Scott (Trustee), in the matter of Heinrich (Bankrupt) [2006] FCA 718

Scott (Trustee), in the matter of Heinrich (Bankrupt) [2006] FCA 718 ALAN GEOFFREY SCOTT AS TRUSTEE OF THE BANKRUPT ESTATE OF STEPHEN GLENN HEINRICH SAD 264 of 2005 MANSFIELD J 13 JUNE 2006 ADELAIDE

ALAN GEOFFREY SCOTT AS TRUSTEE OF THE BANKRUPT ESTATE OF GLENN HEINRICH

REASONS FOR JUDGMENT 1 Mr Scott is the trustee of the bankrupt estate of Mr Heinrich. 2 On 3 April 2006, I determined that Mr Scott, as the trustee, be entitled to pay the surplus of his bankrupt estate to the Commonwealth Bank of Australia in part payment of interest accrued on the admitted debt of the Bank to cover the period from the date of bankruptcy to 3 April 2006. That payment was to be in priority to any claim of Mr Heinrich to that surplus. The order was made on an application of Mr Scott under ss 30 and 134(4) of the Bankruptcy Act 1966 (Cth). 3 These are my reasons for that order. 4 Mr Heinrich was declared bankrupt on 6 September 2000. Mr Scott was on that day appointed as the trustee of his estate. The Bank was the petitioning creditor. Its debt was ultimately admitted to proof for $464,718. No other proofs of debt were received by Mr Scott. 5 Mr Heinrich failed to file a statement of affairs. Mr Scott nevertheless proceeded to get in and realise such of the assets of Mr Heinrich's estate as he was able to identify. On 14 December 2005, the Court ordered that Mr Scott be entitled to distribute a dividend of $464,718 to the Bank, in accordance with Div 2 of Pt VII of the Act as if Mr Heinrich had filed a statement of affairs. That is, the Bank received payment of its debt. The estate of Mr Heinrich has realised well in excess of that amount. As at 1 February 2006, and after payment of the dividend to the Bank and Mr Scott's fees and expenses, there was a surplus of funds in the bankrupt estate of $369,210. By that time, the post-bankruptcy interest payable by Mr Heinrich to the Bank in respect of its admitted debt was $671,347. 6 The issue was whether the surplus funds should be paid to Mr Heinrich (there being no other creditors in his estate) or to the Bank for interest (or part interest) accrued on its admitted debt since the bankruptcy. 7 Mr Heinrich did not appear at the hearing. 8 Interest accruing on a debt post-bankruptcy is not itself a provable debt: s 82(3B) of the Act. That section reflects what was previously a rule of 'justice and convenience': see per Dixon J in Mackenzie v Rees (1941) 65 CLR 1 at 8-11. In the case of a surplus after payment to the creditors from the bankrupt estate, Mackenzie v Rees (in the passage referred to) also lays down that, if admitted debts bore interest to the bankruptcy, the creditors are also entitled to participate in the surplus by way of interest accruing on them after the bankruptcy, and before the debtor may obtain the surplus. See also Midland Montagu Australia Ltd v Harkness (1994) 35 NSWLR 150. McLelland CJ at 164 in that case said the proposition is 'overwhelmingly supported by the authorities'. 9 A similar position obtains in respect of post-liquidation interest in the context of the winding up of a company: see e.g. Gerah Imports Pty Ltd v Duke Group Ltd (in liq) (2004) 88 SASR 419; Re Spedley Securities Ltd (in liq) (2000) 34 ACSR 689 at 692; Re Emilco Pty Ltd (in liq) (2002) 43 ACSR 536 at 540. 10 Upon the facts, the order made followed from a straightforward application of the law. I certify that the preceding ten (10) numbered paragraphs are a true copy of the Reasons for Judgment herein of the Honourable Justice Mansfield.