Federal Court of Australia

Vines (Trustee), in the matter of McKay (Deceased) [2026] FCA 765

ORDERS

THE COURT ORDERS THAT:

1.    Pursuant to s 146 of the Bankruptcy Act 1966 (Cth), distribution of the dividends among creditors who have proved their debts in the bankrupt estate of the late Mercedes McKay shall proceed in accordance with Pt VI, Div 5 of the Bankruptcy Act as if the bankrupt had filed a statement of affairs and those creditors had been stated to be creditors in it.

2.    The costs of this application be costs of the bankruptcy and be paid out of the bankrupt estate.

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

REASONS FOR JUDGMENT

BANKS-SMITH J:

1    The trustees of the bankrupt estate of the late Ms Mercedes McKay seek an order pursuant to s 146 of the Bankruptcy Act 1966 (Cth) that dividends may be distributed among creditors who have proved their debts in the bankrupt estate as if a statement of affairs had been filed and those creditors had been stated to be creditors in it.

Circumstances

2    Ms McKay was made bankrupt by way of a sequestration order made 25 November 2024 on the petition of the Australian Taxation Office. The Official Trustee was appointed trustee of the bankrupt estate.

3    On 27 November 2024 the Official Trustee issued a letter to Ms McKay notifying her of her bankruptcy and her obligations as a bankrupt, including the requirement to complete and lodge a statement of affairs pursuant to s 54(1) of the Bankruptcy Act.

4    The Official Trustee transferred the estate to the current trustees under s 181A of the Bankruptcy Act on 24 January 2025.

5    The trustees were made aware upon their appointment that Ms McKay had not yet completed and lodged a statement of affairs in respect of the bankrupt estate. On 29 January 2025 Mr Vines caused a letter to be issued to the bankrupt by email and post. The letter provided Ms McKay with some general information regarding her bankruptcy and also required that she complete and return (among other things) a statement of affairs within 14 days of receipt of the letter. The trustees did not receive a response.

6    Ms McKay was the registered proprietor of a property in Bedford, Western Australia. The property was her last known address. On 17 February 2025 Mr Vines attended the property, and knocked on the door but there was no response. He then placed a copy of the letter dated 29 January 2025 on the doorstep. Further attempts were made to contact Ms McKay by telephone and email.

7    On 18 February 2025 the trustees were informed by a man who stated that he was a friend of Ms McKay that she had been living at the property, but had sadly passed away the week before. A copy of Ms McKay’s death certificate was in evidence, recording her death on 11 February 2025.

8    On 27 March 2026 Mr Vines caused to be conducted a search of the National Personal Insolvency Index which confirmed that no statement of affairs has been lodged in respect of the bankrupt estate prior to Ms McKay’s death or at all.

9    The trustees made inquiries to ascertain whether there was a will and whether any member of Ms MacKay’s family had intended to apply for probate or letters of administration. The trustees also searched for a will at the property and asked other persons if they had seen a will at the house at any time. The trustees’ efforts and those of their staff and others were detailed in the affidavit evidence filed in support of this application. I am satisfied that the trustees made all reasonable attempts to locate any will and ascertain the position of family members. In the end, no will was found and no family member said they intended to apply for probate or letters of administration.

10    There is a fund available in the bankruptcy.

11    The trustees’ inquiries indicated that the ATO is owed approximately $1,365,202. The bankrupt estate had two (purported) secured creditors, being the City of Bayswater (for rates) and Delta Resource Management Pty Ltd (in liq), both of which lodged caveats over the property. There was no mortgage registered over the property.

12    The trustees did not admit that the claim made by Delta was a secured claim, and subsequently negotiated a settlement with its liquidators. Both caveators’ claims have been resolved.

13    The trustees’ efforts to identify whether there may be any other creditors of the bankrupt estate included:

(a)    obtaining and reviewing a credit report of Ms McKay;

(b)    issuing letters to 47 banking and financial institutions to ascertain whether Ms McKay held any accounts with those institutions, and whether any monies were owing to them by Ms McKay;

(c)    conducting a search of Ms McKay’s residence;

(d)    contacting the liquidator of Delta (of which Ms McKay was previously a director) to enquire as to whether the liquidator was aware of any potential liabilities of Ms McKay; and

(e)    placing advertisements in The West Australian and The Australian newspapers calling for any creditors of the bankrupt estate.

14    None of these steps identified any other creditors of the bankrupt estate.

15    The Bedford property has subsequently been sold. The trustees estimate that there will be approximately $145,154 in the bankrupt estate for distribution to creditors.

16    The question of distribution is therefore real and not academic.

Principles

17    Section 146 of the Bankruptcy 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.

18    The provision is ‘intended to facilitate the distribution of dividends in circumstances where the trustee has not had the benefit of a statement of affairs prepared by the bankrupt’: Re Sturt; Ex parte Official Trustee in Bankruptcy [2001] FCA 1649; (2001) 117 FCR 1 at [14] (Sackville J); Barnet (Trustee), in the matter of Zhang (Bankrupt) v Zhang [2017] FCA 924 at [22] (Lee J).

19    Its purpose 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’: Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968 at [4] (Gyles J).

20    It is not necessary for the trustees to establish a wilful refusal or neglect to file the statement of affairs. A mere omission will suffice: Sturt at [13]-[14]; Vines (Trustee), in the matter of Taylor (Deceased) v Bosnyak [2025] FCA 436 at [34] (Hill J).

21    There are no express statutory requirements or limitations in respect of the exercise of the Court’s power to make an order under the section: Dixon (Trustee) v Grant, in the matter of the bankrupt estate of Grant [2025] FCA 1440 at [12] (Stewart J).

22    The Court must be satisfied that it is appropriate to make the order. Relevant factors include whether the trustee has taken steps to ascertain whether there are creditors, other than those who have come to its attention by filing a proof of debt or otherwise, and whether the creditors have been notified of the application and have had the opportunity to be heard: Sturt at [19].

Determination

23    There has been a failure to file a statement of affairs. Ms McKay was notified of the sequestration of her estate and the obligation to provide a statement of affairs, but did not do so prior to her death.

24    Although s 246 of the Bankruptcy Act requires a legal personal representative to file a statement of affairs, that provision does not apply in the circumstances of this case. It applies where an order has been made under s 244 (where a creditor’s petition has been presented after the debtor has died) or s 245 (where a debtor dies after they have been served with a creditor’s petition but before a sequestration order has been made).

25    The trustees submitted that they are finalising their investigations and have realised all of the assets available, and that there is nothing else that ought reasonably to be done in the administration of the bankrupt estate, other than the distribution of dividends to creditors.

26    As to any prejudice, the trustees submitted that there is no conceivable prejudice to any persons if the orders sought are made, and any potential beneficiaries of the bankrupt’s deceased estate will not suffer any prejudice given the bankrupt estate’s liabilities far exceed its assets. Rather, the trustees submitted that the creditors of the bankrupt estate will suffer prejudice if the orders are not made, as the trustees will not be permitted to distribute any dividends.

27    For completeness, although the trustees were not required to serve the application on any person, Ms Charmaine James, the legal representative for the trustees, deposed to giving notice of the application on various parties, including the ATO and family members of Ms McKay. None of those parties sought to participate or be heard.

28    I am satisfied that an order under s 146 of the Bankruptcy Act is appropriate in the circumstances, as it will permit the trustees to distribute the dividends and finalise the bankrupt estate. I add that the submissions filed on behalf of the trustees were very useful.

Orders

29    There will be orders accordingly. Whilst the prospect seems highly unlikely, the orders also allow for the potential for further creditors to come forward prior to any dividend being distributed.

Associate:

Dated:    18 June 2026