Combis (Trustee) v Geason

Principles 2 On any such application there are two issues. The first flows from the jurisdictional fact which is apparent on the face of s 146; namely, a failure by the bankrupt to file a statement of affairs as required by the Act. If that jurisdictional fact is proved, the second issue is whether, as a matter of discretion, the Court should make an order for distribution under s 146, and if so, on what terms. 3 As has been said in previous cases, the purpose of s 146 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: see eg Re Shaw; Official Trustee in Bankruptcy [1999] FCA 968, at [4] per Gyles J. Later, in Re Sturt; Ex parte Official Trustee in Bankruptcy (2001) 117 FCR 1, after expressing like sentiments as to the purpose of s 146, Sackville J stated, at [19]: Of course, on any application under section 146 of the Bankruptcy Act the court must be satisfied that it's 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 absence 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.

Procedural History and Evidence 4 This application was originally listed for hearing on 24 July 2024. At that time, the hearing was adjourned until today. It was apparent at that July hearing that there was a controversy as to whether the bankrupt had filed a statement of affairs. One of the orders made that day was that the bankrupt, as respondent to the application, file and serve such affidavits as he may be advised, on or before 22 August 2024, with respect to whether, and if so when, he filed, with the Official Receiver, a statement of affairs. Another order made that day, pursuant to s 30(2) of the Act, was that the Official Receiver conduct an inquiry of the records held by the Official Receiver and of the Official Receiver's staff in respect of whether, and if so when, according to such records and such other inquiries, the bankrupt filed with the Official Receiver a statement of affairs. 5 Mr Geason filed no affidavit at all on or before 22 August 2024. The Official Receiver did conduct the inquiry ordered, the result of which was deposed to on behalf of the Official Receiver by an affidavit made by Ms Susan Ann Whitaker, filed on 27 September 2024. 6 That affidavit deposes to the inquiry conducted in response to the Court's order. It also deposes to the electronic databases maintained within the Official Receiver's office. One such database is known as the National Personal Insolvency Index. The Official Receiver's search of that index discloses, as it happens, that Mr Geason was made bankrupt prior to 2014, as well as, as has been mentioned, in 2014. Thus Mr Geason was earlier made bankrupt on 26 October 2004 (the 2004 bankruptcy). He remains undischarged both in respect of the 2004 bankruptcy, as well as the 2014 bankruptcy. The search conducted of the National Personal Insolvency Index discloses that no statement of affairs is recorded as having been accepted for filing in relation to either the 2004 bankruptcy or the 2014 bankruptcy. 7 In respect of the 2004 bankruptcy, there has been a succession of trustees. A Mr Wily of Armstrong Wily & Co was trustee of the estate in respect of the 2004 bankruptcy from 26 October 2004 to 20 February 2022. Between 20 February 2022 and 6 January 2023, the Official Trustee acted as trustee of that bankrupt estate. On and from 6 January 2023 to the present time, Mr Combis has also been trustee in respect of Mr Geason's bankrupt estate arising from the 2004 bankruptcy. 8 It is, with respect, an unfortunate feature of Mr Combis' affidavit filed on 28 May 2024, as read in support of the application which was to be heard in July, that the existence of that earlier bankruptcy was not disclosed. The Official Receiver's inquiry has therefore served a particular public interest in bringing to the Court's attention the existence of the 2004 bankruptcy. It will be necessary to make some further observations concerning the effect of the Act, given the earlier bankruptcy, shortly. 9 As to the 2014 bankruptcy, the Official Trustee was trustee of that bankrupt estate from 5 November 2014 to 21 December 2022. Thereafter, Mr Combis has been trustee of that bankrupt estate. 10 Ms Whitaker's affidavit discloses that the inquiries conducted at her direction did not stop at the National Personal Insolvency Index. Rather, they extended both to an electronic database termed "eSolve" and extended to records kept, prior to the implementation of the eSolve system, in physical files which are stored in an archive. 11 Ms Whitaker's evidence is that, within eSolve, a separate file is maintained in respect of each bankrupt estate. As to that, the practice of the Official Receiver and the Official Receiver's staff is to save on that electronic database all file notes concerning contact between staff of the Official Receiver and a bankrupt, all emails or correspondence sent to, or received from, a bankrupt and any other material provided by a bankrupt (or another person on behalf of a bankrupt) that is or could be construed as information or part of the information required to be disclosed or filed with the Official Receiver. 12 Her evidence is also that prior to the implementation of that eSolve system, the Official Receiver's practice was to save like records on a physical file in respect of each bankrupt estate. Ms Whitaker has caused searches also to be conducted with respect to Mr Geason, both in respect of the eSolve system, the physical records as so described, and also certain electronic email inboxes maintained within the office of the Official Receiver. She further deposes that it is standard practice for documents, emails and correspondence to be saved into the eSolve file. She has no reason to believe that any statement of affairs submitted by Mr Geason was accidentally omitted from having been saved to eSolve and, further, that her experience is that any such failure is not a common occurrence. 13 The searches conducted by Ms Whitaker have taken her to the point where, in respect of the 2004 bankruptcy, an incomplete statement of affairs was filed, dated 2 [blank] 2004 and, in 2012, became the subject of an e-mail exchange between the Official Receiver's office and a person acting on behalf of the trustee of the 2004 bankrupt estate. Ms Whitaker can locate no evidence of a consequential statement of affairs having been amended or completed by Mr Geason or accepted for filing by the Official Receiver with respect to the 2004 bankruptcy. 14 As to the 2014 bankruptcy, Ms Whitaker's searches have disclosed that, at one stage, the Official Receiver considered the making of an application for the issue of a notice under s 77CA of the Act. But in the result such an application was not then made, because Mr Geason's residential address could not be confirmed. Those searches have also disclosed an exchange by email between a client service officer of the Official Receiver's office (with which reference I include the Australian Financial Security Authority (AFSA)) and Mr Geason on 16 July 2018, in which the following statement made by Mr Geason is recorded: Don't intend to send in a statement of affairs. Can still get loans and start and run a business, so it doesn't matter. 15 Thereafter, the Official Receiver did give a notice to Mr Geason pursuant to s 77CA of the Act requiring him to complete and submit a statement of affairs by letter dated 29 August 2018. The letter concerned was sent by post, but returned to sender on 18 September 2018. 16 Ms Whitaker also deposes that the Official Receiver (again which includes the AFSA) maintains an online portal that facilitates the completion and submission of documents electronically. She has conducted a search for Mr Geason, and also his email address, on that online portal. The result of that is that she located no evidence that Mr Geason has a user account through which he could have submitted, via that online portal, a statement of affairs. 17 The end result of all those searches is a statement by Ms Whitaker, on behalf of the Official Receiver, that she has not located any evidence that Mr Geason filed a statement of affairs with respect to the 2014 bankruptcy. 18 Ms Whitaker was not cross-examined by or on behalf of Mr Geason. Counsel was retained by the Official Receiver to appear for Ms Whitaker in the event that such a contingency came to pass. As it happened and as I have mentioned, that contingency did not come to pass. There was no separate application by counsel nonetheless to be heard on the basis of an application by the Inspector-General in Bankruptcy, who has the general administration of the Act (see s 12), to be heard.

Adjournment application 19 When the case was called on for hearing there was an appearance on behalf of Mr Geason by his solicitor. An application was made for the proceedings further to be adjourned. Mr Geason did file an affidavit but not until 11 October 2024, the last business day prior to today's hearing. The trustee, by his solicitors, promptly gave notice to Mr Geason's solicitors for Mr Geason to attend today for cross-examination. He did not so appear. 20 There were assertions, made by way of statements from the bar table, by his solicitors (which were not the subject of consent by the trustee) as to some medical condition, on the part of Mr Geason, which prevented his attendance. However, no affidavit was made and filed attesting to that medical condition or in what way it prevented his attendance today in response to the notice to attend for cross-examination. 21 The contents of Mr Geason's affidavit filed on 11 October 2024 amount to a statement on his part that he did file a statement of affairs and gave copies thereof to various individuals or firms. He also deposes to some endeavours to retrieve copies from those sources which have not yet come to fruition. The content of the affidavit is such that, in my view, it ought to have been filed in chief by 22 August 2024, the date appointed in the Court's orders of 24 July 2024. Further and in any event, Mr Geason had well over two months to gather any material in support evidencing the filing of a statement of affairs in respect of the 2014 bankruptcy. 22 It is quite unsatisfactory, to say the least, that he chose to leave the filing of an affidavit until the last business day prior to today's hearing. In making that observation, I do not make adverse criticism of his present solicitors who have been retained rather late, to say the least. 23 In the face of an objection to the reading of Mr Geason's affidavit by the trustee and having regard to the absence of any supporting medical evidence and the length of time which has elapsed since today's hearing date was appointed, I refuse the application for an adjournment and also refuse to permit the affidavit to be read and relied upon by Mr Geason.

Consideration 24 The end result is that the evidence concerning whether or not a statement of affairs in respect of the 2014 bankruptcy was lodged reposes in the affidavit of Ms Whitaker. As to that affidavit and its disclosures, s 69(4) of the Evidence Act 1995 (Cth) (Evidence Act) provides: If: (a) the occurrence of an event of a particular kind is in question; and (b) in the course of a business, a system has been followed of making and keeping a record of the occurrence of all events of that kind; the hearsay rule does not apply to evidence that tends to prove that there is no record kept, in accordance with that system, of the occurrence of the event. 25 The dictionary in that Act defines "business" to "include an activity conducted by the Crown in any capacity". The operations of the Official Receiver's office, and to the extent that it matters the AFSA, constitute activities conducted by the Crown in right of the Commonwealth. 26 Section 69(4) of the Evidence Act has application in respect of the record systems maintained and as described in Ms Whitaker's affidavit. The filing of a statement of affairs is an event of a particular kind which is in question. The effect of s 69(4), is to create an exception to the hearsay rule such that I can be satisfied, on the basis of Ms Whitaker's evidence, that there is no record of the filing of a statement of affairs within the office where such a statement of affairs should be filed if there be compliance by a bankrupt with the requirements of the Act. On the basis of Ms Whitaker's evidence, I am satisfied that the jurisdictional fact has, on the balance of probabilities, been proved - that no statement of affairs has been filed. The balance of probabilities is the applicable standard: see s 34A(1) of the Act, which replicates, in respect of a bankruptcy proceeding of a civil character, s 140(1) of the Evidence Act. 27 So it is that the question now becomes whether, as a matter of discretion, to make an order under s 146 of the Act? 28 The evidence read in support of the application establishes that, as at today's date, and by virtue of advertisement in The Australian which has notified these proceedings, the only creditors in the estate, subject to the effect of the Act in respect of the 2004 bankruptcy, remain Mr Jeffery Halliday (who has proved in respect of a debt of $122,393.65) and Panthera Finance Pty Ltd (which is proved in respect of a debt in the amount of $773.94). Neither of those creditors has sought to appear today. Neither, as a result of the advertisement, has any other person sought to appear as a creditor in respect of the 2014 bankruptcy. Mr Combis' evidence also discloses that the amount of the net receipts in this estate is $139,344.71. 29 The effect of s 59 of the Act, in circumstances where the 2004 bankruptcy has apparently yet to be finalised, is that, in his capacity as trustee in respect of the bankrupt estate resultant from the 2004 bankruptcy, Mr Combis is a creditor in respect of the 2014 bankruptcy. 30 I do not have evidence as to the creditors who have proved in the 2004 bankruptcy. I do have evidence, namely that of Ms Whitaker, that no statement of affairs was filed in that bankruptcy either. It seems to me that the absence of evidence as to the creditors who have proved in the 2004 bankruptcy should not inhibit, in this case, the making of an order under s 146 for the administration and distribution of the 2014 bankrupt estate. That is because, as trustee of that estate, Mr Combis will be obliged to distribute that estate having regard to his responsibility as trustee of the 2004 bankruptcy to prove in that estate and to administer the 2014 bankrupt estate in accordance with the requirements of s 59. 31 So as to highlight that responsibility, I propose to make express provision in the orders today in respect of that obligation. 32 Having regard to the proofs which I have mentioned, and what one might apprehend are the costs of administration, it seems unlikely that there will be a surplus in respect of the 2014 bankrupt state. That being so, and although I canvassed with counsel for the trustee the making of an order which would disentitle Mr Geason to any surplus funds remaining after payment of dividends to creditors until he had lodged a duly completed statement of affairs with the Official Receiver and until the trustee had dealt with the claim of any further creditors, I do not propose to make such an order. I note that in circumstances where there was a likelihood of a surplus, the making of such an order commended itself to Feutrill J in Joyce (Trustee) in the matter of Domach v Domach [2023] FCA 888. I can, with respect, for the reasons given by his Honour, see good reason for making such an order in such a circumstance. It is just that it appears unlikely in this case that there will be any surplus. 33 The 2014 bankruptcy is, to say the least, an old bankruptcy. Mr Combis, as trustee, has, in my view, done his duty in seeking to bring the administration of that estate to an end, notwithstanding the absence of a statement of affairs. One might perhaps have seen occasion for the making of such an application prior to Mr Combis' assumption of the responsibility of being trustee, but that in no way takes away the responsible act by Mr Combis in seeking to bring the administration of the 2014 bankrupt estate to an end. Bankruptcy proceedings are not just proceedings inter partes. There is also a public interest in the finalisation of the administration of bankrupt estates. 34 For these reasons then, I am satisfied both that there has been a failure on the part of Mr Geason to file a statement of affairs and that it is appropriate as a matter of discretion to make an order pursuant to s 146 in respect of the distribution of the estate, taking into account, in that regard, the existence of the 2004 bankruptcy. I certify that the preceding thirty-four (34) numbered paragraphs are a true copy of the Reasons for Judgment of the Honourable Justice Logan.