FEDERAL COURT OF AUSTRALIA Orr (Trustee), in the matter of Wilkshire v Wilkshire [2017] FCA 220 File number: SAD 329 of 2016 Judge: CHARLESWORTH J Date of judgment: 9 March 2017 Catchwords: BANKRUPTCY – where bankrupt has failed or refused to file a statement of affairs – application by the trustee of the bankrupt's estate for an order pursuant to s 146 of the Bankruptcy Act 1966 (Cth) allowing for the payment of dividends to proven creditors as if the bankrupt had filed a statement of affairs naming those creditors – insufficient assets in the estate to pay the costs of the administration and the debt of the only known creditor in full – application allowed – effect of order Legislation: Bankruptcy Act 1966 (Cth), ss 54, 77CA, 109, 146, 153A Federal Court Rules 2011 (Cth), r 10.24 Cases cited: Official Trustee in Bankruptcy, in the matter of Shaw [1999] FCA 968 Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1 Date of hearing: 30 January 2017 Date of last submissions: 13 February 2017 Registry: South Australia Division: General Division National Practice Area: Commercial and Corporations Sub-area: General and Personal Insolvency Category: Catchwords Number of paragraphs: 22 Counsel for the Applicant: Mr J Neate Solicitor for the Applicant: Lynch Meyer Lawyers Counsel for the Respondent: The Respondent did not appear ORDERS SAD 329 of 2016 IN THE MATTER OF PETER JOHN WILKSHIRE BETWEEN: HILLARY ELIZABETH ORR AS TRUSTEE FOR THE BANKRUPT ESTATE OF PETER JOHN WILKSHIRE Applicant AND: PETER JOHN WILKSHIRE Respondent JUDGE: CHARLESWORTH J DATE OF ORDER: 9 MARCH 2017 THE COURT ORDERS THAT: 1. Distribution of the dividends amongst the creditors who have proved their debts in the bankrupt estate of Peter John Wilkshire shall proceed in accordance with Div 5 of Pt VI of the Bankruptcy Act 1966 (Cth) as if the bankrupt had filed a statement of his affairs and those creditors had been stated to be creditors in it. 2. The applicant is to deliver by ordinary post a copy of these orders and the reasons for judgment to the respondent at the address 51 Bombala Street, Delegate NSW 2633. THE COURT DECLARES THAT: 3. The applicant's costs, charges and expenses of and incidental to this application are costs, charges or expenses of the administration of the respondent's bankruptcy within the meaning of s 109(1)(a) of the Bankruptcy Act 1966 (Cth). Note: Entry of orders is dealt with in Rule 39.32 of the Federal Court Rules 2011. REASONS FOR JUDGMENT CHARLESWORTH J: 1 The applicant, Hillary Orr, is the trustee of the respondent's bankrupt estate. I will refer to her as the Trustee. 2 The respondent, Mr Wilkshire, has not filed a statement of affairs in accordance with s 54(1) of the Bankruptcy Act 1966 (Cth) (Act). 3 The Trustee seeks an order under s 146 of the Act that the distribution of dividends among the creditors who have proved their debts shall proceed in accordance with Div 5 of Part VI of the Act as if Mr Wilkshire had filed a statement of affairs and those creditors had been stated to be creditors in it. The Trustee seeks a further order that her costs of and incidental to this application be paid out of Mr Wilkshire's bankrupt estate. 4 I am satisfied that an order pursuant to s 146 of the Act should be made and that there should be a further declaratory order to the effect that the costs of this application fall within s 109(1)(a) of the Act. FACTS 5 The Trustee relies on her affidavit sworn on 30 November 2016 (the Orr affidavit) and the affidavit of Ms Carter sworn on 20 December 2016 (the Carter affidavit). The following background is drawn from those affidavits. 6 A sequestration order was made against Mr Wilkshire on 12 April 2012 on a creditor's petition presented by Bombala Council. The debts founding the petition were judgment debts in the nature of costs orders obtained in earlier court proceedings. 7 The administration of Mr Wilkshire's bankrupt estate was transferred to the Trustee on 27 August 2012. After her appointment, the Trustee notified Mr Wilkshire repeatedly of his obligation to file a statement of affairs under s 54(1) of the Act. She did so by letters dated 19 March 2013, 22 July 2013, 4 February 2014, 1 May 2015, 11 March 2016 and 31 March 2016. Many of those letters were returned to the Trustee marked "Refused". 8 Under s 77CA of the Act, the Australian Financial Security Authority (AFSA) (being the Official Receiver under the Act) may, by written notice given to a bankrupt, require the bankrupt to give AFSA a statement of affairs within 14 days after receiving the notice. AFSA issued such a notice in respect of Mr Wilkshire on 5 September 2013. The notice was served personally on Mr Wilkshire on 4 December 2013. He did not file a statement of affairs in accordance with the notice. 9 On 9 December 2013, the Trustee became aware that Mr Wilkshire had inherited from his mother's deceased estate a property situated at Unit 3, 5 Irene Street, Redcliffe in Queensland. The Trustee became seized of that property after contested proceedings in the Supreme Court of Queensland. On the sale of the property, the sum of $279,272.42 was paid to Mr Wilkshire's bankrupt estate. The Trustee's searches (which I consider to be reasonable) have not identified any further assets of the bankrupt estate. 10 Bombala Council has proved a debt in the bankruptcy in the amount of $136,450.60. It is presently the only known creditor of the estate. The Trustee's searches (which I also consider to be reasonable) have not identified any creditors or potential creditors of the bankrupt estate. 11 On the basis of affidavit material relied upon by the Trustee, I am satisfied that Mr Wilkshire has not engaged with the Trustee or otherwise complied with s 54(1) of the Act because he is of the view that his bankruptcy has been effected unlawfully. SERVICE 12 The Trustee's attempts to personally serve Mr Wilkshire with the originating application in this action and other documents filed in this proceeding have been unsuccessful. 13 On 30 January 2017, I made orders pursuant to r 10.24 of the Federal Court Rules 2011 (Cth) dispensing with the requirement for personal service of the Trustee's application and further orders providing for substituted service. I am satisfied that service of the originating application and the Orr affidavit has been now been effected in accordance with the orders for substituted service. There remains no appearance on this application by or on behalf of Mr Wilkshire. 14 A period of five weeks has now passed since substituted service was effected. 15 I am satisfied that the only known creditor of the estate has been made aware of this application and the orders sought on it. PRINCIPLES 16 Section 146 of the Act is "intended to facilitate the distribution of dividends among the creditors of the bankrupt 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) 117 FCR 1 at [14] (Sturt) (Sackville J). 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). 17 In Sturt Sackville J said (at [19]): Of course, on any application under s 146 of the Bankruptcy Act the Court must be satisfied that it is appropriate to make an order. The Court may need to be satisfied, for example, that creditors have been notified of the application and have had an opportunity to be heard (although ordinarily the application would be made in the interests of creditors). As in this case, the Court might require evidence that the trustee has taken appropriate steps to ascertain whether there are creditors, other than those who have come to its attention by filing a proof of debt or otherwise. APPLICATION OF PRINCIPLES 18 I am satisfied that it is appropriate to make an order under s 146 of the Act in the circumstances I have described. The efforts of the Trustee to contact and engage with Mr Wilkshire have been costly. Through no apparent fault of the Trustee, those efforts have been ineffective. The Trustee should incur no further expenses encouraging Mr Wilkshire to comply with his obligation to file a statement of affairs. The assets of the estate appear to be limited and the only proven debt is one that attracts post-judgment interest and thus increases over time. Any persistence with that state of affairs would serve only to diminish the returns available to the known creditor and any other creditor who might prove a debt in the bankruptcy prior to the payment of dividends in accordance with Div 5 of Part VI of the Act. 19 Written submissions filed on behalf of the Trustee assert that the administration of the estate is now complete, save for the distribution of a dividend to the only known creditor. The effect of making an order under s 146 of the Act is to enable the administration of the estate to proceed in accordance with the provisions of Div 5 of Part VI, particularly in respect of the declaration and distribution of first, subsequent and final dividends to the known creditors. It is appropriate that I say two things about the order I have determined should be made pursuant to s 146 of the Act. The first is that the order provides for the payment of dividends in accordance with Div 5 of Part VI of the Act to creditors who have proven debts in Mr Wilkshire's bankruptcy. My order allows for the possibility that there may, between the time of the making of the order and the payment of a dividend, be further creditors who come forward. Although the likelihood of that occurring appears remote, nothing in my order should be understood as confining the payment on a dividend only to Bombala Council and to no other creditor. Dividends are to be paid in accordance with Div 5 of Part VI of the Act in accordance with the matters known to the Trustee at the time that a dividend falls to be paid. It is not necessary that I expressly include such a qualification in the order itself. Division 5 of Pt VI will apply in accordance with its terms. 20 Further, although it appears that there is little else by way of investigation and distribution to be done by the Trustee, and nothing further that ought reasonably be done upon the payment of a dividend to known creditors, that circumstance does not, of itself, bring Mr Wilkshire's bankruptcy to an end. Mr Wilkshire remains a bankrupt unless he is discharged from bankruptcy or the bankruptcy is annulled in accordance with the terms of the Act. 21 Mr Wilkshire's bankruptcy cannot presently be annulled by force of s 153A of the Act because upon payment of the Trustee's costs, expenses, charges and remuneration (and any other retention in respect of the same) the payment of a dividend to Bombala Council will not result in the payment of its debt in full. COSTS 22 For clarity, it is appropriate that I make a declaratory order that the costs of and incidental to this application are an expense of the administration of the bankrupt estate within the meaning of s 109(1)(a) of the Act. So far as the prioritisation of that payment is concerned, s 109(1) of the Act will operate in accordance with its terms. I certify that the preceding twenty-two (22) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Charlesworth. Associate: Dated: 9 March 2017