Consideration
64 In Owners of Strata Plan No 23007 v Cross (2006) 153 FCR 398 at 411 [53] (Cross), Edmonds J explained that "the provisions of O 43, r 13 [the predecessor to r 10.09 of the FCR] are triggered if the person to be served is a 'person under disability'. Where it is said that the person is a 'mentally disabled person' rather than an infant or minor the relevant question is: Is the person concerned a person who, owing to mental illness, is incapable of managing his or her affairs in respect of the proceedings? The words 'in respect of the proceedings' are important because they focus upon the person's ability to bring or defend proceedings rather than whether the person is able to manage his or her affairs generally or in relation to some other transaction". The three references to "the proceeding" in r 11.08(1) of the FCCR have a similar effect.
65 As Edmonds J explained, that approach is consonant with the common law approach to capacity, citing Gibbons v Wright (1954) 91 CLR 423 at 437 (Dixon CJ, Kitto and Taylor JJ) ("The law does not prescribe any fixed standard of sanity as requisite for the validity of all transactions. It requires, in relation to each particular matter or piece of business transacted, that each party shall have such soundness of mind as to be capable of understanding the general nature of what he is doing by his participation"). See Cross at 411 [53].
66 Edmonds J also referred to Masterman-Lister v Brutton & Co (Nos 1 and 2) [2003] 3 All ER 162 at 187-8 [74] (Chadwick LJ), citing Re C (adult: refusal of medical treatment) [1994] 1 All ER 819, in support of the proposition that "the exigencies of bringing or defending the proceedings are the focal point of the test of capacity for the purposes of the Rules". See Cross at 412 [55].
67 His Honour then posed the next question that arises: namely, "what are the considerations to which the Court should have regard in applying that test"? See Cross at 412 [55].
68 After referring to Masterman-Lister v Brutton & Co (Nos 1 and 2) [2003] 3 All ER 162 at 188 [75] (Chadwick LJ) and related cases, Edmonds J said at 413 [61]:
In light of what is said in these authorities and having regard to the use of the words 'in respect of the proceedings' in the [Federal Court Rules 1979 (Cth)], the following are relevant to determining capacity in the present case:
(a) whether Ms Cross had the ability to understand that she required advice in respect of the Creditor's petition which had been left with her;
(b) whether she had the ability to communicate this requirement to someone who could arrange an appointment with an appropriate advisor or, alternatively, that she could arrange such an appointment of her own accord;
(c) whether she had the ability to instruct her advisor with sufficient clarity to enable him or her to understand the situation and to advise her appropriately; and
(d) whether she had the ability to make decisions and give instructions based upon, or otherwise give effect to, such advice as she might receive.
69 I have emphasised the words "the following [factors] are relevant to determining capacity in the present case" because they make tolerably clear that his Honour was not intending the factors to be a "checklist" intended to operate as a substitute for the application of the test under the rules, viz, in this case, whether Ms Burnett was, at the time she was given (to use a neutral term) the creditor's petition on 5 September 2017, a person who did not understand the nature and possible consequences of the proceeding, or was not capable of adequately conducting, or giving adequate instruction for the conduct of, the proceeding.
70 Cross was a most unfortunate case. At the time Ms Cross was personally served with the creditor's petition she was, to the knowledge of the creditor's solicitor, an involuntary patient in a psychiatric ward of a hospital. She was not present, nor was she represented, when the creditor's petition came on for hearing - the Registrar duly made a sequestration order, without being told of Ms Cross's circumstances or the circumstances in which she had been purportedly served. See Cross at 425 [111]-[112] (Edmonds J).
71 The mental capacity required by the law in respect of any proceeding is relative to the particular proceeding which is being pursued or defended. As Debelle J observed in Dalle-Molle v Manos (2004) 88 SASR 193 at 199 [23]:
Just as the general rule is that the understanding must be issue-specific to the particular transaction or documents, so in the case of litigation, the understanding must, I think, be in relation to the facts and the subject matter of the particular case. Legal proceedings have a spectrum of complexity. They can extend from the most simple issues through a range of complexity to quite involved and complex litigation. As a general rule, an action to recover a debt or to recover damages consequent upon a motor vehicle accident are examples of more simple forms of litigation, although even proceedings of that kind might involve a degree of complexity. However, an action such as this action where there are two defendants, where the issues against each defendant differ, and where there are real issues as to the nature of the duty of care, the standard of care, whether there was a breach of the duty of care and questions as to causation is an example of more complex litigation. It may be necessary to compromise against one defendant but not the other which only adds complexity to the decision whether or not to compromise the action. Thus, the question whether the person has the capacity to give sufficient instructions must be examined against the facts and subject matter of the particular litigation and the issues involved in that litigation.
72 It follows that a person can have the requisite capacity for one proceeding and lack it for another. See, eg, Slaveski v Victoria (2009) 25 VR 160 at 183 [28] (Kyrou J). To borrow words used by Chadwick LJ in Masterman-Lister v Brutton & Co (Nos 1 and 2) [2003] 3 All ER 162 at 188 [74], "[t]he test is issue specific; and, when applied to different issues, it may yield different answers".
73 It is important, in the circumstances of the case before me, also to bear in mind that "[i]t is not the task of the courts to prevent those who have the mental capacity to make rational decisions from making decisions which others may regard as rash or irresponsible". See Masterman-Lister v Brutton & Co (Nos 1 and 2) [2003] 3 All ER 162 at 189 [78] (Chadwick LJ).
74 Counsel for Ms Burnett accepted that the burden of proving that Ms Burnett was under a relevant incapacity at the time she was given the creditor's petition rested with his client, because there is a presumption of sanity which applies unless and until the contrary is proved.
75 He submitted that he had discharged the burden, and that I should find that, at the time she was given the creditor's petition (5 September 2017), Ms Burnett was under a relevant incapacity in respect of the bankruptcy proceeding that the creditors had commenced against her because:
(1) She has never accepted the outcome of the initial decision in the Magistrates Court.
(2) She has commenced and run myriad and hopeless applications in court since then.
(3) She holds fixed and unshakeable views about the bankruptcy notice and the proceeding, including that they are "false".
(4) Her diagnosis of schizophrenia, which is based on delusional beliefs, impairs her ability to take on advice that is contrary to her own.
(5) Her diagnosis of "Paranoid Schizophrenia with a specifier of continuous" means that "Ms Burnett has been unwell for many years without treatment … [probably since] she lived at the brickworks".
(6) "Her illness has played out through the Courts, with paranoid beliefs, thought disorder, illogicality and no resolution of the legal proceedings".
(7) She "may be able to take advice about simple tasks, but when asked to pay a debt that relates to delusions about her health and delusions involving legal practitioners, she quickly becomes paranoid and illogical".
(8) She "is restricted in her ability to process new information. It is common for patients who suffer schizophrenia to have limited or no insight … she rejects [Dr Reid's] formulation and is adamant not to receive treatment. She therefore does not have any understanding how her beliefs have impacted her decision making".
(The quotations relied on are from Dr Reid's report.)
76 Because Dr Reid had only first met and consulted with Ms Burnett in 2020, it was necessary for Mr Williams also to rely on what is sometimes referred to as the retrospective presumption of continuance for the proposition that later evidence of a person's psychiatric condition may operate in particular circumstances retrospectively to aid in proving the probability of the existence of that condition at an earlier point in time. See, eg, Cross at 414-16 [66]-[72] (Edmonds J), citing Murphy v Doman (2003) 58 NSWLR 51 at 57 [30], 58 [36]-[37] (Handley JA).
77 In essence, Mr Williams submits that, in light of Dr Reid's evidence and with the assistance of that presumption, I should find that Ms Burnett suffered from schizophrenia and had the various personality and character traits referred to above at the time she was given the creditor's petition.
78 There are, in my view, two insuperable difficulties in accepting Mr Williams' submissions.
79 The first is that Dr Reid agreed in cross-examination that it was "hard [for him] to comment" about whether Ms Burnett understood the nature of the proceeding against her around the time she was given the creditor's petition. As appears above (at [50]), counsel for the creditors asked Dr Reid: "… the court is looking at this very point in time that I've taken you to [the giving of the creditor's petition] … I accept what you say about her condition being concerning for you at the moment, but going back to this point in time, she clearly understood, I suggest, the nature of the proceeding against her"? Dr Reid replied: "Again, I think my concern is she has got a major condition. I think it has been present for many years and likely to be present in that time … So unless I had seen her at that time, it's hard to comment …" (emphasis added). That, it seems to me, amounts to a concession by Dr Reid that he could not give reliable evidence about the critical question of Ms Burnett's condition and symptoms in 2017 - which, on one view, is not surprising in circumstances where Dr Reid had only consulted with Ms Burnett twice, the first occasion being in 2020.
80 The second insuperable difficulty is that, by her actions in the relevant time after she was given the creditor's petition, Ms Burnett demonstrated in a tolerably clear way that she understood the nature and possible consequences of the bankruptcy proceeding, and was capable of adequately conducting it, or giving adequate instruction for the conduct of it, including as follows:
(1) On the day after she was given the creditor's petition, Ms Burnett appeared for herself before Holt AsJ at the continuation of a hearing of an application made against her in the Supreme Court of Tasmania and succeeded in having the application dismissed.
(2) Three days after she was given the creditor's petition, Ms Burnett lodged and served a Form B4 (notice of appearance) and a Form B5 (notice stating grounds of opposition) comprising five pages in the bankruptcy proceeding. She also lodged an affidavit of ten pages.
(3) On 24 October 2017, Ms Burnett contacted the Supreme Court of Tasmania (via email to the chambers of Holt AsJ) asking for a record of proceedings sheet because she needed it "for [her] bankruptcy affidavit".
(4) On 3 November 2017, Ms Burnett filed a further affidavit, which she had prepared, in support of her opposition to the creditor's petition.
(5) On 4 November 2017, Ms Burnett sent a letter to the registry of the Federal Court as follows:
Re papers I filed on 3 November 2017
I put some writing in the wrong place.
On page 1 of attachment 'C' I have written some of my submissions to court that go with the submissions or applications on the court form.
I also wish to advise that I will be asking for an adjournment on 20 Nov 17 so I have more time to get documents in order and try to find a lawyer.
(6) On 1 December 2017, Ms Burnett appeared at the hearing of the creditor's petition, and when Registrar Browning made the sequestration order against her, she immediately applied for a stay of that order.
(7) On 27 February 2018, Ms Burnett filed a Form B12 (notice to creditors of application for review of registrar's decision).
81 It seems to me that, in the circumstances of this case, the best evidence of whether Ms Burnett understood the nature and possible consequences of the proceeding and was capable of adequately conducting it, or giving adequate instruction for the conduct of it, at the time she was given the creditor's petition is to look to her conduct in the immediate aftermath of receiving the petition. Whether what Ms Burnett did was prudent is not the relevant question. But the steps she took were the steps that a person served with a creditor's petition is required under the FCCR and FCCBR to take in order to seek to resist it, including filing a notice of appearance, a statement of grounds of opposition and an affidavit in support. And when the sequestration order was made, Ms Burnett sought (unsuccessfully) a stay of the order, and later made an application for it to be reviewed. All of that, it seems to me, speaks volumes about Ms Burnett's capacity adequately to understand and conduct the proceeding brought against her. The wisdom of doing so, and her motivations for doing so, are not to the point, for the reasons set out above.
82 For those reasons, in my view, Ms Burnett did not establish (the burden being on her) that she did not understand the nature and possible consequences of the proceeding or was not capable of adequately conducting, or giving adequate instruction for the conduct of, the proceeding at the time she was given the creditor's petition.
83 If I am wrong about that, and Ms Burnett was a person who needed a litigation guardian in relation to the proceeding at the time she was given the creditor's petition, then the creditor's petition was required to be served on a person who was entitled to be her litigation guardian or in whose care she was. In that event, there would be a breach of the FCCR in the way in which service was purported to be effected. That means that the sequestration order would be voidable. See Cross at 423 [105] (Edmonds J).
84 The issue that would next arise in considering the application under s 153B of the Act is whether, even though the sequestration order ought not to have been made, the court would (on that assumed basis) decline to annul the bankruptcy in the exercise of the discretion under s 153B(1). See Ozer v Australian Liquor Marketers Pty Ltd [2001] FCA 1197 at [30] (Heerey, Emmett and Allsop JJ) ("In considering the application under s 153B of the Act, the primary judge had a discretion, even though he was satisfied that the order ought not to have been made, to decline to annul the bankruptcy"). See also Boles v Official Trustee in Bankruptcy [2001] FCA 639; 183 ALR 239 at 243 [16] (Emmett J, Katz and Conti JJ agreeing); Shaw v Yarranova Pty Ltd (2017) 252 FCR 267 at 289 [101] (North, Perry and Charlesworth JJ).
85 The creditors submit that I should exercise the discretion not to annul the bankruptcy because of the way that Ms Burnett has behaved during the years since the sequestration order was made.
86 In that regard, the creditors say that I should have regard to the sorry history of Ms Burnett's refusal to cooperate with the trustee in the administration of the estate, including:
(a) despite multiple requests, a continuing failure to lodge a statement of affairs (SOA);
(b) on multiple occasions, failing to respond to correspondence from the trustee;
(c) on multiple occasions, failing to meet with the trustee or his representatives;
(d) failing to return phone calls made by the trustee or his representatives;
(e) on occasions, hanging up on the trustee's representatives when they would try and converse with her in order to progress the administration of the bankrupt estate;
(f) generally refusing to recognise the trustee's standing as the trustee of her bankrupt estate or the existence of the bankrupt estate at all; and
(g) failing to cooperate with the Australian Financial Security Authority (AFSA).
87 The litany of events to which these matters relate is set out in the trustee's affidavit sworn 14 January 2021.
88 The trustee says that as a result of that conduct: the administration of the estate has been delayed; additional time has had to be taken to administer the estate; and, therefore, the costs associated with the administration are significantly more than in an "ordinary" bankruptcy. He also swore that the fact that Ms Burnett has (to this day) failed to lodge an SOA has caused difficulties, because he has not been provided with: personal details and circumstance of the bankruptcy; employment and income details; information in relation to unsecured and secured creditors; details of the assets that the bankrupt owns including bank accounts, motor vehicles and real estate; details of assets to which she has contributed; information in relation to any transfers of her assets; details of businesses and companies in which she has been involved; and details of any relevant trusts.
89 The trustee gave a (non-exhaustive) summary of his interactions with Ms Burnett, as follows:
On 4 December 2017, Adam Johnston, of my office, telephoned the Bankrupt … Mr Johnston confirmed that he was speaking with her and identified himself. The Bankrupt confirmed her identity. The Bankrupt claimed that she had written to the AFSA regarding the matter of her bankruptcy. Mr Johnston pointed out to the Bankrupt that I had consented to act as trustee to which the bankrupt replied that she did not want to deal with me and then hung up on Mr Johnston.
On 4 December 2017, I caused an envelope containing a package of documents to be sent to the Bankrupt at 56 Coleman Street, Moonah in Tasmania (the Coleman Street property) by registered post …
On 4 December 2017 Mr Johnston sent an email to the Bankrupt … confirming the Bankruptcy and my appointment to the estate. Attached to the email was a copy of the certificate of appointment, a copy of the Sequestration Order, a copy of a notice of a bankrupt's responsibilities and a copy of the initial package of documents including a blank SOA.
In the email referred to … above, Mr Johnston advised the Bankrupt that she was required to attend on me at my office on 7 December 2017. The Bankrupt failed to comply with my request or contact my office to arrange an alternative time to do so.
On 8 December 2017, the envelope containing the initial package of documents issued to the Bankrupt at the Coleman Street property by registered post on 4 December 2017 was returned to my office. The envelope had not been opened and was marked 'RTS refused'.
On 8 December 2017, I caused an envelope of documents to be sent to the Bankrupt at the Coleman Street property. The envelope was sent by ordinary post and contained a letter addressed to the bankrupt dated 8 December 2017 and further copies of a SOA, Instructions for completing the SOA and notice of bankrupt's responsibilities.
On 8 December 2017, Mr Johnston telephoned the Bankrupt … He identified the person who answered the call as being the Bankrupt from his call to her on 4 December 2017. The Bankrupt claimed she could not hear Mr Johnston and hung up on him.
On 19 December 2017, the envelope of documents issued to the Bankrupt at the Coleman Street property on 8 December 2017 was returned to my office unopened and marked 'Return to Sender'.
On 19 December 2017, Mr Johnston and I attended the Coleman Street property. I knocked on the front door and rang the doorbell several times. However, no person came to the door. Mr Johnston slid an envelope containing a letter addressed to the Bankrupt dated 18 December 2017 and a further copy of the initial package of documents.
On 19 December 2017 Mr Johnston sent an email to the Bankrupt … Attached to the email was a copy of the letter referred to … above and a further copy of the initial package of documents. In his email, Mr Johnston invited the Bankrupt to telephone him at my office to discuss a way forward in order to keep the costs of the administration to a minimum.
Mr Johnston made two attempts to telephone the Bankrupt on 20 December 2017 … Each of his calls went to answer phone. The answer phone message did not identify the owner of the phone. A message was left for the Bankrupt to call him back at my office.
On 18 January 2018, I caused a letter to be sent to the Bankrupt at the Coleman Street property. The letter noted that one of the possible outcomes was that the Coleman Street property be sold; that it was my least preferred option and that if it came to that, I would be seeking vacant possession. A copy of the letter was sent to the Bankrupt [by email] on the same day. The envelope containing the abovementioned letter was returned unopened to my office on 1 February 2018 marked 'Return to Sender'.
On 5 February 2018, I caused a letter to be sent to the Bankrupt at the Coleman Street property. In the letter I noted that investigations had confirmed that the Coleman Street property had been transferred to Christopher Isherwood and Fiona Burnett as trustees for the Dragon Glenn Family trust in April 2016. Further, I requested that the Bankrupt provide me with contact details for the trustees and strongly encouraged the Bankrupt to engage with my office to avoid unnecessary costs being incurred in the bankruptcy administration. A copy of the letter was sent to the Bankrupt by Mr Johnston [by email] on the same day.
In April 2018, I received a telephone call from the Bankrupt's local MP, Ella Haddad. Ms Haddad told me that the Bankrupt had sought assistance from her. She asked to meet with me to discuss the matter.
On 9 May 2018, I met with Ms Haddad, the Bankrupt and a support person. At the meeting it was raised with me that the Bankrupt had purchased the Coleman Street Property with money that she had received for compensation. Given that the Act provides that compensation money received by a bankrupt does not form a part of the bankrupt estate, this is a relevant point. I asked for evidence from the Bankrupt so that I could consider the claim. I understood from the meeting that the bankrupt would provide me with the evidence.
On 15 May 2018, Ms Haddad sent an email to the Bankrupt and myself regarding actions that she and the Bankrupt would undertake, including providing information to me to support the claim that the Coleman Street property was purchased with compensation monies …
On 31 May 2018, in response to a follow up email I sent on 30 May 2018 for information, I received an email from the Bankrupt … In the email the Bankrupt advised that she was still trying to get the relevant documents.
On 12 June 2018, I received a letter from Miller Sockhill Lawyers that advised they acted for the Bankrupt and that they had been instructed that the whole or substantially the whole of the money paid for the purchase or used in the acquisition, of the Bankrupt's real property is protected money, and therefore section 116(1) of the Act does not extend to that real property. The Bankrupt's lawyers further advised that they were taking further instructions in relation to providing evidence of same.
On 4 July 2018, having not heard from Miller Sockhill Lawyers I emailed them and requested advice as to their progress on the matter …
On 4 July 2018, in response to my follow up email of the same day, Miller Sockhill Lawyers advised it had suspended its retainer with the Bankrupt and did not hold any instructions.
On 18 August 2018, I sent an email to the Bankrupt … The email addressed the fact that she had stated during the course of a court hearing, between 10 August 2018 and 4 October 2018, that she had in her possession the sum of $58,000.00 in cash. I advised that … if she maintained that she had $58,000.00 in cash in her possession then she was instructed to deliver it to me forthwith; and … [i]f she asserted that the money was exempt, that is money she had received for compensation, then she would need to provide me with evidence supporting this assertion.
I received no response to this email.
On 13 October 2018 I received an email from the Bankrupt in relation to the matter …
On 16 October 2018, I sent an email to the Bankrupt … Attached to the email was a letter and a further copy of the initial package of documents including a blank SOA. In the letter I noted … that the application relating to the review of the Registrar's decision to make the Sequestration Order had been dismissed … reiterated my direction that the Bankrupt deliver up $58,000.00 in cash that she had stated on oath and in a subsequent affidavit she possessed … acknowledged receiving an extract from Court documents which disclosed information in relation to final judgments; and … requested further information to support the claim that the Coleman Street property was exempt property …
On 7 November 2018, I became aware that the Bankrupt had filed an appeal in relation to the orders made by [Riethmuller] J is respect of the Registrar's decision to make the Sequestration Order.
On 8 August 2019, I sent an email to the Bankrupt. In the email I noted that the Court had dismissed her appeal referred to … above and stressed the importance of communication in order to avoid unnecessary costs. I reminded the Bankrupt of her obligation to complete a SOA.
On 16 August 2019, I sent an email to the Bankrupt requesting she complete a SOA and provide me with contact details of trustees of the Dragon Glenn Family trust. She failed to respond.
On 6 September 2019, I caused a letter to be sent to the Bankrupt. In the letter, I requested that the Bankrupt provide contact details of the trustees of the Dragon Glenn Family Trust and return a completed SOA and deliver up the Certificate of Title for the Coleman Street property or advise of its whereabouts. A copy of the letter was sent to the Bankrupt [by email] by Mr Johnston. She failed to respond.
On or about 20 September 2019 I received correspondence from the Bankrupt. Annexed … is a copy of the correspondence. Its content is an illustration [of] the Bankrupt's general attitude to this matter throughout the period I have been the trustee.
On 27 September 2019, I sent an email to the Bankrupt. In the email I noted that the Court had dismissed her application for a stay of proceedings and urged her to make contact with me in order to reduce the costs that continue to accrue in the administration. I again requested that the Bankrupt provide me with the contact details of the trustees of the Dragon Glenn Family Trust. A blank copy of a SOA form was attached to the email. I received no response.
On 7 October 2019, I caused a letter to be sent to the Bankrupt. In the letter I acknowledged receipt of the Bankrupt's letter of 20 September 2019 and denied her allegations that I had provided false information to the AFSA and lied to the Tasmanian Lands Title Office. I again requested that the Bankrupt provide contact details of the trustees of the Dragon Glenn Family Trust and return a completed SOA and deliver up the Certificate of Title for the Coleman Street property or advise of its whereabouts. A copy of the letter was sent to the Bankrupt [by email] that day by Mr Johnston. I received no response to this correspondence.
On 4 November 2019, after exhausting my attempts to deal directly with the Bankrupt and the trustees of the Dragon Glenn Family trust, in relation to the transfer of the Coleman Street property, I instructed Butler McIntyre & Butler to act for me in relation to this issue. Thereafter Butler McIntyre & Butler acted for me in relation to the recovery of the Coleman Street Property.
On 12 June 2020, I sent an email to the Bankrupt … In the email I made reference to the Bankrupt being Gail Louise Munnings and a property at 4 Moira Street, Montello in Tasmania. I again reminded the Bankrupt of her obligation to complete a SOA and the fact that her failure to do so had added significant further costs to the administration. A blank copy of a SOA form was attached to the email. I received no response from the Bankrupt.
On 25 June 2020, I sent an email to the Bankrupt … In the email I made reference to the withdrawal of funds from a Bendigo & Adelaide Bank account held by Gail Louise Munnings post-bankruptcy. In addition, I reiterated the Bankrupt's obligation in relation to a SOA and again offered, with or without a support person, the opportunity to discuss the bankruptcy [and] endeavour to finalise the administration in a cost efficient manner. Again I received no response from the Bankrupt.
With regard to my retention of Butler McIntyre & Butler to act for me in relation to recovery of the Coleman Street property into the bankrupt estate … legal proceedings were issued to have the transaction declared void … the proceedings were vigorously defended until the day of the final hearing … on multiple occasions I offered, via Butler McIntyre & Butler, to meet with the Bankrupt and/or the Respondents and/or their respective legal representatives. All such offers were declined … and … ultimately orders were consented to by the Respondents to that application on the day of the hearing …
90 Mr Cook further deposed that the administration of the bankrupt estate has been difficult and considerable time charges have been incurred, as a result of the following:
Conduct: despite many attempts, the unwillingness of the Bankrupt to engage with me and my office as outlined in the previous section.
Offence Referrals: significant interaction with the personal insolvency regulator in relation to offence referrals (five offence referrals), the issue and service of a section 77CA notice on the Bankrupt and, attendance to AFSA's requests for information in relation to prosecution.
Antecedent Recovery Action: I have spent considerable time investigating the transfer of the Bankrupt's interest in the Coleman Street property to the trustees of the Dragon Glenn Family Trust and pursuing an antecedent recovery action under section 120 of the Act. As a result of the inability to engage with the trustees I made application to the Official Receiver Notices Team for a notice and a certificate in accordance to sections 139ZQ and 139ZR of the Act. The Official Receiver was satisfied on the available evidence that the transfer of the Bankrupt's interest in the Coleman Street property to the trustees of the Dragon Glenn Family Trust was void against me pursuant to section 120 of the Act and issued a notice and a certificate in accordance to sections 139ZQ and 139ZR of the Act. Including in the abovementioned time is the time my office spent liaising with the AFSA in relation to the issue and service of the s139ZQ notice on the trustees. I, along with AFSA, experienced much difficulty in serving documents on the trustees, however, with the assistance of process servers the trustees were eventually located and served with documents.
I subsequently initiated legal proceedings seeking an order pursuant to section 120 of the Act that the transfer of the Coleman Street property was void against me as trustee of the bankrupt estate. Ultimately judgment was consented to on the day of the hearing of the application.
Subject to the current undertakings contained within the order, in the absence of the Bankrupt and the trustees of the Dragon Glenn Family Trust co-operation to bring about an orderly sale of the Coleman Street property, further significant costs may be incurred in administering the bankrupt estate including the forced sale of the Coleman Street Property and the possibility of selling the 4 Moira Street property.
Investigations: investigations into the examinable affairs have been frustrated by the lack of co-operation by the Bankrupt and parties assisting her. In this administration, it has often been the case that as new information come to hand, further investigations would be required to be undertaken. Examples of this was learning of the Bankrupt's aliases and purchase of the 4 Moira Street property.
Legal proceedings: the requirement of the trustee to participate in and monitor the outcome of legal proceedings has caused significant time charges to be incurred. Annexed … is a table detailing the events relevant to Court proceedings of which I have at least had to have a basic understanding.
Trustee's remuneration and costs: to 6 January 2021, I have not drawn any remuneration and my unbilled and accrued fees total approximately $136,282.00 (excluding GST and disbursements).
A Remuneration Report that details the work performed to date by professional category and task area is enclosed …
I note that I have charged a discounted rate at Manager 2 Level, for a Senior Manager who has been working on the file since 1 November 2018.
My unpaid out of pocket expenses currently total approximately $7,003.00 (excluding GST).
As at the date of this affidavit, unpaid legal expenses as at the date of this affidavit and which continue to accrue total approximately $70,000.00 (ex GST).
In addition to the above, there is a requirement to pay 7% of all sums received (excluding payments to secured creditors) to the Commonwealth Government pursuant to the Estate Charges Act.
91 None of this was contested.
92 In my view, Ms Burnett's behaviour, described in detail by the trustee above, is sufficient to invoke the court's discretion to decline to annul the bankruptcy, were I to have arrived at the point of addressing that question.
93 If I would be wrong about that, the next issue that would arise is whether Ms Burnett should have an order that the sequestration order be set aside.
94 The creditors submitted that, in the event that I were to find that the bankruptcy should come to an end, I should do no more than adopt the "normal" course and make an order pursuant to s 153B(1) of the Act annulling it - not an order setting the sequestration order aside.
95 The distinction matters, of course, because in the case of annulment, the trustee gets the benefit of s 154(1)(b) of the Act, namely, he may apply the property of Ms Burnett still vested in him in payment of the costs, charges and expenses of the administration of the bankruptcy, including his remuneration and expenses. On the other hand, if the sequestration order were set aside, the creditor's petition dismissed and no order made annulling the bankruptcy, the trustee would have no statutory basis for any remuneration and his action (and the consequences thereof) would be left to the general law. See Flint v Richard Busuttil & Co Pty Ltd (2013) 216 FCR 375 at 384 [49] (Allsop CJ, Katzmann and Perry JJ). See also Bechara v Bates [2021] FCAFC 34; 388 ALR 414 at 423 [30] (Allsop CJ, Markovic and Colvin JJ).
96 When a choice is to be made between setting aside a sequestration order and annulling the bankruptcy, "the courts have consistently stressed that a balance must be struck between the rights of the applicant, who should never have been made bankrupt in the first place, and the Trustee who has simply done what the Act requires him to do … The rights of the petitioning creditor have never been referred to as a relevant factor, and understandably so". See Cross at 425-6 [115] (Edmonds J), citing Kyriackou v Shield Mercantile Pty Ltd (No 2) [2004] FCA 1338 at [43] (Weinberg J); Capsalis v Ozdemir [2005] FMCA 1163 at [17] (Connolly FM); Hadjimouratis v Casanova [2005] FMCA 1468 at [13], [16] (Connolly FM); Vaucluse Hospital Pty Ltd v Phillips [2006] FMCA 44 at [70]-[71] (Riethmuller FM).
97 In my view, there is nothing in this case that can sensibly be said in support of the proposition that the appropriate order would be to set aside the sequestration order, were one to get to the point of considering the submission.