FEDERAL COURT OF AUSTRALIA

Reaper v Vrsecky (Trustee), in the matter of Reaper [2017] FCA 948

ORDERS

THE COURT ORDERS THAT:

1.    Proceedings VID 73, 74 and 286 of 2017 be consolidated.

2.    The consolidated proceeding be dismissed.

3.    The applicant pay the respondent’s costs, as agreed or assessed.

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

REASONS FOR JUDGMENT

O’CALLAGHAN J:

1    The applicant was declared bankrupt on 7 March 2013, pursuant to a sequestration order made by the Federal Magistrates’ Court of Australia, as it then was, on the application of a petitioning creditor. The respondent consented to act as trustee of the applicant’s bankrupt estate on 19 July 2012.

substantive Applications before the Court

2    By his application in VID73/2017, made on 2 February 2017, the applicant applies for orders pursuant to s 178 of the Bankruptcy Act 1966 (Cth) (the Act) seeking:

(1)    review of the merits of the respondent’s report to creditors dated 6 May 2013;

(2)    review of the respondent’s “regard to the merits of the Deputy Commissioner of Taxation proof of debt dated 24 April 2013”;

(3)    review of the respondent’s decision entitling the Deputy Commissioner of Taxation to vote as a creditor in the applicant’s bankruptcy;

(4)    review of the respondent’s “regard to the merits of the Deputy Commissioner of Taxation voting statement dated 17 May 2013”; and

(5)    that the respondent be held personally liable for costs in relation to the review of its report to creditors and decision in respect of the Deputy Commissioner of Taxation proof of debt and voting statement.

3    By his application in VID74/2017, made on 3 February 2017, the applicant applies for orders pursuant to s 178 of the Act, seeking:

(1)    review of the “respondent’s regard to the merits of the Deputy Commissioner of Taxation proof of debt dated 6 September 2013”;

(2)    an order that the respondent “upon receipt of the Australian Taxation Office no claim letter issued on 15 June 2013 and/or 4 June 2014, failed to act to validate the conduct of the administration of the bankruptcy”;

(3)    that the respondent be made personally liable for costs in relation to the review of the Deputy Commissioner of Taxation proof of debt and the conduct of the administration of the bankruptcy.

4    By his application in VID286/2017, filed on 13 February 2017, the applicant also seeks orders:

(1)    pursuant s 33A of the Act, altering the filing date of his statement of affairs;

(2)    declaring that the relevant date of discharge from bankruptcy is 24 February 2015;

(3)    pursuant to s 178 of the Act, for review of the respondent’s conduct of the administration of the applicant’s bankrupt estate;

(4)    that the respondent acted contrary to s 19 of the Act; and

(5)    that the respondent be made personally liable for costs in relation to the review of the applicant’s statement of affairs.

5    In VID73/2017, the applicant relies on an application and supporting affidavit filed 2 February 2017 and an interlocutory application and supporting affidavit filed 19 May 2017 (addressed at [9] below).

6    In VID74/2017, the applicant relies on an interlocutory application and supporting affidavit filed 3 February 2017.

7    In VID286/2017, the applicant relies on an interlocutory application and supporting affidavit filed 13 February 2017.

Interlocutory applications

8    On 27 April 2017, the respondent filed an application seeking orders consolidating the three applications and orders summarily dismissing the consolidated proceeding.

9    Consolidation of proceedings is governed by r 30.11 of the Federal Court Rules 2011 (Cth), which provides:

If several proceedings are pending in the Court and the proceedings:

(a)    involve some common question of law or fact; or

(b)    are the subject of claims arising out of the same transaction or series of transactions;

any party to any of the proceedings may apply to the Court for an order that the proceedings be:

(c) consolidated; or

(d) heard together; or

(e) heard immediately after one another; or

(f) stayed until after the determination of any of the other proceedings.

10    Rule 26.01 governs summary judgment and relevantly provides:

(1)    A party may apply to the Court for an order that judgment be given against another party because:

(a)    the applicant has no reasonable prospect of successfully prosecuting the proceeding or part of the proceeding; or

(b)    the proceeding is frivolous or vexatious; or

(c)    no reasonable cause of action is disclosed; or

(d)    the proceeding is an abuse of the process of the Court; or

(e)    the respondent has no reasonable prospect of successfully defending the proceeding or part of the proceeding.

…

11    In response to the respondent’s summary judgment application, on 19 May 2017, the applicant filed an interlocutory application and supporting affidavit seeking orders as follows (errors in original):

1.     That the Respondent’s Interim Application filed with the Registry of the Federal Court of Australia on 27 April 2017 be dismissed;

2.     That the Respondent, Petr Vrsecky, bear his own costs of and incidental to the Interim Application filed 27 April 2017;

3.     That the Respondent’s costs be that of the Applicant.

4.    Pursuant to paragraph 30.11(e) of the Federal Court Rules 2011 (Cth) proceeding VID73/2017 then VID286/2017 then VID74/2017 be heard immediately after one another unless it becomes impracticable to do so;

5.     The Applicant file and serve any further documents he intends to rely in support of his applications by 26 May 2017.

Alternatively to orders [4 & 5]:

6.    This proceeding proceed under the Applicant’s original application dated 30 December 2016 and supporting affidavit affirmed 30 December 2016;

7.    The Applicant may adjust his original documents to reflect any changes that appear in the applications currently before the Court;

8.    The Applicant file and serve the documents by 26 May 2017;

9.    Proceedings VID74/2017 and VID286/2017 be dispensed with.

12    As I understand the interlocutory application filed 19 May 2017, the applicant seeks, in essence, that the proceeding remain trifurcated. Indeed, that was the substance of his submission on the interlocutory application at the hearing on 19 May 2017. Relevantly, the following exchange occurred between the Court and Mr Reaper:

MR REAPER: Well, your Honour, I agree. They should be consolidated under that original document. What has happened is that when I split those documents up, I inadvertently missed a few things like becoming aware of the matters in those applications. Certainly, I didn’t become aware of them any time in 2013, 2012, any other time. The fact that the trustee has refused to give me those documents and I’ve had to go elsewhere to try and understand how the matters occurred or what happened. If the proceedings are consolidated, your Honour, under the original document that was lodged on 30 December, it will resolve a lot of those issues in as far as becoming - - -

HIS HONOUR: You consent to the application to consolidate.

MR REAPER: No, I don’t, your Honour. I seek the consolidation be made under the original document lodged with the court. It’s a lot different. I submit that if we continue under the three applications – if the three applications are consolidated, that’s going to cause a lot of confusion and, of course, double up on a lot of items as Mr Devanny has pointed out. If it reverts back to the original document that was filed on 30 December, there is no confusion, it’s one simple document and there’s no double-ups of anything…

13    I do not accept Mr Reaper’s submissions as to the utility or appropriateness of consolidating the proceeding. Rather, I will make the order sought by the respondent because many of the claims, to the extent that I understand them, are in substance the same. The applications involve the same parties, substantially similar facts and arise out of the same transaction or series of transactions.

Relevant provisions of the Act

14    Sections 19, 33A, 54(1) and 178(1) and (2) of the Act are relevant to the applicant’s claims.

15    Most of the applicant’s claims concern s 178 of the Act Section 178(1) and(2) of the Act provide as follows:

(1)    If the bankrupt, a creditor or any other person is affected by an act, omission or decision of the trustee, he or she may apply to the Court, and the Court may make such order in the matter as it thinks just and equitable.

(2)    The application must be made not later than 60 days after the day on which the person became aware of the trustee’s act, omission or decision.

16    Section 178 of the Act was repealed by item 54 in Pt 2 of Sch 1 to the Insolvency Law Reform Act 2016 (Cth), however the commencement of that item has been delayed, until 1 September 2017: Insolvency Law Reform (Transitional Provisions) Regulations 2016 (Cth), reg 5(2)(p). In any event, the Act, as in force immediately before 1 March 2017, continues to apply to proceedings commenced prior to that date, as each of the applications now before the Court were: Insolvency Law Reform Act 2016 (Cth), s 2 (item 2), Sch 1, Pt 3, items 102 (definitions of “commencement day” and “old Act”) and 164(1)(a). Section 178 thus continues to apply to the administration of the applicant’s estate.

17    Section 19 of the Act provides:

Duties etc. of trustee

(1) The duties of the trustee of the estate of a bankrupt include the following:

(a)    notifying the bankrupt’s creditors of the bankruptcy;

(b)    determining whether the estate includes property that can be realised to pay a dividend to creditors;

(c)    reporting to creditors within 3 months of the date of the bankruptcy on the likelihood of creditors receiving a dividend before the end of the bankruptcy;

(d)    giving information about the administration of the estate to a creditor who reasonably requests it;

(e)    determining whether the bankrupt has made a transfer of property that is void against the trustee;

(f)    taking appropriate steps to recover property for the benefit of the estate;

(g)    taking whatever action is practicable to try to ensure that the bankrupt discharges all of the bankrupt’s duties under this Act;

(h)    considering whether the bankrupt has committed an offence against this Act;

(i)    referring to the Inspector‑General or to relevant law enforcement authorities any evidence of an offence by the bankrupt against this Act;

(j)    administering the estate as efficiently as possible by avoiding unnecessary expense;

(k)    exercising powers and performing functions in a commercially sound way.

(2)    Where a person who became a bankrupt on a creditor’s petition is unable to prepare a proper statement of affairs, the trustee may employ, at the expense of the estate, a qualified person to assist in the preparation of the statement.

18    Section 54(1) of the Act provides:

Bankrupt’s statement of affairs

(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.

Penalty: 50 penalty units.

19    Section 33A of the Act provides:

Alteration of filing date for statement of affairs

(1)  This section applies to a statement of affairs that was filed for the purposes of section 54, 55, 56B, 56F or 57 by a bankrupt, or by a person who later became a bankrupt.

(2)  If the Court is satisfied that the person believed, on reasonable grounds, that the statement had already been filed at a time before it was actually filed, the Court may order that the statement is to be treated as having been filed at a time before it was actually filed.

(3)    The Court cannot make an order that would result in the person being discharged from bankruptcy earlier than 30 days after the order is made.

(4)    In this section:

filed includes presented, lodged or given.

Consideration

Section 178 claims

20    Even assuming, without deciding, that Mr Reaper’s applications seek to complain of “acts, omissions or decisions” of the trustee in bankruptcy, within the meaning of s 178(1) of the Act, nothing in any of the materials on which he relies suggests that the applicant seeks to complain about “acts, omissions or decisions” of which he became aware within 60 days of the applications being made. In fact, almost all of the facts upon which he seeks to rely, to the extent that they are comprehensible, relate to events that happened between 2012 and 2014. The exceptions are the following paragraphs in the applicant’s affidavit affirmed on 27 January 2017 and filed in VID73/2017, which reads as follows:

35.     As I understand it, [the proof of debt lodged with the trustee in bankruptcy on 6 September 2013] replaced [the proof of debt lodged with the trustee in bankruptcy on 24 April 2013]. The [Deputy Commissioner of Taxation] in lodging [the proof of debt lodged with the trustee in bankruptcy on 6 September 2013] rendered [the proof of debt lodged with the trustee in bankruptcy on 24 April 2013] obsolete. To clarify, on 24 July 2016 I contacted the [Australian Taxation Office].

36.    In response, on 2 September 2016 the [Australian Taxation Office] sent to me a letter informing that it has withdrawn its no claim letter and re-raised the balance of the [Director Penalty Notice] being $19,064.89.

37.    In reply, on 14 September 2016 I lodged a complaint with the Inspector-General of Taxation:

(a)    Ultimately, the outcome of the Commonwealth Ombudsman was upheld; and

(b)    The [Australian Taxation Office] issued fresh no claim letters to the trustee on 8 November 2016.

(c)    No progress was made concerning the application [Deputy Commissioner of Taxation] proof of debt.

38.    I state that the [Australian Taxation Office] no claim letters issued to the trustee brought to his attention that he is associating himself with documents he knows, or ought reasonably to know, are false or misleading.

21    Paragraph 38 of the applicant’s affidavit affirmed on 27 January 2017 could be read as making a complaint about matters within the terms of s 178 of the Act. However, that would be a generous reading of the affidavit.

22    In any event, at the hearing on 24 March 2017 and at the hearing of the summary judgment applications on 19 May 2017, I raised the question of the application of s 178(2) with the applicant (who represented himself on both occasions). I asked him if he had any explanation for the delay in bringing the applications.

23    At the hearing on 19 May 2017, Mr Reaper said this by way of explanation:

I will just point out, your Honour, that a lot of those documents that I rely on or the matters that I’ve become aware of, I’ve never been given a copy or been notified of the outcome of those matters. The last document I really received from the trustee was a 60-day report to creditors. I never received a document after that concerning whether the trustees – the outcome of that 60-day report. That’s really all I have on those matters, your Honour.

24    I do not regard that, or anything else that the applicant has said, as constituting a comprehensible explanation for delay.

25    The Court has a discretion to extend the time prescribed by s 178(2) of the Act: see s 33(1)(c) of the Act; and Kerr (Trustee), in the matter of Cross (Bankrupt) v Bechara [2015] FCA 284 at [44]-[46] per Jagot J.

26    Absent any explanation for the delay, however, there is no basis for exercising that discretion in the circumstances of these applications. I would also decline to exercise any discretion to permit the complaints identified in the affidavits filed in support of these applications because they are largely incomprehensible.

27    To the extent that the applicant seeks relief in respect of an alleged breach of the trustee’s duties under s 19 of the Act, that claim relies on the application for relief under s 178. For reasons already expressed, neither claim can succeed.

Statement of affairs claim

28    The respondent made the following submissions in respect of the applicant’s statement of affairs claim:

18.    The remaining claim by Mr Reaper is an application that in effect, would backdate his provision of a statement of affairs to a date over 12 months prior to the time that a sequestration order was made against him.

19. The difficulty with Mr Reaper’s argument is two-fold, and fatal:

a. Section 54 of the Act requires a bankrupt to make out and file with the Official receiver a statement of his or her affairs, within 14 days from the day on which he or she is notified of the bankruptcy. That statement must be made as to his affairs at that time, not of their affairs at some previous time as argued for by Mr Reaper; and

b. Section 33A(3) restricts the Court’s power to make an order that would result in the person being discharged from bankruptcy earlier than 30 days after the order is made. Mr Reaper is already discharged from bankruptcy, the Court lacks power to order anything.

20.     Although section 33(A)1 suggests that the section applies to a statement of affairs filed by a person who later became a bankrupt, that is clearly referring to individuals who present a debtor’s petition that later become a bankrupt as a result of it under sections 55, 56F or 57 of the Act.

29    I accept those submissions. They are unarguably correct.

DISPOSITION

30    For the reasons given above, the consolidated proceeding will be dismissed pursuant to r 26.01 of the Federal Court Rules 2011 (Cth). The applicant should pay the respondent’s costs, as agreed or assessed.

Associate:

Dated:    21 August 2017