Re Peter Ronald Blanch & Iva Tagi Blanch [1984] FCA 373

Federal Court of Australia|1984-11-15|Before: Neaves J

Bankruptcy - Annulment - Menevs paid to truste= in bankruptcy sufficient to pay 100 cents inthe dollar to unsecured creditors who had previcusiy oroved their debts - Moneys not distributed by trustee - Whether Court could te satisfied that unsecured debts of the tankrupt paid ir full - Bankruptcy Act 1965, ©..54.

) ) ) ) BANKRUPTCY DISTRICT OF THE STATE ) No. NSW 128 of 1953 ) ) } )

Declares that the material placed before the Court in

Orders that the application be adjourned azeneralily wi liberty to the bankrupts to restcre the same to the li on 7 davs' notice to the Cfficial Trustee in Bankruptc

) ) ) ) BANKPUPTCY DISTRICT OF THE STATE ») No. NSW 128 of 1953 ) ) ) CAPITAL TERRITORY

This 1s an application by Peter Ronald Elanch and Iva Taqi Blanch ({"the bankrupts") each of whom became a bankrupt on 22 February i983 by force of section £7 cf the

Bankruptcy Act 196€ ("the Act"). The arcplication is tor the

annulment of the bankruptcies pursuant tc section 154 cf the Act. The ground of the application is that the material Placed before the Court should satisfy 1% that the unsecured debts of the bankrupts, being debts that have heen croved in the bankruptcies, have been paid um 'full ({xyaraaraph

The evidence establishes that three creditors have lodged claims against the woint estate for amounts tctalling $1741.56, three creditors have lodged claims against the separate estate of Peter Ronald Blanch for amounts totalling $3016.44 and four creditors have lodged claims against the separate estate of Iva Taqi Blanch for amounts totalling

$2965.08. Those claims have been admitted ts rank far

On 1 Julv 1981 Peter Ronaid Blanch, whiie driving a motor vehicle in the course of his employment, was invoived ina collision with another vehicle. He commenced

proceedings im the Supreme Tourt of the Australian Tapital Territory for damases in respect of the injuries he received un that collision. The proceedings were settled on © Auqust 1984, the settlement resultine in a substantiai sum being paid to Mr Blanch. On 13 September i984 he instructed his solicitor to pay to the trustee of the bankrupt estates sufficient moneys from the proceeds of the settiement of the action to pav all the creditors whose debts had been proved in his bankruptcy and that of Iva Tagi Elanch. An amount of £€723.08 was subseauently paid to the Offzrcial Trustee in Bankruptcy ("the trustee"). According te the trustee's report cated 16 October 1984 that sum is sufficient ta rav

to all unsecured creditors who had before that date rroved

~n the joint cr separate estates i100 cents in the dollar in

respect of their proved debts. The amount does not, however, cover the trustee's fees or any debts which might be proved between 16 October and 16 November 1984. I shail refer to the significance of 16 November 1984 later in these

Mr Blanch has also taken steps te pav in fuli other

unsecured creditors of his who have not proved in his

Upon receipt of the sum of $8772.08 to wnich I have referred, the trustee took the appropriate steps pursuant ta section 140 of the Act to cause notice to be aivern of bis umtention to declare a dividend in the icint and separate estates of the bankrupts. Pursuant to sub-section 140(7), the trustee 1s bound not ts declare the dividend urtil the expiration of 21 days after the expiration of the period specified in the netice as the period within which creditors may lodge their proofs of debt. in the circumstances of

The question that arises for decision is whether by Paving to the trustee the sum of $8722.08 xt can properly be said, in terms of paragraph 154(1){b)} of the Act, that the

unsecured debts of the bankrupts, being debts that nave been

proved in the bankruptcies, have been paid in full.

Counsel for the bankrupt relied upon the absence from paragraph 154(1)(b) of the Act of any express requirement that the payment in respect of a bankrupt's unsecured debts be made to the creditors: all that the language requires, he said, 1s that the unsecured debts of the bankrupt have been paid in full. That requirement is

satisfied, so it was argued, if a sum sufficient to pay those debts in full has been paid to a person who 1s under a duty to distribute that sum amongst the proved creditors so that each will receive 100 cents in the dollar in respect of

Alternatively 1t was submitted that, 1f it he necessary for the purvoses of paragraph 154(1)(b) of the Act to show that the monevs have been paid to the creditors, the Official Trustee in Bankruptcy. as the trustee of the bankrupt estates. 1s for this purpose to be treated as the agent of those creditors. Receipt by the trustee of ar amount equal to the total of the proved unsecured debts constitutes, so ait was submitted. the receipt by each creditor who has proved in the estate of the amount of his

For the trustee 1t was submitted that, if 'the bankruptcies were annulled under secticn i54 of the Act prior to the trustee distributing by way of dividend the sum

of $8723.08, the trustee would lack authority te distribute

that sum by way of dividend amongst the creditors and would be bound, subject to any order of the Court vesting those Moneys in any person or persons, to treat the moneys as having reverted to the bankrupts (see sub-section 154/2)). It was also argued that, if the bankruptcies were annulled under paragraph 154(1)(b), an estoppel bv record miaqht he pleaded in bar in the event that any creditor who had proved his debt sought to bring proceedings against the bankrupts or either of them in respect of that debt. It followed, sa it was submitted, that the creditors who have proved their debts cannot properly be said to have been paid in full until the amount available to the trustee has been distributed in such a manner that each such creditor has received 100 cents in the dollar in respect of his proved debt. Fayment to the trustee @id not, so the arzument ran, constitute payment to the creditors: the trustee was not an

In reply 1t wae submitted on behalf of the Dankrupts that the moneys paid to the Official Trustee ir Bankruptcy were impressed with a statutory trust and, even if the effect of an order annulling the bankruptcies under section 154 was to extinguish that trust. the creditors in respect of whose proved debts the moneys had been paid to the trustee would retain a right at common law to have the moneys distributed to them by the trustee as moneys had and

The submissions put to the Court on behalf of the bankrupts have not satisfied me that their unsecured debts, being debts that have been proved in the bankruptcies, have been paid in full. My reasons for reaching that conclusion

The trustee of the estate of a bankrupt 1s charqed with the due and proper administration of the estate in accordance with the Act and the provisions of the general law in so far as they may be applicable. For this purpose the trustee has the powers and duties specified in the Act. Those duties include the discovery of the hankrupt's property (section &1:;, the admission or rejection of proofs of debt (section 102), the realization of the bankrupt s property (section 129) and its distribution by way of

dividend amongst the creditors who have preved their debts

(section 1240). in the administration cf the estate th trustee 1s subject to the contrcoi of the Court 'section 179) and is, subject to the Act, ta have regard to any lawful directions given by resolution of the creditors at a general

All moneys received by the trustee in the course of administering the bankrupt estate must be deait with in accordance with the statute. His obligation is, subject to

the retention of such sums as are necessary to meet the cost

of administration or to give effect to the provisions of the Act, to distribute as dividend all moneys in hand

{sub-section 140(2)). Procedures are prescribed to ensure

so far as possible, that all creditors of the bankrupt have an opportunity, by proving their debts, tc share in the

A consideration of the trustee's duties in relation to the distribution of the moneys brought to the credit of the estates of the bankrupts demonstrates, so it seems ta me, that it is not correct to regard the bankrupts' unsecured debts as having been paid in full bv reason only of the circumstance that the trustee is holding sufficient funds to pay a dividend of 100 cents in the dollar on the debts that have been proved. The matter may be tested bv assuming that. in response to th netice which the trustee has given pursuant to section 140 of the Act, further creditors of the bankrupts or elther of them lodge procfs of debt which are admitted. Such creditors would be entitled te participate ain the proposed dividend and the moneys now held by the trustee wouid be distrikutabie amongst ail che proved creditors, including those whese proofs fave. on the above hypothesis, been admitted since the receipt by the trustee of the monevs to be distributed. It would. in those

circumstances, be quite contrary to tne fact to reqard the

unsecured debts of the bankrupts as having been paid in

full: each creditor would receive something less than i100

cents in the dollar. It is no answer to sav that it is unlikely that any additional creditors wiil be discovered. Equally 1t is no answer to say that an order of annulment now made would preclude any other creditors from participating 1n the distribution of the amourt now held by

the trustee. The question is whether, aS a necessary condition precedent to the making of an order of annulment,

the Court can be satisfied that the unsecured debts that

Some light is also thrown on the question that now arises for decision by the provisions of sub-section 154(4). That sub-section deals with the situation where a debt has been proved by a creditor but the creditor cannot be found or cannot be identified. In such circumstances the debt may be paid to the Registrar in Bankruptcy and, 1f so paid, is, for the purposes of section 154, to be "deemec to have been paid in full to the creditor". The provision 1s by no means

conclusive but the deeming provision 1% ccntains suqgests that the leqislature has used the expression "paid in full" as encompassing only payments received bv the creditor himself or by an agent duly authorised to receive payment on his behalf. The trustee is not, in my opinion, to be

regarded as such an agent by reason oniy of his undertaking

In the result the application fails. However, having regard to the particular circumstances of the case including the likelihood that within a short time the bankrupts will be ina position to satisfy the Court that their unsecured debts, being debts that have been proved in the bankruptcies, have been paid in fuil, it seems toa me to be appropriate not to dismiss the application but to stand it over generally with liberty to the bankrupts te restore 1t to the list on 7 days' notice to the OCfficiai Trustee in

Il certify that *his and the preceding S pages are a true copy of the Reasons for Judament here Honcurabie Mr Justice

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Cited By (9)