustee’s evidence, I was satisfied that the Court should make the order sought by the trustee. To delay the administration of the estate by refraining from ordering a distribution of the proposed interim dividend would serve no useful purpose and would cause unnecessary prejudice to the creditors of Mr Jarvie. Particularly having regard to the fact that the estate includes the property that is as yet unsold, there is no reason to believe that any prejudice will be caused by the proposed distribution.

Conclusion

35    Accordingly, I made the order sought.

Associate:

Dated:    17 March 2015